<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998
FILE NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
(Exact name of registrant as specified in its charter)
OHIO
(State or other jurisdiction of
incorporation or organization)
4911
(Primary Standard Industrial
Classification Code Number)
34-0150020
(I.R.S. Employer Identification
Number)
C/O FIRSTENERGY CORP., 76 SOUTH MAIN STREET, AKRON, OHIO 44308-1890
(330) 384-5504
(address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
NANCY C. ASHCOM, CORPORATE SECRETARY
C/O FIRSTENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OHIO 44308-1890
(330) 384-5504
(name, address, including ZIP code, and telephone number, including area code,
of agent for service)
COPIES TO:
KEVIN P. MURPHY, ESQ.
COUNSEL
FIRSTENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OHIO 44308-1890
Approximate date of commencement of proposed exchange of securities is as
soon as possible after the registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE* OFFERING PRICE* FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.43% Series D Secured Notes due 2009 $150,000,000 100% $450,000,000 $132,750.00
7.88% Series D Secured Notes due 2017 $300,000,000 100%
================================================================================================================================
</TABLE>
*Estimated solely for the purpose of determining the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
OFFER TO EXCHANGE
7.43% SERIES D SECURED NOTES DUE 2009
FOR ALL OUTSTANDING 7.43% SERIES C SECURED NOTES DUE 2009
$150 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING AND
7.88% SERIES D SECURED NOTES DUE 2017
FOR ALL OUTSTANDING 7.88% SERIES C SECURED NOTES DUE 2017
$300 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
------------------------
The Cleveland Electric Illuminating Company, an Ohio corporation (the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange its 7.43% Series D
Secured Notes due 2009 (the "New Notes due 2009") and 7.88% Series D Secured
Notes due 2017 (the "New Notes due 2017") (collectively, the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for equal principal amounts of its
outstanding 7.43% Series C Secured Notes due 2009 (the "Old Notes due 2009" and
together with the New Notes due 2009, the "Secured Notes due 2009") and 7.88%
Series C Secured Notes due 2017 (the "Old Notes due 2017" and together with the
New Notes due 2017, the "Secured Notes due 2017") (the Old Notes due 2009 and
the Old Notes due 2017 are collectively referred to herein as the "Old Notes"),
of which $150 million and $300 million aggregate principal amount, respectively,
are outstanding. The New Notes and the Old Notes are collectively referred to
herein as the "Secured Notes."
Subject to the terms and conditions set forth in this Prospectus and the
Letter of Transmittal, the Company will accept for exchange any and all Old
Notes that are validly tendered and not withdrawn on or prior to 5:00 p.m., New
York City time, on , 1998, unless the Exchange Offer is extended (the
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which may
be waived by the Company, and to the terms and provisions of the Registration
Agreement (as defined herein). Old Notes may be tendered only in denominations
of $1,000 and integral multiples thereof. The Company has agreed to pay the
expenses of the Exchange Offer. See "The Exchange Offer."
The New Notes will evidence the same debt as the Old Notes for which they
are exchanged and will be obligations of the Company entitled to the benefits of
the Note Indenture (as defined herein) relating to the Secured Notes. The form
and terms of the New Notes are identical in all material respects to the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act, and, following the completion of the Exchange Offer and
during the effectiveness of any required Shelf Registration Statement (as
defined in the Registration Agreement), the holders of the Old Notes will not be
entitled to the contingent increase in the interest rate otherwise provided for
under certain circumstances and will not be entitled to the benefit of certain
registration and exchange rights granted to the holders of the Old Notes under
the Registration Agreement. See "The Exchange Offer" and "Description of the New
Notes."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by
(cover continued on following pages)
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SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3
(Continuation of cover page)
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes if such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 120 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
New Notes of each series will bear interest at the same rate and on the
same terms as the Old Notes of the corresponding series. Under the Note
Indenture, interest on each Old Note ceases to accrue upon the exchange of such
Old Note for a New Note. Interest will accrue on each New Note from the date on
which it is authenticated and will be payable to the person in whose name such
New Note is registered at the close of business on the Regular Record Date (as
defined in the Note Indenture) for such interest, which will be the April 15 or
October 15 (whether or not a business day), as the case may be, next preceding
the payment date for such interest. If, however, the New Note is authenticated
and delivered in exchange for an Old Note (i) between a record date for the
payment of interest on that Old Note and the related interest payment date, the
interest that accrues on the New Note from the date of authentication thereof to
that interest payment date shall be payable to the person in whose name such New
Note was issued on its issuance date or (ii) between an interest payment date
for the payment of interest on that Old Note and the record date for the next
succeeding interest payment date, the interest that accrues on the Old Note from
the earlier interest payment date to the date on which the Old Note is exchanged
for the New Note will be paid to the person in whose name the New Note is
registered on the record date for that next succeeding interest payment date.
The Company intends to cause the New Notes to be authenticated on the date on
which the New Notes are exchanged for the Old Notes. Therefore, the exchange
will not result in the loss of interest income to holders of Old Notes exchanged
for New Notes. Interest on the Secured Notes is payable semiannually in cash in
arrears on May 1 and November 1 of each year, commencing May 1, 1998, and the
Secured Notes will bear interest and mature as follows: for the Secured Notes
due 2009, interest at 7.43% with a maturity date of November 1, 2009, and for
the Secured Notes due 2017, interest at 7.88% with a maturity date of November
1, 2017. See "The Exchange Offer -- Interest on the New Notes."
The Old Notes are, and the New Notes will be, secured equally and ratably
as to payment of principal and interest by first mortgage bonds issued by the
Company and held by the trustee under the indenture for the Secured Notes. See
"1997 First Mortgage Bonds and First Mortgage."
Old Notes of each series initially purchased by qualified institutional
buyers, as defined in Rule 144A under the Securities Act ("QIBs"), were
initially represented by a single, global Secured Note of each series in
registered form (each a "Global Note"), registered in the name of a nominee of
The Depository Trust Company ("DTC"), as depository. The New Notes of each
series exchanged for Old Notes represented by a Global Note will be represented
by a single, global New Note of that series in registered form (each a "Global
New Note"), registered in the name of Cede & Co., as nominee of DTC. Beneficial
interests in the Global New Notes will be shown on, and transfers thereof will
be effected only through, records maintained by DTC and its participants. See
"Description of the New Notes -- Book-Entry; Delivery and Form."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "SEC") to third parties, the Company believes that the
New Notes issued pursuant to this Exchange Offer in exchange for the Old Notes
may be offered for resale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in a distribution of the New
Notes. See Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available
June 5, 1991), and Exxon Capital Holdings Corporation, SEC No-Action Letter
i
<PAGE> 4
(Continuation of cover page)
(available May 13, 1988). Holders of Old Notes wishing to accept the Exchange
Offer must represent to the Company, as required by the Registration Agreement,
that such conditions have been met. If the Company's belief is inaccurate,
holders of New Notes who transfer New Notes in violation of the prospectus
delivery provisions of the Securities Act and without an exemption from
registration thereunder may incur liability under the Securities Act. The
Company does not assume, or indemnify holders against, any such liability.
The net proceeds from the offering of the Old Notes (the "Offering") were
used by the Company, to refinance certain outstanding first mortgage bonds and
to repay short-term borrowings. The Company will not receive any proceeds from
the Exchange Offer, and no underwriter is being utilized in connection with the
Exchange Offer.
The exchange of Old Notes for New Notes will be a tax-free exchange. See
"Certain Tax Considerations."
After completion of the Exchange Offer, Old Notes which have not been
exchanged for New Notes will remain outstanding. See "Risk
Factors -- Consequences of Failure to Exchange."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to the Exchange Offer, there has been no public market for the Old
Notes. The Company does not presently intend to list the New Notes on any stock
exchange or trading market. There can be no assurance that an active public
market for the New Notes will develop. If a market for the New Notes should
develop, the New Notes could trade at a discount from their principal amount.
See "Risk Factors -- Lack of Public Market for the Secured Notes."
The Company has been advised by Morgan Stanley & Co. Incorporated, Chase
Securities Inc., First Chicago Capital Markets, Inc., McDonald & Company
Securities, Inc., Merrill Lynch & Co. and TD Securities, the placement agents of
the Old Notes (the "Placement Agents"), that, following completion of the
Exchange Offer, each intends to make a market in the New Notes; however, none of
the Placement Agents are under any obligation to do so and any market-making
activities with respect to the New Notes may be discontinued at any time.
ii
<PAGE> 5
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURED NOTE OFFERED HEREBY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION SET FORTH HEREIN IS CORRECT
AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
This Prospectus has been prepared by the Company solely for use in
connection with the Exchange Offer. This Prospectus is personal to the offeree
to whom it has been delivered and does not constitute an offer to any other
person or to the public generally to subscribe for or otherwise acquire Secured
Notes. Distribution of this Prospectus to any person other than the offeree and
those persons, if any, retained to advise such offeree with respect thereto is
unauthorized.
This Prospectus incorporates by reference documents which are not presented
herein or delivered herewith. These documents are available upon request from
Nancy C. Ashcom, Corporate Secretary, FirstEnergy Corp., 76 South Main Street,
Akron, Ohio 44308-1890, or telephone (330) 384-5504. In order to assure timely
delivery of the documents, any request should be made by , 1998.
------------------------
Neither the Company nor any of its representatives makes any representation
to any offeree or purchaser of the New Notes offered hereby regarding the
legality of an investment by such offeree or purchaser under legal investment or
similar laws. Each investor should consult with its own advisors as to the
legal, tax, business, financial and related aspects of any purchase of the New
Notes.
------------------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES LAWS. THE COMPANY HAS MADE FORWARD-LOOKING STATEMENTS INCLUDING
STATEMENTS ABOUT ITS FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS.
THESE STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS ABOUT FUTURE PERFORMANCE OR RESULTS, INCLUDING ANY
STATEMENTS USING THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE" OR SIMILAR WORDS.
FOR ALL OF THOSE STATEMENTS, THE COMPANY CLAIMS THE PROTECTION OF THE SAFE
HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THOSE IDENTIFIED UNDER "RISK FACTORS" HEREIN AND THE FOLLOWING
POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE MERGER OF CENTERIOR ENERGY
CORPORATION ("CENTERIOR ENERGY") AND OHIO EDISON COMPANY ("OHIO EDISON") ARE NOT
FULLY REALIZED; (2) REGIONAL COMPETITIVE PRESSURE IN THE ELECTRIC UTILITY
INDUSTRY INCREASES SIGNIFICANTLY; (3) COSTS OR DIFFICULTIES RELATED TO THE
INTEGRATION OF THE BUSINESSES OF CENTERIOR AND OHIO EDISON AS A RESULT OF THEIR
MERGER ARE GREATER THAN EXPECTED; (4) STATE AND FEDERAL REGULATORY INITIATIVES
ARE IMPLEMENTED THAT FURTHER INCREASE COMPETITION, THREATEN COST AND INVESTMENT
RECOVERY OR IMPACT RATE STRUCTURES; (5) NATIONAL AND REGIONAL ECONOMIC
CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; AND (6) COSTS OR DIFFICULTIES
RELATED TO THE YEAR 2000 ISSUE ARE GREATER THAN EXPECTED. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. THESE FACTORS SHOULD BE TAKEN INTO CONSIDERATION IN CONJUNCTION
WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS.
2
<PAGE> 6
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act with respect to the New Notes
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the SEC. For further information with respect to the Company
and the New Notes offered hereby, reference is made to the Registration
Statement. Statements contained in this Prospectus as to the contents of certain
documents filed as exhibits to the Registration Statement are not necessarily
complete and, in each case, are qualified by reference to the copy of the
document so filed.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 ("Exchange Act") and in accordance therewith files reports
and other information with the SEC. Such reports, other information and the
Registration Statement can be inspected and copied at the public reference
facilities maintained by the SEC at its principal office located at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549-1004 and at its regional
offices located at Suite 1400, Northwestern Atrium, 500 West Madison Street,
Chicago, IL 60661-2511 and 7 World Trade Center, 13th Floor, New York, NY 10048.
Copies of such material also can be obtained at prescribed rates from the Public
Reference Section of the SEC at its principal office. The SEC also maintains a
Web site that contains reports and other information filed by the Company. The
SEC's Internet address is http://www.sec.gov. Such material can also be
inspected at the New York Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents heretofore filed with the SEC, pursuant to the Exchange Act,
to which reference hereby is made:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996 ("Form 10-K").
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 ("First Quarter 1997 Form 10-Q").
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 ("Second Quarter 1997 Form 10-Q").
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 ("Third Quarter 1997 Form 10-Q").
5. The Company's Current Reports on Form 8-K dated June 11, 1997 and
July 8, 1997 and Form 8-K/A dated August 27, 1997.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL
REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE
WHICH HAVE BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION THAT THIS PROSPECTUS INCORPORATES. REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO NANCY C. ASHCOM, CORPORATE SECRETARY,
FIRSTENERGY CORP., 76 SOUTH MAIN STREET, AKRON, OHIO 44308-1890, OR TELEPHONE
(330) 384-5504.
3
<PAGE> 7
SUMMARY INFORMATION
The following material is qualified in its entirety by the information appearing
elsewhere in this Prospectus and in the documents incorporated herein by
reference. Holders of Old Notes are urged to read this Prospectus in its
entirety before exchanging their Old Notes for New Notes.
THE COMPANY
The Company, which was incorporated under the laws of the State of Ohio in
1892, is a public utility engaged in the generation, purchase, transmission,
distribution and sale of electric energy in an area of approximately 1,700
square miles in northeastern Ohio, including the City of Cleveland. The Company
also provides electric energy at wholesale to other electric utility companies
and to two municipal electric systems (directly and through American Municipal
Power-Ohio ("AMP-Ohio")) in its service area. The Company serves approximately
753,000 customers and derives approximately 77% of its total electric retail
revenue from customers outside the City of Cleveland. Principal industries
served by the Company include those producing steel and other primary metals;
automotive and other transportation equipment; chemicals; electrical and
nonelectrical machinery; fabricated metal products; and rubber and plastic
products. Nearly all of the Company's operating revenues are derived from the
sale of electric energy. At December 31, 1997, the Company had 3,162 employees.
The Company is a wholly-owned subsidiary of FirstEnergy Corp. ("FirstEnergy").
FirstEnergy is a public utility holding company which is also the direct or
indirect parent of three public utility companies in addition to the Company,
namely, Ohio Edison Company ("Ohio Edison"), Pennsylvania Power Company ("Penn
Power") and The Toledo Edison Company ("Toledo Edison").
The mailing address of the Company's principal offices is 76 South Main
Street, Akron, Ohio 44308, and its telephone number is (330) 384-5100.
4
<PAGE> 8
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $150,000,000 aggregate
principal amount of New Notes due 2009 for an equal aggregate principal amount
of Old Notes due 2009 and up to $300,000,000 aggregate principal amount of New
Notes due 2017 for an equal aggregate principal amount of Old Notes due 2017.
The New Notes are entitled to the benefits of the Note Indenture relating to the
Secured Notes. The form and terms of the New Notes are the same as the form and
terms of the Old Notes except that the New Notes have been registered under the
Securities Act, and, following the completion of the Exchange Offer and during
the effectiveness of any required Shelf Registration Statement, the Old Notes
will not be entitled to the contingent increase in the interest rate otherwise
provided for under certain circumstances and will not be entitled to the benefit
of certain registration and exchange rights granted to the holders of the Old
Notes under the Registration Agreement. See "The Exchange Offer" and
"Description of the New Notes."
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000
principal amount of each series of New Notes
for each $1,000 principal amount of the
corresponding series of Old Notes validly
tendered pursuant to the Exchange Offer. As of
the date hereof, there is $450 million
aggregate principal amount of Old Notes
outstanding. The Company will issue the New
Notes to tendering holders of Old Notes on or
promptly after the Expiration Date. See "The
Exchange Offer -- Background" and "-- General."
RESALE OF THE NEW NOTES....... Based on interpretations by the staff of the
SEC set forth in no-action letters issued to
third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than (i) a broker-dealer
who purchased such Old Notes directly from the
Company for resale pursuant to Rule 144A or any
other available exemption under the Securities
Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
the holder is acquiring the New Notes in its
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate,
in a distribution of the New Notes. If the
Company's belief is inaccurate, holders of New
Notes who transfer New Notes in violation of
the prospectus delivery provisions of the
Securities Act and without an exemption from
registration thereunder may incur liability
under the Securities Act. The Company does not
assume or indemnify holders against any such
liability.
Each broker-dealer that receives New Notes in
exchange for Old Notes held for its own
account, as a result of market-making or other
trading activities, must acknowledge that it
will deliver a prospectus in connection with
any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by any such broker-dealer in connection
with resales of New Notes received in exchange
for Old Notes. The Company has agreed that, for
a period of 120 days after the Expiration Date,
it will make this Prospectus and any amendment
or supplement to this Prospectus available to
any such
5
<PAGE> 9
broker-dealer for use in connection with any
such resales. See "Plan of Distribution." The
Company believes that no registered holder of
the Old Notes is an "affiliate" (as such term
is defined in Rule 405 of the Securities Act)
of the Company.
This Exchange Offer is not being made to, nor
will the Company accept surrenders for exchange
from, holders of Old Notes in any jurisdiction
in which this Exchange Offer or the acceptance
thereof would not be in compliance with the
securities or blue sky laws of such
jurisdiction.
EXPIRATION OF EXCHANGE
OFFER......................... 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is
extended, in which case the term "Expiration
Date" means the latest date and time to which
the Exchange Offer is extended. See "The
Exchange Offer -- Expiration Date; Extensions;
Amendments."
ACCRUED INTEREST ON THE NEW
NOTES AND THE OLD NOTES....... New Notes of each series will bear interest at
the same rate and on the same terms as the Old
Notes of the corresponding series. Under the
Note Indenture, interest on each Old Note
ceases to accrue upon the exchange of such Old
Note for a New Note. Interest will accrue on
each New Note from the date on which it is
authenticated and will be payable to the person
in whose name such New Note is registered at
the close of business on the Regular Record
Date for such interest, which will be the April
15 or October 15 (whether or not a business
day), as the case may be, next preceding the
payment date for such interest. If, however,
the New Note is authenticated and delivered in
exchange for an Old Note (i) between a record
date for the payment of interest on that Old
Note and the related interest payment date, the
interest that accrues on the New Note from the
date of authentication thereof to that interest
payment date shall be payable to the person in
whose name such New Note was issued on its
issuance date or (ii) between an interest
payment date for the payment of interest on
that Old Note and the record date for the next
succeeding interest payment date, the interest
that accrues on the Old Note from the earlier
interest payment date to the date on which the
Old Note is exchanged for the New Note will be
paid to the person in whose name the New Note
is registered on the record date for that next
succeeding interest payment date. The Company
intends to cause the New Notes to be
authenticated on the date on which the New
Notes are exchanged for the Old Notes.
Therefore, the exchange will not result in the
loss of interest income to holders of Old Notes
exchanged for New Notes. Interest on the
Secured Notes is payable semiannually in cash
in arrears on May 1 and November 1 of each
year, commencing May 1, 1998, and the Secured
Notes will bear interest and mature as follows:
for the Secured Notes due 2009, interest at
7.43% with a maturity date of November 1, 2009,
and for the Secured Notes due 2017, interest at
7.88% with a maturity date of November 1, 2017.
See "The Exchange Offer -- Interest on the New
Notes."
TERMINATION OF THE EXCHANGE
OFFER......................... The Exchange Offer is not subject to any
condition, other than (i) that the Exchange
Offer does not violate applicable law or any
6
<PAGE> 10
applicable interpretation of the staff of the
SEC, (ii) that no action or proceeding shall
have been instituted or threatened in any court
or by or before any governmental agency or body
with respect to the Exchange Offer, and (iii)
that there shall not have been adopted or
enacted any law, statute, rule or regulation
that would render the Exchange Offer illegal.
There can be no assurance that any such
condition will not occur. Holders of Old Notes
will have certain rights against the Company
under the Registration Agreement should the
Company fail to consummate the Exchange Offer.
See "The Exchange Offer -- General" and
"-- Termination."
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with any other required
documentation, to the Exchange Agent (as
defined herein), at the address set forth
herein and therein by 5:00 p.m., New York City
time, on the Expiration Date. See "The Exchange
Offer -- Procedures for Tendering."
By executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, (i) it is acquiring the New
Notes pursuant to the Exchange Offer in the
ordinary course of business of the person
receiving such New Notes, whether or not such
person is the holder, (ii) neither the holder
nor any such other person is engaged in or
intends to engage in, or has an arrangement or
understanding with any person to participate
in, any distribution of such New Notes and
(iii) neither the holder nor any such other
person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company
or, if an affiliate, such holder will comply
with the registration and prospectus delivery
requirements of the Securities Act to the
extent applicable. See "The Exchange
Offer -- General" and "-- Procedures for
Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS............ Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender
on its behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial
holder must, prior to completing and executing
the Letter of Transmittal and delivering its
Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
holder's name or obtain a properly completed
bond power from the registered holder. The
transfer of record ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes (or who cannot complete the
procedure for book-entry transfer on a timely
basis) and a properly completed Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expira-
7
<PAGE> 11
tion Date may tender their Old Notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES......... Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer"
and described more fully under "The Exchange
Offer -- Termination") or waiver of such
conditions, the Company will accept for
exchange any and all Old Notes which are
properly tendered in the Exchange Offer and not
validly withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered on or promptly after the
Expiration Date. See "The Exchange
Offer -- General."
CERTAIN TAX CONSIDERATIONS.... The exchange pursuant to the Exchange Offer
will not be a taxable event for federal income
tax purposes. See "Certain Tax Considerations."
REGISTRATION RIGHTS........... In connection with the sale of the Old Notes,
the Company agreed to consummate the Exchange
Offer pursuant to an effective registration
statement or to cause resales of the Old Notes
to be registered under the Securities Act, and,
if neither such event occurs prior to April 23,
1998, interest payable on the Secured Notes
will increase by .50% per annum until one of
such events does occur. Holders who do not
participate in the Exchange Offer may
thereafter hold a less liquid security. See
"Risk Factors -- Consequences of Failure to
Exchange" and "The Exchange Offer."
EXCHANGE AGENT................ The Chase Manhattan Bank, the Trustee under the
Indenture, will serve as exchange agent (the
"Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange
Agent is: The Chase Manhattan Bank, 55 Water
Street, Room 234, North Building, New York, NY
10041, Attention: Carlos Esteves. For
information with respect to the Exchange Offer,
the telephone number for the Exchange Agent is
(212) 638-0828 and the facsimile number for the
Exchange Agent is (212) 638-7375 or (212)
344-9367.
USE OF PROCEEDS............... There will be no cash proceeds payable to the
Company from the issuance of the New Notes
pursuant to the Exchange Offer. The proceeds to
the Company from the sale of the Old Notes were
approximately $450 million, net of discounts
and commissions. Such proceeds were used by the
Company to refinance certain outstanding first
mortgage bonds and to repay short-term
borrowings.
8
<PAGE> 12
SUMMARY DESCRIPTION OF THE NEW NOTES
ISSUER........................ The Company.
SECURITIES TO BE OFFERED...... $150 million aggregate principal amount of New
Notes due 2009 and $300 million aggregate
principal amount of New Notes due 2017.
MATURITY...................... November 1, 2009 for the New Notes due 2009 and
November 1, 2017 for the New Notes due 2017.
RECORD DATES.................. April 15 and October 15 of each year,
commencing with April 15, 1998.
INTEREST PAYMENT DATES........ Payable in cash in arrears on May 1 and
November 1 of each year, commencing on May 1,
1998.
REDEMPTION.................... The New Notes will be redeemable in whole or in
part, at the option of the Company at any time,
at a redemption price equal to the greater of
(i) 100% of their principal amount and (ii) the
sum of the present values of the remaining
scheduled payments of principal and interest
thereon discounted to the date of redemption on
a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the
Treasury Yield (as defined herein) plus
twenty-five (25) basis points in the case of
the Secured Notes due 2009 or twenty-five (25)
basis points in the case of the Secured Notes
due 2017, plus in each case accrued interest to
the date of redemption. The New Notes will not
be subject to any sinking fund. See
"Description of the New Notes -- Redemption."
SECURITY...................... The Old Notes are, and the New Notes (together
with any Old Notes that remain outstanding
after the Exchange Offer is terminated) will
be, secured equally and ratably as to payment
of principal and interest by $450 million
aggregate principal amount of first mortgage
bonds issued by the Company ("1997 First
Mortgage Bonds") which have been issued,
pledged and delivered by the Company to the
Note Trustee. The terms of the 1997 First
Mortgage Bonds correspond to those of the
Secured Notes. See "1997 First Mortgage Bonds
and First Mortgage."
For a discussion of certain factors that should be considered by holders of the
Old Notes in connection with an investment in the New Notes, see "Risk Factors."
9
<PAGE> 13
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- 1997
1992 1993 1994 1995 1996 (UNAUDITED)(E)
------ ------ ------ ------ ------ --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues..................... $1,743 $1,751 $1,698 $1,769 $1,790 $1,781
Operating Income....................... $ 385 $ 222 $ 396 $ 398 $ 359 $ 365
Deferred Carrying Charges, Net(a)...... $ 59 $ (487) $ 25 $ 29 $ -- $ --
Write-off of Perry Nuclear Power Plant
Unit 2 ("Perry Unit 2").............. $ -- $ (351) $ -- $ -- $ -- $ --
Income (Loss) Before Interest
Charges.............................. $ 448 $ (347) $ 427 $ 429 $ 357 $ 363
Interest Charges....................... $ 243 $ 240 $ 242 $ 245 $ 240 $ 245
Earnings (Loss) Before Interest
Charges, Income Taxes, Depreciation
and Amortization ("EBITDA")(b)....... $ 722 $ (414) $ 708 $ 721 $ 636 $ 657
Net Income (Loss)...................... $ 205 $ (587) $ 185 $ 184 $ 117 $ 118
Ratio of Earnings to Fixed
Charges(c)........................... 1.89 --(d) 1.81 1.84 1.57 1.61
Ratio of EBITDA to Interest Charges.... 2.97 -- 2.93 2.94 2.65 2.68
BALANCE SHEET DATA (END OF PERIOD)
Total Assets........................... $8,123 $7,159 $7,151 $7,152 $6,878 $7,282
Long-Term Debt......................... $2,515 $2,793 $2,543 $2,666 $2,441 $3,072
Preferred Stock
With Mandatory Redemption
Provisions........................ $ 314 $ 285 $ 246 $ 215 $ 186 $ 171
Without Mandatory Redemption
Provisions........................ $ 144 $ 241 $ 241 $ 241 $ 238 $ 238
Common Stock Equity.................... $1,865 $1,040 $1,058 $1,127 $1,045 $1,044
Total Capitalization................... $4,838 $4,359 $4,088 $4,249 $3,910 $4,525
</TABLE>
- ---------------
(a) In 1993, the Company wrote off $519 million of deferred carrying charges.
Deferrals under an October 1992 rate stabilization program for the Company
ended in November 1995, and amortization of the deferrals began in December
1995 (see Note 7(d) to the Company's 1996 financial statements in the
Financial Statements Section, as hereinafter defined).
(b) EBITDA consists of income before interest charges, plus income taxes charged
to operating expenses and to other income, plus depreciation and
amortization. EBITDA is not a measure of operating results, but rather is a
measure of debt service ability. EBITDA should not be considered as an
alternative to net income or any other measure of performance required by
generally accepted accounting principles or as an indicator of the Company's
operating performance.
(c) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of net income plus fixed charges and current and deferred
income taxes. Fixed charges consist of total interest charges (including
interest on first mortgage bonds, bank loans, commercial paper, pollution
control notes and other interest included in operation expenses;
amortization of net premium, discount and expense on debt; and capitalized
interest on nuclear fuel lease obligations) and an estimate of the interest
element of rentals (including the interest component of certain sale and
leaseback rentals, leased nuclear fuel in the reactor and other
miscellaneous rentals).
(d) Not meaningful due to a net loss. For the year ended December 31, 1993, the
net loss before taxes and fixed charges was $502 million. Fixed charges
during the period were $334 million. The net loss before income taxes and
fixed charges included write-offs of $986 million related to the Company's
investment in Perry Unit 2 and phase-in plan deferred charges, and other
charges of $79 million attributable to an early retirement program.
Excluding these write-offs, the ratio of earnings to fixed charges would
have been 1.68.
(e) The financial information is for the 12 months ended September 1997 and
therefore does not include the impact of the merger of Centerior Energy and
Ohio Edison. See "Accounting Matters."
10
<PAGE> 14
RISK FACTORS
Holders of the Secured Notes should consider carefully the factors set
forth below, as well as the other information contained in this Prospectus, in
evaluating an investment in the Secured Notes. The information below is
qualified in its entirety by reference to the information in the Company's
financial statements included as part of this Prospectus and in the documents
incorporated in this Prospectus by reference and should be read in conjunction
with such information and the other information set forth in this Prospectus.
FINANCING CAPABILITY
At September 30, 1997, the Company had total long-term debt of
approximately $3,072 million (68% of total capitalization), preferred stock
subject to mandatory redemption provisions of approximately $171 million,
current maturities of approximately $74 million, and short-term borrowings of
$60 million. The Company also has future minimum lease payments of approximately
$1,454 related to generating facility leases.
At September 30, 1997, the Company had approximately $3,230 million in
aggregate principal amount of first mortgage bonds outstanding under its
mortgage (including first mortgage bonds pledged to secure certain debt
obligations), and was not able to issue any additional first mortgage bonds
except in connection with refinancings. The Company expects its foreseeable
future cash needs to be satisfied with internally generated cash and short-term
borrowings and, therefore, that it will not need to issue first mortgage bonds
except in connection with refinancings.
The Company and Toledo Edison have the ability to borrow under a $125
million revolving credit facility that matures in May 1998. At September 30,
1997, there were no borrowings under this facility.
There are no restrictions on the Company's ability to issue preferred or
preference stock.
The Company's current credit ratings are as follows:
<TABLE>
<CAPTION>
STANDARD & POOR'S MOODY'S
----------------- -------------
<S> <C> <C>
First mortgage bonds.................................... BB+ Ba1
Unsecured notes......................................... BB- Ba3
Preferred stock......................................... BB- b1
</TABLE>
LACK OF PUBLIC MARKET FOR THE SECURED NOTES
The Old Notes currently have no trading market. There can be no assurance
that an active trading market for the New Notes will develop or be sustained.
The Company does not presently intend to apply for listing of the New Notes on
any stock exchange or trading market. If the New Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and the
financial condition and performance of, and prospects for, the Company. The
Placement Agents have advised the Company that they currently intend to make a
market in the New Notes. However, the Placement Agents are not obligated to do
so, and any market-making activity with respect to the New Notes may be
discontinued at any time without notice.
CONSEQUENCES OF FAILURE TO EXCHANGE
Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities and will not retain any rights under the
Registration Agreement, except in certain limited circumstances. The Old Notes
will continue to be subject to restrictions on transfer such that: (i) Old Notes
may be resold only if registered pursuant to the Securities Act or if an
exemption from registration is available thereunder, (ii) Old Notes will bear a
legend restricting transfer in the absence of registration or an exemption
therefrom and (iii) a holder of Old Notes who desires to sell or otherwise
dispose of all or any part of its Old Notes under an exemption from registration
under the Securities Act, if requested by the Company, must
11
<PAGE> 15
deliver to the Company an opinion of independent counsel, reasonably
satisfactory in form and substance to the Company, to the effect that such
exemption is available.
ACCOUNTING MATTERS
On November 7, 1997, Centerior Energy consummated its merger with Ohio
Edison. The merger was accounted for using the purchase method of accounting and
the applicable effects were pushed down to the financial statements of the
Company as of the merger date. See "Combined Pro Forma Condensed Financial
Statements for the Company and Toledo Edison" for the accounting effects on the
Company and Toledo Edison of the merger of Centerior Energy and Ohio Edison. The
significant accounting adjustments in these pro forma statements are a result of
the implementation of the FirstEnergy Regulatory Plan (as hereinafter defined)
which is discussed below.
Upon consummation of the merger of Centerior Energy and Ohio Edison, the
FirstEnergy Regulatory Plan went into effect. Pursuant to the terms of the
FirstEnergy Regulatory Plan, the Public Utilities Commission of Ohio ("PUCO")
has authorized the Company and Toledo Edison to recognize additional
depreciation related to their generating assets and additional amortization of
regulatory assets during the regulatory plan period of at least $2 billion more
than the amounts that would have been recognized if the regulatory plans were
not in effect. For regulatory purposes only, these additional charges will be
reflected over the rate plan period. The FirstEnergy Regulatory Plan does not
provide for full recovery of the Company's and Toledo Edison's nuclear
operations. Accordingly, the Company and Toledo Edison ceased application of
Statement of Financial Accounting Standards No. 71 "Accounting for the Effects
of Certain Types of Regulations" (SFAS 71) for their nuclear operations when
implementation of the FirstEnergy Regulatory Plan became probable. As a result,
regulatory assets of the Company representing customer receivables for future
income taxes related to nuclear assets of $499 million were written off in
October 1997. At the consummation of the merger in November 1997, the Company
recognized a fair value purchase accounting adjustment that decreased the
carrying value of its nuclear assets by approximately $1.71 billion. The fair
value adjustment recognized for financial reporting purposes together with a
similar fair value adjustment for Toledo Edison will ultimately satisfy the $2
billion asset reduction commitment contained in the Company's and Toledo
Edison's regulatory plan.
COMPETITION
The Company faces competitive challenges due to regulatory and tax
constraints and its high retail cost structure.
Currently, the Company's most pressing competition comes from municipal
electric systems in its service areas. The Company's rates are generally higher
than those of municipal systems due largely to such systems' exemption from
taxation, the lower cost financing available to them, the continued availability
to them of lower cost power through short-term power purchases and their access
to cheaper governmental power. The Company faces the threat that municipalities
in its service area could establish new electric systems and continue expanding
existing systems. See "The Company -- Competition" and "Regulatory Matters."
Structural changes in the electric utility industry from actions by both
federal and state regulatory bodies are continuing to place downward pressure on
prices and to increase competition for customers. In 1996, the Federal Energy
Regulatory Commission ("FERC") adopted rules relating to open-access
transmission services. The open-access rules require utilities to deliver power
from other utilities or generation sources to their wholesale customers at
nondiscriminatory prices.
A number of states have enacted transition legislation which provides for
introduction of competition for retail electric business and recovery of
stranded investment. Several groups in Ohio are studying the possible
introduction of retail wheeling and stranded investment recovery legislation.
Retail wheeling occurs when a customer obtains power from a utility company
other than its local utility. The term "stranded investment" generally refers to
fixed costs approved for recovery under traditional regulatory methods that
would become unrecoverable, or "stranded," as a result of legislative changes
which allow for widespread competition. The PUCO is sponsoring discussions among
a group of business, utility and consumer interests to explore ways of
12
<PAGE> 16
promoting competitive options without unduly harming the interests of utility
company share owners or customers. The PUCO also has introduced two pilot
projects, both intended as initial steps to introduce competitive elements into
the Ohio electric utility business. A bill to restructure the electric utility
industry in Ohio has been introduced in the Ohio House of Representatives. A
bipartisan committee from both legislative houses has been formed to study the
issue. On January 6, 1998, the co-chairs of the Ohio General Assembly's Joint
Select Committee on Electric Industry Deregulation released their draft report
of a plan which proposes to give customers a choice from whom they buy
electricity beginning January 1, 2000. No consensus has been reached by the full
Committee; in the meantime, legislation consistent with the co-chairs' draft
report may be introduced into the General Assembly by one or both of the
co-chairs. The Company cannot predict when or if this legislation will be
introduced and if it will be passed into law. The Company continues to study the
potential effects that such legislation would have on its financial position and
results of operations.
The Company cannot predict when and to what extent retail wheeling or other
forms of competition will be allowed. The Company believes that pure competition
(unrestricted retail wheeling for all customer classifications) is not imminent
and that any transition to pure competition will be in phases. The FERC and the
PUCO have acknowledged the need to provide at least partial recovery of stranded
investment as greater competition is permitted and, therefore, the Company
believes that there will be a mechanism developed for the recovery of at least
some stranded investment. However, due to the uncertainty involved, there is a
risk in connection with the introduction of retail wheeling that some of the
Company's assets may not be fully recovered. See "The Company -- Competition"
and "2. Conjunctive Electric Service ("CES")" under "Part II. Other Information"
of the Second Quarter 1997 Form 10-Q in the Financial Statements Section.
NUCLEAR OPERATIONS
The Company has interests in three nuclear generating units -- Beaver
Valley Power Station Unit 2 ("Beaver Valley Unit 2"), Davis-Besse Nuclear Power
Station ("Davis-Besse") and Perry Nuclear Power Plant Unit 1 ("Perry Unit 1").
Toledo Edison operates Davis-Besse and Cleveland Electric operates Perry Unit 1.
Duquesne Light Company ("Duquesne") operates Beaver Valley Unit 2. See "The
Company -- Nuclear Units."
The Company's three nuclear units may be impacted by activities or events
beyond its control. Operating nuclear units have experienced unplanned outages
or extensions of scheduled outages because of equipment problems or new
regulatory requirements. A major accident at a nuclear facility anywhere in the
world could cause the United States Nuclear Regulatory Commission ("NRC") to
limit or prohibit the operation or licensing of any domestic nuclear unit. If
one of the Company's nuclear units is taken out of service for an extended
period for any reason, including an accident at such unit or any other nuclear
facility, the Company cannot predict whether regulatory authorities would impose
unfavorable rate treatment. Such treatment could include taking the affected
unit out of rate base, thereby not permitting the Company to recover its
investment in and earn a return on that asset, or disallowing certain
construction or maintenance costs. An extended outage coupled with unfavorable
rate treatment could have a material adverse effect on the Company's financial
condition, cash flows and results of operations.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to identify the applicable year. Any of our programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in system failures or
miscalculations.
We currently believe that with modifications to existing software and
conversions to new software, the Year 2000 Issue will pose no significant
operational problems for our computer systems as so modified and converted. If
these modifications and conversions are not made, or are not completed on a
timely basis, the Year 2000 Issue could have a material impact on our
operations.
We have initiated formal communications with many of our major suppliers to
determine the extent to which we are vulnerable to those third parties' failure
to resolve their own Year 2000 problems. Our total Year 2000 project cost and
estimates to complete are based on currently available information and do not
include
13
<PAGE> 17
the estimated costs and time associated with the impact of a third party's Year
2000 issue. There can be no guarantee that the failure of other companies to
resolve their own Year 2000 issues will not have a material adverse effect on
us.
We are utilizing both internal and external resources to reprogram and/or
replace and test the Company's software for Year 2000 modifications. Most of our
Year 2000 problems will be resolved through system replacements. The different
phases of our Year 2000 project will be completed at various dates, most of
which occur in 1999. We plan to complete the entire Year 2000 project by
mid-December 1999. Of the total project cost, approximately $22 million will be
capitalized since those costs are attributable to the purchase of new software
for total system replacements (i.e., the Year 2000 solution comprises only a
portion of the benefit resulting from the system replacements). The remaining $3
million will be expensed as incurred over the next two years. To date, we have
incurred approximately $350,000 related to the assessment of, and preliminary
efforts in connection with, our Year 2000 project and the development of a
remediation plan.
The costs of the project and the date on which we plan to complete the Year
2000 modifications are based on management's best estimates, which were derived
from numerous assumptions of future events including the continued availability
of certain resources, and other factors. However, there can be no guarantee that
this project will be completed as planned and actual results could differ
materially from the estimates. Specific factors that might cause material
differences include, but are not limited to, the availability and cost of
trained personnel, the ability to locate and correct all relevant computer code,
and similar uncertainties.
14
<PAGE> 18
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- 1997
1992 1993 1994 1995 1996 (UNAUDITED)(e)
------ ------ ------ ------ ------ --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues...................... $1,743 $1,751 $1,698 $1,769 $1,790 $1,781
Fuel and Purchased Power Expense........ $ 434 $ 423 $ 391 $ 413 $ 408 $ 424
Other Operation and Maintenance
Expense............................... $ 410 $ 598 $ 394 $ 418 $ 426 $ 445
Depreciation and Amortization Expense... $ 179 $ 182 $ 195 $ 196 $ 210 $ 214
Operating Income........................ $ 385 $ 222 $ 396 $ 398 $ 359 $ 365
Deferred Carrying Charges, Net (a)...... $ 59 $ (487) $ 25 $ 29 $ -- $ --
Write-off of Perry Unit 2............... $ -- $ (351) $ -- $ -- $ -- $ --
Income (Loss) Before Interest Charges... $ 448 $ (347) $ 427 $ 429 $ 357 $ 363
Interest Charges........................ $ 243 $ 240 $ 242 $ 245 $ 240 $ 245
Earnings (Loss) Before Interest Charges,
Income Taxes, Depreciation and
Amortization ("EBITDA") (b)........... $ 722 $ (414) $ 708 $ 721 $ 636 $ 657
Net Income (Loss)....................... $ 205 $ (587) $ 185 $ 184 $ 117 $ 118
Preferred Dividend Requirements......... $ 41 $ 45 $ 45 $ 43 $ 39 $ 37
Earnings (Loss) on Common Stock......... $ 164 $ (632) $ 140 $ 141 $ 78 $ 81
Ratio of Earnings to Fixed Charges
(c)................................... 1.89 --(d) 1.81 1.84 1.57 1.61
Ratio of EBITDA to Interest Charges..... 2.97 -- 2.93 2.94 2.65 2.68
OTHER DATA
Utility Plant Additions................. $ 156 $ 175 $ 156 $ 155 $ 111 $ 114
BALANCE SHEET DATA (END OF PERIOD)
Total Assets............................ $8,123 $7,159 $7,151 $7,152 $6,878 $7,282
Current Portion of Long-Term Debt and
Preferred Stock....................... $ 310 $ 70 $ 282 $ 177 $ 145 $ 74
Long-Term Debt.......................... $2,515 $2,793 $2,543 $2,666 $2,441 $3,072
Preferred Stock
With Mandatory Redemption
Provisions.......................... $ 314 $ 285 $ 246 $ 215 $ 186 $ 171
Without Mandatory Redemption
Provisions.......................... $ 144 $ 241 $ 241 $ 241 $ 238 $ 238
Common Stock Equity..................... $1,865 $1,040 $1,058 $1,127 $1,045 $1,044
Total Capitalization............. $4,838 $4,359 $4,088 $4,249 $3,910 $4,525
</TABLE>
- ---------------
(a) In 1993, the Company wrote off $519 million of deferred carrying charges.
Deferrals under an October 1992 rate stabilization program for the Company
ended in November 1995, and amortization of the deferrals began in December
1995 (see Note 7(d) to the Company's 1996 financial statements in the
Financial Statements Section).
(b) EBITDA consists of income before interest charges, plus income taxes charged
to operating expenses and to other income, plus depreciation and
amortization. EBITDA is not a measure of operating results, but rather is a
measure of debt service ability. EBITDA should not be considered as an
alternative to net income or any other measure of performance required by
generally accepted accounting principles or as an indicator of the Company's
operating performance.
(c) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of net income plus fixed charges and current and deferred
income taxes. Fixed charges consist of total interest charges (including
interest on first mortgage bonds, bank loans, commercial paper, pollution
control notes and other interest included in operation expenses;
amortization of net premium, discount and expense on debt; and capitalized
interest on nuclear fuel lease obligations) and an estimate of the interest
element of rentals (including the interest component of certain sale and
leaseback rentals, leased nuclear fuel in the reactor and other
miscellaneous rentals).
(d) Not meaningful due to a net loss. For the year ended December 31, 1993, the
net loss before taxes and fixed charges was $502 million. Fixed charges
during the period were $334 million. The net loss before income taxes and
fixed charges included write-offs of $986 million related to the Company's
investment in Perry Unit 2 and phase-in plan deferred charges, and other
charges of $79 million attributable to an early retirement program.
Excluding these write-offs, the ratio of earnings to fixed charges would
have been 1.68.
(e) The financial information is for the 12 months ended September 1997 and
therefore does not include the impact of the merger between Centerior Energy
and Ohio Edison. See "Accounting Matters."
15
<PAGE> 19
THE COMPANY
GENERAL
The Company, which was incorporated under the laws of the State of Ohio in
1892, is a public utility engaged in the generation, purchase, transmission,
distribution and sale of electric energy in an area of approximately 1,700
square miles in northeastern Ohio, including the City of Cleveland. The Company
also provides electric energy at wholesale to other electric utility companies
and to two municipal electric systems (directly and through AMP-Ohio) in its
service area. The Company serves approximately 753,000 customers and derives
approximately 77% of its total electric retail revenue from customers outside
the City of Cleveland. Principal industries served by the Company include those
producing steel and other primary metals; automotive and other transportation
equipment; chemicals; electrical and nonelectrical machinery; fabricated metal
products; and rubber and plastic products. Nearly all of the Company's operating
revenues are derived from the sale of electric energy. At December 31, 1997, the
Company had 3,162 employees of which 1,728 employees (about 55% of total
employees) were represented by one union.
The Company is a wholly owned electric utility subsidiary of FirstEnergy, a
public utility holding company. In addition to the Company, the direct or
indirect public utility subsidiaries of FirstEnergy are Ohio Edison, Penn Power
and Toledo Edison. The Company, Ohio Edison, Penn Power and Toledo Edison
operate as separate companies, each servicing the customers in its respective
service area.
COMPETITION
The Company competes in its service area with suppliers of natural gas to
satisfy customers' energy needs with regard to heating and appliance usage. The
Company also is engaged in competition to a lesser extent with suppliers of oil
and liquefied natural gas for heating purposes and with suppliers of
cogeneration equipment. One competitor provides steam for heating purposes and
provides chilled water for cooling purposes in certain areas of downtown
Cleveland.
The Company also competes with municipally owned electric systems within
its service area. Several communities have evaluated municipalization of
electric service and decided to continue service from the Company. Officials in
other communities have indicated an interest in evaluating the municipalization
issue.
The Company faces continuing competition from locations outside its service
area which are promoted by governmental and private agencies in attempts to
influence potential and existing commercial and industrial customers to locate
in their respective areas.
The Company also periodically competes with other producers of electricity
for sales to electric utilities which are in the market for bulk power
purchases. The Company has interconnections with other electric utilities and
has a transmission system capable of transmitting ("wheeling") power between the
Midwest and the East.
In the future, the Company will encounter an increasingly competitive
environment as a result of the structural changes taking place in the electric
utility industry. For a discussion of these changes, including open-access
transmission, retail wheeling and stranded investment considerations, see "Risk
Factors -- Competition" and "Outlook -- Competition" in Management's Financial
Analysis contained in the Financial Statements.
Located within the Company's service area are two municipally owned
electric systems. The Company supplies a small portion of those systems' power
needs at wholesale rates.
One of those systems, Cleveland Public Power ("CPP"), is operated by the
City of Cleveland in competition with the Company. CPP is primarily an electric
distribution system which currently supplies electric power in approximately 60%
of the City's geographical area and to approximately 35% (about 75,000) of the
electric consumers in the City -- equal to about 10% of all customers served by
the Company. CPP's kilowatt-hour sales and revenues are equal to about 6% of the
Company's kilowatt-hour sales and revenues. Much of the area served by CPP
overlaps that of the Company. For all classes of customers, the Company's rates
are higher than CPP's rates due largely to CPP's exemption from taxation, the
lower-cost financing available to CPP, the continued availability to CPP of
lower cost power through short-term power purchases and CPP's access to cheaper
governmental power.
16
<PAGE> 20
The Company makes power available to CPP on a wholesale basis, subject to
FERC regulation. In 1997, the Company directly and through AMP-Ohio provided a
negligible amount of CPP's energy requirements. CPP's power is purchased from
other sources and wheeled over the Company's transmission systems. As part of
the merger of Centerior Energy and Ohio Edison, the Company has agreed to
additional interconnections with CPP.
On June 11, 1997, an agreement was reached between FirstEnergy and the City
of Cleveland that provides the framework for resolving transmission and
distribution issues between the Company and CPP. The Company believes that the
agreement will enable both the Company and CPP to better serve their customers
while enhancing opportunities for economic development and growth within their
respective service areas. In a related development, an agreement was also
reached with AMP-Ohio that forms a framework for resolving certain transmission
and operating issues. As a result of the agreements, all pending litigation
involving the City of Cleveland or CPP and the Company has been stayed to allow
for settlement discussions.
REGULATORY MATTERS
On January 30, 1997, the PUCO approved a rate reduction and economic
development plan for the Company and Toledo Edison which became effective on
November 8, 1997 and will extend through 2006 ("FirstEnergy Regulatory Plan").
The FirstEnergy Regulatory Plan provides for rate reductions, frozen fuel cost
factors, economic development incentive prices, an energy-efficiency program and
an earnings cap. The FirstEnergy Regulatory Plan requires, for regulatory
purposes, a revaluation of or an accelerated reduction of investment in nuclear
plant and certain regulatory assets (excluding amounts due from customers for
future federal income taxes) by at least $2 billion by the end of 2005. The
FirstEnergy Regulatory Plan does not provide for full recovery of the Company's
and Toledo Edison's nuclear operations. Accordingly, the Company and Toledo
Edison ceased application of SFAS 71 for their nuclear operations when
implementation of the FirstEnergy Regulatory Plan became probable. As a result,
regulatory assets of the Company representing customer receivables for future
income taxes related to nuclear assets of $499 million were written off in
October 1997. At the consummation of the merger in November 1997, the Company
recognized a fair value purchase accounting adjustment that decreased the
carrying value of its nuclear assets by approximately $1.71 billion. The fair
value adjustment recognized for financial reporting purposes together with a
similar fair value adjustment for Toledo Edison will ultimately satisfy the $2
billion asset reduction commitment contained in the Company's and Toledo
Edison's regulatory plan.
The Company's nonnuclear operations continue to comply with the provisions
of SFAS 71 which governs accounting for the effects of certain types of rate
regulation. The Company continually monitors changes in market and regulatory
conditions and considers the effects of such changes in assessing the continuing
applicability of SFAS 71. Criteria that could give rise to discontinuation of
the application of SFAS 71 include: (1) increasing competition which
significantly restricts the Company's ability to charge prices which allow it to
recover operating costs, earn a fair return on invested capital and recover the
amortization of regulatory assets and (2) a significant change in the manner in
which rates are set by the PUCO from cost-based regulation to some other form of
regulation. In the event the Company determines it no longer meets the criteria
for following SFAS 71 for its nonnuclear operations, the Company would be
required to record a before-tax charge to write off its remaining regulatory
assets which total approximately $580 million. In addition, the Company would be
required to evaluate whether the changes in the competitive and regulatory
environment which led to discontinuing the application of SFAS 71 would also
result in an impairment of the net book values of the related property, plant
and equipment.
Notwithstanding the effect of the FirstEnergy Regulatory Plan on the
Company's nuclear generating assets, the Company believes it is reasonable to
expect that rates will be set at levels that will recover all current and
anticipated costs associated with its nonnuclear operations, including all
associated regulatory assets, and such rates can be charged to and collected
from customers. If there is a change in the Company's evaluation of the
competitive environment, regulatory framework or other factors, the Company may
be required to record material charges to earnings. See "Management's Financial
Analysis" in the Financial Statements Section.
17
<PAGE> 21
SALES OF ELECTRICITY
Kilowatt-hour sales by the Company follow a seasonal pattern marked by
increased customer usage in the summer for air conditioning and in the winter
for heating. Historically, the Company has experienced its heaviest demand for
electric service during the summer months because of a significant air
conditioning load on its system and a relatively low amount of electric heating
load in the winter.
The Company's largest customer is a steel manufacturer which has two major
steel producing facilities. Sales to these facilities accounted for 2.4% of the
Company's 1997 total electric operating revenues. The loss of these facilities
would reduce the Company's annual net income by about $17 million based on 1997
sales levels.
FUEL SUPPLY
Generation by type of fuel for 1997 was 63% coal-fired and 37% nuclear.
Coal. In 1997, the Company burned 5 million tons of coal for electric
generation. The Company normally maintains a reserve supply of coal sufficient
for about 20 days of normal operations. On February 1, 1998, this reserve was
about 30 days for plants operated by the Company.
In 1997, about 62% of the Company's coal requirements were purchased under
long-term contracts, with the longest remaining term being almost 5 years. In
most cases, these contracts provide for adjusting the price of the coal on the
basis of changes in coal quality and mining costs. The sulfur content of the
coal purchased under these contracts ranges from less than 1% to about 4%.
Additionally, about 34% of the Company's coal requirements were purchased under
short-term contracts (nine to twelve-month terms) with price adjustments on the
basis of coal quality. The sulfur content of the short-term contracts ranged
from 1.5% to 1.9%. The balance of the Company's coal was purchased on the spot
market with sulfur content ranging from less than 1% to 4%.
The Company's least cost plan for complying with the Clean Air Act of 1970
and its 1990 Amendments, which was included in the agreement approved by the
PUCO in February 1993 in connection with the Company's 1992 long-term forecast
and updated in 1995 proceedings, calls for compliance either through the use of
low-sulfur coal or the use of high sulfur-coal in combination with emission
allowances.
The Company is a member of the Central Area Power Coordination Group
("CAPCO Group"), which was created in 1967 by the Company, Toledo Edison, Ohio
Edison, Duquesne and Ohio Edison's wholly owned subsidiary, Penn Power. The
CAPCO Group companies have a long-term contract with Quarto Mining Company
("Quarto") and Consolidation Coal Company for the supply of about 75%-85% of the
annual coal needs of the Bruce Mansfield Generating Plant ("Mansfield Plant").
The contract is scheduled to run through at least the end of 1999, and the price
of coal is adjustable to reflect changes in labor, materials, transportation and
other costs. The CAPCO Group companies have guaranteed, severally and not
jointly, the debt and lease obligations incurred by Quarto to develop, equip and
operate two of the mines which supply the Mansfield Plant. At December 31, 1997,
the total of Quarto's debt and lease obligations guaranteed by the Company was
$14.3 million. The Company expects that Quarto revenues from sales of coal to
the CAPCO Group companies will continue to be sufficient for Quarto to meets its
debt and lease obligations.
Nuclear. The acquisition and utilization of nuclear fuel involves six
distinct steps: (i) supply of uranium oxide raw material, (ii) conversion to
uranium hexafluoride, (iii) enrichment, (iv) fabrication into fuel assemblies,
(v) utilization as fuel in a nuclear reactor and (vi) storing or disposing of
spent fuel. The Company has inventories of raw material sufficient to provide
nuclear fuel through 1998 for the operation of its nuclear generating units and
has contracts for fabrication services for all that fuel. The CAPCO Group
companies have a contract with the United States Enrichment Corporation ("USEC")
which will supply the needed enrichment services for their nuclear units' fuel
supply. However, the amount of enrichment services under the contract varies by
CAPCO Group company, with the Company's enrichment services reduced to 70% in
1998-1999, 50% in 2003-2005 and reduced to 0% in 2006 and beyond. However the
additional required enrichment services are available. Substantial additional
fuel will have to be obtained in the future over the
18
<PAGE> 22
remaining useful lives of the units. There is a plentiful supply of uranium
oxide raw material to meet the industry's nuclear fuel needs.
Oil. The Company has adequate supplies of fuel oil for its oil-fired
electric generating units which are used primarily as reserve and peaking
capacity.
NUCLEAR UNITS
The Company's generating facilities include, among others, three nuclear
units owned or leased by the CAPCO Group -- Perry Unit 1, Beaver Valley Unit 2
and Davis-Besse. These three units are in commercial operation. The Company has
responsibility for operating Perry Unit 1, Duquesne has responsibility for
operating Beaver Valley Unit 2 and Toledo Edison has responsibility for
operating Davis-Besse. The Company owns 31.11% of Perry Unit 1, 24.47% of Beaver
Valley Unit 2 and 51.38% of Davis-Besse. The Company also leases, jointly with
Toledo Edison, an additional 18.26% of Beaver Valley Unit 2 as a result of a
September 1987 sale and leaseback transaction (see Note 2 to the 1996 financial
statements in the Financial Statements Section).
Davis-Besse was placed in commercial operation in 1977, and its operating
license expires in 2017. Perry Unit 1 and Beaver Valley Unit 2 were placed in
commercial operation in 1987, and their operating licenses expire in 2026 and
2027, respectively.
All three nuclear units have received generally favorable evaluations from
the NRC in their most recent Systematic Assessment of Licensee Performance
("SALP") reviews. Each of the functional areas evaluated is rated according to
three performance categories, with category 1 indicating performance
substantially exceeding regulatory requirements and that reduced NRC attention
may be appropriate; category 2 indicating performance above that needed to meet
regulatory requirements and that NRC attention may be maintained at normal
levels; and category 3 indicating performance does not significantly exceed that
needed to meet minimal regulatory requirements and that NRC attention should be
increased above normal levels.
The most recent review periods and SALP review scores for Beaver Valley
Unit 2, Perry Unit 1 and Davis-Besse are:
<TABLE>
<CAPTION>
BEAVER VALLEY UNIT 2 PERRY UNIT 1 DAVIS-BESSE
-------------------- -------------- ---------------
<S> <C> <C> <C>
SALP Review Period.................. 6/4/95-9/28/96 1/8/95-9/14/96 1/22/95-1/18/97
Operations.......................... 2 2 2
Engineering......................... 2 2 1
Maintenance......................... 1 2 1
Plant Support....................... 2 2 1
</TABLE>
In 1980, Congress passed the Low-Level Radioactive Waste Policy Act which
provides that the disposal of low-level radioactive waste is the responsibility
of the state where such waste is generated. The Act encourages states to form
compacts among themselves to develop regional disposal facilities. Failure by a
state or compact to begin implementation of a program could result in access
denial to the two facilities currently accepting low-level radioactive waste.
Ohio is part of the Midwest Compact and has responsibility for siting and
constructing a disposal facility. In June 1995, the Ohio legislature authorized
the siting, construction and operation of a disposal facility. In addition, the
South Carolina legislature voted to allow out-of-region generators (such as the
Company's nuclear units) to resume shipments of low-level radioactive waste to
the Barnwell disposal facility. On June 26, 1997, the Midwest Compact Commission
voted to halt further siting activities in Ohio due to the availability of
disposal capacity at both the Barnwell facility and the Envirocare facility in
Utah. The Company has also constructed interim storage facilities to house the
waste at each nuclear site. See "5. Ohio Abandons Nuclear Waste Project" under
"Part II. Other Information" of the Second Quarter 1997 Form 10-Q in the
Financial Statements Section.
Off-site disposal of spent nuclear fuel is unavailable, but the CAPCO Group
companies have contracts with the U.S. Department of Energy ("DOE") which
provide for the future acceptance of spent fuel for disposal by the federal
government. On December 17, 1996, the DOE notified the Company that it would be
unable to begin acceptance of spent fuel for disposal by January 31, 1998 as
mandated by Section
19
<PAGE> 23
302(a)(5)(B) of the Nuclear Waste Policy Act ("NWPA"). As a result, the Company
along with 35 other nuclear utilities and 46 state agencies have asked for
federal court approval to stop payments into the Nuclear Waste Fund and for an
order requiring the DOE to take immediate action to comply with NWPA. On-site
storage capacity at Davis-Besse, Perry Unit 1 and Beaver Valley Unit 2 should be
sufficient through 2017, 2011 and 2013, respectively.
See "Risk Factors -- Nuclear Operations" and Note 5(a) to the 1996
financial statements and "Outlook -- Nuclear Operations" in Management's
Financial Analysis contained in the Financial Statements Section for a
discussion of potential risks facing the Company as an owner and lessee of
nuclear generating units.
FINANCING CAPABILITY
At September 30, 1997, the Company had total long-term debt of
approximately $3,072 million (68% of total capitalization), preferred stock
subject to mandatory redemption provisions of approximately $171 million,
current maturities of approximately $74 million, and short-term borrowings of
$60 million. The Company also has future minimum lease payments of approximately
$1,454 related to generating facility leases.
At September 30, 1997, the Company had approximately $3,230 million in
aggregate principal amount of first mortgage bonds outstanding under its
mortgage (including first mortgage bonds pledged to secure certain debt
obligations), and was not able to issue any additional first mortgage bonds
except in connection with refinancings. The Company expects its foreseeable
future cash needs to be satisfied with internally generated cash and short-term
borrowings and, therefore, that it will not need to issue first mortgage bonds
except in connection with refinancings.
The Company and Toledo Edison have the ability to borrow under a $125
million revolving credit facility and matures in May 1998. At September 30,
1997, there were no borrowings under this facility.
There are no restrictions on the Company's ability to issue preferred or
preference stock.
The Company's current credit ratings are as follows:
<TABLE>
<CAPTION>
STANDARD & POOR'S MOODY'S
----------------- -------
<S> <C> <C>
First mortgage bonds....................................... BB+ Ba1
Unsecured notes............................................ BB- Ba3
Preferred stock............................................ BB- b1
</TABLE>
Standard & Poor's has assigned the Secured Notes a rating of "BB+" and
Moody's has assigned the Secured Notes a rating of "Ba1." Any desired further
explanation of the significance of these ratings should be obtained from
Standard & Poor's or Moody's, respectively. The Company furnished Standard &
Poor's and Moody's with certain information and materials with respect to the
Secured Notes and the Company. Generally, rating agencies base their ratings on
the information and materials so furnished to them and on their own
investigations, studies and assumptions. There is no assurance that such ratings
will continue for any given period of time or that they will not be lowered or
withdrawn entirely if, in the judgment of the rating agencies, circumstances so
warrant. Any such change in or withdrawal of such ratings could have an adverse
effect on the market price of the Secured Notes. The Company has not applied for
a rating with respect to the Secured Notes from any other credit rating agency.
CONSTRUCTION PROGRAM
The Company carries on a continuous program of constructing transmission,
distribution and general facilities and modifying existing generating facilities
to meet anticipated demand for electric service and to comply with governmental
regulations. The Company's 1997 long-term (20-year) forecast, as filed with the
PUCO, projects long-term annual growth rates in peak demand and kilowatt-hour
sales of 0.5% and 0.8%, respectively after demand-side management
considerations. The Company's integrated resource plan for the 1990s (which is
included in the long-term forecast) combines peak clipping demand-side
management programs with maximum utilization of existing generating capacity to
postpone the need for new generating
20
<PAGE> 24
units until the next decade. The Company's Lake Shore Plant ("Lake Shore") Unit
18, a 245,000-kilowatt unit which was placed on cold standby status in October
1993, is scheduled to resume active status in 2000.
According to the current long-term integrated resource plan, the Company
does not plan to put into service any new generating capacity until 2008.
The following tables show, categorized by major components, the
construction expenditures by the Company during 1995, 1996 and 1997 and the
estimated cost of its construction programs for 1998 through 2002, in each case
including allowance for funds used during construction and excluding nuclear
fuel:
<TABLE>
<CAPTION>
ACTUAL ESTIMATED
------------------ --------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transmission, Distribution and General
Facilities................................... $ 68 $ 79 $ 94 $ 69 $ 70 $57 $49 $41
Renovation and Modification of Generating Units
Nuclear...................................... 12 17 17 14 15 8 8 10
Nonnuclear................................... 63 19 24 25 16 13 15 16
Clean Air Act Amendments Compliance............ 12 (4) 0 0 7 2 0 2
---- ---- ---- ---- ---- --- --- ---
Total................................ $155 $111 $135 $105 $108 $80 $72 $69
==== ==== ==== ==== ==== === === ===
</TABLE>
Each company in the CAPCO Group is responsible for financing the portion of
the capital costs of nuclear fuel equivalent to its ownership and leased
interest in the unit in which the fuel will be utilized. See "The
Company -- Fuel Supply -- Nuclear" for information regarding nuclear fuel
supplies and Note 6 in the Financial Statements regarding leasing arrangements
to finance nuclear fuel capital costs. Nuclear fuel capital costs incurred by
the Company during 1995, 1996 and 1997 and its estimated nuclear fuel capital
costs for 1998 through 2002 are as follows:
<TABLE>
<CAPTION>
ACTUAL ESTIMATED
------------------ --------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nuclear Fuel Capital Costs..................... $ 19 $ 37 $ 16 $ 32 $ 38 $26 $38 $38
</TABLE>
PROPERTIES
For a description of the Company's properties, see "1997 First Mortgage
Bonds and First Mortgage -- Title to Property."
PENDING MERGER OF THE COMPANY AND TOLEDO EDISON
In March 1994, Centerior Energy announced a plan to merge Toledo Edison
into the Company. In June 1995, the preferred share owners of the Company and
Toledo Edison approved actions necessary for the two companies to merge.
FirstEnergy has not yet made a decision on this matter. In the meantime, at the
request of the NRC, pending FirstEnergy's decision, both the Company and Toledo
Edison have withdrawn their request for authorization to transfer certain NRC
licenses to the merged entity. All other regulatory approvals have been
obtained.
EFFECT OF PENDING MERGER ON FIRST MORTGAGE AND TE FIRST MORTGAGE
Substantially all of the fixed properties and the franchises of the Company
("CEI Mortgaged Property") are subject to the lien of the First Mortgage (as
hereinafter defined), and substantially all of the fixed properties and the
franchises of Toledo Edison ("TE Mortgaged Property") are subject to the lien of
the Forty-Sixth Supplemental Indenture and Deed of Trust of Toledo Edison ("TE
First Mortgage"). If the merger of Toledo Edison into the Company is
consummated, the Company will acquire all of the assets of Toledo Edison,
including the TE Mortgaged Property, and the TE Mortgaged Property will become
subject to the lien of the First Mortgage, which lien will be junior to the lien
of the TE First Mortgage.
If the merger is consummated, the only assets of the Company which will be
subject to the lien of the TE First Mortgage will be the TE Mortgaged Property
at the time of the merger and properties thereafter acquired by the Company
which are betterments, extensions, improvements, additions, repairs, renewals,
replacements, substitutions and alterations to, upon, for and of the TE
Mortgaged Property and all property
21
<PAGE> 25
held or acquired for use or used upon or in connection with or appertaining to
the TE Mortgaged Property. The lien of the First Mortgage would, after the
merger, continue to be a first lien on the CEI Mortgaged Property. After the
merger, the existing junior liens of the subordinate mortgages of the Company
and Toledo Edison would be junior to the liens of the First Mortgage and the TE
First Mortgage.
The Company expects that, after the merger, it would enter into a new
indenture ("New Indenture") which will prohibit the issuance of any bonds under
the TE First Mortgage or the First Mortgage, except to the trustee under the New
Indenture in the same principal amounts as, and as the basis for the issuance
of, bonds issued by the Company under the New Indenture. The New Indenture
trustee would hold such TE First Mortgage Bonds and First Mortgage Bonds for the
benefit of the holders of the New Indenture Bonds, which are thus expected to be
rated the same as the TE First Mortgage Bonds and the First Mortgage Bonds.
A substantial portion of the properties owned by the Company after the
merger, including some or all of the CEI Mortgaged Property and TE Mortgaged
Property, would be subject to the lien of the New Indenture, and such lien will
be junior to the liens of the First Mortgage and the TE First Mortgage, but
senior to the existing liens of the subordinate mortgages of the Company and
Toledo Edison.
At such time as the New Indenture trustee holds all of the outstanding
First Mortgage Bonds or TE First Mortgage Bonds, such bonds will be canceled,
the indenture under which such bonds were issued will be discharged and the lien
of the New Indenture will become a first mortgage lien on the properties which
were subject to the first mortgage lien of the discharged indenture.
COMBINED PRO FORMA CONDENSED FINANCIAL STATEMENTS FOR THE COMPANY AND TOLEDO
EDISON
The Unaudited Cleveland Electric and Toledo Edison Combined Pro Forma
Condensed Balance Sheets as of September 30, 1997 and the Unaudited Combined Pro
Forma Condensed Income Statements for the Nine Months ended September 30, 1997
and for the Year Ended December 31, 1996, give effect to:
(i) the impact on the Company and Toledo Edison of the merger of
Centerior Energy and Ohio Edison. These adjustments were prepared using the
purchase method of accounting based on the assumptions specified in Note 1
of the Notes to Combined Pro Forma Condensed Balance Sheets and Income
Statements. These purchase accounting adjustments are estimates and
therefore subject to change within one year of consummation of the merger
of Centerior Energy and Ohio Edison; and
(ii) the agreement between the Company and Toledo Edison to merge
Toledo Edison into the Company. These adjustments are based on accounting
for the merger of the Company and Toledo Edison on a method similar to a
pooling of interests.
The Combined Pro Forma Condensed Income Statements of Cleveland Electric
and Toledo Edison for the Years ended December 31, 1995 and 1994 give effect
only to the agreements between the Company and Toledo Edison to merge Toledo
Edison into the Company. These adjustments are based on accounting for the
merger of the Company and Toledo Edison on a method similar to a pooling of
interests.
The following pro forma data is not necessarily indicative of the results
of operations or the financial condition which would have been reported had the
merger been in effect during the periods or which would have been reported in
the future.
22
<PAGE> 26
COMBINED PRO FORMA CONDENSED BALANCE SHEETS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------
CLEVELAND ELECTRIC TOLEDO EDISON
------------------------------------------ ------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Net Property, Plant and
Equipment............ $4,806 $(1,717)(1a) $3,089 $1,955 $(852)(1a) $ 1,103
Current Assets......... $ 430 $ 430 $ 193 $ 193
Regulatory and other
assets............... $2,046 $ (546)(1a,1d,1h) $1,500 $1,339 $(342)(1a,1d,1h) $ 997
Goodwill............... $ 1,518(1b) $1,518 $ 511(1b) $ 511
------ ------- ------ ------ ----- -------
Total Assets........... $7,282 $ (745) $6,537 $3,487 $(683) $ 2,804
====== ======= ====== ====== ===== =======
CAPITALIZATION AND
LIABILITIES
Capitalization
Common Stock Equity.. $1,044 $ (88)(1c) $ 956 $ 840 $(303)(1c) $ 537
Preferred Stock
With Mandatory
Redemption
Provisions....... $ 171 $ 12(1d) $ 183 $ 2 $ 2
Without Mandatory
Redemption
Provisions....... $ 238 $ 238 $ 210 $ 210
Long-term debt....... $3,072 $ 111(1d) $3,183 $1,131 $ 56(1d) $ 1,187
------ ------- ------ ------ ----- -------
Total Capitalization... $4,525 $ 35 $4,560 $2,183 $(247) $ 1,936
Current Liabilities.... $ 645 $ 56(1i) $ 701 $ 253 $ 24(1i) $ 277
Deferred Credits and
Other Liabilities.... $2,112 $ (836)(1g,1e,1h) $1,276 $1,051 $(460)(1g,1e,1h) $ 591
------ ------- ------ ------ ----- -------
Total Capitalization
and Liabilities...... $7,282 $ (745) $6,537 $3,487 $(683) $ 2,804
====== ======= ====== ====== ===== =======
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------------
PRO FORMA
COMBINED
PRO FORMA CLEVELAND ELECTRIC
ADJUSTMENTS & TOLEDO EDISON
----------- ------------------
<S> <C> <C>
ASSETS
Net Property, Plant and
Equipment............ $4,192
Current Assets......... $(65)(2a) $ 558
Regulatory and other
assets............... $ (2)(2a) $2,495
Goodwill............... $2,029
---- ------
Total Assets........... $(67) $9,274
==== ======
CAPITALIZATION AND
LIABILITIES
Capitalization
Common Stock Equity.. $1,493
Preferred Stock
With Mandatory
Redemption
Provisions....... $ 185
Without Mandatory
Redemption
Provisions....... $ 448
Long-term debt....... $4,370
------
Total Capitalization... $6,496
Current Liabilities.... $(67)(2a) $ 911
Deferred Credits and
Other Liabilities.... $1,867
---- ------
Total Capitalization
and Liabilities...... $(67) $9,274
==== ======
</TABLE>
The accompanying notes are an integral part of the statement.
23
<PAGE> 27
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
9 MONTHS ENDED
SEPTEMBER 30, 1997
--------------------------------------
CLEVELAND ELECTRIC TOLEDO EDISON
------------------------------------- --------------------------------------
PRO FORMA PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS
---------- ----------- --------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues... $1,359 $1,359 $681 $681 $(112)(2b)
Operating Expenses... $1,070 $ (6)(1f,1g) $1,064 $563 $ (9)(1f,1g) $554 $(112)(2b,2c)
------ ---- ------ ---- ---- ---- -----
Operating Income... $ 289 $ 6 $ 295 $118 $ 9 $127 $ 0
Nonoperating Income
(Loss)............. $ (1) $ 9(1j) $ 8 $ 5 $ 4(1j) $ 9 $ (5)(2c)
------ ---- ------ ---- ---- ---- -----
Income Before
interest
Charges.......... $ 288 $ 15 $ 303 $123 $ 13 $136 $ (5)
Interest Charges..... $ 186 $ (9)(1d) $ 177 $ 74 $ (5)(1d) $ 69 $ (5)
------ ---- ------ ---- ---- ---- -----
Net Income......... $ 102 $ 24 $ 126 $ 49 $ 18 $ 67 $ 0
Preferred Dividend
Requirements....... $ 27 $ 27 $ 12 $ 12
------ ---- ------ ---- ---- ---- -----
Earnings On Common
Stock.............. $ 75 $ 24 $ 99 $ 37 $ 18 $ 55 $ 0
====== ==== ====== ==== ==== ==== =====
<CAPTION>
PRO FORMA
COMBINED
CLEVELAND ELECTRIC
& TOLEDO EDISON
------------------
<S> <C>
Operating Revenues... $1,928
Operating Expenses... $1,506
------
Operating Income... $ 422
Nonoperating Income
(Loss)............. $ 12
------
Income Before
interest
Charges.......... $ 434
Interest Charges..... $ 241
------
Net Income......... $ 193
Preferred Dividend
Requirements....... $ 39
------
Earnings On Common
Stock.............. $ 154
======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------
CLEVELAND ELECTRIC TOLEDO EDISON
-------------------------------------- --------------------------------------
PRO FORMA PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS
---------- ----------- --------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues... $1,790 $1,790 $897 $897 $(133)(2b)
Operating Expenses... $1,431 $ (8)(1f,1g) $1,423 $741 $(12)(1f,1g) $729 $(134)(2b,2c)
------ ---- ------ ---- ---- ---- -----
Operating Income... $ 359 $ 8 $ 367 $156 $ 12 $168 $ 1
Nonoperating Income
(Loss)............. $ (2) $ 4(1j) $ 2 $ (4) $ 2(1j) $ (2) $ (2)(2c)
------ ---- ------ ---- ---- ---- -----
Income Before
Interest
Charges.......... $ 357 $ 12 $ 369 $152 $ 14 $166 $ (1)
Interest Charges..... $ 240 $(13)(1d) $ 227 $ 95 $ (6)(1d) $ 89 $ (1)
------ ---- ------ ---- ---- ---- -----
Net Income......... $ 117 $ 25 $ 142 $ 57 $ 20 $ 77 $ 0
Preferred Dividend
Requirements....... $ 39 $ 39 $ 17 $ 17
------ ---- ------ ---- ---- ---- -----
Earnings On Common
Stock.............. $ 78 $ 25 $ 103 $ 40 $ 20 $ 60 $ 0
====== ==== ====== ==== ==== ==== =====
<CAPTION>
PRO FORMA
COMBINED
CLEVELAND ELECTRIC
& TOLEDO EDISON
------------------
<S> <C>
Operating Revenues... $2,554
Operating Expenses... $2,018
------
Operating Income... $ 536
Nonoperating Income
(Loss)............. $ (2)
------
Income Before
Interest
Charges.......... $ 534
Interest Charges..... $ 315
------
Net Income......... $ 219
Preferred Dividend
Requirements....... $ 56
------
Earnings On Common
Stock.............. $ 163
======
</TABLE>
The accompanying notes are an integral part of the statement.
24
<PAGE> 28
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------
HISTORICAL
-------------------
CLEVELAND TOLEDO PRO FORMA
ELECTRIC EDISON ADJUSTMENTS TOTALS
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues.......................... $1,769 $874 $(127)(2b) $2,516
Operating Expenses.......................... 1,371 686 (129)(2b,2c) 1,928
------ ---- ----- ------
Operating Income.......................... 398 188 2 588
Nonoperating Income (Loss).................. 31 19 (2)(2c) 48
------ ---- ----- ------
Income Before Interest Charges............ 429 207 -- 636
Interest Charges............................ 245 110 355
------ ---- ----- ------
Net Income................................ 184 97 -- 281
Preferred Dividend Requirements............. 43 18 61
------ ---- ----- ------
Earnings On Common Stock.................... $ 141 $ 79 $ -- $ 220
====== ==== ===== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------
HISTORICAL
-------------------
CLEVELAND TOLEDO PRO FORMA
ELECTRIC EDISON ADJUSTMENTS TOTALS
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues.......................... $1,698 $865 $(141)(2b) $2,422
Operating Expenses.......................... 1,302 685 (143)(2b,2c) 1,844
------ ---- ----- ------
Operating Income.......................... 396 180 2 578
Nonoperating Income (Loss).................. 31 17 (2)(2c) 46
------ ---- ----- ------
Income Before Interest Charges............ 427 197 -- 624
Interest Charges............................ 242 115 (1) 356
------ ---- ----- ------
Net Income................................ 185 82 1 268
Preferred Dividend Requirements............. 45 20 1 66
------ ---- ----- ------
Earnings Available for Common Stock......... $ 140 $ 62 $ -- $ 202
====== ==== ===== ======
</TABLE>
The accompanying notes are an integral part of the statement.
25
<PAGE> 29
NOTES TO COMBINED PRO FORMA CONDENSED BALANCE SHEETS AND INCOME STATEMENTS
(UNAUDITED)
Note 1 -- Pro Forma Adjustments (FirstEnergy Merger)
(a) As required by Accounting Principles Board Opinion No. 16, pro forma
adjustments have been recognized by FirstEnergy to adjust Cleveland
Electric (CEI) and Toledo Edison (Toledo) utility plant to fair
value. The major adjustment relates to the nuclear generating units.
Such adjustment has been based upon the results of an independent
appraisal and on the estimated discounted future cash flows expected
to be generated by their nuclear generating units. The estimated cash
flows are based upon management's current view of the likely cost
recovery associated with the nuclear units. As a result of
discontinuing Statement of Financial Accounting Standards No. 71 for
CEI and Toledo nuclear assets and operations, a pro forma adjustment
has been made to reflect the write-off of unrecoverable regulatory
assets prior to consummation of the merger.
(b) A pro forma adjustment has been made to recognize goodwill in
connection with the FirstEnergy Merger. The goodwill represents the
excess of the purchase price over CEI's and Toledo's net assets after
taking into account the pro forma adjustments. The carrying cost for
all other assets and liabilities (except as described in (d), (e),
(h), (r) and (g) below) is assumed to be equal to fair market value.
If it is determined, within one year, that the ultimate fair market
value of CEI's and Toledo's net assets is more or less than their
estimated carrying value at the time of consummation, goodwill would
be adjusted accordingly. The purchase price was based on the imputed
value to holders of Centerior Energy Common Stock using a market
value of Ohio Edison Common Stock of $20.125 per share.
(c) Pro forma equity adjustments recognize the elimination of CEI's and
Toledo's accumulated deficit as of the consummation of the
FirstEnergy Merger and the purchase price computed as described in
(b) above.
(d) A pro forma adjustment has been made to recognize CEI's and Toledo's
preferred stock of consolidated subsidiaries subject to mandatory
redemption and long-term debt at estimated fair market value.
(e) A pro forma adjustment has been made to recognize CEI's and Toledo's
net unamortized transition obligation related to certain retirement
benefits.
(f) Pro forma adjustments have been made to recognize amortization of
goodwill in connection with the FirstEnergy Merger over a 40-year
period, offset by reductions in depreciation expense resulting from
the assumed revaluation of CEI's and Toledo's assets described in (a)
above.
(g) Pro forma adjustments have been made for the estimated tax effects of
the adjustments discussed in (a), (b), (e), (f), (h) and (i).
(h) Pro forma adjustments for Beaver Valley Unit 2 deferred rent
liability to reflect remaining payments on a straight-line basis.
(i) Pro forma adjustments for estimated severance and other compensation
costs payable.
(j) Pro forma adjustments for the FirstEnergy Merger related costs.
Note 2 -- Pro Forma Adjustments (CEI and Toledo merger)
(a) Elimination of intercompany accounts and notes receivable and
accounts and notes payable.
(b) Elimination of intercompany operating revenues and operating
expenses.
(c) Elimination of intercompany working capital transactions.
(d) Elimination of intercompany interest income and interest expense.
26
<PAGE> 30
THE EXCHANGE OFFER
BACKGROUND
The Old Notes were issued and sold by the Company to the Placement Agents
on October 24, 1997 (the "Old Note Issue Date"). Thereafter, the Old Notes were
resold by the Placement Agents to certain purchasers in reliance on one or more
exemptions from the registration requirements of the Securities Act. Pursuant to
the Registration Agreement entered into by the Company and the Placement Agents
("Registration Agreement") as a condition to the obligations of the Placement
Agents under the Placement Agreement between the Company and the Placement
Agents, the Company agreed that, unless the Exchange Offer is prohibited by
applicable law, it would (i) use its reasonable best efforts to cause the
Registration Statement to become effective no later than 150 days after the Old
Note Issue Date and (ii) upon effectiveness of Registration Statement, commence
the Exchange Offer, maintain the effectiveness of the Registration Statement for
at least 30 days (or a longer period if required by law) and deliver to the
Exchange Agent New Notes in the same aggregate principal amount as the Old Notes
that were tendered by the holders thereof pursuant to the Exchange Offer. A copy
of the Registration Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
Subject to the terms and conditions described herein, all Old Notes validly
tendered and not withdrawn prior to the Expiration Date will be accepted for
exchange for New Notes.
The New Notes have terms identical to the terms of the Old Notes except
that the New Notes have been registered under the Securities Act and, following
the completion of the Exchange Offer and during the effectiveness of any
required Shelf Registration Statement, the holders of the Old Notes will not be
entitled to the contingent increase in the interest rate described below. The
New Notes will evidence the same debt as the Old Notes for which they are
exchanged and will be issued under, and be entitled to the benefits of, the Note
Indenture, which also authorized the issuance of the Old Notes.
If (a) the Company determines that the Exchange Offer is not available or
may not be consummated as soon as practicable after the last date the Exchange
Offer is open because it would violate applicable law or the applicable
interpretations of the staff of the SEC; (b) the Exchange Offer is not
consummated by April 23, 1998; (c) the Placement Agents so request with respect
to the Old Notes not eligible to be exchanged for New Notes in the Exchange
Offer and held by them following consummation of the Exchange Offer; or (d) any
holder (other than an exchanging dealer) is not eligible to participate in the
Exchange Offer, or any holder (other than an exchanging dealer) that
participates in the Exchange Offer does not receive freely tradeable New Notes
on the date of the exchange for validly tendered (and not withdrawn) Old Notes,
the Company will use all reasonable efforts to file a Shelf Registration
Statement, cause it to be declared effective and keep it effective for a period
of 120 days or such shorter period as may be necessary to allow for the resale
of all Old Notes. If the Exchange Offer is not consummated or a Shelf
Registration Statement with respect to resales of the Old Notes is not declared
effective by March 23, 1998, the interest rate borne by the Old Notes of each
series will be increased by .50% per annum until such time as such requirements
have been satisfied ("Additional Interest").
The Exchange Offer will be deemed to have been consummated upon the Company
having exchanged New Notes for all outstanding Old Notes that have been tendered
and not withdrawn prior to the close of business on the Expiration Date (other
than Old Notes held by persons not eligible to participate in the Exchange
Offer) pursuant to the Exchange Offer. Upon consummation of the Exchange Offer,
holders of Old Notes seeking liquidity in their investment (except, under
certain circumstances, Participating Broker Dealers (as defined in the
Registration Agreement) and the Placement Agents) would have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act, and such holders will retain no rights under the Registration
Agreement except under certain limited circumstances. See "Risk Factors --
Consequences of Failure to Exchange."
27
<PAGE> 31
Upon the terms and subject to the conditions described in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
each series of New Notes in exchange for each $1,000 principal amount of each
corresponding series of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange Offer
in denominations of $1,000 and integral multiples thereof.
Based on no-action letters issued by the staff of the SEC to third parties,
the Company believes that the New Notes issued pursuant to this Exchange Offer
in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
New Notes in its ordinary course of business and is not participating, and has
no arrangement or understanding with any person to participate, in a
distribution of the New Notes. See Morgan Stanley & Co. Incorporated, SEC
No-Action Letter (available June 5, 1991) and Exxon Capital Holdings
Corporation, SEC No-Action Letter (available May 13, 1988). Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Agreement, that such conditions have been met.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of New Notes if such New Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. The Company has agreed that, for a period of 120 days after
the Expiration Date, it will make this Prospectus and any amendment or
supplement to this Prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution." No underwriter is
being used in connection with the Exchange Offer.
As of the date of this Prospectus, $450 million aggregate principal amount
of Old Notes is outstanding. In connection with the issuance of the Old Notes,
the Company arranged for the Old Notes initially purchased by QIBs or in
offshore transactions in reliance on Regulation S under the Securities Act to be
issued and transferable in book-entry form through the facilities of DTC, acting
as depositary. The New Notes are also issuable and transferable in book-entry
form through DTC. See "Description of the New Notes -- Book-Entry Delivery and
Form."
The Company will be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Note Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the Registration
Agreement and the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations of the SEC thereunder.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all reasonable charges and
28
<PAGE> 32
expenses, other than certain applicable taxes and counsel fees, incurred in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATES; DELAYS; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means the Expiration Date set forth on the cover
of this Prospectus, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" means the latest date
to which the Exchange Offer is extended.
The Company will notify the Exchange Agent of any extension of the
Expiration Date by oral or written notice and will mail to the record holders of
Old Notes an announcement thereof, each prior to 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date.
In the case of an extension, such announcement shall include disclosure of
the approximate number of Old Notes deposited to date and shall be made prior to
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
acceptance of any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Old Notes not previously accepted, if any
of the conditions set forth herein under "--Termination" shall have occurred and
shall not have been waived by the Company (if permitted to be waived by the
Company), by giving oral or written notice of such delay, extension or
termination to the Exchange Agent and (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE SECURED NOTES
The New Notes of each series will bear interest at the same rate and on the
same terms as the Old Notes of the corresponding series. Under the Note
Indenture, interest on each Old Note ceases to accrue upon the exchange of such
Old Note for a New Note. Interest will accrue on each New Note from the date on
which it is authenticated and will be payable to the person in whose name such
New Note is registered at the close of business on the Regular Record Date for
such interest, which will be the April 15 or October 15 (whether or not a
business day), as the case may be, next preceding the payment date for such
interest. If, however, the New Note is authenticated and delivered in exchange
for an Old Note (i) between a record date for the payment of interest on that
Old Note and the related interest payment date, the interest that accrues on the
New Note from the date of authentication thereof to that interest payment date
shall be payable to the person in whose name such New Note was issued on its
issuance date or (ii) between an interest payment date for the payment of
interest on that Old Note and the record date for the next succeeding interest
payment date, the interest that accrues on the Old Note from the earlier
interest payment date to the date on which the Old Note is exchanged for the New
Note will be paid to the person in whose name the New Note is registered on the
record date for that next succeeding interest payment date. The Company intends
to cause the New Notes to be authenticated on the date on which the New Notes
are exchanged for the Old Notes. Therefore, the exchange will not result in the
loss of interest income to holders of Old Notes exchanged for New Notes.
Interest on the Secured Notes is payable semiannually in cash in arrears on May
1 and November 1 of each year, commencing May 1, 1998, and the Secured Notes
will bear interest and mature as follows: for the Secured Notes due 2009,
interest at 7.43% with a maturity date of November 1, 2009 and for the Secured
Notes due 2017, interest at 7.88% with a maturity date of November 1, 2017.
29
<PAGE> 33
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must properly complete, sign and
date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
addresses set forth herein under "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions described herein and set forth in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. DELIVERY OF ALL DOCUMENTS MUST BE MADE TO THE EXCHANGE
AGENT AT ITS ADDRESS SET FORTH HEREIN. HOLDERS MAY ALSO REQUEST THAT THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES
EFFECT SUCH TENDER FOR SUCH HOLDERS.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered in the Security Register (as defined herein) or
any other person who has obtained a properly completed bond power from the
registered holder, or any person whose Old Notes are held of record by DTC who
desires to deliver such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial holder wishes to tender on its own behalf, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and delivering
its Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly completed bond power from
the registered holder which authorizes such owner to tender the Old Notes on
behalf of the registered holder, in each case signed by the registered holder as
the name of such registered holder appears on the Old Notes. The transfer of
record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office of correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has
30
<PAGE> 34
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
While the Company has no present plan to acquire any Old Notes which have
not been tendered in the Exchange Offer or to file a registration statement to
permit resales of Old Notes which are not tendered pursuant to the Exchange
Offer (except as may be required under the Registration Agreement), subject to
the terms of the Note Indenture, the Company reserves the right in its sole
discretion to (a) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, (b) as set forth under
"Termination," terminate the Exchange Offer with respect to such Old Notes or
(c) to the extent permitted by applicable law, purchase Old Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the holder nor
any other person has an arrangement or understanding with any person to
participate in a distribution of the New Notes and that neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if an affiliate, such holder or such other
person will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
lost but are not immediately available or (ii) who cannot deliver their Old
Notes, the Letter of Transmittal or any other
31
<PAGE> 35
required documents to the Exchange Agent prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three business days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
facsimile transmission or letter notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) include a statement that the Depositor is withdrawing its
election to have Old Notes exchanged, and identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the Depositor in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to permit the Trustee with respect to the Old Notes to
register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender and (iv) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. All questions as to
the validity, form and eligibility (including time of receipt) for such
withdrawal notices will be determined by the Company, whose determination will
be final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION
The Exchange Offer is not subject to any condition, other than (i) that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the SEC, (ii) that no action or proceeding shall have been
instituted or threatened in any court or by or before any governmental agency or
statute, rule or regulation that would render the Exchange Offer illegal and
(iii) that there shall not have been adopted or enacted any law, statute, rule
or regulation that would render the Exchange Offer illegal. There can be no
assurance that any such condition will not occur.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders
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<PAGE> 36
thereof, (ii) extend the Exchange Offer and retain all Old Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Old Notes to withdraw their tendered Old Notes or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Old Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a supplement to this Prospectus that will be distributed to each
registered holder of Old Notes, and the Company will extend the Exchange Offer
for a period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.
EXCHANGE AGENT
The Chase Manhattan Bank, the Note Trustee under the Note Indenture, has
been appointed as Exchange Agent for the Exchange Offer. Questions and requests
for assistance and for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or Certified By Facsimile: By Hand or Overnight Courier:
Mail:
The Chase Manhattan Bank (Eligible Institutions Only) The Chase Manhattan Bank
55 Water Street (212) 638-7375 or 55 Water Street
Room 234, North Building (212) 344-9367 Room 234, North Building
New York, New York 10041 New York, New York 10041
Attention: Carlos Esteves Confirm by Telephone: Attention: Carlos Esteves
(212) 638-0828
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone or other means.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
Reasonable expenses incurred in connection with the Exchange Offer,
including expenses of the Exchange Agent and Note Trustee and accounting and
legal fees, other than certain applicable taxes and counsel fees, will be paid
by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
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<PAGE> 37
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an
Indenture dated as of October 24, 1997 and a First Supplemental Indenture
thereto dated as of October 24, 1997 (as supplemented, "Note Indenture") between
the Company and The Chase Manhattan Bank, as trustee ("Note Trustee"). The terms
of the Secured Notes include those stated in the Note Indenture and those made
part of the Note Indenture by reference to the Trust Indenture Act of 1939, as
amended ("Trust Indenture Act"). Holders of Secured Notes are referred to the
Note Indenture and the Trust Indenture Act for a statement of all such terms.
The following summary of the material provisions of the Note Indenture does not
purport to be complete and is qualified in its entirety by reference to the Note
Indenture, including the definitions therein of certain terms used below. Copies
of the Note Indenture are available as set forth below under "Additional
Information."
The Secured Notes are secured equally and ratably as to payment of
principal and interest by $450 million aggregate principal amount of the 1997
First Mortgage Bonds.
The Secured Notes are denominated in United States currency in minimum
denominations of $1,000 and any integral multiple thereof.
PRINCIPAL, MATURITY AND INTEREST
The Secured Notes are limited to an aggregate amount of $450 million
consisting of $150 million aggregate principal amount of Secured Notes due 2009
and $300 million aggregate principal amount of Secured Notes due 2017. New Notes
of each series will bear interest at the same rate and on the same terms as the
Old Notes of the corresponding series. Under the Note Indenture, interest on
each Old Note ceases to accrue upon the exchange of such Old Note for a New
Note. Interest will accrue on each New Note from the date on which it is
authenticated and will be payable to the person in whose name such New Note is
registered at the close of business on the Regular Record Date for such
interest, which will be the April 15 or October 15 (whether or not a business
day), as the case may be, next preceding the payment date for such interest. If,
however, the New Note is authenticated and delivered in exchange for an Old Note
(i) between a record date for the payment of interest on that Old Note and the
related interest payment date, the interest that accrues on the New Note from
the date of authentication thereof to that interest payment date shall be
payable to the person in whose name such New Note was issued on its issuance
date or (ii) between an interest payment date for the payment of interest on
that Old Note and the record date for the next succeeding interest payment date,
the interest that accrues on the Old Note from the earlier interest payment date
to the date on which the Old Note is exchanged for the New Note will be paid to
the person in whose name the New Note is registered on the record date for that
next succeeding interest payment date. The Company intends to cause the New
Notes to be authenticated on the date on which the New Notes are exchanged for
the Old Notes. Therefore, the exchange will not result in the loss of interest
income to holders of Old Notes exchanged for New Notes. Interest on the Secured
Notes is payable semiannually in cash in arrears on May 1 and November 1 of each
year, commencing May 1, 1998, and the Secured Notes will bear interest and
mature as follows: for the Secured Notes due 2009, interest at 7.43% with a
maturity date of November 1, 2009 and for the Secured Notes due 2017, interest
at 7.88% with a maturity date of November 1, 2017. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. Principal,
interest and Additional Interest, if any, on the Secured Notes is payable at the
office or agency of the Company maintained for such purpose within the City of
New York, State of New York or, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the register of holders of Secured Notes
("Security Register"); provided that all payments of principal, interest and
Additional Interest, if any, with respect to Secured Notes the holders of which
have given wire transfer instructions to the Company will be required to be made
by wire transfer of immediately available funds to the accounts specified by the
holders thereof. Until otherwise designated by the Company, the Company's office
or agency in the City of New York will be the office of the Note Trustee
maintained for such purpose.
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SECURITY FOR THE SECURED NOTES
The Old Notes are, and the New Notes (together with any Old Notes that
remain outstanding after the Exchange Offer is terminated) will be, secured
equally and ratably as to payment of principal and interest by the 1997 First
Mortgage Bonds, which were issued, pledged and delivered by the Company to the
Note Trustee in connection with the Offering. The 1997 First Mortgage Bonds
consist of two series of the Company's first mortgage bonds which are secured by
a lien on certain property owned by the Company. See "1997 First Mortgage Bonds
and First Mortgage."
REDEMPTION
The Old Notes due 2009 and the Old Notes due 2017 are, and the New Notes
due 2009 and the New Notes due 2017 will be, redeemable in whole or in part, at
the option of the Company at any time, at a redemption price equal to the
greater of (i) 100% of their principal amount and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield plus twenty-five
(25) basis points in the case of the Secured Notes due 2009 or twenty-five (25)
basis points in the case of the Secured Notes due 2017, plus, in each case,
accrued interest to the date of redemption.
"Treasury Yield" means, with respect to any redemption date, 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 redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the applicable series of Secured Notes 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 series of Secured Notes. "Independent
Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is
unwilling or unable to select the Comparable Treasury Issue, another independent
banking institution of national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any redemption 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 redemption 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, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations or
(B) if fewer than four such Reference Treasury Dealer Quotations are obtained,
the average of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average 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 by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Chase Securities Inc., First Chicago Capital Markets, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective
successors: provided, however, that if any of the foregoing 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.
Holders of Secured Notes to be redeemed will receive notice thereof by
first-class mail at least 30 and not more than 60 days prior to the date fixed
for redemption.
The New Notes will not be subject to any sinking fund.
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<PAGE> 39
EVENTS OF DEFAULT AND REMEDIES
The Note Indenture describes "Events of Default" relating to the Secured
Notes of any series, which include: (i) default for 30 days in the payment when
due of interest on the Secured Notes of that series; (ii) default in payment
when due of the principal of the Secured Notes of that series; (iii) default for
60 days, after notice to the Company by the Note Trustee or to the Company and
the Note Trustee by the holders of a majority in principal amount of the
outstanding Secured Notes of that series, by the Company in the performance, or
breach, of any covenant or warranty in the Note Indenture, (iv) default relating
to any of the 1997 First Mortgage Bonds or (v) certain events of bankruptcy or
insolvency, whether voluntary or involuntary, with respect to the Company.
If any Event of Default occurs and is continuing, the Note Trustee or the
holders of a majority in principal amount of the then outstanding Secured Notes
of any series may declare all the Secured Notes of such series to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect to
the Company, all outstanding Secured Notes will become due and payable without
further action or notice. Holders of the Secured Notes may not enforce the Note
Indenture or the Secured Notes except as provided in the Note Indenture. Subject
to certain limitations, holders of a majority in principal amount of the then
outstanding Secured Notes of any series may direct the Note Trustee in its
exercise of any trust or power with respect to that series. The Note Trustee may
withhold from holders of the Secured Notes notice of any continuing Event of
Default (except an Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The holders of a majority in principal amount of the Secured Notes then
outstanding of any series by notice to the Note Trustee may, on behalf of the
holders of all of the Secured Notes of such series, waive any past Event of
Default and its consequences under the Note Indenture except (i) a continuing
Event of Default in the payment of interest on or the principal of the Secured
Notes or (ii) an Event of Default in respect of a covenant under the Note
Indenture which cannot be amended or modified without the consent of the holders
of each outstanding series Secured Notes.
The Company is required to deliver to the Note Trustee annually an
officer's certificate stating whether or not the Company is in default in the
performance and observance of the terms of the Note Indenture, and, if the
Company shall be in default, a statement specifying the nature of such default.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
respective obligations discharged with respect to the outstanding Secured Notes
("Defeasance") except for (i) the rights of holders of outstanding Secured Notes
to receive, solely from the trust fund described below, payments in respect of
the principal of and interest on such Secured Notes when such payments are due,
(ii) the Company's obligations with respect to the Secured Notes concerning
issuing temporary Secured Notes, registration of Secured Notes, mutilated,
destroyed, lost or stolen Secured Notes and the maintenance of an office or
agency for payment of money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Note Trustee, and the
Company's obligations in connection therewith and (iv) the Defeasance provisions
of the Note Indenture. In addition, the Company may, at its option and at any
time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Note Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations will
not constitute an Event of Default with respect to the Secured Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Secured Notes.
In order to exercise either Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Note Trustee, in trust, for the
benefit of the holders of the Secured Notes, cash in United States dollars, U.S.
Government Obligations (as hereinafter defined) or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants,
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<PAGE> 40
to pay the principal of and interest on the outstanding Secured Notes on the
stated maturity; (ii) in the case of Defeasance, the Company shall have
delivered to the Note Trustee an opinion of counsel reasonably acceptable to the
Note Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Note Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the outstanding Secured Notes will
not recognize gain or loss for federal income tax purposes as a result of such
deposit, Defeasance and discharge and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such deposit, Defeasance and discharge had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Note
Trustee an opinion of counsel reasonably acceptable to the Note Trustee
confirming that the holders of the outstanding Secured Notes will not recognize
gain or loss for federal income tax purposes as a result of the deposit and
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such deposit and Covenant Defeasance had not occurred; (iv) the Company must
deliver to the Note Trustee an officer's certificate to the effect that such
Secured Notes, if then listed on any securities exchange, will not be delisted
as a result of such deposit; (v) no Event of Default shall have occurred and be
continuing on the date of such deposit (other than an Event of Default resulting
from the borrowing of funds to be applied to such deposit which will be cured
upon such Defeasance or Covenant Defeasance) or, insofar as Events of Default
from bankruptcy or insolvency events are concerned, at any time in the period
ending on the 90th day after the date of such deposit; (vi) such Defeasance or
Covenant Defeasance shall not cause the Note Trustee to have a conflicting
interest within the meaning of the Trust Indenture Act; (vii) such Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument to which the Company is a
party or by which the Company is bound; (viii) such Defeasance or Covenant
Defeasance shall not result in the trust arising from such deposit constituting
an investment company within the meaning of the Investment Company Act of 1940,
as amended unless such trust is registered thereunder; and (ix) the Company must
deliver to the Note Trustee an officer's certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to the
Defeasance or the Covenant Defeasance have been complied with.
As used herein, "U.S. Government Obligation" means (x) any security which
is (i) a direct obligation of the United States of America for the payment of
which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation of the
United States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation which is specified in
clause (x) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of principal of or
interest on any U.S. Government Obligation which is so specified and held,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest evidenced
by such depositary receipt and (z) any certificates or other evidences of
ownership interest in obligations of the character described in either case (i)
or (ii) or in specified portions thereof, including without limitation, portions
consisting solely of the interest thereon provided that such obligations are
held in a bank or trust company acceptable to the Note Trustee in a special
account separate from the assets of such custodian.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Secured Notes in accordance with the Note
Indenture. The Registrar (as defined in the Note Indenture) and the Note Trustee
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a holder to pay any taxes and
fees required by law or permitted by the Note Indenture. See "-- Book Entry,
Delivery and Form."
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The registered holder of a Secured Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as described in the next two succeeding paragraphs, the Note
Indenture or the Secured Notes may be amended or supplemented with the consent
of the holders of at least a majority in principal amount of the Secured Notes
then outstanding of the series affected (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Secured Notes), and any existing default or compliance with any provision
of the Note Indenture or the Secured Notes may be waived with the consent of the
holders of a majority in principal amount of the Secured Notes then outstanding
of the series affected (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Secured
Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Secured Notes held by a non-consenting holder): (i) reduce
the principal amount of Secured Notes whose holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Secured Note, (iii) reduce the rate of or change the time
or place for payment of interest on any Secured Note, (iv) waive an Event of
Default in the payment of principal of, interest on or Additional Interest, if
any, on the Secured Notes, (v) make any change in the provisions of the Note
Indenture relating to waivers of past defaults or the rights of holders of
Secured Notes to receive payments of principal of or interest on the Secured
Notes or (vi) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Secured
Notes, the Company and the Note Trustee may amend or supplement the Note
Indenture or the Secured Notes to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Secured Notes in addition to or in place of
certificated Secured Notes, to provide for the assumption of the Company's
obligations to holders of Secured Notes in the case of a merger or consolidation
of the Company, to make any change that would provide any additional rights or
benefits to the holders of Secured Notes or that does not adversely affect the
legal rights under the Note Indenture of any such holder, or to comply with
requirements of the SEC in order to effect or maintain the qualification of the
Note Indenture under the Trust Indenture Act or to provide for the acceptance of
appointment under the Note Indenture of a successor Note Trustee.
CONCERNING THE NOTE TRUSTEE
The Chase Manhattan Bank is the Note Trustee. The Note Trustee may resign
by giving written notice of its resignation as provided in the Note Indenture.
The resignation will take effect only upon the appointment of a successor
trustee. The holders of a majority of the then outstanding principal amount of
the Secured Notes may remove the Note Trustee at any time. The Company may
appoint a successor trustee under the Note Indenture, subject to the right of
the holders to replace the successor trustee appointed by the Company. Any
successor trustee must be eligible pursuant to the Trust Indenture Act and have
a combined capital and surplus of at least $50,000,000.
The Note Indenture contains certain limitations on the rights of the Note
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Note Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest,
it must eliminate such conflict within 90 days, and apply to the SEC for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Secured Notes have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Note Trustee, subject
to certain exceptions. The Note Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Note Trustee is required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Note Trustee is
under no obligation to exercise any of its rights or powers under the Note
Indenture at the request of any holder of Secured Notes, unless such holder
shall have offered to the Note Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
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NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Note Indenture provides that no recourse for the payment of the
principal of or interest on any of the Secured Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Note Indenture, or in
any of the Secured Notes or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director or employee of the Company or of any successor thereof. Each
holder, by accepting the Secured Notes, waives and releases all such liability
and such waiver and release are part of the consideration for issuance of the
Secured Notes. It is the position of the SEC that, notwithstanding such waiver,
holders of the Secured Notes will continue to have all rights and remedies that
are otherwise available under the anti-fraud provisions of the federal
securities laws.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Note Indenture
without charge by writing to Nancy C. Ashcom, Corporate Secretary, FirstEnergy
Corp., 76 South Main Street, Akron, Ohio 44308-1890.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Old Notes were, and the certificates
representing the New Notes will be, issued in fully registered form and without
interest coupons. Each series of the New Notes will be represented by a Global
New Note.
Secured Notes sold in reliance on Rule 144A are represented by one or more
Global Notes in definitive, fully registered form and without interest coupons
and have been deposited with the Note Trustee, as custodian for, and registered
in the name of, a nominee of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in the Global Notes to such persons may be limited
to that extent. Because DTC can act only on behalf of persons who have accounts
with DTC ("participants"), which in turn act on behalf of indirect participants
and certain banks, the ability of a person having a beneficial interest in the
Global Notes to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of physical certificate evidencing such
interests.
The Global Notes
Ownership of beneficial interests in a Global Note is and will be limited
to DTC participants or persons who hold interests through participants.
Ownership of beneficial interests in a Global Note is and will be shown on, and
the transfer of that ownership is and will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants) and
the records of participants (with respect to interests of persons other than
participants). Qualified institutional buyers may hold their interests in a
Global Note directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
Investors may hold their interests in Old Notes sold in reliance on
Regulation S under the Securities Act directly through Cedel Bank or Euroclear,
if they are participants in such systems, or indirectly through organizations
that are participants in such systems. Beginning 40 days after the Closing Date
but not earlier, investors may also hold such interests through organizations
other than Cedel Bank or Euroclear that are participants in the DTC system.
Cedel Bank and Euroclear will hold interests in the Regulation S Global Notes on
behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Secured Notes represented by such Global Note for
all purposes under the Note Indenture and the Secured Notes. No beneficial owner
of an interest in a Global Note is or will be able to transfer that interest
except in accordance with applicable
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procedures of DTC, in addition to those provided for under the Note Indenture
and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, the Global Notes are and
will be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company nor the Note Trustee or any paying agent has any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note, as shown on the records
of DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
If a holder requires physical delivery of a Certificated Note for any reason,
such holder must transfer its interest in the Global Note in accordance with
DTC's applicable procedures and, if applicable, those of Euroclear and Cedel
Bank.
The Company expects that DTC will take any action permitted to be taken by
a holder of Secured Notes (including the presentation of Secured Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of Secured Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Secured Notes, DTC will
exchange the applicable Global Note for Certificated Notes which it will
distribute to its participants.
The Company understands that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates, and certain other organizations. Indirect access to the DTC system
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of DTC, Euroclear and Cedel Bank, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Note
Trustee will have any responsibility for the performance by DTC, Euroclear or
Cedel Bank or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated Notes
If DTC is at any time unwilling or unable to continue as a depository for
the Global Notes and a successor depository is not appointed by the Company
within 90 days, the Company will issue Certificated Notes in exchange for the
Global Notes. Holders of an interest in a Global Note may receive a Certificated
Note in accordance with DTC's rules and procedures in addition to those provided
for under the Note Indenture.
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1997 FIRST MORTGAGE BONDS AND FIRST MORTGAGE
The Old Notes are, and the New Notes, together with any Old Notes that
remain outstanding after the Exchange Offer is terminated, will be, secured
equally and ratably as to payment of principal and interest by the 1997 First
Mortgage Bonds, which were issued, pledged and delivered by the Company to the
Note Trustee. The 1997 First Mortgage Bonds were issued in the aggregate
principal amount of $450 million. The 1997 First Mortgage Bonds held by the Note
Trustee provide for interest in an amount equal to the interest payable on all
Secured Notes outstanding. Satisfaction of the Company's obligations with
respect to principal of, and interest on, the Secured Notes will satisfy the
Company's obligations with respect to principal of, and interest on, the 1997
First Mortgage Bonds.
GENERAL
The 1997 First Mortgage Bonds were issued as two series of the Company's
first mortgage bonds ("First Mortgage Bonds") under the Company's Mortgage and
Deed of Trust, dated July 1, 1940, from the Company to Guaranty Trust Company of
New York as trustee, under which The Chase Manhattan Bank is successor trustee
("First Mortgage Trustee"), as supplemented and modified by seventy-five
supplemental indentures thereto and as further supplemented, for the issuance of
the 1997 First Mortgage Bonds, by a Seventy-Sixth Supplemental Indenture
("Seventy-Sixth Supplemental Indenture") dated October 15, 1997 (the Mortgage
and Deed of Trust as so supplemented herein called the "First Mortgage"). The
following summary of certain provisions of the First Mortgage do not purport to
be complete and are subject to, and qualified in their entirety by, all of the
provisions of the First Mortgage. For a discussion of the effect on the First
Mortgage of the proposed merger of Toledo Edison into the Company, see "Pending
Merger of the Company and Toledo Edison -- Effect of Pending Merger on the First
Mortgage." The Articles cited below refer to Articles of the First Mortgage.
SECURITY
The 1997 First Mortgage Bonds and all First Mortgage Bonds of other series
currently outstanding and hereafter issued under the First Mortgage are, in the
opinion of counsel for the Company, secured equally and ratably (except as to
any sinking or analogous fund established for the First Mortgage Bonds of any
particular series) by a valid and perfected first lien, subject only to certain
permitted liens and other encumbrances, on substantially all the property owned
and franchises held by the Company, except the following: (a) cash, receivables
and contracts not pledged or required to be pledged under the First Mortgage and
leases in which the Company is lessor; (b) securities not specifically pledged
or required to be pledged under the First Mortgage; (c) property held for
consumption in operation or in advance of use for fixed capital purposes or for
resale or lease to customers; (d) electric energy and other materials or
products produced or purchased by the Company for sale, distribution or use in
the ordinary conduct of its business; and (e) all the property of any other
corporation which may now or hereafter be wholly or substantially wholly owned
by the Company. (Clauses preceding Article I) All property acquired by the
Company after June 30, 1940, other than the property excepted from the lien of
the First Mortgage, becomes subject to the lien thereof upon acquisition.
(Article I and granting and other clauses preceding Article I) Under certain
conditions, the First Mortgage permits the Company to acquire property subject
to a lien prior to the lien of the First Mortgage. (Article IV)
Property subject to the lien of the First Mortgage will be released from
the lien upon the sale or transfer of such property if the Company deposits the
fair value of the property with the First Mortgage Trustee and meets certain
other conditions specified in the First Mortgage. (Article VII) Moneys received
by the First Mortgage Trustee for the release of property will, under certain
circumstances, be applied to redeem outstanding First Mortgage Bonds, be applied
to satisfy other obligations of the Company or be paid over to the Company from
time to time based upon property additions or refundable First Mortgage Bonds.
(Article VIII)
In the Nineteenth Supplemental Indenture, the First Mortgage was modified
to permit the Company without the vote or consent of the holders of any First
Mortgage Bonds issued after November 1976 (a) to exclude nuclear fuel from the
lien of the First Mortgage to the extent not excluded therefrom by its existing
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provisions and (b) to revise the definition of property additions which can
constitute bondable property to include facilities outside the State of Ohio
("State") even though they are not physically connected with property of the
Company in the State and to clarify its general scope.
TITLE TO PROPERTY
The generating plants and other principal facilities of the Company are
owned by the Company, except as follows:
(a) The Company and Toledo Edison jointly lease from others for a term
of about 29 1/2 years starting on October 1, 1987 undivided 6.5%, 45.9% and
44.38% tenant-in-common interests in Units 1, 2 and 3, respectively, of the
Mansfield Plant and also jointly lease from others for the same term an
18.26% undivided tenant-in-common interest in Beaver Valley Unit 2, all
located in Shippingport, Pennsylvania. The Company owns another 24.47%
interest in Beaver Valley Unit 2 as a tenant-in-common.
(b) Most of the Lake Shore facilities are situated on artificially
filled land, extending beyond the natural shoreline of Lake Erie as it
existed in 1910. As of December 31, 1996, the cost of the Company's
facilities, other than water intake and discharge facilities, located on
such artificially filled land aggregated $97,081,000.
Title to land under the water of Lake Erie within the territorial
limits of the State (including artificially filled land) is in the State in
trust for the people of the State for the public uses to which it may be
adapted, subject to the powers of the United States, the public rights of
navigation, water commerce and fishery and the rights of upland owners to
wharf out or fill to make use of the water. The State is required by
statute, after appropriate proceedings, to grant a lease to an upland
owner, such as the Company, which erected and maintained facilities on such
filled land prior to October 13, 1955. The Company does not have such a
lease from the State with respect to the artificially filled land on which
its Lake Shore facilities are located, but the Company's position, on
advice of counsel for the Company, is that the Lake Shore facilities and
occupancy may not be disturbed because they do not interfere with the free
flow of commerce in navigable channels and also constitute, at least in
part, and are on land filled pursuant to, the exercise by it of its
property rights as owner of the land above the shoreline adjacent to the
filled land. The Company does hold permits, under federal statutes relating
to navigation, to occupy such artificially filled land.
(c) The facilities at the pumped-storage hydroelectric Seneca Power
Plant in Pennsylvania ("Seneca") are located on land owned by the United
States and occupied by the Company and Pennsylvania Electric Company
pursuant to a license issued by the FERC for a 50-year period starting
December 1, 1965 for the construction, operation and maintenance of a
pumped-storage hydroelectric plant.
(d) The water intake and discharge facilities at the electric
generating plants located along Lake Erie and the Ohio River are extended
into the lake and river under the Company's property rights as owner of the
land above the water line and pursuant to permits under federal statutes
relating to navigation.
(e) The transmission system is located on land, easements or
rights-of-way owned by the Company. The distribution system also is
located, in part, on land owned by the Company, but, for the most part, it
is located on lands owned by others and on streets and highways. In most
cases, the Company has obtained permission from the apparent owner, or, if
located on streets and highways, from the apparent owner of the abutting
property. The electric underground transmission and distribution systems
are located for the most part in public streets. The Pennsylvania portions
of the main transmission lines from Seneca, the Mansfield Plant and Beaver
Valley Unit 2 are not owned by the Company.
The fee title which the Company has as a tenant-in-common owner, and the
leasehold interests it has as a joint lessee, of certain generating units do not
include the right to require a partition or sale for division of proceeds of the
units without the concurrence of all the other owners and their respective
mortgage trustees and the First Mortgage Trustee.
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ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
In addition to the $3,187 million aggregate principal amount of First
Mortgage Bonds outstanding at December 31, 1997 (which includes $140.4 million
principal amount of First Mortgage Bonds pledged to secure the Company's
obligations to various bank creditors), additional First Mortgage Bonds may be
issued under Article III of the First Mortgage, ranking equally and ratably with
such outstanding First Mortgage Bonds and the 1997 First Mortgage Bonds and
without limit as to amount, on the basis of: (a) 70% of bondable property (as
described under "-- Security") not previously used as the basis for issuance of
First Mortgage Bonds or applied for some other purpose under the First Mortgage;
(b) the deposit of cash (which may be withdrawn thereafter on the basis of
bondable property or refundable First Mortgage Bonds); and (c) substitution for
refundable First Mortgage Bonds. First Mortgage Bonds become refundable First
Mortgage Bonds when they are paid upon maturity, redemption or purchase out of
money deposited with the First Mortgage Trustee for such payment or when money
for such payment is irrevocably deposited with the First Mortgage Trustee.
(Articles I, III and VIII) In general, all property subject to the lien of the
First Mortgage which is used or useful in the Company's electric business
(including property not located in the State if it is physically connected with
property of the Company in the State, either directly or through other property
of the Company), which is not subject to an unfunded prior lien and as to which
the Company has good title and corporate power to own and operate, is bondable
property and as such is available as a basis for the issuance of First Mortgage
Bonds. (Article I) The facilities of the Company on the artificially filled land
at Lake Shore will become bondable property only when the Company acquires,
under conditions specified in the First Mortgage, either good title to such land
or the right to occupy it; and the facilities of the Company on the land at
Seneca are not now bondable property. See "-- Title to Property." The
tenant-in-common interests owned by the Company in certain generating units
qualify as bondable property, except that its interest in property located in
Pennsylvania, including Beaver Valley Unit 2, does not qualify because it is
located outside the State and is not physically connected with property of the
Company in the State. (Article I) With certain exceptions, property which the
Company leases from others is not bondable property. (Articles I and III)
Also, with certain exceptions, in order to issue additional First Mortgage
Bonds based on bondable property, net earnings of the Company available for
interest and property retirement appropriations for any 12 consecutive months
within the 15 calendar months immediately preceding the month in which
application for authentication and delivery of such additional First Mortgage
Bonds is made must be at least twice the annual interest charges on all First
Mortgage Bonds outstanding and on the issue applied for. (Article III)
At December 31, 1997, the Company was not able to issue additional First
Mortgage Bonds except in connection with refinancings. The amount of additional
First Mortgage Bonds which may be issued in the future will fluctuate depending
upon the amount of available refundable First Mortgage Bonds, available bondable
property, earnings and interest rates. See "The Company -- Financing
Capability."
COVENANT TO CHARGE EARNINGS NOT APPLICABLE TO THE 1997 FIRST MORTGAGE BONDS
The supplemental indentures applicable to First Mortgage Bonds issued prior
to 1974 contain a covenant to the effect that, so long as any of those First
Mortgage Bonds remain outstanding (which will be until November 15, 2005,
assuming no prior redemption), the Company will charge against earnings, and
credit to reserves for depreciation and retirement of property, an amount not
less than 15% of gross operating revenues for each year (after deducting the
costs of purchased power and net electric energy received on interchange), less
the amounts expended for maintenance and repairs during the year. The
Seventy-Sixth Supplemental Indenture does not extend such covenant to the 1997
First Mortgage Bonds.
REMEDIES IN THE EVENT OF DEFAULT
Events of default under the First Mortgage include the failure of the
Company (a) to pay the principal of or premium, if any, on any First Mortgage
Bond when due; (b) to pay any interest on or sinking fund obligation of any
First Mortgage Bond within 30 days after it is due; (c) to pay the principal of
or interest on any prior lien bonds within any allowable period; (d) to
discharge, appeal or obtain the stay of any final judgment against the Company
in excess of $100,000 within 30 days after it is rendered; or (e) to perform any
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other covenant in the First Mortgage within 60 days after notice to the Company
from the First Mortgage Trustee or the holders of not less than 15% in principal
amount of the First Mortgage Bonds. Events of default also include certain
events of bankruptcy, insolvency or reorganization in bankruptcy or insolvency
of the Company. (Article IX) The Company is required to furnish periodically to
the First Mortgage Trustee a certificate as to the absence of any default or as
to compliance with the terms of the First Mortgage, and such a certificate is
also required in connection with the issuance of any additional First Mortgage
Bonds and in certain other circumstances. (Article III) The First Mortgage
provides that the First Mortgage Trustee, within 90 days after notice of
defaults under the First Mortgage (60 days with respect to events of default
described in (e) above), is required to give notice of such defaults to all
holders of First Mortgage Bonds, but, except in the case of a default resulting
from the failure to make any payment of principal of or interest on the First
Mortgage Bonds or in the payment of any sinking or purchase fund installments,
the First Mortgage Trustee may withhold such notice if it determines in good
faith that it is in the best interests of the holders of the First Mortgage
Bonds to do so. (Article XIII)
Upon the occurrence of any event of default, the First Mortgage Trustee or
the holders of not less than 25% in principal amount of the First Mortgage Bonds
may declare the principal amount of all First Mortgage Bonds due, and, if the
Company cures all defaults before a sale of the mortgaged property, the holders
of a majority in principal amount of the First Mortgage Bonds may waive the
default. If any event of default occurs, the First Mortgage Trustee also may (a)
take possession of and operate the mortgaged property for the purpose of paying
the principal of and interest on the First Mortgage Bonds; (b) sell at public
auction all of the mortgaged property, or such parts thereof as the holders of a
majority in principal amount of the First Mortgage Bonds may request or, in the
absence of such request, as the First Mortgage Trustee may determine; (c) bring
suit to enforce payment of the principal of and interest on the First Mortgage
Bonds, to foreclose the First Mortgage or for the appointment of a receiver of
the mortgaged property; and (d) pursue any other remedy. (Article IX)
No holder of First Mortgage Bonds may institute any action, suit or
proceeding for any remedy under the First Mortgage unless he has previously
given the First Mortgage Trustee written notice of a default by the Company, and
in addition: (a) the holders of not less than 25% in principal amount of the
First Mortgage Bonds have requested the First Mortgage Trustee and afforded it a
reasonable opportunity to exercise its powers under the First Mortgage or to
institute such action, suit or proceeding in its own name; (b) such holder has
offered to the First Mortgage Trustee security and indemnity satisfactory to it
against the costs, expenses and liabilities to be incurred thereby; and (c) the
First Mortgage Trustee has refused or neglected to comply with such request
within a reasonable time. The holders of a majority in outstanding principal
amount of the First Mortgage Bonds, upon furnishing the First Mortgage Trustee
with security and indemnification satisfactory to it, may require the First
Mortgage Trustee to pursue any available remedy, and any holder of the First
Mortgage Bonds has the absolute and unconditional right to enforce the payment
of the principal of and interest on his First Mortgage Bonds. (Article IX)
MODIFICATION OF FIRST MORTGAGE AND FIRST MORTGAGE BONDS
Certain modifications which do not in any manner impair any of the rights
of the holders of any series of First Mortgage Bonds then outstanding or of the
First Mortgage Trustee may be made without the vote of the holders of the First
Mortgage Bonds by supplemental indenture entered into between the Company and
the First Mortgage Trustee. (Article XIV)
Modifications of the First Mortgage or any indenture supplemental thereto,
and of the rights and obligations of the Company and of holders of all series of
First Mortgage Bonds outstanding, may be made with the consent of the Company by
the vote of the holders of at least 80% in principal amount of the outstanding
First Mortgage Bonds entitled to vote at a meeting of the holders of the First
Mortgage Bonds or, if one or more, but less than all, of the series of First
Mortgage Bonds outstanding under the First Mortgage are affected by any such
modification, by the vote of the holders of at least 80% in principal amount of
the outstanding First Mortgage Bonds entitled to vote of each series so
affected; but no such modification may be made which will affect the terms of
payment of the principal of or premium, if any, or interest on any First
Mortgage Bond issued under the First Mortgage or to change the voting percentage
described above to less
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than 80% with respect to any First Mortgage Bonds outstanding when such
modification becomes effective. First Mortgage Bonds owned or held by or for the
account or benefit of the Company or an affiliate of the Company (as defined in
the First Mortgage) are not entitled to vote. (Article XV) In the Nineteenth
Supplemental Indenture, the First Mortgage was modified, effective when none of
the First Mortgage Bonds of any series issued prior to December 1976 are
outstanding, so as to change the 80% voting requirements discussed above to 60%.
Based on the series of First Mortgage Bonds outstanding at December 31, 1997,
the 60% voting requirement will become effective on November 15, 2005.
DEFEASANCE AND DISCHARGE
The First Mortgage provides that the Company will be discharged from any
and all obligations under the First Mortgage if the Company pays the principal,
interest and premium, if any, due on all First Mortgage Bonds outstanding in
accordance with the terms stipulated in each such Bond and if the Company has
performed all other obligations under the First Mortgage. In the event of such
discharge, the Company has agreed to continue to indemnify the First Mortgage
Trustee from any liability arising out of the First Mortgage. (Article XVI)
CERTAIN TAX CONSIDERATIONS
The following is a summary of the taxation of the Secured Notes and of
certain anticipated United States federal income tax consequences resulting from
the ownership of the Secured Notes and the exchange of Old Notes for New Notes.
This summary does not cover all of the possible tax consequences relating to the
ownership of the Secured Notes and the receipt of interest thereon, and it is
not intended as tax advice to any person. It addresses only beneficial owners
who hold the Secured Notes as capital assets and does not address special
classes of beneficial owners such as dealers in securities or currencies, banks,
tax-exempt entities, life insurance companies, persons holding Secured Notes as
a hedge against interest rate or currency risks or as part of a straddle or
conversion transaction, or beneficial owners whose functional currency is not
the U.S. dollar. This summary is based upon the United States federal income tax
laws as currently in effect and as currently interpreted and does not include
any description of the tax laws of any non-U.S. government that may apply.
Prospective purchasers of Secured Notes should consult their own tax
advisors concerning the application of the United States federal income tax
laws, as well as the possible application of the tax laws of any other
jurisdiction, to their particular situation.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Secured Note that is (for purposes of United States federal income tax) (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity treated as a partnership organized in or under the laws of the
United States or of any political subdivisions thereof, or (iii) an estate or
trust that is treated as a "United States person" within the meaning of Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended ("Code"). A "Non-
U.S. Holder" means any holder of a Secured Note other than a U.S. Holder.
The exchange of the Old Notes for the New Notes will be a tax-free exchange
for all holders and no gain or loss will be recognized by a holder as a result
of such exchange. A holder's tax basis for a New Note will be equal to the tax
basis of the Old Note exchanged therefor. A holder's holding period for a New
Note will include the period during which the holder held the Old Note exchanged
therefor.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
General
Under general principles of current law, the interest paid on a Secured
Note will be includable in income by a U.S. Holder when the interest is received
or when it accrues in accordance with the U.S. Holder's regular method of tax
accounting.
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Secured Notes Purchased at a Premium
If a U.S. Holder purchases a Secured Note for an amount that is greater
than the amount payable at maturity, that U.S. Holder will be considered to have
purchased such Secured Note with "amortizable bond premium" equal in amount to
such excess, and may elect, in accordance with the applicable provisions of
Section 171 of the Code, to amortize that premium as an offset to the interest
payments on the Secured Note using a constant yield to maturity method over the
remaining term of the Secured Note. Pursuant to Section 67(b)(11) of the Code,
the amortization of that premium is not considered a miscellaneous itemized
deduction. Any amortization of such premium with respect to the Secured Notes
will reduce the basis of the Secured Note pursuant to Section 1016(a)(5) of the
Code. If a U.S. Holder does not elect to amortize such premium, the premium paid
by such a holder will be included in the basis of the Secured Note and will
decrease the gain, or increase the loss, on a disposition or retirement of the
Secured Note.
Secured Notes Issued at a Discount
In the case of Secured Notes that are offered to the public at a price that
is less than their stated redemption price at maturity (i.e., their principal
amount), the Secured Notes may bear original issue discount, or "OID," for
federal income tax purposes.
Original issue discount is defined as the excess of the Secured Note's
stated redemption price over its issue price (which is the initial offering
price to the public at which a substantial amount of the Secured Notes are
sold), provided that excess equals or exceeds a statutory de minimis amount
(one-quarter of one percent of the Secured Note's stated redemption price at
maturity multiplied by the number of complete years to its maturity).
OID will accrue to U.S. Holders of the Secured Notes over the period to
maturity based on a constant yield to maturity method, using semiannual
compounding. The portion of OID that accrues during the time a U.S. Holder owns
the Secured Notes (i) constitutes interest includable in the U.S. Holder's gross
income for federal income tax purposes and (ii) is added to the U.S. Holder's
tax basis for purposes of determining gain or loss on the maturity, redemption,
prior sale, or other disposition of the Secured Notes. Thus, the effect of OID
is to increase the amount of taxable interest income above the actual interest
payments during the life of the Secured Notes.
Disposition or Retirement of a Secured Note
Upon the sale, exchange or other disposition of a Secured Note, or upon the
retirement of a Secured Note at maturity, a U.S. Holder will recognize gain or
loss equal to the difference, if any, between the amount realized upon the
disposition or retirement and the U.S. Holder's tax basis in the Secured Note. A
U.S. Holder's tax basis for determining gain or loss on the disposition or
retirement of a Secured Note will be the cost of that Secured Note to such U.S.
Holder, increased by the amount of OID and any market discount includable in
such U.S. Holder's gross income with respect to that Secured Note, and decreased
by the amount of any payments under the Secured Note that are part of its stated
redemption price at maturity and by the portion of any premium applied to reduce
interest payments as described above.
Gain or loss upon the disposition or retirement of a Secured Note will be
capital gain or loss, except to the extent the gain represents accrued OID or
market discount not previously included in gross income or accrued interest, to
which extent such gain or loss would be treated as ordinary income. Any capital
loss will be long-term capital loss if at the time of disposition or retirement
the Secured Note has been held for more than one year. Any capital gain
recognized on the disposition or retirement of Secured Notes held for more than
eighteen months will be taxed at a maximum rate of 20 percent. Any capital gain
recognized on the disposition or retirement of Secured Notes held for more than
twelve months and less than eighteen months will be treated as mid-term gain and
taxed at a maximum rate of 28 percent.
Secondary Market Purchasers -- Premium and Market Discount
A U.S. Holder who purchases a Secured Note subsequent to its original
issuance for an amount that is greater than its "adjusted issue price" (defined
as the sum of the issue price of the Secured Note and the
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portion of OID previously includable, disregarding any reduction on account of
acquisition premium, as discussed below, in the gross income of any owners of
the Secured Note and reduced by the amount of any payment previously made on the
Secured Note other than a qualified periodic interest payment) and less than or
equal to its stated redemption price at maturity, reduced by the amount of any
payment previously made on the Secured Note other than a qualified periodic
interest payment, will be considered to have purchased such Secured Note at an
"acquisition premium." The amount of OID that such U.S. Holder must include in
its gross income with respect to such Secured Note for any taxable year is
generally reduced by the portion of such acquisition premium properly allocable
to such year. If a U.S. Holder purchases a Secured Note for a cost in excess of
its stated redemption price at maturity (reduced by the amount of any payment
made on the debt instrument prior to the purchase date other than a qualified
periodic interest payment), such Secured Note will have no OID and such U.S.
Holder may elect to amortize such premium, using a constant interest method,
generally over the remaining term of the Secured Note. Such premium generally
shall be deemed to be an offset to interest otherwise includable with respect to
the Secured Note. Premium on a Secured Note held by a U.S. Holder that does not
make such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Secured Note.
If a U.S. Holder purchases a Secured Note subsequent to its original
issuance for an amount that is less than, respectively, its stated redemption
price at maturity or its revised issue price (defined as the sum of the issue
price of the Secured Note and the aggregate amount of OID includable,
disregarding any reduction on account of acquisition premium, as discussed
above, in the gross income of all owners of the Secured Note), the amount of the
difference generally will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other
disposition of, a Secured Note as ordinary income to the extent of the market
discount that has accrued (and has not previously been included in income)
during the period such U.S. Holder held the Secured Note. In addition, the U.S.
Holder may be required to defer, until the maturity of the Secured Note or its
earlier disposition in a taxable transaction, the deduction of all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
carry such Secured Note.
Any market discount will be considered accrued ratably during the period
from the date of acquisition to the maturity date of the Secured Note, unless
the U.S. Holder elects to accrue on a constant interest basis. A U.S. Holder of
a Secured Note may elect to include market discount in income currently as it
accrues (on either a ratable or a constant interest basis with a corresponding
increase in the U.S. Holder's tax basis in the Secured Note), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
Backup Withholding
In general, if a U.S. Holder fails to furnish a correct taxpayer
identification number or certification of exempt status, fails to report
dividend and interest income in full, or fails to certify that he has provided a
correct taxpayer identification number and that he is not subject to
withholding, the U.S. Holder may be subject to a 31 percent federal backup
withholding tax on certain amounts paid or deemed paid (including OID) to the
U.S. Holder. An individual's taxpayer identification number is his social
security number. The backup withholding tax is not an additional tax and may be
credited against a U.S. Holder's regular federal income tax liability or
refunded by the Internal Revenue Service where applicable.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
General
A Non-U.S. Holder generally will not be subject to United States federal
withholding tax on interest paid on the Secured Notes as long as either (i) the
beneficial owner of the Secured Note, under penalties of perjury, provides the
Companies or their agent with such beneficial owner's name and address and
certifies on
47
<PAGE> 51
IRS Form W-8 (or a suitable substitute form) that it is not a U.S. Holder or
(ii) a securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its trade or business
("financial institution") holds the Secured Note and provides a statement to the
Company or its agent under penalties of perjury in which it certifies that such
an IRS Form W-8 (or a suitable substitute) has been received by it from the
beneficial owner of the Secured Note or qualifying intermediary and furnishes
the Company or its agent a copy thereof. If the information provided in such
statement changes, the Non-U.S. Holder must so inform the payor within 30 days
of such change. The statement generally must be provided in the year a payment
occurs or in either of the two preceding years (or, in the case of payments
after December 31, 1998, three preceding years). A Non-U.S. Holder is eligible
to provide the statement referred to above in this paragraph if the Non-U.S.
Holder: (i) is not actually or constructively a "10 percent shareholder" of the
Company within the meaning of the Code, (ii) is not a "controlled foreign
corporation" with respect to which the Company is a "related person" within the
meaning of Section 881(c)(3)(C) of the Code, and (iii) is not a bank described
in Section 881(c)(3)(A) of the Code.
If the conditions described in the preceding paragraph are not satisfied,
then interest paid on the Secured Notes will be subject to United States
withholding tax at a rate of 30%, unless such rate is reduced or eliminated
pursuant to an applicable tax treaty.
Any capital gain realized by a Non-U.S. Holder on the sale, redemption,
retirement, or other taxable disposition of a Secured Note will be exempt from
United States federal income and withholding tax, provided that (i) the gain is
not effectively connected with the Non-U.S. Holder's conduct of a trade or
business in the United States, (ii) in the case of a Non-U.S. Holder that is an
individual, the holder is not present in the United States for 183 days or more
in the taxable year of the disposition, and (iii) the Non-U.S. Holder is not
subject to tax pursuant to the provisions of Section 877 of the Code applicable
to certain United States expatriates.
Effectively-Connected Income
If the interest, gain, or other income a Non-U.S. Holder recognizes on a
Secured Note is effectively connected with the Non-U.S. Holder's conduct of a
trade or business in the United States, the Non-U.S. Holder (although exempt
from the withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to United States federal income tax rates
applicable to United States persons. In addition, if the Non-U.S. Holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its "effectively connected earnings and profits," as adjusted for certain items,
unless it qualifies for a lower rate under an applicable tax treaty.
Backup Withholding
A Non-U.S. Holder will generally be exempt from backup withholding and
information reporting requirements, provided it complies with the certification
and identification procedures as discussed above. The amount of any backup
withholding from a payment to a holder will be allowed as a credit against the
holder's federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Notes that were acquired for the
account of such broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from the Company or any
affiliate of the Company) may exchange such Old Notes for New Notes pursuant to
the Exchange Offer, provided that each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, if such Old Notes were acquired by
such broker-dealer as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by any such broker-dealer in connection with resales
of New Notes received in exchange for Old Notes if such Old Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that,
48
<PAGE> 52
for a period of 120 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any such broker-dealer for
use in connection with any such resales. In addition, until , 199 ,
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus, and any amendment or
supplement to this Prospectus, to any broker-dealer that requests those
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Secured Notes) other than commissions or concessions of
any broker or dealer and will indemnify the holders of the Secured Notes
(including any broker-dealer) against certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be passed
upon for the Company by David L. Feltner, 76 South Main Street, Akron, Ohio
44308, Associate General Counsel of the Company and by Squire, Sanders & Dempsey
LLP, 4900 Key Tower, Cleveland, Ohio 44114, special counsel to the Company.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996, included
in the Form 10-K and included in or incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
49
<PAGE> 53
INDEX TO FINANCIAL STATEMENTS SECTION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
(Reprinted from the Company's Annual Report to Share
Owners)
Management's Financial Analysis........................
Report of Independent Public Accountants...............
Income Statement.......................................
Retained Earnings......................................
Balance Sheet..........................................
Cash Flows.............................................
Statement of Capitalization............................
Notes to the Financial Statements......................
Financial and Statistical Review.......................
FIRST QUARTER 1997 FORM 10-Q
Notes to the Financial Statements (Unaudited)(a).......
Income Statement.......................................
Balance Sheet..........................................
Cash Flows.............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................
Part II. Other Information(a).........................
SECOND QUARTER 1997 FORM 10-Q
Notes to the Financial Statements (Unaudited)(a).......
Income Statement.......................................
Balance Sheet..........................................
Cash Flows.............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................
Part II. Other Information(a).........................
THIRD QUARTER 1997 FORM 10-Q
Notes to the Financial Statements (Unaudited)(a).......
Income Statement.......................................
Balance Sheet..........................................
Cash Flows.............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................
Part II. Other Information(a).........................
</TABLE>
- ---------------
(a) Combined in each 1997 Form 10-Q for Centerior Energy, the Company and Toledo
Edison and relates to all three companies.
F-1
<PAGE> 54
APPENDIX I
[SPECIMEN]
<TABLE>
<S> <C>
AMBAC Ambac Assurance Corporation
c/o CT Corporation Systems
44 East Mifflin Street, Madison, Wisconsin 53703
Financial Guaranty Insurance Policy Administrative Office:
One State Street Plaza, New York, New York 10004
Telephone: (212) 668-0340
</TABLE>
Obligor: Policy Number:
Obligations: Premium:
AMBAC ASSURANCE CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees to pay to United States Trust Company of New York, as
trustee, or its successor (the "Insurance Trustee"), for the benefit of the
Obligees, that portion of the principal of and interest on the above-described
obligations (the "Obligations") which shall become Due for Payment but shall be
unpaid by reason of Nonpayment by the Obligor.
Ambac will make such payments to the Insurance Trustee within one (1) business
day following notification to Ambac of Nonpayment. Upon an Obligee's
presentation and surrender to the Insurance Trustee of such unpaid Obligations
or appurtenant coupons, uncanceled and in bearer form free of any adverse claim,
the Insurance Trustee will disburse to the Obligee the face amount of principal
and interest which is then Due for Payment but is unpaid. Upon such
disbursement, Ambac shall become the owner of the surrendered Obligations and
coupons and shall be fully subrogated to all of the Obligee's rights to payment.
In cases where the Obligations are issuable only in a form whereby principal is
payable to registered Obligees or their assigns, the Insurance Trustee shall
disburse principal to an Obligee as aforesaid only upon presentation and
surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free
of any adverse claim, together with an instrument of assignment, in form
satisfactory to the Insurance Trustee duly executed by the Obligee or such
Obligee's duly authorized representative, so as to permit ownership of such
Obligation to be registered in the name of Ambac or its nominee. In cases where
the Obligations are issuable only in a form whereby interest is payable to
registered Obligees or their assigns the Insurance Trustee shall disburse
interest to an Obligee as aforesaid only upon presentation to the Insurance
Trustee of proof that the claimant is the person entitled to the payment of
interest on the Obligation and delivery to the Insurance Trustee of an
instrument of assignment, in form satisfactory to the Insurance Trustee, duly
executed by the claimant Obligee or such Obligee's duly authorized
representative, transferring to Ambac all rights under such Obligation to
receive the interest in respect of which the insurance disbursement was made.
Ambac shall be subrogated to all of the Obligees' rights to payment on
registered Obligations to the extent of the insurance disbursements so made.
In the event that a trustee or paying agent for the Obligations has notice that
any payment of principal of or interest on an Obligation which has become Due
for Payment and which is made to an Obligee by or on behalf of the Obligor has
been deemed a preferential transfer and theretofore recovered from the Obligee
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Obligee will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
As used herein, the term "Obligee" means any person other than the Obligor who,
at the time of Nonpayment, is the owner of an Obligation or of a coupon
appertaining to an Obligation. As used herein, "Due for Payment", when
referring to the principal of Obligations, is when the stated maturity date or
mandatory redemption date for the application of a required sinking fund
installment has been reached and does not refer to any earlier date on which
payment is due by reason of call for redemption (other than by application of
required sinking fund installments), acceleration or other advancement of
maturity; and, when referring to interest on the Obligations, is when the
stated date for payment of interest has been reached. As used herein,
"Nonpayment" means the failure of the Obligor to have provided sufficient funds
to the paying agent for payment in full of all principal of and interest on the
Obligations which are Due for Payment.
This Policy is noncancelable. The premium on this Policy is not refundable for
any reason, including payment of the Obligations prior to maturity. This
Policy does not insure against loss of any prepayment or other acceleration
payment which at any time may become due in respect of any Obligation, other
than at the sole option of Ambac, nor against any risk other than Nonpayment.
In witness whereof, Ambac has caused this Policy to be affixed with a
facsimile of its corporate seal and to be signed by its duly authorized
officers in facsimile to become effective as its original seal and signatures
and binding upon Ambac by virtue of the countersignature of its duly
authorized representative.
/s/ P. Lassiter AMBAC ASSURANCE CORPORATION /s/ _______ A. Cooke
President SEAL Secretary
WISCONSIN
Effective Date: Authorized Representative
UNITED STATES TRUST COMPANY OF NEW YORK /s/ H. William Weber
acknowledges that it has agreed to perform
the duties of Insurance Trustee under this Authorized Officer
Policy.
Form No.: 2B-0012(7/97)
<PAGE> 55
======================================================
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations in connection with the Exchange Offer
other than those contained or incorporated by reference in this Prospectus and
the accompanying Letter of Transmittal. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Exchange Agent. Neither this Prospectus nor the accompanying Letter of
Transmittal, or both together, constitute an offer to sell, or a solicitation of
an offer to buy, Secured Notes in any jurisdiction where, or to any person to
whom, it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor the accompanying Letter of Transmittal, or both together,
nor any sale made hereunder shall, under any circumstances, create an
implication that there has not been a change in the facts set forth in this
Prospectus or in the affairs of the Company since the date hereof.
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information......................... 3
Incorporation of Certain Documents by
Reference................................... 3
Summary Information........................... 4
Risk Factors.................................. 11
Selected Financial Information................ 15
The Company................................... 16
Pending Merger of the Company and Toledo
Edison...................................... 21
Combined Pro Forma Condensed Balance Sheets of
Cleveland Electric and Toledo Edison........ 23
Combined Pro Forma Condensed Income Statements
of Cleveland Electric and Toledo Edison..... 24
The Exchange Offer............................ 28
Description of the New Notes.................. 35
1997 First Mortgage Bonds and First
Mortgage.................................... 42
Certain Tax Considerations.................... 46
Plan of Distribution.......................... 49
Legal Matters................................. 50
Experts....................................... 50
Index to Financial Statements Section......... F-1
</TABLE>
======================================================
======================================================
$450,000,000
EXCHANGE OFFER
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
OFFER TO EXCHANGE
7.43% SERIES D SECURED NOTES DUE 2009 OR
7.88% SERIES D SECURED NOTES DUE 2017
FOR ANY AND ALL OUTSTANDING
7.43% SERIES C SECURED NOTES DUE 2009 OR
7.88% SERIES C SECURED NOTES DUE 2017, RESPECTIVELY
PROSPECTUS
, 1998
======================================================
<PAGE> 56
PART II
ITEM 20 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Regulations provide that each person who is or has been a
director or officer of the Company shall be indemnified by the Company against
judgments, penalties, reasonable settlements, legal fees and expenses arising
out of any threatened, pending or completed proceedings of a criminal,
administrative or investigative nature in which he or she may become involved by
reason of his or her relationship to the Company (other than a proceeding by or
on behalf of the Company, but only if he or she is found, by the disinterested
members of the Company's Board, by independent counsel or by the Share Owners,
(a) to have acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Company and (b) in the case
of a criminal matter, to have had no reasonable cause to believe his or her
conduct was unlawful.
In the case of actions brought by or on behalf of the Company against a
director or officer, indemnification is provided only for reasonable legal fees
and expenses and only if it is determined that he or she acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company; but if he or she is adjudged to be liable due to
negligence or misconduct, indemnification is provided only if an appropriate
court determines that indemnification is fair and reasonable under the
circumstances.
Similar indemnification also may be made available by the Company to its
directors and officers, and to a limited extent may be available as a matter of
right to such persons, under Section 1701.13 of the Ohio Revised Code.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against liabilities described in the preceding paragraphs (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by a director, officer or controlling
person, the Company will, unless in the opinion of their counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company maintains and pays the premium on contracts insuring the
Company (with certain exclusions) against any liability to directors and
officers they may incur under the above indemnity provisions and insuring each
director and officer of the Company (with certain exclusions) against liability
and expense, including legal fees, which he or she may incur by reason of his or
her relationship to the Company, even if the Company does not have the
obligation or right to indemnify him or her against such liability or expense.
ITEM 21 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
See Exhibit Index and exhibits following.
(B) FINANCIAL STATEMENT SCHEDULES.
No schedules are required.
ITEM 22 UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To file, during any period when offers or sales are being made, a
post-effective amendment to this Registration Statement:
II-1
<PAGE> 57
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request; and
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
See also the fourth paragraph of Item 20 above.
II-2
<PAGE> 58
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF AKRON, STATE OF OHIO, ON
THE DAY OF , 1998.
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
Registrant
By
--------------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
(i) Principal executive officer:
H. Peter Burg President
(ii) Principal financial officer:
Richard H. Marsh Vice President
(iii) Principal accounting officer:
Harvey L. Wagner Controller , 1998
(iv) Directors:
Willard R. Holland Director
H. Peter Burg Director
Anthony J. Alexander Director
</TABLE>
By
------------------------------------------------------------
II-3
<PAGE> 59
EXHIBIT INDEX
Exhibits Filed Herewith
The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1(a) Placement Agreement.
1(b) Registration Agreement.
1(c) Letter of Transmittal.
1(d) Notice of Guaranteed Delivery.
1(e) Nominee Letter.
1(f) Client's Letter.
4(a) Seventy-Sixth Supplemental Indenture dated October 15, 1997.
4(b) Note Indenture dated as of October 24, 1997.
4(c) First Supplemental Note Indenture dated as of October 24,
1997.
5 Opinion of counsel for the Company.
*10(a) Form of Amendment No. 2 to Facility Lease among Citicorp
Lescaman, Inc., The Cleveland Electric Illuminating Company
and The Toledo Edison Company.
*10(b) Form of Amendment No. 3 to Facility Lease among Citicorp
Lescaman, Inc., The Cleveland Electric Illuminating Company
and The Toledo Edison Company.
**10(c) Form of Amendment No. 2 to Facility Lease among US West
Financial Services, Inc., The Cleveland Electric
Illuminating Company and The Toledo Edison Company.
**10(d) Form of Amendment No. 3 to Facility Lease among US West
Financial Services, Inc., The Cleveland Electric
Illuminating Company and The Toledo Edison Company.
***10(e) Form of Amendment No. 2 to Facility Lease among Midwest
Power Company, The Cleveland Electric Illuminating Company
and The Toledo Edison Company.
12 Statements regarding computation of ratios.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of counsel for the Company (included in Exhibit 5).
25(a) Form T-1 Statement of Eligibility and Qualification for
7.43% Series D Secured Notes due 2009 under Trust Indenture
of 1939 of The Chase Manhattan Bank, as Note Trustee.
25(b) Form T-1 Statement of Eligibility and Qualification for
7.88% Series D Secured Notes due 2017 under Trust Indenture
of 1939 of The Chase Manhattan Bank, as Note Trustee.
</TABLE>
* Documents, substantially identical in all material respects to this Exhibit,
have been entered into relating to two owner participants. Although such
documents may differ in some respects (such as name of the trust, dollar
amounts and percentages), there are no material details in which such
document differs from this Exhibit.
** Documents, substantially identical in all material respects to this Exhibit,
have been entered into relating to three owner participants. Although such
documents may differ in some respects (such as name of the trust, dollar
amounts and percentages), there are no material details in which such
document differs from this Exhibit.
*** Documents, substantially identical in all material respects to this Exhibit,
have been entered into relating to seven owner participants. Although such
documents may differ in some respects (such as name of the trust, dollar
amounts and percentages), there are no material details in which such
document differs from this Exhibit.
<PAGE> 60
EXHIBITS INCORPORATED BY REFERENCE
The exhibits listed below have been filed heretofore with the SEC pursuant
to requirements of the Acts administered by the SEC and are incorporated herein
by reference and made a part hereof. The exhibit number and file number of such
documents are stated in parenthesis.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3a Amended Articles of Incorporation of the Company, as
amended, effective May 28, 1993 (Exhibit 3a, 1993 Form 10-K,
File No. 1-2323).
3b Regulations of the Company, dated April 29, 1981, as amended
effective October 1, 1988 and April 24, 1990 (Exhibit 3b,
1990 Form 10-K, File No. 1-2323).
4b(1) Mortgage and Deed of Trust, dated July 1, 1940, between the
Company and Guaranty Trust Company of New York, as trustee,
(under which The Chase Manhattan Bank is successor trustee)
(Exhibit 7(a), File No. 2-4450).
Supplemental Indentures between the Company and the First
Mortgage Trustee, supplemental to Exhibit 4b(1), dated as
follows:
4b(2) July 1, 1940 (Exhibit 7(b), File No. 2-4450).
4b(3) August 18, 1944 (Exhibit 4(c), File No. 2-9887).
4b(4) December 1, 1947 (Exhibit 7(d), File No. 2-7306).
4b(5) September 1, 1950 (Exhibit 7(c), File No. 2-8587).
4b(6) June 1, 1951 (Exhibit 7(f), File No. 2-8994).
4b(7) May 1, 1954 (Exhibit 4(d), File No. 2-10830).
4b(8) March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839).
4b(9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753).
4b(10) December 20, 1967 (Exhibit 2(a)(4), File No. 2-30759).
4b(11) January 15, 1969 (Exhibit 2(a)(5), File No. 2-30759).
4b(12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008).
4b(13) June 1, 1970 (Exhibit 2(a)(4), File No. 2-37235).
4b(14) November 15, 1970 (Exhibit 2(a)(4), File No. 2-38460).
4b(15) May 1, 1974 (Exhibit 2(a)(4), File No. 2-50537).
4b(16) April 15, 1975 (Exhibit 2(a)(4), File No. 2-52995).
4b(17) April 16, 1975 (Exhibit 2(a)(4), File No. 2-53309).
4b(18) May 28, 1975 (Exhibit 2(c), June 5, 1975 Form 8-A, File No.
1-2323).
4b(19) February 1, 1976 (Exhibit 3(d)(6), 1975 Form 10-K, File No.
1-2323).
4b(20) November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375).
4b(21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401).
4b(22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221).
4b(23) May 1, 1978 (Exhibit 2(b), June 30, 1978 Form 10-Q, File No.
1-2323).
4b(24) September 1, 1979 (Exhibit 2(a), September 30, 1979 Form
10-Q, File No. 1-2323).
4b(25) April 1, 1980 (Exhibit 4(a)(2), September 30, 1980 Form
10-Q, File No. 1-2323).
4b(26) April 15, 1980 (Exhibit 4(b), September 30, 1980 Form 10-Q,
File No. 1-2323).
4b(27) May 28, 1980 (Exhibit 2(a)(4), Amendment No. 1, File No.
2-67221).
4b(28) June 9, 1980 (Exhibit 4(d), September 30, 1980 Form 10-Q,
File No. 1-2323).
4b(29) December 1, 1980 (Exhibit 4(b)(29), 1980 Form 10-K, File No.
1-2323).
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4b(30) July 28, 1981 (Exhibit 4(a), September 30, 1981, Form 10-Q,
File No. 1-2323).
4b(31) August 1, 1981 (Exhibit 4(b), September 30, 1981, Form 10-Q,
File No. 1-2323).
4b(32) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No.
2-76029).
4b(33) July 15, 1982 (Exhibit 4(a), September 30, 1982 Form 10-Q,
File No. 1-2323).
4b(34) September 1, 1982 (Exhibit 4(a)(1), September 30, 1982 Form
10-Q, File No. 1-2323).
4b(35) November 1, 1982 (Exhibit 4(a)(2), September 30, 1982 Form
10-Q, File No. 1-2323).
4b(36) November 15, 1982 (Exhibit 4(b)(36), 1982 Form 10-K, File
No. 1-2323).
4b(37) May 24, 1983 (Exhibit 4(a), June 30, 1983 Form 10-Q, File
No. 1-2323).
4b(38) May 1, 1984 (Exhibit 4, June 30, 1984 Form 10-Q, File No.
1-2323).
4b(39) May 23, 1984 (Exhibit 4, May 22, 1984 Form 8-K, File No.
1-2323).
4b(40) June 27, 1984 (Exhibit 4, June 11, 1984 Form 8-K, File No.
1-2323).
4b(41) September 4, 1984 (Exhibit 4b(41), 1984 Form 10-K, File No.
1-2323).
4b(42) November 14, 1984 (Exhibit 4b(42), 1984 Form 10-K, File No.
1-2323).
4b(43) November 15, 1984 (Exhibit 4b(43), 1984 Form 10-K, File No.
1-2323).
4b(44) April 15, 1985 (Exhibit 4(a), May 8, 1985 Form 8-K, File No.
1-2323).
4b(45) May 28, 1985 (Exhibit 4(b), May 8, 1985 Form 8-K, File No.
1-2323).
4b(46) August 1, 1985 (Exhibit 4, September 30, 1985 Form 10-Q,
File No. 1-2323).
4b(47) September 1, 1985 (Exhibit 4, September 30, 1985 Form 8-K,
File No. 1-2323).
4b(48) November 1, 1985 (Exhibit 4, January 31, 1986 Form S-K, File
No. 1-2323).
4b(49) April 15, 1986 (Exhibit 4, March 31, 1986 Form 10-Q, File
No. 1-2323).
4b(50) May 14, 1986 (Exhibit 4(a), June 30, 1986 Form 10-Q, File
No. 1-2323).
4b(51) May 15, 1986 (Exhibit 4(b), June 30, 1986 Form 10-Q, File
No. 1-2323).
4b(52) February 25, 1987 (Exhibit 4b(52), 1986 Form 10-K, File No.
1-2323).
4b(53) October 15, 1987 (Exhibit 4, September 30, 1987 Form 10-Q,
File No. 1-2323).
4b(54) February 24, 1988 (Exhibit 4b(54), 1987 Form 10-K, File No.
1-2323).
4b(55) September 15, 1988 (Exhibit 4b(55), 1988 Form 10-K, File No.
1-2323).
4b(56) May 15, 1989 (Exhibit 4(a)(2)(i), File No. 33-32724).
4b(57) June 13, 1989 (Exhibit 4(a)(2)(ii), File No. 33-32724).
4b(58) October 15, 1989 (Exhibit 4(a)(2)(iii), File No. 33-32724).
4b(59) January 1, 1990 (Exhibit 4b(59), 1989 Form 10-K, File No.
1-2323).
4b(60) June 1, 1990 (Exhibit 4(a), September 30, 1990 Form 10-Q,
File No. 1-2323).
4b(61) August 1, 1990 (Exhibit 4(b), September 30, 1990 Form 10-Q,
File No. 1-2323).
4b(62) May 1, 1991 (Exhibit 4(a), June 30, 1991 Form 10-Q, File No.
1-2323).
4b(63) May 1, 1992 (Exhibit 4(a)(3), File No. 33-48845).
4b(64) July 31, 1992 (Exhibit 4(a)(3), File No. 33-57292).
4b(65) January 1, 1993 (Exhibit 4b(65), 1992 Form 10-K, File No.
1-2323).
4b(66) February 1, 1993 (Exhibit 4b(66), 1992 Form 10-K, File No.
1-2323).
4b(67) May 20, 1993 (Exhibit 4(a), July 14, 1993 Form 8-K, File No.
1-2323).
4b(68) June 1, 1993 (Exhibit 4(b), July 14, 1993 Form 8-K, File No.
1-2323).
4b(69) September 15, 1994 (Exhibit 4(a), September 30, 1994 Form
10-Q, File No. 1-2323).
4b(70) May 1, 1995 (Exhibit 4(a), September 30, 1995 Form 10-Q,
File No. 1-2323).
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4b(71) May 2, 1995 (Exhibit 4(b), September 30, 1995 Form 10-Q,
File No. 1-2323).
4b(72) June 1, 1995 (Exhibit 4(c), September 30, 1995 Form 10-Q,
File No. 1-2323).
4b(73) July 15, 1995 (Exhibit 4b(73), 1995 Form 10-K, File No.
1-2323).
4b(74) August 1, 1995 (Exhibit 4b(74), 1995 Form 10-K, File No.
1-2323).
4b(75) June 15, 1997 (Exhibit 4(a), File No. 333-35931).
4c Open-End Subordinate Indenture of Mortgage between the
Company and Bank One, Columbus, N.A., as Trustee, Dated as
of June 1, 1994 (Exhibit 4(a), August 26, 1994 Form 8-K,
File No. 1-2323).
</TABLE>
Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the
Registrant has not filed as an exhibit to this Form S-4 any instrument with
respect to long-term debt if the total amount of securities authorized
thereunder does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis, but the Registrant hereby agrees to
furnish to the Securities and Exchange Commission on request any such
instruments.
<PAGE> 1
Exhibit 1(a)
PLACEMENT AGREEMENT
October 16, 1997
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs:
The Cleveland Electric Illuminating Company, an Ohio
corporation ("Cleveland Electric" or the "Company") proposes to issue and sell
to the purchasers named in Schedule I hereto (the "Purchasers") $150,000,000
principal amount of 7.43% Series C Secured Notes Due 2009 and $300,000,000
principal amount of 7.88% Series C Secured Notes Due 2017 (those two tranches of
Notes collectively, the "Notes"), to be issued pursuant to an Indenture to be
dated as of October 24, 1997 and a First Supplemental Indenture to be dated as
of October 24, 1997 (that Indenture, as supplemented by that First Supplemental
Indenture, the "Indenture") between the Company and The Chase Manhattan Bank, a
New York banking corporation, as trustee (the "Trustee").
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on
exemptions therefrom. You have advised the Company and agree that you will make
an offering of the Notes purchased by you hereunder in accordance with Section 6
hereof on the terms set forth in the Preliminary Memorandum and the Final
Memorandum (each as defined below), as soon as practicable after the date hereof
as in your judgment is advisable. The Company hereby confirms that it has
authorized the use of the Preliminary Memorandum and the Final Memorandum in
connection with that offering of the Notes by you. Purchasers of the Notes
(including subsequent transferees) will have the registration rights set forth
in the Registration Agreement of even date herewith (the "Registration
Agreement"), among the Company and the Purchasers. Pursuant to the Registration
Agreement, the Company has agreed to file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") under the Securities Act pursuant to which the Company
will offer to exchange the Notes of each tranche for a series under the
Indenture of secured notes of the Company (the "Exchange Notes") with terms
identical to the Notes of that tranche (except that the Exchange Notes will not
contain terms with respect to transfer restrictions).
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum (the "Preliminary Memorandum") and
will prepare a final offering memorandum (the "Final Memorandum" and, with the
Preliminary Memorandum, each a
<PAGE> 2
"Memorandum") setting forth or including a description of the terms of the
Notes, the terms of the offering, a description of the Company and any material
developments relating to the Company occurring after the date of the most recent
financial statements included therein.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Purchasers to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section l(a) do not apply to
statements or omissions in either Memorandum based upon information relating to
any Purchaser furnished to the Company in writing by that Purchaser through you
expressly for use therein.
(b) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of Ohio,
has the corporate power and authority to own its property and to conduct its
business as described in each Memorandum and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
Subsidiaries (as defined below), taken as a whole.
(c) Each Subsidiary of the Company (i) other than those
subsidiaries specified in clause (ii) of this paragraph (1)(c) has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, and has corporate power and
authority to own its property and to conduct its business as described in the
Final Memorandum or (ii) that is not a corporation is a limited partnership, has
been duly formed and is validly existing as a limited partnership in good
standing under the laws of the jurisdiction of its formation, and has full power
and authority to own its property and to conduct its business as described in
the Final Memorandum; and, in either case, is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property required such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; and the Company is not a general partner in any
partnership. As used herein, the term "Subsidiary" has the meaning ascribed to
it in the Indenture.
(d) The financial statements included or incorporated by
reference in each Memorandum present fairly the financial position of the
Company and its consolidated Subsidiaries and the results of their operations
for the periods specified; and except as otherwise stated in each Memorandum,
those financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis.
-2-
<PAGE> 3
(e) The pro forma adjustments described in each Memorandum
have been properly applied on the bases described therein and the Company
believes that such adjustments with respect to it and the assumptions that
underlie those adjustments are reasonable.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The Indenture has been duly authorized, and when executed
and delivered by the Company (assuming due authorization, execution and delivery
by the Trustee) will constitute a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(h) The Notes have been duly authorized by the Company and,
when the Notes are executed by the Company and authenticated by the Trustee in
accordance with the Indenture and delivered to and paid for by the Purchasers in
accordance with this Agreement, the Notes will be entitled to the benefits of
the Indenture, and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors, rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(i) The Registration Agreement has been duly authorized,
executed and delivered by the Company and (assuming due authorization, execution
and delivery by the Purchasers) constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Notes and the Registration Agreement will not contravene any
provision of applicable law or the articles of incorporation, regulations,
partnership agreement or other organizational documents of the Company or any
Subsidiary of the Company or any agreement or other instrument binding upon the
Company or any Subsidiary of the Company, or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the Company or
any Subsidiary of the Company, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Indenture, the Notes or the Registration Agreement, except such as may be
required (i) by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes and (ii) by the securities or
Blue Sky laws of the various states and the Securities Act in connection with
the offer of the Exchange Notes and (iii) from The Public
-3-
<PAGE> 4
Utilities Commission of Ohio (whose approval for the performance by the Company
of its obligations under the Agreement, the Indenture, the Notes and the
Registration Agreement has been obtained).
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its Subsidiaries, taken as a whole, from that set forth in the Final
Memorandum.
(l) Neither the Company nor any Subsidiary of the Company is
in violation of its respective articles of incorporation or regulations,
partnership agreement or other organizational documents and neither the Company
nor any Subsidiary of the Company is in default in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or other contract, lease or other instrument to which it
is a party or by which any of them is bound, or to which any of its property or
assets is subject, except such violations or defaults as have been waived or
which would not have, singly or in the aggregate, a material adverse effect on
the Company and its Subsidiaries, taken as a whole.
(m) The Company and each of its Subsidiaries has obtained all
necessary consents, authorizations, approvals, orders, licenses, certificates
and permits of and from, and has made all declarations and filings with, all
foreign, federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, required to
own, lease, license, construct, operate and use its properties and assets and to
conduct its business in the manner described in the Final Memorandum, except to
the extent that the failure to obtain, declare or file would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
(n) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened to which the Company or any
Subsidiary of the Company is a party or to which any of the properties of the
Company or any Subsidiary of the Company is subject other than proceedings
accurately described in all material respects in the Final Memorandum and
proceedings that would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under this Agreement, the Indenture, the Notes or the
Registration Agreement or to consummate the transactions contemplated by the
Final Memorandum.
(o) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act of the Notes
or (ii) engaged in any form of general solicitation or general advertising in
connection with the offering of the Notes (as those terms are used in Regulation
D under the Securities Act) or in any manner involving a public offering within
the meaning of section 4(2) of the Securities Act.
-4-
<PAGE> 5
(p) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(q) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Purchasers in the manner contemplated by this
Agreement to register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.
(r) The Company and each of its Subsidiaries (i) is in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval, except in cases in which that noncompliance
with Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
(s) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its Subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of that review, the
Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.
(t) Neither the Company nor any of the Company's Affiliates or
any person acting on its or their behalf (other than the Purchasers) has engaged
in any directed selling efforts (as that term is defined in Regulation S under
the Securities Act ("Regulation S")) with respect to the Notes and the Company
and its Affiliates and any person acting on its or their behalf (other than the
Purchasers) has complied with the offering restrictions requirement of
Regulation S.
(u) The Company is a "subsidiary" of Centerior Energy
Corporation, which is a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. Centerior Energy
Corporation is exempt from regulation under such Act pursuant to Section 3(a)(1)
thereof and the rules and regulations thereunder promulgated by the Securities
and Exchange Commission (the "Commission") and, therefore, the Company is also
exempt from such regulation.
-5-
<PAGE> 6
(v) Cleveland Electric's Mortgage and Deed of Trust dated July
1, 1940, to Guaranty Trust Company of New York as Trustee, under which The Chase
Manhattan Bank is successor trustee (the "Mortgage Trustee"), as supplemented
and modified in certain respects by indentures supplemental thereto (the "
Mortgage"), including the Seventy-Sixth Supplemental Indenture dated October 15,
1997 (the "Supplemental Indenture"), and the First Mortgage Bonds, 7.43% Series
due 2009-D and the First Mortgage Bonds, 7.88% Series due 2017-B, of Cleveland
Electric (collectively, the "First Mortgage Bonds") issued under the Mortgage
and the Supplemental Indenture, on or before the Closing Date will have been
duly authorized, executed and delivered by Cleveland Electric and, as to the
First Mortgage Bonds, assuming that they have been duly authenticated by the
Mortgage Trustee, constitute valid and binding obligations enforceable against
the Company in accordance with their terms, except to the extent that the
binding effect and enforceability thereof are subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws in effect from time to
time affecting the rights of creditors generally or the enforcement of the
security provided by the Mortgage, and except to the extent that the
enforceability thereof may be limited by the application of general principles
of equity and may be subject to limitations upon the right to obtain judicial
orders requiring specific performance;
(w) The execution and delivery of the Supplemental Indenture
and the First Mortgage Bonds and the performance by Cleveland Electric of its
obligations thereunder and under the Mortgage (to the extent pertinent to the
issuance of the First Mortgage Bonds), will not constitute a default under, or
conflict with or violate any of the provisions of, the Articles of
Incorporation, the Regulations, any law, rule, regulation, judgment, order or
decree to which Cleveland Electric is subject or any agreement, indenture,
mortgage, lease, note or other obligation or instrument to which Cleveland
Electric is a party or by which it is bound;
(x) All consents or approvals of the PUCO and of any other
federal or state regulatory agency required in connection with Cleveland
Electric's execution and delivery of, and the performance of its obligations
under the Supplemental Indenture and the First Mortgage Bonds have been
obtained;
(y) Except as specifically described in the Memorandum, there
are no actions, suits, proceedings, inquiries or investigations at law or in
equity before or by any judicial or administrative court or agency, pending or
threatened against Cleveland Electric and there is no basis for any such action,
suit, proceeding, inquiry or investigation wherein the decision, ruling or
finding would materially or adversely affect the validity or enforceability of
the Mortgage (to the extent pertinent to the issuance of the First Mortgage
Bonds) or the First Mortgage Bonds; and
(z) Cleveland Electric has good title to substantially all the
properties referred to or described in the granting clauses of the Mortgage as
being subject to the lien thereof and now owned by it, subject only to the
conditions and exceptions set forth in the Memorandum "Description of Bonds --
Title to Property," none of which materially impairs the use of the property
affected thereby in the operation of the business of Cleveland Electric.
-6-
<PAGE> 7
2. OFFERING. You have advised the Company that the Purchasers
will make an offering of the Notes purchased by the Purchasers hereunder on the
terms to be set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into as in your judgment is advisable.
3. PURCHASE AND DELIVERY. The Company hereby agrees to sell to
the several Purchasers, and the Purchasers, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally and not jointly, to purchase from the
Company the respective principal amounts of Notes set forth in Schedule I hereto
opposite their names at a purchase price equal to the sum of 98.75% of the
principal amount of the 7.43% Series C Secured Notes Due 2009 and 98.50% of the
principal amount of the 7.88% Series C Secured Notes Due 2017, in each case plus
accrued interest, if any, from October 24, 1997, to the date of payment and
delivery.
Payment for the Notes will be made against delivery of the
Notes at a closing to be held at the offices of Squire, Sanders & Dempsey,
L.L.P., at 10:00 A.M., local time, on October 24, 1997. The time and date of
that payment are herein referred to as the Closing Date. Payment for the Notes
will be made by wire transfer to the Company of immediately available funds.
The Company will deliver against payment of the purchase price
the Notes of each tranche to be offered and sold by the Purchasers in reliance
on Regulation S (the "Regulation S Notes") in the form of one permanent global
security in definitive form for that tranche (each, a "Regulation S Global
Note") that will be deposited with the Trustee as custodian for The Depository
Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for
DTC, for the accounts of Euroclear System ("Euroclear") or Cedel Bank ("Cedel").
The Company will deliver against payment of the purchase price the Notes of each
tranche to be purchased by each Purchaser hereunder and to be offered and sold
by each Purchaser in reliance on Rule 144A under the Securities Act (the "144A
Notes") in the form of one permanent global security in definitive form for that
tranche (each, a "Restricted Global Note") deposited with the Trustee as
custodian for DTC and registered in the name of Cede & Co., as nominee for DTC.
The Regulation S Global Notes and the Restricted Global Notes will be assigned
separate CUSIP numbers. The Restricted Global Notes will include the legend
regarding restrictions on transfer set forth under "Transfer Restrictions" in
the Final Memorandum. Until the termination of the restricted period (as defined
in Regulation S) with respect to the offering of the Regulation S Notes,
interests in the Regulation S Global Notes may only be held by the DTC
participants for Euroclear & Cedel. Interests in any permanent global security
will be held only in book-entry form through DTC except in the limited
circumstances described in the Final Memorandum. Both the Restricted Global
Notes and the Regulation S Global Notes will be made available for inspection by
the Purchasers and by DTC by 4:00 p.m., New York time, on the business day prior
to the Closing Date at such place in New York City as the Purchasers and the
Company shall agree.
-7-
<PAGE> 8
The certificates evidencing the Notes will be delivered to you
on the Closing Date for the respective accounts of the several Purchasers, with
any transfer taxes payable in connection with the transfer of the Notes to the
Purchasers duly paid, against payment of the purchase price therefor.
Notwithstanding the foregoing, any Notes sold to Institutional
Accredited Investors (as hereinafter defined) pursuant to Section 6(a) shall be
issued in definitive, fully registered form and shall bear the legend relating
thereto set forth under "Transfer Restrictions" in the Final Memorandum, but
shall be paid for in the same manner as any Notes to be purchased by the
Purchasers hereunder and to be offered and sold by them in reliance on Rule 144A
under the Securities Act.
4. CONDITIONS TO CLOSING. The several obligations of the
Purchasers under this Agreement to purchase the Notes will be subject to the
following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or notice of any review for a possible
change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities
by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, of the Company and its Subsidiaries, taken as a
whole, from that set forth in the Final Memorandum that, in
your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Notes on the terms
and in the manner contemplated in the Final Memorandum.
(b) You shall have received on the Closing Date a certificate
or certificates, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied on or before the Closing Date. The officer
signing and delivering such certificate or certificates may rely upon the best
of knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of
Squire, Sanders & Dempsey, L.L.P., counsel for the Company, dated the Closing
Date, to the effect that:
-8-
<PAGE> 9
(i) the Indenture is a valid and binding agreement of
the Company, enforceable in accordance with its terms except
as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (b) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability; and the Indenture is in
such form that it may be qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), in
compliance with the terms of the provisions of the
Registration Agreement without material modification;
(ii) when the Notes are executed by the Company and
authenticated by the Trustee in accordance with the provisions
of the Indenture and delivered to and paid for by the
Purchasers in accordance with this Agreement, the Notes will
be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in
accordance with their terms except as (a) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(iii) the Registration Agreement (assuming due
authorization, execution and delivery by the Purchasers)
constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability;
(iv) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Notes, the Indenture and the Registration
Agreement will not, to such counsel's knowledge, contravene
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
Subsidiary of the Company, and no consent, approval,
authorization or order of or qualification with any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the
Notes, the Indenture and the Registration Agreement, except
such as may be required (i) by the securities or Blue Sky laws
of the various states in connection with the offer and sale of
the Notes, (ii) by the securities or Blue Sky laws of the
various states and the Securities Act in connection with the
offer of the Exchange Notes and (iii) from The Public
Utilities Commission of Ohio ("PUCO");
(v) the statements in the Final Memorandum under the
captions "Description of Secured Notes," "1997 First Mortgage
Bonds and First Mortgage," "Certain Tax Considerations,"
"Private Placement," "Transfer
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<PAGE> 10
Restrictions," and "Considerations for Employee Benefit
Plans," insofar as those statements constitute summaries of
the legal matters, documents and proceedings referred to
therein, fairly present the information called for with
respect to those legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(vi) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its Subsidiaries is a party or to
which any of the properties of the Company or any of its
Subsidiaries is subject other than proceedings fairly
summarized in all material respects in the Final Memorandum
and proceedings that such counsel believes are not likely to
have a material adverse effect on the Company and its
Subsidiaries taken as a whole, or on the power or ability of
the Company to perform its obligations under this Agreement,
the Indenture, the Notes or the Registration Agreement or to
consummate the transactions contemplated by the Final
Memorandum;
(vii) based upon the representations, warranties and
agreements of the Company in Sections 1(o), 1(t), 5(f), 5(g),
5(h) and 5(l) of this Agreement and of the Purchasers in
Section 6 of this Agreement and on the representations and
agreements contained in Exhibit A to this Agreement, it is not
necessary in connection with the offer, sale and delivery of
the Notes to the Purchasers under this Agreement or in
connection with the initial resale of the Notes by the
Purchasers in accordance with Section 6 of this Agreement to
register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act, it being understood
that no opinion is expressed as to any subsequent resale of
any Secured Note; and
(viii) the Company is not an "investment company" or
an entity "controlled" by an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended.
Such counsel shall also include a statement to the effect that
no facts have come to such counsel's attention that would lead such counsel to
believe that (except for financial statements, schedules and other financial and
statistical information as to which such counsel need not express any belief)
the Final Memorandum when issued did not, and as of the date such opinion is
delivered does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) You shall have received on the Closing Date an opinion of
Terrence G. Linnert or Paul N. Edwards, as counsel of Centerior Energy
Corporation, to the effect that:
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<PAGE> 11
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of Ohio, has the corporate power and
authority to own its property and to conduct its business as
described in the Final Memorandum (references herein to the
Final Memorandum being taken to mean the Final Memorandum, as
amended or supplemented), and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole;
(ii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iii) the Indenture has been duly authorized,
executed and delivered by the Company;
(iv) the Notes have been duly authorized, executed
and delivered by the Company;
(v) the Registration Agreement has been duly
authorized, executed and delivered by the Company;
(vi) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Notes, the Indenture and the Registration
Agreement will not contravene any provision of applicable law
or the articles of incorporation, regulations, partnership
agreement or other organizational documents of the Company or
of any Subsidiary of the Company or, to such counsel's
knowledge, any agreement or other instrument binding on the
Company or on any Subsidiary of the Company that is material
to the Company and its Subsidiaries taken as a whole, or, to
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any Subsidiary of the Company, and no consent,
approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the
Notes, the Indenture and the Registration Agreement, except
such as may be required by (i) the securities or Blue Sky laws
of the various states in connection with the offer and sale of
the Notes and (ii) the securities or Blue Sky laws of the
various states and the Securities Act in connection with the
offer of the Exchange Notes;
(vii) the statements in the Final Memorandum under
the captions "Description of Secured Notes," "1997 First
Mortgage Bonds and First Mortgage," "Private Placement" and
"Transfer Restrictions," insofar as those
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<PAGE> 12
statements constitute summaries of the legal matters,
documents and proceedings referred to therein, fairly present
the information called for with respect to those legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(viii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its Subsidiaries is a party or
to which any of the properties of the Company or any of its
Subsidiaries is subject other than proceedings fairly
summarized in all material respects in the Final Memorandum
and proceedings that such counsel believes are not likely to
have a material adverse effect on the Company and its
Subsidiaries taken as a whole, or on the power or ability of
the Company to perform its obligations under this Agreement,
the Indenture, the Notes or the Registration Agreement or to
consummate the transactions contemplated by the Final
Memorandum;
(ix) each Subsidiary of the Company (A) has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, and has corporate power and authority to own
its property and to conduct its business as described in the
Final Memorandum or (B) is duly qualified to transact business
and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole; and the Company is not a
general partner in any partnership;
(x) the Company and each of its Subsidiaries has
obtained all necessary consents, authorizations, approvals,
orders, licenses, certificates and permits of and from, and
has made all declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other
tribunals, required to own, lease, license, operate and use
its properties and assets and to conduct its business in the
manner described in the Final Memorandum, except to the extent
that the failure to obtain, declare or file would not have a
material adverse effect on the Company and its Subsidiaries,
taken as a whole;
(xi) such counsel is of the opinion that the Company
and each Subsidiary of the Company (A) is in compliance with
any and all applicable Environmental Laws, (B) has received
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (C)
is in compliance with all terms and conditions of any such
permit, license or approval, except in cases in which that
noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to
comply
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<PAGE> 13
with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a
material adverse effect on the Company;
(xii) the Company is a "subsidiary" of Centerior
Energy Corporation, which is a "holding company," as such
terms are defined in the Public Utility Holding Company Act of
1935, as amended. Centerior Energy Corporation is exempt from
regulation under such Act pursuant to Section 3(a)(1) thereof
and the rules and regulations thereunder promulgated by the
Commission and, therefore, the Company is also exempt from
such regulation.
(xiii) The Mortgage and the First Mortgage Bonds have
been duly authorized, executed and delivered by Cleveland
Electric and, as to the First Mortgage Bonds, assuming that
they have been duly authenticated by the Mortgage Trustee,
constitute valid and binding obligations enforceable against
the Company in accordance with their terms, except to the
extent that the binding effect and enforceability thereof are
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws in effect from time to time
affecting the rights of creditors generally or the enforcement
of the security provided by the Mortgage, and except to the
extent that the enforceability thereof may be limited by the
application of general principles of equity and may be subject
to limitations upon the right to obtain judicial orders
requiring specific performance;
(xiv) The execution and delivery of the Supplemental
Indenture and the First Mortgage Bonds and the performance by
Cleveland Electric of its obligations thereunder and under the
Mortgage (to the extent pertinent to the issuance of the First
Mortgage Bonds), does not constitute a default under, or
conflict with or violate any of the provisions of, the
Articles of Incorporation, the Regulations, any law, rule,
regulation, judgment, order or decree to which Cleveland
Electric is subject or any agreement, indenture, mortgage,
lease, note or other obligation or instrument to which
Cleveland Electric is a party or by which it is bound;
(xv) All consents or approvals of the PUCO and of any
other federal or state regulatory agency required in
connection with Cleveland Electric's execution and delivery
of, and the performance of its obligations under the
Supplemental Indenture and the First Mortgage Bonds have been
obtained;
(xvi) Except as specifically described in the Final
Memorandum, there are no actions, suits, proceedings,
inquiries or investigations at law or in equity before or by
any judicial or administrative court or agency, pending or
threatened against Cleveland Electric and there is no basis
for any such action, suit, proceeding, inquiry or
investigation wherein the decision, ruling or finding would
materially or adversely affect the validity or enforceability
of the Mortgage
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<PAGE> 14
(to the extent pertinent to the issuance of the First Mortgage
Bonds) or the First Mortgage Bonds;
(xvii) Cleveland Electric has good title to
substantially all the properties referred to or described in
the granting clauses of the Mortgage as being subject to the
lien thereof and now owned by it, subject only to the
conditions and exceptions set forth in the Final Memorandum
under "1997 First Mortgage Bonds and First Mortgage," none of
which materially impairs the use of the property affected
thereby in the operation of the business of Cleveland
Electric;
(xviii) The Mortgage and all financing statements
have been duly filed and recorded in all places where such
filing or recording is necessary for the perfection or
preservation of the lien of the Mortgage and the Mortgage
constitutes a valid and direct first lien upon all of the
property referred to in subparagraph (xvii) above, subject
only to the conditions and exceptions referred to therein and,
under current law, all property acquired by Cleveland Electric
hereafter, other than property excepted from the lien of the
Mortgage, will become subject to the lien thereof upon
acquisition;
(xix) The First Mortgage Bonds are entitled to the
benefits and security of the Mortgage, equally and ratably
with all other bonds outstanding under the Mortgage, except as
the enforceability thereof may be subject to the limitations
set forth in subparagraph (xiii), above;
(xx) The First Mortgage Bonds are not required to be
registered under the Securities Act of 1933, as amended, and
the Supplemental Indenture is exempt from qualification under
the Trust Indenture Act of 1933, as amended; and
(xxi) Assuming that the Trustee holds the First
Mortgage Bonds as provided in the Indenture, the Indenture
creates a valid and perfected first priority security interest
in the First Mortgage Bonds.
(e) You shall have received on the Closing Date an opinion of
Calfee, Halter & Griswold LLP, counsel for the Purchasers, dated the Closing
Date, covering the matters referred to in subparagraphs (i), (ii), (iii), (v)
(but only as to the statements under the captions "Description of the Secured
Notes," "Private Placement" and "Transfer Restrictions") and (vii), and the
final subparagraph of paragraph (c) above, and the matters referred to in
subparagraphs (ii), (iii), (iv) and (v) of paragraph (d) above.
With respect to the final subparagraph of paragraph (c) above,
Squire, Sanders & Dempsey, L.L.P. and Calfee, Halter & Griswold LLP may state
that their belief is based upon their participation in the preparation of each
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but is without independent check or
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<PAGE> 15
verification except as specified. With respect to matters of fact, such counsel
may rely on certificates of officers of the Company and of governmental
officials, in which case their opinion is to state that they are so doing and
that the Purchasers are justified in relying on such opinions or certificates
and copies of said opinions or certificates are to be attached to the opinion.
The opinion of Squire, Sanders & Dempsey, L.L.P. described in
paragraph (c) above shall be rendered to you at the request of the Company and
shall so state therein.
(f) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from Arthur Andersen LLP,
independent public accountants for the Company, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters (of the type ordinarily applicable for registration statements
filed under the Securities Act) with respect to the financial statements and
certain financial information contained in each Memorandum.
5. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Purchasers herein contained, the Company covenants as follows:
(a) To furnish to you, without charge, during the period
mentioned in paragraph (c) below, as many copies of the Final Memorandum, any
documents incorporated by reference therein and any supplements and amendments
thereto as you may reasonably request; with respect to the Final Memorandum, to
furnish copies of the Final Memorandum in New York City, prior to 3:00 p.m. on
the business day following the date of this Agreement, in such quantities as you
reasonably request; but the Company is not responsible for the costs of
distributing either Memorandum other than to the Purchasers.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and not to
use any such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Notes shall have been sold by the Purchasers, any
event shall occur or condition exist as a result of which it is necessary to
amend or supplement the Final Memorandum in order to make the statements
therein, in the light of the circumstances when such Memorandum is delivered to
a purchaser, not misleading, or if, in the opinion of your counsel, it is
necessary to amend or supplement that Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Purchasers, either
amendments or supplements to that Memorandum so that the statements in that
Memorandum as so amended or supplemented will not, in the light of the
circumstances when that Memorandum is delivered to a purchaser, be misleading or
so that that Memorandum, as so amended or supplemented, will comply with
applicable law.
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<PAGE> 16
(d) To endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) Whether or not any sale of Notes is consummated, to pay
all expenses incident to the performance of their obligations under this
Agreement, including: (i) the preparation of each Memorandum and all amendments
and supplements thereto, (ii) the preparation, issuance and delivery of the
Notes, (iii) the fees and disbursements of the Company's counsel and accountants
and the Trustee and its counsel, if any, (iv) the qualification of the Notes
under securities or Blue Sky laws in accordance with Section 5(d), including
filing fees and the fees and disbursements of counsel for the Purchasers in
connection therewith and in connection with the preparation of any Blue Sky or
legal investment memoranda, (v) the printing and delivery to the Purchasers in
quantities as hereinabove stated of copies of the Memorandum and any amendment
or supplement thereto, (vi) any fees charged by rating agencies for the rating
of Notes, (vii) all document production charges and expenses of counsel to the
Purchasers (but not including their fees for professional services) in
connection with the preparation of this Agreement and (viii) the fees and
expenses, if any, incurred in connection with the admission of Notes for trading
in any appropriate market system.
(f) Neither the Company nor any Affiliate of the Company will
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in the Securities Act) that could be integrated with
the sale of the Notes in a manner that would require the registration under the
Securities Act of those Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes
by means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of section 4(2) of the Securities
Act.
(h) While any of the Notes remain outstanding, to make
available, upon request, to any seller of Notes the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to
section 13 or 15(d) of the Exchange Act.
(i) Until the expiration of two years after the original
issuance of the Notes, the Company will not, and will cause its Affiliates not
to, purchase or agree to purchase or otherwise acquire any Notes which are
"restricted securities" (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise (except as agent acting as a
securities broker on behalf of and for the account of customers in the ordinary
course of business in unsolicited broker's transactions) unless, immediately
upon any such purchase, the Company or any Affiliate shall submit such Notes to
the Trustee for cancellation.
(j) To include information substantially in the form set forth
in Exhibit A in each Memorandum.
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<PAGE> 17
(k) If requested by you, to use its best efforts to permit the
Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL Market.
(l) None of the Company, its Affiliates or any person acting
on its or their behalf (other than the Purchasers) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Notes, and the Company and its Affiliates and each person acting on its or their
behalf (other than the Purchasers) will comply with the offering restrictions of
Regulation S.
(m) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the Notes
(other than the Notes), without your prior written consent.
(n) To use the proceeds from the sale of the Notes in the
manner discussed in the Final Memorandum under the caption "Use of Proceeds".
6. Offering of Notes; Restrictions on Transfer.
--------------------------------------------
(a) Each Purchaser, severally and not jointly, represents and
warrants that Purchaser is a qualified institutional buyer as defined in Rule
144A under the Securities Act (a "QIB"). Each Purchaser, severally and not
jointly, agrees with the Company that (a) it has not solicited and will not
solicit offers for, and it has not offered and sold and it will not offer or
sell, Notes by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of section 4(2) of the Securities
Act and (b) it has solicited and will solicit offers for Notes only from, and
has offered and will offer Notes only to, persons that it reasonably believes to
be (A) in the case of offers or sales inside the United States, (i) QIBs or (ii)
other institutional accredited investors (as defined in Rule 501 (a) (1), (2),
(3) or (7) under the Securities Act (each, an "Institutional Accredited
Investor") that, prior to their purchase of Notes, deliver to that Purchaser a
letter containing the representations and agreements set forth in Annex A to the
Memorandum and (B) in the case of offers or sales outside the United States, to
persons other than U.S. persons ("foreign purchasers," which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)) that, in each case, in purchasing Notes are deemed to have represented
and agreed as provided in Exhibit A hereto.
(b) Each Purchaser, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) it understands that no action has been or will be
taken in any jurisdiction by any Purchaser or the Company that
would permit a public offering of the Notes, or possession or
distribution of either Memorandum or any
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<PAGE> 18
other offering or publicity material relating to the Notes, in
any country or jurisdiction where action for that purpose is
required;
(ii) that Purchaser will comply with all applicable
laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Notes or has in its
possession or distributes either Memorandum or any such other
material, in all cases at its own expense;
(iii) the Notes have not been and will not be
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 except in accordance with Regulation
S under the Securities Act or pursuant to another exemption
from the registration requirements of the Securities Act;
(iv) that Purchaser has offered the Notes and will
offer and sell the Notes (A) as part of their distribution, at
any time and (B) otherwise until 40 days after the later of
the commencement of the Offering and the Closing Date, only in
accordance with Rule 903 of Regulation S. Accordingly, neither
that Purchaser, its Affiliates nor any persons acting on its
or their behalf have engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with
respect to the Notes, and any such Purchaser, its Affiliates
and any such persons have complied and will comply with the
offering restrictions requirement of Regulation S;
(v) that Purchaser has (A) not offered or sold, and
prior to the date 180 days after the Closing Date will not
offer or sell any Notes in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995,
(B) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom, and (C) it has only
issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with
the offering of the Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom that document may otherwise lawfully be issued
or passed on;
(vi) that Purchaser understands that the Notes have
not been and will not be registered under the Securities and
Exchange Law of Japan, and represents that it has not offered
or sold, and agrees that it will not offer or sell, any Notes
acquired by it in connection with the distribution
contemplated hereby,
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<PAGE> 19
directly or indirectly, in Japan or to or for the account of
any resident thereof, except for offers or sales to Japanese
dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law
of Japan and otherwise in compliance with applicable
provisions of Japanese law, and further agrees that it will
send to any dealer who purchases from it any of the Notes a
notice stating in substance that, by purchasing those Notes,
that dealer represents and agrees that it has not offered or
sold, and will not offer or sell, any Notes, directly or
indirectly, in Japan or to or for the account of any resident
thereof, except for offers or sales to Japanese dealers and
except pursuant to any exemption from the registration
requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese
law, and that that dealer will send to any other dealer to
whom it sells any of the Notes a notice containing
substantially the same statement as is contained in this
sentence.
(vii) that Purchaser agrees that, at or prior to
confirmation of sales of the Notes made in reliance on
Regulation S, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the
restricted period a confirmation or notice substantially to
the following effect:
"The Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution, at any time or,
(ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in
either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in this Section 6 have the meanings given to them by Regulation S.
(c) Each Purchaser understands and agrees that, upon original
issuance of the Notes, and until such time as the applicable provisions of the
Securities Act and the rules promulgated thereunder and under the Indenture no
longer so require, the Notes will bear the legends set forth in "Transfer
Restrictions" in the Final Memorandum.
7. Indemnification and Contribution.
---------------------------------
(a) The Company agrees to indemnify and hold harmless each
Purchaser, and each person, if any, who controls that Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, or is under common control with, or is controlled by, that Purchaser, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred by any
Purchaser
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<PAGE> 20
or any such controlling or affiliated person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Purchaser furnished to the Company in writing by such Purchaser
through you expressly for use therein. The indemnity agreement contained in this
Section 7(a) with respect to any Preliminary Memorandum does not inure to the
benefit of any Purchaser (or the benefit of any person controlling any
Purchaser) if the person asserting any such losses, liabilities, claims,
damages, or expenses purchased the Notes which are the subject thereof if at or
prior to the written confirmation of the sale of the Notes a copy of the Final
Memorandum (or the Final Memorandum as amended or supplemented) was not sent or
delivered to that person and the Final Memorandum (or the Final Memorandum as
amended or supplemented) would have cured the defect giving rise to those
losses, claims, damages or liabilities so long as the Company has complied with
its obligations set forth in Sections 5(a) and 5(c) hereof to permit that
sending or delivery.
(b) Each Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to that Purchaser, but only with
reference to information relating to that Purchaser furnished to the Company by
that Purchaser in writing through you expressly for use in either Memorandum or
any amendment or supplement thereto.
(c) If any proceeding (including any governmental
investigation) is instituted involving any person in respect of which indemnity
may be sought pursuant to either paragraph (a) or (b) above, that person (the
"indemnified party") shall promptly notify the person against whom that
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in that proceeding and
shall pay the fees and disbursements of that counsel related to that proceeding.
In any such proceeding, any indemnified party has the right to retain its own
counsel, but the fees and expenses of that counsel will be at the expense of
that indemnified party unless (i) the indemnifying party and the indemnified
party have mutually agreed to the retention of that counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate because of actual or
potential differing interests between them. It is understood that the
indemnifying party will not in respect of the legal expenses of any indemnified
party in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses
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<PAGE> 21
shall be reimbursed as they are incurred. That firm shall be designated in
writing by Morgan Stanley & Co. Incorporated in the case of parties indemnified
pursuant to paragraph (a) above and by the Company in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party will not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with that consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of that settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it will be liable for any
settlement of any proceeding affected without its written consent if (i) that
settlement is entered into more than 60 days after receipt by that indemnifying
party of the aforesaid request and (ii) that indemnifying party has not
reimbursed the indemnified party in accordance with that request prior to the
date of that settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by that indemnified
party, unless that settlement includes an unconditional release of that
indemnified party from all liability on claims that are the subject matter of
that proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under that paragraph, in lieu of
indemnifying that indemnified party thereunder, shall contribute to the amount
paid or payable by that indemnified party as a result of those losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Purchasers on
the other hand from the offering of those Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Purchasers on the other hand in connection with the statements or
omissions that resulted in those losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Purchasers on the other hand in
connection with the offering of Notes will be deemed to be in the same
respective proportions as the aggregate net proceeds from the offering of those
Notes (before deducting expenses) received by the Company and the total
discounts and commissions received by the Purchasers in respect thereof, in each
case as set forth in the Final Memorandum, bear to the aggregate offering price
of those Notes. The relative fault of the Company on the one hand and of the
Purchasers on the other hand will be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent that
statement or omission. The Purchasers' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective principal
amount of Notes they have purchased hereunder, and not joint.
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<PAGE> 22
(e) The Company and the Purchasers agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
PRO RATA allocation (even if the Purchasers were treated as one entity for that
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) above will be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by that indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Purchaser will be required to contribute any amount in excess of
the amount by which the total price at which the Notes resold by it in the
initial placement of those Notes were offered to investors exceeds the amount of
any damages that that Purchaser has otherwise been required to pay by reason of
that untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) is entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The indemnity and contribution
provisions contained in this Section 7 and the representations and warranties of
the Company contained in this Agreement will remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Purchasers or any person controlling
the Purchasers or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Notes. The remedies provided for in this Section 7 are not exclusive and
do not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. TERMINATION. This Agreement is subject to termination by
notice given by Morgan Stanley & Co. Incorporated (the "Purchaser
Representative") to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), that event singly or
together with any other such event makes it, in the Purchaser Representative's
judgment, impracticable to market the Notes on the terms and in the manner
contemplated in the Final Memorandum.
9. MISCELLANEOUS. If, on the Closing Date, any one or more of
the Purchasers fails or refuses to purchase Notes that it or they have agreed to
purchase hereunder on that date, and the aggregate principal amount of Notes
that that defaulting Purchaser or Purchasers agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of
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<PAGE> 23
Notes to be purchased on that date, the other Purchasers will be obligated
severally in the proportions that the principal amount of Notes set forth
opposite their respective names in Schedule I bear to the aggregate principal
amount of Notes set forth opposite the names of all such non-defaulting
Purchasers, or in such other proportions as you may specify, to purchase the
Notes that the defaulting Purchaser or Purchasers agreed but failed or refused
to purchase on that date, but in no event will the principal amount of Notes
that any Purchaser has agreed to purchase pursuant to Section 3 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of that principal
amount of Notes without the written consent of that Purchaser. If, on the
Closing Date any Purchaser or Purchasers fails or refuses to purchase Notes that
it or they have agreed to purchase hereunder on that date and the aggregate
principal amount of Notes with respect to which that default occurs is more than
one-tenth of the aggregate principal amount of Notes to be purchased on that
date, and arrangements satisfactory to you and the Company for the purchase of
those Notes are not made within 36 hours after that default, this Agreement will
terminate without liability on the part of any non-defaulting Purchaser or of
the Company. In any such case either you or the Company may postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Final Memorandum or in any other document or arrangement
may be effected. Any action taken under this paragraph will not relieve any
defaulting Purchaser from liability in respect of any default of that Purchaser
under this Agreement.
This Agreement may be signed in any number of counterparts,
each of which is an original, with the same effect as if the signatures thereto
and hereto were on the same instrument.
If this Agreement is terminated by the Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company is unable to perform its obligations under this
Agreement, the Company will reimburse the Purchasers or such Purchasers as have
so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by those Purchasers in connection with this Agreement or the
offering contemplated hereunder.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
The headings of the sections of this Agreement have been
inserted for convenience of reference only and will not be deemed a part of this
Agreement.
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<PAGE> 24
Please confirm your agreement to the foregoing by signing in
the space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement will constitute a binding agreement between us.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By /s/ Terrance G. Linnert
--------------------------------------
Name: Terrance G. Linnert
Title: Vice President
------------------------
Accepted as of the date first written above
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
By MORGAN STANLEY & CO. INCORPORATED
By /s/ Michael Fusco
----------------------------------
Name: Michael Fusco
Title:
---------------------
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<PAGE> 25
SCHEDULE I
Principal Amount
Purchaser of Notes To Be Purchased
- --------- ------------------------
Morgan Stanley & Co. Incorporated $60,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$120,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
Chase Securities Inc. $30,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$60,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
First Chicago Capital Markets, Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
McDonald & Company Securities, Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
Merrill Lynch, Pierce, Fenner & Smith $15,000,000 principal amount of 7.43%
Incorporated Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
TD Securities (USA) Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
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<PAGE> 26
EXHIBIT A
Each Memorandum will contain language to the following effect:
"Each purchaser of the Notes will be deemed to:
(1) represent that it is purchasing the Notes for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is (i) a QIB and
is aware that the sale to it is being made in reliance on Rule 144A,
(ii) an Institutional Accredited Investor, or (iii) a foreign purchaser
that is outside the United States (or a foreign purchaser that is a
dealer or other fiduciary as referred to above);
(2) acknowledge that the Notes have not been registered under
the Securities Act and may not be offered or sold in the United States
or to, or for the account or benefit of, U.S. persons except as set
forth below;
(3) if it is a person other than a foreign purchaser outside
of the United States, agree that if it resells or otherwise transfers
the Notes within the time period referred to in Rule 144(k) under the
Securities Act with respect to such transfer, it will do so only (i) to
The Cleveland Electric Illuminating Company (the "Company") or any
Subsidiary thereof, (ii) inside the United States to a QIB in
compliance with Rule 144A, (iii) inside the United States to an
Institutional Accredited Investor that, prior to such transfer,
furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the Notes (the form of which letter can be obtained from the
Trustee) and, if that transfer is in respect of an aggregate principal
amount of Notes at the time of transfer of less than $100,000, an
opinion of counsel acceptable to the Company that that transfer is in
compliance with the Securities Act, (iv) outside the United States in
compliance with Rule 904 under the Securities Act, (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities
Act (if available) or (vi) pursuant to an effective registration
statement under the Securities Act. Each Institutional Accredited
Investor that is not a QIB and that is an original purchaser of the
Notes will be required to sign an agreement to the foregoing effect in
the form attached hereto as Appendix I. Subject to the procedures set
forth under "Description of Secured Notes--Book Entry, Delivery and
Form," prior to any proposed transfer of any of the Notes (otherwise
than pursuant to an effective registration statement) within the time
period referred to above, the holder thereof must check the appropriate
box set forth on the reverse of its Notes relating to the manner of
such transfer and submit the Notes to the Trustee;
(4) agree that it will deliver to each person to whom it
transfers any of the Notes notice of any restrictions on transfer of
those Notes;
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<PAGE> 27
(5) if it is a foreign purchaser outside the United States,
understand that the Notes will initially be represented by a
Regulations S Global Note and that transfers thereof are restricted as
described under "Description of Secured Notes--Book Entry, Delivery and
Form";
(6) if it is a QIB, understand that the Notes offered in
reliance on Rule 144A will be represented by a Restricted Global Note.
Before any interest in a Restricted Global Note may be offered, sold,
pledged or otherwise transferred to a person who is not a QIB, the
transferee will be required to provide the Trustee with a written
certification (the form of which certification can be obtained from the
Trustee) as to compliance with the transfer restriction referred to
above;
(7) understand that, unless or until registered under the
Securities Act, the Notes (other than those issued to foreign
purchasers) will bear a legend to the following effect unless otherwise
agreed by the Company and the holder thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) or (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT,
IF IT IS A PURCHASER OTHER THAN A FOREIGN PURCHASER OUTSIDE
THE UNITED STATES, IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN
EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY ("COMPANY"), (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF THAT TRANSFER
IS IN RESPECT OF AN AGGREGATE PRINCI-
-2-
<PAGE> 28
PAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
THAT TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT THAT TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS;
(8) acknowledge that the Company, the Placement Agents and
others will rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements, and agree that, if
any of the acknowledgements, representations or warranties deemed to
have been made by it by its purchase of Notes are no longer accurate,
it shall promptly notify the Company and the Placement Agents. If it is
acquiring Notes as a fiduciary or agent for one or more investor
accounts, it represents that is has sole investment discretion with
respect to each such account and it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of
each such account.
Each Memorandum must also contain language to the following
effect:
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<PAGE> 29
"Each person receiving this Memorandum acknowledges that (i)
that person has been afforded an opportunity to request from the
Company, and to review, all additional information considered by it to
be necessary to verify the accuracy of, or to supplement, the
information contained herein; (ii) that person has not relied on the
Placement Agents or any person affiliated with the Placement Agents in
connection with its investigation of the accuracy of that information
or its investment decision; and (iii) no person has been authorized to
give any information or to make any representation concerning the
Company or the Notes (other than as contained herein and information
given by duly authorized officers and employees of the Company in
connection with the investor's examination of the Company and the terms
of the sale of the Notes), and, if given or made, any such other
information or representation should not be relied upon as having been
authorized by the Company or the Placement Agents."
-4-
<PAGE> 1
Exhibit 1(b)
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
REGISTRATION AGREEMENT
October 16, 1997
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The Cleveland Electric Illuminating Company, an Ohio
corporation (the "Company") proposes to issue and sell to Morgan Stanley & Co.
Incorporated Chase Securities Inc., First Chicago Capital Markets, Inc.,
McDonald & Company Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, TD Securities (USA) Inc. and the other purchasers identified in
Schedule I of the Placement Agreement (defined below) (collectively, the
"Purchasers"), on the terms set forth in a placement agreement of even date
herewith (the "Placement Agreement"), $150,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009, $ 300,000,000 principal amount of 7.88% Series
C Secured Notes Due 2017, (those two tranches of notes, collectively, the
"Notes"). The Notes will be issued pursuant to an Indenture to be dated as of
October 24, 1997 and a First Supplemental Indenture to be dated as of October
24, 1997 (that Indenture, as supplemented by that First Supplemental Indenture,
the "Indenture") between the Company and The Chase Manhattan Bank, a New York
banking corporation, as trustee (the "Trustee").
As an inducement to the Purchasers to enter into the Placement
Agreement and in satisfaction of a condition to your obligations thereunder, the
Company agrees with the Purchasers for the benefit of the registered holders of
the Notes (including, without limitation, the Purchasers) and the Exchange Notes
(as defined below) (collectively, the "Holders"), as follows:
SECTION 1. REGISTERED EXCHANGE OFFER. The Company shall use
its best efforts to prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to an offer (the "Registered Exchange
Offer") to the holders of Transfer Restricted Notes (as defined in
<PAGE> 2
Section 6 hereof), who are not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Notes of each tranche, a like
aggregate principal amount of debt securities (the "Exchange Notes") of the
Company issued under the Indenture and identical in all material respects to the
Notes of that tranche (excluding the transfer restrictions relating to the
Notes) that would be registered under the Securities Act. The Company shall use
its best efforts to cause that Exchange Offer Registration Statement to become
effective under the Securities Act within 150 days after the date of original
issue of the Notes and shall keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (that period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the
Company will be entitled to close the Registered Exchange Offer 30 days after
the commencement thereof if the Company has accepted all the notes validly
tendered by the 30th day after that commencement in accordance with the terms of
the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange
Offer Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of the Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes electing to exchange those
Transfer Restricted Notes for Exchange Notes (assuming that Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Notes in the ordinary course of that Holder's business and has no
arrangement with any person to participate in the distribution of the Exchange
Notes, and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) -to trade those Exchange Notes
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. In connection with the Registered
Exchange Offer, the Company shall use its best efforts to consummate the
Registered Exchange Offer and shall comply with the applicable requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other
applicable laws and regulations in connection with the Registered -Exchange
Offer.
The Company acknowledges that, pursuant to current
interpretations by the Commission's staff of section 5 of the Securities Act, in
the absence of an applicable exemption therefrom, (a) each Holder that is a
broker-dealer electing to exchange Notes, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing
the information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section, in
connection with a sale of any such Exchange Notes received by that Exchanging
Dealer pursuant to the Registered Exchange Offer; and (b) if the Purchasers are
permitted to and elect to sell Exchange Notes acquired in exchange for Notes
constituting any portion of an unsold allotment, they are required to deliver a
prospectus containing the
2
<PAGE> 3
information required by Item 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with that sale.
The Company shall include in the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Purchasers, that contains a summary statement of
the positions taken or policies made by the staff of the Commission with respect
to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by that broker-dealer in the Registered Exchange Offer (a
"Participating Broker-Dealer"), whether those positions or policies have been
publicly disseminated by the staff of the Commission or those positions or
policies, in the reasonable judgment of the Purchasers based on advice of
counsel (which may be in-house counsel), represent the prevailing views of the
staff of the Commission.
The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit that prospectus to be lawfully
delivered by the Purchasers and all Exchanging Dealers subject to the prospectus
delivery requirements of the Securities Act and shall make that prospectus
available to the Purchasers and those Exchanging dealers for such period of time
after the consummation of the Registered Exchange Offer as those persons must
comply with those requirements in order to resell the Exchange Notes, but that
period shall not exceed 120 days (unless extended pursuant to Section 30)
below), and those persons are not authorized by the Company to deliver and shall
not deliver any such prospectus after the expiration of that period in
connection with the resales contemplated by this paragraph.
The Company shall make available for a period of 120 days
after the consummation of the Registered Exchange Offer a copy of the
prospectus, and any amendment or supplement thereto, forming part of the
Exchange Offer Registration Statement, to any broker-dealer for use in
connection with any resale of any Exchange Notes. The Notes and the Exchange
Notes are herein collectively called the "Securities."
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date
notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;
3
<PAGE> 4
(d) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Registered Exchange Offer remains open; and
(e) otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all the Notes validly
tendered and not withdrawn pursuant to the Registered Exchange
Offer;
(ii) deliver, or cause to be delivered, to the
Trustee for cancellation all the Notes so accepted for
exchange; and
(iii) issue, and cause the Trustee to authenticate
and deliver promptly to each Holder of the Notes of any
tranche, Exchange Notes of the same tranche, equal in
principal amount to the Notes of that tranche of that Holder
so accepted for exchange.
The Indenture will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture.
Interest on each Exchange Note issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Notes surrendered in exchange therefor or, if no
interest has been paid on those Notes, from the date of original issue of those
Notes.
Each Holder participating in the Registered Exchange Offer
will be required to represent to the Company at the time of the consummation of
the Registered Exchange Offer (a) that any Exchange Note received by that Holder
will be acquired in the ordinary course of business; (b) that the Holder will
have no arrangement or understanding with any person to participate in the
distribution of the Notes or the Exchange Notes within the meaning of the
Securities Act; (c) that the Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, that Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable; (d) if that Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, any
distribution of the Exchange Notes; and (v) if that Holder is a broker-dealer,
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of those Exchange Notes.
Notwithstanding any other provision hereof, the Company will
ensure that (a) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act
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<PAGE> 5
and the rules and regulations thereunder; (b) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and (c) any
prospectus forming part of any Exchange Offer Registration Statement, and any
supplement to that prospectus, at the time of issuance does not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 2. SHELF REGISTRATION. If (a) the Company determines
that a Registered Exchange Offer, as contemplated by Section 1 hereof, is not
available or may not be consummated as soon as practicable after the last date
the Registered Exchange Offer is open because it would violate applicable law or
the applicable interpretations of the staff of the Commission; (b) the
Registered Exchange Offer is not consummated within 180 days after the date of
original issue of the Notes; (c) the Purchasers so request with respect. to the
Notes not eligible to be exchanged for Exchange Notes in the Registered Exchange
Offer and held by them following consummation of the Registered Exchange Offer;
or (d) any Holder (other than an Exchanging Dealer) is not eligible to
participate in the Registered Exchange Offer, or any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer does not
receive freely tradeable Exchange Notes on the date of the exchange for validly
tendered (and not withdrawn) Notes:
(i) The Company shall use all reasonable efforts to prepare
and file, as promptly as practicable, with the Commission and
thereafter to cause to be declared effective a registration statement
(the "Shelf Registration Statement" and, together with the Exchange
Offer Registration Statement, a "Registration Statement") on an
appropriate form under the Securities Act relating to the offer and
sale of the Transfer Restricted Notes (as defined below), by the
Holders thereof from time to time in accordance, with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf Registration"), but
no Holder (other than the Purchasers) is entitled to have any
Securities held by it covered by that Shelf Registration Statement
unless that Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to that Holder.
(ii) The Company shall use all reasonable efforts to keep the
Shelf Registration Statement continuously effective in order to permit
the prospectus included therein to be lawfully delivered by the Holders
of the relevant Securities, until the earlier of (A) the end of the
period referred to in Rule 144(k) under the Securities Act after the
original issue date of the Notes expires (or the end of such longer
period as may result from an extension pursuant to Section 3(j) below),
and (B) the date on which all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto.
(iii) Notwithstanding any other provision of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any
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<PAGE> 6
amendment or supplement thereto, as of the effective date of the Shelf
Registration Statement, amendment or supplement, (A)to comply in all
material respects with tile applicable requirements of the Securities
Act and the rules and regulations of the Commission and (B) not to
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3. REGISTRATION PROCEDURES. In connection with any
Shelf Registration contemplated by Section 2 hereof and, to the extent
applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the
following provisions shall apply:
(a) The Company shall (i) furnish to the Purchasers, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to
the prospectus included therein and shall not file any such
Registration Statement or amendment thereto or any prospectus or any
supplement thereto (including any document that, upon filing, would be
incorporated or deemed to be incorporated by reference therein and any
amendment to any such document other than documents required to be
filed pursuant to the Exchange Act) to which the Purchasers shall
reasonably object, except for any Registration Statement or amendment
thereto or prospectus or supplement thereto (a copy of which has been
previously furnished to the Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel))
which counsel to the Company has advised the Company in writing is
required to be filed, notwithstanding any such objection, in order to
comply with applicable law; (ii) include information substantially to
the effect set forth (A) in Annex A hereto on the cover, (B) in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, (C) in Annex C hereto in the "Plan of
Distribution" section, of the prospectus forming a part of the Exchange
Offer Registration Statement, and (D) include the information set forth
in Annex D hereto in the Letter of Transmittal delivered in connection
with the Registered Exchange Offer; (iii) to the extent required by law
or interpretation of the staff of the Commission, if requested by the
Purchasers, include the information required by Item 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement;
and (iv) to the extent required by law or interpretation of the staff
of the Commission, in the case of a Shelf Registration Statement,
include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling
securityholders.
(b) The Company shall notify promptly the Purchasers, the
Holders and any Participating Broker-Dealer from whom the Company has
received prior written notice stating that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant
to clauses (ii) through (v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made) and, if requested by the Purchasers, the
Holders or any such Participating Broker-Dealer, confirm such notice in
writing:
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<PAGE> 7
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for an
amendment or supplement to the Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceeding for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of
the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for that purpose;
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus does not contain an untrue statement of a material
fact or omit to state a material fact required. to be stated
therein or necessary to make the statements therein; in light
of the circumstances under which they were made, not
misleading; and
(vi) of any determination by the Company that a
post-effective amendment to a Registration Statement would be
appropriate.
(c) The Company shall make every reasonable effort to prevent
the issuance, and if issued to obtain the withdrawal at the earliest
possible time, of any order suspending the effectiveness of the
Registration Statement and shall provide prompt written notice to the
Purchasers and each Holder of the withdrawal of any such order.
(d) The Company shall furnish to each Holder of Securities
included in the Shelf Registration, without charge, at least one
conformed copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules (without documents incorporated therein by reference or
exhibits thereto, unless a Holder so requests in writing).
(e) The Company shall deliver to the Purchasers, and to any
other Holder that so requests, without charge, at least one conformed
copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules (without documents incorporated therein by reference or
exhibits thereto, unless the Purchasers or any such Holder so request
in writing).
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<PAGE> 8
(f) The Company shall deliver to each Holder of Securities
included in the Shelf Registration, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto as
that Holder may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities
covered by, and as contemplated by, the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Purchaser, any
Participating Broker-Dealer and any Exchanging Dealer, without charge,
as many copies of the final prospectus included in the Exchange Offer
Registration Statement and any amendment or supplement thereto as that
person or entity may reasonably request, during a period not exceeding
120 days following the consummation of the Registered Exchange Offer.
The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by the
Purchasers, if necessary, any Participating Broker-Dealer and any
Exchanging Dealer and such other persons as may be required to deliver
a prospectus following the Registered Exchange Offer in connection with
the offering and sale of the Exchange Notes covered by the prospectus,
or any amendment or supplement thereto, included in the Exchange Offer
Registration Statement, but no such person or entity is authorized by
the Company to deliver and no such person or entity shall deliver any
such prospectus after the expiration of the period referred to in the
immediately preceding sentence, in connection with any resale
contemplated by this paragraph.
(h) Prior to any public offering of Securities pursuant to
any Registration Statement, the Company shall use its best efforts to
register or qualify or cooperate with the Holders of the Securities
included therein and their respective counsel in connection with the
registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of such states of the United
States as any Holder of the Securities reasonably requests in writing
and shall do any and all other acts or things necessary or advisable to
enable that Holder to offer and sell in such jurisdictions the
Securities covered by that Registration Statement owned by that Holder,
but the Company is not required to (i) qualify generally or as foreign
corporations to do business in any jurisdiction where they are not
then so qualified or (ii) take any action which would subject them to
general service of process or to taxation in any jurisdiction where
they are not then so subject.
(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Shelf Registration Statement free of any restrictive legend and in such
denominations (consistent with the provisions of the Indenture) and
registered in such names as the Holders may request at least two
business days prior to closing of any sale of the Securities pursuant
to such Shelf Registration Statement.
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<PAGE> 9
(j) If any event contemplated by paragraphs (ii) through (vi)
of Section 3(b) above occurs during the period in which the Company is
required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and
any other required document so that, as thereafter delivered to Holders
of the Notes or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer in
accordance with paragraphs (ii) through (vi) of Section 3(b) above to
suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Purchasers, the Holders of the
Securities and any such Participating Broker-Dealer shall suspend use
of that prospectus until the Company has amended or supplemented the
prospectus to correct that misstatement or omission, and the period of
effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of
days from and including the date of the giving of that notice to and
including the date when the Purchasers, the Holders of the Securities
and any known Participating Broker-Dealer shall have received that
amended or supplemented prospectus pursuant to this Section 3(j), but
the minimum time period before the Company is entitled to close the
Registered Exchange offer will be extended only to the extent required
by the Commission. Each Purchaser, Holder and Participating
Broker-Dealer agrees that on receipt of any such notice from the
Company it will not distribute copies of the prospectus that are the
subject of that notice and will retain those copies in its files.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will obtain a CUSIP number for each
tranche of the Transfer Restricted Notes or the Exchange Notes, as the
case may be, and provide the Trustee with printed certificates for the
Notes or the Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to their security holders (or otherwise provide in
accordance with section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of section 11(a) of the Securities
Act, no later than 45 days after the end of the 12-month period (or 90
days, if that period is a fiscal year) that begins with the first month
of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement will cover that
12-month period.
(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and to contain any changes that
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<PAGE> 10
are necessary for that qualification. If that qualification would
require the appointment of a new trustee under the Indenture, the
Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding that Holder and the distribution of
the Securities as the Company may from time to time reasonably request
for inclusion in the Shelf Registration Statement, and the Company may
exclude from that registration the Securities of any Holder that
unreasonably fails to furnish that information within a reasonable time
after receiving that request.
(o) In the case of any Shelf Registration, the Company shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other
action, if any, as the Holders of a majority of the Securities being
sold shall reasonably request in order to facilitate the disposition of
the Securities pursuant to that Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall
make available for inspection by a representative of the Holders of
Securities being sold, their counsel and an accountant retained by
those Holders, in a manner designed to permit underwriters to satisfy
their due diligence investigation under the Securities Act, all
financial and other records, pertinent corporate documents and
properties of the Company customarily inspected by underwriters in
primary underwritten offerings and shall cause the officers, directors
and employees of the Company and its subsidiaries to supply all
information reasonably requested by, and customarily supplied in
connection with primary underwritten offerings to, any such
representative, attorney or accountant in connection with that
registration, but any records, information or documents that are
designated by the Company as confidential at the time of delivery
thereof shall be kept confidential by those persons, unless (i) those
records, information or documents are in the public domain or otherwise
publicly available (ii) disclosure of those records, information or
documents is required by a court or administrative order; or (iii)
disclosure of those records, information or documents, in the written
opinion of counsel to those persons, is otherwise required by law
(including, without limitation, pursuant to the Securities Act).
(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall (i) cause
its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form addressed to the selling Holder and the
managing underwriters, if any, covering matters customarily covered in
opinions requested in underwritten offerings; (ii) cause its officers
to execute and deliver such documents and certificates and updates
thereof as may be reasonably requested by any underwriter of the
applicable Securities, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to, and to
evidence compliance with any customary conditions contained in, an
underwriting agreement; and (iii) cause its independent public
accountants to provide to the selling Holders of the applicable
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Securities (and any underwriter therefor) a comfort letter in customary
form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) If a Registered Exchange Offer is to be consummated, upon
delivery of the Notes by Holders to the Company (or to any other Person
designated by the Company) in exchange for the Exchange Notes, the
Company shall mark, or caused to be marked, on the Notes so exchanged
that those Notes are being canceled in exchange for the Exchange Notes,
and in no event shall the Notes be marked as paid or otherwise
satisfied.
(s) The Company shall use its best efforts to cause the
Securities covered by a Registration Statement to be rated by two
nationally recognized statistical rating organizations (as that term is
defined in Rule 436(g)(2) under the Securities Act) if so requested by
Holders of a majority in aggregate principal amount of the Securities
covered by that Registration Statement, or by the managing
underwriters, if any.
(t) If any broker-dealer registered under the Exchange Act
underwrites any Securities or participates as a member of an
underwriting syndicate or selling group or assists in the distribution"
(within the meaning of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of
those Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of those
Rules and By-Laws, including by (i) if those Rules, including Rule
2720, shall so require, engaging a "qualified independent underwriter"
(as defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to those Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of
the offering contemplated by that Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification
of underwriters provided in Section 5 hereof; and (iii) providing such
information to that broker-dealer as may be required in order for that
broker-dealer to comply with the requirements of the Conduct Rules of
the NASD.
SECTION 4. REGISTRATION RESPONSES. The Company shall pay all
fees and expenses incident to the performance of or compliance with this
Agreement by the Company including, without limitation, (a) all Commission,
stock exchange or NASD registration and filing fees; (b) all fees and expenses
incurred in connection with compliance with state securities or Blue Sky laws
(including reasonable fees and disbursements of counsel for any underwriters or
holders in connection with Blue Sky qualification of any of the Securities); (c)
all out of pocket expenses of any persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any prospectus, any amendment or supplement to either thereof, any
underwriting agreement, securities sales agreement or other document relating to
the performance of and compliance with this Agreement; (d) all rating agency
fees; and (e) the fees and disbursements of counsel for the Company and, in the
event of a Shelf Registration, the
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reasonable fees and disbursements of one firm of counsel designated by the
Holders of a majority in principal amount of the Securities covered thereby and
of the independent public accountants of the Company, including the expense of
any special audit or "cold comfort" letter required by or incident to that
performance and compliance, but excluding fees and expenses of counsel to the
underwriters and underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Securities by a Holder.
SECTION 5. INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless each Holder of Securities, any Participating
Broker-Dealer, and each person, if any, who controls that Holder or
Participating Broker-Dealer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, that Holder or Participating Broker-Dealer, from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus (as amended or supplemented if the Company
shall have furnished any amendment or supplement thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based on information
relating to that Holder or Participating Broker-Dealer furnished to the Company
in writing by that Holder or Participating Broker-Dealer expressly for use
therein, but the foregoing indemnity with respect to any preliminary prospectus
will not inure to the benefit of any Holder or Participating Broker-Dealer from
whom the person asserting any such losses, claims, damages or liabilities
purchased Securities, or any person controlling or affiliated with that Holder
or Participating Broker-Dealer, if a copy of the final prospectus (as then
amended or supplemented if the Company shall have furnished any amendment or
supplement thereto) was not sent or given by or on behalf of that Holder or
Participating Broker-Dealer to that person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to that person, and if the final prospectus (as so amended or supplemented)
would have cured the defect giving rise to that loss, claim, damage or
liability.
(b) Each Participating Broker-Dealer and Holder of securities,
severally and not jointly, agrees to indemnify and hold harmless the Company,
other selling Holders and participating Broker-Dealers, directors of the
Company, the officers of the Company who sign a Registration Statement and each
person, if any, who controls the Company or any selling Holder or Participating
Broker-Dealer, within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to that Holder or Participating Broker-Dealer, but only with
reference to information relating to that Holder furnished to the Company in
writing by that Holder or Participating Broker-Dealer expressly for use in a
Registration Statement, any preliminary prospectus, prospectus or any amendment
or supplement to any thereof.
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(c) If any proceeding (including any governmental
investigation) is instituted involving any person in respect of which indemnity
may be sought pursuant to either paragraph (a) or (b) above, that person (the
"indemnified party") shall promptly notify the person against whom that
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in that proceeding and
shall pay the fees and expenses of that counsel related to that proceeding. In
any such proceeding, any indemnified party may retain its own counsel, but the
fees and expenses of that counsel will be at the expense of that indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of that counsel, or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate because of actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. If an indemnified party
includes (x) the Purchasers or such controlling persons of the Purchasers, that
firm will be designated in writing by Morgan Stanley & Co. Incorporated; or (y)
Holders of Securities (other than the Purchasers) or controlling persons of
those Holders, that firm will be designated in writing by the Holders of a
majority in aggregate principal amount of those Securities. In all other cases,
that firm will be designated by the Company. The indemnifying party will not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with that consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of that settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it will be liable for any
settlement of any proceeding effected without its written consent if (i) that
settlement is entered into more than 90 days after receipt by the indemnifying
party of the aforesaid request and (ii) the indemnifying party shall not have
reimbursed the indemnified party in accordance with that request prior to the
date of that settlement. No indemnifying party may, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by that indemnified
party, unless that settlement includes an unconditional release of that
indemnified party from all liability on claims that are the subject matter of
that proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under that paragraph, in lieu of
indemnifying that indemnified party thereunder, shall contribute to the amount
paid or payable by that indemnified party as a result of those losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying
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party or parties, on the one hand, and the indemnified party or parties, on the
other hand, in connection with the statements or omissions that resulted in
those losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by that Holder,
Participating Broker-Dealer or other party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent that
statement or omission. The Holders, and Participating Broker-Dealers' respective
obligations to contribute pursuant to this Section 5 are several in proportion
to the respective amount of Notes they have purchased, not joint.
(e) The Company, each Participating Broker-Dealer and each
Holder agree that it would not be just or equitable if contribution pursuant to
this Section 5 were determined by PRO RATA allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in subsection (d) of this Section 5. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in subsection (d) above is deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
that indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5, no Holder of
Securities is required to contribute any amount in excess of the amount by which
the total price at which the securities were sold by that Holder pursuant to a
Registration Statement exceeds the amount of any damages that Holder has
otherwise been required to pay by reason of that untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) is
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution provisions contained in
this Section 5 will remain operative and in full force and effect regardless of
(i) any termination of this Agreement; (ii) any investigation made by or on
behalf of any Holder or Participating Broker-Dealer or any person controlling
that Holder or Participating Broker-Dealer or by or on behalf of the Company,
its officers or directors or any person controlling the Company; and (iii) the
sale of the Securities. The remedies provided for in this Section 5 are not
exclusive and do not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
SECTION 6. ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES.
(a) Additional interest (the "Additional Interest") with respect to the
Securities will be assessed as follows if any of the following events occurs
(each event identified in clause (i), (ii) or (iii) below, a "Failure to
Register"):
(i) If by the 150th day after the date of the original issue
of the Notes (that date of issue, the "Closing Date"), neither the
Exchange Offer Registration Statement nor a Shelf Registration
Statement has been filed with the Commission;
14
<PAGE> 15
(ii) If by the 180th day after the Closing Date, the
Registered Exchange Offer is not consummated and, if required in lieu
thereof, the Shelf Registration Statement is not declared effective by
the Commission; or
(iii) If, after the 180th day after the Closing Date, and
after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, (A) that Registration
Statement thereafter ceases to be effective prior to completion of the
Exchange Offer or the sale of all the Transfer Restricted Notes
registered pursuant to the Shelf Registration Statement, as the case
may be; or (B) that Registration Statement or the related prospectus
ceases to be usable in connection with resales of Transfer Restricted
Notes during the periods specified in this Agreement (except as
permitted in paragraph (b) of this Section 6) because either (1) any
event occurs as a result of which the related prospectus forming part
of that Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they
were made not misleading, or (2) it shall be necessary to amend that
Registration Statement, or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Notes of each tranche
over and above the interest set forth in the title of the Notes of that tranche
from and including the date on which any such Failure to Register shall occur to
but excluding the date on which all such Failures to Register have been cured,
at a rate of 0.50% per annum.
(b) A Failure to Register referred to in Section 6(a)(iii) is
deemed not to be continuing in relation to a Registration Statement or the
related prospectus if (i) that Failure to Register has occurred solely as a
result of (x) the filing of a post-effective amendment to that Registration
Statement to incorporate annual audited financial information with respect to
the Company, when such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus or (y)
the occurrence of other material events or developments with respect to the
Company or its Affiliates that would need to be described in that Registration
Statement or the related prospectus, and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement that
Registration Statement and related prospectus to describe those events or, in
the case of material developments that the Company determines in good faith must
remain confidential for business reasons, the Company is proceeding promptly and
in good faith to take such steps as are necessary so that those developments
need no longer remain confidential, but in any case, if any Failure to Register
(including any referred to in clause (x) or (y), above) continues for a period
in excess of 45 days, Additional Interest will be Payable in accordance with the
above paragraph from the day following the last day of that 45-day period until
the date on which that Failure to Register is cured.
(c) Any Additional Interest payable will be payable on the
regular interest payment dates with respect to the Notes, in the same manner as
the manner in which regular interest is payable. The amount of Additional
Interest for any period will be determined by
15
<PAGE> 16
multiplying the applicable Additional Interest rate by the principal amount of
the applicable Notes, multiplied by a fraction, the numerator of which is the
number of days that Additional Interest rate was applicable during that period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
(d) "Transfer Restricted Note" means each Security until (i)
the date on which that Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Note in the Registered Exchange
Offer; (ii) following the exchange by a broker-dealer in the Registered Exchange
Offer of a Transfer Restricted Note for an Exchange Note, the date on which that
Exchange Note is sold to a purchaser who receives from that broker-dealer on or
prior to the date of that sale a copy of the prospectus contained in the
Exchange Offer Registration Statement; (iii) the date on which that Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement; or (iv) the date on which that
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
SECTION 7. RULES 144 AND 144A. The Company shall use its best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file those reports, it will, upon the request of any Holder of
Transfer Restricted Notes, make publicly available other information so long as
is necessary to permit sales of Securities pursuant to Rules 144 and 144A. The
Company covenants that it will take such further action as any Holder of
Transfer Restricted Notes may reasonably request, all to the extent required
from time to time to enable that Holder to sell Transfer Restricted Notes
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). Upon request by a Purchaser, the Company will provide a copy of
this Agreement to prospective purchasers of Notes identified to the Company by
that Purchaser. Upon the request of any Holder of Transfer Restricted Notes, the
Company shall deliver to that Holder a written statement as to whether it has
complied with those requirements. Notwithstanding the foregoing, nothing in this
Section 7 requires the Company to register any of its securities under the
Exchange Act.
SECTION 8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer
Restricted Notes covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Notes included in that offering, but the Managing
Underwriters must be reasonably satisfactory to the Company.
No person may participate in any underwritten registration
hereunder unless that person (a) agrees to sell that person's Transfer
Restricted Notes on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve those
arrangements; and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of those underwriting arrangements.
16
<PAGE> 17
SECTION 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
except by the Company and the written consent of the Holders of a majority in
principal amount of the Securities affected thereby.
(b) NOTICES. All notices and other communications provided for
or permitted hereunder must be given in writing by hand-delivery, first-class
mail, facsimile transmission, or air courier that guarantees overnight delivery:
(i) if to a Holder of Securities, at the most current address
given by that Holder to the Company in accordance with this Section
9(b), which address initially is, with respect to each Holder, the
address of that Holder to which confirmation of the sale of the Notes
to that Holder was first sent by the Purchasers, with a copy in like
manner to you as follows:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile: (212) 761-0359
Attention: Managing Director, Syndicate
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Facsimile: (216) 241-0816
Attention: Edward W. Moore
(2) if to the Company, at the following address:
The Cleveland Electric Illuminating Company
6200 Oak Tree Boulevard
Independence, Ohio 44131
Facsimile: (216)447-3100
Attention: Terrence G. Linnert
17
<PAGE> 18
with a copy to:
Squire, Sanders & Dempsey, L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Facsimile: (216) 479-8793
Attention: Gordon S. Kaiser
All such notices and communications will be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by the recipient's facsimile machine operator, if
sent by facsimile transmission; and on the day delivered, if sent by overnight
air courier guaranteeing next day delivery.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the
date hereof, entered into, nor may the Company, on or after the date hereof,
enter into, any agreement with respect to the Securities that is inconsistent
with the rights granted to the Holders herein or that otherwise conflicts with
this Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement is binding on the
Company and its successors and assigns.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed will constitute an original and all of which taken
together constitute one and the same agreement.
(f) GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY, AND IS TO BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
(h) SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein is not affected or impaired thereby.
18
<PAGE> 19
(i) SECURITIES HELD BY THE COMPANY. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Company or its affiliates will not
be counted in determining whether that consent or approval was given by the
Holders of that required percentage.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Purchasers and the Company in accordance with its terms.
Very truly yours,
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ Terrence G. Linnett
--------------------------------
Name: Terrance G. Linnett
Title: Vice President
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Acting severally on behalf of
themselves and the several Purchasers
By MORGAN STANLEY & CO. INCORPORATED
By: /s/ Michael Fusco
---------------------------------
Name: Mike Fusco
Title:
---------------------------
19
<PAGE> 20
ANNEX A
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the consummation of the Exchange Offer, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution".
20
<PAGE> 21
ANNEX B
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, that were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of those
Exchange Notes. See "Plan of Distribution."
21
<PAGE> 22
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes when those Existing Notes were acquired as a result
of market making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the consummation of the Exchange Offer,
they will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
________________ 199__, all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus.1
The Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by any broker-dealer
for its own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of those methods of resale, at market prices prevailing at the time
of resale or at prices related to those prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of those Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such person may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus, and any amendment or
supplement to this Prospectus, to any broker-dealer that requests those
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
broker or dealer and will indemnify the Holders of the Securities (including any
broker-dealer) against certain liabilities, including liabilities under the
Securities Act.
- ----------------
1 In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Exchange Offer prospectus.
22
<PAGE> 23
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENT OR SUPPLEMENT THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
23
<PAGE> 1
Exhibit 1(c)
LETTER OF TRANSMITTAL
FOR
7.43% SERIES C SECURED NOTES DUE 2009
AND
7.88% SERIES C SECURED NOTES DUE 2017
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF ALL OF THEIR OUTSTANDING
7.43% SERIES C SECURED NOTES DUE 2009 AND
7.88% SERIES C SECURED NOTES DUE 2017
FOR
7.43% SERIES D SECURED NOTES DUE 2009 AND
7.88% SERIES D SECURED NOTES DUE 2017, RESPECTIVELY
------------------------------------------------------------
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES (AS DEFINED HEREIN) MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M. ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 638-7375 or (212) 344-9367
Confirm by Telephone:
(212) 638-0828
By Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE
A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
dated , 1998 (the "Prospectus") of The Cleveland Electric
Illuminating Company (the "Company"), which, together with this Letter of
Transmittal and the instructions hereto (the "Letter of Transmittal"),
constitute the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 7.43% Series D Secured Notes due 2009 (the "New Notes
due 2009") and 7.88% Series D Secured Notes due 2017 (the "New Notes due 2017")
(collectively, the "New Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a registration
statement of which the Prospectus constitutes a part, for each $1,000 principal
amount of their outstanding 7.43% Series C Secured Notes due 2009 (the "Old
Notes due 2009") and 7.88% Series C Secured Notes due 2017 (the "Old Notes due
2017") (collectively, the "Old Notes"), upon the terms and subject to the
conditions set forth in the Prospectus.
This Letter of Transmittal is to be used by Holders (as defined below) if:
(i) certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC") pursuant to the procedures set forth in the Prospectus under
"The Exchange Offer -- Procedures for Tendering" by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Old Notes (such participants acting on behalf of Holders
are referred to herein, together with such Holders, as "Acting Holders"); or
(iii) tender of Old Notes is to be made according to the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures," and, in each case, instructions are being transmitted
through the DTC Automated Tender Offer Program ("ATOP"). See Instruction 1.
Delivery of documents to DTC does not constitute delivery to the Exchange Agent.
<PAGE> 2
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder; or (ii) whose Old Notes are held of record by DTC and who desires to
deliver such Old Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF OLD
NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION
IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined shall have the meaning
ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF NOTES" AND
SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE PROSPECTUS AND HEREIN.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES
- ---------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE NUMBERS* AGGREGATE PRINCIPAL
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH SIGNED LIST AMOUNT TENDERED
APPEAR(S) ON OLD NOTES BEING TENDERED) IF NECESSARY) (IF LESS THAN ALL)**
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
==========================================================================
==========================================================================
==========================================================================
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer
** Need not be completed by Holders who wish to tender with respect to all Old Notes listed. See Instruction 2.
- ---------------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
-------------------------------------------------------------------------------
DTC Book-Entry Account No.:
-------------------------------------------------------------------------------
Transaction Code No.:
-------------------------------------------------------------------------------
</TABLE>
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit the Letter of Transmittal,
certificates representing such Old Notes or other required documents to reach
the Exchange Agent prior to the Expiration Date, or (iii) the procedure for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of such Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures." DTC participants may also accept the
Exchange Offer by submitting the notice of guaranteed delivery through ATOP.
<PAGE> 3
<TABLE>
<S> <C> <C>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED
TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (See Instructions 1 and 4):
Name(s) of Holder(s) of Old Notes:
-------------------------------------------------------------------------------
Window Ticket No. (if any):
-------------------------------------------------------------------------------
Date of Execution of
Notice of Guaranteed Delivery:
-------------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
---------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER FACILITY, AND PROVIDE THE FOLLOWING
INFORMATION:
Name of Tendering Institution:
-------------------------------------------------------------------------------
DTC Book-Entry Account No.:
-------------------------------------------------------------------------------
Transaction Code No.:
-------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------------------------------------------------------------------
Address:
=====================================================================================================================
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
</TABLE>
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
LADIES AND GENTLEMEN:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to the Company the principal amount of Old Notes indicated in the box entitled
"Description of Notes." Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to the Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
Indenture for the Old Notes and the New Notes) with respect to the tendered Old
Notes with full power of substitution to (i) deliver certificates for such Old
Notes to the Company, or transfer ownership of such Old Notes on the account
books maintained by DTC together, in either such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Old Notes for transfer on the books of the Company and receive
all benefits and otherwise execute all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed irrevocable and coupled with
an interest.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby, and (c) when the same are accepted for exchange by the Company,
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim or right. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the sale, assignment and transfer of the Old Notes
tendered hereby.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. The
undersigned also acknowledges that this Exchange Offer is being made in reliance
upon interpretations by the staff of the Securities and Exchange Commission that
the New Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for sale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangement or understanding with any person
to participate in the distribution of the New Notes and (iii) such holder is not
an "affiliate," as defined under Rule 405 of the Securities Act, of the Company
or, if such holder is an affiliate, such holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately
<PAGE> 5
negotiated transactions or otherwise. The terms of any such purchases or offers
will differ from the terms of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described in the Prospectus and the instructions thereto, the
exchange of the Old Notes for the New Notes will not result in the loss of
interest income for the tendering holder.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when the Company has given oral or written
notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted
for exchange pursuant to the Exchange Offer for any reason, certificates for any
such unaccepted Old Notes will be returned (except as noted below with respect
to tenders through DTC), without expense, to the undersigned at the address
shown below or at a different address as may be indicated under "Special
Issuance Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
All questions as to form, validity, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of the undersigned (or in either such event in the case
of Old Notes tendered by DTC, by credit to the account at DTC). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s), unless, in either event,
tender is being made through DTC. In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES
REGARDLESS OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on the certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If the signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Company of such person's authority to so act. See Instruction 3 herein.
<TABLE>
<S> <C>
X Date:
- ----------------------------------------------------------- -----------------------------------------------------
X
Date:
- ----------------------------------------------------------- -----------------------------------------------------
SIGNATURE(S) OF HOLDER(S) OR
AUTHORIZED SIGNATORY
Name(s):
Address
- ----------------------------------------------------------- --------------------------------------------------
------------------------------------------------
----------------------------------------------------
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity: Area Code and
Telephone No.:
- ----------------------------------------------------------- -----------------------------------------------------------
Social Security No.:
- -----------------------------------------------------------
</TABLE>
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTION 3 HEREIN)
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURE(S))
- --------------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(PRINTED NAME)
- --------------------------------------------------------------------------------
(TITLE)
Date:
---------------------------------------------------------------------------
<PAGE> 7
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 2, 3, 4 AND 5 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal
amount not tendered are to be issued in the name of, or the New Notes
issued pursuant to the Exchange Offer are to be issued to the order of,
someone other than the person(s) whose signature(s) appear(s) within this
Letter of Transmittal, or issued to an address different from that shown
in the box entitled "Description of Notes" within this Letter of
Transmittal, or if Old Notes tendered by book-entry transfer are not
accepted for purchase are to be credited to an account maintained at DTC
other than the account indicated above.
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(YOU MUST ALSO COMPLETE SUBSTITUTE FORM W-9 HEREIN)
Credit unaccepted Old Notes tendered by book-entry transfer to:
[ ] The Depository Trust Company account set forth below:
------------------------------------------------------------
(DTC ACCOUNT NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 2, 3, 4 AND 5 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal
amount not tendered or not accepted for purchase or the New Notes issued
pursuant to the Exchange Offer are to be sent to someone other than the
person(s) whose signature(s) appear(s) within this Letter of Transmittal,
or issued to an address different from that shown in the box entitled
"Description of Notes" within this Letter of Transmittal.
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(YOU MUST ALSO COMPLETE SUBSTITUTE FORM W-9 HEREIN)
------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER AND THE
SOLICITATION
1. Delivery of this Letter of Transmittal and Old Notes; Guaranteed
Delivery Procedures. The certificates for the tendered Old Notes (or a
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
of all Old Notes delivered electronically), as well as a properly completed and
duly executed copy of this Letter of Transmittal or facsimile hereof and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal, prior to 5:00 P.M., New York City time, on the Expiration
Date. The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that the Holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. No Letter of Transmittal or Old Notes should be sent to
the Company.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
lost but are not immediately available or (ii) who cannot deliver their Old
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Old Notes and
follow the guaranteed delivery procedures set forth in the Prospectus. Pursuant
to such procedures: (i) such tender must be made by or through an Eligible
Institution; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within three business days after the Expiration Date, this Letter of
Transmittal (or a facsimile hereof) together with the certificate(s)
representing the Old Notes (or a confirmation of electronic delivery of
book-entry delivery into the Exchange Agent's account at DTC) and any of the
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal (or a facsimile hereof), as well as other documents required by this
Letter of Transmittal and the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of electronic mail delivery of
book-entry delivery into the Exchange Agent's account at DTC), must be received
by the Exchange Agent within three business days after the Expiration Date, all
as provided in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." Any Holder of Old Notes who wishes to
tender his Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 P.M., New York City time, on the Expiration Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to the holders by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
2. Partial Tenders. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes is tendered, the tendering Holder
should fill in the principal amount tendered in the third column of the chart
entitled "Description of Notes." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of Old Notes is not
tendered, Old Notes for the principal amount of Old Notes not tendered and a
certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal or unless tender is made through DTC, promptly after the Old Notes
are accepted for exchange.
<PAGE> 9
3. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or a facsimile hereof)
is signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or a facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on the
endorsement or bond power guaranteed by a recognized member of the Medallion
Signature Guarantee Program.
If this Letter of Transmittal (or a facsimile hereof) is signed by a person
other than the registered Holder(s) of any Certificates listed, such
Certificates must be endorsed or accompanied by appropriate bond powers signed
as the name of the registered Holder(s) appears on the Certificates.
If this Letter of Transmittal (or a facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of its
authority so to act must be submitted with this Letter of Transmittal. If any
Old Notes tendered hereby are owned of record by two or more joint owners, all
such owners must sign this Letter of Transmittal. If any Old Notes tendered
hereby are registered in different names on several certificates, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of certificates.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by a recognized member of the Medallion
Signature Guarantee Program.
Signatures on this Letter of Transmittal (or a facsimile hereof) must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder (including any participant in DTC whose name appears on a security
position listing as the owner of Old Notes) who has not completed the box set
forth herein entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" or (ii) for the account of a member of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (each of the foregoing being referred to
as an "Eligible Institution").
4. Special Issuance and Delivery Instructions. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name or address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if such Old Notes are to be credited to an account maintained
at DTC other than the account indicated above). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated. If no such instructions are given, any Old
Notes not exchanged will be returned to the name and address of the person
signing this Letter of Transmittal.
5. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
<PAGE> 10
9. Withdrawal. Tenders may be withdrawn only pursuant to the withdrawal
rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, (b) specify the name of the person who tendered
the Old Notes, (c) include a statement that the person who tendered Old Notes is
withdrawing its election to have such Old Notes exchanged and contain the
description of the Old Notes to be withdrawn, the certificate numbers shown on
the particular certificates evidencing such Old Notes and the aggregate
principal amount represented by such Old Notes and (d) be signed by the holder
of such Old Notes in the same manner as the original signature appears on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence sufficient to have the Note Trustee with respect to the
Old Notes register the transfer of such Old Notes into the name of the holder
withdrawing the tender. The signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Old Notes have been tendered
(a) by a registered holder of Old Notes who has not completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the Company, whose determination shall be final and binding on all parties. If
the Old Notes to be withdrawn have been delivered or otherwise identified to the
Exchange Agent, a signed notice of withdrawal is effective immediately upon
receipt by the Exchange Agent of a written or facsimile transmission notice of
withdrawal even if physical release is not yet effected. In addition, such
notice must specify, in the case of Old Notes tendered by delivery of
certificates for such Old Notes, the name of the registered holder (if different
from that of the tendering holder) to be credited with the withdrawn Old Notes.
Withdrawals may not be rescinded, and any Old Notes withdrawn will thereafter be
deemed not validly tendered for purposes of the Exchange Offer. However,
properly withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer -- Procedures for Tendering" in
the Prospectus at any time on or prior to the Expiration Date.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(DO NOT WRITE IN SPACE BELOW)
- ----------------------------------------------------------------------------------------------------------------------
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
<S> <C> <C>
======================================================================================================================
======================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------
Delivery Prepared by Checked by Date
- ------------------------------------- ------------------------------------------- -------------------------------
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service, and payments made with respect to New Notes purchased pursuant to the
Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
<PAGE> 11
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i) the
Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that the Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PAYER'S NAME
- -----------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PROVIDE YOUR TIN IN THE BOX AT RIGHT AND PART 3 --
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW
Awaiting TIN [ ]
------------------------------------------------------------------------------
DEPARTMENT OF THE PART 2 -- Certification -- Under Penalties of -----------------------
TREASURY INTERNAL Perjury, SOCIAL SECURITY NUMBER
REVENUE SERVICE I certify that: OR
PAYER'S REQUEST (1) The number shown on this form is my correct ----------------------
FOR TAXPAYER Taxpayer Identification Number (or I am waiting for EMPLOYER IDENTIFICATION
IDENTIFICATION a number to be issued to me) and NUMBER(S)
NUMBER (TIN) (2) I am not subject to backup withholding either
because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to
report all interest or dividends, or the IRS has
notified me that I am no longer subject to
backup withholding.
------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax returns. However,
if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you
are no longer subject to backup withholding, do not cross out such item (2).
SIGNATURE ---------------------------------- DATE-----------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Please fill out your name and address below:
------------------------------------------------------------------------------
Name
------------------------------------------------------------------------------
Address (Number and street)
------------------------------------------------------------------------------
City, State and Zip Code
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE> 12
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within 60
days, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number and that, if I do not provide my taxpayer
identification number within 60 days, such retained amounts shall be remitted
to the IRS as backup withholding.
<TABLE>
<S> <C>
----------------------------------------------- -----------------------------------------------
SIGNATURE DATE
</TABLE>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
The Chase Manhattan Bank
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile: By Hand or Overnight Courier:
The Chase Manhattan Bank (Eligible Institutions Only) The Chase Manhattan Bank
55 Water Street (212) 638-7375 or (212) 344-9367 55 Water Street
Room 234, North Building Room 234, North Building
New York, New York 10041 Confirm by Telephone: New York, New York 10041
Attention: Carlos Esteves (212) 638-0828 Attention: Carlos Esteves
</TABLE>
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
7.43% SERIES C SECURED NOTES DUE 2009 AND
7.88% SERIES C SECURED NOTES DUE 2017
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
As set forth in the Prospectus dated , 1998 (the
"Prospectus"), of The Cleveland Electric Illuminating Company (the "Company")
and in the accompanying Letter of Transmittal and instructions thereto (the
"Letter of Transmittal"), this form or one substantially equivalent hereto must
be used to accept the Company's exchange offer (the "Exchange Offer") to
exchange any or all of its outstanding 7.43% Series C Secured Notes due 2009
(the "Old Notes due 2009") and 7.88% Series C Secured Notes due 2017 (the "Old
Notes due 2017") (collectively, the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not lost
but are not immediately available, (ii) time will not permit the Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date, or (iii) the
procedure for book-entry transfer cannot be completed prior to the Expiration
Date. This form may be delivered by an Eligible Institution (as defined herein)
by mail or hand delivery or transmitted, via telegram, telex or facsimile, to
the Exchange Agent as set forth below. All capitalized terms used herein but not
defined herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, , 1998 UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M. ON
THE EXPIRATION DATE.
To: The Chase Manhattan Bank, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile: By Hand or Overnight Courier:
The Chase Manhattan Bank (Eligible Institutions Only) The Chase Manhattan Bank
55 Water Street (212) 638-7375 or (212) 344-9367 55 Water Street
Room 234, North Building Room 234, North Building
New York, New York 10041 Confirm by Telephone: New York, New York 10041
Attention: Carlos Esteves (212) 638-0828 Attention: Carlos Esteves
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM,
TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below, pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Subject to and effective upon acceptance for exchange of the Old Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of the Company all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Old Notes tendered hereby. In the event
of a termination of the Exchange Offer, the Old Notes tendered pursuant hereto
will be returned to the tendering Old Note holder promptly.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the sale, assignment and transfer of
the Old Notes tendered.
<PAGE> 2
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time, on the Expiration
Date. Tenders of Old Notes may also be withdrawn if the Exchange Offer is
terminated without any such Old Notes being purchased thereunder or as otherwise
provided in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders."
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE COMPLETE AND SIGN
Signature(s) of Registered Owner(s) or
Authorized Signatory:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Principal Amount and Series of Old Notes Tendered:
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Certificate No(s). of Old Notes (if available):
- ------------------------------------------------------------
- ------------------------------------------------------------
Date:
- ------------------------------------------------------------
Name(s) of Registered Holder(s):
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Address:
- ------------------------------------------------------------
- ------------------------------------------------------------
Area Code and Telephone No.:
- ------------------------------------------------------------
If Old Notes will be delivered by book-entry transfer at The Depository Trust
Company, insert The Depository Account No.:
- ------------------------------------------------------------
Transaction Code No.:
- ------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL.
<PAGE> 3
Guarantee
(not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby guarantees that, within three New York Stock Exchange trading days from
the date of this Notice of Guaranteed Delivery, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company, pursuant to the
procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent at one of
its addresses set forth above.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in financial loss to the
undersigned.
<TABLE>
<S> <C>
Name of Firm:
--------------------------------------------- ----------------------------
AUTHORIZED SIGNATURE
Address: Name:
-------------------------------------------------- ---------------------
Title:
- ---------------------------------------------------------- ---------------------
Area Code and Telephone No. Date:
------------------------------- ---------------------
</TABLE>
<PAGE> 1
OFFER TO EXCHANGE
7.43% SERIES D SECURED NOTES DUE 2009
FOR ALL OUTSTANDING 7.43% SERIES C SECURED NOTES DUE 2009
$150 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING AND
7.88% SERIES D SECURED NOTES DUE 2017
FOR ALL OUTSTANDING 7.88% SERIES C SECURED NOTES DUE 2017
$300 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, , 1998, UNLESS EXTENDED. TENDERS OF OLD NOTES
MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith an offer by The Cleveland Electric Illuminating
Company (the "Company") to exchange (the "Exchange Offer") its 7.43% Series D
Secured Notes due 2009 (the "New Notes due 2009") and 7.88% Series D Secured
Notes due 2017 (the "New Notes due 2017") (collectively, the "New Notes") for
all outstanding 7.43% Series C Secured Notes due 2009 (the "Old Notes due 2009")
and 7.88% Series C Secured Notes due 2017 (the "Old Notes due 2017")
(collectively, the "Old Notes"), upon the terms and conditions set forth in the
accompanying Prospectus dated , 1998 (the "Prospectus") and
related Letter of Transmittal and instructions thereto (the "Letter of
Transmittal").
The Letter of Transmittal is being circulated to holders of Old Notes with
the Prospectus. The Exchange Offer also provides a procedure for holders to
tender the Old Notes by means of guaranteed delivery.
Based on an interpretation of the Securities and Exchange Commission (the
"Commission"), New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company for resale pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933, as amended (the "Securities Act") or
(ii) a person that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the New Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed that, for a period of 90 days
after the Expiration Date, as defined herein, they will make this Prospectus and
any amendment or supplement thereto available to any broker-dealer for use in
connection with any such resale.
Notwithstanding any other term of the Exchange Offer, the Company may
terminate or amend the Exchange Offer as provided in the Prospectus and will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
accepted for exchange prior to such termination.
THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM ANY
TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION,
THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE SECURITIES LAWS.
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own names. The Company will not pay any fees or commissions to any broker,
dealer or other person (other than the Exchange Agent as described in the
Prospectus) in connection with the solicitation of tenders of Old Notes pursuant
to the Exchange Offer. You will, however, be reimbursed by the Company for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay any transfer taxes
<PAGE> 2
applicable to the tender of Old Notes to them or their order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed is a copy of each of the following documents:
1. The Prospectus.
2. A Letter of Transmittal for your use in connection with the
Exchange Offer and for the information of your clients.
3. A form of letter that may be sent to your clients for whose
accounts you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining the clients' instructions with
regard to the Exchange Offer.
4. A form of Notice of Guaranteed Delivery.
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
6. A return envelope addressed to The Chase Manhattan Bank, the
Exchange Agent.
YOUR PROMPT ATTENTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED (THE
"EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE
WITHDRAWN, SUBJECT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS AND THE LETTER
OF TRANSMITTAL, AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE. THE EXCHANGE OFFER IS NOT CONDITIONED ON ANY MINIMUM PRINCIPAL
AMOUNT OF OLD NOTES BEING TENDERED.
To tender Old Notes in the Exchange Offer, certificates for Old Notes (or
confirmation of a book-entry transfer into the Exchange Agent's account at The
Depository Trust Company of Old Notes tendered electronically) and a duly
executed and properly completed Letter of Transmittal or a facsimile thereof,
together with any other required documents, must be received by the Exchange
Agent as indicated in the Prospectus.
If holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit the Letter of Transmittal,
certificates evidencing such Old Notes or other required documents to reach the
Exchange Agent prior to the Expiration Date or (iii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
holders may effect a tender of such Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." Holders following the guaranteed
delivery procedure must still fully complete, execute and deliver the Letter of
Transmittal or facsimile thereof.
THE EXCHANGE OFFER IS NOT BE MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR
ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE MAKING
OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITIES LAW.
Additional copies of the enclosed material may be obtained from the
Exchange Agent.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY, THE TRUSTEE OR THE EXCHANGE AGENT, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE EXCHANGE OFFER OR THE SOLICITATION, EXCEPT FOR
STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Very truly yours,
, Secretary
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
<PAGE> 1
OFFER TO EXCHANGE
7.43% SERIES D SECURED NOTES DUE 2009
FOR ALL OUTSTANDING 7.43% SERIES C SECURED NOTES DUE 2009
$150 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING AND
7.88% SERIES D SECURED NOTES DUE 2017
FOR ALL OUTSTANDING 7.88% SERIES C SECURED NOTES DUE 2017
$300 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
To Our Clients:
Enclosed for your consideration are the Prospectus dated ,
1998 (the "Prospectus") and the related Letter of Transmittal and instructions
thereto (the "Letter of Transmittal") in connection with the offer by The
Cleveland Electric Illuminating Company (the "Company") to exchange (the
"Exchange Offer") its 7.43% Series D Secured Notes due 2009 (the "New Notes due
2009") and 7.88% Series D Secured Notes due 2017 (the "New Notes due 2017")
(collectively, the "New Notes") for all outstanding 7.43% Series C Secured Notes
due 2009 (the "Old Notes due 2009") and 7.88% Series C Secured Notes due 2017
(the "Old Notes due 2017") (collectively, the "Old Notes" and, together with the
New Notes, the "Secured Notes"), upon the terms and conditions set forth in the
Prospectus and Letter of Transmittal.
WE ARE THE REGISTERED HOLDER (THE "REGISTERED HOLDER") OF OLD NOTES HELD
FOR YOUR ACCOUNT. AN EXCHANGE OF THE OLD NOTES CAN BE MADE ONLY BY US AS THE
REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
EXCHANGE THE OLD NOTES HELD BY US FOR YOUR ACCOUNT. THE PROSPECTUS AND RELATED
LETTER OF TRANSMITTAL ALSO PROVIDE A PROCEDURE FOR HOLDERS TO TENDER THEIR OLD
NOTES BY MEANS OF GUARANTEED DELIVERY.
We request information as to whether you wish us to exchange any or all of
the Old Notes held by us for your account upon the terms and subject to the
conditions of the Exchange Offer. We urge you to read carefully the Prospectus
and the Letter of Transmittal before instructing us to tender your Old Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1998 (THE "EXPIRATION DATE"), UNLESS
EXTENDED. Old Notes tendered pursuant to the Exchange Offer may only be
withdrawn under the circumstances described in the Prospectus and the Letter of
Transmittal.
Your attention is directed to the following:
1. The New Notes will be exchanged for the Old Notes at the rate of
$1,000 principal amount of New Notes for each $1,000 principal amount of
Old Notes. There will be no loss of interest income to holders of Old Notes
whose Old Notes are accepted for exchange, as more fully explained in the
Prospectus. The form and terms of the New Notes are identical in all
material respects to the form and terms of the Old Notes, except that the
New Notes have been registered under the Securities Act of 1933, as amended
(the "Securities Act"). Following completion of the Exchange Offer and
during the effectiveness of any required Shelf Registration Statement, none
of the Secured Notes will be entitled to the benefits of the Registration
Agreement (as defined in the Prospectus) relating to a contingent increase
in the interest rate borne by the Secured Notes under certain
circumstances.
2. Based on an interpretation of the Securities and Exchange
Commission (the "Commission"), New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than (i) a broker-dealer
who purchased Old Notes directly from the Company for resale pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the
holder is acquiring the New Notes in its ordinary course of business and is
not participating, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes. Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company that
such conditions have been met.
3. THE EXCHANGE OFFER IS NOT CONDITIONED ON ANY MINIMUM PRINCIPAL
AMOUNT OF OLD NOTES BEING TENDERED.
<PAGE> 2
4. Notwithstanding any other term of the Exchange Offer, the Company
may terminate or amend the Exchange Offer as provided in the Prospectus and
will not be required to accept for exchange, or exchange New Notes for, any
Old Notes not accepted for exchange prior to such termination.
5. The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended (the "Expiration Date"). Tendered
Old Notes may be withdrawn, subject to the procedures described in the
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date if such Old Notes have not previously been accepted for
exchange pursuant to the Exchange Offer.
6. Any transfer taxes applicable to the exchange of the Old Notes
pursuant to the Exchange Offer will be paid by the Company, except as
otherwise provided in Instruction 5 of the Letter of Transmittal.
7. Tendering holders may withdraw their tender at any time until the
Expiration Date.
8. The acceptance for exchange of Old Notes validly tendered and not
validly withdrawn and the issuance of New Notes will be made as promptly as
practicable after the Expiration Date. Subject to rules promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company, however, expressly reserves the right to delay
acceptance of any of the Old Notes or to terminate the Exchange Offer and
not accept for purchase any Old Notes not theretofore accepted if any of
the conditions set forth in the Prospectus under the caption "The Exchange
Offer -- Termination" shall not have been satisfied or waived by the
Company.
9. The Company expressly reserves the right, in its sole discretion,
(i) to amend the terms of the Exchange Offer or (ii) to terminate the
Exchange Offer. Any delay, extension, amendment or termination will be
followed as promptly as practicable by oral or written notice to the
Exchange Agent and a public announcement thereof. In the case of an
extension, such public announcement shall include disclosure of the
approximate number of Old Notes deposited to date and shall be made prior
to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
10. Consummation of the Exchange Offer may have adverse consequences
to non-tendering Old Note holders, including that the reduced amount of
outstanding Old Notes as a result of the Exchange Offer may adversely
affect the trading market, liquidity and market price of the Old Notes.
If you wish to have us tender any or all of your Old Notes, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Old Notes, the entire principal amount of Old Notes
held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
THE EXCHANGE OFFER IS NOT BE MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR
ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE MAKING
OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITIES LAW.
<PAGE> 3
OFFER TO EXCHANGE
7.43% SERIES D SECURED NOTES DUE 2009
FOR ALL OUTSTANDING 7.43% SERIES C SECURED NOTES DUE 2009
$150 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING AND
7.88% SERIES D SECURED NOTES DUE 2017
FOR ALL OUTSTANDING 7.88% SERIES C SECURED NOTES DUE 2017
$300 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal, in connection with the offer
by the Company to exchange the Old Notes for the New Notes.
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal, and the undersigned hereby makes the applicable representations
set forth in such Letter of Transmittal.
SIGN HERE
--------------------------------------
Signature
--------------------------------------
Signature
[ ] Please tender the Old Notes held
by you for my account, as indicated
below.
[ ] Please do not tender any Old Notes
held by you for my account.
Principal Amount*
of Old Notes to be Tendered: $
------------
(must be in the principal amount of
$1,000 or an integral multiple
thereof)
[ ]
Name(s) (Please Print)
- ------------------------------------------
Address
- ------------------------------------------
Zip Code
- ------------------------------------------
Area Code and Telephone Number
Dated: , 1997
- --------------------------------------------------------------------------------
*Unless otherwise indicated, it will be assumed that all of the securities
listed are to be tendered.
<PAGE> 4
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<S> <C>
- ---------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account or,
if combined funds,
any one of the
individuals(1)
3. Husband and wife The actual owner
(joint accounts) of the account or,
if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult, or
(joint account) if the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for or incompetent
a designated ward, minor, person(3)
or incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, Legal entity (Do not
or pension trust furnish the identify-
ing number of the
personal representa-
tive or trustee unless
the legal entity
itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other The organization
tax-exempt organization
14. Broker or registered nominee The broker or
nominee
15. Account with the Department The public entity
of Agriculture in the name of a
public entity (such as a State or local
government, school district or prison)
that receives agricultural program
payments
- ---------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS. ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends, that
are not subject to information reporting, are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividends, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
Exhibit 4(a)
================================================================================
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK,
as Trustee.
------------------------
SEVENTY-SIXTH SUPPLEMENTAL INDENTURE
DATED OCTOBER 15, 1997
FIRST MORTGAGE BONDS, 7.43% SERIES DUE 2009-D
FIRST MORTGAGE BONDS, 7.88% SERIES DUE 2017-B
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THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
SEVENTY-SIXTH SUPPLEMENTAL INDENTURE
DATED OCTOBER 15, 1997
TABLE OF CONTENTS
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PARTIES............................................................. 1
RECITALS:
Indenture and Supplemental Indentures.......................... 1
First Mortgage Bonds outstanding............................... 1
Authorization by Indenture of issue of additional Bonds........ 2
Pledge Bonds................................................... 2
Purpose of Seventy-Sixth Supplemental Indenture................ 2
Authorization of Seventy-Sixth Supplemental Indenture.......... 2
Compliance with conditions to making of Seventy-Sixth
Supplemental Indenture....................................... 2
ARTICLE I -- CONFIRMATION OF 1940 MORTGAGE AND SUPPLEMENTAL
INDENTURES......................................... 3
ARTICLE II -- CREATION, PROVISIONS, REDEMPTION, PRINCIPAL
AMOUNT AND FORM OF PLEDGE BONDS DUE 2009........... 3
Section 1 -- Creation and designation of Bonds and compliance
with Indenture..................................... 3
Section 2 -- Registered Bonds and denominations................. 4
Section 3 -- Date of Bonds, maturity date, interest rate,
accrual date, payment dates, Record Date and place
of payments........................................ 4
Section 4 -- Transfer and exchange of Bonds..................... 5
Section 5 -- Redemption of Bonds................................ 6
Section 6 -- Notice of redemption............................... 6
Section 7 -- Purchase, prepayment or payment of principal of
Notes deemed to be corresponding payment of
Bonds.............................................. 6
Section 8 -- Redemption of Bonds in an "Event of Default"
under the Note Indenture........................... 6
Section 9 -- Redemption of Bonds pursuant to the Note
Indenture.......................................... 7
Section 10 -- Notice of Redemption under Sections 5 through 9
of Article II of the Supplemental Indenture........ 7
Section 11 -- Payment of interest or premium on Notes deemed
to be corresponding payment on Bonds............... 8
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Section 12 -- Surrender of Bonds purchased or otherwise
acquired........................................... 8
Section 13 -- Surrender of Bonds in the event of payment in
full or partial payment thereof and issuance of new
Bonds for the unpaid balance....................... 8
Section 14 -- Notation of payments on Bonds before transfer...... 8
Section 15 -- Principal amount of Bonds which may be
authenticated and delivered........................ 9
Section 16 -- Form of Fully Registered Pledge Bonds.............. 9
Form of Trustee's Certificate of Authentication.... 14
ARTICLE III -- CREATION, PROVISIONS, REDEMPTION, PRINCIPAL
AMOUNT AND FORM OF PLEDGE BONDS DUE 2017........... 15
Section 1 -- Creation and designation of Bonds and compliance
with Indenture..................................... 15
Section 2 -- Registered Bonds and denominations................. 15
Section 3 -- Date of Bonds, maturity date, interest rate,
accrual date, payment dates, Record Date and place
of payments........................................ 15
Section 4 -- Transfer and exchange of Bonds..................... 16
Section 5 -- Redemption of Bonds................................ 17
Section 6 -- Notice of redemption............................... 17
Section 7 -- Purchase, prepayment or payment of principal of
Notes deemed to be corresponding payment of
Bonds.............................................. 17
Section 8 -- Redemption of Bonds in an "Event of Default"
under the Note Indenture........................... 18
Section 9 -- Redemption of Bonds pursuant to the Note
Indenture.......................................... 18
Section 10 -- Notice of Redemption under Sections 5 through 9
of Article III of the Supplemental Indenture....... 19
Section 11 -- Payment of interest or premium on Notes deemed
to be corresponding payment on Bonds............... 19
Section 12 -- Surrender of Bonds purchased or otherwise
acquired........................................... 19
Section 13 -- Surrender of Bonds in the event of payment in
full or partial payment thereof and issuance of new
Bonds for the unpaid balance.................... 19
Section 14 -- Notation of payments on Bonds before transfer...... 20
Section 15 -- Principal amount of Bonds which may be
authenticated and delivered........................ 20
Section 16 -- Form of Fully Registered Pledge Bonds.............. 20
Form of Trustee's Certificate of Authentication.... 25
ARTICLE IV -- THE TRUSTEE........................................ 26
Section 1 -- Acceptance by Trustee.............................. 26
Section 2 -- Responsibility of Trustee.......................... 26
Section 3 -- Reliance by Trustee upon certain demands,
certificates and opinions.......................... 26
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Section 4 -- Records kept and indemnity given by agency of
the Company........................................ 26
Section 5 -- Certain advices to the Company..................... 27
ARTICLE V -- MISCELLANEOUS PROVISIONS........................... 27
EXECUTION........................................................... 27
COMPANY'S ACKNOWLEDGMENT............................................ S-1
TRUSTEE'S ACKNOWLEDGMENT............................................ S-1
RECORDING AND FILING DATA........................................... R-1
* The Table of Contents, the page headings and the recording data are not
part of the Seventy-Sixth Supplemental Indenture as executed
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SEVENTY-SIXTH SUPPLEMENTAL INDENTURE, dated October 15, 1997, made by and
between THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized and
existing under the laws of the State of Ohio (the "Company"), and THE CHASE
MANHATTAN BANK, successor by merger to The Chase Manhattan Bank (National
Association), which in turn was successor to Morgan Guaranty Trust Company of
New York, formerly Guaranty Trust Company of New York), a corporation organized
and existing under the laws of the State of New York (the "Trustee"), as Trustee
under the Mortgage and Deed of Trust dated July 1, 1940, hereinafter mentioned:
RECITALS
In order to secure First Mortgage Bonds of the Company ("Bonds"), the
Company has heretofore executed and delivered to the Trustee the Mortgage and
Deed of Trust dated July 1, 1940 (the "1940 Mortgage") and seventy-five
Supplemental Indentures thereto dated, respectively, July 1, 1940, August 18,
1944, December 1, 1947, September 1, 1950, June 1, 1951, May 1, 1954, March 1,
1958, April 1, 1959, December 20, 1967, January 15, 1969, November 1, 1969, June
1, 1970, November 15, 1970, May 1, 1974, April 15, 1975, April 16, 1975, May 28,
1975, February 1, 1976, November 23, 1976, July 26, 1977, September 27, 1977,
May 1, 1978, September 1, 1979, April 1, 1980, April 15, 1980, May 28, 1980,
June 9, 1980, December 1, 1980, July 28, 1981, August 1, 1981, March 1, 1982,
July 15, 1982, September 1, 1982, November 1, 1982, November 15, 1982, May 24,
1983, May 1, 1984, May 23, 1984, June 27, 1984, September 4, 1984, November 14,
1984, November 15, 1984, April 15, 1985, May 28, 1985, August 1, 1985, September
1, 1985, November 1, 1985, April 15, 1986, May 14, 1986, May 15, 1986, February
25, 1987, October 15, 1987, February 24, 1988, September 15, 1988, May 15, 1989,
June 13, 1989, October 15, 1989, January 1, 1990, June 1, 1990, August 1, 1990,
May 1, 1991, May 1, 1992, July 31, 1992, January 1, 1993, February 1, 1993, May
20, 1993, June 1, 1993, September 15, 1994, May 1, 1995, May 2, 1995, June 1,
1995, July 15, 1995, August 1, 1995, June 15, 1997 and August 1, 1997; and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Seventy-Sixth Supplemental Indenture, will be hereinafter
collectively referred to as the "Indenture" and this Seventy-Sixth Supplemental
Indenture will be hereinafter referred to as "this Supplemental Indenture"; and
Pursuant to the provisions of the Indenture, the Company has issued 124
series of Bonds in the aggregate principal amount of $6,296,962,000, of which 84
series in the aggregate principal amount of $2,395,779,000 are no longer
outstanding; and
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The Indenture provides among other things that the Company, from time to
time, in addition to the Bonds authorized to be executed, authenticated and
delivered pursuant to other provisions therein, may execute and deliver
additional Bonds to the Trustee and the Trustee shall thereupon authenticate and
deliver such Bonds to or upon the order of the Company; and
The Company has determined to create pursuant to the provisions of the
Indenture two new series of first mortgage bonds (collectively, the "Pledge
Bonds"), to be pledged as security for the payment of principal of and interest
on certain notes (as hereinafter defined), with such Pledge Bonds to have the
denominations, rate of interest, date of maturity, redemption provisions and
other provisions and agreements in respect thereof as in this Supplemental
Indenture set forth; and
The Pledge Bonds are to be limited in aggregate principal amount to $450
million and are to be delivered to The Chase Manhattan Bank, as trustee
(hereinafter called the "Note Trustee") pursuant to a certain indenture dated as
of October 24, 1997, between the Company and the Note Trustee, as amended and
supplemented from time to time (hereinafter called the "Note Indenture") under
which the Note Trustee will hold the Pledge Bonds as security for the payment of
principal of and interest on two new series of notes to be issued in a private
placement and two new series of notes that may be exchanged therefor pursuant to
a registered exchange offer (hereinafter collectively called the "Notes"); and
The Company, in the exercise of the powers and authority conferred upon and
reserved to it under the provisions of the Indenture, and pursuant to
appropriate resolutions of its Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee this Supplemental
Indenture in the form hereof for the purposes herein provided; and
All conditions and requirements necessary to make this Supplemental
Indenture a valid, binding and legal instrument have been done, performed and
fulfilled and the execution and delivery hereof have been in all respects duly
authorized.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
That The Cleveland Electric Illuminating Company, in consideration of the
premises and of the mutual covenants herein contained and of the sum of One
Dollar ($1.00) to it duly paid by the Trustee at or before the ensealing and
delivery of these presents and for other valuable considerations, the receipt
whereof is hereby acknowledged, hereby covenants and agrees to and with the
Trustee and its succes-
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sors in the Trust under the Indenture, for the benefit of those who shall hold
the Bonds and coupons, if any, issued and to be issued thereunder and under this
Supplemental Indenture as hereinafter provided, as follows:
ARTICLE I
CONFIRMATION OF 1940 MORTGAGE AND
SUPPLEMENTAL INDENTURES
The 1940 Mortgage (as modified in Article V of the Supplemental Indenture
dated December 1, 1947, Article V of the Supplemental Indenture dated May 1,
1954, Article V of the Supplemental Indenture dated March 1, 1958, Article V of
the Supplemental Indenture dated January 15, 1969, Article III of the
Supplemental Indenture dated November 23, 1976 and Article III of the
Supplemental Indenture dated April 15, 1985) and the Supplemental Indentures
dated July 1, 1940, August 18, 1944, December 1, 1947, September 1, 1950, June
1, 1951, May 1, 1954, March 1, 1958, April 1, 1959, December 20, 1967, January
15, 1969, November 1, 1969, June 1, 1970, November 15, 1970, May 1, 1974, April
15, 1975, April 16, 1975, May 28, 1975, February 1, 1976, November 23, 1976,
July 26, 1977, September 27, 1977, May 1, 1978, September 1, 1979, April 1,
1980, April 15, 1980, May 28, 1980, June 9, 1980, December 1, 1980, July 28,
1981, August 1, 1981, March 1, 1982, July 15, 1982, September 1, 1982, November
1, 1982, November 15, 1982, May 24, 1983, May 1, 1984, May 23, 1984, June 27,
1984, September 4, 1984, November 14, 1984, November 15, 1984, April 15, 1985,
May 28, 1985, August 1, 1985, September 1, 1985, November 1, 1985, April 15,
1986, May 14, 1986, May 15, 1986, February 25, 1987, October 15, 1987, February
24, 1988, September 15, 1988, May 15, 1989, June 13, 1989, October 15, 1989,
January 1, 1990, June 1, 1990, August 1, 1990, May 1, 1991, May 1, 1992, July
31, 1992, January 1, 1993, February 1, 1993, May 20, 1993, June 1, 1993,
September 15, 1994, May 1, 1995, May 2, 1995, June 1, 1995, July 15, 1995,
August 1, 1995, June 15, 1997 and August 1, 1997, respectively, are hereby in
all respects confirmed.
ARTICLE II
CREATION, PROVISIONS, REDEMPTION, PRINCIPAL AMOUNT
AND FORM OF PLEDGE BONDS DUE 2009
SECTION 1. The Company hereby creates a new series of Bonds to be issued
under and secured by the Indenture and to be designated as "First Mortgage
Bonds, 7.43% Series due 2009-D" of the Company and hereinabove and hereinafter
called the "Pledge Bonds due 2009". The Pledge Bonds due 2009 shall be executed,
authenticated and delivered
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in accordance with the provisions of, and shall in all respects be subject to,
all of the terms, conditions and covenants of the Indenture.
SECTION 2. The Pledge Bonds due 2009 shall be issued as fully registered
Bonds only, without coupons, in the denominations of $1,000 or any multiple
thereof.
SECTION 3. The Pledge Bonds due 2009 shall be dated the date of
authentication, shall mature November 1, 2009, and shall bear interest from the
time hereinafter provided at such rate per annum on each interest payment date
hereinafter defined as shall cause the amount of interest payable on such Pledge
Bonds due 2009 to equal the amount of interest payable on such interest payment
date on the Notes due 2009 (as defined below), such interest payable on May 1
and November 1 in each year starting on May 1, 1998 (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such Pledge Bonds duly called for redemption, on and until the redemption date,
or in the case of any default by the Company in the payment of the principal due
on any such Pledge Bonds, until the Company's obligation with respect to the
payment of the principal shall be discharged as provided in the Indenture. The
amount of interest payable on any interest payment date, the date of maturity
and any redemption date shall be computed on the same basis as the corresponding
matters are computed on the 7.43% Series C Secured Notes due 2009 and the 7.43%
Series D Secured Notes due 2009 provided for in the Note Indenture (together,
the "Notes due 2009").
The Pledge Bonds due 2009 shall be payable as to principal and interest at
the agency of the Company in the Borough of Manhattan, The City of New York, or,
at the option of the registered owner, at the agency of the Company in the City
of Cleveland, State of Ohio, in any coin or currency of the United States of
America which at the time of payment is legal tender for the payment of public
and private debts.
Except as hereinafter provided, each Pledge Bond due 2009 shall bear
interest from the later of the date of initial authentication of the Pledge
Bonds due 2009 or the most recent date to which interest has been paid or duly
provided for until the principal of such Pledge Bond due 2009 is paid or duly
provided for.
The interest payable on any interest payment date shall be paid to the
respective persons in whose names the Pledge Bonds due 2009 shall be registered
at the close of business on the Record Date next preceding such interest payment
date, notwithstanding the cancellation of any such Bond upon any transfer or
exchange thereof subsequent to such Record Date and prior to such interest
payment date; provided, however, that, if and to the extent the Company shall
default in the payment of the interest due on such interest payment
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date (other than an interest payment date that is a redemption date or maturity
date), such defaulted interest shall be paid to the respective persons in whose
names such outstanding Pledge Bonds due 2009 are registered at the close of
business on a date (the "Subsequent Record Date") not less than ten days nor
more than 15 days next preceding the date of payment of such defaulted interest,
such Subsequent Record Date to be established by the Company by notice given by
mail by or on behalf of the Company to the registered owners of Pledge Bonds due
2009 not less than 10 days next preceding such Subsequent Record Date. If any
interest payment date should fall on a day that is not a business day, then such
interest payment date shall be the next succeeding business day.
The initial interest rate on the Notes due 2009, and therefore on the
Pledge Bonds due 2009, is 7.43%. Under certain circumstances specified in a
Registration Agreement dated October 16, 1997 between the Company and the
Purchasers (as defined therein) of the Notes, the interest rate on the Notes due
2009, and therefore on the Pledge Bonds due 2009, will increase temporarily to
7.93%.
The term "Record Date", with respect to any interest payment date,
redemption date or date of maturity of any Pledge Bond, shall have the same
meaning as the term "Record Date" has with respect to those events for the Notes
due 2009.
SECTION 4. In the manner and subject to the limitations provided in the
Indenture, Pledge Bonds due 2009 may be transferred or may be exchanged for a
like aggregate principal amount of Bonds of such series of other authorized
denominations, in either case without charge, except for any tax or taxes or
other governmental charges incident to such transfer or exchange, at the agency
of the Company in the Borough of Manhattan, The City of New York.
In the event less than all of the Pledge Bonds due 2009 at the time
outstanding are called for redemption, the Company shall not be required (a) to
register any transfer or make any exchange of any such Bond for a period of 15
days before the mailing of the notice of redemption of any such Bonds, (b) to
register any transfer or make any exchange of any such Bond so called for
redemption in its entirety or (c) to register any transfer or make any exchange
of any portion of any such Bond so called for redemption.
Except as otherwise provided in Section 3 of this Article II with respect
to the payment of interest, the Company, the agencies of the Company and the
Trustee may deem and treat the person in whose name a Pledge Bond is registered
as the absolute owner thereof for the purpose of receiving any payment and for
all other purposes.
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SECTION 5. The Pledge Bonds due 2009 shall be redeemable only to the extent
provided in this Article II, subject to the provisions contained in Article IV
of the Indenture and the form of Pledge Bond due 2009.
SECTION 6. Subject to the applicable provisions of the Indenture, written
notice of redemption of Pledge Bonds due 2009 pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Pledge Bonds due 2009 to be redeemed a notice of such redemption, first
class postage prepaid, at its last address as it shall appear upon the books of
the Company for the registration and transfer of such Pledge Bonds due 2009. Any
notice of redemption shall be mailed at least 30 days, but no more than 60 days,
prior to the redemption date. In the event of partial redemption of Pledge Bonds
due 2009, the Trustee shall select the Pledge Bonds due 2009 or portions thereof
to be redeemed, subject to the provisions of this Supplemental Indenture, in
such manner as the Trustee shall deem appropriate and fair.
SECTION 7. If and when any Notes due 2009 shall be purchased by the Company
and surrendered to the Note Trustee for cancellation or if and when the
principal of any Notes due 2009 shall be paid by the Company, then there shall
be deemed to have been paid a principal amount of the Pledge Bonds due 2009 then
outstanding which bears the same ratio to the aggregate principal amount of
Pledge Bonds due 2009 then outstanding as the principal amount of the Notes due
2009 so purchased or paid bears to the aggregate principal amount of the Notes
due 2009 outstanding immediately before such purchase or payment; provided,
however, that such purchase or payment of Pledge Bonds due 2009 shall be deemed
to have been made only when and to the extent that notice of such purchase or
payment of the principal amount of such Notes due 2009 shall have been given by
the Company to the Trustee. The Trustee may rely upon any such notification by
the Company that such purchase or payment of Notes due 2009 has been so made.
SECTION 8. The Pledge Bonds due 2009 shall be redeemed by the Company in
whole at any time prior to maturity at a redemption price of 100% of the
principal amount to be redeemed, plus accrued and unpaid interest to the
redemption date, but only if the Trustee shall receive a written demand from the
Note Trustee for redemption of all Pledge Bonds due 2009 held by the Note
Trustee stating that an "Event of Default" under the Note Indenture has occurred
and is continuing, that payment of the principal of the Notes due 2009 has been
accelerated and that the Note Trustee is waiving notice of redemption; provided,
however, that the Pledge Bonds due 2009 shall not be redeemed in the event that
prior to such redemption (a) the Trustee
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shall have received a certificate of the Note Trustee (i) stating that there has
been a waiver of such Event of Default and a rescission and annulment of such
acceleration or (ii) withdrawing said written demand or (b) an event of default
under Section 6.01 of Article VI of the Note Indenture shall have occurred and
be continuing, and there has been a declaration of acceleration of the principal
of the Pledge Bonds due 2009. The redemption of the Pledge Bonds due 2009
pursuant to this Section shall be made not more than 60 days after receipt of
the written demand.
SECTION 9. The Pledge Bonds due 2009 shall be subject to redemption by the
Company prior to maturity in whole at any time or in part from time to time, at
the same redemption price as shall be payable on the Notes due 2009 to be
redeemed concurrently therewith, such redemption price to equal the greater of
(i) 100% of the principal amount being redeemed and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield (as defined in
the Note Indenture) plus twenty-five (25) basis points, plus in each case
accrued interest to the date of redemption, but in each instance only upon
receipt by the Trustee of an officers' certificate to the effect (a) that the
Company has given notice to the Note Trustee that the Company is exercising its
option to direct the redemption of all or part (specifying the principal amount)
of the Notes due 2009 as provided in the Note Indenture and (b) that an
equivalent principal amount of Pledge Bonds due 2009 shall be concurrently
called for redemption. Such officers' certificate shall specify the principal
amount of the Pledge Bonds due 2009 to be redeemed and the redemption price
thereof and accrued and unpaid interest to the redemption date, shall have
attached to it a copy of said notice to the Note Trustee and said direction of
the Company and shall specify the redemption date of such Pledge Bonds due 2009
(which redemption date shall be the same date as the redemption date of the
Notes due 2009 being concurrently redeemed which is specified in said attached
notice). The redemption of the Pledge Bonds due 2009 shall be made upon the
notice and in the manner provided in this Article II, subject to the provisions
of the Indenture.
SECTION 10. Subject to the provisions of the Indenture, written notice of
redemption of Pledge Bonds due 2009 pursuant to any of Sections 5 through 9,
inclusive, of this Article II shall be given by the Trustee by mailing to the
registered owner or owners of such Bonds to be redeemed a notice of such
redemption, first class postage prepaid, at its last address as it shall appear
upon the books of the Company for the registration and transfer of such Bonds.
Any notice of redemption pursuant to said Sections 5 through 9, inclusive, shall
be mailed at
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least 30 days and not more than 60 days before the redemption date; provided,
however, that the registered owner or owners of all Pledge Bonds due 2009 may
consent in writing to a shorter notice period, and such consent, if filed with
the Trustee, shall be binding upon the Company and such registered owner or
owners and their transferees. In the event of a partial redemption, the Trustee
shall select the Pledge Bonds due 2009 to be redeemed in such manner as the
Trustee shall deem appropriate and fair.
SECTION 11. If and when the Company shall pay interest for any given period
of time on the Notes due 2009, there shall be deemed to have been paid on the
Pledge Bonds due 2009 an amount of interest equal to the amount of interest paid
on the Notes due 2009; provided, however, that such payment of interest shall be
deemed to have been made only when and to the extent that notice of such payment
of interest on such Notes due 2009 shall have been given by the Company to the
Trustee. The Trustee may rely upon any such notification by the Company that
such payment of interest has been so made.
SECTION 12. Any Pledge Bonds due 2009 at any time purchased or otherwise
acquired by the Company shall be surrendered to the Trustee for cancellation and
the Trustee shall forthwith cancel the same.
SECTION 13. All Pledge Bonds due 2009 deemed to have been redeemed or paid
in full as provided in Sections 5 through 9, inclusive, of this Article II shall
be surrendered to the Trustee for cancellation and the Trustee shall forthwith
cancel the same. In the event that part of a Pledge Bond due 2009 shall be
deemed to have been redeemed or paid as provided in said Sections 5 through 9,
the registered owner may, at its option, surrender such Pledge Bond to the
Trustee for cancellation, in which event the Trustee shall cancel such Pledge
Bond and the Company shall execute and the Trustee shall authenticate and
deliver to the registered owner Pledge Bonds due 2009 in such authorized
denominations as shall be specified by the registered owner in an aggregate
principal amount equal to the unpaid balance of the principal amount of such
surrendered Pledge Bond.
SECTION 14. Pledge Bonds due 2009 shall not be transferable unless the
registered owner shall have first surrendered the same to the Trustee for
notation thereon of all payments of principal deemed to have been made thereon
under Section 7 of this Article II or for cancellation and execution,
authentication and delivery of Pledge Bonds due 2009 in an aggregate principal
amount equal to the unpaid balance of the principal amount of such surrendered
Pledge Bonds due 2009 under Section 13 of this Article II.
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SECTION 15. The aggregate principal amount of Pledge Bonds due 2009 which
may be authenticated and delivered hereunder shall not exceed $150,000,000,
except as otherwise provided in the Indenture.
SECTION 16. The form of the fully registered Pledge Bonds due 2009, and of
the Trustee's certificate of authentication thereon, shall be substantially as
follows:
[FORM OF FULLY REGISTERED BOND]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 7.43% SERIES DUE 2009-D
Due November 1, 2009
No. $
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized and
existing under the laws of the State of Ohio (hereinafter called the "Company",
which term shall include any successor corporation as defined in the Indenture
hereinafter referred to), for value received, hereby promises to pay to
, or registered assigns, the sum of Dollars
($ ) or the aggregate unpaid principal amount hereof (as shown on the
Schedule of Payments hereon), whichever is less, on November 1, 2009, in any
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts, and to pay interest on
the unpaid principal amount hereof in like coin or currency from the time
hereinafter provided, at such rate per annum as shall cause the amount of
interest payable on the Pledge Bonds due 2009 (hereinafter defined), together
with the interest payable on all other Pledge Bonds (hereinafter defined) held
by the Note Trustee (hereinafter defined), to equal the amount of interest
payable on the Notes due 2009 (hereinafter defined), such interest to be payable
on May 1 and November 1 in each year starting on May 1, 1998 (each such date
herein called an "interest payment date"), and on and until the date of maturity
of this Bond, or, if this Bond shall be duly called for redemption, on and until
the redemption date, or, if the Company shall default in the payment of the
principal amount of this Bond, until the Company's obligation with respect to
the payment of such principal shall be discharged as provided in said Indenture.
Except as hereinafter provided, this Bond shall bear interest from the date of
initial authentication of this Bond or the most recent date to which interest
has been paid or duly provided for until the principal of this Bond has been
paid or duly provided for. Subject to certain exceptions provided in said
Indenture, the interest payable on any interest payment date
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shall be paid to the person in whose name this Bond shall be registered at the
close of business on the Record Date (as defined in Section 3 of Article II of
the Supplemental Indenture, hereinafter defined) or, in the case of defaulted
interest, on a day preceding the date of payment thereof established by notice
to the registered owner of this Bond in the manner provided in the Supplemental
Indenture. Principal of and interest on this Bond are payable at the agency of
the Company in the Borough of Manhattan, The City of New York, or, at the option
of the registered owner, at the agency of the Company in the City of Cleveland,
State of Ohio.
This Bond is one of the duly authorized Bonds of the Company (herein called
the "Bonds"), all issued and to be issued under and equally secured by a
Mortgage and Deed of Trust dated July 1, 1940, executed by the Company to
Guaranty Trust Company of New York (subsequently Morgan Guaranty Trust Company
of New York and then The Chase Manhattan Bank (National Association)), now
succeeded by The Chase Manhattan Bank as Trustee (herein called the "Trustee"),
and all indentures supplemental thereto (said Mortgage as so supplemented herein
called the "Indenture") to which reference is hereby made for a description of
the properties mortgaged and pledged, the nature and extent of the security, the
rights of the registered owner or owners of the Bonds and of the Trustee in
respect thereof, and the terms and conditions upon which the Bonds are, and are
to be, secured. The Bonds may be issued in series, for various principal sums,
may mature at different times, may bear interest at different rates and may
otherwise vary as in the Indenture provided. This Bond is one of a series
designated as the First Mortgage Bonds, 7.43% Series due 2009-D (herein called
the "Pledge Bonds due 2009") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $150,000,000, issued under and
secured by the Indenture and described in the Seventy-Sixth Supplemental
Indenture dated October 15, 1997, between the Company and the Trustee (herein
called the "Supplemental Indenture").
The Pledge Bonds due 2009 have been delivered by the Company to The Chase
Manhattan Bank, as trustee (hereinafter called the "Note Trustee"), pursuant to
a Note Indenture, dated as of October 24, 1997, between the Company and the Note
Trustee, under which the Note Trustee holds the Pledge Bonds due 2009 as
security for the payment of principal of and interest on 7.43% Series C Secured
Notes due 2009 and 7.43% Series D Secured Notes due 2009 (together, herein
called the "Notes due 2009").
If and when any Notes due 2009 are purchased by the Company and surrendered
to the Note Trustee for cancellation or the principal of any Notes due 2009 is
paid by the Company then there is deemed to
<PAGE> 15
11
be paid a principal amount of the Pledge Bonds due 2009 then outstanding which
bears the same ratio to the aggregate principal amount of Pledge Bonds due 2009
then outstanding as the aggregate principal amount of the Notes due 2009 so
purchased or paid bears to the aggregate principal amount of the Notes due 2009
outstanding immediately before such purchase or payment; provided, however, that
such purchase or payment of Pledge Bonds due 2009 is deemed to be made only when
and to the extent that notice of such purchase or payment of such Notes due 2009
is given by the Company to the Trustee.
If and when the Company pays interest for any given period of time on the
Notes due 2009, there shall be deemed to be paid on the Pledge Bonds due 2009 an
amount of interest equal to the amount of interest paid on the Notes due 2009;
provided, however, that such payment of interest is deemed to be made only when
and to the extent that notice of such payment of interest on such Notes due 2009
is given by the Company to the Trustee.
In the event that this Bond is deemed to be paid or redeemed in full, this
Bond shall be surrendered to the Trustee for cancellation. In the event that
this Bond is deemed to be paid or redeemed in part, this Bond may, at the option
of the registered owner, be surrendered to the Trustee for cancellation, in
which event the Trustee will cancel this Bond and the Company will execute and
the Trustee will authenticate and deliver to the registered owner Pledge Bonds
due 2009 in authorized denominations in aggregate principal amount equal to the
unpaid balance of the principal amount of this Bond.
The Pledge Bonds due 2009 shall be redeemed by the Company prior to
maturity in whole at any time as provided in Section 8 of Article II of the
Supplemental Indenture at a redemption price of 100% of the principal amount to
be redeemed, plus accrued and unpaid interest to the redemption date.
The Pledge Bonds due 2009 are subject to redemption by the Company prior to
maturity in whole at any time or in part from time to time as provided in
Section 9 of Article II of the Supplemental Indenture at the same redemption
price as shall be payable on the Notes due 2009 to be redeemed concurrently
therewith, such redemption price to equal the greater of (i) 100% of the
principal amount being redeemed and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Yield (as defined in the Note Indenture)
plus twenty-five (25) basis points, plus in each case accrued interest to the
date of redemption.
<PAGE> 16
12
Any redemption of the Pledge Bonds due 2009 shall be made after written
notice to the registered owner or owners of such Bonds, sent by the Trustee by
first class mail, postage prepaid, at least 30 days and not more than 60 days
before the redemption date, unless a shorter notice period is consented to in
writing by the registered owner or owners of all Pledge Bonds due 2009 and such
consent is filed with the Trustee, and such redemption and notice shall be made
in the manner provided in Article II of the Supplemental Indenture, subject to
the provisions of the Indenture. In the event of a partial redemption, the
Trustee shall select the Pledge Bonds due 2009 to be redeemed in such manner as
the Trustee shall deem appropriate and fair.
In the Forty-Third Supplemental Indenture dated April 15, 1985 between the
Company and the Trustee, the Company has modified, in certain respects, the
redemption provisions in the Indenture effective only with respect to the Bonds
of all series established or created in said Forty-Third Supplemental Indenture
and all supplemental indentures dated after May 28, 1985.
To the extent permitted by and as provided in the Indenture, modifications
or alterations of the Indenture, or of any indenture supplemental thereto, and
of the rights and obligations of the Company and of the holders of the Bonds and
coupons may be made with the consent of the Company by an affirmative vote of
not less than 80% in principal amount of the Bonds entitled to vote then
outstanding, at a meeting of Bondholders called and held as provided in the
Indenture, and, in case one or more but less than all of the series of Bonds
then outstanding under the Indenture are so affected, by an affirmative vote of
not less than 80% in principal amount of the Bonds of any series entitled to
vote then outstanding and affected by such modification or alteration; provided,
however, that no such modification or alteration shall be made which will affect
the terms of payment of the principal of or interest on this Bond. In the
Nineteenth Supplemental Indenture dated November 23, 1976 between the Company
and the Trustee, the Company has modified the Indenture effective from and after
the time when none of the Bonds of any series established prior to the execution
of the Nineteenth Supplemental Indenture shall remain outstanding so as to
change "80%" in the foregoing sentence to "60%" and to make certain other
modifications of the Indenture and has reserved the right to make certain other
modifications of the Indenture without any vote, consent or other action by the
holders of Bonds of any series established in the Nineteenth Supplemental
Indenture or in any subsequent supplemental indenture.
If an event of default, as defined in the Indenture, shall occur, the
principal of all the Bonds at any such time outstanding under the Indenture may
be declared or may become due and payable, upon the
<PAGE> 17
13
conditions and in the manner and with the effect provided in the Indenture. The
Indenture provides that such declaration may in certain events be waived by the
holders of a majority in principal amount of the Bonds outstanding.
Subject to the limitations provided in the Indenture and the Note
Indenture, this Bond is transferable by the registered owner hereof, in person
or by duly authorized attorney, on the books of the Company to be kept for that
purpose at the agency of the Company in the Borough of Manhattan, The City of
New York upon surrender and cancellation of this Bond, and upon presentation of
a duly executed written instrument of transfer, and thereupon a new fully
registered Bond or Pledge Bonds due 2009 of the same series, of the same
aggregate principal amount and in authorized denominations will be issued to the
transferee or transferees in exchange herefor; and this Bond, with or without
others of the same series, may in like manner be exchanged for one or more new
fully registered Pledge Bonds due 2009 of the same series of other authorized
denominations but of the same aggregate principal amount; all without charge
except for any tax or taxes or other governmental charges incidental to such
transfer or exchange and all subject to the terms and conditions set forth in
the Indenture. In the event less than all of the Pledge Bonds due 2009 at the
time outstanding are called for redemption, the Company shall not be required
(a) to register any transfer or make any exchange of any such Pledge Bond for a
period of 15 days before the mailing of the notice of redemption of any such
Pledge Bonds, (b) to register any transfer or make any exchange of any such
Pledge Bond called for redemption in its entirety, or (c) to register any
transfer or make any exchange of any portion of any such Pledge Bond which has
been called for redemption. Except as otherwise provided herein with respect to
the payment of interest, the Company, the agencies of the Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof for the purpose of receiving any payment and for all
other purposes.
No recourse shall be had for the payment of the principal of or the
interest on this Bond, or for any claim based hereon or on the Indenture or any
indenture supplemental thereto, against any incorporator, or against any
stockholder, director or officer, past, present or future, of the Company, or of
any predecessor or successor corporation, as such, either directly or through
the Company or any such predecessor or successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability, whether at common law,
in equity, by any constitution or statute or otherwise, of incorporators,
stockholders, directors or officers being released by every owner hereof by the
<PAGE> 18
14
acceptance of this Bond and as part of the consideration for the issue hereof,
and being likewise released by the terms of the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or any
indenture supplemental thereto, or become valid or obligatory for any purpose,
until the Trustee under the Indenture, or a successor trustee thereto under the
Indenture, shall have signed the form of certificate of authentication endorsed
hereon.
IN WITNESS WHEREOF, The Cleveland Electric Illuminating Company has caused
this Bond to be signed in its name by its President or a Vice President (whose
signature may be manual or a facsimile thereof) and its corporate seal (or a
facsimile thereof) to be hereto affixed and attested by its Secretary or an
Assistant Secretary (whose signature may be manual or a facsimile thereof).
Dated:
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By ....................................................
Attest:
...............................
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds of the series designated and described in the
within-mentioned Indenture and Supplemental Indenture.
THE CHASE MANHATTAN BANK, TRUSTEE
By ...........................................
AUTHORIZED OFFICER
[FORM OF SCHEDULE OF PAYMENTS]
SCHEDULE OF PAYMENTS
<TABLE>
<CAPTION>
UNPAID AGENCY OF THE
PRINCIPAL PRINCIPAL PREMIUM INTEREST COMPANY AUTHORIZED
DATE PAYMENT AMOUNT PAYMENT PAYMENT MAKING NOTATION OFFICER TITLE
---- --------- --------- ------- -------- --------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
[END OF FORM OF FULLY REGISTERED BOND]
<PAGE> 19
15
ARTICLE III
CREATION, PROVISIONS, REDEMPTION, PRINCIPAL AMOUNT
AND FORM OF PLEDGE BONDS DUE 2017
SECTION 1. The Company hereby creates a new series of Bonds to be issued
under and secured by the Indenture and to be designated as "First Mortgage
Bonds, 7.88% Series due 2017-B" of the Company and hereinabove and hereinafter
called the "Pledge Bonds due 2017". The Pledge Bonds due 2017 shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, all of the terms, conditions and covenants of the
Indenture.
SECTION 2. The Pledge Bonds due 2017 shall be issued as fully registered
Bonds only, without coupons, in the denominations of $1,000 or any multiple
thereof.
SECTION 3. The Pledge Bonds due 2017 shall be dated the date of
authentication, shall mature November 1, 2017, and shall bear interest from the
time hereinafter provided at such rate per annum on each interest payment date
hereinafter defined as shall cause the amount of interest payable on such Pledge
Bonds due 2017 to equal the amount of interest payable on such interest payment
date on the Notes due 2017 (as defined below), such interest payable on May 1
and November 1 in each year starting on May 1, 1998 (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such Pledge Bonds duly called for redemption, on and until the redemption date,
or in the case of any default by the Company in the payment of the principal due
on any such Pledge Bonds, until the Company's obligation with respect to the
payment of the principal shall be discharged as provided in the Indenture. The
amount of interest payable on any interest payment date, the date of maturity
and any redemption date shall be computed on the same basis as the corresponding
amount of interest is computed on the 7.88% Series C Secured Notes due 2017 and
7.88% Series D Secured Notes due 2017 provided for in the Note Indenture
(together, the "Notes due 2017").
The Pledge Bonds due 2017 shall be payable as to principal and interest at
the agency of the Company in the Borough of Manhattan, The City of New York, or,
at the option of the registered owner, at the agency of the Company in the City
of Cleveland, State of Ohio, in any coin or currency of the United States of
America which at the time of payment is legal tender for the payment of public
and private debts.
Except as hereinafter provided, each Pledge Bond due 2017 shall bear
interest from the later of the date of initial authentication of the
<PAGE> 20
16
Pledge Bonds due 2017 or the most recent date to which interest has been paid or
duly provided for until the principal of such Pledge Bond due 2017 is paid or
duly provided for.
The interest payable on any interest payment date shall be paid to the
respective persons in whose names the Pledge Bonds due 2017 shall be registered
at the close of business on the Record Date next preceding such interest payment
date, notwithstanding the cancellation of any such Bond upon any transfer or
exchange thereof subsequent to such Record Date and prior to such interest
payment date; provided, however, that, if and to the extent the Company shall
default in the payment of the interest due on such interest payment date (other
than an interest payment date that is a redemption date or maturity date), such
defaulted interest shall be paid to the respective persons in whose names such
outstanding Pledge Bonds due 2017 are registered at the close of business on a
date (the "Subsequent Record Date") not less than ten days nor more than 15 days
next preceding the date of payment of such defaulted interest, such Subsequent
Record Date to be established by the Company by notice given by mail by or on
behalf of the Company to the registered owners of Pledge Bonds due 2017 not less
than 10 days next preceding such Subsequent Record Date. If any interest payment
date should fall on a day that is not a business day, then such interest payment
date shall be the next succeeding business day.
The initial interest rate on the Notes due 2017, and therefore on the
Pledge Bonds due 2017, is 7.88%. Under certain circumstances specified in a
Registration Agreement dated October 16, 1997 between the Company and the
Purchasers (as defined therein) of the Notes, the interest rate on the Notes due
2017, and therefore on the Pledge Bonds due 2017, will increase temporarily to
8.38%.
The term "Record Date", with respect to any interest payment date,
redemption date or date of maturity of any Pledge Bond, shall have the same
meaning as the term "Record Date" has with respect to those events for the Notes
due 2017.
SECTION 4. In the manner and subject to the limitations provided in the
Indenture, Pledge Bonds due 2017 may be transferred or may be exchanged for a
like aggregate principal amount of Bonds of such series of other authorized
denominations, in either case without charge, except for any tax or taxes or
other governmental charges incident to such transfer or exchange, at the agency
of the Company in the Borough of Manhattan, The City of New York.
In the event less than all of the Pledge Bonds due 2017 at the time
outstanding are called for redemption, the Company shall not be required (a) to
register any transfer or make any exchange of any
<PAGE> 21
17
such Bond for a period of 15 days before the mailing of the notice of redemption
of any such Bonds, (b) to register any transfer or make any exchange of any such
Bond so called for redemption in its entirety or (c) to register any transfer or
make any exchange of any portion of any such Bond so called for redemption.
Except as otherwise provided in Section 3 of this Article III with respect
to the payment of interest, the Company, the agencies of the Company and the
Trustee may deem and treat the person in whose name a Pledge Bond is registered
as the absolute owner thereof for the purpose of receiving any payment and for
all other purposes.
SECTION 5. The Pledge Bonds due 2017 shall be redeemable only to the extent
provided in this Article III, subject to the provisions contained in Article IV
of the Indenture and the form of Pledge Bond due 2017.
SECTION 6. Subject to the applicable provisions of the Indenture, written
notice of redemption of Pledge Bonds due 2017 pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Pledge Bonds due 2017 to be redeemed a notice of such redemption, first
class postage prepaid, at its last address as it shall appear upon the books of
the Company for the registration and transfer of such Pledge Bonds due 2017. Any
notice of redemption shall be mailed at least 30 days, but no more than 60 days,
prior to the redemption date. In the event of partial redemption of Pledge Bonds
due 2017, the Trustee shall select the Pledge Bonds due 2017 or portions thereof
to be redeemed, subject to the provisions of this Supplemental Indenture, in
such manner as the Trustee shall deem appropriate and fair.
SECTION 7. If and when any Notes due 2017 shall be purchased by the Company
and surrendered to the Note Trustee for cancellation or if and when the
principal of any Notes due 2017 shall be paid by the Company, then there shall
be deemed to have been paid a principal amount of the Pledge Bonds due 2017 then
outstanding which bears the same ratio to the aggregate principal amount of
Pledge Bonds due 2017 then outstanding as the principal amount of the Notes due
2017 so purchased or paid bears to the aggregate principal amount of the Notes
due 2017 outstanding immediately before such purchase or payment; provided,
however, that such purchase or payment of Pledge Bonds due 2017 shall be deemed
to have been made only when and to the extent that notice of such purchase or
payment of the principal amount of such Notes due 2017 shall have been given by
the Company to the Trustee. The Trustee may rely upon any such notification by
the Company that such purchase or payment of Notes due 2017 has been so made.
<PAGE> 22
18
SECTION 8. The Pledge Bonds due 2017 shall be redeemed by the Company in
whole at any time prior to maturity at a redemption price of 100% of the
principal amount to be redeemed, plus accrued and unpaid interest to the
redemption date, but only if the Trustee shall receive a written demand from the
Note Trustee for redemption of all Pledge Bonds due 2017 held by the Note
Trustee stating that an "Event of Default" under the Note Indenture has occurred
and is continuing, that payment of the principal of the Notes due 2017 has been
accelerated and that the Note Trustee is waiving notice of redemption; provided,
however, that the Pledge Bonds due 2017 shall not be redeemed in the event that
prior to such redemption (a) the Trustee shall have received a certificate of
the Note Trustee (i) stating that there has been a waiver of such Event of
Default and a rescission and annulment of such acceleration or (ii) withdrawing
said written demand or (b) an event of default under Section 6.01 of Article VI
of the Note Indenture shall have occurred and be continuing, and there has been
a declaration of acceleration of the principal of the Pledge Bonds due 2017. The
redemption of the Pledge Bonds due 2017 pursuant to this Section shall be made
not more than 60 days after receipt of the written demand.
SECTION 9. The Pledge Bonds due 2017 shall be subject to redemption by the
Company prior to maturity in whole at any time or in part from time to time, at
the same redemption price as shall be payable on the Notes due 2017 to be
redeemed concurrently therewith, such redemption price to equal the greater of
(i) 100% of the principal amount being redeemed and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield (as defined in
the Note Indenture) plus twenty-five (25) basis points, plus in each case
accrued interest to the date of redemption, but in each instance only upon
receipt by the Trustee of an officers' certificate to the effect (a) that the
Company has given notice to the Note Trustee that the Company is exercising its
option to direct the redemption of all or part (specifying the principal amount)
of the Notes due 2017 as provided in the Note Indenture and (b) that an
equivalent principal amount of Pledge Bonds due 2017 shall be concurrently
called for redemption. Such officers' certificate shall specify the principal
amount of the Pledge Bonds due 2017 to be redeemed and the redemption price
thereof and accrued and unpaid interest to the redemption date, shall have
attached to it a copy of said notice to the Note Trustee and said direction of
the Company and shall specify the redemption date of such Pledge Bonds due 2017
(which redemption date shall be the same date as the redemption date of the
Notes due 2017 being concurrently redeemed which is specified in said attached
<PAGE> 23
19
notice). The redemption of the Pledge Bonds due 2017 shall be made upon the
notice and in the manner provided in this Article III, subject to the provisions
of the Indenture.
SECTION 10. Subject to the provisions of the Indenture, written notice of
redemption of Pledge Bonds due 2017 pursuant to any of Sections 5 through 9,
inclusive, of this Article III shall be given by the Trustee by mailing to the
registered owner or owners of such Bonds to be redeemed a notice of such
redemption, first class postage prepaid, at its last address as it shall appear
upon the books of the Company for the registration and transfer of such Bonds.
Any notice of redemption pursuant to said Sections 5 through 9, inclusive, shall
be mailed at least 30 days and not more than 60 days before the redemption date;
provided, however, that the registered owner or owners of all Pledge Bonds due
2017 may consent in writing to a shorter notice period, and such consent , if
filed with the Trustee, shall be binding upon the Company and such registered
owner or owners and their transferees. In the event of a partial redemption, the
Trustee shall select the Pledge Bonds due 2017 to be redeemed in such manner as
the Trustee shall deem appropriate and fair.
SECTION 11. If and when the Company shall pay interest for any given period
of time on the Notes due 2017, there shall be deemed to have been paid on the
Pledge Bonds due 2017 an amount of interest equal to the amount of interest paid
on the Notes due 2017; provided, however, that such payment of interest shall be
deemed to have been made only when and to the extent that notice of such payment
of interest on such Notes due 2017 shall have been given by the Company to the
Trustee. The Trustee may rely upon any such notification by the Company that
such payment of interest has been so made.
SECTION 12. Any Pledge Bonds due 2017 at any time purchased or otherwise
acquired by the Company shall be surrendered to the Trustee for cancellation and
the Trustee shall forthwith cancel the same.
SECTION 13. All Pledge Bonds due 2017 deemed to have been redeemed or paid
in full as provided in Sections 5 through 9, inclusive, of this Article III
shall be surrendered to the Trustee for cancellation and the Trustee shall
forthwith cancel the same. In the event that part of a Pledge Bond due 2017
shall be deemed to have been redeemed or paid as provided in said Sections 5
through 9, the registered owner may, at its option, surrender such Pledge Bond
to the Trustee for cancellation, in which event the Trustee shall cancel such
Pledge Bond and the Company shall execute and the Trustee shall authenticate and
deliver to the registered owner Pledge Bonds due 2017 in such authorized
denominations as shall be specified by the registered owner in an aggregate
principal amount equal to the unpaid balance of the principal amount of such
surrendered Pledge Bond.
<PAGE> 24
20
SECTION 14. Pledge Bonds due 2017 shall not be transferable unless the
registered owner shall have first surrendered the same to the Trustee for
notation thereon of all payments of principal deemed to have been made thereon
under Section 7 of this Article III or for cancellation and execution,
authentication and delivery of Pledge Bonds due 2017 in an aggregate principal
amount equal to the unpaid balance of the principal amount of such surrendered
Pledge Bonds due 2017 under Section 13 of this Article III.
SECTION 15. The aggregate principal amount of Pledge Bonds due 2017 which
may be authenticated and delivered hereunder shall not exceed $300,000,000,
except as otherwise provided in the Indenture.
SECTION 16. The form of the fully registered Pledge Bonds due 2017, and of
the Trustee's certificate of authentication thereon, shall be substantially as
follows:
[FORM OF FULLY REGISTERED BOND]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 7.88% SERIES DUE 2017-B
Due November 1, 2017
No. $
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized and
existing under the laws of the State of Ohio (hereinafter called the "Company",
which term shall include any successor corporation as defined in the Indenture
hereinafter referred to), for value received, hereby promises to pay to
, or registered assigns, the sum of Dollars
($ ) or the aggregate unpaid principal amount hereof (as shown on the
Schedule of Payments hereon), whichever is less, on November 1, 2017, in any
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts, and to pay interest on
the unpaid principal amount hereof in like coin or currency from the time
hereinafter provided, at such rate per annum as shall cause the amount of
interest payable on the Pledge Bonds due 2017 (hereinafter defined), together
with the interest payable on all other Pledge Bonds (hereinafter defined) held
by the Note Trustee (hereinafter defined), to equal the amount of interest
payable on the Notes due 2017 (hereinafter defined), such interest to be payable
on May 1 and November 1 in each year starting on May 1, 1998 (each such date
herein called an "interest payment date"), and on and until the date of maturity
of this Bond, or, if this Bond shall be duly called for redemption, on and until
the redemption date, or, if the Company shall default in the payment of the
principal amount of this Bond, until the
<PAGE> 25
21
Company's obligation with respect to the payment of such principal shall be
discharged as provided in said Indenture. Except as hereinafter provided, this
Bond shall bear interest from the date of initial authentication of this Bond or
the most recent date to which interest has been paid or duly provided for until
the principal of this Bond has been paid or duly provided for. Subject to
certain exceptions provided in said Indenture, the interest payable on any
interest payment date shall be paid to the person in whose name this Bond shall
be registered at the close of business on the Record Date (as defined in Section
3 of Article III of the Supplemental Indenture, hereinafter defined) or, in the
case of defaulted interest, on a day preceding the date of payment thereof
established by notice to the registered owner of this Bond in the manner
provided in the Supplemental Indenture. Principal of and interest on this Bond
are payable at the agency of the Company in the Borough of Manhattan, The City
of New York, or, at the option of the registered owner, at the agency of the
Company in the City of Cleveland, State of Ohio.
This Bond is one of the duly authorized Bonds of the Company (herein called
the "Bonds"), all issued and to be issued under and equally secured by a
Mortgage and Deed of Trust dated July 1, 1940, executed by the Company to
Guaranty Trust Company of New York (subsequently Morgan Guaranty Trust Company
of New York and then The Chase Manhattan Bank (National Association)), now
succeeded by The Chase Manhattan Bank as Trustee (herein called the "Trustee"),
and all indentures supplemental thereto (said Mortgage as so supplemented herein
called the "Indenture") to which reference is hereby made for a description of
the properties mortgaged and pledged, the nature and extent of the security, the
rights of the registered owner or owners of the Bonds and of the Trustee in
respect thereof, and the terms and conditions upon which the Bonds are, and are
to be, secured. The Bonds may be issued in series, for various principal sums,
may mature at different times, may bear interest at different rates and may
otherwise vary as in the Indenture provided. This Bond is one of a series
designated as the First Mortgage Bonds, 7.88% Series due 2017-B (herein called
the "Pledge Bonds due 2017") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $300,000,000, issued under and
secured by the Indenture and described in the Seventy-Sixth Supplemental
Indenture dated October 15, 1997, between the Company and the Trustee (herein
called the "Supplemental Indenture").
The Pledge Bonds due 2017 have been delivered by the Company to The Chase
Manhattan Bank, as trustee (hereinafter called the "Note Trustee"), pursuant to
a Note Indenture, dated as of October 24, 1997, between the Company and the Note
Trustee, under which the Note Trustee holds the Pledge Bonds due 2017 as
security for the payment
<PAGE> 26
22
of principal and interest on 7.88% Series C Secured Notes due 2017 and 7.88%
Series D Secured Notes due 2017 (together, herein called the "Notes due 2017").
If and when any Notes due 2017 are purchased by the Company and surrendered
to the Note Trustee for cancellation or the principal of any Notes due 2017 is
paid by the Company then there shall be deemed to be paid a principal amount of
the Pledge Bonds due 2017 then outstanding which bears the same ratio to the
aggregate principal amount of Pledge Bonds due 2017 then outstanding as the
principal amount of the Notes due 2017 so purchased or paid bears to the
aggregate principal amount of the Notes due 2017 outstanding immediately before
such purchase or payment; provided, however, that such purchase or payment of
Pledge Bonds due 2017 is deemed to be made only when and to the extent that
notice of such purchase or payment of such Notes due 2017 is given by the
Company to the Trustee.
If and when the Company pays interest for any given period of time on the
Notes due 2017, there shall be deemed to be paid on the Pledge Bonds due 2017 an
amount of interest equal to the amount of interest paid on the Notes due 2017;
provided, however, that such payment of interest is deemed to be made only when
and to the extent that notice of such payment of interest on such Notes due 2017
is given by the Company to the Trustee.
In the event that this Bond is deemed to be paid or redeemed in full, this
Bond shall be surrendered to the Trustee for cancellation. In the event that
this Bond is deemed to be paid or redeemed in part, this Bond may, at the option
of the registered owner, be surrendered to the Trustee for cancellation, in
which event the Trustee will cancel this Bond and the Company will execute and
the Trustee will authenticate and deliver to the registered owner Pledge Bonds
due 2017 in authorized denominations in aggregate principal amount equal to the
unpaid balance of the principal amount of this Bond.
The Pledge Bonds due 2017 shall be redeemed by the Company prior to
maturity in whole at any time as provided in Section 8 of Article III of the
Supplemental Indenture at a redemption price of 100% of the principal amount to
be redeemed, plus accrued and unpaid interest to the redemption date.
The Pledge Bonds due 2017 are subject to redemption by the Company prior to
maturity in whole at any time or in part from time to time as provided in
Section 9 of Article III of the Supplemental Indenture at the same redemption
price as shall be payable on the Notes due 2017 to be redeemed concurrently
therewith, such redemption price to equal the greater of (i) 100% of the
principal amount being redeemed and (ii) the sum of the present values of the
remaining
<PAGE> 27
23
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield (as defined in the Note Indenture) plus
twenty-five (25) basis points, plus in each case accrued interest to the date of
redemption.
Any redemption of the Pledge Bonds due 2017 shall be made after written
notice to the registered owner or owners of such Bonds, sent by the Trustee by
first class mail, postage prepaid, at least 30 days and not more than 60 days
before the redemption date, unless a shorter notice period is consented to in
writing by the registered owner or owners of all Pledge Bonds due 2017 and such
consent is filed with the Trustee, and such redemption and notice shall be made
in the manner provided in Article III of the Supplemental Indenture, subject to
the provisions of the Indenture. In the event of a partial redemption, the
Trustee shall select the Pledge Bonds due 2017 to be redeemed in such manner as
the Trustee shall deem appropriate and fair.
In the Forty-Third Supplemental Indenture dated April 15, 1985 between the
Company and the Trustee, the Company has modified, in certain respects, the
redemption provisions in the Indenture effective only with respect to the Bonds
of all series established or created in said Forty-Third Supplemental Indenture
and all supplemental indentures dated after May 28, 1985.
To the extent permitted by and as provided in the Indenture, modifications
or alterations of the Indenture, or of any indenture supplemental thereto, and
of the rights and obligations of the Company and of the holders of the Bonds and
coupons may be made with the consent of the Company by an affirmative vote of
not less than 80% in principal amount of the Bonds entitled to vote then
outstanding, at a meeting of Bondholders called and held as provided in the
Indenture, and, in case one or more but less than all of the series of Bonds
then outstanding under the Indenture are so affected, by an affirmative vote of
not less than 80% in principal amount of the Bonds of any series entitled to
vote then outstanding and affected by such modification or alteration; provided,
however, that no such modification or alteration shall be made which will affect
the terms of payment of the principal of or interest on this Bond. In the
Nineteenth Supplemental Indenture dated November 23, 1976 between the Company
and the Trustee, the Company has modified the Indenture effective from and after
the time when none of the Bonds of any series established prior to the execution
of the Nineteenth Supplemental Indenture shall remain outstanding so as to
change "80%" in the foregoing sentence to "60%" and to make certain other
modifications of the Indenture and has reserved the right to make certain other
modifications of the Indenture without any vote, consent or other action by the
holders of Bonds of any series estab-
<PAGE> 28
24
lished in the Nineteenth Supplemental Indenture or in any subsequent
supplemental indenture.
If an event of default, as defined in the Indenture, shall occur, the
principal of all the Bonds at any such time outstanding under the Indenture may
be declared or may become due and payable, upon the conditions and in the manner
and with the effect provided in the Indenture. The Indenture provides that such
declaration may in certain events be waived by the holders of a majority in
principal amount of the Bonds outstanding.
Subject to the limitations provided in the Indenture and the Note
Indenture, this Bond is transferable by the registered owner hereof, in person
or by duly authorized attorney, on the books of the Company to be kept for that
purpose at the agency of the Company in the Borough of Manhattan, The City of
New York upon surrender and cancellation of this Bond, and upon presentation of
a duly executed written instrument of transfer, and thereupon a new fully
registered Bond or Pledge Bonds due 2017 of the same series, of the same
aggregate principal amount and in authorized denominations will be issued to the
transferee or transferees in exchange herefor; and this Bond, with or without
others of the same series, may in like manner be exchanged for one or more new
fully registered Pledge Bonds due 2017 of the same series of other authorized
denominations but of the same aggregate principal amount; all without charge
except for any tax or taxes or other governmental charges incidental to such
transfer or exchange and all subject to the terms and conditions set forth in
the Indenture. In the event less than all of the Pledge Bonds due 2017 at the
time outstanding are called for redemption, the Company shall not be required
(a) to register any transfer or make any exchange of any such Pledge Bond for a
period of 15 days before the mailing of the notice of redemption of any such
Pledge Bonds, (b) to register any transfer or make any exchange of any such
Pledge Bond called for redemption in its entirety, or (c) to register any
transfer or make any exchange of any portion of any such Pledge Bond which has
been called for redemption. Except as otherwise provided herein with respect to
the payment of interest, the Company, the agencies of the Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof for the purpose of receiving any payment and for all
other purposes.
No recourse shall be had for the payment of the principal of or the
interest on this Bond, or for any claim based hereon or on the Indenture or any
indenture supplemental thereto, against any incorporator, or against any
stockholder, director or officer, past, present or future, of the Company, or of
any predecessor or successor corporation, as such, either directly or through
the Company or any such predecessor
<PAGE> 29
25
or successor corporation, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise, all
such liability, whether at common law, in equity, by any constitution or statute
or otherwise, of incorporators, stockholders, directors or officers being
released by every owner hereof by the acceptance of this Bond and as part of the
consideration for the issue hereof, and being likewise released by the terms of
the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or any
indenture supplemental thereto, or become valid or obligatory for any purpose,
until the Trustee under the Indenture, or a successor trustee thereto under the
Indenture, shall have signed the form of certificate of authentication endorsed
hereon.
IN WITNESS WHEREOF, The Cleveland Electric Illuminating Company has caused
this Bond to be signed in its name by its President or a Vice President (whose
signature may be manual or a facsimile thereof) and its corporate seal (or a
facsimile thereof) to be hereto affixed and attested by its Secretary or an
Assistant Secretary (whose signature may be manual or a facsimile thereof).
Dated:
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By ....................................................
Attest:
...............................
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds of the series designated and described in the
within-mentioned Indenture and Supplemental Indenture.
THE CHASE MANHATTAN BANK, TRUSTEE
By ...........................................
AUTHORIZED OFFICER
[FORM OF SCHEDULE OF PAYMENTS]
SCHEDULE OF PAYMENTS
<TABLE>
<CAPTION>
UNPAID AGENCY OF THE
PRINCIPAL PRINCIPAL PREMIUM INTEREST COMPANY AUTHORIZED
DATE PAYMENT AMOUNT PAYMENT PAYMENT MAKING NOTATION OFFICER TITLE
---- --------- --------- ------- -------- --------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
[END OF FORM OF FULLY REGISTERED BOND]
<PAGE> 30
26
ARTICLE IV
THE TRUSTEE
SECTION 1. The Trustee hereby accepts the trusts hereby declared and
provided upon the terms and conditions in the Indenture set forth and upon the
terms and conditions set forth in this Article IV.
SECTION 2. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or the due execution hereof by the Company or for or in respect of the recitals
contained herein, all of which recitals are made by the Company solely. In
general, each and every term and condition contained in Article XIII of the
Indenture shall apply to this Supplemental Indenture with the same force and
effect as if the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate.
SECTION 3. For purposes of this Supplemental Indenture (a) the Trustee may
conclusively rely and shall be protected in acting upon the written demand from,
or certificate of, any agency duly appointed by resolution of the Board of
Directors of the Company or any officers' certificate or opinion of counsel, as
to the truth of the statements and the correctness of the opinions expressed
therein, without independent investigation or verification thereof, subject to
Article XIII of the Indenture and (b) a written demand from, or certificate of,
an agency of the Company shall mean a written demand or certificate executed by
the president, any vice president or any trust officer of, or any other person
authorized to act for, such agency, as such.
SECTION 4. The Company shall cause any agency of the Company, other than
the Trustee, which it may appoint from time to time to act as such agency in
respect of the Pledge Bonds, to execute and deliver to the Trustee an instrument
in which such agency shall:
(a) Agree to keep and maintain, and furnish to the Trustee from time
to time as reasonably requested by the Trustee, appropriate records of all
transactions carried out by it as such agency and to furnish the Trustee
such other information and reports as the Trustee may reasonably require;
(b) Certify that it is eligible for appointment as such agency and
agree to notify the Trustee promptly if it shall cease to be so eligible;
and
(c) Agree to indemnify the Trustee, in a manner satisfactory to the
Trustee, against any loss, liability or expense incurred by,
<PAGE> 31
27
and defend any claim asserted against, the Trustee by reason of any acts or
failures to act as such agency, except for any liability resulting from any
action taken by it at the specific direction of the Trustee;
provided, however, that the Company, in lieu of causing any such agency to
furnish such an instrument, may make such other arrangements with the Trustee in
respect of any such agency as shall be satisfactory to the Trustee.
SECTION 5. The Trustee shall advise the Company in writing of the receipt
of any notification provided for in or any cancellation made pursuant to
Sections 6 through 13 of Articles II and III of this Supplemental Indenture.
ARTICLE V
MISCELLANEOUS PROVISIONS
This Supplemental Indenture may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original; but such
counterparts shall together constitute but one and the same instrument.
EXECUTION
IN WITNESS WHEREOF, said The Cleveland Electric Illuminating Company has
caused this Supplemental Indenture to be executed on its behalf by its President
or one of its Vice Presidents and its corporate seal to be hereto affixed and
said seal and this Supplemental Indenture to be attested by its Secretary or an
Assistant Secretary, and said The Chase Manhattan Bank, in evidence of its
acceptance of the trust hereby created, has caused this Supplemental Indenture
to be executed on its behalf by one of its Vice Presidents or one of its
Corporate Trust Officers, and its corporate seal to be hereto affixed and said
seal and this Supplemental Indenture to be attested by one of its Assistant
Secretaries, all as of the day and year first above written.
<PAGE> 32
S-1
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By: TERRENCE G. LINNERT
--------------------------------------------------
Terrence G. Linnert, Vice President
ATTEST:
JANIS T. PERCIO
- ------------------------------------------
Janis T. Percio, Secretary
Signed, sealed and acknowledged by The
Cleveland Electric Illuminating Company in
the presence of:
[SEAL]
CAROL L. HEBACH
- ------------------------------------------
Carol L. Hebach
PATRICIA M. MITCHELL
- ------------------------------------------
Patricia M. Mitchell
As witnesses
THE CHASE MANHATTAN BANK, AS TRUSTEE
By: P.J. GILKESON
--------------------------------------------------
P.J. Gilkeson, Vice President
ATTEST:
GREGORY P. SHEA
- ------------------------------------------
Gregory P. Shea, Senior Trust Officer
Signed, sealed and acknowledged by The
Chase Manhattan Bank in the presence of:
[SEAL]
DAVID TRAKIMOWICZ
- ------------------------------------------
David Trakimowicz
JAMES P. FREEMAN
- ------------------------------------------
James P. Freeman
As witnesses
<PAGE> 33
S-2
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
On this 13th day of October, 1997, before me personally appeared Terrence
G. Linnert and Janis T. Percio to me personally known, who being by me severally
duly sworn, did say that they are a Vice President and the Secretary,
respectively, of The Cleveland Electric Illuminating Company, that the seal
affixed to the foregoing instrument is the corporate seal of said corporation
and that said instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors; and said officers severally acknowledged
said instrument to be the free act and deed of said corporation.
CAROL L. HEBACH
------------------------------------------
Notary Public
Carol L. Hebach
Notary Public, State of Ohio
Recorded in Cuyahoga County
My Commission expires January 19, 2000
[SEAL]
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this 14th day of October, 1997, before me personally appeared P.J.
Gilkeson and Gregory P. Shea to me personally known, who being by me severally
duly sworn, did say that they are a Vice President and a Senior Trust Officer,
respectively, of The Chase Manhattan Bank, that the seal affixed to the
foregoing instrument is the corporate seal of said corporation and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors; and said officers severally acknowledged said instrument
to be the free act and deed of said corporation.
EMILY FAYAN
------------------------------------------
Notary Public
Emily Fayan
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate Filed in New York County
Commission expires December 31, 1997
[SEAL]
This Instrument Prepared By Paul N. Edwards, Attorney At Law.
<PAGE> 34
R-1
This page contains information as to recording and filing which was not set
forth in this Supplemental Indenture at the time of execution. This page is not
a part of this Supplemental Indenture.
RECORDING AND FILING DATA
This Supplemental Indenture was filed for record and recorded in the record
of mortgages in the offices of the Recorders of the following Counties:
<TABLE>
<CAPTION>
COUNTY VOLUME PAGE FILED FOR RECORD
------ ------ ---- ----------------
<S> <C> <C> <C>
Ohio
Ashtabula )
Cuyahoga )
Geauga )
Lake )
Lorain ) October , 1997
Ottawa )
Portage )
Stark )
Summit )
Trumbull )
Pennsylvania )
Warren )
Beaver )
</TABLE>
This Supplemental Indenture was filed for record and recorded in the
Registered Land Department of the offices of the Recorders of the following
Counties in the State of Ohio
<TABLE>
<CAPTION>
COUNTY DOCUMENT NUMBER FILED FOR RECORD
------ --------------- ----------------
<S> <C> <C>
Cuyahoga
Lake October , 1997
</TABLE>
An amendment to a previously filed financing statement and a counterpart of
this Supplemental Indenture were filed in the office of the Secretary of the
Commonwealth of Pennsylvania on October , 1997 under original file number
, microfilm number 18111533, to comply with the filing requirements of
the Pennsylvania enactment of the Uniform Commercial Code.
<PAGE> 1
Exhibit 4 (b)
================================================================================
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
-----------------------------------
INDENTURE
DATED AS OF OCTOBER 24, 1997
-----------------------------------
THE CHASE MANHATTAN BANK
Trustee
================================================================================
<PAGE> 2
Certain Sections of this Indenture relating to Sections 310 through 318,
inclusive, of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C> <C>
Section 310(a) (1)........................................................................... 7.09
(a) (2).............................................................................. 7.09
(a) (3).............................................................................. Not Applicable
(a) (4).............................................................................. Not Applicable
(b).................................................................................. 7.08
..................................................................................... 7.10
311 (a).................................................................................. 7.13
(b).................................................................................. 7.13
312 (a).................................................................................. 8.01
..................................................................................... 8.02
(b).................................................................................. 8.02
(c).................................................................................. 8.02
313 (a).................................................................................. 8.03
(b).................................................................................. 8.03
(c).................................................................................. 8.03
(d).................................................................................. 8.03
314 (a).................................................................................. 8.04
(a) (4).............................................................................. 1.01
............................................. 11.04
(b).................................................................................. 11.05
(c) (1).............................................................................. 1.02
(c) (2).............................................................................. 1.02
(c) (3).............................................................................. Not Applicable
(d).................................................................................. 1.02
(e).................................................................................. 1.02
315 (a).................................................................................. 7.01
(b).................................................................................. 7.02
(c).................................................................................. 7.01
(d).................................................................................. 7.01
(e).................................................................................. 6.14
316 (a).................................................................................. 1.01
(a) (1) (A).......................................................................... 6.02
............................................. 6.12
(a) (1) (B).......................................................................... 6.13
(a) (2).............................................................................. Not Applicable
(b).................................................................................. 6.08
(c).................................................................................. 1.04
317 (a) (1).............................................................................. 6.03
(a) (2).............................................................................. 6.04
(b).................................................................................. 11.03
318 (a).................................................................................. 1.07
<FN>
- ----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C> <C>
SECTION 1.01. Definitions.............................................................................. 1
Act............................................................................................ 2
Affiliate...................................................................................... 2
Authenticating Agent........................................................................... 2
Board of Directors............................................................................. 2
Board Resolutions.............................................................................. 2
Business Day................................................................................... 2
Cleveland Electric............................................................................. 2
Commission..................................................................................... 2
Company........................................................................................ 2
Company Request or Company Order............................................................... 2
Corporate Trust Office......................................................................... 2
Corporation.................................................................................... 2
Covenant Defeasance............................................................................ 2
Defaulted Interest............................................................................. 2
Defeasance..................................................................................... 3
Depository..................................................................................... 3
Event of Default............................................................................... 3
Exchange Act................................................................................... 3
Expiration Date................................................................................ 3
First Mortgage................................................................................. 3
First Mortgage Bonds........................................................................... 3
Global Security................................................................................ 3
Holder......................................................................................... 3
Indenture...................................................................................... 3
independent.................................................................................... 3
Interest....................................................................................... 3
Interest Payment Date.......................................................................... 3
Investment Company Act......................................................................... 3
Maturity....................................................................................... 3
Mortgage Trustee............................................................................... 4
Notice of Default.............................................................................. 4
Officer's Certificate.......................................................................... 4
Opinion of Counsel............................................................................. 4
Original Issue Discount Security............................................................... 4
Outstanding.................................................................................... 4
Paying Agent................................................................................... 5
Person......................................................................................... 5
Place of Payment............................................................................... 5
Predecessor Security........................................................................... 5
Redemption Date................................................................................ 5
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C>
Redemption Price............................................................................... 5
Regular Record Date............................................................................ 5
Responsible Officer............................................................................ 5
Securities..................................................................................... 5
Securities Act................................................................................. 5
Security Register and Security Registrar....................................................... 6
Special Record Date............................................................................ 6
Stated Maturity................................................................................ 6
Subsidiary..................................................................................... 6
Trust Indenture Act............................................................................ 6
Trustee........................................................................................ 6
U.S. Government Obligation..................................................................... 6
Vice President................................................................................. 6
SECTION 1.02. Compliance Certificates and Opinions..................................................... 6
SECTION 1.03. Form of Documents Delivered to Trustee................................................... 7
SECTION 1.04. Acts of Holders; Record Dates........................................................... 7
SECTION 1.05. Notices, Etc., to the Trustee and the Company.............................................9
SECTION 1.06. Notice to Holders; Waiver................................................................ 9
SECTION 1.07. Conflict with Trust Indenture Act....................................................... 10
SECTION 1.08. Effect of Headings and Table of Contents ............................................... 10
SECTION 1.09. Successors and Assigns.................................................................. 10
SECTION 1.10. Separability Clause..................................................................... 10
SECTION 1.11. Benefits of Indenture................................................................... 10
SECTION 1.12. Governing Law........................................................................... 10
SECTION 1.13. Legal Holidays.......................................................................... 10
SECTION 1.14. Immunity of Incorporators, Stockholders, Officers and Directors..........................11
ARTICLE II.
SECURITY FORMS
SECTION 2.01. Forms Generally......................................................................... 11
SECTION 2.02. Reserved................................................................................ 11
SECTION 2.03. Reserved................................................................................ 11
SECTION 2.04. Form of Legend for Global Securities.................................................... 11
SECTION 2.05. Form of Trustee's Certificate of Authentication......................................... 12
ARTICLE III.
THE SECURITIES
SECTION 3.01. Amount Unlimited; Issuable in Series.................................................... 12
SECTION 3.02. Denominations........................................................................... 14
SECTION 3.03. Execution, Authentication, Delivery and Dating.......................................... 14
SECTION 3.04. Temporary Securities.................................................................... 16
SECTION 3.05. Registration, Registration of Transfer and Exchange..................................... 17
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities........................................ 18
SECTION 3.07. Payment of Interest; Interest Rights Preserved.......................................... 19
SECTION 3.08. Persons Deemed Owners................................................................... 19
SECTION 3.09. Cancellation............................................................................ 20
SECTION 3.10. Computation of Interest................................................................. 20
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 3.11. CUSIP Numbers........................................................................... 20
SECTION 3.12. Payments on First Mortgage Bonds........................................................ 20
ARTICLE IV.
FIRST MORTGAGE BONDS
SECTION 4.01. Acceptance of First Mortgage Bonds...................................................... 20
SECTION 4.02. Terms of First Mortgage Bonds........................................................... 20
SECTION 4.03. First Mortgage Bonds as Security for Securities......................................... 21
SECTION 4.04. Reserved................................................................................ 21
SECTION 4.05. First Mortgage Bonds Held by the Trustee................................................ 21
SECTION 4.06. No Transfer of First Mortgage Bonds; Exception.......................................... 21
SECTION 4.07. Delivery to the Company of all First Mortgage Bonds..................................... 21
SECTION 4.08. Further Assurances...................................................................... 22
SECTION 4.09. Exchange and Surrender of First Mortgage Bonds.......................................... 22
ARTICLE V.
SATISFACTION AND DISCHARGE
SECTION 5.01. Satisfaction and Discharge of Indenture................................................. 22
SECTION 5.02. Application of Trust Money.............................................................. 24
SECTION 5.03. Paying Agent to Repay Moneys Held........................................................24
SECTION 5.04. Return of Unclaimed Moneys...............................................................24
ARTICLE VI.
REMEDIES
SECTION 6.01. Events of Default....................................................................... 24
SECTION 6.02. Acceleration of Maturity; Rescission and Annulment...................................... 25
SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by Truste26
SECTION 6.04. Trustee May File Proofs of Claim........................................................ 27
SECTION 6.05. Trustee May Enforce Claims Without Possession of Securities............................. 27
SECTION 6.06. Application of Money Collected...........................................................27
SECTION 6.07. Limitation on Suits..................................................................... 28
SECTION 6.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest.............................................................. 28
SECTION 6.09. Restoration of Rights and Remedies...................................................... 28
SECTION 6.10. Rights and Remedies Cumulative.......................................................... 29
SECTION 6.11. Delay or Omission Not Waiver............................................................ 29
SECTION 6.12. Control by Holders...................................................................... 29
SECTION 6.13. Waiver of Past Defaults................................................................. 29
SECTION 6.14. Undertaking for Costs................................................................... 30
SECTION 6.15. Waiver of Usury, Stay or Extension Laws................................................. 30
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE VII.
THE TRUSTEE
<S> <C> <C>
SECTION 7.01. Certain Duties and Responsibilities..................................................... 30
SECTION 7.02. Notice of Defaults...................................................................... 31
SECTION 7.03. Certain Rights of Trustee............................................................... 31
SECTION 7.04. Not Responsible for Recitals or Issuance of Securities ................................. 32
SECTION 7.05. May Hold Securities..................................................................... 32
SECTION 7.06. Money Held in Trust..................................................................... 32
SECTION 7.07. Compensation and Reimbursement ......................................................... 32
SECTION 7.08. Conflicting Interests................................................................... 33
SECTION 7.09. Corporate Trustee Required; Eligibility................................................. 33
SECTION 7.10. Resignation and Removal; Appointment of Successor....................................... 34
SECTION 7.11. Acceptance of Appointment by Successor.................................................. 35
SECTION 7.12. Merger, Conversion, Consolidation or Succession to Business............................. 36
SECTION 7.13. Preferential Collection of Claims Against Company....................................... 36
SECTION 7.14. Appointment of Authenticating Agent..................................................... 36
ARTICLE VIII.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 8.01. Company to Furnish Trustee Names and Addresses of Holders............................... 37
SECTION 8.02. Preservation of Information; Communications to Holders.................................. 38
SECTION 8.03. Reports by Trustee...................................................................... 38
SECTION 8.04. Reports by Company...................................................................... 38
ARTICLE IX.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 9.01. Company May Consolidate, Etc., Only on Certain Terms.................................... 38
SECTION 9.02. Successor Substituted................................................................... 39
ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders............................................................. 40
SECTION 10.02. With Consent of Holders................................................................ 40
SECTION 10.03. Execution of Amendments or Supplements................................................. 41
SECTION 10.04. Effect of Amendments or Supplements.................................................... 42
SECTION 10.05. Conformity with Trust Indenture Act.................................................... 42
SECTION 10.06. Reference in Securities to Amendments or Supplements................................... 42
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
ARTICLE XI.
COVENANTS
<S> <C> <C>
SECTION 11.01. Payment of Principal, Premium and Interest............................................. 42
SECTION 11.02. Maintenance of Office or Agency........................................................ 42
SECTION 11.03. Money for Securities Payments to Be Held in Trust...................................... 43
SECTION 11.04. Statement by Officers as to Default.................................................... 44
SECTION 11.05. Recording, Filing, Etc.; Opinions of Counsel........................................... 44
SECTION 11.06. Waiver of Certain Covenants............................................................ 44
SECTION 11.07. Calculation of Original Issue Discount................................................. 45
ARTICLE XII.
REDEMPTION OF SECURITIES
SECTION 12.01. Applicability of Article............................................................... 45
SECTION 12.02. Election to Redeem; Notice to Trustee.................................................. 45
SECTION 12.03. Selection by Trustee of Securities to Be Redeemed...................................... 45
SECTION 12.04. Notice of Redemption................................................................... 46
SECTION 12.05. Securities Payable on Redemption Date; Deposit
of Redemption Price............................................................ 47
SECTION 12.06. Reserved .............................................................................. 47
SECTION 12.07. Securities Redeemed in Part............................................................ 47
ARTICLE XIII.
SINKING FUNDS
SECTION 13.01. Applicability of Article............................................................... 47
SECTION 13.02. Satisfaction of Sinking Fund Payments with Securities.................................. 48
SECTION 13.03. Redemption of Securities for Sinking Fund.............................................. 48
ARTICLE XIV.
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 14.01. Option of the Company to Effect Defeasance or
Covenant Defeasance.............................................................. 48
SECTION 14.02. Defeasance and Discharge............................................................... 48
SECTION 14.03. Covenant Defeasance.................................................................... 49
SECTION 14.04. Conditions to Defeasance or Covenant Defeasance........................................ 49
SECTION 14.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.................................................. 51
SECTION 14.06. Reinstatement.......................................................................... 52
SIGNATURES ....................................................................................... S-1
</TABLE>
-v-
<PAGE> 8
INDENTURE, dated as of October 24, 1997, between THE CLEVELAND
ELECTRIC ILLUMINATING COMPANY, a corporation duly organized and existing under
the laws of the State of Ohio (herein called "CLEVELAND ELECTRIC" or the
"COMPANY"), having its principal office at 6200 Oak Tree Boulevard,
Independence, Ohio 44131 and THE CHASE MANHATTAN BANK, a New York banking
corporation, as Trustee (herein called the "TRUSTEE").
RECITALS OF THE COMPANY
The Company (as hereinafter defined) has duly authorized the
execution and delivery of this Indenture to provide for the issuance from time
to time of bonds, debentures, notes or other evidences of indebtedness (herein
called the "SECURITIES"), to be issued in one or more series as in this
Indenture provided.
Subject to the provisions of SECTION 4.03, the Company may
issue one or more series of First Mortgage Bonds (as hereinafter defined) and
deliver such First Mortgage Bonds to the Trustee to hold in trust for the
benefit of the respective Holders from time to time of the related series of
Securities, or require the Trustee to deliver to the Company for cancellation
any and all First Mortgage Bonds held by the Trustee.
All things necessary to make this Indenture a valid agreement
of the Company in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually agreed, for the benefit of
all Holders of the Securities or of series thereof, as follows:
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted in the United
States of America;
(4) unless the context otherwise requires, any reference to an
"ARTICLE" or a "SECTION" refers to an Article or a Section, as the case
may be, of this Indenture; and
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(5) the words "HEREIN," "HEREOF" and "HEREUNDER" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"ACT," when used with respect to any Holder, has the meaning
specified in SECTION 1.04.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AUTHENTICATING AGENT" means any Person authorized by the
Trustee pursuant to SECTION 7.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"BOARD OF DIRECTORS" means the board of directors of the
Company or any duly authorized committee of such board.
"BOARD RESOLUTIONS" mean copies of resolutions certified by
the Secretary or an Assistant Secretary or Associate Secretary of the Company to
have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"BUSINESS DAY," shall mean any day other than a Saturday,
Sunday or other day on which banks are authorized to be closed in the city in
which the Corporate Trust Office is located, Cleveland, Ohio or New York, New
York.
"CLEVELAND ELECTRIC" means the Person named as "CLEVELAND
ELECTRIC" in the first paragraph of this instrument until a successor Person
shall have become such pursuant to the provisions of this Indenture, and
thereafter "CLEVELAND ELECTRIC" shall mean such successor Person.
"COMMISSION" means the Securities and Exchange Commission,
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"COMPANY" means Cleveland Electric.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request
or order signed in the name of the Company by one of its Chairman of the Board,
its President, its Vice President, its Chief Financial Officer, its Treasurer,
its Controller, its Secretary, or an Assistant Secretary, and delivered to the
Trustee.
"CORPORATE TRUST OFFICE" means the office of the Trustee in
New York at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at 450 W.
33rd Street, New York, New York 10001.
"CORPORATION" means a corporation, association, company,
joint-stock company or business trust.
"COVENANT DEFEASANCE" has the meaning specified in SECTION
14.03.
"DEFAULTED INTEREST" has the meaning specified in SECTION
3.07.
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"DEFEASANCE" has the meaning specified in SECTION 14.02.
"DEPOSITORY" means, with respect to Securities of any series
issuable in whole or in part in the form of one or more Global Securities, a
clearing agency registered under the Exchange Act that is designated to act as
Depository for such Securities as contemplated by SECTION 3.01.
"EVENT OF DEFAULT" has the meaning specified in SECTION 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and
any statute successor thereto, in each case as amended from time to time.
"EXPIRATION DATE" has the meaning specified in SECTION 1.04.
"FIRST MORTGAGE" means the Mortgage and Deed of Trust between
Cleveland Electric and Guaranty Trust Company of New York (now The Chase
Manhattan Bank as successor trustee), as trustee, dated as of July 1, 1940, as
supplemented and amended from time to time, and including without limitation,
the Seventy-Sixth Supplemental Indenture thereto to be dated October 15 , 1997.
"FIRST MORTGAGE BONDS" mean any series of first mortgage bonds
issued by Cleveland Electric under the First Mortgage and delivered to the
Trustee pursuant to Section 4.01 hereof.
"GLOBAL SECURITY" means a Security that evidences all or part
of the Securities of any series and bears the legend described in SECTION 2.04
(or such legend as may be specified as contemplated by SECTION 3.01 for such
Securities), that is delivered to a Depository and that shall be registered in
the name of a Depository or nominee.
"HOLDER" means a Person in whose name a Security is registered
in the Security Register.
"INDENTURE" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the provisions hereof, including,
for all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by SECTION 3.01.
"INDEPENDENT," when applied to any accountant, appraiser, or
other expert, shall mean such a Person who is in fact independent, selected by
the Company and approved by the Trustee in the exercise of reasonable care.
"INTEREST," when used with respect to an Original Issue
Discount Security that by its terms bears interest only after Maturity, means
interest payable after Maturity.
"INTEREST PAYMENT DATE," when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended from time to
time.
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"MATURITY," when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
"MORTGAGE TRUSTEE" mean the Person serving as trustee at the
time under the First Mortgage.
"NOTICE OF DEFAULT" means a written notice of the kind
specified in SECTION 6.01(4).
"OFFICER'S CERTIFICATE" means a certificate signed by one of
the Chairman of the Board, the President, the Vice President, the Chief
Financial Officer, the Treasurer, the Controller, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. The officer of the
Company signing an Officer's Certificate given pursuant to SECTION 11.04 shall
be the principal executive, financial or accounting officer of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who
may be counsel for the Company or other counsel, who shall be reasonably
acceptable to the Trustee.
"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security that
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
SECTION 6.02.
"OUTSTANDING," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption funds in the
necessary amount have been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as Paying
Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(3) Securities as to which Defeasance has been effected
pursuant to SECTION 14.02; and
(4) Securities that have been replaced pursuant to SECTION
3.06 or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to SECTION 6.02, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security that shall
be deemed to be Outstanding shall be the
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<PAGE> 12
amount as specified or determined as contemplated by SECTION 3.01, (C) the
principal amount of a Security denominated in one or more foreign currencies or
currency units that shall be deemed to be Outstanding shall be the U.S. dollar
equivalent, determined as of such date in the manner provided as contemplated by
SECTION 3.01, of the principal amount of such Security (or, in the case of a
Security described in Clause (A) or (B) above, of the amount determined as
provided in such Clause), and (D) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities that the Trustee actually knows to be so owned shall be
so disregarded. Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"PAYING AGENT" means any Person authorized by the Company to
pay the principal of or any premium or interest on any Securities on behalf of
the Company.
"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PLACE OF PAYMENT," when used with respect to the Securities
of any series, means the place or places where the principal of and any premium
and interest on the Securities of that series are payable as specified as
contemplated by SECTION 3.01.
"PREDECESSOR SECURITY," of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under SECTION 3.06 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"REDEMPTION DATE," when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REGULAR RECORD DATE" means, unless otherwise specified
pursuant to SECTION 3.01, the fifteenth day of the calendar month immediately
preceding an Interest Payment Date.
"RESPONSIBLE OFFICER," when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any senior trust officer, any trust officer or
assistant trust officer, the controller or any assistant controller or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"SECURITIES" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
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"SECURITIES ACT" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to time.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the
respective meanings specified in SECTION 3.05.
"SPECIAL RECORD DATE" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to SECTION 3.07.
"STATED MATURITY," when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"SUBSIDIARY" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "VOTING STOCK" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "TRUST INDENTURE ACT" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"TRUSTEE" means the Person named as the "TRUSTEE" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the provisions of this Indenture, and thereafter "TRUSTEE" shall
mean or include each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, "TRUSTEE" as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.
"U.S. GOVERNMENT OBLIGATION" has the meaning specified in
SECTION 14.04.
"VICE PRESIDENT," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as are required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officer's Certificate, if to be given by officers of the Company, or an Opinion
of Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include,
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
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<PAGE> 14
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous. Any Opinion of Counsel delivered hereunder may contain
standard exceptions and qualifications reasonably satisfactory to the Trustee.
Any certificate or opinion of an officer of the Company, or of
counsel, may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of, or representations by, an independent public
accountant or firm of accountants, unless such officer or counsel, as the case
may be, knows that the certificate or opinions or representations with respect
to the accounting matters upon which the certificate or opinion of such officer
or counsel may be based are erroneous, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.04. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
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<PAGE> 15
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
All of the Holders of Outstanding Securities of each series
will give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture together
as one class and none of the Holders of Outstanding Securities of any such
series will have the right to act as a class separate from any other Holder
within the same series on any matter.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
The Company may set any day that is after the day on which the
record date is set as a record date for the purpose of determining the Holders
of Outstanding Securities of any series entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities of such series, provided that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of the relevant series
on such record date, and no other Holders, shall be entitled to take or revoke
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on such record date.
Nothing in this paragraph shall be construed to prevent the Company from setting
a new record date that is after the day on which the new record date is set for
any action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in SECTION 1.06.
The Trustee may set any day that is after the day on which the
record date is set as the record date for the purpose of determining the Holders
of Outstanding Securities of any series entitled to join in the giving or making
of (i) any Notice of Default, (ii) any declaration of acceleration referred to
in SECTION 6.02, (iii) any request to institute proceedings referred to in
SECTION 6.07(2) or (iv) any direction referred to in SECTION 6.12 or SECTION
6.13, in each case with respect to Securities of such series. If any record date
is set pursuant to this paragraph, the Holders of Outstanding Securities of such
series on such
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<PAGE> 16
record date, and no other Holders, shall be entitled to join in such notice,
declaration, request or direction or to revoke the same, whether or not such
Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new applicable record date
that is after the day on which the new record date is set for any action for
which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities of the relevant series on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the expense of the Company, shall cause notice of
such record date, the proposed action by Holders and the applicable Expiration
Date to be given to the Company in writing and to each Holder of Securities of
the relevant series in the manner set forth in SECTION 1.06.
With respect to any record date set pursuant to this Section,
the party hereto that sets such record date may designate any day after that
record date as the "EXPIRATION DATE" and from time to time may change the
Expiration Date to any earlier or later day that is after that record date;
provided that no such change shall be effective unless notice of the proposed
new Expiration Date is given to the other parties hereto in writing, and to each
Holder of Securities of the relevant series in the manner set forth in SECTION
1.06, prior to the earlier of the new Expiration Date and the existing
Expiration Date. If an Expiration Date is not designated with respect to any
record date set pursuant to this Section, the party hereto which set such record
date shall be deemed to have initially designated the 180th day after such
record date as the Expiration Date with respect thereto, subject to its right to
change the Expiration Date as provided in this paragraph. Notwithstanding the
foregoing, no Expiration Date shall be later than the 180th day after the
applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.05. NOTICES, ETC., TO THE TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at 450 W.
33rd Street, New York, New York 10001, Attention: Corporate
Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 1.06. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, registered mail,
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return receipt requested, to each Holder affected by such event, at his address
as it appears in the Security Register, not later than the latest date (if any),
and not earlier than the earliest date (if any), prescribed for the giving of
such notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act which is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act which may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
SECTION 1.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.09. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.11. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York, without regard to
conflicts of laws or principles thereof.
SECTION 1.13. LEGAL HOLIDAYS.
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In any case when any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of any Security that specifically states that
such provision shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next preceding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date or at the Stated Maturity.
SECTION 1.14. IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS.
No recourse for the payment of the principal of or any premium
or interest on any Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company, contained in this Indenture or in any supplemental
indenture, or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or any successor
corporation, either directly or through the Company or any successor
corporation(s), whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Securities.
ARTICLE II.
SECURITY FORMS
SECTION 2.01. FORMS GENERALLY.
The Securities of each series shall be in substantially such
form as shall be established by or pursuant to Board Resolutions or in one or
more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or Depository
therefor or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution thereof. If the form
of Securities of any series is established by action taken pursuant to Board
Resolutions, a copy of an appropriate record of such action shall be certified
by the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by SECTION
3.03 for the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
SECTION 2.02. RESERVED.
SECTION 2.03. RESERVED.
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SECTION 2.04. FORM OF LEGEND FOR GLOBAL SECURITIES.
Unless otherwise specified as contemplated by SECTION 3.01 for
the Securities evidenced thereby, every Global Security authenticated and
delivered hereunder shall bear a legend as shall be established in one or more
indentures supplemental hereto.
SECTION 2.05. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: THE CHASE MANHATTAN BANK,
As Trustee
By
-----------------------------
Authorized Signatory
ARTICLE III.
THE SECURITIES
SECTION 3.01. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is unlimited. Notwithstanding
the foregoing, the Company shall not issue any Securities, if, after giving
effect to such issuance, the aggregate principal amount of outstanding
Securities would exceed the aggregate principal amount of the outstanding First
Mortgage Bonds. The Securities may be issued in one or more series. There shall
be established by or pursuant to Board Resolutions and, subject to SECTION 3.03,
set forth or determined in the manner provided or established in one or more
indentures supplemental hereto, prior to the issuance of Securities of any
series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to SECTION 3.04, 3.05, 3.06, 10.06 or
12.07 and except for any Securities that, pursuant to SECTION 3.03, are
deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom interest on a Security of the series
shall be payable, if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest;
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(4) the date or dates on which the principal of any Securities
of the series is payable;
(5) the rate or rates at which any Securities of the series
shall bear interest, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which interest shall be payable,
the manner (if any) of determination of such Interest Payment Dates and
the Regular Record Date for such interest payable on any Interest
Payment Date;
(6) the right, if any, to extend the interest payment periods
and the duration of such extension;
(7) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(8) the period or periods within which, the price or prices at
which and the terms and conditions upon which any Securities of the
series may be redeemed, in whole or in part, at the option of the
Company and, if other than by Board Resolutions, the manner in which
any election by the Company to redeem the Securities shall be
evidenced;
(9) the obligation, if any, of the Company to redeem or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(10) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
(11) if the amount of principal of or any premium or interest
on any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
(12) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the series
shall be payable and the manner of determining the equivalent thereof
in the currency of the United States of America for any purpose,
including for purposes of the definition of "Outstanding" in SECTION
1.01;
(13) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to
be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be
determined);
(14) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the series which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to SECTION 6.02;
(15) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount
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which shall be deemed to be the principal amount of such
Securities as of any such date for any purpose thereunder or
hereunder, including the principal amount thereof which shall
be due and payable upon any Maturity other than the Stated
Maturity or which shall be deemed to be Outstanding as of any
date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount
shall be determined);
(16) if applicable, that the Securities of the series, in
whole or any specified part, shall be defeasible pursuant to SECTION
14.02 or SECTION 14.03 or both such Sections and, if other than by
Board Resolutions, the manner in which any election by the Company to
defease such Securities shall be evidenced;
(17) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositories for such
Global Securities, the form of any legend or legends which shall be
borne by any such Global Security in addition to or in lieu of that set
forth in SECTION 2.04 and any circumstances in addition to or in lieu
of those set forth in Clause (2) of the last paragraph of SECTION 3.05
in which any such Global Security may be exchanged in whole or in part
for Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the name or names of Persons
other than the Depository for such Global Security or a nominee
thereof;
(18) the designation of the series of First Mortgage Bonds to
be delivered to the Trustee in connection with the issuance of such
series of Securities pursuant to SECTION 4.01;
(19) any addition to or change in the Events of Default that
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to SECTION 6.02;
(20) any addition to or change in the covenants set forth in
ARTICLE XI that applies to Securities of the series; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by SECTION 10.01(5)).
All Securities of any one series shall be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to the Board Resolutions referred to above and (subject to SECTION
3.03) set forth, or determined in the manner provided in any such indenture
supplemental hereto.
If any of the terms of the series are established by action
taken pursuant to Board Resolutions, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order for the authentication and delivery of the series of Securities.
SECTION 3.02. DENOMINATIONS.
The Securities of each series shall be issuable only in fully
registered form without coupons and only in such denominations as shall be
specified as contemplated by SECTION 3.01. In the absence of any such specified
denomination with respect to the Securities of any series, the Securities of
such series shall be issuable in denominations of $1,000 and any integral
multiple thereof.
SECTION 3.03. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
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Unless otherwise provided as contemplated by SECTION 3.01 with
respect to any series of Securities, the Securities shall be executed on behalf
of the Company by its Chairman of the Board, its President or one of its Vice
Presidents. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and First
Mortgage Bonds conforming to the requirements of SECTIONS 4.01 and 4.02, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to SECTION 7.01) shall be
fully protected in relying upon, (1) First Mortgage Bonds meeting the
requirements of SECTION 4.02, and (2) an Opinion of Counsel stating,
(A) if the form of such Securities has been established by or
pursuant to Board Resolutions or in a supplemental indenture as
permitted by SECTION 2.01, that such form has been duly authorized by
the Company and established in conformity with the provisions of this
Indenture;
(B) if the terms of such Securities have been duly authorized
by the Company and established by or pursuant to Board Resolutions or
in a supplemental indenture as permitted by SECTION 3.01, that such
terms have been established in conformity with the provisions of this
Indenture;
(C) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will have been duly
issued under the Indenture and will constitute valid and legally
binding obligations of the Company, entitled to the benefits provided
by the Indenture, and enforceable in accordance with their terms,
subject to (a) bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles, (b) the necessity for compliance with the statutory
procedural rights governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers, procedures,
remedies, and other specified provisions of such Securities and this
Indenture may be unenforceable under or limited by the laws of the
State of Ohio;
(D) that the First Mortgage Bonds being delivered to the
Trustee in connection with the issuance of such series of Securities
have been duly authorized, executed, authenticated, issued, and
delivered by the Company, constitute valid and legally binding
obligations of the Company entitled to the benefits and security
provided by the First Mortgage, and enforceable in accordance with
their terms, subject to (a) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles, (b) the necessity for compliance with the statutory
procedural requirements governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers, procedures,
remedies, and other specified provisions of the First Mortgage Bonds
and the First Mortgage may be unenforceable under or limited by the law
of the State of Ohio or
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Commonwealth of Pennsylvania or the laws of the United States of
America; and that the First Mortgage Bonds are entitled to the
benefits provided by the First Mortgage, equally and ratably,
with all first mortgage bonds outstanding thereunder, except
as to sinking fund provisions; and
(E) that the execution and delivery of this Indenture and the
Securities by the Company and the execution and delivery of the First
Mortgage and any First Mortgage Bonds by Cleveland Electric have been
duly authorized by the Public Utilities Commission of the State of Ohio
(the "PUCO"), the PUCO had jurisdiction in the premises, and no further
approval, authorization, or consent of any other public board or body
is necessary to the validity of such execution and delivery of this
Indenture, the Securities, the First Mortgage, and the First Mortgage
Bonds, except as may be required under state securities or blue sky
laws, as to which laws such counsel shall not be required to express an
opinion.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
In the event that all of the Securities of a series are not
issued at one time, for each issuance of Securities after the original issuance
of Securities, the Company shall be required only to deliver to the Trustee (i)
the Securities, (ii) a written request to the Trustee to authenticate such
Securities and to deliver such Securities in accordance with the instructions
specified by such request and (iii) an Opinion of Counsel. Any such request
shall constitute a representation and warranty by the Company that the
Securities are being issued pursuant to the same Board Resolutions or
supplemental indenture as the original issuance of Securities of such series.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in SECTION 3.09, then such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 3.04. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any
series, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company
will cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of definitive Securities of such
series, the temporary Securities of such series shall be exchangeable for
definitive
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Securities of such series upon surrender of the temporary Securities
of such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities of any series, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
SECTION 3.05. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Company shall cause to be maintained in the Borough of
Manhattan, the City and State of New York a register (the register maintained in
such office or in any other office or agency of the Company in a Place of
Payment being herein sometimes referred to as the "SECURITY REGISTER") in which,
subject to such reasonable regulations as the Trustee may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Trustee is hereby appointed "SECURITY REGISTRAR" for the purpose of
registering Securities and transfers of Securities as herein provided. The
Security Register shall be in written form or in any other form capable of being
converted into written form within a reasonable time. At all reasonable times
such register shall be open for inspection by the Company.
Upon surrender for registration of transfer of any Security of
a series at the office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be
exchanged for other Securities of the same series, of any authorized
denominations and of like tenor and aggregate principal amount, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Securities that the Holder making
the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities.
If the Securities of any series (or of any series and
specified tenor) are to be redeemed, the Company shall not be required (A) to
issue, register the transfer of or exchange any Securities of that series (or of
that series and specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption and ending at the
close of business on the day of such mailing, or (B) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
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The provisions of Clauses (1), (2), (3) and (4) below shall
apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depository designated for such Global
Security or a nominee thereof and delivered to such Depository or a nominee
thereof or custodian therefor.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depository for such Global Security or a
nominee thereof unless (A) such Depository (i) has notified the Company that it
is unwilling or unable to continue as Depository for such Global Security or
(ii) has ceased to be a clearing agency registered under the Exchange Act, (B)
there shall have occurred and be continuing an Event of Default with respect to
such Global Security or (C) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this purpose
as contemplated by SECTION 3.01.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion thereof shall
be registered in such names as the Depository for such Global Security shall
direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global Security
or any portion thereof, whether pursuant to this Section, SECTION 3.04, 3.06,
10.06 or 12.07 or otherwise, shall be authenticated and delivered in the form
of, and shall be, a Global Security, unless such Security is registered in the
name of a Person other than the Depository for such Global Security or a nominee
thereof.
SECTION 3.06. MUTILATED, DESTROYED, LOST AND STOLEN
SECURITIES.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled
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to all the benefits of this Indenture equally and proportionately with any and
all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Except as otherwise provided as contemplated by SECTION 3.01
with respect to any series of Securities, interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest.
Any interest on any Security of any series which is payable,
but is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such Holder,
and such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each Security of such
series and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest that shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
given to each Holder of Securities of such series in the manner set forth in
SECTION 1.06, not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant to
this Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, that were carried by such other Security.
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SECTION 3.08. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and any
premium and (subject to SECTION 3.07) any interest on such Security and for all
other purposes whatsoever, whether or not such Security shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 3.09. CANCELLATION.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder that the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder that the Company has not issued and sold, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; provided, however, that the Trustee shall not be required to destroy such
canceled Securities.
SECTION 3.10. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by SECTION 3.01
for Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 3.11. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 3.12. PAYMENTS ON FIRST MORTGAGE BONDS MORTGAGE BONDS.
Subject to ARTICLE V and ARTICLE XIV hereof, all payments made
by the Company to the Trustee on First Mortgage Bonds shall be applied by the
Trustee to pay, when due, principal of, premium, if any, and interest on the
related series of Securities and, to the extent so applied, shall satisfy the
obligations of the Company on such Securities.
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ARTICLE IV.
FIRST MORTGAGE BONDS
SECTION 4.01. ACCEPTANCE OF FIRST MORTGAGE BONDS.
At or prior to the time of issuance of a series of Securities
hereunder, there shall have been delivered to the Trustee, and the Trustee shall
have accepted, for the benefit of the Holders of the Securities as described in
SECTION 4.03, First Mortgage Bonds of a series not theretofore delivered to the
Trustee, registered in the name of the Trustee and conforming to the
requirements of SECTION 4.02.
SECTION 4.02. TERMS OF FIRST MORTGAGE BONDS.
First Mortgage Bonds delivered to the Trustee pursuant to
SECTION 4.01 shall have the same rate or rates of interest (or interest
calculated in the same manner), interest payment dates, maturity and redemption
provisions, and shall be in the same aggregate principal amount, as the series
of Securities being issued.
SECTION 4.03. FIRST MORTGAGE BONDS AS SECURITY FOR
SECURITIES.
Subject to ARTICLE V and ARTICLE XIV hereof, First Mortgage
Bonds delivered to the Trustee pursuant to SECTION 4.01 for the benefit of the
Holders of Securities shall serve equally and ratably as security for any and
all obligations of the Company under such Securities, including, but not limited
to (1) the full and prompt payment of the principal and premium, if any, on such
Securities when and as the same shall become due and payable in accordance with
the terms and provisions of this Indenture or the Securities either at the
Stated Maturity thereof, upon acceleration of the maturity thereof or upon
redemption, and (2) the full and prompt payment of any interest on such
Securities when and as the same shall become due and payable in accordance with
the terms and provisions of this Indenture or the Securities.
SECTION 4.04. RESERVED.
SECTION 4.05. FIRST MORTGAGE BONDS HELD BY THE TRUSTEE.
The Trustee, as a Holder of First Mortgage Bonds, shall attend
any meeting of holders of First Mortgage Bonds under the First Mortgage as to
which it receives due notice, or, at its option, shall deliver its proxy in
connection therewith. Either at such meeting, or otherwise where consent of
holders of First Mortgage Bonds issued under the First Mortgage is sought
without a meeting, the Trustee shall vote all of such First Mortgage Bonds held
by it, or shall consent or withhold its consent with respect thereto, as
directed by the Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities; provided, however, that the Trustee shall
not vote as such holder of a particular series of First Mortgage Bonds in favor
of, or give its consent to, any action that, in the Trustee's opinion, would
materially adversely affect such series of First Mortgage Bonds in a manner not
shared generally by all other First Mortgage Bonds, except upon notification by
the Trustee to the Holders of the related series of Outstanding Securities of
such proposal and consent thereto of the holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of such series.
SECTION 4.06. NO TRANSFER OF FIRST MORTGAGE BONDS;
EXCEPTION.
Except as required to effect an assignment to a successor
trustee under this Indenture or pursuant to SECTION 4.07 or SECTION 4.09, the
Trustee shall not sell, assign or transfer the First Mortgage
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Bonds and the Company shall issue stop transfer instructions to the Mortgage
Trustee and any transfer agent under the First Mortgage to effect compliance
with this SECTION 4.06.
SECTION 4.07. DELIVERY TO THE COMPANY OF ALL FIRST MORTGAGE
BONDS.
When the obligation of the Company to make payment with
respect to the principal of and premium, if any, and interest on the First
Mortgage Bonds shall be satisfied or deemed satisfied pursuant to SECTION 5.01
or ARTICLE XIV, the Trustee shall, upon written request of the Company, deliver
to the Company without charge therefor all of the First Mortgage Bonds, together
with such appropriate instruments of transfer or release as may be reasonably
requested by the Company. All such First Mortgage Bonds delivered to the Company
in accordance with this SECTION 4.07 shall be delivered by the Company to the
Mortgage Trustee for cancellation.
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SECTION 4.08. FURTHER ASSURANCES.
The Company, at its own expense, shall do such further lawful
acts and things, and execute and deliver such additional conveyances,
assignments, assurances, agreements, financing statements and instruments, as
may be necessary in order to further assign, assure, perfect and confirm to the
Trustee its security interest in the First Mortgage Bonds and for maintaining,
protecting and preserving such security interest.
SECTION 4.09. EXCHANGE AND SURRENDER OF FIRST MORTGAGE
BONDS.
At any time upon receipt of a Company Order at the written
direction of the Company, the Trustee shall surrender to the Company all or part
of the First Mortgage Bonds in exchange for First Mortgage Bonds equal in
aggregate principal amount to, in different denominations than but of the same
series and with all other terms identical to, the First Mortgage Bonds so
surrendered to the Company. If at any time a Security shall cease to be entitled
to any lien, benefit or security under this Indenture pursuant to SECTION 5.01
or ARTICLE XIV, the Trustee shall surrender an equal principal amount of First
Mortgage Bonds of the related series to the Company for cancellation. If less
than all of the Securities of any series are redeemed pursuant to Article XII,
the Trustee shall surrender to the Company for cancellation, in a proportion set
forth in a Company Request, a principal amount of the First Mortgage Bonds equal
to the principal amount of the Securities so redeemed. The Trustee shall,
together with any such First Mortgage Bonds, deliver to the Company such
appropriate instruments of transfer or release as the Company may reasonably
request. Prior to the surrender required by this paragraph, the Trustee shall
receive from the Company, and (subject to SECTION 7.01) shall be fully protected
in relying upon, an Officer's Certificate stating (i) the aggregate Outstanding
principal amount of the First Mortgage Bonds of the series surrendered by the
Trustee, after giving effect to such surrender, (ii) the aggregate Outstanding
principal amount of the related series of Securities, (iii) that the surrender
of the First Mortgage Bonds will not result in any default under this Indenture,
and (iv) that any First Mortgage Bonds to be delivered in exchange for the First
Mortgage Bonds being surrendered comply with the provisions of this Section.
The Company shall not be permitted to cause the surrender or
exchange of all or any part of the First Mortgage Bonds contemplated in this
Section, if, after such surrender or exchange, the aggregate Outstanding
principal amount of the related series of Securities would exceed the aggregate
Outstanding principal amount of the First Mortgage Bonds held by the Trustee
relating to such series of Securities. Any First Mortgage Bonds received by the
Company pursuant to this SECTION 4.09 shall be delivered to the Mortgage Trustee
for cancellation.
ARTICLE V.
SATISFACTION AND DISCHARGE
SECTION 5.01. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
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(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in SECTION 3.06
and (ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in SECTION 11.03) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company, and the Company, in the
case of (i), (ii) or (iii) above, have deposited or caused to
be deposited with the Trustee as trust funds in trust for this
purpose funds in an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and
any premium and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under SECTION 7.07, the
obligations of the Company to any Authenticating Agent under SECTION 7.14 and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
Clause (1) of this Section, the obligations of the Trustee under SECTION 5.02
and the last paragraph of SECTION 11.03 shall survive.
If the Securities are deemed paid and discharged pursuant to
this SECTION 5.01 or defeased pursuant to ARTICLE XIV, the obligation of the
Company to make payment with respect to the principal of and premium, if any,
and interest on the First Mortgage Bonds shall be satisfied and discharged, as
provided in the supplemental trust indenture or indentures to the First Mortgage
creating such First Mortgage Bonds, and the First Mortgage Bonds shall cease to
secure the Securities in any manner.
If the Company shall have paid or caused to be paid the
principal of and premium, if any, and interest on any Security, as and when the
same shall have become due and payable or the Company shall have delivered to
the Trustee for cancellation any outstanding Security, such Security shall cease
to be entitled to any lien, benefit or security under this Indenture. Upon a
Security of any series ceasing to be entitled to any lien, benefit or security
under this Indenture, the obligation of the Company to make payment with respect
to principal of and premium, if any, and interest on a principal amount of the
First Mortgage Bonds equal to the principal amount of such Security shall be
satisfied and discharged and such
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portion of the principal amount of such First Mortgage Bonds shall cease to
secure the Securities in any manner.
SECTION 5.02. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of SECTION
11.03, all money deposited with the Trustee pursuant to SECTION 5.01 shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as the Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal and any premium
and interest for whose payment such money has been deposited with the Trustee.
SECTION 5.03. PAYING AGENT TO REPAY MONEYS HELD.
Upon the satisfaction and discharge of this Indenture all
moneys then held by any Paying Agent for the Securities (other than the Trustee)
shall, upon written demand by the Company, be repaid to the Company or paid to
the Trustee, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
SECTION 5.04. RETURN OF UNCLAIMED MONEYS.
Any moneys deposited with or paid to the Trustee for payment
of the principal of or any premium or interest on any Securities and not applied
but remaining unclaimed by the holders of such Securities for two years after
the date upon which the principal of or any premium or interest on such
Securities, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on written demand by the Company, and all
liability of the Trustee shall thereupon cease; and any holder of any such
Securities shall thereafter look only to the Company for any payment which such
holder may be entitled to collect.
ARTICLE VI.
REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein with respect to
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of or any premium
on any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
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(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of a majority in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "NOTICE OF DEFAULT" hereunder; or
(5) a Default (as defined in the First Mortgage) has occurred
and is continuing, and the Mortgage Trustee, Cleveland Electric or
Holders of at least 25% in principal amount of the outstanding
Securities shall have given written notice thereof to the Trustee; or
(6) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(8) any other Event of Default provided with respect to
Securities of that series.
SECTION 6.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default
specified in SECTION 6.01(6) or 6.01(7)) with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the Holders of a majority in principal amount of the Outstanding
Securities of that series may declare the principal amount of all the Securities
of that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in SECTION 6.01(6)
or
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6.01(7) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable. Upon such
Securities becoming immediately due and payable, by declaration or otherwise,
pursuant to any of the foregoing provisions of this SECTION 6.02, the Trustee
shall immediately file with the Mortgage Trustee a written demand for the
acceleration of the payment of principal of all First Mortgage Bonds relating to
such series of outstanding Securities pursuant to the provisions of the
supplemental indenture to the First Mortgage.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, and prior to the receipt by the Trustee
from the Mortgage Trustee of an irrevocable, valid and unconditional notice to
the Trustee of the acceleration of the payment of principal, by declaration or
otherwise, of all of the First Mortgage Bonds relating to such series of
Securities, the related Event of Default and its consequences (including, if
given, the written demand for the acceleration of the payment of principal of
all such First Mortgage Bonds) will be automatically waived, resulting in an
automatic rescission and annulment of the acceleration of the Securities if
(1) there shall have been paid to or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of that series that have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of Securities of that series
that have become due solely by such declaration of acceleration, have been cured
(including any Defaults (as defined in the First Mortgage) under the First
Mortgage, as evidenced by notice thereof received by the Trustee from the
Mortgage Trustee) or waived as provided in SECTION 6.13 or under the First
Mortgage.
No such rescission and annulment shall affect any subsequent default or impair
any right consequent thereon.
SECTION 6.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
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the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel other than through its negligence or bad
faith, and any other amounts due the Trustee under SECTION 7.07 hereof.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights (including any rights that the Trustee may have
as a holder of First Mortgage Bonds relating to the series of such Securities)
and the rights of the Holders of Securities of such series by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 6.04. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or
any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee (including any claims of
the Trustee as a holder of First Mortgage Bonds) allowed in any such proceeding.
In particular, the Trustee shall be authorized to collect and receive any moneys
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under SECTION 7.07.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and be a member of a
creditors' or other similar committee.
SECTION 6.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 6.06. APPLICATION OF MONEY COLLECTED.
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Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or any premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
SECTION 7.07;
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal and any
premium and interest, respectively; and
THIRD: To the payment of the balance, if any, to the Company
in the manner set forth in a Company Request or any other Person or
Persons legally entitled thereto.
SECTION 6.07. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than a majority in principal
amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 6.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and any premium and
(subject to SECTION 3.07) interest on such Security on the respective Stated
Maturities expressed in such
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Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 6.09. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.10. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of SECTION 3.06, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 6.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 6.12. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction,
(3) subject to the provisions of SECTION 7.01, the Trustee
shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of
the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability, and
(4) the Trustee shall have the right to decline to follow any
such direction if the Trustee in good faith shall so determine that the
actions or forebearances specified in or pursuant to such direction
would be unduly prejudicial to the interests of Holders of the
Securities of all series so affected not joining in the giving of said
direction, it being understood that the Trustee shall have
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no duty to ascertain whether or not such actions or forebearances
are unduly prejudicial to such Holders.
SECTION 6.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of
the Outstanding Securities of any series by notice to the Trustee may, on behalf
of the Holders of all the Securities of such series, waive any existing or past
default hereunder with respect to such series and its consequences (including by
way of consents obtained in connection with a tender offer or exchange for
Securities of such series), except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
ARTICLE X cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 6.14. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or the Trustee.
SECTION 6.15. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury, stay or
extension law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VII.
THE TRUSTEE
SECTION 7.01. CERTAIN DUTIES AND RESPONSIBILITIES.
Except during the continuance of a default, the duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act,
and no implied covenants or obligations shall be read into the Indenture against
the Trustee. The phrase "default (as such term is defined in such indenture)" as
it
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appears in SECTION 3.15 of the Trust Indenture Act shall mean an Event of
Default with respect to a series of Securities which shall have occurred and is
continuing. Notwithstanding the foregoing, no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not herein expressly so
provided, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
If default of which the Trustee has knowledge has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstance in the
conduct of his own affairs.
SECTION 7.02. NOTICE OF DEFAULTS.
If a default occurs hereunder with respect to Securities of
any series, the Trustee shall give the Holders of Securities of such series
notice of such default known to the Trustee within 90 days after it occurs;
provided, however, that in the case of any default of the character specified in
SECTION 6.01(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
Except in the case of an Event of Default in payment on any Security pursuant to
SECTION 6.01(1) or (2) hereof, the Trustee may withhold the notice if the
Trustee in good faith determines that withholding the notice is in the interest
of the Holders. For the purpose of this Section, the term "DEFAULT" means any
event which is, or after notice or lapse of time or both would become, an Event
of Default with respect to Securities of such series.
SECTION 7.03. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of SECTION 7.01:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolutions of the Board of Directors shall be sufficiently
evidenced by Board Resolutions;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of negligence or bad faith on its part, rely upon an
Officer's Certificate and/or an Opinion of Counsel;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this
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Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such
request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) except as otherwise provided in SECTION 6.01(4), the
Trustee shall not be charged with knowledge of any default or Event of
Default unless either (i) a Responsible Officer of the Trustee assigned
to the Corporate Trustee Administration of the Trustee (or any
successor division or department of the Trustee) shall have actual
knowledge of the default or Event of Default, or (ii) written notice of
such default or Event of Default shall have been given to the Trustee
by the Company, any other obligor on the Securities or by any Holder of
such Securities or, in the case of an Event of Default described in
SECTION 6.01(5), by the Mortgage Trustee under the First Mortgage or
Holders of at least 25% in principal amount of the Outstanding
Securities.
SECTION 7.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities or as to the
value, title or validity of any First Mortgage Bonds or other securities at any
time pledged or deposited with the Trustee hereunder or as to the security
offered thereby or hereby. Neither the Trustee nor any Authenticating Agent
shall be accountable for the use or application by the Company of Securities or
the proceeds thereof or of any moneys paid to the Company under any provision
hereof. The Trustee shall not be responsible for recording or filing this
Indenture, any indenture supplemental hereto or any financing or continuation
statement in any public office or elsewhere at any time or times.
SECTION 7.05. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in their individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
SECTIONS 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 7.06. MONEY HELD IN TRUST.
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Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 7.07. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such compensation
as shall be agreed to in writing between the Company and the Trustee
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities upon all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this SECTION 7.07, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
Without limiting any rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in SECTION 6.01(6) or SECTION
6.01(7), the expenses (including the reasonable charges and expenses of its
agents and counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Federal or State
bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 7.08. CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall eliminate such
conflict within 90 days, apply to the Commission for permission to continue as
Trustee or resign. To the extent permitted by such Act, the Trustee shall not be
deemed to have a conflicting interest by virtue of being a trustee under this
Indenture with respect to Securities of more than one series.
SECTION 7.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be one (and only one) Trustee
hereunder with respect to the Securities of each series, which may be Trustee
hereunder for Securities of one or more other series. Each Trustee shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at
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least annually, pursuant to law or to the requirements of its supervising or
examining authority, then for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
with respect to the Securities of any series shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
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SECTION 7.10. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
requirements of SECTION 7.11.
The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
SECTION 7.11 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
If at any time:
(1) the Trustee shall fail to comply with SECTION 7.08 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under SECTION 7.09
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(A) the Company by Board Resolutions may remove the Trustee with
respect to all Securities, or (B) subject to SECTION 6.14, any Holder
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with
respect to all Securities and the appointment of a successor Trustee or
Trustees.
If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by Board
Resolutions, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of SECTION 7.11. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the requirements of SECTION 7.11, become
the successor Trustee with respect to the Securities of such series and to that
extent supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
required by SECTION 7.11, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
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The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all Holders of Securities of such series in the manner provided in SECTION
1.06. Each notice shall include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
SECTION 7.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee, including right,
title and interest in the First Mortgage Bonds; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. The successor Trustee shall mail a
notice of its succession to the Holders of the Securities.
In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees as co-trustees of
the same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in the first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
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SECTION 7.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 7.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 7.14. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with
respect to one or more series of Securities which shall be authorized to act on
behalf of the Trustee to authenticate Securities of such series issued upon
exchange, registration of transfer or partial redemption thereof or pursuant to
SECTION 3.06, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall
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cease to be eligible in accordance with the provisions of this Section, the
Trustee may appoint a successor Authenticating Agent that shall be acceptable to
the Company and shall give notice of such appointment in the manner provided in
SECTION 1.06 to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: THE CHASE MANHATTAN BANK,
As Trustee
By
Authenticating Agent
By
Authorized Officer
ARTICLE VIII.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 8.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES
OF HOLDERS.
The Company will furnish or cause to be furnished to the
Trustee
(1) within fifteen days after each Regular Record Date, a
list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of Securities of each series as of such
Regular Record Date, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
provided, however, the Company may exclude from any such list names and
addresses received by the Trustee in its capacity as Security Registrar.
SECTION 8.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS.
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The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in SECTION 8.01 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
SECTION 8.01 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 8.03. REPORTS BY TRUSTEE.
The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto. If required by Section 3.13(a) of the Trust Indenture Act, the Trustee
shall, within sixty days after each May 15 following the date of this Indenture
deliver to Holders a brief report, dated as of such May 15, which complies with
the provisions of such Section 3.13(a).
A copy of each such report shall, at the time of such
transmission to Holders be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
SECTION 8.04. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission,
and transmit to Holders such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE IX.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 9.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
(1) Except for a consolidation or merger of Cleveland Electric
and The Toledo Edison Company ("Toledo Edison") pursuant to Clause (2) hereof,
the Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and the Company shall not permit any Person to consolidate with or merge
into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
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(a) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership, unincorporated organization or trust, shall
be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and (a) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due
and punctual payment of the principal of and any premium and interest
on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed
or observed and (b) shall expressly assume, by an indenture
supplemental to the First Mortgage, executed and delivered to the
Trustee and the Mortgage Trustee, in form satisfactory to the Trustee
and the Mortgage Trustee, the due and punctual payment of the principal
of and any premium and interest on the First Mortgage Bonds then held
by the Trustee pursuant to ARTICLE IV, and the performance of every
covenant of the First Mortgage on the part of the Company to be
performed or observed;
(b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing; and
(c) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
(2) Cleveland Electric and Toledo Edison may consolidate with
or merge into each other, or convey, transfer or lease its properties and assets
substantially as an entirety one to the other, upon the satisfaction or waiver
of any conditions set forth in the First Mortgage with respect to such
consolidation, merger, conveyance, transfer or lease.
SECTION 9.02. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with SECTION 9.01, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of any conveyance, transfer or lease of less than all of the properties
or assets of the Company, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
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ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may amend or supplement this Indenture or the Securities for any of the
following purposes:
(1) to cure any ambiguity, defect or inconsistency; or
(2) to provide for uncertificated Securities in addition to or
in place of certificated Securities; or
(3) to evidence the succession of another Person to the
Company in accordance with this Indenture and the assumption by any
such successor of the covenants of the Company herein and in the
Securities; or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change or elimination (A) shall neither (i)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (ii) modify the rights of the Holder of any such Security
with respect to such provision or (B) shall become effective only when
there is no such Security Outstanding; or
(6) to make any change that would provide any additional
rights or benefits to the Holders of the Securities or that does not
adversely affect the legal rights of any Holder; or
(7) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act or to evidence or provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of SECTION 7.11; or
(8) to secure the Securities; or
(9) to establish the form or terms of Securities of any series
as permitted by SECTIONS 2.01 and 3.01.
SECTION 10.02. WITH CONSENT OF HOLDERS.
With the consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Securities
of each such
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series), by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by Board Resolutions, and the Trustee may (a) amend or
supplement the Indenture or the Securities or (b) subject to SECTION 6.13
hereof, waive compliance with any provision of this Indenture or the Securities;
provided, however, that, without the consent of the Holder of each Outstanding
Security affected thereby, no such amendment, supplement or waiver shall (with
respect to any Securities held by a non-consenting Holder),
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to SECTION 6.02, or change any Place of
Payment where, or the coin or currency in which, any Security or any
premium or interest thereon is payable, or impair the interest
hereunder of the Trustee in the First Mortgage Bonds, or impair the
right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), impair the interest hereunder of the
Trustee in the First Mortgage Bonds, reduce the principal amount of
First Mortgage Bonds to an amount less than the principal amount of the
related series of Securities or alter the payment provisions of such
First Mortgage Bonds in a manner adverse to the Holders of the
Securities, or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, SECTION 6.13
or SECTION 11.06, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived (with respect to any Securities held by a non-consenting Holder)
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
SECTION 11.06, or the deletion of this proviso, in accordance with the
requirements of SECTIONS 7.11 and 10.01(7).
An amendment or supplement which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed amendment or supplement,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 10.03. EXECUTION OF AMENDMENTS OR SUPPLEMENTS.
In executing, or accepting the additional trusts created by,
any amendment or supplement permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to SECTION 7.01) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such amendment or
supplement is authorized or permitted by this
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Indenture. The Trustee may, but shall not be obligated to, enter into any such
amendment or supplement which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 10.04. EFFECT OF AMENDMENTS OR SUPPLEMENTS.
Upon the execution of any amendment or supplement under this
Article, this Indenture shall be modified in accordance therewith, and such
amendment or supplement shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 10.05. CONFORMITY WITH TRUST INDENTURE ACT.
Every amendment or supplement executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act.
SECTION 10.06. REFERENCE IN SECURITIES TO AMENDMENTS OR
SUPPLEMENTS.
Securities of any series authenticated and delivered after the
execution of any amendment or supplement pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such amendment or supplement. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such amendment or supplement may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE XI.
COVENANTS
SECTION 11.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of each
series of Securities that it will duly and punctually pay the principal of and
any premium and interest on the Securities of that series in accordance with the
terms of the Securities and this Indenture.
SECTION 11.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of
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Payment for Securities of any series for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 11.03. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN
TRUST.
If the Company shall at any time act as Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for
any series of Securities, it will, prior to each due date of the principal of or
any premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will (1) comply with the
provisions of the Trust Indenture Act applicable to it as a Paying Agent and (2)
during the continuance of any default by the Company (or any other obligor upon
the Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee to the Paying
Agent, forthwith pay to the Trustee all sums held in trust by such Paying Agent
for payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same terms as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or any
premium or interest on any Security of any series and remaining unclaimed for
two years after such principal, premium or interest has become due and payable
shall be paid to the Company on Company Request and in the manner set forth in
the Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
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SECTION 11.04. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officer's Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 11.05. RECORDING, FILING, ETC.; OPINIONS OF COUNSEL.
The Company will cause this Indenture, any Indentures
supplemental to this Indenture, and any financing or continuation statements to
be promptly recorded and filed and rerecorded and refiled in such a manner and
in such places as may be required by law in order fully to preserve, protect and
perfect the security of the Holders and all rights of the Trustee, and shall
deliver to the Trustee:
(a) upon the execution and delivery of this Indenture and of
any indenture supplemental to this Indenture, an Opinion of Counsel
either stating that, in the opinion of such counsel, this Indenture or
such supplemental indenture and any financing or continuation
statements have been properly recorded and filed so as to make
effective and to perfect the security interest of the Trustee intended
to be created by this Indenture for the benefit of the Holders from
time to time in the First Mortgage Bonds, and reciting the details of
such action, or stating that, in the opinion of such counsel, no such
action is necessary to perfect or make such security interest effective
and stating what, if any, action of the foregoing character may
reasonably be expected to become necessary prior to October 15, 2002 to
maintain, perfect and make such security interest effective; and
(b) on October 1, 2002, and on every fifth anniversary
thereof, an Opinion of Counsel either stating that in the opinion of
such counsel such action has been taken, since the date of the most
recent Opinion of Counsel furnished pursuant to this SECTION 11.05(B)
or the first Opinion of Counsel furnished pursuant to SECTION 11.05(A),
with respect to the recording, filing, rerecording, or refiling of this
Indenture, each supplemental indenture and any financing or
continuation statements, as is necessary to maintain and perfect the
security interest of the Trustee intended to be created by this
Indenture for the benefit of the Holders from time to time of the
Securities in the First Mortgage Bonds, and reciting the details of
such action, or stating that in the opinion of such counsel no such
action is necessary to maintain and perfect such security interest and
stating what, if any, action of the foregoing character may reasonably
be expected to become necessary prior to the next succeeding fifth
anniversary to maintain, perfect and make such security interest
effective.
SECTION 11.06. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by SECTION 3.01
for Securities of such series, the Company may, with respect to the Securities
of any series, omit in any particular instance to comply with any term,
provision or condition set forth in any covenant provided pursuant to this
ARTICLE 11 (except for the covenants set forth in SECTIONS 11.01 through 11.03
hereof) for the benefit of the Holders of such series if before the time for
such compliance the Holders of a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
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SECTION 11.07. CALCULATION OF ORIGINAL ISSUE DISCOUNT.
If applicable, the Company shall file with the Trustee
promptly at the end of each calendar year a written notice specifying the amount
of original issue discount (including daily rates and accrual periods) accrued
on Outstanding Securities as of the end of such year.
ARTICLE XII.
REDEMPTION OF SECURITIES
SECTION 12.01. APPLICABILITY OF ARTICLE.
Securities of any series which are redeemable before their
Stated Maturity shall be redeemable in accordance with their terms and (except
as otherwise specified as contemplated by SECTION 3.01 for such Securities) in
accordance with this Article.
SECTION 12.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by Board Resolutions or in another manner specified as contemplated by
SECTION 3.01 for such Securities. In case of any redemption at the election of
the Company, the Company shall, at least 45 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed, of the Redemption Price of the
Securities to be redeemed and, if applicable, of the tenor of the Securities to
be redeemed. In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or (b) pursuant to an election of the
Company that is subject to a condition specified in the terms of such Securities
or elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officer's Certificate evidencing compliance with such restriction or condition.
SECTION 12.03. SELECTION BY TRUSTEE OF SECURITIES TO BE
REDEEMED.
If less than all the Securities of any series are to be
redeemed (unless all the Securities of such series and of a specified tenor are
to be redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 30 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and that may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 30 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
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The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 12.04. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall identity the Securities to be
redeemed (including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
and of a specified tenor consisting of more than a single Security are
to be redeemed, the identification (and, in the case of partial
redemption of any such Securities, the principal amounts) of the
particular Securities to be redeemed and, if less than all the
Outstanding Securities of any series and of a specified tenor
consisting of a single Security are to be redeemed, the principal
amount of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
If at the time of the mailing of any notice of redemption the
Company shall not have irrevocably directed the Trustee to apply funds deposited
with the Trustee or held by it and available to be used for the redemption of
Notes to redeem the Notes called for redemption, such notice shall state that it
is subject to the receipt of the redemption moneys by the Trustee before the
date fixed for redemption and that such notice shall be of no effect unless such
moneys are so received before such date. Any notice which is given in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the Holder receives the notice. In any case, failure duly to give such
notice, or any defect in notice, to the Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
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SECTION 12.05. SECURITIES PAYABLE ON REDEMPTION DATE; DEPOSIT
OF REDEMPTION PRICE.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified; provided that the Company
shall have deposited with the Trustee or with a Paying Agent on or prior to such
Redemption Date an amount sufficient to pay the Redemption Price, together with
accrued interest to the Redemption Date. Interest on the Securities or portions
thereof so called for redemption shall cease to bear interest from and after the
Redemption Date. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that, unless otherwise specified as contemplated by SECTION
3.01, installments of interest whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of SECTION
3.07.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, or if the Company shall not have
deposited with the Trustee or a Paying Agent on or prior to the Redemption Date
an amount sufficient to pay the Redemption Price of all Securities called for
redemption, together with the interest accrued to the Redemption Date, the
notice of redemption shall be ineffective and the principal and any premium
shall continue to bear interest from the Redemption Date at the rate prescribed
therefor in the Security as if the notice of redemption had not been given.
SECTION 12.06. RESERVED.
SECTION 12.07. SECURITIES REDEEMED IN PART.
Any Security that is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so require, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities of the same series and of
like tenor, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
ARTICLE XIII.
SINKING FUNDS
SECTION 13.01. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of any series except as otherwise
specified as contemplated by SECTION 3.01 for such Securities.
The minimum amount of any sinking fund payment provided for by
the terms of any Securities is herein referred to as a "MANDATORY SINKING FUND
PAYMENT", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "OPTIONAL SINKING FUND
PAYMENT". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in SECTION 13.02.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
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SECTION 13.02. SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES.
The Company (1) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 13.03. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 30 days prior to each sinking fund payment date
for any Securities, the Company will deliver to the Trustee an Officer's
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, that is to be satisfied by payment of cash and the portion thereof, if
any, that is to be satisfied by delivering and crediting Securities pursuant to
SECTION 13.02 and stating the basis for such credit and that such Securities
have not been previously so credited and will also deliver to the Trustee any
Securities to be so delivered. Not less than 15 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in SECTION 12.03 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in SECTION 12.04. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in SECTIONS 12.05 and 12.07.
ARTICLE XIV.
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 14.01. OPTION OF THE COMPANY TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE.
The Company may elect, at its option at any time, to have
SECTION 14.02 or SECTION 14.03 applied to any Securities or any series of
Securities, as the case may be, designated pursuant to SECTION 3.01 as being
defeasible pursuant to such SECTION 14.02 or 14.03, in accordance with any
applicable requirements provided pursuant to SECTION 3.01 and upon compliance
with the conditions set forth below in this Article. Any such election shall be
evidenced by Board Resolutions or in another manner specified as contemplated by
SECTION 3.01 for such Securities.
SECTION 14.02. DEFEASANCE AND DISCHARGE.
Upon the exercise of the option (if any) of the Company to
have this Section applied to any Securities or any series of Securities, as the
case may be, the Company shall be deemed to have been discharged from their
obligations with respect to such Securities as provided in this Section on and
after the date the conditions set forth in SECTION 14.04 are satisfied
(hereinafter called "Defeasance") and the obligation of the Company to make
payment with respect to the principal of and premium, if any, and interest on
the First Mortgage Bonds shall be satisfied and discharged, as provided in the
supplemental trust
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indenture or indentures to the First Mortgage creating such First Mortgage Bonds
and the First Mortgage Bonds shall cease to secure the Securities in any manner.
For this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Securities and
to have satisfied all their other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in SECTION 14.04 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when payments are due, (2) the
obligations of the Company with respect to such Securities under SECTIONS 3.04,
3.05, 3.06, 11.02 and 11.03 and with respect to the Trustee under SECTION 7.07,
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder,
and (4) this Article. Subject to compliance with this Article, the Company may
exercise its option (if any) to have this Section applied to any Securities
notwithstanding the prior exercise of its option (if any) to have SECTION 14.03
applied to such Securities.
SECTION 14.03. COVENANT DEFEASANCE.
Upon the exercise of the option (if any) of the Company to
have this Section applied to any Securities or any series of Securities, as the
case may be, (1) the Company shall be released from any covenants provided
pursuant to SECTIONS 11.04 through 11.07 for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in SECTION 6.01(4)
(with respect to any such covenants provided pursuant to SECTIONS 11.04 through
11.07 shall be deemed not to be or result in an Event of Default with respect to
such Securities as provided in this Section on and after the date the conditions
set forth in SECTION 14.04 are satisfied (hereinafter called "COVENANT
DEFEASANCE"). For this purpose, such Covenant Defeasance means that, with
respect to such Securities, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such specified Section (to the extent so specified in the case of SECTION
6.01(4)), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby. In addition, upon the
Company's exercise under SECTION 14.01 hereof of the option applicable to this
SECTION 14.03, subject to the satisfaction of the conditions set forth in
SECTION 14.04 hereof, SECTIONS 6.01(1) through 6.01(5) and SECTION 6.01(8)
hereof shall not constitute Events of Default.
SECTION 14.04. CONDITIONS TO DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to the application of
SECTION 14.02 or SECTION 14.03 to any Securities or any series of Securities, as
the case may be:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms [and
without reinvestment thereof], will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof, in
each case sufficient, in a report from a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and that shall be applied by the
Trustee to pay and discharge, the principal of and any premium and interest on
such Securities on the respective Stated Maturities or on any Redemption Date
established pursuant to Clause (9) below, in accordance with the terms of this
Indenture and such Securities. As used herein, "U.S. GOVERNMENT OBLIGATION"
means (x) any security which is (i) a direct obligation of the United States of
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<PAGE> 59
America for the payment of which the full faith and credit of the United States
of America is pledged or (ii) an obligation of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i) or (ii),
is not callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation
which is specified in Clause (x) above and held by such bank for the account of
the holder of such depositary receipt, or with respect to any specific payment
of principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt, and (z) any certificates or other
evidences of ownership interest in obligations of the character described in
either case (i) or (ii) or in specified portions thereof, including without
limitation, portions consisting solely of the interest thereon provided that
such obligations are held in a bank or trust company acceptable to the Trustee
in a special account separate from the assets of such custodian.
(2) In the event of an election to have SECTION 14.02 apply to
any Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this instrument, there has been a
change in the Federal income tax law, in either case (A) or (B) to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for Federal income tax purposes as a
result of the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit,
Defeasance and discharge were not to occur.
(3) In the event of an election to have SECTION 14.03 apply to
any Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Securities will not recognize gain or loss for Federal income
tax purposes as a result of the deposit and Covenant Defeasance to be effected
with respect to such Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the case if
such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities exchange, will
be delisted as a result of such deposit.
(5) No event that is, or after notice or lapse of time or both
would become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such deposit
(other than an Event of Default resulting from the borrowing of funds to be
applied to such deposit which will be cured upon such Defeasance or Covenant
Defeasance) or, with regard to any such event specified in SECTIONS 6.01(6) and
(7), at any time on or prior to the 90th day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until after
such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Securities are in default within the meaning of such Act).
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<PAGE> 60
(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be registered
under such Act or exempt from registration thereunder.
(9) If the Securities are to be redeemed prior to Stated
Maturity (other than from mandatory sinking fund payments or analogous payments)
notice of such redemption shall have been duly given pursuant to this Indenture
or provision therefor satisfactory to the Trustee shall have been made.
(10) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant Defeasance have
been complied with.
SECTION 14.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST; MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of SECTION
11.03, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to SECTION 14.04 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Securities,
of all sums due and to become due thereon in respect of principal and any
premium and interest, but money so held in trust need not be segregated from
other funds except to the extent required by law.
Any moneys held by the Trustee in accordance with the
provision of this Article shall be invested by the Trustee only in U.S.
Government Obligations having maturity dates, which, at the option of the holder
of those obligations, shall be not later than the date or dates at which moneys
will be required for the purposes described above. Unless otherwise directed by
the Company, the Trustee shall not be obligated to invest U.S. Government
Obligations deposited with the Trustee in accordance with the provisions of this
Article.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to SECTION 14.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request and in the manner set forth in the Company Request any money or U.S.
Government Obligations (including any income or interest earned by, or increment
to, the investments held under this Section) held by it as provided in SECTION
14.04 with respect to any Securities that, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to such Securities.
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<PAGE> 61
SECTION 14.06. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article with respect to any Securities by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the obligations
under this Indenture and such Securities from which the Company has been
discharged or released pursuant to SECTION 14.02 or 14.03 shall be revived and
reinstated as though no deposit had occurred pursuant to this Article with
respect to such Securities, until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust pursuant to SECTION 14.05 with
respect to such Securities in accordance with this Article; provided, however,
that if the Company makes any payment of principal of or any premium or interest
on any such Security following such reinstatement of its obligations, the
Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE CHASE MANHATTAN BANK, as Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-55-
<PAGE> 1
Exhibit 4 (c)
================================================================================
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
-----------------------------------
$150,000,000 7.43% SERIES C SECURED NOTES DUE 2009
$300,000,000 7.88% SERIES C SECURED NOTES DUE 2017
$150,000,000 7.43% SERIES D SECURED NOTES DUE 2009
$300,000,000 7.88% SERIES D SECURED NOTES DUE 2017
-----------------------------------
FIRST SUPPLEMENTAL INDENTURE
DATED OCTOBER 24, 1997
-----------------------------------
THE CHASE MANHATTAN BANK
Trustee
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated October 24, 1997, between THE
CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation duly organized and
existing under the laws of the State of Ohio (herein called "Cleveland Electric"
or the "Company"), having its principal office at 6200 Oak Tree Boulevard,
Independence, Ohio 44131, and THE CHASE MANHATTAN BANK, a New York banking
corporation, as Trustee (herein called the "Trustee") under the Indenture dated
as of October 24, 1997 between the Company and the Trustee (the "Indenture").
RECITALS OF THE COMPANY
The Company has executed and delivered the Indenture to the Trustee to
provide for the issuance from time to time of its securities (the "Securities"),
said Securities to be issued in one or more series as in the Indenture provided.
Unless otherwise defined in Article III hereof, capitalized terms used herein
shall have the meaning ascribed to such terms in the Indenture.
Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of four new series of its Securities to be known as its
7.43% Series C Secured Notes Due 2009 (herein called the "Initial 2009 Notes")
and 7.88% Series C Secured Notes Due 2017 (herein called the "Initial 2017
Notes" and, together with the Initial 2009 Notes, the "Initial Notes") and, if
and when issued pursuant to a Registered Exchange Offer, 7.43% Series D Secured
Notes Due 2009 (herein called the "Exchange 2009 Notes") and 7.88% Series D
Secured Notes Due 2017 (herein called the "Exchange 2017 Notes" and, together
with the Exchange 2009 Notes, the "Exchange Notes" and, together with the
Initial Notes, the "Notes"), the form and substance of such Notes and the terms,
provisions, and conditions thereof to be set forth as provided in the Indenture
and this First Supplemental Indenture.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company, and to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee, the valid obligations of the
Company, have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, and for the purpose of setting forth, as provided in the
Indenture, the form and substance of the Notes and the terms, provisions, and
conditions thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Notes, as follows:
1
<PAGE> 3
ARTICLE I.
GENERAL TERMS AND CONDITIONS OF THE NOTES
SECTION 1.01 ESTABLISHMENT OF NOTES.
(a) INITIAL NOTES. There shall be and are hereby
authorized two series of Securities as follows:
<TABLE>
<CAPTION>
Designation Principal Amount
----------- ----------------
<S> <C>
7.43% Series C Secured Notes due 2009 $150,000,000
7.88% Series C Secured Notes due 2017 $300,000,000
</TABLE>
The Initial Notes shall mature and the principal thereof shall be due and
payable together with all accrued and unpaid interest thereon on the following
dates:
<TABLE>
<CAPTION>
Series Maturity Date
------ -------------
<S> <C>
Initial 2009 Notes November 1, 2009
Initial 2017 Notes November 1, 2017
</TABLE>
The Initial Notes are being offered and sold by the Company pursuant to the
Placement Agreement and shall be issued in the form of registered Initial Notes
without interest coupons. Principal of, and premium, if any, and interest on the
Initial Notes will be payable, the transfer of Initial Notes will be registrable
and Initial Notes will be exchangeable for Exchange Notes bearing identical
terms and provisions (except with respect to transfer restrictions), at the
office or agency of the Company in the Borough of Manhattan, The City and State
of New York; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the registered holder at such address
as shall appear in the Security Register.
(b) EXCHANGE NOTES. There shall be and are hereby authorized
two series of Securities as follows:
<TABLE>
<CAPTION>
Designation Principal Amount
----------- ----------------
<S> <C>
7.43% Series D Secured Notes due 2009 $150,000,000
7.88% Series D Secured Notes due 2017 $300,000,000
</TABLE>
The Exchange Notes are issuable only in exchange for the Initial Notes in the
Registered Exchange Offer, as described in the Registration Agreement. The
Exchange Notes shall mature and the principal shall be due and payable together
with all accrued and unpaid interest thereon on the following dates:
<TABLE>
<CAPTION>
Series Maturity Date
------ -------------
<S> <C> <C>
Exchange 2009 Notes November 1, 2009
Exchange 2017 Notes November 1, 2017
</TABLE>
2
<PAGE> 4
SECTION 1.02 FORM OF INITIAL NOTES, GLOBAL NOTES AND DEFINITIVE
NOTES.
(a) FORM OF INITIAL NOTES. The Initial Notes shall be
substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this First Supplemental
Indenture.
(b) GLOBAL NOTES.
(i) Initial Notes offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A"),
as provided in the Placement Agreement, shall be issued
initially in the form of one or more permanent global
securities in definitive, fully registered form without
interest coupons with the global notes legend and the
restricted notes legend set forth in Exhibit A hereto (each, a
"Restricted Global Note"), which shall be deposited on behalf
of the Purchasers with the Trustee, at its New York office, as
Securities Custodian, and registered in the name of the
Depository or a nominee of the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of each Restricted
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the
Depository or its nominee, as the case may be, as hereinafter
provided.
(ii) Initial Notes offered and sold in reliance on
Regulation S under the Securities Act ("Regulation S"), as
provided in the Placement Agreement, shall be issued initially
in the form of one or more permanent global securities in
definitive, fully registered form without interest coupons
with the global notes legend and the restricted notes legend
set forth in Exhibit A hereto (each, a "Regulation S Global
Note" and, together with the Restricted Global Notes, the
"Global Notes"), which shall be deposited on behalf of the
Purchasers with the Trustee, at its New York office, as
Securities Custodian, and registered in the name of the
Depository or a nominee of the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter
provided. Prior to the 40th day after the Closing Date,
beneficial interests in the Regulation S Global Note may only
be held for the accounts of designated agents holding on
behalf of the Euroclear System ("Euroclear") or Cedel Bank
("Cedel"). Following the 40th day after the Closing Date,
beneficial interests in the Regulation S Global Note may be
held through Euroclear, Cedel or other participants having
accounts at the Depository. The aggregate principal amount of
each Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of
the Trustee and the Depository or its nominee, as the case may
be, as hereinafter provided.
(iii) Members of, or participants in, the Depository
("Agent Members") shall have no rights under this First
Supplemental Indenture or the Indenture with respect to any
Global Note held on their behalf by the Depository or by the
Trustee as the Securities Custodian or under such Global Note,
and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depository or impair,
as between the Depository and its Agent Members, the operation
of
3
<PAGE> 5
customary practices of such Depository governing the exercise
of the rights of a holder of a beneficial interest in any
Global Note.
(iv) The provisions of the "Operating Procedures of
the Euroclear System" and "Terms and Conditions Governing Use
of Euroclear" and the "Management Regulations" and
"Instructions to Participants" of Cedel shall be applicable to
interests in the Regulations S Global Notes that are held by
Agent Members through Euroclear or Cedel. The Trustee shall
have no obligation to notify Holders of any such procedures or
to monitor or enforce compliance with the same.
(c) DEFINITIVE NOTES. Except as provided in this Section 1.02
or Article II, owners of beneficial interests in Global Notes will not
be entitled to receive physical delivery of Initial Notes. Purchasers
of Initial Notes who are Institutional Accredited Investors and are not
QIBs and did not purchase Initial Notes sold in reliance on Regulation
S will receive Definitive Notes; provided, however, that upon transfer
of such Definitive Notes to a QIB or in accordance with Regulation S,
such Definitive Notes will, unless the relevant Global Note has
previously been exchanged, be exchanged for an interest in a Global
Note pursuant to the provisions of Article II.
SECTION 1.03 INTEREST ON THE INITIAL NOTES.
(a) THE INITIAL 2009 NOTES. Each Initial 2009 Note will bear
interest at the rate of 7.43% per annum from October 24, 1997 until the
principal thereof is paid or duly provided for, and on any overdue
principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of
interest at the same rate per annum, payable on May 1 and November 1 of
each year, commencing on May 1, 1998 to the Person in whose name such
Initial 2009 Note or any predecessor Initial Note is registered, at the
close of business on the April 15 or October 15 next preceding such
interest payment date; provided, however, that the interest payable at
maturity will be payable to the Person to whom principal shall be
payable. Interest on each Initial 2009 Note will cease to accrue upon
the exchange of such Note for an Exchange 2009 Note, and if the record
date for the interest payment date next following that exchange occurs
after that exchange, the accrued and unpaid interest on that Initial
2009 Note will be payable to the Person in whose name such Exchange
2009 Note is registered on that record date. Each Initial 2009 Note
will bear Additional Interest as and to the extent required under and
in accordance with Section 1.03(e) hereof.
(b) THE INITIAL 2017 NOTES. Each Initial 2017 Note will bear
interest at the rate of 7.88% per annum from October 24, 1997 until the
principal thereof is paid or duly provided for, and on any overdue
principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of
interest at the same rate per annum, payable on May 1 and November 1 of
each year, commencing on May 1, 1998 to the Person in whose name such
Initial 2017 Note or any predecessor Initial Note is registered, at the
close of business on the April 15 or October 15 next preceding such
interest payment date; provided, however, that the interest payable at
maturity will be payable to the Person to whom principal shall be
payable. Interest on each Initial 2017 Note will cease to accrue upon
the exchange of such Note for an Exchange 2017 Note, and if the record
date for the interest payment date next following that exchange occurs
after that exchange, the accrued and unpaid interest on that Initial
2017 Note will be payable to the Person in whose name such Exchange
2017 Note is registered on that record date. Each Initial
4
<PAGE> 6
2017 Note will bear Additional Interest as and to the extent required
under and in accordance with Section 1.03(e) hereof.
(c) DEFAULTED INTEREST ON THE INITIAL NOTES. Any interest
installment on the Initial Notes not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holders on
the Regular Record Date, and may be paid to the Person in whose name
the Initial Note (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such defaulted interest, notice of which
shall be given to the registered holders of the Initial Notes not less
than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Initial Notes may be listed,
and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture.
(d) CALCULATION OF INTEREST ON THE INITIAL NOTES. The amount
of interest or Additional Interest payable for any period on the
Initial Notes will be computed on the basis of a 360 day year of twelve
30-day months. In the event that any date on which interest or
Additional Interest is payable on the Initial Notes is not a Business
Day, then payment of interest or Additional Interest payable on such
date will be made on the next preceding day that is a Business Day.
(e) ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES.
(i) Additional interest (the "Additional Interest")
with respect to the Initial Notes will accrue as follows if
any of the following events occurs (each event identified in
clause (A), (B) or (C) below, a "Failure to Register"):
(A) If by the 150th day after the date of the original
issue of the Initial Notes (that date of issue, the
"Closing Date"), neither the Exchange Offer
Registration Statement nor a Shelf Registration
Statement has been filed with the Commission;
(B) If by the 180th day after the Closing Date, the
Registered Exchange Offer is not consummated and, if
required in lieu thereof, the Shelf Registration
Statement is not declared effective by the Commission;
or
(C) If, after the 180th day after the Closing Date,
and after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is
declared effective, (1) that Registration Statement
thereafter ceases to be effective prior to completion
of the Exchange Offer or the sale of all the Transfer
Restricted Notes registered pursuant to the Shelf
Registration Statement, as the case may be; or (2)
that Registration Statement or the related prospectus
ceases to be usable in connection with resales of
Transfer Restricted Notes during the periods specified
in the Registration Agreement (except as permitted in
paragraph (ii) of this paragraph (e)) because either
(x) any event occurs as a result of which the related
prospectus forming part of that Registration Statement
would include any untrue statement of a material fact
or omit to state any material fact necessary to make
the statements therein in the light of the
circumstances under which they were made not
misleading, or (y) it shall be necessary to amend that
Registration Statement, or
5
<PAGE> 7
supplement the related prospectus, to comply with the
Securities Act or the Exchange Act or the respective
rules thereunder.
Additional Interest shall accrue on the Initial Notes of each
series over and above the interest set forth in the title of the
Initial Notes of that series from and including the date on which any
such Failure to Register shall occur to but excluding the date on which
all such Failures to Register have been cured, at a rate of 0.50% per
annum.
(ii) A Failure to Register referred to in Section
1.03(e)(i)(C) is deemed not to be continuing in relation to a
Registration Statement or the related prospectus if (A) that
Failure to Register has occurred solely as a result of (x) the
filing of a post-effective amendment to that Registration
Statement to incorporate annual audited financial information
with respect to the Company, when such post-effective
amendment is not yet effective and needs to be declared
effective to permit Holders to use the related prospectus or
(y) the occurrence of other material events or developments
with respect to the Company or its Affiliates that would need
to be described in that Registration Statement or the related
prospectus, and (B) in the case of clause (y), the Company is
proceeding promptly and in good faith to amend or supplement
that Registration Statement and related prospectus to describe
those events or, in the case of material developments that the
Company determines in good faith must remain confidential for
business reasons, the Company is proceeding promptly and in
good faith to take such steps as are necessary so that those
developments need no longer remain confidential, but in any
case, if any Failure to Register (including any referred to in
clause (x) or (y), above) continues for a period in excess of
45 days, Additional Interest will be payable in accordance
with the above paragraph from the day following the last day
of that 45-day period until the date on which that Failure to
Register is cured.
(iii) Any Additional Interest payable will be payable
on the regular interest payment dates with respect to the
Initial Notes, in the same manner as the manner in which
regular interest is payable. The amount of Additional Interest
for any period will be determined by multiplying the
applicable Additional Interest rate by the principal amount of
the applicable Initial Notes, multiplied by a fraction, the
numerator of which is the number of days that Additional
Interest rate was applicable during that period (determined on
the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
(iv) For all purposes of the Indenture, this First
Supplemental Indenture and the Initial Notes, the Trustee is
permitted to assume for all purposes that Additional Interest
is not due in respect of an Initial Note until such time as
the Company shall deliver an Officer's Certificate to the
Trustee stating that Additional Interest is due in respect of
one or more series of Initial Notes (such Officer's
Certificate to also state the date on which Additional
Interest began to accrue). Upon receipt of such an Officer's
Certificate, the Trustee is permitted to assume for all
purposes that Additional Interest shall be due as set forth in
such Officer's Certificate until such time as such Officer's
Certificate shall be superseded by a subsequent Officer's
Certificate pursuant to this Section 1.03 stating that
Additional Interest is no longer due in respect of the Initial
Notes (such Officer's Certificate to also state the date on
which Additional Interest ceased to accrue). Absent receipt by
it of
6
<PAGE> 8
an Officer's Certificate specifying that Additional Interest
has begun accruing or an Officer's Certificate that Additional
Interest is no longer accruing, the Trustee shall not be
charged with knowledge of such matters unless a Responsible
Officer of the Trustee assigned to the Corporate Trustee
Administration of the Trustee (or any successor division or
department of the Trustee) shall have actual knowledge that a
Failure to Register has occurred and is continuing, or has
been cured, as applicable.
SECTION 1.04 THE EXCHANGE NOTES. The Exchange Notes shall be
substantially in the form of, and contain the terms and provisions set forth in,
Exhibit B hereto, which is hereby incorporated in and expressly made a part of
this First Supplemental Indenture. The Trustee shall authenticate and deliver
Exchange Notes of any series for issue only in a Registered Exchange Offer
pursuant to the Registration Agreement, for a like principal amount of Initial
Notes of the series bearing interest at the same rate, in each case pursuant to
a Company Order. Such Company Order shall specify the series and the amount of
the Exchange Notes to be authenticated and the date on which the original issue
of such Exchange Notes is to be authenticated. Prior to authenticating and
delivering Exchange Notes pursuant to this Section 1.04, the Trustee may request
that the Company deliver an Officer's Certificate and/or an Opinion of Counsel
stating that the Exchange Notes are being issued pursuant to an effective
registration statement in accordance with the Registration Agreement. Except as
provided in the Indenture, the aggregate principal amount of Notes outstanding
at any time may not exceed (x) $150,000,000 with respect to the Initial 2009
Notes and the Exchange 2009 Notes and (y) $300,000,000 with respect to the
Initial 2017 Notes and the Exchange 2017 Notes. If an Exchange Note is
authenticated and delivered in exchange for an Initial Note between a record
date for the payment of interest on that Initial Note and the related interest
payment date, the interest that accrues on such Exchange Note from the date of
authentication thereof to that interest payment date shall be payable to the
Person in whose name such Exchange Note was issued on its issuance date.
SECTION 1.05 INTEREST ON THE EXCHANGE NOTES.
(a) THE EXCHANGE 2009 NOTES. Each Exchange 2009 Note will bear
interest at the rate of 7.43% per annum from its date of authentication
until the principal thereof is paid or duly provided for, and on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of
interest at the same rate per annum, payable on May 1 and November 1 of
each year, commencing on May 1, 1998 to the Person in whose name such
Exchange 2009 Note or any predecessor Exchange Note is registered, at
the close of business on the April 15 or October 15 next preceding such
interest payment date; provided, however, that the interest payable at
maturity will be payable to the Person to whom principal shall be
payable.
(b) THE EXCHANGE 2017 NOTES. Each Exchange 2017 Note will bear
interest at the rate of 7.88% per annum from its date of authentication
until the principal thereof is paid or duly provided for, and on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of
interest at the same rate per annum, payable on May 1 and November 1 of
each year, commencing on May 1, 1998 to the Person in whose name such
Exchange 2017 Note or any predecessor Exchange Note is registered, at
the close of business on the April 15 or October 15 next preceding such
interest payment date; provided, however, that the interest payable at
maturity will be payable to the Person to whom principal shall be
payable.
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(c) DEFAULTED INTEREST ON THE EXCHANGE NOTES. Any interest
installment on the Exchange Notes not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holders on
the Regular Record Date, and may be paid to the Person in whose name
the Exchange Note (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such defaulted interest, notice of which
shall be given to the registered holders of the Exchange Notes not less
than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Exchange Notes may be listed,
and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture.
(d) CALCULATION OF INTEREST ON THE EXCHANGE NOTES. The amount
of interest payable for any period on the Exchange Notes will be
computed on the basis of a 360 day year of twelve 30-day months. In the
event that any date on which interest is payable on the Exchange Notes
is not a Business Day, then payment of interest payable on such date
will be made on the next preceding day that is a Business Day.
SECTION 1.06 FIRST MORTGAGE BONDS.
(a) The Company hereby delivers to the Trustee, for the
benefit of the holders of the Notes, First Mortgage Bonds, which shall
serve equally and ratably as security for any and all obligations of
the Company under the Notes, including, but not limited to, the payment
of principal and interest on such Notes when and as the same shall
become due and payable. The First Mortgage Bonds so delivered consist
of $150,000,000 principal amount of First Mortgage Bonds, 7.43% Series
Due 2009-D, and $300,000,000 principal amount of First Mortgage Bonds,
7.88% Series Due 2017-B. The aggregate principal amount of the First
Mortgage Bonds being delivered hereunder is subject to reduction in
accordance with the terms of the First Mortgage.
(b) The Trustee acknowledges receipt of and accepts the First
Mortgage Bonds in the aggregate principal amount of $450,000,000, for
the benefit of the holders of the Notes, as security for any and all
obligations of the Company under the Notes, including, but not limited
to, the payment of principal and interest on the Notes when and as the
same shall become due and payable.
SECTION 1.07 OPTIONAL REDEMPTION. (a) At its option, the Company may,
from time to time, redeem all or any part of the Notes, upon notice as provided
in the Indenture at a redemption price equal to, the greater of (i) 100% of
their principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield plus twenty-five (25) basis points, plus in
each case accrued interest to the date of redemption.
(b) For purposes of this Section 1.07, the following terms
shall have the meanings set forth below:
"Treasury Yield" means, with respect to any redemption date,
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 redemption date.
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"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the applicable Notes 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 the applicable Notes. "Independent Investment Banker" means
Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to
select the Comparable Treasury Issue, another independent banking institution of
national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any
redemption 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 redemption 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, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if fewer than four such Reference Treasury Dealer Quotations are obtained,
the average of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average 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 by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc., and First Chicago Capital Markets, Inc., and their respective
successors; provided, however, that if any of the foregoing 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.
The Trustee shall be under no duty to inquire into, may conclusively
presume the correctness of, and shall be fully protected in acting upon the
Company's calculation of any redemption price.
(c) For purposes of this Section 1.07: (i) the related series
of First Mortgage Bonds for the Notes Due 2009 is the Company's First
Mortgage Bonds, 7.43% Series Due 2009-D, and (ii) the related series of
First Mortgage Bonds for the Notes Due 2017 is the Company's First
Mortgage Bonds, 7.88% Series Due 2017-B.
(d) When the obligation of the Company to make payments with
respect to the principal of, and premium, if any, and interest on all
or any part of the Note shall be satisfied or deemed satisfied pursuant
to the Indenture or pursuant to Section 1.07 of this First Supplemental
Indenture, the Trustee shall, upon written request of the Company,
deliver to the Company without charge therefor all of the related
Series of First Mortgage Bonds so satisfied or deemed satisfied,
together with such appropriate instruments of transfer or release as
may be reasonably requested by the Company. All First Mortgage Bonds
delivered to the Company in accordance with this Section 1.07(d) shall
be delivered by the Company to the Mortgage Trustee for cancellation.
SECTION 1.08 DEFEASANCE. The Notes shall be defeasible pursuant to
Section 14.02 and Section 14.03 of the Indenture.
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SECTION 1.09 PAYING AGENT. The Chase Manhattan Bank will be the Paying
Agent for the Notes. The Depository Trust Company will be the Depository for the
Notes.
ARTICLE II.
TRANSFER AND EXCHANGE OF NOTES
SECTION 2.01 TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive
Notes are presented to the Security Registrar with a request to register the
transfer of such Definitive Notes or to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Security 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 Notes surrendered for transfer or exchange:
(a) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(b) are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act pursuant to
Section 2.02, or pursuant to clause (i), (ii) or (iii) below, and are
accompanied by the following additional information and documents, as
applicable:
(i) if such Definitive Notes are being delivered to
the Security Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from
such Holder to that effect (in the form set forth on the
reverse of the Note); or
(ii) if such Definitive Notes are being transferred
to the Company, a certification to that effect (in the form
set forth on the reverse of the Note); or
(iii) if such Definitive Notes are being transferred
(x) pursuant to an exemption from registration in accordance
with Rule 144, (y) in reliance on another exemption from the
registration requirements of the Securities Act or (z) to an
Institutional Accredited Investor that is acquiring the Note
for its own account, or for the account of such an
Institutional Accredited Investor, in each case 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: (A) a certification to that effect (in the
form set forth on the reverse of the Note) and (B) in the case
of clause (y), an Opinion of Counsel from such Holder or the
transferee reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act
and (C) in the case of clause (z), if the aggregate principal
amount of such Definitive Notes being transferred is less than
$100,000, an opinion of counsel addressed to the Company as to
the compliance with the restrictions set forth in the legend
set forth in Exhibit A hereto.
SECTION 2.02 RESTRICTIONS ON TRANSFER OF A DEFINITIVE NOTE FOR A
BENEFICIAL INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged for
a beneficial interest in a Global Note except upon
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satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with:
(a) certification, in the form set forth on the reverse of the
Note, that such Definitive Note is being transferred (A) to a QIB in
accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(b) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to the Restricted Global Note or the Regulation S
Global Note, as the case may be, to reflect an increase in the
aggregate principal amount of the Notes represented by such Global
Note, such instructions to contain information regarding the Depository
account (or in the case of the Regulation S Global Note only, the
Euroclear or Cedel account) to be credited with such increase,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian
(including the rules of Euroclear and Cedel, if applicable), the aggregate
principal amount of Notes represented by the Restricted Global Note or the
Regulation S Global Note, as the case may be, to be increased by the principal
amount of the Definitive Note to be exchanged and shall credit or cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in such Global Note equal to the principal amount of the
Definitive Note so canceled. If no Global Notes are then outstanding, the
Company shall issue and the Trustee shall authenticate, pursuant to a Company
Order, a new Restricted Global Note or Regulation S Global Note, as the case may
be, in the appropriate principal amount.
SECTION 2.03 TRANSFER AND EXCHANGE OF GLOBAL NOTES AND BENEFICIAL
INTERESTS THEREIN.
(a) The transfer and exchange of Global Notes or beneficial
interests therein shall be effected through the Depository in
accordance with this First Supplemental Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor, including the rules and procedures of
Euroclear and Cedel, if applicable. A transferor of a beneficial
interest in a Global Note shall deliver to the Security Registrar a
written order given in accordance with the Depository's procedures
containing information regarding the Euroclear, Cedel or other
participant account of the Depository to be credited with a beneficial
interest in the Global Note. The Security Registrar shall, in
accordance with such instructions instruct the Depository to credit to
the account of the Person specified in such instructions a beneficial
interest in the Global Note and to debit the account of the Person
making the transfer the beneficial interest in the Global Note being
transferred.
Transfers of beneficial interests in the Global Notes to
Persons required to take delivery in the form of an interest in another
Global Note shall be permitted as follows:
(i) Restricted Global Note to Regulation S
Global Note. If, at any time, an owner of a beneficial
interest in a Restricted Global Note deposited with the
Depository (or the Trustee as custodian for the Depository)
wishes to transfer its beneficial
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interest in such Restricted Global Note to a Person who is
required or permitted to take delivery thereof in the form of
an interest in a Regulation S Global Note, such owner shall,
subject to the Depository's procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in a Regulation S Global Note as provided in this
Section 2.03(a)(i). Upon receipt by the Trustee of (1)
instructions given in accordance with the Depository's
procedures from an Agent Member directing the Trustee to
credit or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the beneficial
interest in the Restricted Global Note to be exchanged, (2) a
written order given in accordance with the Depository's
procedures containing information regarding the Agent Member
account of the Depository and the Euroclear or Cedel account
to be credited with such increase, and (3) a certificate given
by the owner of such beneficial interest stating that the
transfer of such interest has been made in compliance with the
transfer restriction applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S, then the Security Registrar shall instruct the
Depository to reduce or cause to be reduced the aggregate
principal amount at maturity of the applicable Restricted
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Regulation S Global Note by the principal amount at maturity
of the beneficial interest in the Restricted Global Note to be
exchanged or transferred, to credit or cause to be credited to
the account of the Person specified in such instructions, a
beneficial interest in the Regulation S Global Note equal to
the reduction in the aggregate principal amount at maturity of
the Restricted Global Note, and to debit, or cause to be
debited, from the account of the Person making such exchange
or transfer the beneficial interest in the Restricted Note
that is being exchanged or transferred.
(ii) Regulation S Global Note to Restricted
Global Note. If, at any time, after the expiration of the
40-day restricted period (as defined in Regulation S), an
owner of a beneficial interest in a Regulation S Global Note
deposited with the Depository or with the Trustee as custodian
for the Depository wishes to transfer its beneficial interest
in such Regulation S Global Note to a Person who is required
or permitted to take delivery thereof in the form of an
interest in a Restricted Global Note, such owner shall,
subject to the Depository's procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest of a Restricted Global Note as provided in this
Section 2.03(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel, if applicable, and the
Depository, directing the Security Registrar to credit or
cause to be credited a beneficial interest in the Restricted
Global Note equal to the beneficial interest in the Regulation
S Global Note to be exchanged, such instructions to contain
information regarding the Agent Member account with the
Depository to be credited with such increase, (2) a written
order given in accordance with the Depository's procedures
containing information regarding the participant account of
the Depository and (3) a certificate given by the owner of
such beneficial interest stating (A) if the transfer is
pursuant to Rule 144A, that the Person transferring such
interest in a Regulation S Global Note reasonably believes
that the Person acquiring such interest in the Regulation S
Global Note is a QIB and is obtaining such beneficial interest
in a transaction meeting the requirement of Rule 144A and any
applicable blue sky or securities laws of any state of the
United States, (B) that the transfer complies with the
requirements of Rule 144 under the Securities Act, or (C) if
the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the
transfer of such interest has been made in compliance with the
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transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the requirements of the
exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in
form reasonably acceptable to the Company and to the Security
Registrar and in each case, in accordance with any applicable
securities laws of any state of the United States or any other
applicable jurisdiction, then the Security Registrar shall
instruct the Depository to reduce or cause to be reduced the
aggregate principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Restricted Global Note by the principal amount at maturity of
the beneficial interest in the Regulation S Global Note to be
exchanged or transferred, and the Security Registrar shall
instruct the Depository, concurrently with such reduction, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
applicable Restricted Global Note equal to the reduction in
the aggregate principal amount at maturity of such Regulation
S Global Note and to debit or cause to be debited from the
account of the Person making such transfer the beneficial
interest in the Regulation S Global Note that is being
exchanged or transferred.
(b) Notwithstanding any other provisions of this First
Supplemental Indenture (other than the provisions set forth in Section
2.09), a Global Note may not be transferred as a whole except by the
Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by
the Depository or any such nominee to a successor Depository or a
nominee of such successor Depository.
(c) The Company shall advise the Trustee as to the
commencement of the Registered Exchange Offer or the effectiveness of
the Shelf Registration Statement and the Trustee may rely conclusively
thereon.
(d) In the event that a Global Note is exchanged for Notes in
definitive registered form pursuant to this First Supplemental
Indenture or Section 3.05 of the Indenture, prior to the consummation
of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Notes, such Notes may be
exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.03 (including the
certification requirements set forth on the reverse of the Initial
Notes intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be) and such other procedures as may from
time to time be adopted by the Company.
SECTION 2.04 TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A
DEFINITIVE NOTE.
(a) Subject to Section 2.03(b), any Person having a beneficial
interest in a Transfer Restricted Note that is a Global Note may
transfer such beneficial interest to an Institutional Accredited
Investor that is acquiring the Note for its own account, or for the
account of such an Institutional Accredited Investor, in each case 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;
provided, however, that any written order or such other form of
instructions as is customary for the Depository, from the Depository or
its nominee on behalf of any Person having a beneficial interest in
such Global Note shall be accompanied by (i) a certification from the
transferee or transferor with respect to the transfer (in the form set
forth on the reverse of the Note) and such other
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certifications as the Trustee may reasonably request and (ii) if the
aggregate principal amount of the applicable Global Note being
transferred is less than $100,000, an opinion of counsel addressed to
the Company as to the compliance with the restrictions set forth in the
legend described in Section 2.05(a). Upon receipt by the Trustee of
such information and documents, the Trustee or the Securities
Custodian, at the direction of the Trustee, will cause, in accordance
with the standing instructions and procedures existing between the
Depository and the Securities Custodian, including the rules and
procedures of Euroclear or Cedel, if applicable, the aggregate
principal amount of the applicable Global Note to be reduced on its
books and records and, following such reduction, the Company will
execute and the Trustee will authenticate and deliver to the transferee
a Definitive Note.
(b) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.04 shall be
registered in such names and in such authorized denominations as
Euroclear or Cedel, if applicable, and the Depository, pursuant to
instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Definitive
Notes to the Persons in whose names such Notes are so registered in
accordance with the instructions of the Depository.
SECTION 2.05 LEGENDS.
(a) Except as permitted by the following paragraphs (b), (c)
and (d), each Note certificate evidencing the Global Notes and the
Definitive Notes (and all Notes issued in exchange or in substitution
therefor) shall bear the restricted notes legend set forth in Exhibit A
hereto ("Restricted Notes Legend").
(b) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note)
pursuant to Rule 144 under the Securities Act:
(i) in the case of any Transfer Restricted Note that
is a Definitive Note, the Security Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a certificated
Note that does not bear the Restricted Notes Legend and rescind any
restriction on the transfer of such Transfer Restricted Note; and
(ii) in the case of any Transfer Restricted Note that
is represented by a Global Note, the Security Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Note for a
certificated Note that does not bear the Restricted Notes Legend and
rescind any restriction on the transfer of such Transfer Restricted
Note, if the Holder certifies in writing to the Security Registrar that
its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Note).
(c) After a transfer of any Initial Notes under and in the
manner described in a Shelf Registration Statement with respect to such
Initial Notes, all requirements pertaining to legends on such Initial
Note will cease to apply, the requirements requiring any such Initial
Note issued to certain Holders to be issued in global form will cease
to apply, and a certificated Initial Note without legends will be
available to the transferee of the Holder of such Initial Notes upon
exchange of such transferring Holder's certificated Initial Note or
directions to transfer such Holder's interest in the Global Note, as
applicable.
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(d) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Notes pursuant to which Holders of such Initial
Notes are offered Exchange Notes in exchange for their Initial Notes,
all requirements pertaining to such Initial Notes that Initial Notes
issued to certain Holders be issued in global form will cease to apply
and certificated Initial Notes with the Restricted Notes Legend set
forth in Exhibit A hereto will be available to Holders of such Initial
Notes that do not exchange their Initial Notes, and Exchange Notes in
certificated or global form will be available to Holders that exchange
such Initial Notes in such Registered Exchange Offer.
SECTION 2.06 CANCELLATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as
all beneficial interests in a Global Note have either been exchanged for
certificated Notes, redeemed, repurchased or canceled, such Global Note shall be
returned to the Depository for cancellation or retained and canceled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in a
Global Note is exchanged for certificated Notes, redeemed, repurchased or
canceled, the principal amount of Notes represented by such Global Note shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Note) with respect to
such Global Note, by the Trustee or the Securities Custodian, to reflect such
reduction.
SECTION 2.07 OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
NOTES.
(a) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Notes and Global Notes at the Security Registrar's request.
(b) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith.
(c) Prior to the due presentation for registration of transfer
of any Note, the Company, the Trustee, the Paying Agent or the Security
Registrar may deem and treat the Person in whose name a Note is
registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all
other purposes whatsoever, whether or not such Note is overdue, and
none of the Company, the Trustee, the Paying Agent or the Security
Registrar shall be affected by notice to the contrary.
(d) All Notes issued upon any transfer or exchange pursuant to
the terms of this First Supplemental Indenture and the Indenture shall
evidence the same debt and shall be entitled to the same benefits under
this First Supplemental Indenture and the Indenture as the Notes
surrendered upon such transfer or exchange.
SECTION 2.08 NO OBLIGATION OF THE TRUSTEE.
(a) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Note, a member of, or a participant in
the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or
member thereof, with respect to any ownership interest in the Notes or
with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount,
under or with respect to such Notes. All
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notices and communications to be given to the Holders and all payments
to be made to Holders under the Notes shall be given or made only to or
upon the order of the registered Holders (which shall be the Depository
or its nominee in the case of a Global Note). The rights of beneficial
owners in any Global Note shall be exercised only through the
Depository subject to the applicable rules and procedures of the
Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to
its members, participants and any beneficial owners.
(b) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this First Supplemental Indenture or the Indenture or
under applicable law with respect to any transfer of any interest in
any Note (including any transfers between or among Depository
participants, members or beneficial owners in any Global Note) 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 First Supplemental Indenture
or the Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 2.09 ISSUANCE OF DEFINITIVE NOTES.
(a) A Global Note deposited with the Depository or with the
Securities Custodian pursuant to Section 1.02 shall be transferred to
the beneficial owners thereof in the form of Definitive Notes in an
aggregate principal amount equal to the principal amount of such Global
Note, in exchange for such Global Note, only if such transfer complies
with Section 2.03 and (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for such Global Note
or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, (ii) an Event
of Default has occurred and is continuing or (iii) the Company, in its
sole discretion, notifies the Trustee in writing that it elects to
cause the issuance of Definitive Notes under this First Supplemental
Indenture.
(b) Any Global Note that is transferable to the beneficial
owners thereof pursuant to this Section 2.09 shall be surrendered by
the Depository to the Trustee located in New York, New York, to be so
transferred, in whole or from time to time in part, without charge, and
the Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Note, an equal aggregate principal amount of
Definitive Notes of authorized denominations. Any portion of a Global
Note transferred pursuant to this Section 2.09 shall be executed,
authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the
Depository shall direct. Any Definitive Note delivered in exchange for
an interest in the Global Note shall, except as otherwise provided by
Section 2.05, bear the restricted notes legend set forth in Exhibit A
hereto.
(c) Subject to the provisions of this Section 2.09, the
registered Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action that a Holder is
entitled to take under this First Supplemental Indenture or the
Indenture or the Notes.
16
<PAGE> 18
(d) In the event of the occurrence of any of the events
specified in Section 2.09(a), the Company will promptly make available
to the Trustee a reasonable supply of Definitive Notes in definitive,
fully registered form without interest coupons.
ARTICLE III.
DEFINITIONS
SECTION 3.01 DEFINITIONS. For the purposes of this First Supplemental
Indenture the following terms shall have the meanings indicated below:
"Definitive Note" means a certificated Initial Note which may be held
by an Institutional Accredited Investor in accordance with Section 1.02(c).
"Depository" means The Depository Trust Company, New York, New York,
its nominees and their respective successors.
"Exchange Notes" has the meaning set forth in the second paragraph
under "RECITALS OF THE COMPANY."
"Exchange Offer Registration Statement" has the meaning set forth in
Section 1 of the Registration Agreement.
"Institutional Accredited Investor" means an institutional "accredited
investor" as described in Rule 501(a) (1), (2), (3) or (7) under the Securities
Act.
"Paying Agent" means The Chase Manhattan Bank.
"Placement Agreement" means the Placement Agreement dated October 16,
1997 between the Company and the Purchasers.
"Purchasers" means Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc., First Chicago
Capital Markets, Inc., McDonald & Company Securities, Inc., and TD Securities
(USA) Inc.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant to
the Registration Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in exchange for the Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.
"Registration Agreement" means the Registration Agreement dated October
24, 1997 between the Company and the Purchasers.
"Registration Statement" means each of the Exchange Offer Registration
Statement and the Shelf Registration Statement.
17
<PAGE> 19
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Note (as appointed by the Depository), or any successor Person thereto and shall
initially be the Trustee.
"Shelf Registration Statement" means any registration statement filed
by the Company in connection with the offer and sale of Initial Notes pursuant
to the Registration Agreement.
"Transfer Restricted Notes" means each Definitive Note and each Note
that bears or is required to bear the legend described in Section 2.05 until (i)
the date on which that Note has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer; (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on
which that Exchange Note is sold to a purchaser who receives from that
broker-dealer on or prior to the date of that sale a copy of the prospectus
contained in the Exchange Offer Registration Statement; (iii) the date on which
that Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement; or (iv) the date on
which that Note is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
ARTICLE IV.
SUNDRY PROVISIONS
SECTION 4.01 TERMS. Except as otherwise expressly provided in this
First Supplemental Indenture or in the forms of Notes or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said
forms of Notes that are defined in the Indenture shall have the several meanings
respectively assigned to them thereby.
SECTION 4.02 INDENTURE. This First Supplemental Indenture shall be
deemed part of the Indenture in the manner and to the extent herein and therein
provided.
SECTION 4.03 TRUSTEE. The Trustee hereby accepts the trusts herein
declared, provided, created, supplemented, or amended and agrees to perform the
same upon the terms and conditions herein and in the Indenture, as heretofore
and hereafter supplemented and amended, set forth and upon the following terms
and conditions: the Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this First Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely. In general, each and every term and
condition contained in Article VII of the Indenture shall apply to and form part
of this First Supplemental Indenture with the same force and effect as if the
same were herein set forth in full. If there is a conflict in the terms of the
Indenture and this First Supplemental Indenture that affects the Trustee's
rights and obligations, then the terms of the Indenture shall govern.
SECTION 4.04 COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
18
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
THE CHASE MANHATTAN BANK, as Trustee
By:
-----------------------------------
Name:
-----------------------------------
Title:
----------------------------------
S-1
<PAGE> 21
[FORM OF FACE OF INITIAL NOTE]
[___% Series C Secured Note Due ____]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
No............... $ .............
CUSIP No.
--------------
The Cleveland Electric Illuminating Company hereby promises to pay to ,
or registered assigns, the principal sum of.......................Dollars
on .......................
Interest Payment Dates: May 1 and November 1, commencing May 1, 1998.
Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note
attached hereto which further provisions shall for all purposes have the same
effect as if set forth in this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer.
Dated:
--------------------------------
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
By:
-----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:
-------------------------------
Name:
Title:
Date of Authentication:
-----------
<PAGE> 22
EXHIBIT A
[FORM OF REVERSE SIDE OF INITIAL NOTE]
[___% Series C Secured Note Due ____]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT, IF IT IS A
PURCHASER OTHER THAN A FOREIGN PURCHASER OUTSIDE THE UNITED STATES, IT WILL NOT,
WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN
EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE CLEVELAND ELECTRIC ILLUMINATING COMPANY ("COMPANY"), (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER
A-2
<PAGE> 23
EXHIBIT A
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE SIDE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE 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. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Cleveland Electric Illuminating Company, a corporation
duly organized and existing under the laws of the State of Ohio ("CLEVELAND
ELECTRIC" or the "COMPANY", which term includes any successor Person under the
Indenture hereinafter referred to), hereby promises to pay interest on the
principal amount of this Note and Additional Interest, if any. The Company will
pay interest from the later of October 24, 1997 or the most recent Interest
Payment Date to which interest has been paid or duly provided for, semiannually
on May 1 and November 1 in each year, commencing May 1, 1998, at the rate of
___% per annum, until the principal and premium, if any, hereof is paid or made
available for payment and will pay Additional Interest, if any. The interest and
any Additional Interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15 or October 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest or Additional Interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice of
which shall be given to Holders of Notes of this series not less than 10 days
prior to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes of this series may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
A-3
<PAGE> 24
EXHIBIT A
Interest on this Note shall cease to accrue upon the exchange of this
Note for an Exchange Note in like principal amount and having substantially
identical terms to this Note pursuant to a Registered Exchange Offer. If the
record date for the interest payment date next following the exchange of this
Note occurs after the exchange of this Note, the accrued and unpaid interest on
this Note will be payable to the Person in whose name the Exchange Note is
registered on that record date.
The amount of interest or Additional Interest payable for any period
will be computed on the basis of a 360 day year of twelve 30-day months. In the
event that any date on which interest or Additional Interest is payable on this
Note is not a Business Day, then payment of interest or Additional Interest
payable on such date will be made on the next preceding day that is a Business
Day.
2. METHOD OF PAYMENT. Payment of the principal of (and premium, if
any), interest and Additional Interest, if any, on this Note will be made at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, New York, New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts or, at the option of the Company payment of interest or Additional
Interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided that
payment by wire transfer of immediately available funds shall be required with
respect to principal of, and interest and Additional Interest, if any, on all
Global Notes and all other Notes the Holders of which shall have provided
written wire transfer instructions to the Company or the Paying Agent.
3. PAYING AGENT AND SECURITY REGISTRAR. Initially, the Trustee shall
act as the Paying Agent and Security Registrar. The Company may change any
Paying Agent or Security Registrar without notice to any Holder.
The Company or any of its Affiliates may act in any such capacity.
4. INDENTURE. This Note is one of a duly authorized issue of Securities
of the Company (herein called the "NOTES"), issued and to be issued in one or
more series under an Indenture, dated as of October 24, 1997 (herein called the
"INDENTURE", which term shall have the meaning assigned to it in such
instrument), between the Company and The Chase Manhattan Bank, as Trustee
(herein called the "TRUSTEE", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered. This Note is
one of the series designated on the face hereof, limited in aggregate principal
amount to $____________.
5. SECURITY. This Note will be secured equally and ratably by First
Mortgage Bonds (the "FIRST MORTGAGE BONDS") delivered by the Company to the
Trustee for the benefit of the Holders of the Notes. Such First Mortgage Bonds
shall be issued under the Mortgage and Deed of Trust between Cleveland Electric
and Guaranty Trust Company of New York (now The Chase Manhattan Bank as
successor trustee), as trustee (the "MORTGAGE TRUSTEE"), dated as of July 1,
1940, as supplemented and amended from time to time (the "FIRST MORTGAGE").
Reference is made to the First Mortgage for a description of property mortgaged
and pledged thereunder, the nature and extent of the security, the rights of the
holders of first mortgage bonds under the First Mortgage and of the Mortgage
Trustee in respect thereof, the duties and immunities of the Mortgage Trustee
and the terms and conditions upon which the First Mortgage Bonds are secured and
the circumstances under which additional first mortgage bonds may be issued
under the First Mortgage.
A-4
<PAGE> 25
EXHIBIT A
6. REGISTRATION. Pursuant to the Registration Agreement by and between
the Company and the Purchasers, the Company will be obligated to consummate an
exchange offer pursuant to which the Holders of the Notes shall have the right
to exchange the Notes for ___% Series D Secured Notes Due ____, of the Company,
which are to be registered under the Securities Act, in like principal amount
and having identical terms as the Notes except with respect to transfer
restrictions. If the Exchange Offer is not accomplished, the Company will be
obligated to file a shelf registration statement to cover resales of the Notes
under certain circumstances. The Holders of the Notes shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated, the shelf registration statement is not filed and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Agreement.
7. REDEMPTION. At any time at the option of the Company, the Notes of
this series are subject to redemption, in whole or in part from time to time,
upon not less than 30 days' notice by mail, at a redemption price equal to the
greater of (i) 100% of their principal amount and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield plus twenty-five
(25) basis points, plus in each case accrued interest to the date of redemption.
"Treasury Yield" means, with respect to any redemption date,
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 redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the applicable Notes 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 the applicable Notes. "Independent Investment Banker" means
Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to
select the Comparable Treasury Issue, another independent banking institution of
national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any
redemption 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 redemption 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, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if fewer than four such Reference Treasury Dealer Quotations are obtained,
the average of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average 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 by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
A-5
<PAGE> 26
EXHIBIT A
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc., and First Chicago Capital Markets, Inc., and their respective
successors; provided however, that if any of the foregoing 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.
If notice has been given as provided in the Indenture and
funds for the redemption of any Notes (or any portion thereof) called for
redemption shall have been made available on the redemption date referred to in
such notice, such Notes (or any portion thereof) will cease to bear interest on
the date fixed for such redemption specified in such notice and the only right
of the Holders of such Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of Notes of this series (or
any portion thereof) will be given to Holders at their addresses, as shown in
the security register for such Notes, not more than 60 nor less than 30 days
prior to the date fixed for redemption. The notice of redemption will specify,
among other items, the redemption price and the principal amount of the Notes
held by such Holder to be redeemed. If less than all of the Notes are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the portion of such Notes to be redeemed
in whole or in part as provided in the Indenture.
In the event of redemption of this Note in part only, a new
Note or Notes of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
8. DEFAULT AND REMEDIES. If an Event of Default with respect to Notes
of this series shall occur and be continuing, the principal of the Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture and, upon such declaration, the Trustee can demand the acceleration of
the payment of principal of the First Mortgage Bonds as provided in the
Indenture.
As provided in and subject to the provisions of the Indenture,
the Holder of this Note shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Notes of this series, the Holders of not less than a majority in principal
amount of the Notes of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not have received from the Holders of a majority in principal
amount of Notes of this series at the time Outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Note for
the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
A-6
<PAGE> 27
EXHIBIT A
9. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture permits, with
certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Notes of each series to be affected under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Notes at the time Outstanding of each series
to be affected. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Notes of each series at the
time Outstanding, on behalf of the Holders of all Notes of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.
10. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes of this series are
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Notes of this series are exchangeable for
a like aggregate principal amount of Notes of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
11. PERSONS DEEMED OWNERS. Prior to due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
12. UNCLAIMED MONEY. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to any portion of such
money must look only to the Company, and not to the Trustee or Paying Agent, for
payment as general creditors, or, as applicable law designates, another person.
13. TRUSTEE DEALINGS WITH THE COMPANY. Subject to certain limitations
imposed by the Trust Indenture Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of the Notes,
and may otherwise deal with and collect obligations owed to it by the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
14. DISCHARGE PRIOR TO MATURITY. The Company's obligations pursuant to
the Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of money or U.S.
Government Obligations sufficient to pay when due the principal of and interest
on the Notes to maturity.
A-7
<PAGE> 28
EXHIBIT A
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Note or certain restrictive covenants and Events of
Default with respect to this Note, in each case upon compliance with certain
conditions set forth in the Indenture.
15. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to the Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
16. NO RECOURSE AGAINST OTHERS. No director, officer, employee, or
stockholder of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. By accepting a Note, each
Holder hereof waives and releases all such liability. The waiver and release are
part of the consideration for the issue of this Note.
17. AUTHENTICATION. Unless the certificate of authentication hereon has
been executed by the Trustee, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture or the Registration Agreement.
Requests may be made to:
Janis T. Percio, Secretary
Centerior Energy Corporation
P.O. Box 94661
Cleveland, Ohio 44101-4661
A-8
<PAGE> 29
EXHIBIT A
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
And irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:_____________________ Your Signature:___________________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act of 1933 after the later of the date of original
issuance of such Notes and the last date, if any, on which such Notes were owned
by the Company or any Affiliate of the Company, the undersigned confirms that
such Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account of
a qualified institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933; or
A-9
<PAGE> 30
EXHIBIT A
(5) [ ] inside the United States to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933) that, prior to
such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter can be obtained from the Trustee) and, if such
transfer is in respect of an aggregate principal amount of
Notes at the time of transfer of less than $100,000, an
opinion of counsel acceptable to the Company that such
transfer is in compliance with the restrictions set forth in
the legend on the Notes; or
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered holder thereof; provided, however, that if box (4), (5) or (6) is
checked, the Trustee may require, prior to registering any such transfer of the
Notes, such legal opinions, certifications and other information as the Company
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, such as the exemption provided by
Rule 144 under such Act.
-----------------------------------------
Signature
- -------------------------- -----------------------------------------
Signature Guarantee: (Signature must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Security
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion Program
("STAMP") or such other "signature
guarantee program" as may be determined
by the Security Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.)
A-10
<PAGE> 31
EXHIBIT A
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it 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.
Dated: ____________________ ----------------------------------------------
NOTICE: To be executed by an executive officer
A-11
<PAGE> 32
EXHIBIT A
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have
been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal amount of
Amount of decrease in Amount of increase in this Global Note Signature of authorized
Date of Principal Amount of Principal Amount of following such officer of Trustee or
Exchange this Global Note this Global Note decrease or increase Securities Custodian
- -------- --------------------- --------------------- -------------------- -----------------------
</TABLE>
A-12
<PAGE> 33
[FORM OF FACE OF EXCHANGE NOTE]
[____% Series D Secured Note Due ____]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
No. .............. $ .............
CUSIP No. ____________
The Cleveland Electric Illuminating Company hereby promises to pay
to................. ,or registered assigns, the principal sum of
........................................... Dollars on ...................
Interest Payment Dates: May 1 and November 1, commencing May 1, 1998.
Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note
attached hereto which further provisions shall for all purposes have the same
effect as if set forth in this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer.
Dated: ___________________
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
By:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the
series designated therein referred to in
the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:
------------------------------------
Name:
Title:
Date of Authentication: _______________
<PAGE> 34
EXHIBIT B
[FORM OF REVERSE SIDE OF EXCHANGE NOTE]
[___% Series D Secured Note Due ____]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Cleveland Electric Illuminating Company, a corporation
duly organized and existing under the laws of the State of Ohio ("CLEVELAND
ELECTRIC" or the "COMPANY", which term includes any successor Person under the
Indenture hereinafter referred to), hereby promises to pay interest on the
principal amount of this Note from the date of authentication of this Note.
Interest shall be payable semiannually on May 1 and November 1 in each year,
commencing May 1, 1998, at the rate of ___% per annum, until the principal and
premium, if any, hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the April
15 or October 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. If this Note is authenticated and
delivered in exchange for an Initial Note between a record date for the payment
of interest on that Initial Note and the related interest payment date, the
interest that accrues on this Note from the date of authentication hereof to
that interest payment date shall be payable to the Person in whose name this
Note was issued on its issuance date. Any interest on this Note not punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes of
this series not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
The amount of interest payable for any period will be computed on the
basis of a 360 day year of twelve 30-day months. In the event that any date on
which interest is payable on this Note is not a Business Day, then payment of
interest payable on such date will be made on the next preceding day that is a
Business Day.
2. METHOD OF PAYMENT. Payment of the principal of, and premium, if any,
and interest on this Note will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, New York, New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts or, at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall
- ----------
1. If the Note is to be issued in global form add the global notes legend
from Exhibit A and the attachment from such Exhibit A captioned "TO BE
ATTACHED TO GLOBAL NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL
NOTE."
B-2
<PAGE> 35
EXHIBIT B
appear in the Security Register; provided that payment by wire transfer of
immediately available funds shall be required with respect to principal of and
interest on all Global Notes and all other Notes the Holders of which shall
have provided written wire transfer instructions to the Company or the Paying
Agent.
3. PAYING AGENT AND SECURITY REGISTRAR. Initially, the Trustee shall
act as the Paying Agent and Security Registrar. The Company may change any
Paying Agent or Security Registrar without notice to any Holder.
The Company or any of its Affiliates may act in any such capacity.
4. INDENTURE. This Note is one of a duly authorized issue of Securities
of the Company (herein called the "NOTES"), issued and to be issued in one or
more series under an Indenture, dated as of October 24, 1997 (herein called the
"INDENTURE", which term shall have the meaning assigned to it in such
instrument), between the Company and The Chase Manhattan Bank, as Trustee
(herein called the "TRUSTEE", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered. This Note is
one of the series designated on the face hereof, limited in aggregate principal
amount to $___________.
5. SECURITY. This Note will be secured by First Mortgage Bonds (the
"FIRST MORTGAGE BONDS") delivered by the Company to the Trustee for the benefit
of the Holders of the Notes. Such First Mortgage Bonds shall be issued under the
Mortgage and Deed of Trust between Cleveland Electric and Guaranty Trust Company
of New York (now The Chase Manhattan Bank as successor trustee), as trustee (the
"MORTGAGE TRUSTEE"), dated as of July 1, 1940, as supplemented and amended from
time to time (the "FIRST MORTGAGE"). Reference is made to the First Mortgage
for a description of property mortgaged and pledged thereunder, the nature and
extent of the security, the rights of the holders of first mortgage bonds under
the First Mortgage and of the Mortgage Trustee in respect thereof, the duties
and immunities of the Mortgage Trustee and the terms and conditions upon which
the First Mortgage Bonds are secured and the circumstances under which
additional first mortgage bonds may be issued under the First Mortgage.
6. EXCHANGE OFFER. This Note is issued pursuant to a Registered
Exchange Offer under which the Initial Note of the Company, in like principal
amount and having substantially identical terms to this Note, was exchanged for
this Note.
7. REDEMPTION. At any time at the option of the Company, the Notes of
this series are subject to redemption, in whole or in part from time to time,
upon not less than 30 days' notice by mail, at a redemption price equal to the
greater of (i) 100% of their principal amount and (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Yield plus twenty-five
(25) basis points, plus in each case accrued interest to the date of redemption.
"Treasury Yield" means, with respect to any redemption date,
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 redemption date.
B-3
<PAGE> 36
EXHIBIT B
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the applicable Notes 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 the applicable Notes. "Independent Investment Banker" means
Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to
select the Comparable Treasury Issue, another independent banking institution of
national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any
redemption 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 redemption 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, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if fewer than four such Reference Treasury Dealer Quotations are obtained,
the average of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average 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 by such Reference Treasury Dealer at 5:00 p.m. on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc., and First Chicago Capital Markets, Inc., and their respective
successors; provided, however, that if any of the foregoing 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.
If notice has been given as provided in the Indenture and
funds for the redemption of any Notes (or any portion thereof) called for
redemption shall have been made available on the redemption date referred to in
such notice, such Notes (or any portion thereof) will cease to bear interest on
the date fixed for such redemption specified in such notice and the only right
of the Holders of such Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of Notes of this series (or
any portion thereof) will be given to Holders at their addresses, as shown in
the security register for such Notes, not more than 60 nor less than 30 days
prior to the date fixed for redemption. The notice of redemption will specify,
among other items, the redemption price and the principal amount of the Notes
held by such Holder to be redeemed. If less than all of the Notes are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the portion of such Notes to be redeemed
in whole or in part as provided in the Indenture.
B-4
<PAGE> 37
EXHIBIT B
In the event of redemption of this Note in part only, a new
Note or Notes of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
8. DEFAULT AND REMEDIES. If an Event of Default with respect to Notes
of this series shall occur and be continuing, the principal of the Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture and, upon such declaration, the Trustee can demand the acceleration of
the payment of principal of the First Mortgage Bonds as provided in the
Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes of this series, the Holders of not less than a majority in principal
amount of the Notes of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not have received from the Holders of a majority in principal
amount of Notes of this series at the time Outstanding a direction inconsistent
with such request, and shall have failed to institute any such proceeding, for
60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Note for
the enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
9. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture permits, with
certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Notes of each series to be affected under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Notes at the time Outstanding of each series
to be affected. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Notes of each series at the
time Outstanding, on behalf of the Holders of all Notes of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.
10. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes of this series are
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Notes of this series are exchangeable for
a like aggregate principal amount of Notes of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering the
same.
B-5
<PAGE> 38
EXHIBIT B
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
11. PERSONS DEEMED OWNERS. Prior to due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
12. UNCLAIMED MONEY. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to any portion of such
money must look only to the Company, and not to the Trustee or Paying Agent, for
payment as general creditors, or, as applicable law designates, another person.
13. TRUSTEE DEALINGS WITH THE COMPANY. Subject to certain limitations
imposed by the Trust Indenture Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of the Notes,
and may otherwise deal with and collect obligations owed to it by the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
14. DISCHARGE PRIOR TO MATURITY. The Company's obligations pursuant to
the Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of money or U.S.
Government Obligations sufficient to pay when due the principal of and interest
on the Notes to maturity.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Note or certain restrictive covenants and Events of
Default with respect to this Note, in each case upon compliance with certain
conditions set forth in the Indenture.
15. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to the Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
16. NO RECOURSE AGAINST OTHERS. No director, officer, employee, or
stockholder of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. By accepting a Note, each
Holder hereof waives and releases all such liability. The waiver and release are
part of the consideration for the issue of this Note.
B-6
<PAGE> 39
EXHIBIT B
17. AUTHENTICATION. Unless the certificate of authentication hereon has
been executed by the Trustee, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Janis T. Percio, Secretary
Centerior Energy Corporation
P.O. Box 94661
Cleveland, Ohio 44101-4661
B-7
<PAGE> 40
EXHIBIT B
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
And irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: __________________ Your Signature: ________________________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
- ---------------------------- -----------------------------------------
Signature Guarantee: (Signature must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Security
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion Program
("STAMP") or such other "signature
guarantee program" as may be determined
by the Security Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.)
B-8
<PAGE> 1
Exhibit 5
The Cleveland Electric
Illuminating Company
c/o FirstEnergy Corporation
76 South Main Street
Akron, Ohio 44308
Gentlemen:
With reference to the proposed issue and sale of the principal amounts
of Series D Secured Notes (the "Notes") of The Cleveland Electric Illuminating
Company (the "Company") set forth in the Registration Statement described below
and to be issued and sold under an Indenture dated as of October 24, 1997 and a
First Supplemental Indenture thereto dated October 24, 1997 (as supplemented,
the "Note Indenture") between the Company and The Chase Manhattan Bank, as
trustee, I am counsel for the Company, and attorneys acting under my supervision
have examined the following:
(a) A copy of the Company's Amended Articles of Incorporation, as filed
with the Secretary of the State of Ohio;
(b) A copy of the Company's Regulations, certified by the Secretary of
the Company;
(c) The Application (as amended and supplemented) filed by the Company
with the Public Utilities Commission of Ohio for authority to issue and sell the
Notes;
(d) The Note Indenture;
(e) The proposed form of the Notes;
(f) The Registration Statement on Form S-4 (including the Prospectus
and exhibits) relating to the Notes and the documents incorporated by reference
therein, in the form in which it is being filed with the Securities and Exchange
Commission (such Registration Statement being herein called the "Registration
Statement" and the Prospectus contained therein being herein called the
"Prospectus"); and
(g) Such other documents and matters as I deem necessary to express
this opinion.
Based on the foregoing and such legal considerations as I deem
relevant, I am of the opinion that:
1. The Company is a corporation duly organized and validly existing and
in good standing under the laws of the State of Ohio, with power to authorize
the issue and sale of the Notes;
2. The Note Indenture and the Notes are in due and legal form; and
<PAGE> 2
3. Upon (a) due execution by the Company and authentication by the
trustee of the Notes as provided in the Note Indenture and (b) issuance and sale
of the Notes in accordance with the Registration Statement when the same shall
have become effective, the Notes will be legally issued, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
I hereby consent (a) to the use of my name in connection with the
statements made under the heading "Legal Opinions" in the Prospectus, and (b) to
the filing of this opinion and consent with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Respectfully submitted,
___________________________________________
David L. Feltner
Associate General Counsel for The Cleveland
Electric Illuminating Company
<PAGE> 1
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
Exhibit 10(a)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 2
dated as of June 13, 1997
to
FACILITY LEASE
dated as of September 30, 1987
as amended February 26, 1988
among
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee for Bruce Mansfield 1987 Trust H
under and pursuant to a Trust Agreement,
dated as of September 30, 1987, with
CITICORP LESCAMAN, INC.,
as Lessor
and
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
as Lessees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AGREEMENT AS AMENDED
HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF IBJ
SCHRODER BANK & TRUST COMPANY, INDENTURE TRUSTEE, UNDER AND TO THE EXTENT
SET FORTH IN THE TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASE, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED AND
SUPPLEMENTED BETWEEN MERIDIAN TRUST COMPANY (PREDECESSOR TO WILMINGTON
TRUST COMPANY), AS OWNER TRUSTEE FOR BRUCE MANSFIELD 1987 TRUST H (UNDER AND
PURSUANT TO A TRUST AGREEMENT, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED,
BETWEEN SUCH PARTY AND MERIDIAN TRUST COMPANY, PREDECESSOR TO WILMINGTON
TRUST COMPANY) AND IBJ SCHRODER BANK & TRUST COMPANY, AS INDENTURE TRUSTEE,
AS SUCH INDENTURE MAY BE AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME
IN ACCORDANCE WITH THE PROVISIONS THEREOF. THIS AMENDMENT NO. 2 HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION 3(d) OF THIS AMENDMENT NO. 2
FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS
HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
<PAGE> 2
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
AMENDMENT NO. 2, dated as of June 13, 1997 ("Amendment No.
2"), to the Facility Lease, dated as of September 30, 1987, as amended by
Amendment No. 1 thereto, dated as of February 26, 1988, all as in effect on the
date hereof (the "Facility Lease"), among WILMINGTON TRUST COMPANY, a Delaware
trust company (successor to Meridian Trust Company), not in its individual
capacity, but solely as Owner Trustee under a Trust Agreement, as amended, dated
as of September 30, 1987, with the Owner Participant identified on the cover
page hereof (in such capacity, the "Lessor"), THE TOLEDO EDISON COMPANY, an Ohio
corporation ("Toledo Edison"), and THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
an Ohio corporation ("Cleveland Electric") (Cleveland Electric and Toledo Edison
being collectively referred to as the "Lessees"),
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessor have heretofore entered
into the Facility Lease providing for the lease by the Lessor to the Lessees of
the Undivided Interest; and
WHEREAS, Section 3(f) of the Facility Lease provides for an
adjustment to the Basic Lease Rate Factors and the Stipulated Loss Value,
Termination Value and Special Termination Value percentages in the event, among
other things, Refunding Notes are issued resulting in a change in the actual
interest rate payable on the Secured Notes, the dates on which interest is
payable thereon, the amortization schedules and/or the debt/equity ratio; and
WHEREAS, Section 8.01 of the Indenture provides, among other
things, that the Lessor and Indenture Trustee may, without the consent of any
Holder of Secured Notes, execute a supplement to the Indenture in order to
establish and issue the Refunding Notes in accordance with Section 2.12 of the
Indenture; and
WHEREAS, the Lessor and the Indenture Trustee intend to
execute a Supplemental Indenture No. 2 dated as of June 13, 1997 to the
Indenture, providing for the issuance of one new promissory note;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein and not
otherwise defined herein or in the recitals shall have the meanings assigned to
such terms in the Facility Lease.
SECTION 2. AMENDMENTS.
(a) Section 3(f)(i) of the Facility Lease is hereby amended by
(i) deleting the comma after the phrase "Section
4.02(5)" and inserting the word "and",
(ii) deleting the phrase "and 4.08(1)" immediately
preceding the phrase "of Revenue Procedure 75-28",
(iii) deleting the phrase "and the requirements of
Section 4.08(1) shall be applied on a prospective basis" immediately
following the phrase "minimum equity investment will be consistent
with the maintenance of that originally made by the Owner
Participant."
<PAGE> 3
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
(b) Schedules 1 through 4 of the Facility Lease are hereby amended as
follows:
(i) Schedule 1 entitled "Basic Lease Rate Factors" is
deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(ii) Schedule 2 entitled "Stipulated Loss Value" is
deleted in its entirety and is hereby replaced with Schedule 2
hereto.
(iii) Schedule 3 entitled "Termination Value" is
deleted in its entirety and is hereby replaced with Schedule 3
hereto.
(iv) Schedule 4 entitled "Special Termination Value"
is deleted in its entirety and is hereby replaced with Schedule 4
hereto.
SECTION 3. MISCELLANEOUS.
(a) Execution. Although this Amendment No. 2 is dated as of
the date first above written for convenience, the actual dates of execution
hereof by the parties hereto are, respectively, the dates set forth under the
signatures hereto. This Amendment No. 2 shall be effective as of the date upon
which the Owner Trustee receives a payment of Supplemental Rent as provided in
the Facility Lease (the "Effective Date"). This Amendment No. 2 amends and
modifies the Facility Lease and is to be read with and form part of the Facility
Lease. On and from the Effective Date, any reference in any Operative Document
to the Facility Lease shall be deemed to refer to the Facility Lease as amended
and modified by Amendment No. 1 thereto, dated as of February 26, 1988, and by
this Amendment No. 2.
(b) Non-Waiver or Amendment. The agreements contained in this
Amendment shall not, except as expressly provided in this Amendment, operate as
a waiver of any right, power or remedy of any party under any Operative
Document, nor constitute, except as expressly provided in this Amendment, a
waiver of any provision of any Operative Document.
(c) Governing Law. This Amendment No. 2 shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the laws of the Commonwealth of Pennsylvania govern the creation
of, and perfection of, interest in property (whether real or personal) and
except to the extent that the Federal laws of the United States are mandatorily
applicable.
[The remainder of this page intentionally left blank.]
<PAGE> 4
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
(d) Original Counterpart. The single executed original of this
Amendment No. 2 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Lease Indenture Trustee thereon shall be the
"Original" of this Amendment No. 2. No security interest in this Amendment No. 2
may be created or continued through the transfer or possession of any
counterpart other than the "Original."
IN WITNESS WHEREOF, intending to be legally bound, each of the
parties hereto has caused this Amendment No. 2 to Facility Lease to be duly
executed by an officer thereunto duly authorized.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee for Bruce Mansfield 1987 Trust H
under and pursuant to a Trust Agreement
dated as of September 30, 1987 between
Meridian Trust Company, predecessor to
Wilmington Trust Company, and Citicorp
Lescaman, Inc.
ATTEST:
[Corporate Seal] By: /s/ CHRIS L. KAISER
--------------------------
By: Debra Eberly Name: Chris L. Kaiser
Title: Admin. Acct. Manager Title: Vice President
Date: June 18, 1997
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
ATTEST:
[Corporate Seal] By: /s/ DAVID M. BLANK
---------------------------
By: Name: David M. Blank
Title: Title: Treasurer of each
Date: June 18, 1997
<PAGE> 5
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
CERTIFICATE OF SERVICE
The Lessee, The Toledo Edison Company, hereby certifies that
its precise address is 300 Madison Avenue, Toledo, Ohio 43651.
By: /s/ DAVID M. BLANK
-------------------------
Name: David M. Blank
Title: Treasurer
Date: June 18, 1997
CERTIFICATE OF SERVICE
The Lessee, The Cleveland Electric Illuminating Company,
hereby certifies that its precise address is 6200 Oak Tree Boulevard,
Independence, Ohio 44131.
By: /s/ DAVID M. BLANK
-----------------------
Name: David M. Blank
Title: Treasurer
Date: June 18, 1997
4
<PAGE> 6
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
STATE OF DELAWARE )
) ss:
COUNTY OF NEW CASTLE )
On this 16th day of June, 1997, before me, the undersigned
notary public, personally appeared Chris L. Kaiser who acknowledged himself to
be a Vice President of WILMINGTON TRUST COMPANY, a Delaware trust company, and
that he, as such officer being authorized to do so, executed the foregoing
instrument in the capacity and for the purposes therein contained by signing the
name of the trust company by himself as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal.
[Notarial Seal] /s/ KATHLEEN A. PEDELINI
---------------------------------
Notary Public
My Commission Expires: October 31, 1998
<PAGE> 7
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
SCHEDULE 1
TO AMENDMENT NO. 2
TO FACILITY LEASE
BASIC LEASE RATE FACTORS
------------------------
Date % of Facility Cost
---- ------------------
(*)1
- --------
(1) Percentage for first Rent Payment Date reflects prepayment of Basic Rent
made on June 18, 1997.
<PAGE> 8
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
SCHEDULE 2
TO AMENDMENT NO. 2
TO FACILITY LEASE
STIPULATED LOSS VALUE
---------------------
Date % of Facility Cost
---- ------------------
<PAGE> 9
CITICORP LESCAMAN, INC. -- TRUST H EXECUTION COPY
SCHEDULE 3
TO AMENDMENT NO. 2
TO FACILITY LEASE
TERMINATION VALUE
-----------------
Date % of Facility Cost
---- ------------------
<PAGE> 1
Exhibit 10(b)
CITICORP LESCAMAN, INC. - TRUST H
================================================================================
AMENDMENT NO. 3
dated as of December 12, 1997
to
FACILITY LEASE
dated as of September 30, 1987
as amended February 26, 1988
and as amended as of June 13, 1997
among
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee for Bruce Mansfield 1987 Trust H
under and pursuant to a Trust Agreement,
dated as of September 30, 1987, with
CITICORP LESCAMAN, INC.,
as Lessor
and
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
as Lessees
================================================================================
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AGREEMENT AS AMENDED HAVE
BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF IBJ SCHRODER
BANK & TRUST COMPANY, INDENTURE TRUSTEE, UNDER AND TO THE EXTENT SET FORTH IN
THE TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASE, DATED
AS OF SEPTEMBER 30, 1987, AS AMENDED AND SUPPLEMENTED BETWEEN MERIDIAN TRUST
COMPANY (PREDECESSOR TO WILMINGTON TRUST COMPANY), AS OWNER TRUSTEE FOR BRUCE
MANSFIELD 1987 TRUST H (UNDER AND PURSUANT TO A TRUST AGREEMENT, DATED AS OF
SEPTEMBER 30, 1987, AS AMENDED, BETWEEN SUCH PARTY AND MERIDIAN TRUST COMPANY,
PREDECESSOR TO WILMINGTON TRUST COMPANY) AND IBJ SCHRODER BANK & TRUST COMPANY,
AS INDENTURE TRUSTEE, AS SUCH INDENTURE MAY BE AMENDED, MODIFIED OR SUPPLEMENTED
FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS THEREOF. THIS AMENDMENT NO.
3 HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION 3(d) OF THIS AMENDMENT
NO. 3 FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS
HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
<PAGE> 2
CITICORP LESCAMAN, INC. - TRUST H
AMENDMENT NO. 3, dated as of December 12, 1997 ("Amendment No.
3"), to the Facility Lease, dated as of September 30, 1987, as amended by
Amendment No. 1 thereto, dated as of February 26, 1988 and as amended by
Amendment No. 2 thereto, dated as of June 13, 1997, all as in effect on the date
hereof (the "Facility Lease"), among WILMINGTON TRUST COMPANY, a Delaware trust
company (successor to Meridian Trust Company), not in its individual capacity,
but solely as Owner Trustee under a Trust Agreement, as amended, dated as of
September 30, 1987, with the Owner Participant identified on the cover page
hereof (in such capacity, the "Lessor"), THE TOLEDO EDISON COMPANY, an Ohio
corporation ("Toledo Edison"), and THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
an Ohio corporation ("Cleveland Electric") (Cleveland Electric and Toledo Edison
being collectively referred to as the "Lessees"),
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessor have heretofore entered
into the Facility Lease providing for the lease by the Lessor to the Lessees of
the Undivided Interest; and
WHEREAS, the Lessor and the Lessees have agreed to adjust the
Basic Lease Rate Factors and the Stipulated Loss Value, Termination Value and
Special Termination Value percentages in connection with the transactions
contemplated by the Second Amended and Restated Shippingport Trust Participation
Agreement, dated as of the date hereof; and
WHEREAS, subject to the terms and conditions hereof, the
Lessees propose to make a special payment of Basic Rent in the amount of
$800,908.58 (the "Special Rent Payment") to Wilmington Trust Company, as Owner
Trustee; and
WHEREAS, upon receipt of the Special Rent Payment from the
Lessees, Wilmington Trust Company shall make a payment of interest in the amount
of $763,113.78 on behalf of the Lessor to Mansfield Capital Trust;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein and not
otherwise defined herein or in the recitals shall have the meanings assigned to
such terms in the Facility Lease.
SECTION 2. AMENDMENTS.
Schedules 1 through 3 of the Facility Lease are hereby amended as
follows:
(a) Schedule 1 entitled "Basic Lease Rate Factors" is
deleted in its entirety and is hereby replaced with Schedule 1 hereto
(which includes the Special Rent Payment).
(b) Schedule 2 entitled "Stipulated Loss Value" is
deleted in its entirety and is hereby replaced with Schedule 2
hereto.
(c) Schedule 3 entitled "Termination Value" is
deleted in its entirety and is hereby replaced with Schedule 3
hereto.
SECTION 3. MISCELLANEOUS.
2
<PAGE> 3
CITICORP LESCAMAN, INC. - TRUST H
(a) Execution. The actual dates of execution hereof by
the parties hereto are respectively the dates set forth under the
signatures hereto; however, this Agreement shall be effective as of
the date first written above. This Amendment No. 3 shall be effective
as of the date upon which the Owner Trustee receives the Special Rent
Payment as provided in the Facility Lease (the "Effective Date").
This Amendment No. 3 amends and modifies the Facility Lease and is to
be read with and form part of the Facility Lease. On and from the
Effective Date, any reference in any Operative Document to the
Facility Lease shall be deemed to refer to the Facility Lease as
amended and modified by Amendment No. 1 thereto, dated as of February
26, 1988 by Amendment No. 2 thereto, dated as of June 13, 1997, and
by this Amendment No. 3.
(b) Non-Waiver or Amendment. The agreements contained in
this Amendment shall not, except as expressly provided in this
Amendment, operate as a waiver of any right, power or remedy of any
party under any Operative Document, nor constitute, except as
expressly provided in this Amendment, a waiver of any provision of
any Operative Document.
Except as amended hereby, the Facility Lease shall
continue in full force and effect in accordance with the provisions
thereof.
(c) Governing Law. This Amendment No. 3 shall be governed
by and construed in accordance with the laws of the State of New
York, except to the extent that the laws of the Commonwealth of
Pennsylvania govern the creation of, and perfection of, interest in
property (whether real or personal) and except to the extent that the
Federal laws of the United States are mandatorily applicable.
[The remainder of this page intentionally left blank.]
3
<PAGE> 4
CITICORP LESCAMAN, INC. - TRUST H
(d) Original Counterpart. The single executed original of
this Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL
COUNTERPART" and containing the receipt of the Lease Indenture
Trustee thereon shall be the "Original" of this Amendment No. 3. No
security interest in this Amendment No. 3 may be created or continued
through the transfer or possession of any counterpart other than the
"Original."
IN WITNESS WHEREOF, intending to be legally bound, each
of the parties hereto has caused this Amendment No. 3 to Facility Lease to be
duly executed by an officer thereunto duly authorized.
WILMINGTON TRUST COMPANY, not in its individual capacity,
but solely as Owner Trustee for Bruce Mansfield 1987 Trust H under and pursuant
to a Trust Agreement dated as of September 30, 1987 between Meridian Trust
Company, predecessor to Wilmington Trust Company, and Citicorp Lescaman, Inc.
ATTEST:
[Corporate Seal] By: /s/ TERRI C. TAVANI
--------------------------------
By:__________________________ Name: Terri C. Tavani
Title:_______________________ Title: Financial Services Officer
Date: November 14, 1997
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
ATTEST:
[Corporate Seal] By: /s/ THEODORE F. STRUCK II
--------------------------------
By:__________________________ Name: Theodore F. Struck II
Title:_______________________ Title: Treasurer of each
Date: November 14, 1997
S-1
<PAGE> 5
CITICORP LESCAMAN, INC. - TRUST H
CERTIFICATE OF SERVICE
The Lessee, The Toledo Edison Company, hereby certifies that
its precise address is 300 Madison Avenue, Toledo, Ohio 43651.
By: /s/ THEODORE F. STRUCK II
---------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
CERTIFICATE OF SERVICE
The Lessee, The Cleveland Electric Illuminating Company,
hereby certifies that its precise address is 76 South Main Street, Akron, Ohio
44308.
By: /s/ THEODORE F. STRUCK II
---------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
S-2
<PAGE> 6
CITICORP LESCAMAN, INC. - TRUST H
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE TOLEDO EDISON COMPANY, by Theodore F.
Struck II, its Treasurer, who acknowledged that he/she did sign the foregoing
instrument on behalf of said corporation by authority of its Board of Directors
and that the same is the free act and deed of said corporation and his/her free
act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Akron, Ohio this 14th day of November, 1997.
/s/ DOROTHY A. BRATANOV
---------------------------
Notary Public
My Commission Expires: February 24, 1998
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
by Theodore F. Struck II, its Treasurer, who acknowledged that he/she did sign
the foregoing instrument on behalf of said corporation by authority of its Board
of Directors and that the same is the free act and deed of said corporation and
his/her free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Akron, Ohio this 14th day of November, 1997.
/s/ DOROTHY A. BRATANOV
---------------------------
Notary Public
My Commission Expires: February 24, 1998
S-3
<PAGE> 7
CITICORP LESCAMAN, INC. - TRUST H
STATE OF DELAWARE )
) ss:
COUNTY OF NEW CASTLE )
On this 14th day of November, 1997, before me, the undersigned
notary public, personally appeared Terri C. Tavani who acknowledged himself to
be a Financial Services Officer of WILMINGTON TRUST COMPANY, a Delaware trust
company, and that he, as such officer being authorized to do so, executed the
foregoing instrument in the capacity and for the purposes therein contained by
signing the name of the trust company by himself as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal.
[Notarial Seal] /s/ PATRICIA W. ZINK
---------------------------
Notary Public
My Commission Expires: July 12, 1999
S-4
<PAGE> 8
CITICORP LESCAMAN, INC. - TRUST H
SCHEDULE 1
TO AMENDMENT NO. 3
TO FACILITY LEASE
BASIC LEASE RATE FACTORS
------------------------
Date % of Facility Cost
---- ------------------
<PAGE> 9
CITICORP LESCAMAN, INC. - TRUST H
SCHEDULE 2
TO AMENDMENT NO. 3
TO FACILITY LEASE
STIPULATED LOSS VALUE
---------------------
Date % of Facility Cost
---- ------------------
<PAGE> 10
CITICORP LESCAMAN, INC. - TRUST H
SCHEDULE 3
TO AMENDMENT NO. 3
TO FACILITY LEASE
TERMINATION VALUE
-----------------
Date % of Facility Cost
---- ------------------
<PAGE> 1
Exhibit 10(c)
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 2
dated as of August 22, 1997
to
FACILITY LEASE
dated as of September 30, 1987
as amended February 26, 1988
among
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Owner Trustee for Bruce Mansfield 1987 Trust J
under and pursuant to a Trust Agreement,
dated as of September 30, 1987, with
US WEST FINANCIAL SERVICES, INC.,
as Lessor
and
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
as Lessees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AGREEMENT AS AMENDED
HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF IBJ
SCHRODER BANK & TRUST COMPANY, INDENTURE TRUSTEE, UNDER AND TO THE EXTENT
SET FORTH IN THE TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASE, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED AND
SUPPLEMENTED BETWEEN MERIDIAN TRUST COMPANY (PREDECESSOR TO FIRST UNION
TRUST COMPANY, NATIONAL ASSOCIATION), AS OWNER TRUSTEE FOR BRUCE MANSFIELD
1987 TRUST J (UNDER AND PURSUANT TO A TRUST AGREEMENT, DATED AS OF SEPTEMBER
30, 1987, AS AMENDED, BETWEEN SUCH PARTY AND MERIDIAN TRUST COMPANY,
PREDECESSOR TO FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION) AND IBJ
SCHRODER BANK & TRUST COMPANY, AS INDENTURE TRUSTEE, AS SUCH INDENTURE MAY
BE AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME IN ACCORDANCE WITH
THE PROVISIONS THEREOF. THIS AMENDMENT NO. 2 HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS. SEE SECTION 3(d) OF THIS AMENDMENT NO. 2 FOR INFORMATION
CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
<PAGE> 2
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
AMENDMENT NO. 2, dated as of August 22, 1997 ("Amendment No.
2"), to the Facility Lease, dated as of September 30, 1987, as amended by
Amendment No. 1 thereto, dated as of February 26, 1988, all as in effect on the
date hereof (the "Facility Lease"), among FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association (successor to Meridian Trust
Company), not in its individual capacity, but solely as Owner Trustee under a
Trust Agreement, as amended, dated as of September 30, 1987, with the Owner
Participant identified on the cover page hereof (in such capacity, the
"Lessor"), THE TOLEDO EDISON COMPANY, an Ohio corporation ("Toledo Edison"), and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, an Ohio corporation ("Cleveland
Electric") (Cleveland Electric and Toledo Edison being collectively referred to
as the "Lessees").
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessor have heretofore entered
into the Facility Lease providing for the lease by the Lessor to the Lessees of
the Undivided Interest; and
WHEREAS, Section 3(f) of the Facility Lease provides for an
adjustment to the Basic Lease Rate Factors and the Stipulated Loss Value,
Termination Value and Special Termination Value percentages in the event, among
other things, Refunding Notes are issued resulting in a change in the actual
interest rate payable on the Secured Notes, the dates on which interest is
payable thereon, the amortization schedules and/or the debt/equity ratio; and
WHEREAS, Section 8.02 of the Indenture provides, among other
things, that the Lessor and Indenture Trustee may, with the consent of the
Holder of the Secured Notes, execute a supplement to the Indenture in order to
modify terms of the Secured Notes issued under the Indenture; and
WHEREAS, the Lessor and the Indenture Trustee intend to modify
certain terms of the Secured Notes which will result in a change, among other
things, in the actual interest rate payable on the Secured Notes and the
amortization schedules of the Secured Notes;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein and not
otherwise defined herein or in the recitals shall have the meanings assigned to
such terms in the Facility Lease.
SECTION 2. AMENDMENTS.
Schedules 1 through 4 of the Facility Lease are hereby amended
as follows:
(i) Schedule 1 entitled "Basic Lease Rate Factors" is
deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(ii) Schedule 2 entitled "Stipulated Loss Value" is
deleted in its entirety and is hereby replaced with Schedule 2
hereto.
(iii) Schedule 3 entitled "Termination Value" is
deleted in its entirety and is hereby replaced with Schedule 3
hereto.
(iv) Schedule 4 entitled "Special Termination Value"
is deleted in its
- 2 -
<PAGE> 3
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
entirety and is hereby replaced with Schedule 4 hereto.
SECTION 3. MISCELLANEOUS.
(a) Execution. Although this Amendment No. 2 is dated as of
the date first above written for convenience, the actual dates of execution
hereof by the parties hereto are, respectively, the dates set forth under the
signatures hereto. This Amendment No. 2 shall be effective as of the date upon
which the Owner Trustee receives a payment of Supplemental Rent as provided in
the Facility Lease (the "Effective Date"). This Amendment No. 2 amends and
modifies the Facility Lease and is to be read with and form part of the Facility
Lease. On and from the Effective Date, any reference in any Operative Document
to the Facility Lease shall be deemed to refer to the Facility Lease as amended
and modified by Amendment No. 1 thereto, dated as of February 26, 1988, and by
this Amendment No. 2.
(b) Non-Waiver or Amendment. The agreements contained in this
Amendment shall not, except as expressly provided in this Amendment, operate as
a waiver of any right, power or remedy of any party under any Operative
Document, nor constitute, except as expressly provided in this Amendment, a
waiver of any provision of any Operative Document.
(c) Governing Law. This Amendment No. 2 shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the laws of the Commonwealth of Pennsylvania govern the creation
of, and perfection of, interest in property (whether real or personal) and
except to the extent that the Federal laws of the United States are mandatorily
applicable.
(d) Original Counterpart. The single executed original of this
Amendment No. 2 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Lease Indenture Trustee thereon shall be the
"Original" of this Amendment No. 2. No security interest in this Amendment No. 2
may be created or continued through the transfer or possession of any
counterpart other than the "Original."
[The remainder of this page intentionally left blank.]
- 3 -
<PAGE> 4
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
IN WITNESS WHEREOF, intending to be legally bound, each of the
parties hereto has caused this Amendment No. 2 to Facility Lease to be duly
executed by an officer thereunto duly authorized.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
for Bruce Mansfield 1987 Trust J under
and pursuant to a Trust Agreement dated
as of September 30, 1987 between
Meridian Trust Company, predecessor to
First Union Trust Company, National
Association, and U.S. West Financial
Services, Inc.
ATTEST:
[Corporate Seal] By: /s/ STEPHEN J. KABA
----------------------------
By: ___________________________ Name: Stephen J. Kaba
Title: ________________________ Title: Vice President
Date: August 20, 1997
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
ATTEST:
[Corporate Seal] By: /s/ DAVID M. BLANK
---------------------------
By: ___________________________ Name: David M. Blank
Title: ________________________ Title: Treasurer of each
Date: August 20, 1997
- 4 -
<PAGE> 5
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
CERTIFICATE OF SERVICE
The Lessee, The Toledo Edison Company, hereby certifies that
its precise address is 300 Madison Avenue, Toledo, Ohio 43651.
By: /s/ DAVID M. BLANK
-----------------------
Name: David M. Blank
Title: Treasurer
Date: August 20, 1997
CERTIFICATE OF SERVICE
The Lessee, The Cleveland Electric Illuminating Company,
hereby certifies that its precise address is 6200 Oak Tree Boulevard,
Independence, Ohio 44131.
By: /s/ DAVID M. BLANK
-----------------------
Name: David M. Blank
Title: Treasurer
Date: August 20, 1997
- 5 -
<PAGE> 6
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
STATE OF OHIO )
) ss.:
COUNTY OF CUYAHOGA )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE TOLEDO EDISON COMPANY, by David M.
Blank, its Treasurer, who acknowledged that he/she did sign the foregoing
instrument on behalf of said corporation by authority of its Board of Directors
and that the same is the free act and deed of said corporation and his/her free
act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Cleveland, Ohio this 20th day of August, 1997.
/s/ MARY E. SCHUBERT
---------------------------
Notary Public
My Commission Expires: August 18, 2001
STATE OF OHIO )
) ss.:
COUNTY OF CUYAHOGA )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
by David M. Blank, its Treasurer, who acknowledged that he/she did sign the
foregoing instrument on behalf of said corporation by authority of its Board of
Directors and that the same is the free act and deed of said corporation and
his/her free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Cleveland, Ohio this 20th day of August, 1997.
/s/ MARY E. SCHUBERT
----------------------------
Notary Public
My Commission Expires: August 18, 2001
- 6 -
<PAGE> 7
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
On this 20th day of August, 1997, before me, the undersigned
notary public, personally appeared Stephen J. Kaba who acknowledged himself to
be a Vice President of FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a
national banking association, and that he, as such officer being authorized to
do so, executed the foregoing instrument in the capacity and for the purposes
therein contained by signing the name of the trust company by himself as such
officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal.
[Notarial Seal] /s/ JOANNE E. LEE
---------------------------
Notary Public
My Commission Expires: May 14, 1999
- 7 -
<PAGE> 8
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
SCHEDULE 1
TO AMENDMENT NO. 2
TO FACILITY LEASE
BASIC LEASE RATE FACTORS
------------------------
Date % of Facility Cost
---- ------------------
- 8 -
<PAGE> 9
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
SCHEDULE 2
TO AMENDMENT NO. 2
TO FACILITY LEASE
STIPULATED LOSS VALUE
---------------------
Date % of Facility Cost
---- ------------------
- 9 -
<PAGE> 10
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
SCHEDULE 3
TO AMENDMENT NO. 2
TO FACILITY LEASE
TERMINATION VALUE
-----------------
Date % of Facility Cost
---- ------------------
- 10 -
<PAGE> 11
US WEST FINANCIAL SERVICES, INC. - TRUST J (EXECUTION)
SCHEDULE 4
TO AMENDMENT NO. 2
TO FACILITY LEASE
SPECIAL TERMINATION VALUE
-------------------------
Date % of Facility Cost
---- ------------------
- 11 -
<PAGE> 12
DO NOT LOSE THIS REQUEST FORM
INCORRECT OR INSUFFICIENT DOCUMENT LOCATION INFORMATION
WILL DELAY PROCESSING OF YOUR REQUEST
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10(d)
USWFS INTERMEDIARY TRUST - TRUST J
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT NO. 3
dated as of December 12, 1997
to
FACILITY LEASE
dated as of September 30, 1987
as amended February 26, 1988
and as amended as of August 22, 1997
among
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
not in its individual capacity, but solely
as Owner Trustee for Bruce Mansfield 1987 Trust J
under and pursuant to a Trust Agreement,
dated as of September 30, 1987, with
USWFS INTERMEDIARY TRUST
as Lessor
and
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
as Lessees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AGREEMENT AS AMENDED HAVE
BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF IBJ SCHRODER
BANK & TRUST COMPANY, INDENTURE TRUSTEE, UNDER AND TO THE EXTENT SET FORTH IN
THE TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASE, DATED
AS OF SEPTEMBER 30, 1987, AS AMENDED AND SUPPLEMENTED BETWEEN MERIDIAN TRUST
COMPANY (PREDECESSOR TO FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION), AS
OWNER TRUSTEE FOR BRUCE MANSFIELD 1987 TRUST J (UNDER AND PURSUANT TO A TRUST
AGREEMENT, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED, BETWEEN SUCH PARTY AND
MERIDIAN TRUST COMPANY, PREDECESSOR TO FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION) AND IBJ SCHRODER BANK & TRUST COMPANY, AS INDENTURE TRUSTEE, AS
SUCH INDENTURE MAY BE AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME IN
ACCORDANCE WITH THE PROVISIONS THEREOF. THIS AMENDMENT NO. 3 HAS BEEN EXECUTED
IN SEVERAL COUNTERPARTS. SEE SECTION 3(d) OF THIS AMENDMENT NO. 3 FOR
INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
<PAGE> 2
USWFS INTERMEDIARY TRUST - TRUST J
AMENDMENT NO. 3, dated as of December 12, 1997 ("Amendment No.
3"), to the Facility Lease, dated as of September 30, 1987, as amended by
Amendment No. 1 thereto, dated as of February 26, 1988, and as amended by
Amendment No. 2 thereto, dated as of August 22, 1997, all as in effect on the
date hereof (the "Facility Lease"), among FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association (successor to Meridian Trust
Company), not in its individual capacity, but solely as Owner Trustee under a
Trust Agreement, as amended, dated as of September 30, 1987, with the Owner
Participant identified on the cover page hereof (in such capacity, the
"Lessor"), THE TOLEDO EDISON COMPANY, an Ohio corporation ("Toledo Edison"), and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, an Ohio corporation ("Cleveland
Electric") (Cleveland Electric and Toledo Edison being collectively referred to
as the "Lessees"),
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessor have heretofore entered
into the Facility Lease providing for the lease by the Lessor to the Lessees of
the Undivided Interest; and
WHEREAS, Section 3(f) of the Facility Lease provides for an
adjustment to the Basic Lease Rate Factors and the Stipulated Loss Value,
Termination Value and Special Termination Value percentages in the event, among
other things, Refunding Notes are issued resulting in a change in the actual
interest rate payable on the Secured Notes, the dates on which interest is
payable thereon, the amortization schedules and/or the debt/equity ratio; and
WHEREAS, Section 8.01 of the Indenture provides, among other
things, that the Lessor and Indenture Trustee may, without the consent of any
Holder of Secured Notes, execute a supplement to the Indenture in order to
establish and issue the Refunding Notes in accordance with Section 2.12 of the
Indenture; and
WHEREAS, the Lessor and the Indenture Trustee intend to
execute a Supplemental Indenture No. 3 to the Indenture, dated the date hereof,
providing for the issuance of one new promissory note;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein and not
otherwise defined herein or in the recitals shall have the meanings assigned to
such terms in the Facility Lease.
- 1 -
<PAGE> 3
USWFS INTERMEDIARY TRUST - TRUST J
SECTION 2. AMENDMENTS.
Schedules 1 through 4 of the Facility Lease are hereby amended
as follows:
(i) Schedule 1 entitled "Basic Lease Rate Factors" is
deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(ii) Schedule 2 entitled "Stipulated Loss Value" is
deleted in its entirety and is hereby replaced with Schedule 2
hereto.
(iii) Schedule 3 entitled "Termination Value" is
deleted in its entirety and is hereby replaced with Schedule 3
hereto.
(iv) Schedule 4 entitled "Special Termination Value"
is deleted in its entirety and is hereby replaced with Schedule 4
hereto.
SECTION 3. MISCELLANEOUS.
(a) Execution. The actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto;
however, this Agreement shall be effective as of the date first written above.
This Amendment No. 3 shall be effective as of the date upon which the Owner
Trustee receives a payment of Supplemental Rent as provided in the Facility
Lease (the "Effective Date"). This Amendment No. 3 amends and modifies the
Facility Lease and is to be read with and form part of the Facility Lease. On
and from the Effective Date, any reference in any Operative Document to the
Facility Lease shall be deemed to refer to the Facility Lease as amended and
modified by Amendment No. 1 thereto, dated as of February 26, 1988, by Amendment
No. 2 thereto, dated as of August 22, 1997, and by this Amendment No. 3.
(b) Non-Waiver or Amendment. The agreements contained in this
Amendment shall not, except as expressly provided in this Amendment, operate as
a waiver of any right, power or remedy of any party under any Operative
Document, nor constitute, except as expressly provided in this Amendment, a
waiver of any provision of any Operative Document.
Except as amended hereby, the Facility Lease shall continue in
full force and effect in accordance with the provisions thereof.
(c) Governing Law. This Amendment No. 3 shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the laws of the Commonwealth of Pennsylvania govern the creation
of, and perfection of, interest in property (whether real or personal) and
except to the extent that the Federal laws of the United States are mandatorily
applicable.
- 2 -
<PAGE> 4
USWFS INTERMEDIARY TRUST - TRUST J
(d) Original Counterpart. The single executed original of this
Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Lease Indenture Trustee thereon shall be the
"Original" of this Amendment No. 3. No security interest in this Amendment No. 3
may be created or continued through the transfer or possession of any
counterpart other than the "Original."
IN WITNESS WHEREOF, intending to be legally bound, each of the
parties hereto has caused this Amendment No. 3 to Facility Lease to be duly
executed by an officer thereunto duly authorized.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
for Bruce Mansfield 1987 Trust J under
and pursuant to a Trust Agreement dated
as of September 30, 1987 between
Meridian Trust Company, predecessor to
First Union Trust Company, National
Association, and USWFS Intermediary
Trust
ATTEST:
[Corporate Seal] By: /s/ STEPHEN J. KABA
--------------------------
By: Name: Stephen J. Kaba
Title: Title: Vice President
Date: December 15, 1997
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
ATTEST:
[Corporate Seal] By: /s/ THEODORE F. STRUCK II
---------------------------
By: Name: Theodore F. Struck II
Title: Title: Treasurer of each
Date: December 15, 1997
S - 1
<PAGE> 5
USWFS INTERMEDIARY TRUST - TRUST J
CERTIFICATE OF SERVICE
The Lessee, The Toledo Edison Company, hereby certifies that
its precise address is 300 Madison Avenue, Toledo, Ohio 43651.
By: /s/ THEODORE F. STRUCK II
-----------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
CERTIFICATE OF SERVICE
The Lessee, The Cleveland Electric Illuminating Company,
hereby certifies that its precise address is 76 South Main Street, Akron, Ohio
44038.
By: /s/ THEODORE F. STRUCK II
-----------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
S - 2
<PAGE> 6
USWFS INTERMEDIARY TRUST - TRUST J
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE TOLEDO EDISON COMPANY, by Theodore F.
Struck II, its Treasurer, who acknowledged that he/she did sign the foregoing
instrument on behalf of said corporation by authority of its Board of Directors
and that the same is the free act and deed of said corporation and his/her free
act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Akron, Ohio this 15th day of December, 1997.
/s/ DEBRA L. CORDEA
-----------------------------
Notary Public
My Commission Expires: November 20, 1999
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
by Theodore F. Struck II, its Treasurer, who acknowledged that he/she did sign
the foregoing instrument on behalf of said corporation by authority of its Board
of Directors and that the same is the free act and deed of said corporation and
his/her free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Akron, Ohio this 15th day of December, 1997.
/s/ DEBRA L. CORDEA
-----------------------------
Notary Public
My Commission Expires: November 20, 1999
S - 3
<PAGE> 7
USWFS INTERMEDIARY TRUST - TRUST J
STATE OF DELAWARE )
) ss:
COUNTY OF NEW CASTLE )
On this 15th day of December, 1997, before me, the undersigned
notary public, personally appeared Stephen J. Kaba who acknowledged himself to
be a Vice President of FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a
national banking association, and that he, as such officer being authorized to
do so, executed the foregoing instrument in the capacity and for the purposes
therein contained by signing the name of the trust company by himself as such
officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal.
[Notarial Seal] /s/ JOANNE E. LEE
------------------------
Notary Public
My Commission Expires: May 14, 1999
S - 4
<PAGE> 8
USWFS INTERMEDIARY TRUST - TRUST J
SCHEDULE 1
TO AMENDMENT NO. 3
TO FACILITY LEASE
BASIC LEASE RATE FACTORS
------------------------
Date % of Facility Cost
---- ------------------
<PAGE> 9
USWFS INTERMEDIARY TRUST - TRUST J
SCHEDULE 2
TO AMENDMENT NO. 3
TO FACILITY LEASE
STIPULATED LOSS VALUE
---------------------
Date % of Facility Cost
---- ------------------
<PAGE> 10
USWFS INTERMEDIARY TRUST - TRUST J
SCHEDULE 3
TO AMENDMENT NO. 3
TO FACILITY LEASE
TERMINATION VALUE
-----------------
Date % of Facility Cost
---- ------------------
<PAGE> 11
USWFS INTERMEDIARY TRUST - TRUST J
SCHEDULE 4
TO AMENDMENT NO. 3
TO FACILITY LEASE
SPECIAL TERMINATION VALUE
-------------------------
Date % of Facility Cost
---- ------------------
<PAGE> 1
MIDWEST POWER COMPANY - TRUST A Exhibit 10(e)
- --------------------------------------------------------------------------------
AMENDMENT NO. 2
dated as December 12, 1997
to
FACILITY LEASE
dated as of September 30, 1987
as amended February 26, 1988
among
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
not in its individual capacity, but solely
as Owner Trustee for Bruce Mansfield 1987 Trust A
under and pursuant to a Trust Agreement,
dated as of September 30, 1987, with
MIDWEST POWER COMPANY
as Lessor
and
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
as Lessees
- --------------------------------------------------------------------------------
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS LEASE AGREEMENT AS AMENDED HAVE
BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF IBJ
SCHRODER BANK & TRUST COMPANY, INDENTURE TRUSTEE, UNDER AND TO THE EXTENT SET
FORTH IN THE TRUST INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF
LEASE, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED AND SUPPLEMENTED BETWEEN
MERIDIAN TRUST COMPANY (PREDECESSOR TO FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION), AS OWNER TRUSTEE FOR BRUCE MANSFIELD 1987 TRUST A (UNDER AND
PURSUANT TO A TRUST AGREEMENT, DATED AS OF SEPTEMBER 30, 1987, AS AMENDED,
BETWEEN SUCH PARTY AND MERIDIAN TRUST COMPANY, PREDECESSOR TO FIRST UNION TRUST
COMPANY, NATIONAL ASSOCIATION) AND IBJ SCHRODER BANK & TRUST COMPANY, AS
INDENTURE TRUSTEE, AS SUCH INDENTURE MAY BE AMENDED, MODIFIED OR SUPPLEMENTED
FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS THEREOF. THIS AMENDMENT NO.
2 HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION 3(d) OF THIS AMENDMENT
NO. 2 FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS
HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
<PAGE> 2
MIDWEST POWER COMPANY - TRUST A
AMENDMENT NO. 2, dated as of December 12, 1997 ("Amendment
No. 2"), to the Facility Lease, dated as of September 30, 1987, as amended by
Amendment No. 1 thereto, dated as of February 26, 1988, all as in effect on the
date hereof (the "Facility Lease"), among FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association (successor to Meridian Trust
Company), not in its individual capacity, but solely as Owner Trustee under a
Trust Agreement, as amended, dated as of September 30, 1987, with the Owner
Participant identified on the cover page hereof (in such capacity, the
"Lessor"), THE TOLEDO EDISON COMPANY, an Ohio corporation ("Toledo Edison"),
and THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, an Ohio corporation
("Cleveland Electric") (Cleveland Electric and Toledo Edison being collectively
referred to as the "Lessees"),
W I T N E S S E T H:
WHEREAS, the Lessees and the Lessor have heretofore entered
into the Facility Lease providing for the lease by the Lessor to the Lessees of
the Undivided Interest; and
WHEREAS, Section 3(f) of the Facility Lease provides for an
adjustment to the Basic Lease Rate Factors and the Stipulated Loss Value,
Termination Value and Special Termination Value percentages in the event, among
other things, Refunding Notes are issued resulting in a change in the actual
interest rate payable on the Secured Notes, the dates on which interest is
payable thereon, the amortization schedules and/or the debt/equity ratio; and
WHEREAS, Section 8.01 of the Indenture provides, among other
things, that the Lessor and Indenture Trustee may, without the consent of any
Holder of Secured Notes, execute a supplement to the Indenture in order to
establish and issue the Refunding Notes in accordance with Section 2.12 of the
Indenture; and
WHEREAS, pursuant to that certain Refinancing Agreement dated
as of December 12, 1997, between the parties hereto and others, the Lessor and
the Indenture Trustee intend to execute a Supplemental Indenture No. 2 to the
Indenture, dated the date hereof, providing for the issuance of one new
promissory note;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein and not
otherwise defined herein or in the recitals shall have the meanings assigned to
such terms in the Facility Lease.
SECTION 2. AMENDMENTS.
(i) Schedule 1 entitled "Basic Lease Rate Factors"
is deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(ii) Schedule 2 entitled "Stipulated Loss Value" is
deleted in its entirety and is hereby replaced with Schedule 2
hereto.
(iii) Schedule 3 entitled "Termination Value" is
deleted in its entirety and is hereby replaced with Schedule 3
hereto.
(iv) Schedule 4 entitled "Special Termination Value"
is deleted in its entirety and is hereby replaced with Schedule 4
hereto.
<PAGE> 3
MIDWEST POWER COMPANY - TRUST A
SECTION 3. MISCELLANEOUS.
(a) Execution. The actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures
hereto; however, this Agreement shall be effective as of the date first written
above. This Amendment No. 2 shall be effective as of December 12, 1997 (the
"Effective Date"). This Amendment No. 2 amends and modifies the Facility Lease
and is to be read with and form part of the Facility Lease. On and from the
Effective Date, any reference in any Operative Document to the Facility Lease
shall be deemed to refer to the Facility Lease as amended and modified by
Amendment No. 1 thereto, dated as of February 26, 1988, and by this Amendment
No. 2.
(b) Non-Waiver or Amendment. The agreements contained in this
Amendment shall not, except as expressly provided in this Amendment, operate as
a waiver of any right, power or remedy of any party under any Operative
Document, nor constitute, except as expressly provided in this Amendment, a
waiver of any provision of any Operative Document.
Except as amended hereby, the Facility Lease shall continue
in full force and effect in accordance with the provisions thereof.
(c) Governing Law. This Amendment No. 2 shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the laws of the Commonwealth of Pennsylvania govern the
creation of, and perfection of, interest in property (whether real or personal)
and except to the extent that the Federal laws of the United States are
mandatorily applicable.
[The remainder of this page intentionally left blank.]
2
<PAGE> 4
MIDWEST POWER COMPANY - TRUST A
(d) Original Counterpart. The single executed original of
this Amendment No. 2 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Lease Indenture Trustee thereon shall be the
"Original" of this Amendment No. 2. No security interest in this Amendment No.
2 may be created or continued through the transfer or possession of any
counterpart other than the "Original."
IN WITNESS WHEREOF, intending to be legally bound, each of
the parties hereto has caused this Amendment No. 2 to Facility Lease to be duly
executed by an officer thereunto duly authorized.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
for Bruce Mansfield 1987 Trust A under
and pursuant to a Trust Agreement dated
as of September 30, 1987 between
Meridian Trust Company, predecessor to
First Union Trust Company, National
Association and Midwest Power Company
ATTEST:
[Corporate Seal] By: /s/ EDWARD L. TRUITT, JR.
---------------------------
By: /s/ M. Bonilla Name: Edward L. Truitt, Jr.
Title: Vice President Title: Assistant Vice President
Date: November 14, 1997
THE TOLEDO EDISON COMPANY
and
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
ATTEST:
[Corporate Seal] By: /s/ THEODORE F. STRUCK II
---------------------------
By:/s/ Nancy C. Ashcom Name: Theodore F. Struck II
Title: Secretary Title: Treasurer of each
Date: November 14, 1997
S-1
<PAGE> 5
MIDWEST POWER COMPANY - TRUST A
CERTIFICATE OF SERVICE
The Lessee, The Toledo Edison Company, hereby certifies that
its precise address is 300 Madison Avenue, Toledo, Ohio 43651.
By: /s/ THEODORE F. STRUCK II
---------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
CERTIFICATE OF SERVICE
The Lessee, The Cleveland Electric Illuminating Company,
hereby certifies that its precise address is 76 South Main Street, Akron, Ohio
44308.
By: /s/ THEODORE F. STRUCK II
---------------------------
Name: Theodore F. Struck II
Title: Treasurer
Date: December 15, 1997
S-2
<PAGE> 6
MIDWEST POWER COMPANY - TRUST A
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE TOLEDO EDISON COMPANY, by Theodore F.
Struck II, its Treasurer, who acknowledged that he/she did sign the foregoing
instrument on behalf of said corporation by authority of its Board of Directors
and that the same is the free act and deed of said corporation and his/her free
act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at Akron, Ohio this 14th day of November, 1997.
/s/ DOROTHY A. BRATANOV
---------------------------
Notary Public
My Commission Expires: February 24, 1998
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY, by Theodore F. Struck II, its Treasurer, who acknowledged that he/she
did sign the foregoing instrument on behalf of said corporation by authority of
its Board of Directors and that the same is the free act and deed of said
corporation and his/her free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at Akron, Ohio this 14th day of November, 1997.
/s/ DOROTHY A. BRATANOV
---------------------------
Notary Public
My Commission Expires: February 24, 1998
S-3
<PAGE> 7
MIDWEST POWER COMPANY - TRUST A
STATE OF DELAWARE )
) ss:
COUNTY OF NEW CASTLE )
On this 14th day of December, 1997, before me, the
undersigned notary public, personally appeared Edward L. Truitt, Jr. who
acknowledged himself to be a Assistant Vice President of WILMINGTON TRUST
COMPANY, a Delaware trust company, and that he, as such officer being
authorized to do so, executed the foregoing instrument in the capacity and for
the purposes therein contained by signing the name of the trust company by
himself as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
[Notarial Seal]
/s/ JOANNE E. LEE
---------------------------
Notary Public
My Commission Expires: May 14, 1999
S-4
<PAGE> 8
MIDWEST POWER COMPANY - TRUST A
SCHEDULE 1
TO AMENDMENT NO. 2
TO FACILITY LEASE
BASIC LEASE RATE FACTORS
------------------------
Date % of Facility Cost
---- ------------------
<PAGE> 9
MIDWEST POWER COMPANY - TRUST A
SCHEDULE 2
TO AMENDMENT NO. 2
TO FACILITY LEASE
STIPULATED LOSS VALUE
---------------------
Date % of Facility Cost
---- ------------------
<PAGE> 10
MIDWEST POWER COMPANY - TRUST A
SCHEDULE 3
TO AMENDMENT NO. 2
TO FACILITY LEASE
TERMINATION VALUE
-----------------
Date % of Facility Cost
---- ------------------
<PAGE> 11
MIDWEST POWER COMPANY - TRUST A
SCHEDULE 4
TO AMENDMENT NO. 2
TO FACILITY LEASE
SPECIAL TERMINATION VALUE
-------------------------
Date % of Facility Cost
---- ------------------
<PAGE> 12
DO NOT LOSE THIS REQUEST FORM
INCORRECT OR INSUFFICIENT DOCUMENT LOCATION INFORMATION
WILL DELAY PROCESSING OF YOUR REQUEST
***********************************************************
<PAGE> 1
Exhibit 12
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
-------------------------------------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
(Thousands of Dollars)
Statement Setting Forth Computations Showing Satisfaction of the Requirements
Specified in Regulation S-K, Item 503(d):
<TABLE>
<CAPTION>
Year Ended December 31 12 Months
----------------------------------------------------------------- Ended
1992 1993 1994 1995 1996 9/30/97
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Net Income (Loss) $ 204,939 ($587,147) $ 185,431 $ 183,719 $ 116,553 $ 117,775
Add
Federal Income Taxes Expense (Credit) 94,627 (247,966) 85,455 95,561 69,120 81,398
Interest (a) 253,042 252,479 254,248 251,793 244,789 248,234
Provision for Interest Element of Rentals (b) 81,948 81,131 79,462 79,642 79,503 77,041
--------- --------- --------- --------- --------- ---------
Total Earnings $ 634,556 ($501,503) $ 604,596 $ 610,715 $ 509,965 $ 524,448
--------- --------- --------- --------- --------- ---------
Fixed Charges
Interest (a) $ 253,042 $ 252,479 $ 254,248 $ 251,793 $ 244,789 $ 248,234
Provision for Interest Element of Rentals (b) 81,948 81,131 79,462 79,642 79,503 77,041
--------- --------- --------- --------- --------- ---------
Total Fixed Charges $ 334,990 $ 333,610 $ 333,710 $ 331,435 $ 324,292 $ 325,275
--------- --------- --------- --------- --------- ---------
Ratio of Earnings to Fixed Charges 1.89 (1.50) 1.81 1.84 1.57 1.61
========= ========= ========= ========= ========= =========
<FN>
- ---------------------------------
(a) Includes interest on first mortgage bonds, bank loans, commercial paper,
pollution control notes, and other interest included in operation expenses;
amortization of net premium, discount and expense on debt; and capitalized
interest on nuclear fuel lease obligations.
(b) Includes the interest component of Bruce Mansfield sale and leaseback
rentals, leased nuclear fuel in the reactor, and other miscellaneous
rentals.
</TABLE>
<PAGE> 1
[ARTHUR ANDERSEN LLP LETTERHEAD]
Exhibit 23(A)
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated February 14, 1997, included in this registration statement, and to the
incorporation by reference in this registration statement of our report dated
February 14, 1997, included in the Cleveland Electric Illuminating Company's
Form 10-K for the year ended December 31, 1996, and to all references to our
Firm included in this registration statement.
Arthur Andersen LLP
Cleveland, Ohio
March 6, 1998
<PAGE> 1
Exhibit 25 (a)
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
(Exact name of obligor as specified in its charter)
OHIO 34-0150020
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O FIRST ENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OHIO 44308-1890
(Address of principal executive offices) (Zip Code)
-------------------------------------------
7.43% SERIES D SECURED NOTES DUE 2009
(Title of the indenture securities)
-------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 17th day of February, 1998.
THE CHASE MANHATTAN BANK
By /s/ P. Kelly
---------------------
/s/ P. Kelly
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ................................................$ 12,428
Interest-bearing balances ........................................ 3,428
Securities: ..........................................................
Held to maturity securities............................................ 2,561
Available for sale securities.......................................... 43,058
Federal funds sold and securities purchased under
agreements to resell ............................................. 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income $129,260
Less: Allowance for loan and lease losses 2,783
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 126,477
Trading Assets ....................................................... 62,575
Premises and fixed assets (including capitalized
leases).......................................................... 2,943
Other real estate owned .............................................. 295
Investments in unconsolidated subsidiaries and
associated companies............................................. 231
Customers' liability to this bank on acceptances
outstanding ..................................................... 1,698
Intangible assets .................................................... 1,466
Other assets ......................................................... 10,268
--------
TOTAL ASSETS ......................................................... $297,061
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C>
Deposits
In domestic offices ..................................................... $94,524
Noninterest-bearing .................................. $39,487
Interest-bearing ..................................... 55,037
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's .................................................. 71,162
Noninterest-bearing .................................. $ 3,205
Interest-bearing ..................................... 67,957
--------
Federal funds purchased and securities sold under agree-
ments to repurchase ........................................................... 43,181
Demand notes issued to the U.S. Treasury ...................................... 1,000
Trading liabilities ........................................................... 48,903
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
With a remaining maturity of one year or less ............................ 3,599
With a remaining maturity of more than one year
through three years ............................................... 253
With a remaining maturity of more than three years ....................... 132
Bank's liability on acceptances executed and outstanding ...................... 1,698
Subordinated notes and debentures ............................................. 5,715
Other liabilities ............................................................. 9,896
TOTAL LIABILITIES ............................................................. 280,063
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................. 0
Common stock .................................................................. 1,211
Surplus (exclude all surplus related to preferred stock) ...................... 10,291
Undivided profits and capital reserves ........................................ 5,502
Net unrealized holding gains (losses)
on available-for-sale securities ......................................... (22)
Cumulative foreign currency translation adjustments ........................... 16
TOTAL EQUITY CAPITAL .......................................................... 16,998
---------
TOTAL LIABILITIES AND EQUITY CAPITAL .......................................... $ 297,061
=========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
<PAGE> 1
Exhibit 25 (b)
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
(Exact name of obligor as specified in its charter)
OHIO 34-0150020
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O FIRST ENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OHIO 44308-1890
(Address of principal executive offices) (Zip Code)
-------------------------------------------
7.88% SERIES D SECURED NOTES DUE 2017
(Title of the indenture securities)
-------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 17th day of February, 1998.
THE CHASE MANHATTAN BANK
By /s/ P. Kelly
---------------------
/s/ P. Kelly
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ................................................$ 12,428
Interest-bearing balances ........................................ 3,428
Securities: ..........................................................
Held to maturity securities............................................ 2,561
Available for sale securities.......................................... 43,058
Federal funds sold and securities purchased under
agreements to resell ............................................. 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income $129,260
Less: Allowance for loan and lease losses 2,783
Less: Allocated transfer risk reserve ......... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .......................................... 126,477
Trading Assets ....................................................... 62,575
Premises and fixed assets (including capitalized
leases).......................................................... 2,943
Other real estate owned .............................................. 295
Investments in unconsolidated subsidiaries and
associated companies............................................. 231
Customers' liability to this bank on acceptances
outstanding ..................................................... 1,698
Intangible assets .................................................... 1,466
Other assets ......................................................... 10,268
---------
TOTAL ASSETS ......................................................... $297,061
=========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C>
Deposits
In domestic offices ..................................................... $94,524
Noninterest-bearing .................................. $39,487
Interest-bearing ..................................... 55,037
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's .................................................. 71,162
Noninterest-bearing .................................. $ 3,205
Interest-bearing ..................................... 67,957
--------
Federal funds purchased and securities sold under agree-
ments to repurchase ........................................................... 43,181
Demand notes issued to the U.S. Treasury ...................................... 1,000
Trading liabilities ........................................................... 48,903
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
With a remaining maturity of one year or less ............................ 3,599
With a remaining maturity of more than one year
through three years ............................................... 253
With a remaining maturity of more than three years ....................... 132
Bank's liability on acceptances executed and outstanding ...................... 1,698
Subordinated notes and debentures ............................................. 5,715
Other liabilities ............................................................. 9,896
TOTAL LIABILITIES ............................................................. 280,063
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................. 0
Common stock .................................................................. 1,211
Surplus (exclude all surplus related to preferred stock) ..................... 10,291
Undivided profits and capital reserves ........................................ 5,502
Net unrealized holding gains (losses)
on available-for-sale securities .............................................. (22)
Cumulative foreign currency translation adjustments ........................... 16
TOTAL EQUITY CAPITAL .......................................................... 16,998
---------
TOTAL LIABILITIES AND EQUITY CAPITAL .......................................... $ 297,061
=========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
