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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FEBRUARY 24, 1999
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 4911 34-0150020
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
C/O FIRSTENERGY CORP., 76 SOUTH MAIN STREET, AKRON, OHIO
44308-1890 (330) 384-5100 (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: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
_____________________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION FEE
PER BOND* OFFERING PRICE*
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First Mortgage Bonds, 6.86% Series A $125,000,000 100% $125,000,000 $34,750
due 2008
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*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.
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PROSPECTUS
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
EXCHANGE OFFER FOR
$125,000,000
FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
TERMS OF EXCHANGE OFFER
-----------------------------------------
- Expires 5:00 p.m., New York City time, [ ], 1999, unless
extended
- All outstanding bonds that are validly tendered and not validly
withdrawn will be exchanged
- Tenders of outstanding bonds may be withdrawn any time prior to
the expiration of the exchange offer
- The exchange of bonds will not be a taxable exchange for U.S.
federal income tax purposes
- We will not receive any proceeds from the exchange offer
- The terms of the bonds to be issued are substantially identical
to the outstanding bonds, except for certain transfer
restrictions and registration rights relating to the outstanding
bonds
- Not subject to any condition other than that the exchange offer
not violate applicable law or any applicable interpretation of
the Staff of the Securities and Exchange Commission, that no
action or proceeding has been instituted or threatened with
respect to the exchange offer and nothing would render the
exchange offer illegal.
-----------------------------------------
SEE "RISK FACTORS" ON PAGE 12 OF THIS PROSPECTUS FOR A DISCUSSION OF
RISKS TO BE CONSIDERED IN CONNECTION WITH YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE BONDS OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY.......................................................................................4
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS....................................................12
RISK FACTORS............................................................................................12
Financial Capability....................................................................................12
Debt and Other Obligations............................................................12
Sources of Future Cash Needs..........................................................13
Credit Ratings........................................................................13
Consequences of Failure to Exchange Old Bonds for New Bonds.............................................13
Risks Associated with a Lack of Public Market for the New Bonds.........................................14
Challenges and Risks That We Face from Competition......................................................14
Municipal Electric Systems............................................................14
Open-access Rules for Transmission Services...........................................14
Competition in Retail Electricity.....................................................14
Nuclear Operations......................................................................................15
Impact of the Year 2000 Issue...........................................................................16
The Problem of Y2K....................................................................16
Our State of Readiness................................................................16
Third Parties' State of Readiness - Potential Impact..................................17
The Costs to Address Our Y2K Issues...................................................17
Risks; Contingency Plan...............................................................17
THE COMPANY.............................................................................................17
General.................................................................................................17
PENDING MERGER OF THE COMPANY AND TOLEDO EDISON.........................................................18
Effect of Pending Merger on First Mortgage and TE First Mortgage........................................18
Combined Pro Forma Condensed Financial Statements for the Company and Toledo Edison.....................19
COMBINED PRO FORMA CONDENSED BALANCE SHEETS OF CLEVELAND ELECTRIC
AND TOLEDO EDISON....................................................................................20
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS OF CLEVELAND ELECTRIC
AND TOLEDO EDISON....................................................................................21
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS OF CLEVELAND ELECTRIC
AND TOLEDO EDISON....................................................................................22
NOTES TO COMBINED PRO FORMA CONDENSED BALANCE SHEET AND INCOME STATEMENTS...............................23
THE EXCHANGE OFFER......................................................................................24
Background..............................................................................................24
General.................................................................................................24
Expiration Dates; Delays; Extensions; Amendments........................................................26
Interest on the New Bonds...............................................................................27
Procedures for Tendering................................................................................28
General...............................................................................28
DTC's - Book Entry Delivery Transfer Facility.........................................28
Bonds Registered in Another's Name; Beneficial Holders................................29
Letter of Transmittal.................................................................29
DTC's Automated Tender Offer Program..................................................29
Company's Discretion..................................................................29
Holders' Representations..............................................................30
Guaranteed Delivery Procedures..........................................................................30
Withdrawal of Tenders...................................................................................31
Termination.............................................................................................32
Exchange Agent..........................................................................................32
Fees and Expenses.......................................................................................33
DESCRIPTION OF NEW BONDS................................................................................33
General.................................................................................................33
Principal, Maturity and Interest........................................................................34
Security for the First Mortgage Bonds...................................................................35
Title to Property.......................................................................................36
Issuance of Additional First Mortgage Bonds.............................................................37
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Redemption..............................................................................................38
Transfer and Exchange...................................................................................39
Concerning the First Mortgage Trustee...................................................................39
No Personal Liability of Incorporators, Stockholders, Officers or Directors.............................40
Book-Entry Issuance.....................................................................................40
The Global Bonds......................................................................40
Issuance of Certificated Bonds if DTC fails to Continue as Depositary.................42
Events of Default; Remedies.............................................................................42
Events of Default.....................................................................42
Notices of Default....................................................................43
Remedies in Event of Default..........................................................43
Exercise of Remedies..................................................................43
Modification of First Mortgage and First Mortgage Bonds.................................................44
Defeasance and Discharge................................................................................44
Additional Information..................................................................................44
CERTAIN TAX CONSIDERATIONS..............................................................................45
U.S. Federal Income Taxation of U.S. Holders............................................................45
General...............................................................................45
Bonds Purchased at a Premium..........................................................45
Bonds Issued at a Discount............................................................46
Disposition or Retirement of a Bond...................................................46
Secondary Market Purchasers -- Premium and Market Discount.............................47
Backup Withholding....................................................................48
U.S. Federal Income Taxation of Non-U.S. Holders........................................................48
General...............................................................................48
Effectively-Connected Income..........................................................49
Backup Withholding....................................................................49
PLAN OF DISTRIBUTION....................................................................................49
LEGAL MATTERS...........................................................................................50
EXPERTS.................................................................................................50
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS
PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
THIS PROSPECTUS INCLUDES SPECIFIC TERMS OF THE BONDS WE ARE OFFERING TO
EXCHANGE, AS WELL AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL
DATA. WE ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY. REFERENCES IN
THIS DOCUMENT TO "WE", "US", "OUR", "CLEVELAND ELECTRIC" OR THE "COMPANY" ARE
REFERENCES TO THE CLEVELAND ELECTRIC ILLUMINATING COMPANY.
THE COMPANY
WHO WE ARE
We are a public utility engaged in the generation, purchase,
transmission, distribution and sale of electric energy in northeastern Ohio. We
also provide wholesale electric energy to other electric utility companies and
to two municipal electric systems in our service area directly and through
American Municipal Power-Ohio.
We were incorporated in 1892. Currently, we serve about 743,000
customers and employ about 1,800 people. We are wholly owned by FirstEnergy
Corp., a holding company that also holds three other public utility companies,
namely, Ohio Edison Company, Pennsylvania Power Company and The Toledo Edison
Company.
WHERE YOU CAN FIND US
Our principal office is located at 76 South Main Street, Akron, Ohio
44308-1890. Our telephone number is (330) 384-5100.
SUMMARY OF THE EXCHANGE OFFER
OVERVIEW
We completed on September 29, 1998 the private offering of $125 million
of our First Mortgage Bonds, 6.86% Series due 2008 ("Old Bonds").
We entered into a Registration Rights Agreement with the placement
agents in the private offering in which we agreed, among other things, to use
our best efforts to consummate an exchange offer of the Old Bonds for registered
bonds or to register resales of the Old Bonds on or prior to April 3, 1999. If
we do not consummate the exchange offer or the registered resale of Old Bonds on
or prior to April 3, 1999 the interest rate on the Old Bonds will be increased
by 0.5% per year until one of these events occurs. You should read the
discussion under the heading "Summary of Terms of the New Bonds" and
"Description of New Bonds" for further information regarding the registered
bonds.
REGISTRATION RIGHTS AGREEMENT
You are entitled to exchange in the exchange offer your Old Bonds for
registered bonds with substantially identical terms. The exchange offer is
intended to satisfy these rights. You may hold a less liquid security after the
exchange offer if you decide not to exchange your bonds and you may not be
entitled to the benefits of certain registration and exchange rights with
respect to your Old Bonds. You should read the discussion under the headings,
"The Exchange Offer," "Description of New Bonds," and "Risk Factors -
Consequences of Failure to Exchange Old Bonds for New Bonds."
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THE EXCHANGE OFFER
We are offering to exchange $1,000 principal amount of First Mortgage
Bonds, 6.86% Series A due 2008 that have been registered under the Securities
Act of 1933 ("New Bonds") for each $1000 principal amount of the outstanding Old
Bonds that were issued in September 1998 in a private offering. In order to be
exchanged, an Old Bond must be properly tendered and accepted. All Old Bonds
that are validly tendered and not validly withdrawn will be exchanged.
As of this date there are $125 million principal amount of Old Bonds
outstanding.
We will issue the New Bonds on or promptly after the expiration of the
exchange offer.
RESALE OF THE NEW BONDS
We believe that the New Bonds issued in the exchange offer may be
offered for resale, resold and otherwise transferred by you without compliance
with the registration and prospectus delivery provisions of the Securities Act
of 1933 provided that:
- the New Bonds issued in the exchange offer are being acquired in
the ordinary course of your business;
- you are not participating, do not intend to participate and have
no arrangement or understanding with any person to participate,
in the distribution of the New Bonds issued to you in the
exchange offer;
- you are not an affiliate of ours; and
- you are not a broker-dealer who purchased the Old Bonds directly
from us for resale under Rule 144A or any other exemption under
the Securities Act.
If our belief is inaccurate, and you transfer any New Bond issued to
you in the exchange offer without delivering a prospectus meeting the
requirements of the Securities Act or without an exemption from registration of
your New Bonds from such requirements, you may incur liability under the
Securities Act of 1933. We do not assume or indemnify you against any such
liability.
Each broker-dealer that is issued New Bonds for its own account in
exchange for bonds that 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 New Bonds. By delivering a
prospectus and so acknowledging, such broker-dealer will not be deemed to admit
that it is an underwriter under the Securities Act. A broker-dealer may use this
prospectus in connection with resales of the New Bonds for 120 days after the
expiry of the exchange offer.
We do not believe that this would be the case as we believe that no
registered holder of bonds is an affiliate
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time, on
_________,1999, unless we decide to extend the expiration date.
ACCRUED INTEREST ON THE NEW BONDS AND THE OLD BONDS
The New Bonds bear interest at the same rate and on the same terms as
the Old Bonds. Under the First Mortgage, interest on the Old Bonds will cease to
accrue upon
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their exchange for New Bonds. Interest will accrue on the New Bonds from the
date they are authenticated. We intend to authenticate the New Bonds on the date
that they are exchanged for the Old Bonds.
Interest on the New Bonds will be payable to the person in whose name
the New Bond is registered at the close of business on the record date for such
interest. The record date will be March 15 in the case of an April 1 payment
date for interest and September 15 in the case of an October 1 payment date.
Interest on the bonds is to be paid in cash twice a year, on April 1
and October 1, commencing October 1, 1999.
A New Bond holder will be paid any interest accruing from the date of
authentication of a New Bond to the next interest payment date where it is
exchanged for an Old Bond between an Old Bond record date and that interest
payment date. Similarly, the New Bond holder will be paid any interest accruing
from an earlier interest payment date to the date of exchange where it is
exchanged for an Old Bond between that interest payment date and the following
record date. Therefore, you will lose no interest income on your Old Bonds if
you exchange them for New Bonds.
CONDITIONS TO THE EXCHANGE OFFER
The exchange offer is not subject to any condition other than
- that the exchange offer does not violate applicable law or any
applicable interpretation of - the staff of the Securities and
Exchange Commission,
- 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
- that there shall not have been adopted or enacted any law,
statute, rule or regulation that would render the exchange offer
illegal.
You will have certain rights against the Company under the Registration
Agreement if one of these conditions should occur and prevent the exchange offer
from taking place.
PROCEDURES FOR TENDERING OLD BONDS
If you wish to accept the exchange offer and tender your Old Bonds you
must transmit to The Chase Manhattan Bank, as exchange agent, a properly
completed and duly executed Letter of Transmittal, which accompanies this
prospectus, or a facsimile of the Letter of Transmittal. You must also transmit
all other documents required by the Letter of Transmittal, to the Exchange Agent
at the address set forth in this prospectus in accordance with the instructions
contained in this prospectus, 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, you will represent to the
Company that you, or the person to receive the New Bonds,
- are acquiring them in the ordinary course of business,
- are not participating, do not intend to participate in, and have
no arrangement or understanding with any person to participate in
the distribution of New Bonds, and
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- are not an "affiliate" of ours or, if you are an affiliate, you
will comply with the Securities Act.
See "The Exchange Offer--General" and "--Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL HOLDERS
If you are the beneficial owner of Old Bonds registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and you wish
to tender such Old Bonds you should contact the registered holder promptly and
instruct it to tender on your behalf.
If you wish to tender on your own behalf, you must arrange to register
ownership of the Old Bonds in your own name or obtain a properly completed bond
power from the registered holder before you are able to complete and execute the
Letter of Transmittal and deliver your Old Bonds.
You should be aware that it may take considerable time to register
ownership of the Old Bonds in your name.
See "The Exchange Offer--Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your Old Bonds and time will not permit your
Letter of Transmittal and other required documents to reach the Exchange Agent
by the Expiration Date, or the procedure for book-entry transfer cannot be
completed on time or certificates for registered bonds cannot be delivered on
time, you may tender your bonds pursuant to the procedures described in this
prospectus under the heading "The Exchange Offer--Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS
You may withdraw the tender of your Old Bonds at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD BONDS AND DELIVERY OF NEW BONDS
The Company will accept for exchange all properly tendered Old Bonds
that have not been validly withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date, subject to the conditions to the exchange offer summarized
above. The New Bonds issued pursuant to the exchange offer will be delivered on
or promptly after the Expiration Date.
CERTAIN TAX CONSIDERATIONS
The exchange pursuant to the exchange offer will not be a taxable event
for federal income tax purposes.
EXCHANGE AGENT
The Chase Manhattan Bank, the Trustee under the First Mortgage, is
serving as 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, New York 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 fax number for the Exchange Agent is
(212) 638-7375 or (212) 344-9367.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the New Bonds
pursuant to the exchange offer. We will pay all expenses incident to the
exchange offer. We received approximately $125 million from the sale of the Old
Bonds and used it to retire certain outstanding long-term debt.
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SUMMARY OF TERMS OF THE NEW BONDS
The form and terms of the New Bonds are the same as the form and terms
of the Old Bonds except that the New Bonds will be registered under the
Securities Act of 1933 and, therefore, will not bear legends restricting their
transfer and will not be entitled to registration under the Securities Act of
1933. The New Bonds will evidence the same debt as the Old Bonds and both Old
and New Bonds are governed by the First Mortgage.
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AGGREGATE AMOUNT .................................... $125 million principal amount of New Bonds.
MATURITY ............................................ October 1, 2008.
RECORD DATES......................................... March 15 and September 15 of each year.
INTEREST PAYMENT DATES............................... Payable in cash in arrears on April 1 and October 1 of
each year, commencing on October 1, 1999.
REDEMPTION........................................... The New Bonds will be redeemable in whole or in part,
at our option at any time, at a redemption price equal
to the greater of:
- 100% of the principal amount of the bond, and
- the sum of the present values of the remaining
scheduled payments of principal and interest at the
date the redemption is to be made. The present value
amount is determined on a semiannual basis at the
Treasury Yield plus thirty-seven and one-half (37
1/2) basis points, plus accrued interest to the date
of redemption.
The New Bonds will not be subject to any sinking fund.
See "Description of the New Bonds--Redemption."
FORM OF NEW BOND..................................... The New Bonds to be issued in the exchange offer will
be represented by permanent Global securities deposited
with The Chase Manhattan Bank, as depositary, for the
benefit of The Depositary Trust Company ("DTC"). You
will not receive definitive bonds unless certain events
occur (See "Description of New Bonds - Book -Entry
Issuance"). Instead, beneficial interests in the New
Bonds and transfers of the New Bonds will be shown on
records maintained in book-entry form by DTC.
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NO PUBLIC MARKET
Prior to the exchange offer, there has been no public market for the
Old Bonds. We do not presently intend to list the New Bonds on any stock
exchange or trading market.
The placement agents of the Old Bonds have advised us that, following
completion of the exchange offer, each intends to make a market in the New
Bonds. However, they have no obligation to make a market and they may
discontinue any such market-making activities at any time. See "Risk
Factors--Risks Associated With a Lack of Public Market for the New Bonds."
RISK FACTORS
See "Risk Factors" immediately following this summary for a discussion
of certain factors that you should consider in connection with your investment
in the bonds to be issued in the exchange offer.
WHERE YOU CAN FIND MORE INFORMATION
CERTAIN DOCUMENTS REFERRED TO IN THIS PROSPECTUS
Cleveland Electric has filed with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form S-4 under the Securities
Act of 1933, as amended, covering the bonds to be issued in the exchange offer.
This prospectus does not contain all of the information included in the
Registration Statement. Any statement made in this prospectus concerning the
contents of any contract, agreement or other document is not necessarily
complete. If we have filed such contract, agreement or other document as an
exhibit to the Registration Statement, you should read the exhibit for a more
complete understanding of the document or matter involved. Each statement
regarding a contract, agreement or other document is qualified in its entirety
by reference to the actual document.
In addition, we have filed with the SEC the following documents
incorporated by reference in this prospectus:
- Annual Report on Form 10-K for the year ended December 31,
1997
- Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1998.
- Current Report on Form 8-K dated March 16, 1998, July 6, 1998,
October 15, 1998 and December 17, 1998.
WHO YOU MAY CONTACT TO OBTAIN THESE DOCUMENTS
We will provide any of these documents to you free of charge if you
make a request. You can direct your request to Nancy C. Ashcom, Corporate
Secretary, FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308-1890,
telephone (330) 384-5504. We will also provide upon request the exhibits to
these documents if they are specifically referred to or incorporated into this
prospectus.
PERIODIC REPORTS AND OTHER SEC FILINGS
We are required to file periodic reports and other information with the
SEC under the Securities Exchange Act of 1934. You may read and copy the
Registration Statement, including the attached exhibits, and any reports,
statements or other information that we file at the SEC's public reference room
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
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Trade Center, 13th Floor, New York, NY 10048. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Such material can also be inspected at the New York Stock
Exchange.
Our SEC filings will also be available to the public on the SEC
Internet site (http://www.sec.gov).
INFORMATION CONTAINED IN THIS PROSPECTUS
You should rely only on the information provided in this prospectus.
No person has been authorized to provide you with different
information. The information in this prospectus is accurate as of the date on
the front cover. You should not assume that the information contained in this
prospectus is accurate as of any other date.
This prospectus has been prepared by the Company solely for use in
connection with the exchange offer. This prospectus is personal to you and does
not constitute an offer to any other person or to the public generally to
subscribe for or otherwise acquire New Bonds.
We do not make and our representatives are not making any
representation to you regarding the legality of your investment under legal
investment or similar laws. You should consult with your own advisors as to the
legal, tax, business, financial and related aspects of any purchase of the New
Bonds.
WE ARE NOT MAKING AN OFFER TO EXCHANGE BONDS IN ANY JURISDICTION WHERE
THE OFFER IS NOT PERMITTED.
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SUMMARY FINANCIAL INFORMATION
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9 MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- 1998
1993(a) 1994 1995 1996 1997(b) (UNAUDITED)
--------------------------------------------------------------- -----------
(DOLLARS IN MILLIONS)
Jan. 1- Nov. 8-
Nov. 7 Dec. 31 (c)
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INCOME STATEMENT DATA
Operating Revenues.......... $ 1,751 $ 1,698 $ 1,769 $ 1,790 $ 1,529 $ 254 $ 1,393
Net Income (Loss)........... (587) 185 184 117 (229) 19 149
Earnings (Loss) on Common (632) 140 141 78 (274) 19 132
Stock.....................
Ratio of Earnings to Fixed -- 1.81 1.84 1.57 1.64 1.73 2.12
Charges(d)................
BALANCE SHEET DATA (END OF
PERIOD)
Total Assets................ 7,200 7,204 7,222 6,962 6,440 6,427
Long-Term Debt.............. 2,952 2,683 2,759 2,523 3,190 2,957
Preferred Stock
With Mandatory Redemption 285 246 216 186 183 168
Provisions..............
Without Mandatory 241 241 241 238 238 238
Redemption Provisions...
Common Stock Equity......... 1,040 1,058 1,127 1,045 951 1,033
Total Capitalization........ 4,518 4,228 4,343 3,992 4,562 4,396
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(a) Net Income (Loss) and Earnings (Loss) on Common Stock included write-offs
of $987 million ($691 million after taxes) 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.
(b) The Company is a wholly owned subsidiary of FirstEnergy. Prior to the
merger in November 1997, the Company and Toledo Edison were the principal
operating subsidiaries of Centerior Energy. The merger was accounted for
using the purchase method of accounting in accordance with generally
accepted accounting principles, and the applicable effects were reflected
on the separate financial statements of Centerior Energy's direct
subsidiaries as of the merger date. Accordingly, the post-merger financial
statements reflect a new basis of accounting, and pre-merger period and
post-merger period financial results (separated by a heavy black line) are
presented. The Company discontinued the application of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" for its nuclear operations in October 1997.
As a result, regulatory assets attributable to nuclear operations of
$499.1 million ($324.4 million after taxes) were written off as an
extraordinary item.
(c) Net Income and Earnings on Common Stock includes net after tax charges of
$5.8 million relating to a voluntary retirement program.
(d) "Earnings" for purposes of these calculations have been computed by adding
to "income before extraordinary items" all taxes based on income or
profits, total interest charges and the estimated interest element of
rentals charged to income. "Fixed charges" include total interest charges
and the estimated interest element of rentals. The Ratio of Earnings to
Fixed Charges for the year ended December 31, 1993 is not meaningful due
to a loss before extraordinary items. For the year ended December 31,
1993, the loss before taxes and fixed charges was $502 million. Fixed
charges during the period were $334 million. The loss before income taxes
and fixed charges included write-offs of $987 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.
11
<PAGE> 13
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We caution you that this prospectus contains forward-looking statements
within the meaning of the Securities Exchange Act. They are statements about
future performance or results (such as statements including the words "believe,"
"expect" and "anticipate") when the Company discusses its financial condition,
results of operations and business.
Forward looking statements involve certain risks, assumptions and
uncertainties. They are not guarantees of future performance. Factors may cause
actual results to differ materially from those expressed in these
forward-looking statements. These factors include those identified in the
section concerning Risk Factors, as well as the following possibilities:
- if we do not fully realize the expected cost savings from the
merger of Centerior Energy Corporation and Ohio Edison
Company;
- if regional competitive pressure in the electric utility
industry increases greatly;
- if state and federal regulatory initiatives are implemented
that increase our competition, threaten our cost and
investment recovery or impact our rate structures;
- if national and regional economic conditions are less
favorable than we had expected;
- if there are disruptions in the wholesale power markets
because of supply or delivery constraints; and
- if we have costs or difficulties related to the Year 2000
issue greater than we had expected.
WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN OUR FORWARD-LOOKING
STATEMENTS ARE REASONABLE. HOWEVER, WE CAN NOT ASSURE YOU THAT THESE
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. YOU SHOULD CONSIDER THE FACTORS WE
HAVE NOTED ABOVE AND THE FOLLOWING SECTION, "RISK FACTORS," AS YOU READ THE
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS.
RISK FACTORS
You should carefully review all the information contained in this
prospectus, the information incorporated by reference into this prospectus, and
you should particularly consider the matters included in this section.
FINANCIAL CAPABILITY
DEBT AND OTHER OBLIGATIONS
At September 30, 1998, we had long-term debt of approximately $2,957
million (67% of total capitalization), preferred stock subject to mandatory
redemption provisions of approximately $168 million, current maturities of
approximately $181 million, and short-term borrowings of $61 million from an
associated company. We also have future minimum operating lease payments (net of
capital trust income) of approximately $793 million (as of December 31, 1997)
related to generating facility leases.
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<PAGE> 14
At September 30, 1998, we had approximately $2,888 million in aggregate
principal amount of first mortgage bonds outstanding under our mortgage. This
includes first mortgage bonds pledged to secure certain debt obligations. We are
not currently able to issue any additional first mortgage bonds except on the
basis of refundable bonds, and at September 30, 1998, our capacity to make any
such issuances was $190 million.
FirstEnergy has a $100 million revolving credit facility that expires
in May 1999, which FirstEnergy currently intends to extend. FirstEnergy may
borrow under this facility, with all borrowings jointly and severally guaranteed
by us and Toledo Edison. FirstEnergy plans to transfer any borrowed funds under
this facility to us and Toledo Edison based on our respective cash requirements.
There are no restrictions on our ability to issue preferred or
preference stock.
SOURCES OF FUTURE CASH NEEDS
Based on our present plans, we could provide for our cash requirements
during 1999 from the following sources:
- funds from operations;
- available cash and temporary cash investments (approximately
$54.4 million as of September 30, 1998);
- the issuance of long-term debt (for refunding purposes); and
- funds available under the FirstEnergy revolving credit
facility discussed above.
CREDIT RATINGS
Our current credit ratings are as follows:
Standard & Poor's Moody's
----------------- -------
First mortgage bonds BB+ Ba1
Unsecured notes BB- Ba3
Preferred stock BB- b1
CONSEQUENCES OF FAILURE TO EXCHANGE OLD BONDS FOR NEW BONDS
Old Bonds that are not exchanged for New Bonds 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 Bonds will continue to be subject to restrictions on transfer
such that:
- Old Bonds may be resold only if registered pursuant to the
Securities Act, or if an exemption is available,
- Old Bonds will bear a legend restricting transfer in the
absence of registration or an exemption, and
- a holder of Old Bonds who wishes to sell or dispose of all or
part of its Old Bonds, under a Securities Act exemption from
registration must if so requested, deliver to us an Opinion of
Independent Counsel confirming that such exemption from
13
<PAGE> 15
registration is available. The Opinion must be obtained in a
form and substance satisfactory to us.
RISKS ASSOCIATED WITH A LACK OF PUBLIC MARKET FOR THE NEW BONDS
The Old Bonds do not have an existing trading market and we cannot
assure that an active trading market for the New Bonds will develop or be
sustained. We do not presently intend to apply for listing of the New Bonds on
any stock exchange or trading market. If they are traded after their initial
issuance, the New Bonds may trade at a discount from their initial offering
price. This will depend upon prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and our
financial condition, performance and prospects.
Morgan Stanley Dean Witter, Credit Suisse First Boston and McDonald &
Company Securities, Inc., the placement agents of the Old Bonds (the "Placement
Agents"), have advised us that, following completion of the exchange offer, each
intends to make a market in the New Bonds. However, none of the Placement Agents
is under any obligation to make a market in the New Bonds. Also, any
market-making activities with respect to the New Bonds that they make may be
discounted at any time without notice.
CHALLENGES AND RISKS THAT WE FACE FROM COMPETITION
We face competitive challenges due to regulatory and tax constraints
and our high retail cost structure.
MUNICIPAL ELECTRIC SYSTEMS
Our most pressing competition currently comes from municipal electric
systems in our service areas. Our rates are generally higher than those of
municipal systems. This is because municipal systems are able to obtain tax
exemptions, lower financing costs, continuing availability of lower cost power
through short-term power purchases and cheaper access to government power. This
results in their ability to maintain lower overall costs. We face the threat
that municipalities in our service area could establish new electric systems and
continue expanding existing systems.
OPEN-ACCESS RULES FOR TRANSMISSION SERVICES
Federal and State regulatory bodies are acting to impose structural
changes in the electric utility industry that place downward pressure on prices
and 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.
COMPETITION IN RETAIL ELECTRICITY
A number of states have enacted transitional legislation that
encourages competition for retail electric businesses and the recovery of
stranded investment. Investment is "stranded" when fixed costs approved for
recovery under traditional regulatory methods become unrecoverable (or
"stranded") as a result of legislative changes that allow for widespread
competition.
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<PAGE> 16
Consistent with the development in other states, the co-chairs of the
Ohio General Assembly's Joint Select Committee on Electric Industry Deregulation
have taken the following steps:
- released on January 6, 1998, the draft report of a plan which
proposes to give customers a choice from whom they buy
electricity beginning January 1, 2000.
- introduced Ohio legislation on March 26, 1998 that is designed
to bring competition to Ohio's retail electric industry. The
legislation is consistent with recommendations of the
co-chairs in response to the bipartisan committee's final
report.
House and Senate hearings are expected to begin in early 1999. We
cannot predict when this legislation will be passed into law but will continue
to study the potential effects that such legislation would have on our financial
position and results of operations.
We cannot predict when and to what extent retail wheeling or other
forms of competition will be allowed. ("Retail wheeling" similarly encourages
competition by permitting the customer to purchase power from a utility company
other than its local utility.) The FERC and the PUCO have acknowledged the need
to provide at least partial recovery of stranded investment as greater
competition is permitted. We believe that a mechanism for the recovery of at
least some stranded investment will be developed as a result of regulatory moves
to increase competition.
NUCLEAR OPERATIONS
We have interests in three nuclear generating units:
- Beaver Valley Power Station Unit 2 ("Beaver Valley Unit 2");
- Davis-Besse Nuclear Power Station; and
- Perry Nuclear Power Plant Unit 1 ("Perry Unit 1").
Toledo Edison operates Davis-Besse and the Company operates Perry Unit
1. Duquesne Light Company operates Beaver Valley Unit 2. On October 15, 1998,
FirstEnergy signed an agreement in principle with Duquesne that would result in
the transfer of 1,436 megawatts owned by Duquesne at five generating plants
(including Beaver Valley Unit 2) in exchange for 1,298 megawatts at three plants
owned by FirstEnergy's electric utility operating companies, including the
Company.
These three nuclear units may be impacted by activities or events
beyond our 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. Such
an action would require us to purchase replacement power on the open market. Our
financial condition, cash flows and results of operations could be materially
adversely affected by such action depending on the prices of any such
replacement power.
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<PAGE> 17
IMPACT OF THE YEAR 2000 ISSUE
THE PROBLEM OF Y2K
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.
OUR STATE OF READINESS
We have determined that if we did not take any action to avoid the
consequences of the Year 2000 issue, a material effect on our business, results
of operations and financial condition would result. Consequently, we have
developed a multi-phase program for Year 2000 compliance. The program consists
of:
- assessment of corporate systems and operations that could be
affected by the Year 2000 problem;
- remediation or replacement of non-compliant systems and
components; and
- testing of systems and components following such remediation
or replacement.
We have focused our Year 2000 review on three areas:
- information technology ("IT") system applications;
- non-IT systems; and
- relationships with third parties (including suppliers as well
as end customers).
We 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. Most
of our Year 2000 issues will be resolved through system conversion/ replacement.
Major IT Systems and Applications.
- The general ledger system and the inventory management and
procurement accounts payable system was replaced at the end of
1998.
- The payroll system was replaced in July 1998; all employees
have been converted to the new system.
- The customer service system will be replaced in mid-1999.
Non-IT Systems. We have categorized our non-IT systems into 16 separate
areas and have already determined that five of such areas pose no material Year
2000 problem. We have identified certain Year 2000 issues in the remaining areas
and are in the process of remediating them. We plan to complete the entire Year
2000 project by September 1999.
Potential Impact. The Year 2000 issue would have a material impact on
our operations if the already identified modifications and conversions are not
made, are not completed on a timely basis, or if we identify material additional
modifications that are not completed on a timely basis.
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<PAGE> 18
THIRD PARTIES' STATE OF READINESS - POTENTIAL IMPACT
We have completed formal communications with most of our key suppliers
to determine the extent to which we are vulnerable to those third parties'
failure to resolve their own Year 2000 problems. For suppliers having potential
compliance problems, we are developing alternate sources and services in the
event such noncompliance occurs. We are also identifying areas requiring higher
inventory levels based on compliance uncertainties. We cannot guarantee that the
failure of companies to resolve their own Year 2000 issue will not have a
material adverse effect on our business, financial condition and results of
operations.
THE COSTS TO ADDRESS OUR Y2K ISSUES
We are utilizing both internal and external resources to reprogram
and/or replace and test our software for Year 2000 modifications. Of the $38
million total project cost, approximately $31 million will be capitalized since
those costs are attributable to the purchase of new software for total system
replacements because the Year 2000 solution comprises only a portion of the
benefit resulting from the system replacements. The remaining $7 million will be
expensed as incurred.
To date, we have expensed $2 million for Year 2000 maintenance
activities. Our total Year 2000 projected cost, as well as our estimates of the
time needed to complete remedial efforts, are based on currently available
information and do not include the estimated costs and time associated with the
impact of a third party's Year 2000 issue.
RISKS; CONTINGENCY PLAN
We believe the Y2K worst case scenario most reasonably likely to occur
would be disruptions in power plant monitoring systems, thereby producing
inaccurate data and failures in electronic switching mechanisms at transmission
junctions. This would prolong localized outages because technicians would have
to manually activate switches. Such an event would have a material, but
presently indeterminable, effect on our financial results. We are developing
contingency plans to address any delay in becoming Year 2000 compliant, and
expect to have contingency plans completed by June 1999.
The costs of the project and the dates on which we plan to complete the
Year 2000 modifications are based on management's best estimates. These
estimates were derived from numerous assumptions of future events including the
continued availability of certain resources and other factors. However, we
cannot guarantee that this project will be completed as planned. Also, 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.
THE COMPANY
GENERAL
The Company, is a public utility engaged in the generation, purchase,
transmission, distribution and sale of electric energy. It operates in an area
of approximately 1,700 square miles in northeastern Ohio that includes the City
of Cleveland. It was incorporated under the laws of the State of Ohio in 1892.
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<PAGE> 19
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 743,000
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. The Company had approximately 1,800 employees at December 31, 1998.
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.
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 stockholders 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 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
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<PAGE> 20
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
proposed 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 June 30, 1998 and the Unaudited Combined Pro
Forma Condensed Income Statements for the Six Months ended June 30, 1998 and for
the years ended December 31, 1997, 1996 and 1995 give effect to the agreement
between the Company and Toledo Edison to merge Toledo Edison into the Company.
The Combined Pro Forma Condensed Income Statements of Cleveland Electric and
Toledo Edison for the Year ended December 31, 1997 give effect to the Ohio
Edison - Centerior Energy merger (see note 8 in 1997 Annual Report) and the
merger of Toledo Edison into the Company. The pro forma statements 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.
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<PAGE> 21
COMBINED PRO FORMA CONDENSED BALANCE SHEETS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(Unaudited)
(Millions of Dollars)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
---------------------
HISTORICAL HISTORICAL PRO FORMA COMBINED
CLEVELAND TOLEDO PRO FORMA CLEVELAND ELECTRIC &
ELECTRIC EDISON ADJUSTMENTS TOLEDO EDISON
-------- ------ ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Net Property, Plant and
Equipment................ $3,769 $1,576 $ -- $5,345
Current Assets............... 445 199 (18) (a) 626
Regulatory and other assets.. 701 472 -- 1,173
Goodwill..................... 1,512 501 -- 2,013
------ --- -----
Total Assets................. $6,427 $2,748 ($18) $9,157
====== ====== ===== ======
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stockholder's Equity $1,033 $ 572 $ -- $1,605
Preferred Stock With Mandatory
Redemption
Provisions............ 168 -- -- 168
Without Mandatory Redemption
Provisions........... 238 210 -- 448
Long-term debt............... 2,957 1,086 -- 4,043
------ ------ ------
Total Capitalization......... 4,396 1,868 -- 6,264
Current Liabilities.......... 704 332 (18)(a) 1,018
Deferred Credits and Other
Liabilities.............. 1,327 548 1,875
------ ------ ----- ------
Total Capitalization and
Liabilities.............. $6,427 $2,748 ($18) $9,157
====== ====== ===== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE STATEMENT.
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<PAGE> 22
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(UNAUDITED)
(MILLION OF DOLLARS)
<TABLE>
<CAPTION>
9 MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------------------------------------------
Historical Pro Forma Combined
Cleveland Historical Pro Forma Cleveland Electric &
Electric Toledo Edison Adjustments Toledo Edison
-------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Operating Revenues................. $1,393 $ 714 ($86)(b) $ 2,021
Operating Expenses and
Taxes............................ 1,092 573 (86)(b) 1,579
------ ------ ---- ---------
Operating Income................... 301 141 0 442
Other Income (Loss)................ 21 10 (1)(c) 30
Net Interest Charges............... 173 65 (1)(c) 237
------ ------ ---------
Net Income......................... $ 149 $ 86 $ 0 $ 235
====== ====== ===== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------
Pro Forma Pro Forma Pro Forma Combined
Cleveland Toledo Pro Forma Cleveland Electric &
Electric(d) Edison(d) Adjustments Toledo Edison
<S> <C> <C> <C> <C>
Operating Revenues................. $1,783 $895 ($151)(b) $ 2,527
Operating Expenses and 742 2,009
---- ------
Taxes............................ 1,418 (151)(b)
----- -----
Operating Income................... 365 153 - 518
Other Income (Loss)................ 15 10 (6)(c) 19
Net Interest Charges............... 232 91 (6)(c) 317
------ ---- ------
Net Income......................... $ 148 $ 72 $ - $ 220
====== ==== ===== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE STATEMENTS.
21
<PAGE> 23
COMBINED PRO FORMA CONDENSED INCOME STATEMENTS
OF CLEVELAND ELECTRIC AND TOLEDO EDISON
(UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------
Historical Pro Forma Combined
Cleveland Historical Pro Forma Cleveland Electric &
Electric Toledo Edison Adjustments Toledo Edison
<S> <C> <C> <C> <C>
Operating Revenues................. $1,790 $897 ($133)(b) $2,554
Operating Expenses
and Taxes........................ $1,431 $741 ($134)(b) $2,038
------ ---- ------ ------
Operating Income................... $ 359 $156 $ 1 $ 516
Other Income (Loss)................ $ (2) $(4) ($2)(c) $ (8)
Net Interest Charges................ $ 240 $ 95 ($1)(c) $ 334
------ ---- --------- ------
Net Income.......................... $ 117 $ 57 $ - $ 174
====== ==== ========= ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------
Historical Pro Forma Combined
Cleveland Historical Pro Forma Cleveland Electric &
Electric Toledo Edison Adjustments Toledo Edison
<S> <C> <C> <C> <C>
Operating Revenues................. $1,769 $874 ($127)(b) $2,516
Operating Expenses 1,371 686 ( 129)(b) 1,928
------ ---- ------ ------
and Taxes........................
Operating Income................... 398 188 2 588
Other Income (Loss)................ 31 19 (2)(c) 48
Net Interest Charges................ 245 110 -- 355
------ ---- ------ ------
Net Income......................... $ 184 $ 97 $ -- $ 281
====== ==== ====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE STATEMENTS.
22
<PAGE> 24
NOTES TO COMBINED PRO FORMA CONDENSED BALANCE SHEET AND
INCOME STATEMENTS
(UNAUDITED)
The Pro Forma Financial Statements include the following adjustments:
(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 interest income and interest
expense.
(d) Give effect to Ohio Edison--Centerior Energy merger with the
purchase accounting adjustments recognized in the business
combination (see note 8 in 1997 Annual Report).
23
<PAGE> 25
THE EXCHANGE OFFER
BACKGROUND
The Old Bonds were issued and sold by the Company to the Placement
Agents on September 29, 1998 (the "Old Bond Issue Date"). Thereafter, the Old
Bonds 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 (the "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 it would:
- use its best efforts to cause the Registration Statement to
become effective no later than 150 days after the Old Bond
Issue Date, and
- unless the exchange offer is prohibited by applicable law or
SEC policy, upon effectiveness of the 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 Bonds in the same aggregate principal amount as the Old
Bonds 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 Bonds
validly tendered and not withdrawn prior to the Expiration Date will be accepted
for exchange for New Bonds.
The New Bonds have terms identical to the terms of the Old Bonds except
that the New Bonds 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 Bonds will not be
entitled to the contingent increase in the interest rate described below. The
New Bonds will evidence the same debt as the Old Bonds for which they are
exchanged and will be issued under, and be entitled to the benefits of, the
First Mortgage, which also authorized the issuance of the Old Bonds.
The Company must use all reasonable efforts to file a Shelf
Registration Statement, cause it to be declared effective and keep it effective
until the end of the restricted period for the Old Bonds or such shorter period
as may be necessary to allow for the resale of all Old Bonds, if
- 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;
- the exchange offer is not consummated by April 3, 1999;
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<PAGE> 26
- the Placement Agents so request with respect to the Old Bonds
not eligible to be exchanged for New Bonds in the exchange
offer and held by them following consummation of the exchange
offer; or
- 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 Bonds on the date
of the exchange for validly tendered (and not withdrawn) Old
Bonds
If the exchange offer is not consummated or a Shelf Registration
Statement with respect to resales of the Old Bonds is not declared effective by
April 3, 1999, the interest rate borne by the Old Bonds 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 Bonds for all outstanding Old Bonds that have been
tendered and not withdrawn prior to the close of business on the Expiration Date
(other than Old Bonds 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 Bonds 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."
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 Bonds 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 Bonds in exchange for each $1,000 principal amount
of each corresponding series of outstanding Old Bonds accepted in the exchange
offer. Holders may tender some or all of their Old Bonds 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 Bonds issued pursuant to this
exchange offer in exchange for Old Bonds may be offered for resale, resold and
otherwise transferred by any holder thereof, other than
- a broker-dealer who purchased such Old Bonds directly from the
Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or
- 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 Bonds 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 Bonds. 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 Bonds
wishing to accept the exchange
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<PAGE> 27
offer must represent to the Company, as required by the Registration Agreement,
that such conditions have been met.
Each broker-dealer that receives New Bonds in exchange for Old Bonds
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 Bonds. 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 Bonds if
such New Bonds 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, $125 million aggregate principal
amount of Old Bonds is outstanding. In connection with the issuance of the Old
Bonds, the Company arranged for the Old Bonds 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 Bonds are also issuable and transferable in book-entry
form through DTC. See "Description of New Bonds-- Book-Entry Issuance."
The Company will be deemed to have accepted validly tendered Old Bonds
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 Bonds for the purpose of receiving New Bonds from
the Company and delivering New Bonds to such holders.
If any tendered Old Bonds 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 Bonds will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of the Old Bonds do not have any appraisal or dissenters'
rights under the First Mortgage 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 Bonds 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
Bonds pursuant to the exchange offer. The Company will pay all reasonable
charges and 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.
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<PAGE> 28
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 Bonds 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 Bonds 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,
- to delay acceptance of any Old Bonds, to extend the exchange
offer or to terminate the exchange offer and to refuse to
accept Old Bonds 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
- to amend the terms of the exchange offer in any manner deemed
by it to be advantageous to the holders of the Old Bonds.
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
Bonds 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 NEW BONDS
The New Bonds will bear interest at the same rate and on the same terms
as the Old Bonds. Under the First Mortgage, interest on each Old Bond ceases to
accrue upon the exchange of such Old Bond for a New Bond. Interest will accrue
on each New Bond from the date on which it is authenticated and will be payable
to the person in whose name such New Bond is registered at the close of business
on the Regular Record Date for such interest, which will be the March 15 or
September 15 (whether or not a business day), as the case may be, next preceding
the payment date for such interest. If, however, the New Bond is authenticated
and delivered in exchange for an Old Bond
- between a record date for the payment of interest on that Old
Bond and the related interest payment date, the interest that
accrues on the New Bond from the date of authentication
thereof to that interest payment date shall be payable to the
person in whose name such New Bond was issued on its issuance
date or
- between an interest payment date for the payment of interest
on that Old Bond and the record date for the next succeeding
interest payment date, the interest that accrues on the Old
Bond from the earlier interest payment date to the date on
which the Old Bond is exchanged for the New Bond will be paid
to the person in
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<PAGE> 29
whose name the New Bond is registered on the record date for
that next succeeding interest payment date.
The Company intends to cause the New Bonds to be authenticated on the
date on which the New Bonds are exchanged for the Old Bonds. Therefore, the
exchange will not result in the loss of interest income to holders of Old Bonds
exchanged for New Bonds. Interest on the Bonds is payable semiannually in cash
in arrears on April 1 and October 1 of each year, commencing April 1, 1999 and
the Bonds will bear interest at 6.86% and mature on October 1, 2008.
PROCEDURES FOR TENDERING
GENERAL
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 Bonds (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.
The tender by a holder of Old Bonds 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 BONDS 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 BONDS 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 Bonds may tender such Old Bonds in the exchange
offer. The term "holder" with respect to the exchange offer means any person in
whose name Old Bonds 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 Bonds are held of record by DTC who
desires to deliver such Old Bonds by book-entry transfer at DTC.
DTC'S - BOOK ENTRY DELIVERY TRANSFER FACILITY
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Bonds by
causing DTC to transfer such Old Bonds into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. Although delivery of Old
Bonds 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.
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<PAGE> 30
BONDS REGISTERED IN ANOTHER'S NAME; BENEFICIAL HOLDERS
Any beneficial holder whose Old Bonds 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 Bonds, either make appropriate arrangements to register ownership of the
Old Bonds in such holder's name or obtain a properly completed bond power from
the registered holder which authorizes such owner to tender the Old Bonds 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 Bonds. The transfer of
record ownership may take considerable time.
LETTER OF TRANSMITTAL
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 or 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 Bonds
tendered pursuant thereto are tendered,
- by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal, or
- 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 Bonds listed therein, such Old Bonds must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Bonds on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Bonds.
If the Letter of Transmittal or any Old Bonds 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.
DTC'S AUTOMATED TENDER OFFER PROGRAM
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 Bonds..
COMPANY'S DISCRETION
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Bonds 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 Bonds
not properly tendered or any Old Bonds the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
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<PAGE> 31
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Bonds. 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 Bonds 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 Bonds nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Bonds will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Bonds 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 Bonds 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 Bonds which
have not been tendered in the exchange offer or to file a registration statement
to permit resales of Old Bonds which are not tendered pursuant to the exchange
offer (except as may be required under the Registration Agreement), subject to
the terms of the First Mortgage, the Company reserves the right in its sole
discretion to:
- purchase or make offers for any Old Bonds that remain
outstanding subsequent to the Expiration Date,
- as set forth under -"Termination" terminate the exchange offer
with respect to such Old Bonds, or
- to the extent permitted by applicable law, purchase Old Bonds
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.
HOLDERS' REPRESENTATIONS
By tendering, each holder of Old Bonds will represent to the Company
that, among other things,
- the New Bonds acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the
person receiving such New Bonds, 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 Bonds,
- 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 Bonds and (i) whose Old Bonds are
not lost but are not immediately available or (ii) who cannot deliver their Old
Bonds, the Letter of Transmittal or
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<PAGE> 32
any other 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:
- The tender is made through an Eligible Institution;
- 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 Bonds,
- the certificate number or numbers of such Old Bonds,
and
- the principal amount of Old Bonds 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 Bonds 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
- such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s)
representing all tendered Old Bonds in proper form for
transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Bonds 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 Bonds 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 Bonds 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:
- specify the name of the person having deposited the Old Bonds
to be withdrawn (the "Depositor"),
- include a statement that the Depositor is withdrawing its
election to have Old Bonds exchanged, and identify the Old
Bonds to be withdrawn (including the certificate number or
numbers and principal amount of such Old Bonds),
- be signed by the Depositor in the same manner as the original
signature on the Letter of Transmittal by which such Old Bonds
were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to permit
the Trustee with respect to the Old Bonds to register the
transfer of such Old Bonds into the name of the Depositor
withdrawing the tender, and
- specify the name in which any such Old Bonds are to be
registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility
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<PAGE> 33
(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 Bonds so withdrawn will be deemed not to have been validly
tendered for purposes of the exchange offer and no New Bonds will be issued with
respect thereto unless the Old Bonds so withdrawn are validly retendered. Any
Old Bonds 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 Bonds 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 that:
- the exchange offer does not violate applicable law or any
applicable interpretation of the staff of the SEC,
- 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
- 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:
- refuse to accept any Old Bonds and return any Old Bonds that
have been tendered to the holders thereof,
- extend the exchange offer and retain all Old Bonds tendered
prior to the Expiration of the exchange offer, subject to the
rights of such holders of tendered Old Bonds to withdraw their
tendered Old Bonds, or
- waive such termination event with respect to the exchange
offer and accept all properly tendered Old Bonds 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 Bonds, 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 Bonds, if the exchange offer would otherwise
expire during such period.
EXCHANGE AGENT
The Chase Manhattan Bank, the First Mortgage Trustee under the First
Mortgage, 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:
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<TABLE>
<CAPTION>
<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>
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 Bonds and in handling
or forwarding tenders for exchange.
Reasonable expenses incurred in connection with the exchange offer,
including expenses of the Exchange Agent and First Mortgage 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 Bonds pursuant to the exchange offer. If, however, certificates
representing New Bonds or Old Bonds 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 Bonds
tendered, or if tendered Old Bonds 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 Bonds pursuant to the
exchange offer, then the amount of any such transfer tax (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.
DESCRIPTION OF NEW BONDS
GENERAL
The Old Bonds were, and the New Bonds will be, issued 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-nine supplemental indentures thereto and as to be further
supplemented, for the issuance of the New Bonds, by an Eightieth Supplemental
Indenture ("Eightieth Supplemental Indenture") to be dated as of _____________,
1999 (the
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<PAGE> 35
Mortgage and Deed of Trust as so supplemented herein called the "First
Mortgage"). The terms of the Bonds include those stated in the First Mortgage
and those made part of the First Mortgage by reference to the Trust Indenture
Act of 1939, as amended ("Trust Indenture Act"). Holders of Bonds are referred
to the First Mortgage and the Trust Indenture Act for a statement of all such
terms.
The following summary of certain provisions of the First Mortgage does
not purport to be complete and is subject to, and qualified in its entirety by,
all of the provisions of the First Mortgage. Copies of the First Mortgage are
available as set forth herein under "--Additional Information." 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 First Mortgage." The Articles cited below refer to Articles of
the First Mortgage.
PRINCIPAL, MATURITY AND INTEREST
The Bonds are limited to an aggregate amount of $125 million. The New
Bonds will bear interest at the same rate and on the same terms as the Old Bonds
of the corresponding series. Under the First Mortgage, interest on each Old Bond
ceases to accrue upon the exchange of such Old Bond for a New Bond. Interest
will accrue on each New Bond from the date on which it is authenticated and will
be payable to the person in whose name such New Bond is registered at the close
of business on the Regular Record Date for such interest, which will be the
March 15 or September 15 (whether or not a business day), as the case may be,
next preceding the payment date for such interest. If, however, the New Bond is
authenticated and delivered in exchange for an Old Bond:
- between a record date for the payment of interest on that Old
Bond and the related interest payment date, the interest
that accrues on the New Bond from the date of authentication
thereof to that interest payment date shall be payable to the
person in whose name such New Bond was issued on its issuance
date, or
- between an interest payment date for the payment of interest
on that Old Bond and the record date for the next succeeding
interest payment date, the interest that accrues on the Old
Bond from the earlier interest payment date to the date on
which the Old Bond is exchanged for the New Bond will be paid
to the person in whose name the New Bond is registered on the
record date for the next succeeding interest payment date.
The Company intends to cause the New Bonds to be authenticated on the
date on which the New Bonds are exchanged for the Old Bonds. Therefore, the
exchange will not result in the loss of interest income to holders of Old Bonds
exchanged for New Bonds.
Interest on the Bonds is payable semiannually in cash on April 1 and
October 1 of each year, commencing April 1, 1999. The Bonds will bear interest
at 6.86% and mature on October 1, 2008. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, interest and
Additional Interest (as hereinafter defined), if any, on the Bonds will be
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
Bonds ("Security Register"); provided that all payments of
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<PAGE> 36
principal, interest and Additional Interest, if any, with respect to Bonds, 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 First Mortgage Trustee maintained for such purpose.
The Bonds are denominated in United States currency in minimum
denominations of $1,000 and any integral multiple thereof.
SECURITY FOR THE FIRST MORTGAGE BONDS
The 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:
- cash, receivables and contracts not pledged or required to be
pledged under the First Mortgage and leases in which the
Company is lessor;
- securities not specifically pledged or required to be pledged
under the First Mortgage;
- property held for consumption in operation or in advance of
use for fixed capital purposes or for resale or lease to
customers;
- 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
- 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 provisions and (b) to revise the definition of property additions which
can constitute bondable property to include facilities outside the State of Ohio
("State")
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<PAGE> 37
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) Mansfield Plant and Beaver Valley Unit 2: 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) Lake Shore facilities: 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.
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) Seneca Power Plant: 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) Water Intake and Discharge Facilities: 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) Transmission and Distribution Systems: 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
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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.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
In addition to the principal amount of First Mortgage Bonds outstanding
at September 30, 1998 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 Bonds and without limit as to amount,
on the basis of:
- 70% of bondable property (as described under "-Security for
the First Mortgage Bonds") not previously used as the basis
for issuance of First Mortgage Bonds or applied for some other
purpose under the First Mortgage;
- the deposit of cash (which may be withdrawn thereafter on the
basis of bondable property or refundable First Mortgage
Bonds); and
- 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
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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 September 30, 1998, the Company was not able to issue additional
First Mortgage Bonds except on the basis of refundable bonds. 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.
REDEMPTION
The Bonds will be redeemable as a whole or in part, at the option of
the Company at any time, at a redemption price equal to the greater of
- 100% of their principal amount and
- the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the
date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate
plus thirty-seven and one-half [37 1/2] basis points for the
Bonds,
plus in the case of each of the above clauses, accrued interest to the date of
redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term ("Remaining Life") of the series of Bonds to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Bonds.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated
or, if such firm is unwilling or unable to select the Comparable Treasury Issue,
an independent investment banking institution of national standing selected by
the Company.
"Comparable Treasury Price" means (1) the average of four Reference
Treasury Dealer Quotations for such redemption date after excluding the highest
and lowest Reference Treasury Dealer Quotations, or (2) if the Independent
Investment Banker obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co. Incorporated
and Credit Suisse First Boston Corporation and their respective successors,
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in The City of New York (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer
and (2) any other Primary Treasury Dealer selected by the Independent Investment
Banker after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m. New York City time, on the third Business Day preceding such redemption
date.
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"Treasury Rate" means, with respect to any redemption date,
- the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently
published statistical release designated "H.15(519)", or any
successor publication which is published weekly by the Federal
Reserve and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under
the caption "Treasury Constant Maturities," for the maturity
corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Remaining Life,
yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be
determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight line basis,
rounding to the nearest month) or
- if such release (or any successor release) is not published
during the week preceding the calculation date or does not
contain such yields, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using 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.
The Treasury Rate shall be calculated on the third Business Day (as defined in
the Seventh-Eighth Supplemental Indenture) preceding the redemption date.
Holders of Bonds 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. If fewer than all of the Bonds are to be redeemed, the Trustee
will select, not more than 60 days prior to the redemption date, the particular
portions thereof for redemption from the outstanding Bonds by such method as the
Trustee deems fair and appropriate.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Bonds in accordance with the First
Mortgage. The First Mortgage 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
First Mortgage. See "- Book-Entry Issuance."
The registered holder of a Bond will be treated as the owner of it for
all purposes.
CONCERNING THE FIRST MORTGAGE TRUSTEE
The Chase Manhattan Bank is the First Mortgage Trustee. The First
Mortgage Trustee may resign by giving written notice of its resignation as
provided in the First Mortgage. The resignation will take effect on the date
specified in such notice, unless previously a successor trustee shall have been
appointed in accordance with the First Mortgage. The holders of a majority of
the then outstanding principal amount of the Bonds may remove the First Mortgage
Trustee at any time. Any successor trustee must be a bank or trust company in
good standing organized and doing business under the laws of the United States
or of any State and having its principal office in the Borough of Manhattan, the
City of New York, New York, and have a combined capital and surplus of at least
$5,000,000.
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The First Mortgage contains certain limitations on the rights of the
First Mortgage Trustee, should it become a creditor of the Company within four
months prior to a default or thereafter, 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 First Mortgage Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days or resign.
The holders of a majority in principal amount of the then outstanding
Bonds will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the First Mortgage Trustee,
subject to certain exceptions. The First Mortgage provides that in case an Event
of Default shall occur (which shall not be cured), the First Mortgage 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 First
Mortgage Trustee is under no obligation to exercise any of its rights or powers
under the First Mortgage at the request of any of the holders of Bonds unless
such holder shall have offered to the First Mortgage Trustee security and
indemnity satisfactory to it against any cost, liability or expense.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS OR DIRECTORS
The First Mortgage provides that no recourse for the payment of the
principal of or interest on any of the Bonds or for any claim based thereon or
otherwise in respect thereof shall be had against any incorporator, stockholder,
officer or director of the Company or of any successor thereof. Each holder, by
accepting the Bonds, waives and releases all such liability and such waiver and
release are part of the consideration for issuance of the Bonds.
BOOK-ENTRY ISSUANCE
The certificates representing the Bonds were, and the certificates
representing the New Bonds will be, issued in fully registered form and without
interest coupons.
Bonds sold in reliance on Rule 144A are represented by one or more
global Bonds (the "Global Bonds") in definitive, fully registered form and
without interest coupons and have been deposited with the First Mortgage
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 Bonds 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 Bonds 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 certificates evidencing
such interests.
THE GLOBAL BONDS
Ownership of beneficial interests in a Global Bond is and will be
limited to DTC participants or persons who hold interests through participants.
Ownership of beneficial interests in a Global Bond 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
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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 Bond 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 Bonds 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 Bonds on
behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Bond, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Bonds represented by such Global Bond for all
purposes under the First Mortgage and the Bonds. No beneficial owner of an
interest in a Global Bond is or will be able to transfer that interest except in
accordance with applicable procedures of DTC, in addition to those provided for
under the First Mortgage and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, the Global Bonds will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company nor the First Mortgage Trustee or any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Bonds
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 Bond, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Bond, 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 Bond
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 Bond for
any reason, such holder must transfer its interest in the Global Bond 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 Bonds (including the presentation of Bonds for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Bonds are credited and only in respect
of such portion of the aggregate principal amount of Bonds as to which such
participant or participants has or have given such direction. However, if there
is an Event of
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Default under the Bonds, DTC will exchange the applicable Global Bond for
Certificated Bonds 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
Bonds 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 First
Mortgage 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.
ISSUANCE OF CERTIFICATED BONDS IF DTC FAILS TO CONTINUE AS DEPOSITARY
If DTC is at any time unwilling or unable to continue as a depository
for the Global Bonds and a successor depository is not appointed by the Company
within 90 days, the Company will issue Certificated Bonds in exchange for the
Global Bonds. Holders of an interest in a Global Bond may receive a Certificated
Bond in accordance with DTC's rules and procedures in addition to those provided
for under the First Mortgage.
EVENTS OF DEFAULT; REMEDIES
EVENTS OF DEFAULT
Events of default under the First Mortgage include the failure of the
Company
- to pay the principal of or premium, if any, on any First
Mortgage Bond when due;
- to pay any interest on or sinking fund obligation of any First
Mortgage Bond within 30 days after it is due;
- to pay the principal of or interest on any prior lien bonds
within any allowable period;
- 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
- to perform any 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.
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Events of default also include certain events of bankruptcy, insolvency or
reorganization in bankruptcy or insolvency of the Company. (Article IX.)
NOTICES OF DEFAULT
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 the last bullet
point 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.)
REMEDIES IN EVENT OF DEFAULT
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
- take possession of and operate the mortgaged property for the
purpose of paying the principal of and interest on the First
Mortgage Bonds;
- 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;
- 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
- pursue any other remedy. (Article IX.)
EXERCISE OF REMEDIES
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:
- 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;
- 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
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- 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.)
In accordance with the Nineteenth Supplemental Indenture, which
modified the First Mortgage, 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 60% 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 60% 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 than 60% 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.)
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.)
ADDITIONAL INFORMATION
Anyone who receives this Memorandum may obtain a copy of the First
Mortgage without charge by writing to Nancy C. Ashcom, Corporate Secretary, The
Cleveland Electric Illuminating Company, c/o FirstEnergy Corp., 76 South Main
Street, Akron, OH 44308-1890.
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CERTAIN TAX CONSIDERATIONS
The following is a summary of the taxation of the Bonds and of certain
anticipated United States federal income tax consequences resulting from the
ownership of the Bonds and the exchange of Old Bonds for New Bonds. This summary
does not cover all of the possible tax consequences relating to the ownership of
the Bonds 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 Bonds 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 Bonds 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.
YOU SHOULD CONSULT YOUR 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 YOUR PARTICULAR SITUATION.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Bond that is (for purposes of United States federal income tax):
- a citizen or resident of the United States,
- 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
- 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 Bond other than a U.S. Holder.
The exchange of the Old Bonds for the New Bonds 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 Bond will be equal to
the tax basis of the Old Bond exchanged therefor. A holder's holding period for
a New Bond will include the period during which the holder held the Old Bond
exchanged therefor.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
GENERAL
Under general principles of current law, the interest paid on a Bond
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.
BONDS PURCHASED AT A PREMIUM
If a U.S. Holder purchases a Bond for an amount that is greater than
the amount payable at maturity, that U.S. Holder will be considered to have
purchased such Bond 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 Bond using a constant yield to maturity method over the remaining term of
the
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Bond. 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 Bonds will reduce the basis of the Bond
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 Bond and will decrease the gain, or increase the loss, on a
disposition or retirement of the Bond.
BONDS ISSUED AT A DISCOUNT
In the case of Bonds 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 Bonds may bear original issue discount, or "OID," for federal
income tax purposes.
Original issue discount is defined as the excess of the Bond's stated
redemption price over its issue price (which is the initial offering price to
the public at which a substantial amount of the Bonds are sold), provided that
excess equals or exceeds a statutory de minimis amount (one-quarter of one
percent of the Bond'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 Bonds 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 Bonds:
- constitutes interest includable in the U.S. Holder's gross
income for federal income tax purposes, and
- 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 Bonds. Thus, the effect of
OID is to increase the amount of taxable interest income above
the actual interest payments during the life of the Bonds.
DISPOSITION OR RETIREMENT OF A BOND
Upon the sale, exchange or other disposition of a Bond, or upon the
retirement of a Bond 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 Bond. A U.S.
Holder's tax basis for determining gain or loss on the disposition or retirement
of a Bond will be the cost of that Bond 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 Bond, and decreased by the amount of any payments
under the Bond 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 Bond will be
capital gain or loss, except to the extent the gain represents accrued OID 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 Bond has
been held for more than one year. Any capital gain recognized on the disposition
or retirement of Bonds held for more than twelve months will be taxed at a
maximum rate of 20 percent.
46
<PAGE> 48
SECONDARY MARKET PURCHASERS -- PREMIUM AND MARKET DISCOUNT
A U.S. Holder who purchases a Bond 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 Bond and the 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 Bond and reduced by the amount
of any payment previously made on the Bond 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 Bond other
than a qualified periodic interest payment, will be considered to have purchased
such Bond at an "acquisition premium."
The amount of OID that such U.S. Holder must include in its gross
income with respect to such Bond 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 Bond 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 Bond 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 Bond. Such premium generally shall be deemed to be an offset to interest
otherwise includable with respect to the Bond. Premium on a Bond 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 Bond.
If a U.S. Holder purchases a Bond 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 Bond 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 Bond), 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 Bond 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 Bond. In
addition, the U.S. Holder may be required to defer, until the maturity of the
Bond 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 Bond.
Any market discount will be considered accrued ratably during the
period from the date of acquisition to the maturity date of the Bond, unless the
U.S. Holder elects to accrue on a constant interest basis. A U.S. Holder of a
Bond 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 Bond), 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.
47
<PAGE> 49
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 Bonds as long as either
- the beneficial owner of the Bond, under penalties of perjury,
provides the Company or their agent with such beneficial
owner's name and address and certifies on IRS Form W-8 (or a
suitable substitute form) that it is not a U.S. Holder or
- a securities clearing organization, bank, or other financial
institution that holds customers' securities in the ordinary
course of its trade or holds the Bond 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 Bond 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, 1999, 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
- is not actually or constructively a "10 percent shareholder"
of the Company within the meaning of the Code,
- 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
- 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 Bonds 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 Bond will be exempt from United
States federal income and withholding tax, provided that
48
<PAGE> 50
- the gain is not effectively connected with the Non-U.S.
Holder's conduct of a trade or business in the United States,
- 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
- 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 Bond 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.
Recently adopted United States Treasury Regulations, which generally
are effective for payments made after December 31, 1999 (subject to certain
transition rules), alter the foregoing rules in certain respects. Under those
regulations, a Non-U.S. Holder will be subject to information reporting and
backup withholding unless the Company or its agent receives certification of the
holder's non-United States status. Depending upon the circumstances, this
certification will need to be provided (i) directly by the non-U.S. Holder, (ii)
in the case of a non-U.S. Holder that is treated as a partnership or other
fiscally transparent entity, by the partners, shareholders, or other
beneficiaries of such entity, or (iii) certain qualified financial institutions
or other qualified entities on behalf of the non-U.S. Holder.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Bonds that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities (other than Old Bonds acquired directly from the Company or any
affiliate of the Company) may exchange such Old Bonds for New Bonds pursuant to
the exchange offer, provided that each broker-dealer that receives New Bonds for
its own account in exchange for Old Bonds, if such Old Bonds 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 Bonds.
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
Bonds received in exchange for Old
49
<PAGE> 51
Bonds if such Old Bonds 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 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 ____, 1999, all dealers effecting transactions
in the New Bonds may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Bonds by
broker-dealers. New Bonds 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 Bonds 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 Bonds.
Any broker-dealer that resells New Bonds 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 Bonds may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Bonds 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 Bonds) other than commissions or concessions of any
broker or dealer and will indemnify the holders of the Bonds (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, Esq., Associate General Counsel
for FirstEnergy Corp., and Winthrop, Stimson, Putnam & Roberts, One Battery Park
Plaza, New York, NY 10004-1490, special counsel.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 (post-merger) and 1996 (pre-merger) and for the years ended December 31,
1996 and 1995 and the period from January 1, 1997 through November 7, 1997
(pre-merger), and the period from November 8, 1997 to December 31, 1997
(post-merger), incorporated by reference in this prospectus, have been audited
by Arthur Andersen LLP, independent public accountants, as stated in their
report dated February 13, 1998, with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
50
<PAGE> 52
With respect to the unaudited interim financial information for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of that information. However, their separate reports
thereon state that they did not audit and they do not express opinions on that
interim financial information. Accordingly, the degree of reliance on their
reports on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim financial information because those
reports are not "reports" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the Act.
51
<PAGE> 53
$125,000,000
EXCHANGE OFFER
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
FIRST MORTGAGE BONDS, 6.86% SERIES A DUE 2008
FOR ANY AND ALL OUTSTANDING
FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
PROSPECTUS
, 1999
<PAGE> 54
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.
II-1
<PAGE> 55
(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:
(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> 56
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 24th day of February, 1999.
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
By /s/ H. Peter Burg
-----------------------
<PAGE> 57
Each of the undersigned directors and officers of the Registrant,
individually as such director and/or officer, hereby makes, constitutes and
appoints H. Peter Burg and Nancy C. Ashcom, and each of them singly or jointly,
with full power of substitution, as his true and lawful attorney-in-fact and
agent to execute in his name, place and stead, in any and all capacities, and to
file with the Commission, this registration statement and any and all
amendments, including post-effective amendments, to this registration statement,
which amendment may make such changes in the registration statement, as the
Registrant deems appropriate hereby ratifying and confirming all that each of
said attorneys-in-fact, or his, her or their substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Principal executive officer:
/s/ H. Peter Burg February 24, 1999
- -------------------------------
H. Peter Burg President
Principal financial officer:
/s/ Richard H. Marsh February 24, 1999
- -------------------------------
Richard H. Marsh Vice President
Principal accounting officer:
/s/ Harvey L. Wagner February 24, 1999
- -------------------------------
Harvey L. Wagner Controller
Directors:
/s/ Willard R. Holland February 24, 1999
- -------------------------------
Willard R. Holland Director
/s/ H. Peter Burg February 24, 1999
- -------------------------------
H. Peter Burg Director
/s/ Anthony J. Alexander February 24, 1999
- -------------------------------
Anthony J. Alexander Director
II-2
<PAGE> 58
EXHIBIT INDEX
Exhibits Filed Herewith
The following Exhibits are filed herewith and made a part hereof:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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.
Supplemental Indentures between the Company and the First
Mortgage Trustee (the number of such supplemental indenture in
parentheses) supplemental to the Mortgage and Deed of Trust
dated July 1, 1940, between the Company and The First Mortgage
Trustee, dated as follows:
4b(77) June 1, 1998.
4b(78) October 1, 1998.
4b(79) October 1, 1998
4b(80) _________, 1999
5 Opinion of counsel for the Company.
12 Statements regarding computation of ratios.
15 Letter regarding unaudited interim financial information.
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 First
Mortgage Bonds, 6.86% Series A due 2008 under Mortgage and Deed
of Trust dated July 1, 1940, of The Chase Manhattan Bank, as
Trustee.
<PAGE> 59
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 parentheses.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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(l) 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(l), 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).
2
<PAGE> 60
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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).
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).
3
<PAGE> 61
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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(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).
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).
4b(76) October 15, 1997 (Exhibit 4(a), File No. 333-47651).
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
4
<PAGE> 62
EXHIBIT
NUMBER DESCRIPTION
------ -----------
26, 1994 Form 8-K, File No. 1-2323).
4(d)(1) Note Indenture dated as of October 24, 1997.
4(d)(2) First Supplemental Note Indenture dated as of October 24, 1997.
*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.
* 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.
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.
5
<PAGE> 1
Exhibit 1(a)
PLACEMENT AGREEMENT
September 29, 1998
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
McDonald & Company Securities, 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") $125,000,000 aggregate
principal amount of First Mortgage Bonds, 6.86% Series Due 2008 (the "Bonds"),
to be issued pursuant to the 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 "original Indenture"), as supplemented and
modified in certain respects by indentures supplemental thereto, including the
Seventy-Eighth Supplemental Indenture to be dated as of October 1, 1998 (the
"Supplemental Indenture") (that original Indenture, as supplemented and modified
by all indentures supplemental thereto, the "Indenture") between the Company and
The Chase Manhattan Bank, a New York banking corporation, as trustee (the
"Trustee").
The Bonds 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 Bonds purchased by you hereunder in accordance with Section 6 hereof on
the terms set forth in the Final Memorandum (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 Final Memorandum in
connection with that offering of the Bonds by you. Purchasers of the Bonds
(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 Bonds for a series under the Indenture of mortgage
bonds of the Company (the "Exchange Bonds") with terms identical to the Bonds
(except that the Exchange Bonds will not contain terms with respect to transfer
restrictions).
In connection with the sale of the Bonds, the Company will prepare an
offering memorandum (the "Final Memorandum") setting forth or including a
description of the terms of the Bonds, the terms of the offering, a description
of the Company and any material
<PAGE> 2
developments relating to the Company occurring after the date of the most recent
financial statements included or incorporated by reference therein.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to, and agrees with, you that as of the date hereof:
(a) 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 the Final
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 the Final 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 the Final 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 the Final
Memorandum, those financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis.
(e) The pro forma adjustments described in the Final
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.
2
<PAGE> 3
(f) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
enforceable against the Company in accordance with its terms except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law) and by
an implied covenant of good faith and fair dealing or except as rights in the
nature of indemnity under the Agreement may be limited by principles of public
policy.
(g) The original Indenture has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding agreement
enforceable against the Company in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law) and by
an implied covenant of good faith and fair dealing or as the same may be limited
by the laws of the United States or the laws of the State of Ohio, where the
property covered thereby is located, affecting the remedies for the enforcement
of the security provided for therein.
(h) The Supplemental 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 the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and by an implied covenant of good faith and fair dealing or as the same
may be limited by the laws of the United States or the laws of the State of
Ohio, where the property covered thereby is located, affecting the remedies for
the enforcement of the security provided for therein.
(i) The Bonds have been duly authorized by the Company and,
when the Bonds 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 Bonds 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 the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of whether enforceability
is considered in a proceeding in equity or at law) and by an implied covenant of
good faith and fair dealing.
(j) 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 the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable principles (regardless of
3
<PAGE> 4
whether enforceability is considered in a proceeding in equity or at law) and by
an implied covenant of good faith and fair dealing.
(k) The execution and delivery by the Company of this
Agreement, the Supplemental Indenture, the Bonds and the Registration Agreement,
and the performance by the Company of its obligations thereunder and under the
Indenture (to the extent pertinent to the issuance of the Bonds), will not
constitute a default under, or conflict with or violate any provision of the
articles of incorporation, regulations, partnership agreement or other
organizational documents of the Company or any Subsidiary of the Company or any
agreement, indenture, mortgage, lease, note or other obligation or instrument to
which the Company or any Subsidiary of the Company is a party or by which it is
bound, or any law, rule, regulation, 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
execution, delivery or performance by the Company of its obligations under this
Agreement, the Indenture (to the extent pertinent to the issuance of the Bonds),
the Bonds 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 Bonds 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 Bonds and (iii) from The Public Utilities Commission of Ohio ("PUCO")
(whose approval for the performance by the Company of its obligations under the
Agreement, the Supplemental Indenture, the Bonds and the Registration Agreement
has been obtained).
(l) 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.
(m) 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.
(n) 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.
4
<PAGE> 5
(o) There are no legal or governmental actions, suits,
proceedings, inquiries or investigations 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 (to the extent pertinent to the issuance of the Bonds), the Bonds
or the Registration Agreement or to consummate the transactions contemplated by
the Final Memorandum.
(p) 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 Bonds in a
manner that would require the registration under the Securities Act of the Bonds
or (ii) engaged in any form of general solicitation or general advertising in
connection with the offering of the Bonds (as those terms are used in Regulation
D under the Securities Act) or in any manner involving a public offering thereof
within the meaning of section 4(2) of the Securities Act.
(q) 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.
(r) It is not necessary in connection with the offer, sale and
delivery of the Bonds to the Purchasers in the manner contemplated by this
Agreement to register the Bonds under the Securities Act or to qualify the
Supplemental Indenture under the Trust Indenture Act of 1939, as amended.
(s) 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.
(t) 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
5
<PAGE> 6
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.
(u) 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 Bonds 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.
(v) The Company is a "subsidiary" of FirstEnergy Corp., which
is a "holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended. FirstEnergy Corp. 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.
(w) Cleveland Electric has good title to substantially all the
properties referred to or described in the granting clauses of the Indenture 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 "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.
2. OFFERING. You have advised the Company that the Purchasers will make
an offering of the Bonds 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 Bonds set forth in Schedule I hereto opposite
their names at a purchase price equal to the sum of 98.875% of the principal
amount of the Bonds, plus accrued interest, if any, from October 1, 1998, to the
date of payment and delivery.
Payment for the Bonds will be made against delivery of the
Bonds at a closing to be held at the offices of Winthrop, Stimson, Putnam &
Roberts, at 10:00 A.M., local time, on October 5, 1998. The time and date of
that payment are herein referred to as the Closing Date. Payment for the Bonds
will be made by wire transfer to the Company of immediately available funds.
The Company will deliver against payment of the purchase price
the Bonds to be offered and sold by the Purchasers in reliance on Regulation S
(the "Regulation S Bonds") in the form of one permanent global security in
definitive form (a "Regulation S Global Bond") that will be deposited with the
Trustee as custodian for The Depository Trust Company ("DTC") and
6
<PAGE> 7
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 Bonds 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 Bonds") in the form of one
permanent global security in definitive form (a "Restricted Global Bond")
deposited with the Trustee as custodian for DTC and registered in the name of
Cede & Co., as nominee for DTC. The Regulation S Global Bonds and the Restricted
Global Bonds will be assigned separate CUSIP numbers. The Restricted Global
Bonds 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 Bonds, interests in the Regulation S Global Bonds 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 Bonds and the Regulation S Global Bonds 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.
The certificates evidencing the Bonds 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 Bonds to the
Purchasers duly paid, against payment of the purchase price therefor.
Notwithstanding the foregoing, any Bonds 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 Bonds 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 Bonds 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,
7
<PAGE> 8
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 Bonds 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
Winthrop, Stimson, Putnam & Roberts, counsel for the Company, dated the Closing
Date, to the effect that:
(i) the Supplemental Indenture is a valid and binding
agreement of the Company, enforceable in accordance with its terms
except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an implied
covenant of good faith and fair dealing or as the same may be limited
by the laws of the United States or the laws of the State of Ohio,
where the property covered thereby is located, affecting the remedies
for the enforcement of the security provided for therein; and the form
of supplemental indenture pursuant to which the Exchange Bonds are to
be issued 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 Bonds 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 Bonds 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 the same may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an implied
covenant of good faith and fair dealing;
(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 the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors'
rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at
law) and by an implied covenant of good faith and fair dealing;
8
<PAGE> 9
(iv) the execution and delivery by the Company of
this Agreement, the Supplemental Indenture, the Bonds and the
Registration Agreement, and the performance by the Company of its
obligations thereunder and under the Indenture (to the extent pertinent
to the issuance of the Bonds), 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
execution, delivery or performance by the Company of its obligations
under this Agreement, the Indenture (to the extent pertinent to the
issuance of the Bonds), the Bonds 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 Bonds, (ii)
by the securities or Blue Sky laws of the various states and the
Securities Act in connection with the offer of the Exchange Bonds and
(iii) from the PUCO;
(v) the statements in the Final Memorandum under the
captions "Description of Bonds," "Certain Tax Considerations," "Private
Placement," "Transfer Restrictions," and "Considerations for Employee
Benefit Plans," insofar as those statements constitute summaries of the
legal matters, documents and requirements referred to therein, fairly
present in all material respects such legal matters, documents and
requirements;
(vi) after due inquiry, such counsel does not know of
any legal or governmental actions, suits, 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 (to the extent pertinent to the issuance of the Bonds),
the Bonds or the Registration Agreement or to consummate the
transactions contemplated by the Final Memorandum;
(vii) assuming the accuracy and correctness of the
representations, warranties and agreements of the Company in Sections
1(p), 1(u), 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 sale of the Bonds to the Purchasers
under this Agreement or in connection with the initial resale of the
Bonds by the Purchasers in accordance with Section 6 of this Agreement
to register the Bonds under the Securities Act or to qualify the
Supplemental Indenture under the Trust Indenture Act, it being
understood that no opinion is expressed as to any subsequent resale of
any Bond;
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<PAGE> 10
(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; and
(ix) the Company is a "subsidiary" of FirstEnergy
Corp., which is a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. FirstEnergy
Corp. 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.
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
David L. Feltner, Esq., as counsel of FirstEnergy Corp., to the effect that:
(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 and constitutes a valid
and binding agreement enforceable against the Company in
accordance with its terms except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors rights generally, by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing or except as
rights in the nature of indemnity under the Agreement may be
limited by principles of public policy;
(iii) the original Indenture has been duly
authorized, executed, and delivered by the Company and
constitutes a valid and binding agreement enforceable against
the Company in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization,
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<PAGE> 11
moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing or as the same
may be limited by the laws of the United States or the laws of
the State of Ohio, where the property covered thereby is
located, affecting the remedies for the enforcement of the
security provided for therein;
(iv) the Supplemental Indenture has been duly
authorized, executed and delivered by the Company and
(assuming due authorization, execution and delivery by the
Trustee) constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms except as
the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity
or at law) and by an implied covenant of good faith and fair
dealing or as the same may be limited by the laws of the
United States or the laws of the State of Ohio, where the
property covered thereby is located, affecting the remedies
for the enforcement of the security provided for therein;
(v) the Bonds have been duly authorized and executed
by the Company and, when the Bonds are authenticated by the
Trustee in accordance with the Indenture and delivered to and
paid for by the Purchasers in accordance with this Agreement,
the Bonds 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 the same
may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity
or at law) and by an implied covenant of good faith and fair
dealing;
(vi) 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
the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors rights
generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity
or at law) and by an implied covenant of good faith;
(vii) the execution and delivery by the Company of
this Agreement, the Supplemental Indenture, the Bonds and the
Registration Agreement, and the performance by the Company of
its obligations thereunder and under the original
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<PAGE> 12
Indenture (to the extent pertinent to the issuance of the
Bonds), 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
Bonds, the Supplemental Indenture, the original Indenture (to
the extent pertinent to the issuance of the Bonds) 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 Bonds and (ii) the
securities or Blue Sky laws of the various states and the
Securities Act in connection with the offer of the Exchange
Bonds;
(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 Bonds 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
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<PAGE> 13
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 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 has good title to substantially all
the properties referred to or described in the granting
clauses of the Indenture 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
"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;
(xiii) the Indenture 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 Indenture and the Indenture
constitutes a valid and direct first lien upon all of the
property referred to in subparagraph (xii) 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
Indenture, will become subject to the lien thereof upon
acquisition; and
(xiv) the Bonds are entitled to the benefits and
security of the Indenture, equally and ratably with all other
bonds outstanding under the Indenture, except as the
enforceability thereof may be subject to the limitations set
forth in subparagraph (iii), above.
(e) You shall have received on the Closing Date an opinion of
Squire, Sanders & Dempsey L.L.P., counsel for the Purchasers, dated the Closing
Date, covering the matters referred to in subparagraphs (v) (but only as to the
statements under the captions "Description of Bonds," "Private Placement" and
"Transfer Restrictions") and (vii), and the final subparagraph of paragraph (c)
above.
With respect to the final subparagraph of paragraph (c) above,
Winthrop, Stimson, Putnam & Roberts and Squire, Sanders & Dempsey L.L.P may
state that their belief is based upon their participation in the preparation of
the Final Memorandum and any amendments or supplements thereto and review and
discussion of the contents thereof, but is without
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<PAGE> 14
independent check or 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 Winthrop, Stimson, Putnam & Roberts 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 the Final 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 the Final Memorandum other than to the Purchasers.
(b) Before amending or supplementing the Final 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 Bonds 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.
(d) To endeavor to qualify the Bonds for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided, however, that the
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<PAGE> 15
Company shall not be required to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
general or unlimited service of process in any jurisdiction where it is not now
so subject.
(e) Whether or not any sale of Bonds is consummated, to pay
all expenses incident to the performance of their obligations under this
Agreement, including: (i) the preparation of the Final Memorandum and all
amendments and supplements thereto, (ii) the preparation, issuance and delivery
of the Bonds, (iii) the fees and disbursements of the Company's counsel and
accountants and the Trustee and its counsel, if any (but not the fees and
disbursements of counsel to the Purchasers), (iv) the qualification of the Bonds
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 Final Memorandum and any
amendment or supplement thereto, (vi) any fees charged by rating agencies for
the rating of Bonds and (vii) the fees and expenses, if any, incurred in
connection with the admission of Bonds 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 Bonds in a manner that would require the registration under the
Securities Act of those Bonds.
(g) Not to solicit any offer to buy or offer or sell the Bonds
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 Bonds remain outstanding, to make
available, upon request, to any seller of Bonds 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 Bonds, the Company will not, and will cause its Affiliates not
to, purchase or agree to purchase or otherwise acquire any Bonds 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 Bonds to
the Trustee for cancellation.
(j) To include information substantially in the form set forth
in Exhibit A in the Final Memorandum.
(k) If requested by you, to use its best efforts to permit the
Bonds 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.
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<PAGE> 16
(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
Bonds, 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 Bonds
(other than the Bonds), without your prior written consent.
(n) To use the proceeds from the sale of the Bonds in the
manner discussed in the Final Memorandum under the caption "Use of Proceeds".
6. OFFERING OF BONDS; 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, Bonds 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 Bonds only from, and
has offered and will offer Bonds 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 Bonds, deliver to that Purchaser a
letter containing the representations and agreements set forth in Annex A to the
Final 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 Bonds 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 Bonds, or possession or
distribution of the Final Memorandum or any other offering or
publicity material relating to the Bonds, 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 Bonds or has in
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<PAGE> 17
its possession or distributes the Final Memorandum or any such
other material, in all cases at its own expense;
(iii) the Bonds 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 Bonds and will
offer and sell the Bonds (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 Bonds, 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 Bonds 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 Bonds 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 Bonds 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 Bonds 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 Bonds
acquired by it in connection with the distribution
contemplated hereby, 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
Bonds a notice stating in substance that, by purchasing those
Bonds, that dealer represents and agrees that it has not
offered or sold, and will not offer or sell, any Bonds,
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<PAGE> 18
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 Bonds 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 Bonds 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 Bonds from it during the
restricted period a confirmation or notice substantially to
the following effect:
"The Bonds covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (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
(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 Bonds, 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 Bonds 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 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 the Final
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.
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<PAGE> 19
(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 the Final 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 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.
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<PAGE> 20
(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 in such proportion as is appropriate to reflect 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 (or actions in respect thereof), as well
as any other relevant equitable considerations, including relevant benefits. 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 Bonds they have
purchased hereunder, and not joint.
(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 Bonds resold by it in the
initial placement of those Bonds 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 Bonds. 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
20
<PAGE> 21
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 Bonds 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 Bonds that it or they have agreed to
purchase hereunder on that date, and the aggregate principal amount of Bonds
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 Bonds
to be purchased on that date, the other Purchasers will be obligated severally
in the proportions that the principal amount of Bonds set forth opposite their
respective names in Schedule I bear to the aggregate principal amount of Bonds
set forth opposite the names of all such non-defaulting Purchasers, or in such
other proportions as you may specify, to purchase the Bonds 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 Bonds 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 Bonds without the
written consent of that Purchaser. If, on the Closing Date any Purchaser or
Purchasers fails or refuses to purchase Bonds that it or they have agreed to
purchase hereunder on that date and the aggregate principal amount of Bonds with
respect to which that default occurs is more than one-tenth of the aggregate
principal amount of Bonds to be purchased on that date, and arrangements
satisfactory to you and the Company for the purchase of those Bonds 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.
21
<PAGE> 22
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
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.
22
<PAGE> 23
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/ T.F. Struck, II
-----------------------------------------
Name: T.F. Struck, II
Title: Treasurer
Accepted as of the date first written above
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
McDonald & Company Securities, Inc.
By MORGAN STANLEY & CO. INCORPORATED
By: /s/ Harold J. Hendershot III
-----------------------------------
Name: Harold J. Hendershot III
Title: Vice President
23
<PAGE> 24
SCHEDULE I
Principal Amount
Purchaser of Bonds To Be Purchased
- --------- ------------------------
Morgan Stanley & Co. Incorporated $62,500,000 principal amount of
First Mortgage Bonds, 6.86%
Series Due 2008
Credit Suisse First Boston Corporation $31,250,000 principal amount of
First Mortgage Bonds, 6.86%
Series Due 2008
McDonald & Company Securities, Inc. $31,250,000 principal amount of
First Mortgage Bonds, 6.86%
Series Due 2008
<PAGE> 25
EXHIBIT A
Each Memorandum will contain language to the following effect:
"Each purchaser of the Bonds will be deemed to:
(1) represent that it is purchasing the Bonds 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 Bonds 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 Bonds 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"), (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 Bonds (the form of which letter can be obtained from the
Trustee) and, if that transfer is in respect of an aggregate principal amount of
Bonds 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
Bonds will be required to sign an agreement to the foregoing effect in the form
attached hereto as Appendix 1. Subject to the procedures set forth under
"Description of Bonds--Book Entry, Delivery and Form," prior to any proposed
transfer of any of the Bonds (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 Bonds
relating to the manner of such transfer and submit the Bonds to the Trustee;
(4) agree that it will deliver to each person to whom it transfers any
of the Bonds notice of any restrictions on transfer of those Bonds;
(5) if it is a foreign purchaser outside the United States, understand
that the Bonds will initially be represented by a Regulations S Global Bond and
that transfers thereof are restricted as described under "Description of
Bonds--Book Entry, Delivery and Form";
(6) if it is a QIB, understand that the Bonds offered in reliance on
Rule 144A will be represented by a Restricted Global Bond. Before any interest
in a Restricted Global Bond may
1
<PAGE> 26
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 Bonds (other than those issued to foreign purchasers or in substitution
or exchange therefor) will bear a legend to the following effect unless
otherwise agreed by the Company and the holder thereof:
THIS BOND 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 BOND 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 BOND 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 BOND (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF BONDS 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 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 BOND IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS BOND WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER
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<PAGE> 27
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 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 BOND 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
Bonds are no longer accurate, it shall promptly notify the Company and the
Placement Agents. If it is acquiring Bonds 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:
"Each person receiving this Memorandum acknowledges that (i) that
person has been afforded an opportunity to request from the Company, and to
review, and has received, 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 the
accuracy of such 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 Bonds (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 Bonds),
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."
3
<PAGE> 1
Exhibit 1(b)
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
REGISTRATION AGREEMENT
September 29, 1998
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
McDonald & Company Securities, 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 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"), $125,000,000 aggregate principal amount of First Mortgage Bonds,
6.86% Series Due 2008 (the "Bonds"), to be issued pursuant to the 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
"original Indenture"), as supplemented and modified in certain respects by
indentures supplemental thereto, including the Seventy-Eighth Supplemental
Indenture to be dated as of October 1, 1998 (the "Supplemental Indenture," and
the original Indenture, as supplemented by all indentures supplemental thereto,
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 Bonds (including, without limitation, the Purchasers) and the Exchange Bonds
(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 Bonds (as defined in 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 Bonds, a like aggregate principal amount of debt
securities (the "Exchange Bonds") of the Company issued under the Indenture and
identical in all material respects to the Bonds (excluding the transfer
<PAGE> 2
restrictions relating to the Bonds) 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 Bonds 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 bonds 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 Bonds electing to exchange those
Transfer Restricted Bonds for Exchange Bonds (assuming that Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Bonds in the ordinary course of that Holder's business and has no
arrangement with any person to participate in the distribution of the Exchange
Bonds, and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade those Exchange Bonds
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 Bonds, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Bonds (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 Bonds received by that Exchanging
Dealer pursuant to the Registered Exchange Offer; and (b) if the Purchasers are
permitted to and elect to sell Exchange Bonds acquired in exchange for Bonds
constituting any portion of an unsold allotment, they are required to deliver a
prospectus containing the 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
2
<PAGE> 3
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 Bonds 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 Bonds, but that
period shall not exceed 120 days (unless extended pursuant to Section 3 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 Bonds. The Bonds and the Exchange
Bonds 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;
(d) permit Holders to withdraw tendered Bonds 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.
3
<PAGE> 4
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all the Bonds 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 Bonds so accepted for
exchange; and
(iii) issue, and cause the Trustee to authenticate
and deliver promptly to each Holder of the Bonds, Exchange
Bonds, equal in principal amount to the Bonds of that Holder
so accepted for exchange.
The Supplemental Indenture will provide that the Exchange
Bonds will not be subject to the transfer restrictions set forth in the
Supplemental Indenture.
Interest on each Exchange Bond issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Bonds surrendered in exchange therefor or, if no
interest has been paid on those Bonds, from the date of original issue of those
Bonds.
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 Bond 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 Bonds or the Exchange Bonds 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 Bonds; and (v) if that Holder is a broker-dealer,
that it will receive Exchange Bonds for its own account in exchange for Bonds
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 Bonds.
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 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
4
<PAGE> 5
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 Bonds; (c) the Purchasers so request with respect to the
Bonds not eligible to be exchanged for Exchange Bonds 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 Bonds on the date of the exchange for validly
tendered (and not withdrawn) Bonds:
(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 Bonds (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 Bonds expires (or the end of such longer period as
may result from an extension pursuant to Section 3 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
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 the 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
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<PAGE> 6
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 he 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 security
holders.
(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:
(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;
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(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).
(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 an
amendment
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<PAGE> 8
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 Bonds 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 a
foreign corporation to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it
is 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.
(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 Bonds 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
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<PAGE> 9
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 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 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 he 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 the
Transfer Restricted Bonds or the Exchange Bonds, as the case may be, and
provide the Trustee with printed certificates for the Bonds or the
Exchange Bonds, as the case may be, in a form eligible 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 the 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 supplemental indenture
pursuant to which the Exchange Bonds are to be issued to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and to contain any changes that 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
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<PAGE> 10
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 independent public accountants to provide to the selling
Holders of the applicable 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 Bonds by Holders to the Company (or to any other Person
designated by the Company) in exchange for the Exchange Bonds, the
Company shall mark, or caused to be marked, on
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<PAGE> 11
the Bonds so exchanged that those Bonds are being canceled in exchange
for the Exchange Bonds, and in no event shall the Bonds 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 EXPENSES. 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, 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.
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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.
(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 or Participating Broker-Dealer
furnished to the Company in writing by that Holder or Participating
Broker-Dealer expressly for use in a Registration Statement, any prospectus or
any amendment or supplement to any thereof.
(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
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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 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 Bonds 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
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<PAGE> 14
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 Bonds (that date of issue, the "Closing
Date"), neither the Exchange Offer Registration Statement nor
a Shelf Registration Statement has been filed with the
Commission;
(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 Bonds 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 Bonds
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.
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Additional Interest shall accrue on the Bonds over and above
the interest set forth in the title of the Bonds 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 Bonds, 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 Bonds,
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 Bond" 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 Bond in the Registered Exchange
Offer; (ii) following the exchange by a broker-dealer in the Registered Exchange
Offer of a Transfer Restricted Bond for an Exchange Bond, the date on which that
Exchange Bond 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 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
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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 Bonds, 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 Bonds may
reasonably request, all to the extent required from time to time to enable that
Holder to sell Transfer Restricted Bonds 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 Bonds identified to the Company by that Purchaser. Upon the
request of any Holder of Transfer Restricted Bonds, 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 Bonds 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 Bonds 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 Bonds 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.
SECTION 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS.
The provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents 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 Bonds 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
16
<PAGE> 17
New York, NY 10036
Facsimile: (212) 761-0359
Attention: Managing Director, Syndicate
with a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Facsimile: (216) 479-8780
Attention: Dynda A. Thomas
(2) if to the Company, at the following address:
The Cleveland Electric Illuminating Company
c/o FirstEnergy Corp.
76 South Main Street
Akron, Ohio 44308
Facsimile: (330) 384-3772
Attention: David L. Feltner, Esq.
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Facsimile: (212) 858-1500
Attention: John H. Byington, Jr.
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 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.
17
<PAGE> 18
(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.
(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.
18
<PAGE> 19
Very truly yours,
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ T.F. STRUCK, II
----------------------------
Name: T.F. Struck, II
Title: Treasurer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
McDonald & Company Securities, Inc.
Acting severally on behalf of
themselves and the several Purchasers
By MORGAN STANLEY & CO. INCORPORATED
By: /s/ Harold J. Hendershot III
---------------------------------------
Name: Harold J. Hendershot III
Title: Vice President
S-1
<PAGE> 20
ANNEX A
Each broker-dealer that receives Exchange Bonds 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 Bonds. 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 Bonds received in exchange for Existing Bonds where
such Existing Bonds 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".
A-1
<PAGE> 21
ANNEX B
Each broker-dealer that receives Exchange Bonds for its own
account in exchange for Bonds, 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 Bonds. See "Plan of Distribution."
B-1
<PAGE> 22
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Bonds for its own
account pursuant the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Bonds. 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 Bonds received in
exchange for Existing Bonds when those Existing Bonds 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 Bonds
may be required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of
Exchange Bonds by broker-dealers. Exchange Bonds 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 Bonds 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
Bonds. Any broker-dealer that resells Exchange Bonds that were received by it
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in distribution of those Exchange Bonds may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Bonds 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 Bonds) other than commissions or concessions of any
broker-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.
C-1
<PAGE> 23
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
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
Bonds. If the undersigned is a broker dealer that will receive Exchange Bonds
for its own account in exchange for Bonds 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 Bonds;
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.
D-1
<PAGE> 1
EXHIBIT 1(c)
LETTER OF TRANSMITTAL
FOR
FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF ALL OF THEIR OUTSTANDING
FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
FOR
FIRST MORTGAGE BONDS, 6.86% SERIES A DUE 2008
--------------------------------------------
PURSUANT TO THE PROSPECTUS DATED , 1999
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, , 1999 UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE"). TENDERS OF OLD BONDS (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
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmissions: By Hand or Overnight Delivery:
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 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 BONDS FOR THEIR OLD
BONDS PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD BONDS TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the
Prospectus dated , 1999 (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 First Mortgage Bonds, 6.86% Series A due 2008 (the "New
Bonds"), 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 First Mortgage Bonds, 6.86% Series due 2008 (the "Old Bonds"), 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 Bonds are to be physically delivered to
the Exchange Agent herewith by Holders; (ii) tender of Old Bonds 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 Bonds (such participants acting on behalf of Holders
are referred to herein, together with such Holders, as "Acting Holders"); or
(iii) tender of Old Bonds 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.
The term "Holder" with respect to the Exchange Offer means any person:
(i) in whose name Old Bonds 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 Bonds are held of record by DTC and who
desires to deliver such Old Bonds 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.
<PAGE> 2
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF OLD
BONDS 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
BONDS MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF BONDS"
AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE OLD
BONDS AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE PROSPECTUS AND HEREIN.
List below the Old Bonds 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 Bonds will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF BONDS
- ---------------------------------------------- ---------------------------------------- ----------------------------------------
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 BONDS BEING TENDERED) IF NECESSARY) (IF LESS THAN ALL)**
- ---------------------------------------------- ---------------------------------------- ----------------------------------------
<S> <C> <C>
- ---------------------------------------------- ---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
- ---------------------------------------------- ---------------------------------------- ----------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD BONDS 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 Bonds listed. See Instruction 2.
- ---------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD BONDS 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.:
--------------------------------------------
If Holders desire to tender Old Bonds pursuant to the Exchange Offer
and (i) certificates representing such Old Bonds are not lost but are not
immediately available, (ii) time will not permit the Letter of Transmittal,
certificates representing such Old Bonds 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 Bonds 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.
[ ] CHECK HERE IF TENDERED OLD BONDS 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
Bonds:
---------------------------------------------------------------
2
<PAGE> 3
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 BONDS 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 BONDS ARE ENCLOSED HEREWITH.
3
<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 Bonds indicated in the box
entitled "Description of Bonds." Subject to and effective upon the acceptance
for exchange of the principal amount of Old Bonds 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
Bonds 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 Bonds and the New Bonds) with respect to the
tendered Old Bonds with full power of substitution to (i) deliver certificates
for such Old Bonds to the Company, or transfer ownership of such Old Bonds 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 Bonds for transfer on the books of the
Company and receive all benefits and otherwise execute all rights of beneficial
ownership of such Old Bonds, 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 Bonds
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 Bonds
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 Bonds 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 Bonds issued in exchange for the Old Bonds 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 Bonds 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 Bonds 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
Bonds.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE OLD BONDS 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 Bonds 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 Bonds 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 Bonds. If the undersigned is a broker-dealer that will
receive New Bonds for its own account in exchange for Old Bonds 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 Bonds; 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 Bonds 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 Bonds
that remain outstanding subsequent to the Expiration Date or to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Bonds in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers will differ from the terms of the Exchange
Offer.
4
<PAGE> 5
The undersigned understands that by tendering Old Bonds pursuant to one
of the procedures described in the Prospectus and the instructions thereto, the
exchange of the Old Bonds for the New Bonds 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 Bonds when the Company has given oral or written
notice thereof to the Exchange Agent. If any tendered Old Bonds are not accepted
for exchange pursuant to the Exchange Offer for any reason, certificates for any
such unaccepted Old Bonds 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 Bonds 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 Bonds 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 Bonds issued in exchange for
the Old Bonds accepted for exchange and return any Old Bonds not tendered or not
exchanged in the name(s) of the undersigned (or in either such event in the case
of Old Bonds 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 Bonds issued in exchange for the Old Bonds
accepted for exchange and any certificates for Old Bonds 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 Bonds issued in exchange for the Old Bonds
accepted for exchange and return any Old Bonds 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 Bonds from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Bonds so tendered.
5
<PAGE> 6
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD BONDS REGARDLESS OF WHETHER OLD
BONDS ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Bonds
exactly as their name(s) appear(s) on the certificate(s) for Old Bonds 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 Bonds, 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.
X __________________________________ Date: ___________________________________
X __________________________________ Date: ____________________________________
SIGNATURE(S) OF HOLDER(S) OR
AUTHORIZED SIGNATORY
Name(s): _____________________________ Address_________________________________
______________________________________ ________________________________________
(PLEASE PRINT) (INCLUDING ZIP CODE)
Area Code and
Capacity:_____________________________ Telephone No.:_________________________
Social Security No.:__________________
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:
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6
<PAGE> 7
- -------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 2, 3, 4 AND 5 HEREIN)
To be completed ONLY if certificates for Old Bonds in a principal
amount not tendered are to be issued in the name of, or the New Bonds 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 Bonds" within this Letter of Transmittal, or if Old
Bonds 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 Bonds 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 Bonds in a principal
amount not tendered or not accepted for purchase or the New Bonds 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 Bonds" 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)
_______________________________________________________________________________
7
<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 Bonds; Guaranteed
Delivery Procedures. The certificates for the tendered Old Bonds (or a
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
of all Old Bonds 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 Bonds, 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 Bonds should be sent to
the Company.
THE METHOD OF DELIVERY OF OLD BONDS 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 Bonds and (i) whose Old Bonds are
not lost but are not immediately available or (ii) who cannot deliver their Old
Bonds, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Old Bonds 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 Bonds, the
certificate number or numbers of such Old Bonds and the principal amount of Old
Bonds 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 Bonds (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 Bonds
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 Bonds who wishes to tender
his Old Bonds 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 Bonds 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 Bonds
not properly tendered or any Old Bonds 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 Bonds. 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 Bonds 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 Bonds, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Bonds will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Bonds 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 Bonds, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
2. Partial Tenders. Tenders of Old Bonds 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 Bonds is tendered, the tendering Holder
should fill in the principal amount tendered in the third column of the chart
entitled "Description of Bonds." The entire principal amount of Old Bonds
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of Old Bonds is not
tendered, Old Bonds for the principal amount of Old Bonds not tendered and a
certificate or certificates representing New Bonds issued in exchange for any
Old Bonds 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 Bonds
are accepted for exchange.
8
<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 Bonds
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Bonds 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 Bonds tendered and the certificate(s) for New Bonds
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Bonds is to be reissued) to the registered Holder, such Holder need not
and should not endorse the Old Bonds 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 Bonds
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 Bonds tendered hereby are owned of record by two or more joint owners, all
such owners must sign this Letter of Transmittal. If any Old Bonds 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 Bonds 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 Bonds 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 Bonds) 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 Bonds or
substitute Old Bonds 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
Bonds through DTC, if such Old Bonds 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
Bonds 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 Bonds pursuant to the Exchange Offer. If,
however, certificates representing New Bonds or Old Bonds 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 Bonds tendered hereby, or if tendered Old Bonds 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 Bonds
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 Bonds 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 Bonds tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Bonds. Any tendering Holder
whose Old Bonds 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
9
<PAGE> 10
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
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 Bonds, (c) include a statement that the person who tendered
Old Bonds is withdrawing its election to have such Old Bonds exchanged and
contain the description of the Old Bonds to be withdrawn, the certificate
numbers shown on the particular certificates evidencing such Old Bonds and the
aggregate principal amount represented by such Old Bonds and (d) be signed by
the holder of such Old Bonds 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 Trustee with
respect to the Old Bonds register the transfer of such Old Bonds 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 Bonds
have been tendered (a) by a registered holder of Old Bonds 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 Bonds 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 Bonds tendered by
delivery of certificates for such Old Bonds, the name of the registered holder
(if different from that of the tendering holder) to be credited with the
withdrawn Old Bonds. Withdrawals may not be rescinded, and any Old Bonds
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer. However, properly withdrawn Old Bonds 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.
- -------------------------------------------------------------------------------
(DO NOT WRITE IN SPACE BELOW)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------ ------------------------------------------ ------------------------------------------
CERTIFICATE SURRENDERED OLD BONDS TENDERED OLD BONDS ACCEPTED
- ------------------------------------------- ------------------------------------------ ------------------------------------------
<S> <C> <C>
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
Delivery Prepared by Checked by Date
--------------------- -------------------------- ----------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Bonds 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 Bonds 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.
10
<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 Bonds. If the Old Bonds 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>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PROVIDE YOUR TIN IN THE BOX AT RIGHT PART 3 --
AND CERTIFY BY SIGNING AND DATING BELOW Awaiting TIN [ ]
-----------------------------------------------------------------------------------------------------
FORM W-9 PART 2 -- Certification - Under Penalties of Perjury,
I certify that:
DEPARTMENT OF THE
TREASURY INTERNAL (1) The number shown on this form is my correct
REVENUE SERVICE Taxpayer Identification Number (or I am ---------------------------------------------------
waiting for a number to be issued to me) and SOCIAL SECURITY NUMBER
PAYER'S REQUEST FOR
TAXPAYER (2) I am not subject to backup withholding OR
IDENTIFICATION either because I have not been notified by
NUMBER (TIN) the Internal Revenue Service (the "IRS") ---------------------------------------------------
that I am subject to backup withholding as EMPLOYER IDENTIFICATION NUMBER(S)
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 BONDS
PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
11
<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.
- ----------------------------------------------- ------------------------------
SIGNATURE DATE
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
The Chase Manhattan Bank
<TABLE>
<CAPTION>
By Registered or Certified Mail: By Facsimile: By Hand or Overnight Courier:
<S> <C> <C>
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>
12
<PAGE> 13
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.
- --------------------------------------- ----------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL
SECURITY
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-trustee (1)
account (grantor is also 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)
- ------------------------------------------------------------------------------
- ----------------------------------------- --------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF -
- ----------------------------------------- --------------------
9. A valid trust, estate, Legal entity (Do
or pension trust not furnish the
identifying
number of the
personal
representative 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
- ---------------------------------------------------------- --------------------
(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 fund.
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> 14
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 1 (d)
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
As set forth in the Prospectus dated , 1999 (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 First Mortgage Bonds, 6.86% Series due 2008 (the "Old Bonds") if (i)
certificates representing the Old Bonds 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 Bonds 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 ____________, ___________, 1999 UNLESS THE
OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OLD BONDS 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 Bonds 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 Bonds
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 Bonds tendered hereby. In the event
of a termination of the Exchange Offer, the Old Bonds tendered pursuant hereto
will be returned to the tendering Old Bond 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 Bonds 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 Bonds tendered.
The undersigned understands that tenders of Old Bonds will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Bonds 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 Bonds may also be withdrawn if the
<PAGE> 2
Exchange Offer is terminated without any such Old Bonds 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.
<TABLE>
PLEASE COMPLETE AND SIGN
<S> <C>
Signature(s) of Registered Owner(s) or : Name(s) of Registered Holder(s):
Authorized Signatory
- ------------------------------------------------------- ------------------------------------------------------
- ------------------------------------------------------- ------------------------------------------------------
Address:
- ------------------------------------------------------- ------------------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------
Principal Amount and Series of Old Bonds Tendered: ------------------------------------------------------
Area Code and Telephone No.:
- ------------------------------------------------------
- ------------------------------------------------------ -------------------------------------------------------
If Old Bonds will be delivered by book-entry transfer at
Certificate No(s). of Old Bonds (if available): The Depository Trust Company, insert The Depository
Account No.:
- ------------------------------------------------------ -------------------------------------------------------
Transaction Code No.:
- ------------------------------------------------------ ----------------------------------
- ------------------------------------------------------
Date:
-------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Bonds exactly as its (their) name(s) appear on certificates
for Old Bonds or on a security position listing as the owner of Old Bonds, 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 BONDS WITH THIS FORM. OLD BONDS SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
- ------------------------------------------------------------------------------
2
<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 Bonds tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Old Bonds 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 Bonds 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.
Name of Firm:__________________________ ______________________________________
AUTHORIZED SIGNATURE
Address:_______________________________ Name:________________________________
_______________________________________ Title:________________________________
Area Code and Telephone No.___________ Date:_________________________________
- ------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 1 (e)
OFFER TO EXCHANGE
FIRST MORTGAGE BONDS, 6.86% SERIES A DUE 2008
FOR ALL OUTSTANDING FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
$150 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
, , 1999 UNLESS THE OFFER IS EXTENDED
(THE "EXPIRATION DATE"). TENDERS OF OLD BONDS 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
First Mortgage Bonds, 6.86% Series A due 2008 (the "New Bonds") for all
outstanding First Mortgage Bonds, 6.86% Series due 2008 (the "Old Bonds"), upon
the terms and conditions set forth in the accompanying Prospectus dated
, 1999 (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 Bonds
with the Prospectus. The Exchange Offer also provides a procedure for holders to
tender the Old Bonds by means of guaranteed delivery.
Based on an interpretation of the Securities and Exchange Commission
(the "Commission"), New Bonds issued pursuant to the Exchange Offer in exchange
for Old Bonds may be offered for resale, resold and otherwise transferred by
holders thereof (other than (i) a broker-dealer who purchased such Old Bonds
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 Bonds 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 Bonds. Holders of Old
Bonds wishing to accept the Exchange Offer must represent to the Company that
such conditions have been met.
Each broker-dealer that receives New Bonds in exchange for Old Bonds
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 Bonds. 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 Bonds
received in exchange for Old Bonds. 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 Bonds for, any Old Bonds not
accepted for exchange prior to such termination.
THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED OLD BONDS 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 Bonds
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 Bonds 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 Bonds 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
applicable to the tender of Old Bonds to them or their order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
<PAGE> 2
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 Bonds 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 , , 1999 UNLESS THE
OFFER IS EXTENDED (THE "EXPIRATION DATE"). OLD BONDS 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 BONDS BEING TENDERED.
To tender Old Bonds in the Exchange Offer, certificates for Old Bonds
(or confirmation of a book-entry transfer into the Exchange Agent's account at
The Depository Trust Company of Old Bonds 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 Bonds pursuant to the Exchange Offer
and (i) certificates representing such Old Bonds are not lost but are not
immediately available, (ii) time will not permit the Letter of Transmittal,
certificates evidencing such Old Bonds 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 Bonds 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 TO BE MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE OLD BONDS 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,
Nancy C. Ashcom, Corporate Secretary
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
<PAGE> 1
EXHIBIT 1(f)
OFFER TO EXCHANGE
FIRST MORTGAGE BONDS, 6.86% SERIES A DUE 2008
FOR ALL OUTSTANDING FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
$125 MILLION AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
OF
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
To Our Clients:
Enclosed for your consideration are the Prospectus dated , 1999 (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 First Mortgage Bonds, 6.86% Series A due 2008 (the "New Bonds") for all
outstanding First Mortgage Bonds, 6.86% Series due 2008, (the "Old Bonds" and,
together with the New Bonds, the "Bonds"), upon the terms and conditions set
forth in the Prospectus and Letter of Transmittal.
WE ARE THE REGISTERED HOLDER (THE "REGISTERED HOLDER") OF OLD BONDS
HELD FOR YOUR ACCOUNT. AN EXCHANGE OF THE OLD BONDS 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 BONDS HELD BY US FOR YOUR ACCOUNT. THE PROSPECTUS AND
RELATED LETTER OF TRANSMITTAL ALSO PROVIDE A PROCEDURE FOR HOLDERS TO TENDER
THEIR OLD BONDS BY MEANS OF GUARANTEED DELIVERY.
We request information as to whether you wish us to exchange any or all
of the Old Bonds 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 Bonds.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Old Bonds 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 , , 1999 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). Old Bonds 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 Bonds will be exchanged for the Old Bonds at the rate
of $1,000 principal amount of New Bonds for each $1,000 principal
amount of Old Bonds. There will be no loss of interest income to
holders of Old Bonds whose Old Bonds are accepted for exchange, as more
fully explained in the Prospectus. The form and terms of the New Bonds
are identical in all material respects to the form and terms of the Old
Bonds, except that the New Bonds 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 Bonds 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 Bonds under certain circumstances.
2. Based on an interpretation of the Securities and Exchange
Commission (the "Commission"), New Bonds issued pursuant to the
Exchange Offer in exchange for Old Bonds may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchased Old Bonds 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 Bonds
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 Bonds. Holders of Old Bonds 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 BONDS BEING TENDERED.
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 Bonds for, any Old Bonds not accepted for exchange prior to such
termination.
<PAGE> 2
5. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , , 1999 unless the Exchange Offer is extended (the
"Expiration Date"). Tendered Old Bonds 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 Bonds have not
previously been accepted for exchange pursuant to the Exchange Offer.
6. Any transfer taxes applicable to the exchange of the Old Bonds
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 Bonds validly tendered and
not validly withdrawn and the issuance of New Bonds 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 Bonds or to terminate the
Exchange Offer and not accept for purchase any Old Bonds 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 Bonds 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 Bond holders, including that the
reduced amount of outstanding Old Bonds as a result of the Exchange
Offer may adversely affect the trading market, liquidity and market
price of the Old Bonds.
If you wish to have us tender any or all of your Old Bonds, 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 Bonds, the entire principal amount of Old Bonds
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 BONDS 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.
2
<PAGE> 3
OFFER TO EXCHANGE
FIRST MORTGAGE BONDS, 6.86% SERIES A DUE 2008
FOR ALL OUTSTANDING FIRST MORTGAGE BONDS, 6.86% SERIES DUE 2008
$125 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 Bonds for the New Bonds.
This will instruct you to tender the principal amount of Old Bonds
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 Bonds held by you for my account,
as indicated below.
[ ] Please do not tender any Old Bonds held by you for my
account.
Principal Amount*
of Old Bonds 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: , 1999
- -----------------------------------
* Unless otherwise indicated, it will be assumed that all of the securities
listed are to be tendered.
<PAGE> 1
EXHIBIT 4b (77)
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK,
as Trustee.
Seventy-Seventh Supplemental Indenture
Dated as of June 1, 1998
First Mortgage Bonds, 1998 Guaranty Series due 2028
<PAGE> 2
Seventy-Seventh Supplemental Indenture, dated as of June 1, 1998, 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-six
Supplemental Indentures thereto; and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Seventy-Seventh Supplemental Indenture, will be
hereinafter collectively referred to as the "Indenture" and this Seventy-Seventh
Supplemental Indenture will be hereinafter referred to as "this Supplemental
Indenture"; and
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 a new series of first mortgage bonds (the "Pledge Bonds"), to be
pledged as security for the payment of certain obligations undertaken by the
Company in connection with the issuance by the Beaver County Industrial
Development Authority (the "Authority") of $5,993,376 aggregate principal amount
of the Authority's Exempt Facilities Revenue Bonds 5.375% 1998 Series A
(Shippingport Project) on behalf of the Company (the "Revenue Bonds"), 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
$5,993,376 and are to be delivered to Chase Manhattan Trust Company, National
Association, as trustee (hereinafter called the "Revenue Bond Trustee") under
the Trust Indenture (the "Revenue Bond Indenture") dated as of June 1, 1998
between the Authority and the Revenue Bond Trustee; 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
<PAGE> 3
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 successors 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, August 1, 1997, and October 15, 1997,
respectively, are hereby in all respects confirmed.
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<PAGE> 4
ARTICLE II
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF PLEDGE BONDS
-----------------------------------------
Section 2.01 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, 1998 Guaranty Series due 2028" of the Company and hereinabove
and hereinafter called the "Pledge Bonds." The Pledge Bonds 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 2.02 The Pledge Bonds shall be issued as fully registered Bonds
only, without coupons, in the denominations of $1,000 or any higher multiple of
$1.00.
Section 2.03 The Pledge Bonds shall be dated the date of
authentication, shall mature on June 1, 2028, 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 to equal the amount of interest payable on such interest payment date on
the Revenue Bonds, such interest payable on June 1 and December 1 in each year
starting on the Initial Interest Accrual Date (as defined below) (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 Pledge Bonds shall be payable as to principal and interest at the
agency of the Company in the City of Akron, 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 shall bear interest
from the Initial Interest Accrual Date (as defined below) until the principal of
such Pledge Bond 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 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 are registered at the close of business on a date (the
"Subsequent Record Date") not less than 10 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 not less than 10 days next
preceding such Subsequent Record
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<PAGE> 5
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 interest rate on the Revenue Bonds, and therefore on the Pledge
Bonds, is 5.375% per annum.
Section 2.04 In the manner and subject to the limitations provided in
the Indenture, Pledge Bonds may be exchanged for a like aggregate principal
amount of Pledge Bonds 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 office or agency of the Company in the Borough
of Manhattan, The City of New York or the City of Akron, State of Ohio.
Except as otherwise provided in Section 2.03 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.
Section 2.05 The Pledge Bonds 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.
Section 2.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Pledge Bonds pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Pledge 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 Pledge Bonds. Any notice of
redemption shall be mailed at least 30 days, but no more than 60 days, prior to
the redemption date.
Section 2.07 If and when the principal of any Revenue Bonds shall be
paid, then there shall be deemed to have been paid a principal amount of the
Pledge Bonds then outstanding which bears the same ratio to the aggregate
principal amount of Pledge Bonds then outstanding as the principal amount of the
Revenue Bonds so paid bears to the aggregate principal amount of the Revenue
Bonds outstanding immediately before such payment; provided, however, that such
payment of Pledge Bonds shall be deemed to have been made only when and to the
extent that notice of such payment of the principal amount of such Revenue Bonds
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 Revenue
Bonds has been so made.
Section 2.08 The Pledge Bonds 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 written advice from the Revenue Bond
Trustee stating that the principal amount of all the Revenue Bonds then
outstanding under the Revenue Bond Indenture has been declared due and payable
pursuant to the provisions of Section 8.02 of the Revenue Bond Indenture,
specifying the date of the accelerated maturity of such Revenue Bonds and the
date from which interest on the
4
<PAGE> 6
Revenue Bonds issued under the Revenue Bond Indenture has then accrued and is
unpaid, stating such declaration of maturity has not been annulled and demanding
payment of the principal amount hereof plus accrued interest hereon to the date
fixed for such redemption. The date fixed for such redemption shall be not
earlier than the date specified in the aforesaid written advice as the date of
accelerated maturity of the Revenue Bonds then outstanding under the Revenue
Bond Indenture. Upon mailing of notice of redemption, the date from which unpaid
interest on the Revenue Bonds has then accrued (as specified by the Revenue Bond
Trustee) shall become the initial interest accrual date (the "Initial Interest
Accrual Date") with respect to the bonds of this series; provided, however, on
any demand for payment of the principal amount hereof at maturity as a result of
the principal of the Revenue Bonds becoming due and payable on the maturity date
of the bonds of this series, the date from which unpaid interest on the Revenue
Bonds has then accrued shall become the Initial Interest Accrual Date with
respect to the bonds of this series, such date to be as stated in a written
notice from the Revenue Bond Trustee to the Trustee. The aforementioned notice
of redemption shall become null and void for all purposes under the Indenture
(including the fixing of the Initial Interest Accrual Date with respect to the
bonds of this series) upon receipt by the Trustee of written notice from the
Revenue Bond Trustee of the annulment of the acceleration of the maturity of the
Revenue Bonds then outstanding under the Revenue Bond Indenture and of the
rescission of the aforesaid written advice prior to the redemption date
specified in such notice of redemption, and thereupon no redemption of the bonds
of this series and no payment in respect thereof as specified in such notice of
redemption shall be effected or required. But no such rescission shall extend to
any subsequent written advice from the Revenue Bond Trustee or impair any right
consequent on such subsequent written advice.
Section 2.09 The Pledge Bonds shall not otherwise be subject to
redemption by the Company prior to maturity.
Section 2.10 Subject to the provisions of the Indenture, written notice
of redemption of Pledge Bonds pursuant to this Article II shall be given by the
Trustee by mailing to the registered owner or owners of such Pledge 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 Pledge Bonds.
Section 2.11 Pledge Bonds shall not be transferable except to a
successor trustee under the Revenue Bond Indenture or in connection with the
exercise of the rights and remedies of the holder thereof consequent upon an
event of default as defined in the Indenture.
Section 2.12 The aggregate principal amount of Pledge Bonds which may
be authenticated and delivered hereunder shall not exceed $5,993,376, except as
otherwise provided in The Indenture.
Section 2.13 The form of the fully registered Pledge Bonds, and of the
Trustee's certificate of authentication thereon, shall be substantially as
follows:
5
<PAGE> 7
[FORM OF FULLY REGISTERED BOND]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 1998 GUARANTY SERIES
Due June 1, 2028
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, whichever is
less, on June 1, 2028, 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 the rate of five and
three-eights per centum per annum, such interest to be payable on June 1 and
December 1 in each year starting on the Initial Interest Accrual Date
(hereinafter defined) (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 Initial Interest Accrual Date (hereinafter
defined) 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 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 City of Akron, 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, 1998 Guaranty Series due 2028 (herein
called the "Pledge Bonds")
6
<PAGE> 8
limited, except as otherwise provided in the Indenture, in aggregate principal
amount to $5,993,376, issued under and secured by the Indenture and described in
the Seventy-Seventh Supplemental Indenture dated as of June 1, 1998, between the
Company and the Trustee (herein called the "Supplemental Indenture").
The Pledge Bonds have been delivered by the Company to Chase Manhattan
Trust Company, National Association, as trustee (hereinafter called the "Revenue
Bond Trustee") under the Trust Indenture (the "Revenue Bond Indenture") dated as
of June 1, 1998 between the Beaver County Industrial Development Authority (the
"Authority") and the Revenue Bond Trustee securing, among other bonds,
$5,993,376 of the Authority's Exempt Facilities Revenue Bonds, 5.375% 1998
Series A (Shippingport Project) which have been issued on behalf of the Company
(the "Revenue Bonds").
If and when the principal of any Revenue Bonds is paid then there is
deemed to be paid a principal amount of the Pledge Bonds then outstanding which
bears the same ratio to the aggregate principal amount of Pledge Bonds then
outstanding as the aggregate principal amount of the Revenue Bonds so paid bears
to the aggregate principal amount of the Revenue Bonds, outstanding immediately
before such payment; provided, however, that such payment of Pledge Bonds is
deemed to be made only when and to the extent that notice of such payment of
such Revenue Bonds is given by the Company to the Trustee.
The Pledge Bonds shall be redeemed by the Company prior to maturity in
whole at any time as provided in Section 2.08 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.
Any redemption of the Pledge Bonds 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 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 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
7
<PAGE> 9
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 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 Section 2.11
of the Supplemental 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 office or agency of the Company in the Borough
of Manhattan, The City of New York or in the City of Akron, State of Ohio upon
surrender and cancellation of this Bond, and upon presentation of a duly
executed written instrument of transfer, and thereupon new fully registered
Pledge Bonds 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 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. 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
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
8
<PAGE> 10
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
Attest: By: ________________________________
- ---------------------
Secretary
[FORM OF TRUSTEE'S OF 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
[END OF FORM OF FULLY REGISTERED BOND]
ARTICLE III
THE TRUSTEE
-----------
Section 3.01 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 III.
Section 3.02 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
9
<PAGE> 11
if the same were herein set forth in full, with such omissions, variations and
modifications thereof as may be appropriate.
Section 3.03 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 officer's 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 3.04 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, 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 3.05 The Trustee shall advise the Company in writing of the
receipt of any notification provided for pursuant to Section 2.07 or 2.08 of
Article II of this Supplemental Indenture.
ARTICLE IV
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.
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<PAGE> 12
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
Corporate 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.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By:/s/ Richard H. Marsh
--------------------------------
Richard H. Marsh, Vice President
Attest:
/s/ Nancy C. Ashcom
- ------------------------------------
Nancy C. Ashcom, Corporate Secretary
Signed, sealed and acknowledged by
The Cleveland Electric Illuminating Company
in the presence of
/s/ Thomas C. Navin
- ------------------------------------
Thomas C. Navin
/s/ Cynthia A. LaFlame
- ------------------------------------
Cynthia A. LaFlame
11
<PAGE> 13
THE CHASE MANHATTAN BANK, AS TRUSTEE
By:/s/ P.J. Gilkeson
---------------------------------
P.J. Gilkeson, Vice President
Attest:
/s/ R. Lorenzen
- --------------------------------------
R. Lorenzen, Senior Trust Officer
Signed, sealed and acknowledged by
The Chase Manhattan Bank
in the presence of
/s/ W. Keenan
- --------------------------------------
W. Keenan
/s/ David Trakimowicz
- --------------------------------------
David Trakimowicz
As witnesses
12
<PAGE> 14
STATE OF OHIO
COUNTY OF SUMMIT
On this 5th day of June, 1998, before me personally appeared Richard
H. Marsh and Nancy C. Ashcom, to me personally known, who being by me severally
duly sworn, did say that they are a Vice President and the Corporate 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 the free act and deed of said corporation.
/s/ Susie M. Hoisten
-----------------------------------
Notary Public
Susie M. Hoisten
Residence - Summit County
State Wide Jurisdiction, Ohio
My Commission expires November 19, 2001
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 4th day of June, 1998, before me personally appeared P.J.
Gilkeson and R. Lorenzen, 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 the free act and deed of said corporation.
/s/ 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, 1999
13
<PAGE> 1
EXHIBIT 4b (78)
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK,
as Trustee.
Seventy-Eighth Supplemental Indenture
Dated as of October 1, 1998
First Mortgage Bonds, 6.86% Series due 2008
<PAGE> 2
Seventy-Eighth Supplemental Indenture, dated as of October 1, 1998,
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-seven
supplemental indentures thereto ("Supplemental Indentures"); and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Seventy-Eighth Supplemental Indenture, will be
hereinafter collectively referred to as the "Indenture" and this Seventy-Eighth
Supplemental Indenture will be hereinafter referred to as "this Supplemental
Indenture"; and
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 a new series of first mortgage bonds designated as "First Mortgage
Bonds, 6.86% Series due 2008" with the denominations, rate of interest, date of
maturity, redemption provisions, exchange provisions and other provisions and
agreements in respect thereof as in this Supplemental Indenture set forth; and
The Company intends to create pursuant to the provisions of the
Indenture another new series of first mortgage bonds (the "Exchange Bonds") with
the denominations, rate of interest, date of maturity, redemption provisions,
exchange provisions and other provisions and agreements in respect thereof as in
another supplemental indenture set forth to be identical to the Bonds of this
Series (except with respect to transfer restrictions), for which the Bonds of
this Series will be exchangeable pursuant to the terms of a Registered Exchange
Offer (capitalized terms not otherwise defined have the definitions assigned to
them under Article IV herein); 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
<PAGE> 3
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 successors 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, August 1, 1997, October 15, 1997, and June 1,
1998, respectively, are hereby in all respects confirmed.
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<PAGE> 4
ARTICLE II
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF BONDS OF THIS SERIES
-------------------------------------------------
Section 2.01 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, 6.86% Series due 2008" of the Company and hereinabove and
hereinafter called the "Bonds of this Series." The Bonds of this Series 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 2.01 The Bonds of this Series shall be issued as fully
registered Bonds only, without coupons, in the denominations of $1,000 or any
multiple thereof.
Section 2.03 (a) The Bonds of this Series shall be dated the date of
authentication, shall mature on October 1, 2008, and shall bear interest from
the time hereinafter provided at the rate of 6.86% per annum payable on April 1
and October 1 in each year starting on April 1, 1999 (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such 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 Bonds, until the Company's obligation with respect to the payment of
the principal shall be discharged as provided in the Indenture. Interest on any
Bond of this Series will cease to accrue upon the exchange of such Bond for an
Exchange Bond, and if the Record Date (hereinafter defined) for the interest
payment date next following that exchange occurs after that exchange, the
accrued and unpaid interest on that Bond of this Series will be payable to the
Person in whose name such Exchange Bond is registered on that Record Date. Each
Bond of this Series will bear Additional Interest (as defined below) as and to
the extent required under and in accordance with Section 2.03(e) hereof.
(b) The Bonds of this Series shall be payable as to principal (and
premium, if any) and interest at the agency of the Company in the Borough of
Manhattan, The City of New York, 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, 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 Bonds (as hereinafter defined) and all other Bonds the Holders of
which shall have provided written wire transfer instructions to the Company or
the Paying Agent.
(c) Except as hereinafter provided, each Bond of this Series shall bear
interest from the most recent date to which interest has been paid or, if no
interest has been paid, then from October 1, 1998, until the principal of such
Bond is paid. Interest on the Bonds of this Series shall be computed on the
basis of twelve 30-day months and a 360-day year.
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<PAGE> 5
(d) The interest payable on any interest payment date shall be paid to
the respective persons in whose names the Bonds of this Series 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 Bonds of this Series are registered at the close
of business on a date (the "Subsequent Record Date") not less than 10 days nor
more than 30 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 Bonds of this
Series 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.
(c) (i) Additional interest (the "Additional Interest") with respect to
the Bonds of this Series 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 Bonds of this Series (that date of
issue, the "Closing Date"), neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has
been filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act;
(B) If by the 180th day after the Closing
Date, the Registered Exchange Offer has not been consummated
and, if required in lieu thereof, the Shelf Registration
Statement has not been 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 Registered Exchange
Offer or the sale of all the Transfer Restricted Bonds
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 Bonds 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 statements 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 supplement the related prospectus,
to comply with the Securities Act or the Exchange Act or the
respective rules thereunder.
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<PAGE> 6
Additional Interest shall accrue on the Bonds of this Series
over and above the interest set forth in the title of the Bonds of this
Series from and including the date on which any such Failure to
Register shall occur to but excluding the date on which such Failures
to Register have been cured, at a rate of 0.50% per annum.
(ii) A Failure to Register referred to in Section
2.03(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 (as defined in the Securities
Act) 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 Bonds of this
Series, 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 Bonds of this Series, 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 Supplemental
Indenture and the Bonds of this Series, the Trustee is permitted to
assume for all purposes that Additional Interest is not due in respect
of a Bond of this Series until such time as the Company shall deliver
an Officer's Certificate to the Trustee stating that Additional
Interest is due in respect of Bonds of this Series (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 2.03 stating that
Additional Interest is no longer due in respect of the Bonds of this
Series (such Officer's Certificate to also state the date on which
Additional Interest ceased to accrue). Absent receipt by it of 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
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<PAGE> 7
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.
(f) The term "Record Date" shall mean, with respect to any interest
payment date of any Bond of this Series, the close of business on the fifteenth
day (whether or not a business day at the place of payment) of the calendar
month next preceding such interest payment date.
Section 2.04 The Bonds of this Series shall be redeemable as provided
in this Article II, subject to the provisions contained in Article IV of the
Indenture and the form of Bond of this Series.
Section 2.05 (a) The Bonds of this Series will be redeemable as a whole
or in part, at the option of the Company at any time, at a redemption price
equal to the greater of (1) 100% of their principal amount and (2) the sum of
the present values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate (as
defined below) plus thirty-seven and one-half [37.5] basis points, plus, in the
case of each of clause (1) and (2), accrued interest to the date of redemption.
(b) For purposes of this Section 2.05, the following terms shall have
the meanings set forth below:
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term ("Remaining Life") of the
series of Bonds to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice in
pricing new issues of corporate debt securities of comparable maturity
to the remaining term of such Bonds.
"Independent Investment Banker" means Morgan Stanley & Co.
Incorporated or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking
institution of national standing selected by the Company.
"Comparable Treasury Price" means (1) the average of four
Reference Treasury Dealer Quotations for such redemption date after
excluding the highest and lowest Reference Treasury Dealer Quotations,
or (2) if the Independent Investment Banker obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such
quotations.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co.
Incorporated, and Credit Suisse First Boston Corporation and their
respective successors, provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in The
City of New York (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer and (2) any other
Primary Treasury Dealer selected by the Independent Investment Banker
after consultation with the Company.
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<PAGE> 8
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date, the average as
determined by the Independent Investment Banker, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Independent Investment Banker at 5:00 p.m. New York City time, on the
third Business Day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date,
(1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)", or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month) or (2)
if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using 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. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
Section 2.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Bonds of this Series pursuant to this
Supplemental Indenture shall be given by the Trustee by mailing to each
registered owner 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 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 Bonds of this Series,
the Trustee shall select the Bonds of this Series to be redeemed, subject to the
provisions of this Supplemental Indenture, in such manner as the Trustee shall
deem appropriate and fair.
Section 2.07 Any Bonds of this Series 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 2.08 All Bonds of this Series redeemed as provided in Sections
2.04, 2.05 and 2.06 shall be surrendered to the Trustee for cancellation and the
Trustee shall forthwith cancel the same. In the event that part of a Bond of
this Series shall be redeemed as provided in said Sections 2.04, 2.05 and 2.06,
the registered owner may, at its option, surrender such Bond to the Trustee for
cancellation, in which event the Trustee shall cancel such Bond and the Company
shall execute and the Trustee shall authenticate and deliver to the registered
owner Bonds of this Series in such authorized denominations as shall be
specified by the registered owner in an
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<PAGE> 9
aggregate principal amount equal to the unpaid balance of the principal amount
of such surrendered Bond of this Series.
Section 2.09 The aggregate principal amount of Bonds of this Series
which may be authenticated and delivered hereunder shall not exceed
$125,000,000, except as otherwise provided in the Indenture.
Section 2.10 (a)(1) Bonds of this Series 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 bonds legend
and the restricted bonds legend set forth below (each, a "Restricted
Global Bond"), 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 Bond 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) Bonds of this Series 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 bonds legend and the
restricted bonds legend set forth below (each, a "Regulation S Global
Bond" and, together with the Restricted Global Bonds, the "Global
Bonds"), 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 Bond 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 Bond may be held through Euroclear, Cedel or other
participants having accounts at the Depository. The aggregate principal
amount of each Regulation S Global Bond 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 Supplemental Indenture or the
Indenture with respect to any Global Bond held on their behalf by the
Depository or by the Trustee as the Securities Custodian or under such
Global Bond, 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 Bond 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
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<PAGE> 10
Members, the operation of customary practices of such Depository
governing the exercise of the rights of a holder of a beneficial
interest in any Global Bond.
(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
Bonds 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) Except as provided in this Section 2.10 or Article II, owners of
beneficial interests in Global Bonds will not be entitled to receive physical
delivery of Bonds of this Series. Purchasers of Bonds of this Series who are
Institutional Accredited Investors and are not QIBs and did not purchase Bonds
of this Series sold in reliance on Regulation S will receive Definitive Bonds;
provided, however, that upon transfer of such Definitive Bonds to a QIB or in
accordance with Regulation S, such Definitive Bonds will, unless the relevant
Global Bond has previously been exchanged, be exchanged for an interest in a
Global Bond pursuant to the provisions of Article II.
(d) The form of the fully registered Bonds of this Series, and of the
Trustee's certificate of authentication thereon, shall be substantially as
follows:
[FORM OF FULLY REGISTERED BOND]
[Global Bonds 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 CLEVELAND ELECTRIC ILLUMINATING COMPANY ("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 BOND 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 BOND SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO BELOW.
[Restricted Bonds Legend]
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<PAGE> 11
THIS BOND 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 BOND 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 BOND
EXCEPT (A) TO THE 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
BOND (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF BONDS AT THE TIME OF
TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL REASONABLY 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 BOND IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS BOND WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH BELOW 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
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<PAGE> 12
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.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 6.86% SERIES
Due 2008
No. $125,000,000
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized
and existing under the laws of the State of Ohio (hereinafter called the
"Company," which term shall include any successor corporation as defined in the
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________________________, or registered assigns, the sum of
_____________________________Dollars ($___________) or the aggregate unpaid
principal amount hereof, whichever is less, on October 1, 2008, 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 the rate per annum specified in the title hereof, plus
Additional Interest (as hereinafter defined), if any, such interest to be
payable on April 1 and October 1 in each year starting on April 1, 1999 (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. Interest and Additional Interest, if any, on this Bond shall be
computed on the basis of twelve 30-day months and a 360-day year. Except as
hereinafter provided, this Bond shall bear interest and Additional Interest, if
any, from the most recent date to which interest has been paid or, if no
interest has been paid, then from the date of initial authentication of this
Bond, until the principal of this Bond has been paid or duly provided for.
Subject to certain exceptions provided in said Indenture, the interest and
Additional Interest, if any, 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 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 and to the person
as provided in the Supplemental Indenture.
Principal of and interest and Additional Interest, if any, 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 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, if this
Bond is held on behalf
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<PAGE> 13
of the beneficial owners hereof by a Securities Custodian or Depository or if
the Holder of this Bond is the Holder of Bonds of this Series in the aggregate
principal amount of at least $100,000 and such Holder shall have provided
written wire transfer instructions to the Company or the Paying Agent.
Interest on this Bond shall cease to accrue upon the exchange of this
Bond for an Exchange Bond (as defined in the Supplemental Indenture) in like
principal amount and having substantially identical terms to this Bond pursuant
to a registered exchange offer (hereinafter described). If the Record Date for
the interest payment date next following the exchange of this Bond occurs after
the exchange of this Bond, the accrued and unpaid interest on this Bond will be
payable to the Person in whose name the Exchange Bond is registered on that
Record Date.
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, 6.86% Series due 2008 (herein called the
"Bonds of this Series") limited, except as otherwise provided in the Indenture,
in aggregate principal amount to $125,000,000, issued under and secured by the
Indenture and described in the Seventy-Eighth Supplemental Indenture dated as of
October 1, 1998, between the Company and the Trustee (herein called the
"Supplemental Indenture").
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 Bonds of this Series shall have the right
to exchange the Bonds of this Series for Exchange Bonds, which are to be
registered under the Securities Act, in like principal amount and having
identical terms as the Bonds of this Series 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 Bonds
of this Series under certain circumstances. The Holders of the Bonds of this
Series shall be entitled to receive certain additional interest payments
("Additional Interest") 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, as
defined in the Supplemental Indenture.
The Bonds of this Series are redeemable as a whole or in part, at the
option of the Company at any time, as provided in Article II of the Supplemental
Indenture, at a redemption price equal to the greater of (1) 100% of their
principal amount and (2) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the
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<PAGE> 14
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate (as defined in the Supplemental
Indenture) plus thirty-seven and one-half [37.5] basis points, plus, in the case
of each of clause (1) and (2), accrued interest to the date of redemption.
Any redemption of the Bonds of this Series shall be made after written
notice has been given by the Trustee by mailing to each registered owner 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 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 Bonds of this Series, the Trustee shall
select the Bonds of this Series to be redeemed, subject to the provisions of the
Indenture, in such manner as the Trustee shall deem appropriate and fair. Any
notice of redemption of the Bonds of this Series may be conditional on the
Company depositing funds with the Trustee, or irrevocably directing the Trustee
to apply moneys held by it, sufficient to pay the redemption price thereof, and
if such funds are not so deposited or such direction is not given, such notice
shall be of no effect.
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 60% 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 60% 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 reserved the right to make
certain modifications of the Indenture, not including modifications which will
affect the status of payment of the principal of or interest on this Bond,
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 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.
The term "Record Date" shall mean, with respect to any interest payment
date of any Bond of this Series, the close of business on the fifteenth day
(whether or not a business day at the place of payment) of the calendar month
next preceding such interest payment date.
Subject to the limitations provided in the Indenture, this Bond, with
or without others of the same series, may be exchanged for one or more new fully
registered Bonds of the same series of other authorized denominations but of the
same aggregate principal amount; without charge except for any tax or taxes or
other governmental charges incidental to such exchange and
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<PAGE> 15
subject to the terms and conditions set forth in the Indenture. 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 or Additional Interest, if any, 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 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
Attest: By: ______________________________
- ---------------------
Secretary
[FORM OF TRUSTEE'S OF 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
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<PAGE> 16
- ------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Bond, fill in the form below:
I or we assign and transfer this Bond 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 Bond 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 Bond.
In connection with any transfer of any of the Bonds 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 Bonds and the last date, if any, on which such Bonds were owned
by the Company or any Affiliate of the Company, the undersigned confirms that
such Bonds 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
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<PAGE> 17
(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 Bonds
at the time of transfer of less than $100,000, an opinion of
counsel reasonably acceptable to the Company that such transfer
is in compliance with the restrictions set forth in the legend on
the Bonds; 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 Bonds 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
Bonds, 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.)
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<PAGE> 18
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Bond 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
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<PAGE> 19
[TO BE ATTACHED TO GLOBAL BONDS]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL BOND
The following increases or decreases in this Global Bond
have been made:
<TABLE>
<CAPTION>
Amount of Amount of Signature of
decrease in increase in Principal amount of authorized officer
Principal Amount Principal Amount this Global Bond of Trustee or
Date of of this of this Global following such Securities
Exchange Global Bond Bond Decrease Or Increase Custodian
- -------- ----------- ---- -------------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
[END OF FORM OF FULLY REGISTERED BOND]
ARTICLE III
TRANSFER AND EXCHANGE OF BONDS
------------------------------
Section 3.01 Transfer and Exchange of Definitive Bonds. When Definitive
Bonds are presented to the Security Registrar with a request to register the
transfer of such Definitive Bonds or to exchange such Definitive Bonds for an
equal principal amount of Definitive Bonds 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 Bonds 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 3.02, 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 Bonds 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 Bond); or
(ii) if such Definitive Bonds are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse of the Bond); or
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<PAGE> 20
(iii) if such Definitive Bonds 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 Bond 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 Bond) 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 Bonds 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 Section 2.10.
Section 3.02 RESTRICTIONS ON TRANSFER OF A DEFINITIVE BOND FOR A
BENEFICIAL INTEREST IN A GLOBAL BOND. A Definitive Bond may not be exchanged for
a beneficial interest in a Global Bond except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Bond,
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 Bond,
that such Definitive Bond 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 Bond or the Regulation S Global Bond, as the
case may be, to reflect an increase in the aggregate principal amount of the
Bonds represented by such Global Bond, such instructions to contain information
regarding the Depository account (or in the case of the Regulation S Global Bond
only, the Euroclear or Cedel account) to be credited with such increase,
then the Trustee shall cancel such Definitive Bond 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 Bonds represented by the Restricted Global Bond or the
Regulation S Global Bond, as the case may be, to be increased by the principal
amount of the Definitive Bond 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 Bond equal to the principal amount of the
Definitive Bond so canceled. If no Global Bonds are then outstanding, the
Company shall issue and the Trustee shall authenticate, pursuant to a Company
Order, a new Restricted Global Bond or Regulation S Global Bond, as the case may
be, in the appropriate principal amount.
Section 3.03 TRANSFER AND EXCHANGE OF GLOBAL BONDS AND BENEFICIAL
INTERESTS THEREIN.
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<PAGE> 21
(a) The transfer and exchange of Global Bonds or beneficial interests
therein shall be effected through the Depository in accordance with this
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 Bond 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 Bond. 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 Bond and to debit the account of the Person
making the transfer the beneficial interest in the Global Bond being
transferred.
Transfers of beneficial interests in the Global Bonds to
Persons required to take delivery in the form of an interest in another Global
Bond shall be permitted as follows:
(i) RESTRICTED GLOBAL BOND TO REGULATION S GLOBAL BOND. If, at
any time, an owner of a beneficial interest in a Restricted Global Bond
deposited with the Depository (or with the Trustee as custodian for the
Depository) wishes to transfer its beneficial interest in such
Restricted Global Bond to a Person who is required or permitted to take
delivery thereof in the form of an interest in a Regulation S Global
Bond, 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 Bond as provided in this
Section 3.03(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 Bond in an amount equal
to the beneficial interest in the Restricted Global Bond to be
exchanged, (2) a written order given in accordance with the
Depository's procedures containing information regarding the Agent
Member account with 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 Bonds 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 Bond
and to increase or cause to be increased the aggregate principal amount
at maturity of the applicable Regulation S Global Bond by the principal
amount at maturity of the beneficial interest in the Restricted Global
Bond 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 Bond equal to the
reduction in the aggregate principal amount at maturity of the
Restricted Global Bond, 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 Bond that is being exchanged or transferred.
(ii) REGULATION S GLOBAL BOND TO RESTRICTED GLOBAL BOND. 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 Bond deposited with the Depository (or with the
Trustee as custodian for the Depository) wishes to transfer its
20
<PAGE> 22
beneficial interest in such Regulation S Global Bond to a Person who is
required or permitted to take delivery thereof in the form of an
interest in a Restricted Global Bond, 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
Bond as provided in this Section 3.03(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 Bond equal
to the beneficial interest in the Regulation S Global Bond 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 Bond reasonably believes that the Person acquiring such interest
in the Regulation S Global Bond 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 transfer restrictions applicable to the Global
Bonds 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 Bond and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable Restricted
Global Bond by the principal amount at maturity of the beneficial
interest in the Regulation S Global Bond 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 Bond equal to the
reduction in the aggregate principal amount at maturity of such
Regulation S Global Bond 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 Bond that is being exchanged or transferred.
(b) Notwithstanding any other provisions of this Supplemental Indenture
(other than the provisions set forth in Section 3.09), a Global Bond 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 promptly 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.
21
<PAGE> 23
(d) In the event that a Global Bond is exchanged for Bonds in
definitive registered form pursuant to this Supplemental Indenture or Article II
of the Indenture, prior to the consummation of a Registered Exchange Offer or
the effectiveness of a Shelf Registration Statement with respect to such Bonds,
such Bonds may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 3.03 (including the
certification requirements set forth on the reverse of the Bonds of this Series
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 3.04 TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL BOND FOR A
DEFINITIVE BOND.
(a) Subject to Section 3.03(b), any Person having a beneficial interest
in a Transfer Restricted Bond that is a Global Bond may transfer such beneficial
interest to an Institutional Accredited Investor that is acquiring the Bond 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
Bond, 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 Bond) and such other certifications as the Trustee may reasonably request
and (ii) if the aggregate principal amount of the applicable Global Bond 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 3.05(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 Bond 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 Bond.
(b) Definitive Bonds issued in exchange for a beneficial interest in a
Global Bond pursuant to this Section 3.04 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
Bonds to the Persons in whose names such Bonds are so registered in accordance
with the instructions of the Depository.
Section 3.05 LEGENDS.
(a) Except as permitted by the following paragraphs (b), (c) and (d),
each Bond certificate evidencing the Global Bonds and the Definitive Bonds (and
all Bonds issued in exchange or in substitution therefor) shall bear the
restricted Bonds legend set forth in Section 2.10 ("Restricted Bonds Legend").
22
<PAGE> 24
(b) Upon any sale or transfer of a Transfer Restricted Bond (including
any Transfer Restricted Bond represented by a Global Bond) pursuant to Rule 144
under the Securities Act:
(i) in the case of any Transfer Restricted Bond that is a
Definitive Bond, the Security Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Bond for a certificated Bond that
does not bear the Restricted Bonds Legend and rescind any restriction
on the transfer of such Transfer Restricted Bond; and
(ii) in the case of any Transfer Restricted Bond that is
represented by a Global Bond, the Security Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Bond for a
certificated Bond that does not bear the Restricted Bonds Legend and
rescind any restriction on the transfer of such Transfer Restricted
Bond, 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 Bond).
(c) After a transfer of any Bonds of this Series under and in the
manner described in a Shelf Registration Statement with respect to such Bonds of
this Series, all requirements pertaining to legends on such Bond of this Series
will cease to apply, the requirements requiring any such Bond of this Series
issued to certain Holders to be issued in global form will cease to apply, and a
certificated Bond of this Series without legends will be available to the
transferee of the Holder of such Bonds of this Series upon exchange of such
transferring Holder's certificated Bond of this Series or directions to transfer
such Holder's interest in the Global Bond, as applicable.
(d) Upon the consummation of a Registered Exchange Offer with respect
to the Bonds of this Series pursuant to which Holders of such Bonds of this
Series are offered Exchange Bonds in exchange for their Bonds of this Series,
all requirements pertaining to such Bonds of this Series that Bonds of this
Series issued to certain Holders be issued in global form will cease to apply
and certificated Bonds of this Series with the Restricted Bonds Legend set forth
in Section 2.10 will be available to Holders of such Bonds of this Series that
do not exchange their Bonds of this Series, and Exchange Bonds in certificated
or global form will be available to Holders that exchange such Bonds of this
Series in such Registered Exchange Offer.
Section 3.06 CANCELLATION OR ADJUSTMENT OF GLOBAL BOND. At such time as
all beneficial interests in a Global Bond have either been exchanged for
certificated Bonds, redeemed, repurchased or canceled, such Global Bond 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 Bond is exchanged for certificated Bonds, redeemed, repurchased or
canceled, the principal amount of Bonds represented by such Global Bond 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 Bond) with respect to
such Global Bond, by the Trustee or the Securities Custodian, to reflect such
reduction.
Section 3.07 OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
BONDS.
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<PAGE> 25
(a) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Bonds and Global
Bonds 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 provided, however, that the Company shall pay any and all transfer
tax, assessments, or similar governmental charges payable in connection with the
Registered Exchange Offer.
(c) Prior to the due presentation for registration of transfer of any
Bond, the Company, the Trustee, the Paying Agent or the Security Registrar may
deem and treat the Person in whose name a Bond is registered as the absolute
owner of such Bond for the purpose of receiving payment of principal of and
interest on such Bond and for all other purposes whatsoever, whether or not such
Bond 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 Bonds issued upon any transfer or exchange pursuant to the
terms of this Supplemental Indenture and the Indenture shall evidence the same
debt and shall be entitled to the same benefits under this Supplemental
Indenture and the Indenture as the Bonds surrendered upon such transfer or
exchange.
Section 3.08 NO OBLIGATION OF THE TRUSTEE.
(a) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Bond, 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 Bonds 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 Bonds. All notices and communications
to be given to the Holders and all payments to be made to Holders under the
Bonds 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 Bond). The
rights of beneficial owners in any Global Bond 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
Supplemental Indenture or the Indenture or under applicable law with respect to
any transfer of any interest in any Bond (including any transfers between or
among Depository participants, members or beneficial owners in any Global Bond)
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 Supplemental Indenture or the Indenture, and to
examine the same to determine substantial compliance as to form with the express
requirements hereof.
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<PAGE> 26
Section 3.09 ISSUANCE OF DEFINITIVE BONDS.
(a) A Global Bond deposited with the Depository or with the Securities
Custodian pursuant to Section 2.10 shall be transferred to the beneficial owners
thereof in the form of Definitive Bonds in an aggregate principal amount equal
to the principal amount of such Global Bond, in exchange for such Global Bond,
only if such transfer complies with Section 3.03 and (i) the Depository notifies
the Company that it is unwilling or unable to continue as Depository for such
Global Bond 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 Bonds
under this Supplemental Indenture.
(b) Any Global Bond that is transferable to the beneficial owners
thereof pursuant to this Section 3.09 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 Bond, an equal
aggregate principal amount of Definitive Bonds of authorized denominations. Any
portion of a Global Bond transferred pursuant to this Section 3.09 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 Bond delivered in exchange for an interest in the Global
Bond shall, except as otherwise provided by Section 3.05, bear the restricted
bonds legend set forth in Section 2.10.
(c) Subject to the provisions of this Section 3.09, the registered
Holder of a Global Bond 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
Supplemental Indenture or the Indenture or the Bonds.
(d) In the event of the occurrence of any of the events specified in
Section 3.09(a), the Company will promptly make available to the Trustee a
reasonable supply of Definitive Bonds in definitive, fully registered form
without interest coupons.
ARTICLE IV
DEFINITIONS
-----------
Section 4.01 DEFINITIONS. For the purposes of this Supplemental
Indenture the following terms shall have the meanings indicated below:
"Definitive Bond" means a certificated Bond of this Series which may be
held by an Institutional Accredited Investor in accordance with Section 2.10(c).
"Depository" means The Depository Trust Company, New York. New York,
its nominees and their respective successors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
25
<PAGE> 27
"Exchange Bonds" has the meaning set forth in the fifth paragraph under
"RECITALS."
"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 September 29,
1998 between the Company and the Purchasers.
"Purchasers" means Morgan Stanley & Co. Incorporated, Credit Suisse
First Boston Corporation and McDonald & Company Securities, 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 Bonds of this Series, to issue
and deliver to such Holders, in exchange for the Bonds of this Series, a like
aggregate principal amount of Exchange Bonds registered under the Securities
Act.
"Registration Agreement" means the Registration Agreement dated
September 29, 1998 between the Company and the Purchasers.
"Registration Statement" means each of the Exchange Offer Registration
Statement and the Shelf Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Bond (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 Bonds of this Series
pursuant to the Registration Agreement.
"Transfer Restricted Bonds" means each Definitive Bond and each Bond
that bears or is required to bear the legend described in Section 3.05 until (i)
the date on which that Bond has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Bond in the Registered
Exchange Offer; (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Bond for an Exchange Bond, the date on
which that Exchange Bond 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 Bond has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement; or (iv)
26
<PAGE> 28
the date on which that Bond 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 V
THE TRUSTEE
-----------
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 V.
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.
ARTICLE VI
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.
27
<PAGE> 29
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
Corporate 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.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By:/s/ Richard H. Marsh
------------------------------------------
Richard H. Marsh, Vice President
Attest:
/s/ Nancy C. Ashcom
- -----------------------------------------
Nancy C. Ashcom, Corporate Secretary
Signed, sealed and acknowledged by
The Cleveland Electric Illuminating Company
in the presence of
/s/ Thomas C. Navin
- -----------------------------------------
Thomas C. Navin
/s/ Cynthia A. Laflame
- -----------------------------------------
Cynthia A. Laflame
28
<PAGE> 30
THE CHASE MANHATTAN BANK, AS TRUSTEE
By:/s/ James P. Freeman
--------------------------------------------
James P. Freeman, Assistant Vice President
Attest:
/s/ R. Lorenzen
- -----------------------------------
R. Lorenzen, Senior Trust Officer
Signed, sealed and acknowledged by
The Chase Manhattan Bank
in the presence of
/s/ W. Keenan
- -----------------------------------
W. Keenan
/s/ Melissa Goldsmith
- -----------------------------------
Melissa Goldsmith
As witnesses
29
<PAGE> 31
STATE OF OHIO
COUNTY OF SUMMIT
On this 1st day of October, 1998, before me personally appeared
Richard H. Marsh and Nancy C. Ashcom, to me personally known, who being by me
severally duly sworn, did say that they are a Vice President and the Corporate
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 the free act and deed of said corporation.
/s/ Susie M. Hoisten
--------------------------
Notary Public
Susie M. Hoisten
Residence - Summit County
State Wide Jurisdiction, Ohio
My Commission expires November 19, 2001
30
<PAGE> 32
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 1st day of October, 1998, before me personally appeared James
P. Freeman and R. Lorenzen, 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 the free act and deed of said corporation.
/s/ Annabelle Deluca
---------------------------
Notary Public
Annabelle DeLuca
This instrument prepared by: FirstEnergy Corp., 76 South Main Street,
Akron, Ohio 44308.
31
<PAGE> 1
EXHIBIT 4b (79)
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK,
as Trustee.
Seventy-Ninth Supplemental Indenture
Dated as of October 1, 1998
First Mortgage Bonds, Guarantee Series A of 1998 due 2030
First Mortgage Bonds, Guarantee Series B of 1998 due 2030
First Mortgage Bonds, Guarantee Series C of 1998 due 2030
<PAGE> 2
Seventy-Ninth Supplemental Indenture, dated as of October 1, 1998, 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-Eight
Supplemental Indentures thereto; and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Seventy-Ninth Supplemental Indenture, will be hereinafter
collectively referred to as the "Indenture" and this Seventy-Ninth Supplemental
Indenture will be hereinafter referred to as "this Supplemental Indenture"; and
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 three new series of first mortgage bonds, to be pledged as security
for the payment of certain obligations undertaken by the Company (i) in
connection with (the "Series A Bonds") the issuance by the Ohio Water
Development Authority (the "OWDA") of $46,510,000 aggregate principal amount of
the State of Ohio Pollution Control Revenue Refunding Bonds, Series 1998-A (The
Cleveland Electric Illuminating Company Project), (ii) in connection with (the
"Series B Bonds") the issuance by the Ohio Air Quality Development Authority
(the "OAQDA") of $12,085,000 aggregate principal amount of the State of Ohio
Pollution Control Revenue Refunding Bonds, Series 1998-B (The Cleveland Electric
Illuminating Company Project) and (iii) in connection with (the "Series C
Bonds") the issuance by the Beaver County Industrial Development Authority (the
"BCIDA") of $46,300,000 aggregate principal amount of the Beaver County
Industrial Development Authority Pollution Control Revenue Refunding Bonds,
Series 1998 (The Cleveland Electric Illuminating Company Project), with such
first mortgage bonds to have the denominations, rates of interest, dates of
maturity, redemption provisions and other provisions and agreements in respect
thereof as in this Supplemental Indenture set forth; and
The Series A Bonds are to be limited in aggregate principal amount to
$46,510,000 and are to be delivered to Chase Manhattan Trust Company, National
Association, as trustee (hereinafter called the "OWDA Revenue Bond Trustee")
under the Trust Indenture (the "OWDA Revenue Bond Indenture") dated as of
October 1, 1998 between the OWDA and the OWDA Revenue Bond Trustee; and
<PAGE> 3
The Series B Bonds are to be limited in aggregate principal amount to
$12,085,000 and are to be delivered to Chase Manhattan Trust Company, National
Association, as trustee (hereinafter called the "OAQDA Revenue Bond Trustee")
under the Trust Indenture (the "OAQDA Revenue Bond Indenture") dated as of
October 1, 1998 between the OAQDA and the OAQDA Revenue Bond Trustee; and
The Series C Bonds are to be limited in aggregate principal amount to
$46,300,000 and are to be delivered to Chase Manhattan Trust Company, National
Association, as trustee (hereinafter called the "BCIDA Revenue Bond Trustee")
under the Trust Indenture (the "BCIDA Revenue Bond Indenture") dated as of
October 1, 1998 between the BCIDA and the BCIDA Revenue Bond Trustee; 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 successors 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,
2
<PAGE> 4
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, August 1, 1997, October 15, 1997, June
1, 1998 and October 1, 1998 respectively, are hereby in all respects confirmed.
ARTICLE II
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF SERIES A BONDS
-------------------------------------------
Section 2.01 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, Guarantee Series A of 1998 due 2030" of the Company and
hereinabove and hereinafter called the "Series A Bonds." The Series A Bonds
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 2.02 The Series A Bonds shall be issued as fully registered
Bonds only, without coupons, in the denominations of $1,000 and any integral
multiple thereof.
Section 2.03 The Series A Bonds shall be dated the date of
authentication, shall mature on October 1, 2030, 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
Series A Bonds to equal the amount of interest payable on the OWDA Revenue
Bonds, such interest payable on October 1 and April 1 in each year starting on
the Initial Interest Accrual Date (as defined below) (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such Series A 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 Series A Bonds, until the Company's obligation with
respect to the payment of the principal shall be discharged as provided in the
Indenture.
The Series A Bonds 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 the
City of Akron, 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 Series A Bond shall bear interest
from the Initial Interest Accrual Date (as defined below) until the principal of
such Series A Bond is paid or duly provided for.
3
<PAGE> 5
The interest payable on any interest payment date shall be paid to the
respective persons in whose names the Series A Bonds 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 Series A Bonds are registered at the close of business on a date
(the "Subsequent Record Date") not less than 10 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 Series A Bonds 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 interest rate on the Series A Bonds shall be the same rate of
interest per annum as is borne by the OWDA Revenue Bonds; provided, however,
that if there are different rates of interest borne by the OWDA Revenue Bonds,
or if interest is required to be paid on the OWDA Revenue Bonds more frequently
than on each October 1 or April 1, the interest rate on the Series A Bonds shall
be the rate that results in the total amount of interest payable on an interest
payment date, a redemption date or at maturity, as the case may be, or at any
other time interest on the Series A Bonds is due and payable, to be equal to the
total amount of unpaid interest that has accrued on all then outstanding OWDA
Revenue Bonds.
In the manner and subject to the limitations provided in the Indenture,
Series A Bonds may be exchanged for a like aggregate principal amount of Series
A Bonds 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 office or agency of the Company in the Borough of Manhattan,
The City of New York or the City of Akron, State of Ohio.
Except as otherwise provided in Section 2.03 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 Series A Bond is
registered as the absolute owner thereof for the purpose of receiving any
payment and for all other purposes.
Section 2.05 The Series A Bonds shall be redeemable only to the extent
provided in this Article II, subject to the provisions contained in Article VI
of the Indenture and the form of Series A Bond.
Section 2.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Series A Bonds pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Series A 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 Series A Bonds. Any notice of
redemption shall be mailed at least 30 days, but no more than 60 days, prior to
the redemption date.
4
<PAGE> 6
Section 2.07 If and when the principal of any OWDA Revenue Bonds shall
be paid, then there shall be deemed to have been paid a principal amount of the
Series A Bonds then outstanding which bears the same ratio to the aggregate
principal amount of Series A Bonds then outstanding as the principal amount of
the OWDA Revenue Bonds so paid bears to the aggregate principal amount of the
OWDA Revenue Bonds outstanding immediately before such payment; provided,
however, that such payment of Series A Bonds shall be deemed to have been made
only when and to the extent that notice of such payment of the principal amount
of such OWDA Revenue Bonds 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 OWDA Revenue Bonds has been so made.
Section 2.08 The Series A Bonds 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 written advice from the
OWDA Revenue Bond Trustee stating that the principal amount of all the OWDA
Revenue Bonds then outstanding under the OWDA Revenue Bond Indenture has been
declared due and payable pursuant to the provisions of Section 11.02 of the OWDA
Revenue Bond Indenture, specifying the date of the accelerated maturity of such
OWDA Revenue Bonds and the date or dates from which interest on the OWDA Revenue
Bonds issued under the OWDA Revenue Bond Indenture has then accrued and is
unpaid (specifying the rate or rates of such accrual and the principal amount of
the particular OWDA Revenue Bonds to which such rates apply), stating such
declaration of maturity has not been annulled and demanding payment of the
principal amount of the Series A Bonds plus accrued interest thereon to the date
fixed for such redemption. The date fixed for such redemption shall be not
earlier than the date specified in the aforesaid written advice as the date of
accelerated maturity of the OWDA Revenue Bonds then outstanding under the OWDA
Revenue Bond Indenture, and not later than forty-five days after such date of
accelerated maturity. Upon mailing of notice of redemption, the earliest date
from which unpaid interest on the OWDA Revenue Bonds has then accrued (as
specified by the OWDA Revenue Bond Trustee) shall become the initial interest
accrual date (the "Initial Interest Accrual Date") with respect to the Series A
Bonds; provided, however, on any demand for payment of the principal amount
thereof at maturity as a result of the principal of the OWDA Revenue Bonds
becoming due and payable on the maturity date of the Series A Bonds, the
earliest date from which unpaid interest on the OWDA Revenue Bonds has then
accrued shall become the Initial Interest Accrual Date with respect to the
Series A Bonds, such date, together with each other different date from which
unpaid interest on the OWDA Revenue Bonds has then accrued, to be as stated in a
written notice from the OWDA Revenue Bond Trustee to the Trustee, which notice
shall also specify the rate or rates of such accrual and the principal amount of
the particular OWDA Revenue Bonds to which such rate or rates apply. The
aforementioned notice of redemption shall become null and void for all purposes
under the Indenture (including the fixing of the Initial Interest Accrual Date
with respect to the bonds of this series) upon receipt by the Trustee of written
notice from the OWDA Revenue Bond Trustee of the annulment of the acceleration
of the maturity of the OWDA Revenue Bonds then outstanding under the OWDA
Revenue Bond Indenture and of the rescission of the aforesaid written advice
prior to the redemption date specified in such notice of redemption, and
thereupon no redemption of the Series A Bonds and no payment in respect thereof
as specified in such notice of redemption shall be effected or required. But no
such rescission shall extend to any
5
<PAGE> 7
subsequent written advice from the OWDA Revenue Bond Trustee or impair any right
consequent on such subsequent written advice.
Section 2.09 The Series A Bonds shall not otherwise be subject to
redemption by the Company prior to maturity.
Section 2.10 Subject to the provisions of the Indenture, written notice
of redemption of Series A Bonds pursuant to this Article II shall be given by
the Trustee by mailing to the registered owner or owners of such Series A 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 Series A Bonds.
Section 2.11 Series A Bonds shall not be transferable except to a
successor trustee under the OWDA Revenue Bond Indenture or in connection with
the exercise of the rights and remedies of the holder thereof consequent upon an
event of default as defined in the Indenture.
Section 2.12 The aggregate principal amount of Series A Bonds which may
be authenticated and delivered hereunder shall not exceed $46,510,000, except as
otherwise provided in the Indenture.
Section 2.13 The form of the fully registered Series A Bonds, 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, GUARANTEE SERIES A OF 1998
Due October 1, 2030
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, whichever is less, on October 1, 2030, 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 the rate specified in Article II of the Supplemental
Indenture (hereinafter referred to), such interest to be payable on October 1
and April 1 in each year starting on the Initial Interest Accrual Date
(hereinafter defined) (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
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<PAGE> 8
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 Initial Interest Accrual Date (hereinafter defined) 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 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 (hereinafter referred to). 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 the City of Akron, 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, Guarantee Series A of 1998 due 2030
(herein called the "Pledge Bonds") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $46,510,000, issued under and
secured by the Indenture and described in the Seventy-Ninth Supplemental
Indenture dated as of October 1, 1998, between the Company and the Trustee
(herein called the "Supplemental Indenture").
The Pledge Bonds have been delivered by the Company to Chase Manhattan
Trust Company, National Association, as trustee (hereinafter called the "Revenue
Bond Trustee") under the Trust Indenture (the "Revenue Bond Indenture") dated as
of October 1, 1998 between the Ohio Water Development Authority (the
"Authority") and the Revenue Bond Trustee securing $46,510,000 of the
Authority's State of Ohio Pollution Control Revenue Refunding Bonds, Series
1998-A (The Cleveland Electric Illuminating Company Project) which have been
issued on behalf of the Company (the "Revenue Bonds").
Subject to becoming null and void as provided in Section 2.08 of
Article II of the Supplemental Indenture, the Initial Interest Accrual Date for
the Pledge Bonds shall be the earliest date from which unpaid and overdue
interest on the Revenue Bonds has accrued.
If and when the principal of any Revenue Bonds is paid then there is
deemed to be paid a principal amount of the Pledge Bonds then outstanding which
bears the same ratio to the aggregate principal amount of Pledge Bonds then
outstanding as the aggregate principal amount of the Revenue Bonds so paid bears
to the aggregate principal amount of the Revenue Bonds outstanding immediately
before such payment; provided, however, that such payment of Pledge
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<PAGE> 9
Bonds is deemed to be made only when and to the extent that notice of such
payment of such Revenue Bonds is given by the Company to the Trustee.
The Pledge Bonds shall be redeemed by the Company prior to maturity in
whole at any time as provided in Section 2.08 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.
Any redemption of the Pledge Bonds 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 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 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 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 Section 2.11
of the Supplemental Indenture, this Bond is transferable by the registered owner
hereof, in person or by duly
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<PAGE> 10
authorized attorney, on the books of the Company to be kept for that purpose at
the office or agency of the Company in the Borough of Manhattan, The City of New
York or the City of Akron, State of Ohio upon surrender and cancellation of this
Bond, and upon presentation of a duly executed written instrument of transfer,
and thereupon new fully registered Pledge Bonds 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 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. 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
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 Corporate
Secretary or an Assistant Secretary (whose signature may be manual or a
facsimile thereof).
Dated: THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
Attest: By: ______________________________
- ---------------------
Corporate Secretary
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[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
[END OF FORM OF FULLY REGISTERED BOND]
ARTICLE III
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF SERIES B BONDS
-------------------------------------------
Section 3.01 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, Guarantee Series B of 1998 due 2030" of the Company and
hereinabove and hereinafter called the "Series B Bonds." The Series B Bonds
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 3.02 The Series B Bonds shall be issued as fully registered
Bonds only, without coupons, in the denominations of $1,000 and any integral
multiple thereof.
Section 3.03 The Series B Bonds shall be dated the date of
authentication, shall mature on October 1, 2030, 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
Series B Bonds to equal the amount of interest payable on the OAQDA Revenue
Bonds, such interest payable on October 1 and April 1 in each year starting on
the Initial Interest Accrual Date (as defined below) (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such Series B 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 Series B Bonds, until the Company's obligation with
respect to the payment of the principal shall be discharged as provided in the
Indenture.
The Series B Bonds 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 the
City of Akron, 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.
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<PAGE> 12
Except as hereinafter provided, each Series B Bond shall bear interest
from the Initial Interest Accrual Date (as defined below) until the principal of
such Series B Bond 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 Series B Bonds 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 Series B Bonds are registered at the close of business on a date
(the "Subsequent Record Date") not less than 10 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 Series B Bonds 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 interest rate on the Series B Bonds shall be the same rate of
interest per annum as is borne by the OAQDA Revenue Bonds; provided, however,
that if there are different rates of interest borne by the OAQDA Revenue Bonds,
or if interest is required to be paid on the OAQDA Revenue Bonds more frequently
than on each October 1 or April 1, the interest rate on the Series B Bonds shall
be the rate that results in the total amount of interest payable on an interest
payment date, a redemption date or at maturity, as the case may be, or at any
other time interest on the Series B Bonds is due and payable, to be equal to the
total amount of unpaid interest that has accrued on all then outstanding OAQDA
Revenue Bonds.
Section 3.04 In the manner and subject to the limitations provided in
the Indenture, Series B Bonds may be exchanged for a like aggregate principal
amount of Series B Bonds 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 office or agency of the Company in
the Borough of Manhattan, The City of New York or the City of Akron, State of
Ohio.
Except as otherwise provided in Section 3.03 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 Series B Bond is
registered as the absolute owner thereof for the purpose of receiving any
payment and for all other purposes.
Section 3.05 The Series B Bonds shall be redeemable only to the extent
provided in this Article III, subject to the provisions contained in Article VI
of the Indenture and the form of Series B Bond.
Section 3.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Series B Bonds pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Series B Bonds to be redeemed a notice of
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<PAGE> 13
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
Series B Bonds. Any notice of redemption shall be mailed at least 30 days, but
no more than 60 days, prior to the redemption date.
Section 3.07 If and when the principal of any OAQDA Revenue Bonds shall
be paid, then there shall be deemed to have been paid a principal amount of the
Series B Bonds then outstanding which bears the same ratio to the aggregate
principal amount of Series B Bonds then outstanding as the principal amount of
the OAQDA Revenue Bonds so paid bears to the aggregate principal amount of the
OAQDA Revenue Bonds outstanding immediately before such payment; provided,
however, that such payment of Series B Bonds shall be deemed to have been made
only when and to the extent that notice of such payment of the principal amount
of such OAQDA Revenue Bonds 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 OAQDA Revenue Bonds has been so made.
Section 3.08 The Series B Bonds 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 written advice from the
OAQDA Revenue Bond Trustee stating that the principal amount of all the OAQDA
Revenue Bonds then outstanding under the OAQDA Revenue Bond Indenture has been
declared due and payable pursuant to the provisions of Section 11.02 of the
OAQDA Revenue Bond Indenture, specifying the date of the accelerated maturity of
such OAQDA Revenue Bonds and the date or dates from which interest on the OAQDA
Revenue Bonds issued under the OAQDA Revenue Bond Indenture has then accrued and
is unpaid (specifying the rate or rates of such accrual and the principal amount
of the particular OAQDA Revenue Bonds to which such rates or rates apply),
stating such declaration of maturity has not been annulled and demanding payment
of the principal amount of the Series B Bonds plus accrued interest thereon to
the date fixed for such redemption. The date fixed for such redemption shall be
not earlier than the date specified in the aforesaid written advice as the date
of accelerated maturity of the OAQDA Revenue Bonds then outstanding under the
OAQDA Revenue Bond Indenture, and not later than forty-five days after such date
of accelerated maturity. Upon mailing of notice of redemption, the earliest date
from which unpaid interest on the OAQDA Revenue Bonds has then accrued (as
specified by the OAQDA Revenue Bond Trustee) shall become the initial interest
accrual date (the "Initial Interest Accrual Date") with respect to the Series B
Bonds; provided, however, on any demand for payment of the principal amount
thereof at maturity as a result of the principal of the OAQDA Revenue Bonds
becoming due and payable on the maturity date of the Series B Bonds, the
earliest date from which unpaid interest on the OAQDA Revenue Bonds has then
accrued shall become the Initial Interest Accrual Date with respect to the
Series B Bonds, such date, together with each other different date from which
unpaid interest on the OAQDA Revenue Bonds has then accrued, to be as stated in
a written notice from the OAQDA Revenue Bond Trustee to the Trustee, which
notice shall also specify the rate or rates of such accrual and the principal
amount of the particular OAQDA Revenue Bonds to which such rate or rates apply.
The aforementioned notice of redemption shall become null and void for all
purposes under the Indenture (including the fixing of the Initial Interest
Accrual Date with respect to the Series B Bonds) upon receipt by the Trustee of
written notice from the OAQDA Revenue Bond Trustee of the annulment of the
acceleration of the maturity of the OAQDA
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Revenue Bonds then outstanding under the OAQDA Revenue Bond Indenture and of the
rescission of the aforesaid written advice prior to the redemption date
specified in such notice of redemption, and thereupon no redemption of the
Series B Bonds and no payment in respect thereof as specified in such notice of
redemption shall be effected or required. But no such rescission shall extend to
any subsequent written advice from the OAQDA Revenue Bond Trustee or impair any
right consequent on such subsequent written advice.
Section 3.09 The Series B Bonds shall not otherwise be subject to
redemption by the Company prior to maturity.
Section 3.10 Subject to the provisions of the Indenture, written notice
of redemption of Series B Bonds pursuant to this Article III shall be given by
the Trustee by mailing to the registered owner or owners of such Series B 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 Series B Bonds.
Section 3.11 Series B Bonds shall not be transferable except to a
successor trustee under the OAQDA Revenue Bond Indenture or in connection with
the exercise of the rights and remedies of the holder thereof consequent upon an
event of default as defined in the Indenture.
Section 3.12 The aggregate principal amount of Series B Bonds which may
be authenticated and delivered hereunder shall not exceed $12,085,000, except as
otherwise provided in the Indenture.
Section 3.13 The form of the fully registered Series B Bonds, 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, GUARANTEE SERIES B OF 1998
Due October 1, 2030
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, whichever is less, on October 1, 2030, 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 the rate specified in Article III of the Supplemental
Indenture
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<PAGE> 15
(hereinafter referred to), such interest to be payable on October 1 and April 1
in each year starting on the Initial Interest Accrual Date (hereinafter defined)
(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 Initial Interest Accrual Date (hereinafter defined) 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 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 (hereinafter referred to). 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 the City of Akron, 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, Guarantee Series B of 1998 due 2030
(herein called the "Pledge Bonds") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $12,085,000, issued under and
secured by the Indenture and described in the Seventy-Ninth Supplemental
Indenture dated as of October 1, 1998, between the Company and the Trustee
(herein called the "Supplemental Indenture").
The Pledge Bonds have been delivered by the Company to Chase Manhattan
Trust Company, National Association, as trustee (hereinafter called the "Revenue
Bond Trustee") under the Trust Indenture (the "Revenue Bond Indenture") dated as
of October 1, 1998 between the Ohio Air Quality Development Authority (the
"Authority") and the Revenue Bond Trustee securing $12,085,000 of the
Authority's State of Ohio Pollution Control Revenue Refunding Bonds, Series
1998-B (The Cleveland Electric Illuminating Company Project) which have been
issued on behalf of the Company (the "Revenue Bonds").
Subject to becoming null and void as provided in Section 3.08 of
Article III of the Supplemental Indenture, the Initial Interest Accrual Date for
the Pledge Bonds shall be the earliest date from which unpaid and overdue
interest on the Revenue Bonds has accrued.
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<PAGE> 16
If and when the principal of any Revenue Bonds is paid then there is
deemed to be paid a principal amount of the Pledge Bonds then outstanding which
bears the same ratio to the aggregate principal amount of Pledge Bonds then
outstanding as the aggregate principal amount of the Revenue Bonds so paid bears
to the aggregate principal amount of the Revenue Bonds outstanding immediately
before such payment; provided, however, that such payment of Pledge Bonds is
deemed to be made only when and to the extent that notice of such payment of
such Revenue Bonds is given by the Company to the Trustee.
The Pledge Bonds shall be redeemed by the Company prior to maturity in
whole at any time as provided in Section 3.08 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.
Any redemption of the Pledge Bonds 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 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 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 conditions and in the manner
and with the effect provided in the Indenture.
15
<PAGE> 17
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 Section 3.11
of the Supplemental 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 office or agency of the Company in the Borough
of Manhattan, The City of New York or the City of Akron, State of Ohio upon
surrender and cancellation of this Bond, and upon presentation of a duly
executed written instrument of transfer, and thereupon new fully registered
Pledge Bonds 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 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. 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
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 Corporate
Secretary or an Assistant Secretary (whose signature may be manual or a
facsimile thereof).
Dated: THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
Attest: By: _____________________________
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<PAGE> 18
- ---------------------
Corporate 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
[END OF FORM OF FULLY REGISTERED BOND]
ARTICLE IV
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF SERIES C BONDS
-------------------------------------------
Section 4.01 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, 1998 Guarantee Series C of 1998 due 2030" of the Company and
hereinabove and hereinafter called the "Series C Bonds." The Series C Bonds
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 4.02 The Series C Bonds shall be issued as fully registered
Bonds only, without coupons, in the denominations of $1,000 and any integral
multiple thereof.
Section 4.03 The Series C Bonds shall be dated the date of
authentication, shall mature on October 1, 2030, 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
Series C Bonds to equal the amount of interest payable on the BCIDA Revenue
Bonds, such interest payable on October 1 and April 1 in each year starting on
the Initial Interest Accrual Date (as defined below) (each such date hereinafter
called an "interest payment date") on and until maturity, or, in the case of any
such Series C 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 Series C Bonds, until the Company's obligation with
respect to the payment of the principal shall be discharged as provided in the
Indenture.
The Series C Bonds 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 the
City of Akron, State of
17
<PAGE> 19
================================================================================
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 Series C Bond shall bear interest
from the Initial Interest Accrual Date (as defined below) until the principal of
such Series C Bond 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 Series C Bonds 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 Series C Bonds are registered at the close of business on a date
(the "Subsequent Record Date") not less than 10 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 Series C Bonds 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 interest rate on the Series C Bonds shall be the same rate of
interest per annum as is borne by the BCIDA Revenue Bonds; provided, however,
that if there are different rates of interest borne by the BCIDA Revenue Bonds,
or if interest is required to be paid on the BCIDA Revenue Bonds more frequently
than on each October 1 or April 1, the interest rate on the Series C Bonds shall
be the rate that results in the total amount of interest payable on an interest
payment date, a redemption date or at maturity, as the case may be, or at any
other time interest on the Series C Bonds is due and payable, to be equal to the
total amount of unpaid interest that has accrued on all then outstanding BCIDA
Revenue Bonds.
Section 4.04 in the manner and subject to the limitations provided in
the Indenture, Series C Section 4.04 Bonds may be exchanged for a like aggregate
principal amount of Series C Bonds 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 office or agency of the Company in
the Borough of Manhattan, The City of New York or the City of Akron, State of
Ohio.
Except as otherwise provided in Section 4.03 of this Article IV 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 Series C Bond is
registered as the absolute owner thereof for the purpose of receiving any
payment and for all other purposes.
Section 4.05 The Series C Bonds shall be redeemable only to the extent
provided in this Article IV, subject to the provisions contained in Article VI
of the Indenture and the form of Series C Bond.
18
<PAGE> 20
Section 4.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Series C Bonds pursuant to this Supplemental
Indenture shall be given by the Trustee by mailing to each registered owner of
such Series C 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 Series C Bonds. Any notice of
redemption shall be mailed at least 30 days, but no more than 60 days, prior to
the redemption date.
Section 4.07 If and when the principal of any BCIDA Revenue Bonds shall
be paid, then there shall be deemed to have been paid a principal amount of the
Series C Bonds then outstanding which bears the same ratio to the aggregate
principal amount of Series C Bonds then outstanding as the principal amount of
the BCIDA Revenue Bonds so paid bears to the aggregate principal amount of the
BCIDA Revenue Bonds outstanding immediately before such payment; provided,
however, that such payment of Series C Bonds shall be deemed to have been made
only when and to the extent that notice of such payment of the principal amount
of such BCIDA Revenue Bonds 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 BCIDA Revenue Bonds has been so made.
Section 4.08 The Series C Bonds 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 written advice from the
BCIDA Revenue Bond Trustee stating that the principal amount of all the BCIDA
Revenue Bonds then outstanding under the BCIDA Revenue Bond Indenture has been
declared due and payable pursuant to the provisions of Section 11.02 of the
BCIDA Revenue Bond Indenture, specifying the date of the accelerated maturity of
such BCIDA Revenue Bonds and the date or dates from which interest on the BCIDA
Revenue Bonds issued under the BCIDA Revenue Bond Indenture has then accrued and
is unpaid (specifying the rate or rates of such accrual and the principal amount
of the particular BCIDA Revenue Bonds to which such rate or rates apply, stating
such declaration of maturity has not been annulled and demanding payment of the
principal amount of the Series C Bonds plus accrued interest thereon to the date
fixed for such redemption. The date fixed for such redemption shall be not
earlier than the date specified in the aforesaid written advice as the date of
accelerated maturity of the BCIDA Revenue Bonds then outstanding under the BCIDA
Revenue Bond Indenture, and not later than forty-five days after such date of
accelerated maturity. Upon mailing of notice of redemption, the earliest date
from which unpaid interest on the BCIDA Revenue Bonds has then accrued (as
specified by the BCIDA Revenue Bond Trustee) shall become the initial interest
accrual date (the "Initial Interest Accrual Date") with respect to the Series C
Bonds; provided, however, on any demand for payment of the principal amount
thereof at maturity as a result of the principal of the BCIDA Revenue Bonds
becoming due and payable on the maturity date of the Series C Bonds, the
earliest date from which unpaid interest on the BCIDA Revenue Bonds has then
accrued shall become the Initial Interest Accrual Date with respect to the
Series C Bonds, such date, together with each other different date from which
unpaid interest on the BCIDA Revenue Bonds has then accrued, to be as stated in
a written notice from the BCIDA Revenue Bond Trustee to the Trustee, which
notice shall also specify the rate or rates of such accrual and the principal
amount of the particular BCIDA Revenue Bonds to which such rate or rates shall
apply. The aforementioned notice of redemption shall become null and void for
all
19
<PAGE> 21
purposes under the Indenture (including the fixing of the Initial Interest
Accrual Date with respect to the Series C Bonds) upon receipt by the Trustee of
written notice from the BCIDA Revenue Bond Trustee of the annulment of the
acceleration of the maturity of the BCIDA Revenue Bonds then outstanding under
the BCIDA Revenue Bond Indenture and of the rescission of the aforesaid written
advice prior to the redemption date specified in such notice of redemption, and
thereupon no redemption of the Series C Bonds and no payment in respect thereof
as specified in such notice of redemption shall be effected or required. But no
such rescission shall extend to any subsequent written advice from the BCIDA
Revenue Bond Trustee or impair any right consequent on such subsequent written
advice.
Section 4.09 The Series C Bonds shall not otherwise be subject to
redemption by the Company prior to maturity.
Section 4.10 Subject to the provisions of the Indenture, written notice
of redemption of Series C Bonds pursuant to this Article IV shall be given by
the Trustee by mailing to the registered owner or owners of such Series C 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 Series C Bonds.
Section 4.11 Series C Bonds shall not be transferable except to a
successor trustee under the BCIDA Revenue Bond Indenture or in connection with
the exercise of the rights and remedies of the holder thereof consequent upon an
event of default as defined in the Indenture.
Section 4.12 The aggregate principal amount of Series C Bonds which may
be authenticated and delivered hereunder shall not exceed $46,300,000, except as
otherwise provided in The Indenture.
Section 4.13 The form of the fully registered Series C Bonds, 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, GUARANTEE SERIES C OF 1998
Due October 1, 2030
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, whichever is less, on October 1, 2030, in any
coin or currency of the United States of America
20
<PAGE> 22
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 the rate specified in
Article IV of the Supplemental Indenture (hereinafter referred to), such
interest to be payable on October 1 and April 1 in each year starting on the
Initial Interest Accrual Date (hereinafter defined) (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 Initial
Interest Accrual Date (hereinafter defined) 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 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 (hereinafter referred
to). 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 the City of Akron,
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, Guarantee Series C of 1998 due 2030
(herein called the "Pledge Bonds") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $46,300,000, issued under and
secured by the Indenture and described in the Seventy-Ninth Supplemental
Indenture dated as of October 1, 1998, between the Company and the Trustee
(herein called the "Supplemental Indenture").
The Pledge Bonds have been delivered by the Company to Chase Manhattan
Trust Company, National Association, as trustee (hereinafter called the "Revenue
Bond Trustee") under the Trust Indenture (the "Revenue Bond Indenture") dated as
of October 1, 1998 between the Beaver County Industrial Development Authority
(the "Authority") and the Revenue Bond Trustee securing $46,300,000 of the
Authority's Pollution Control Revenue Refunding Bonds Series 1998 (The Cleveland
Electric Illuminating Company Project) which have been issued on behalf of the
Company (the "Revenue Bonds").
21
<PAGE> 23
Subject to becoming null and void as provided in Section 4.08 of
Article IV of the Supplemental Indenture, the Initial Interest Accrual Date for
the Pledge Bonds shall be the earliest date from which unpaid and overdue
interest on the Revenue Bonds has accrued.
If and when the principal of any Revenue Bonds is paid then there is
deemed to be paid a principal amount of the Pledge Bonds then outstanding which
bears the same ratio to the aggregate principal amount of Pledge Bonds then
outstanding as the aggregate principal amount of the Revenue Bonds so paid bears
to the aggregate principal amount of the Revenue Bonds outstanding immediately
before such payment; provided, however, that such payment of Pledge Bonds is
deemed to be made only when and to the extent that notice of such payment of
such Revenue Bonds is given by the Company to the Trustee.
The Pledge Bonds shall be redeemed by the Company prior to maturity in
whole at any time as provided in Section 4.08 of Article IV 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.
Any redemption of the Pledge Bonds 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 and such consent is filed
with the Trustee, and such redemption and notice shall be made in the manner
provided in Article IV of the Supplemental Indenture, subject to the provisions
of the Indenture.
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.
22
<PAGE> 24
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 Section 4.11
of the Supplemental 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 office or agency of the Company in the Borough
of Manhattan, The City of New York or the City of Akron, State of Ohio upon
surrender and cancellation of this Bond, and upon presentation of a duly
executed written instrument of transfer, and thereupon new fully registered
Pledge Bonds 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 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. 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
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.
23
<PAGE> 25
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 Corporate
Secretary or an Assistant Secretary (whose signature may be manual or a
facsimile thereof).
Dated: THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
Attest: By: ______________________________
- ---------------------
Corporate 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
[END OF FORM OF FULLY REGISTERED BOND]
ARTICLE V
THE TRUSTEE
-----------
Section 5.01 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 V.
Section 5.02 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.
24
<PAGE> 26
Section 5.03 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 officer's 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 5.04 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, 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 5.05 The Trustee shall advise the Company in writing of the
receipt of any notification provided for pursuant to Sections 2.07 or 2.08 of
Article II, Sections 3.07 or 3.08 of Article III and Sections 4.07 or 4.08 of
Article IV of this Supplemental Indenture.
ARTICLE VI
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.
25
<PAGE> 27
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
Corporate 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 Corporate Secretaries, all as of the day and year first above
written.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By:/s/ Richard H. Marsh
----------------------------------------
Richard H. Marsh, Vice President
Attest:
/s/ Nancy C. Ashcom
- ----------------------------------------
Nancy C. Ashcom, Corporate Secretary
Signed, sealed and acknowledged by
The Cleveland Electric Illuminating Company
in the presence of
/s/ Thomas C. Navin
- ----------------------------------------
Thomas C. Navin
/s Cynthia A. Laflame
- ----------------------------------------
Cynthia A. LaFlame
As Witnesses
26
<PAGE> 28
THE CHASE MANHATTAN BANK, AS TRUSTEE
By:/s/ James P. Freeman
-----------------------------------
James P. Freeman, Vice President
Attest:
/s R. Lorenzen
- ----------------------------------------
R. Lorenzen, Senior Trust Officer
Signed, sealed and acknowledged by
The Chase Manhattan Bank
in the presence of
/s/ W. Keenan
- ----------------------------------------
W. Keenan
/s/ Melissa Goldsmith
- ----------------------------------------
Melissa Goldsmith
As witnesses
27
<PAGE> 29
STATE OF OHIO )
: ss.:
COUNTY OF SUMMIT )
On this 1st day of October 1998, before me personally appeared Richard
H. Marsh and Nancy C. Ashcom, to me personally known, who being by me severally
duly sworn, did say that they are a Vice President and the Corporate 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 the free act and deed of said corporation.
/s/ Susie M. Hoisten
-------------------------
Notary Public
Susie M. Hoisten
Residence - Summit County
State Wide Jurisdiction, Ohio
My Commission expires November 19, 2001
<PAGE> 30
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 1st day of October, 1998, before me personally appeared James
P. Freeman and R. Lorenzen, 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 the free act and deed of said corporation.
/s/ Annabelle Deluca
---------------------------------
Annabelle DeLuca
Notary Public, State of New York
No. 01DE5013759
Qualified in Kings County
Certificate Filed in New York County
Commission Expires July 15, 1999
This instrument prepared by: FirstEnergy Corp., 76 South Main Street,
Akron, Ohio 44308.
<PAGE> 1
Exhibit 4b (80)
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK,
as Trustee.
Eightieth Supplemental Indenture
Dated as of _________, 1999
First Mortgage Bonds, 6.86% Series A due 2008
<PAGE> 2
Eightieth Supplemental Indenture, dated as of __________, 1999, 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-nine
supplemental indentures thereto ("Supplemental Indentures"); and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Eightieth Supplemental Indenture, will be hereinafter
collectively referred to as the "Indenture" and this Eightieth Supplemental
Indenture will be hereinafter referred to as "this Supplemental Indenture"; and
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 a new series of first mortgage bonds designated as "First Mortgage
Bonds, 6.86% Series A due 2008" with the denominations, rate of interest, date
of maturity, redemption provisions, exchange provisions and other provisions and
agreements in respect thereof as in this Supplemental Indenture set forth; and
The Bonds of this Series are being issued in order to be exchanged,
pursuant to the terms of a registered exchange offer, for the outstanding First
Mortgage Bonds, 6.86% Series due 2008 issued pursuant to the Seventy-Eighth
Supplemental Indenture (the "Initial Bonds"), which Initial Bonds have the
denominations, rate of interest, date of maturity, redemption provisions,
exchange provisions and other provisions and agreements in respect thereof
identical to the Bonds of this Series (except with respect to transfer
restrictions); 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.
<PAGE> 3
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 successors 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, August 1, 1997, October 15, 1997, June 1, 1998,
October 1, 1998 and October 1, 1998, respectively, are hereby in all respects
confirmed.
ARTICLE II
CREATION, PROVISIONS, REDEMPTION,
PRINCIPAL AMOUNT AND FORM OF BONDS OF THIS SERIES
-------------------------------------------------
Section 2.01 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, 6.86% Series A due 2008" of the Company and hereinabove and
hereinafter called the "Bonds of this Series." The Bonds of this Series shall be
executed, authenticated and delivered in accordance with the
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<PAGE> 4
provisions of, and shall in all respects be subject to, all of the terms,
conditions and covenants of the Indenture.
Section 2.02 The Bonds of this Series shall be issued as fully
registered Bonds only, without coupons, in the denominations of $1,000 or any
multiple thereof.
Section 2.03 (a) The Bonds of this Series shall be dated the date of
authentication, shall mature on October 1, 2008, and shall bear interest from
the time hereinafter provided at the rate of 6.86% per annum payable on April 1
and October 1 in each year starting on October 1, 1999 (each such date
hereinafter called an "interest payment date") on and until maturity, or, in the
case of any such 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 Bonds, until the Company's obligation with respect to
the payment of the principal shall be discharged as provided in the Indenture.
If a Bond of this Series is authenticated and delivered in exchange for an
Initial Bond between a record date for the payment of interest on that Initial
Bond and the related interest payment date, the interest that accrues on the
Bond of this Series from the date of authentication thereof to that interest
payment date shall be payable to the Person in whose name such Bond of this
Series was issued on its issuance date.
(b) The Bonds of this Series shall be payable as to principal (and
premium, if any) and interest at the agency of the Company in the Borough of
Manhattan, The City of New York, 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, 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 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 Bonds (as hereinafter defined) and all
other Bonds the Holders of which shall have provided written wire transfer
instructions to the Company or the Paying Agent.
(c) Except as hereinafter provided, each Bond of this Series shall bear
interest from the most recent date to which interest has been paid or, if no
interest has been paid, then from ________, 1999, until the principal of such
Bond is paid. Interest on the Bonds of this Series shall be computed on the
basis of twelve 30-day months and a 360-day year.
(d) The interest payable on any interest payment date shall be paid to
the respective persons in whose names the Bonds of this Series shall be
registered at the close of business on the Record Date next preceding 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 Bonds of this Series are registered at the close of
business on a date (the "Subsequent Record Date") not less than 10 days nor more
than 30 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 Bonds of this Series
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.
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<PAGE> 5
(e) The term "Record Date" shall mean, with respect to any interest
payment date of any Bond of this Series, the close of business on the fifteenth
day (whether or not a business day at the place of payment) of the calendar
month next preceding such interest payment date.
Section 2.04 The Bonds of this Series shall be redeemable as provided
in this Article II, subject to the provisions contained in Article IV of the
Indenture and the form of Bond of this Series.
Section 2.05 (a) The Bonds of this Series will be redeemable as a whole
or in part, at the option of the Company at any time, at a redemption price
equal to the greater of (1) 100% of their principal amount and (2) the sum of
the present values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate (as
defined below) plus thirty-seven and one-half [37.5] basis points, plus, in the
case of each of clause (1) and (2), accrued interest to the date of redemption.
(b) For purposes of this Section 2.05, the following terms shall have
the meanings set forth below:
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term ("Remaining Life") of the
series of Bonds to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice in
pricing new issues of corporate debt securities of comparable maturity
to the remaining term of such Bonds.
"Independent Investment Banker" means Morgan Stanley & Co.
Incorporated or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking
institution of national standing selected by the Company.
"Comparable Treasury Price" means (1) the average of four
Reference Treasury Dealer Quotations for such redemption date after
excluding the highest and lowest Reference Treasury Dealer Quotations,
or (2) if the Independent Investment Banker obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such
quotations.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co.
Incorporated, and Credit Suisse First Boston Corporation and their
respective successors, provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in The
City of New York (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer and (2) any other
Primary Treasury Dealer selected by the Independent Investment Banker
after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date, the average as
determined by the Independent Investment Banker, of the bid and asked
prices for the Comparable Treasury Issue
4
<PAGE> 6
(expressed in each case as a percentage of its principal amount) quoted
in writing to the Independent Investment Banker at 5:00 p.m. New York
City time, on the third Business Day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date,
(1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)", or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month) or (2)
if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using 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. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
Section 2.06 Subject to the applicable provisions of the Indenture,
written notice of redemption of Bonds of this Series pursuant to this
Supplemental Indenture shall be given by the Trustee by mailing to each
registered owner 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 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 Bonds of this Series,
the Trustee shall select the Bonds of this Series to be redeemed, subject to the
provisions of this Supplemental Indenture, in such manner as the Trustee shall
deem appropriate and fair.
Section 2.07 Any Bonds of this Series 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 2.08 All Bonds of this Series redeemed as provided in Sections
2.04, 2.05 and 2.06 shall be surrendered to the Trustee for cancellation and the
Trustee shall forthwith cancel the same. In the event that part of a Bond of
this Series shall be redeemed as provided in said Sections 2.04, 2.05 and 2.06,
the registered owner may, at its option, surrender such Bond to the Trustee for
cancellation, in which event the Trustee shall cancel such Bond and the Company
shall execute and the Trustee shall authenticate and deliver to the registered
owner Bonds of this Series 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 Bond of this Series.
5
<PAGE> 7
Section 2.09 The aggregate principal amount of Bonds of this Series
which may be authenticated and delivered hereunder shall not exceed
$125,000,000, except as otherwise provided in the Indenture.
Section 2.10 (a) Bonds of this Series shall be issued initially in the
form of one or more permanent global securities in definitive, fully registered
form without interest coupons with the legend set forth below (each, a "Global
Bond"), which shall be deposited on behalf of the Holders with the Trustee, at
its New York office, as the initial custodian with respect to a Global Bond
("Securities Custodian"), and registered in the name of The Depository Trust
Company, its nominees and their respective successors ("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 Global
Bond 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.
(b) Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Supplemental Indenture or the Indenture with
respect to any Global Bond held on their behalf by the Depository or by the
Trustee as the Securities Custodian or under such Global Bond, 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 Bond 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 customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Bond.
(c) Except as provided in this Section 2.10 or Article III, owners of
beneficial interests in Global Bonds will not be entitled to receive physical
delivery of Bonds of this Series.
(d) The form of the fully registered Bonds of this Series, and of the
Trustee's certificate of authentication thereon, shall be substantially as
follows:
[FORM OF FULLY REGISTERED BOND]
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 CLEVELAND ELECTRIC ILLUMINATING COMPANY ("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.
6
<PAGE> 8
TRANSFERS OF THIS GLOBAL BOND 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.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 6.86% SERIES A Due 2008
No. $125,000,000
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized
and existing under the laws of the State of Ohio (hereinafter called the
"Company," which term shall include any successor corporation as defined in the
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________________________, or registered assigns, the sum of
_____________________________Dollars ($___________) or the aggregate unpaid
principal amount hereof, whichever is less, on October 1, 2008, 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 the rate per annum specified in the title hereof, such
interest to be payable on April 1 and October 1 in each year starting on October
1, 1999 (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. Interest on this Bond shall be computed on the basis
of twelve 30-day months and a 360-day year. Except as hereinafter provided, this
Bond shall bear interest from the most recent date to which interest has been
paid or, if no interest has been paid, then from the date of initial
authentication of this Bond, until the principal of this Bond has been paid or
duly provided for. 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 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 and to the person
as provided in the Supplemental Indenture. If this Bond is authenticated and
delivered in exchange for an Initial Bond between a record date for the payment
of interest on that Initial Bond and the related interest payment date, the
interest that accrues on this Bond from the date of authentication thereof to
that interest payment date shall be payable to the Person in whose name this
Bond was issued on its issuance date.
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 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 Security
Register; provided that payment by wire transfer of
7
<PAGE> 9
immediately available funds shall be required with respect to principal of and
interest on this Bond if this Bond is held on behalf of the beneficial owners
hereof by a Securities Custodian or Depository or if the Holder of this Bond is
the Holder of Bonds of this Series in the aggregate principal amount of at least
$100,000 and such Holder shall have provided written wire transfer instructions
to the Company or the Paying Agent.
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, 6.86% Series A due 2008 (herein called
the "Bonds of this Series") limited, except as otherwise provided in the
Indenture, in aggregate principal amount to $125,000,000, issued under and
secured by the Indenture and described in the Eightieth Supplemental Indenture
dated as of ___________, 1999, between the Company and the Trustee (herein
called the "Supplemental Indenture").
This Bond is issued pursuant to a registered exchange offer under which
an Initial Bond of the Company, in like principal amount and having identical
terms to this Bond, except with respect to transfer restrictions, was exchanged
for this Bond.
The Bonds of this Series are redeemable as a whole or in part, at the
option of the Company at any time, as provided in Article II of the Supplemental
Indenture, at a redemption price equal to the greater of (1) 100% of their
principal amount and (2) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate (as defined in the Supplemental Indenture)
plus thirty-seven and one-half [37.5] basis points, plus, in the case of each of
clause (1) and (2), accrued interest to the date of redemption.
Any redemption of the Bonds of this Series shall be made after written
notice has been given by the Trustee by mailing to each registered owner 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 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 Bonds of this Series, the Trustee shall
select the Bonds of this Series to be redeemed, subject to the provisions of the
Indenture, in such manner as the Trustee shall deem appropriate and fair. Any
notice of redemption of the Bonds of this Series may be conditional on the
Company depositing funds with the Trustee, or irrevocably directing the
8
<PAGE> 10
Trustee to apply moneys held by it, sufficient to pay the redemption price
thereof, and if such funds are not so deposited or such direction is not given,
such notice shall be of no effect.
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 60% 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 60% 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 reserved the right to make
certain modifications of the Indenture, not including modifications which will
affect the status of payment of the principal of or interest on this Bond,
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 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.
The term "Record Date" shall mean, with respect to any interest payment
date of any Bond of this Series, the close of business on the fifteenth day
(whether or not a business day at the place of payment) of the calendar month
next preceding such interest payment date.
Subject to the limitations provided in the Indenture, this Bond, with
or without others of the same series, may be exchanged for one or more new fully
registered Bonds of the same series of other authorized denominations but of the
same aggregate principal amount; without charge except for any tax or taxes or
other governmental charges incidental to such exchange and subject to the terms
and conditions set forth in the Indenture. 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
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<PAGE> 11
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
Attest: By:_________________________________
- ---------------------
Secretary
[FORM OF TRUSTEE'S OF 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
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<PAGE> 12
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Bond, fill in the form below:
I or we assign and transfer this Bond 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 Bond 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 Bond.
[TO BE ATTACHED TO GLOBAL BONDS]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL BOND
The following increases or decreases in this Global Bond have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of Amount of Signature of
decrease in increase in Principal amount of authorized officer
Principal Amount Principal Amount this Global Bond of Trustee or
Date of of this of this Global following such Securities
Exchange Global Bond Bond decrease or increase Custodian
- -------- ----------- ---- -------------------- ---------
</TABLE>
[END OF FORM OF FULLY REGISTERED BOND]
11
<PAGE> 13
ARTICLE III
TRANSFER AND EXCHANGE OF BONDS
------------------------------
Section 3.01 TRANSFER AND EXCHANGE OF GLOBAL BONDS AND BENEFICIAL
INTERESTS THEREIN.
(a) The transfer and exchange of Global Bonds or beneficial interests
therein shall be effected through the Depository in accordance with this
Supplemental Indenture and the procedures of the Depository therefor. A
transferor of a beneficial interest in a Global Bond shall deliver to the
Security Registrar a written order given in accordance with the Depository's
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Bond. 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 Bond and to debit the account of the Person
making the transfer the beneficial interest in the Global Bond being
transferred.
(b) Notwithstanding any other provisions of this Supplemental Indenture
(other than the provisions set forth in Section 3.05), a Global Bond 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.
Section 3.02 CANCELLATION OR ADJUSTMENT OF GLOBAL BOND. At such time as
all beneficial interests in a Global Bond have either been exchanged for
certificated Bonds, redeemed, repurchased or canceled, such Global Bond 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 Bond is exchanged for certificated Bonds, redeemed, repurchased or
canceled, the principal amount of Bonds represented by such Global Bond 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 Bond) with respect to
such Global Bond, by the Trustee or the Securities Custodian, to reflect such
reduction.
Section 3.03 OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
BONDS.
(a) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Bonds 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
Bond, the Company, the Trustee, the Paying Agent or the Security Registrar may
deem and treat the Person in whose name a Bond is registered as the absolute
owner of such Bond for the purpose of receiving payment of principal of and
interest on such Bond and for all other purposes whatsoever, whether or not such
Bond is overdue, and none of the Company, the Trustee, the Paying Agent or the
Security Registrar shall be affected by notice to the contrary.
12
<PAGE> 14
(d) All Bonds issued upon any transfer or exchange pursuant to the
terms of this Supplemental Indenture and the Indenture shall evidence the same
debt and shall be entitled to the same benefits under this Supplemental
Indenture and the Indenture as the Bonds surrendered upon such transfer or
exchange.
Section 3.04 NO OBLIGATION OF THE TRUSTEE. At such time as all
beneficial interests in a GlobalThe Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Bond, 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 Bonds 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 Bonds. All notices and
communications to be given to the Holders and all payments to be made to Holders
under the Bonds 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 Bond). The rights of beneficial owners in any Global Bond 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.
Section 3.05 ISSUANCE OF DEFINITIVE BONDS.
(a) A Global Bond deposited with the Depository or with the Securities
Custodian pursuant to Section 2.10 shall be transferred to the beneficial owners
thereof in the form of Definitive Bonds in an aggregate principal amount equal
to the principal amount of such Global Bond, in exchange for such Global Bond,
only if (i) the Depository notifies the Company that it is unwilling or unable
to continue as Depository for such Global Bond or if at any time such Depository
ceases to be a "clearing agency" registered under the Securities Exchange Act of
1934 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 Bonds under this Supplemental
Indenture.
(b) Any Global Bond that is transferable to the beneficial owners
thereof pursuant to this Section 3.05 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 Bond, an equal
aggregate principal amount of Definitive Bonds of authorized denominations. Any
portion of a Global Bond transferred pursuant to this Section 3.05 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.
(c) Subject to the provisions of this Section 3.05, the registered
Holder of a Global Bond 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
Supplemental Indenture or the Indenture or the Bonds.
13
<PAGE> 15
(d) In the event of the occurrence of any of the events specified in
Section 3.05(a), the Company will promptly make available to the Trustee a
reasonable supply of Definitive Bonds in definitive, fully registered form
without interest coupons.
ARTICLE IV
THE TRUSTEE
-----------
Section 4.01 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 4.02 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 4.03 The Trustee shall act as initial Paying Agent and as
initial Securities Custodian.
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.
14
<PAGE> 16
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
Corporate 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.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By:________________________________________
Richard H. Marsh, Vice President
Attest:
- -------------------------------------
Nancy C. Ashcom, Corporate Secretary
Signed, sealed and acknowledged by
The Cleveland Electric Illuminating Company
in the presence of
- -------------------------------------
Thomas C. Navin
- -------------------------------------
Cynthia A. LaFlame
15
<PAGE> 17
THE CHASE MANHATTAN BANK, AS TRUSTEE
By:__________________________________________
James P. Freeman, Assistant Vice President
Attest:
- -------------------------------------
R. Lorenzen, Senior Trust Officer
Signed, sealed and acknowledged by
The Chase Manhattan Bank
in the presence of
- -------------------------------------
W. Keenan
- -------------------------------------
Melissa Goldsmith
As witnesses
16
<PAGE> 18
STATE OF OHIO
COUNTY OF SUMMIT
On this ____ day of ________, 1999, before me personally appeared
Richard H. Marsh and Nancy C. Ashcom, to me personally known, who being by me
severally duly sworn, did say that they are a Vice President and the Corporate
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 the free act and deed of said corporation.
------------------------------------------
Notary Public
Susie M. Hoisten
Residence - Summit County
State Wide Jurisdiction, Ohio
My Commission expires November 19, 2001
17
<PAGE> 19
STATE OF NEW YORK
COUNTY OF NEW YORK
On this ____ day of _________, 1999, before me personally appeared
James P. Freeman and R. Lorenzen, 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 the free act and deed of said corporation.
------------------------------------------
Notary Public
Annabelle DeLuca
This instrument prepared by: FirstEnergy Corp., 76 South Main Street,
Akron, Ohio 44308.
18
<PAGE> 1
Exhibit 5
[FirstEnergy Letterhead of David Feltner]
February 22, 1999
The Cleveland Electric Illuminating Company
c/o FirstEnergy Corporation
76 South Main Street
Akron, Ohio 44308
Gentlemen:
I am Associate General Counsel of FirstEnergy Corp. and, in such
capacity, have acted as Ohio counsel to The Cleveland Electric Illuminating
Company (the "Company"), a wholly owned subsidiary of FirstEnergy Corp., in
connection with the proposed issue and sale of $125,000,000 aggregate principal
amount of the Company's First Mortgage Bonds, 6.86% Series A due 2008 (the
"Bonds") to be issued and sold under a 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, as amended and supplemented by seventy-nine
indentures supplemental thereto and as to be further supplemented by the
Eightieth Supplemental Indenture dated as of _________, 1999 (the original
Indenture, as so supplemented, the "Indenture"). In my capacity as such counsel,
I have reviewed 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) Resolutions of the Board of Directors of the Company relating to
the Bonds;
(d) The Application filed by the Company with the Public Utilities
Commission of Ohio for authority to issue and sell the Bonds;
(e) The Indenture;
(f) The proposed form of the Bonds;
(g) The Registration Statement on Form S-4 (including the Prospectus
and exhibits) relating to the Bonds 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
<PAGE> 2
(h) Such other documents and matters as I deem necessary to express
this opinion.
I am a member of the Bar of the State of Ohio and, for purposes of this
opinion, do not hold myself out as an expert on the laws of any jurisdiction
other than the State of Ohio.
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 Bonds;
2. The Indenture and the Bonds are in due and legal form; and
3. Upon (a) due execution by the Company and authentication by the
trustee of the Bonds as provided in the Indenture and (b) issuance and sale of
the Bonds in accordance with the Registration Statement when the same shall have
become effective, the Bonds 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.
This opinion is rendered to you in connection with the above-described
transaction. This opinion may not be relied upon by you for any other purpose,
or relied upon by, or furnished to, any other person, firm or corporation
without my prior written consent.
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. In giving such consent,
I do not hereby admit that I am within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Respectfully submitted,
/s/ David L. Feltner
--------------------
David L. Feltner
2
<PAGE> 1
Exhibit 12
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------------------
(Thousands of Dollars)
Statement Setting fort Computations Showing Satisfaction of the Requirements
Specified in Regulation S-K, Item 503(d):
<TABLE>
<CAPTION>
Year Ended December 31 12 Mos.
--------------------------------------------------------- Ended
1993 1994 1995 1996 1997 9/30/98
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Net Income (Loss) ($587,147) $ 185,431 $ 183,719 $ 116,553 $ 114,481 $ 162,028
Add
Federal Income Taxes Expense (247,966) 85,455 95,561 69,120 92,969 123,761
(Credit)
Interest (a) 252,479 254,248 251,793 244,789 248,429 236,227
Provision for Interest Element of
Rentals 81,131 79,462 79,642 79,503 69,086 65,123
--------- --------- --------- --------- --------- ---------
Total Earnings ($501,503) $ 604,596 $ 610,715 $ 509,965 $ 524,965 $ 587,139
--------- --------- --------- --------- --------- ---------
Fixed Charges
Interest (a) $ 252,479 $ 254,248 $ 251,793 $ 244,789 $ 248,429 $ 236,227
Provision for Interest Element of
Rentals 81,131 79,462 79,462 79,503 69,086 65,123
--------- --------- --------- --------- --------- ---------
Total Fixed Charges $ 333,610 $ 333,710 $ 331,435 $ 324,292 $ 317,515 $ 301,350
--------- --------- --------- --------- --------- ---------
Ratio of Earnings to Fixed Charges (1.50) 1.81 1.84 1.57 1.65 1.95
========= ========= ========= ========= ========= =========
</TABLE>
(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.
<PAGE> 1
Exhibit 15
[Arthur Andersen LLP Letterhead]
February 23, 1999
To The Cleveland Electric Illuminating Company:
We are aware that The Cleveland Electric Illuminating Company has incorporated
by reference in its Registration Statement on Form S-4 to register $125 million
principal amount of First Mortgage Bonds, 6.86% Series A due 2008, its Form
10-Qs for the quarters ended March 31, 1998, June 30, 1998 and September 30,
1998, which include our reports dated May 13, 1998, August 12, 1998 and
November 13, 1998, respectively, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act
of 1933, those reports are not considered a part of the registration statement
prepared or certified by our firm or reports prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<PAGE> 1
Exhibit 23(a)
[Arthur Andersen LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 13, 1998
included in The Cleveland Electric Illuminating Company's Form 10-K for the year
ended December 31, 1997 and to all references to our Firm included in this
registration statement to register $125 million principal amount of The
Cleveland Electric Illuminating Company's First Mortgage Bonds, 6.86% Series A
due 2008.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
February 23, 1999.
<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)
---------------------------------------------
FIRST MORTGAGE BONDS
(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
- 2 -
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 12th day of February, 1999.
THE CHASE MANHATTAN BANK
By /s/ William G. Keenan
----------------------------
William G. Keenan
Trust Officer
<PAGE> 4
- 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 12th day of February, 1999.
THE CHASE MANHATTAN BANK
By /s/William G. Keenan
----------------------------
William G. Keenan
Trust Officer
