<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 33-51379
PROSPECTUS SUPPLEMENT BOOK-ENTRY ONLY
(To Prospectus Dated April 5, 1994)
$150,000,000
COMMONWEALTH EDISON COMPANY
7% NOTES DUE FEBRUARY 15, 1997
Interest on the Notes offered hereby (the "Offered Notes") is payable semi-
annually on February 15 and August 15 of each year, beginning August 15, 1994.
The Offered Notes will not be redeemable prior to maturity. The Offered Notes
will be registered in the name of Cede & Co., as registered owner and as
nominee for The Depository Trust Company ("DTC"), New York, New York.
Beneficial interests in the Offered Notes will be shown on, and transfers will
be effected only through, records maintained by DTC (with respect to its
participants' interests) and its participants. Except as described herein,
Offered Notes will not be issued in certificated form. Settlement for the
Offered Notes will be made in immediately available funds. The Offered Notes
will trade in DTC's Same-Day Funds Settlement System until maturity, and
secondary market trading activity for the Offered Notes will therefore settle
in immediately available funds. All payments of principal and interest will be
made by the Company in immediately available funds. See "Description of the
Offered Notes."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
Per Offered Note........................ 100.000% .375% 99.625%
Total................................... $150,000,000 $562,500 $149,437,500
- --------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from April 12, 1994.
(2) Before deducting expenses payable by the Company estimated to be $210,000.
The Offered Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Offered Notes will be made through the
facilities of DTC on or about April 12, 1994.
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
The date of this Prospectus Supplement is April 5, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF THE OFFERED NOTES
The following description of the particular terms of the Offered Notes
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of Notes set forth in the Prospectus, to
which description reference is hereby made. Capitalized terms not defined
herein have the meanings assigned to such terms in the Prospectus.
GENERAL.
The Offered Notes will be issued in a single series of Notes under the
Company's Indenture dated as of September 1, 1987, as amended and supplemented,
and as further supplemented by a Supplemental Indenture to be dated April 1,
1994, creating the Offered Notes. The Offered Notes will bear interest at the
rate per annum, and will be due and payable on the date, specified in their
title on the cover page of this Prospectus Supplement.
The Offered Notes will be issued only in fully registered form and, when
issued, will be registered in the name of Cede & Co., as registered owner and
as nominee for DTC. DTC will act as securities depository for the Offered
Notes. Purchases of beneficial interests in the Offered Notes will be made in
book-entry form only, in denominations of $1,000 or any integral multiple
thereof. Purchasers of such beneficial interests will not receive certificates
representing their beneficial interests in the Offered Notes. See "Book-Entry
Notes" below. No service charge will be made for any transfer or exchange of
Offered Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charges that may be imposed in connection
therewith.
Principal and interest payments on the Offered Notes will be made by the
Company to Cede & Co. (as nominee of DTC) so long as Cede & Co. is the
registered owner. Disbursement of such payments to the DTC Participants is the
responsibility of DTC, and disbursement of such payments to the beneficial
owners of the Offered Notes is the responsibility of DTC Participants and
Indirect Participants, all as described below under "Book-Entry Notes."
The Offered Notes will not be redeemable prior to maturity. The Offered Notes
will not be subject to any sinking fund.
BOOK-ENTRY NOTES.
DTC will act as securities depository for the Offered Notes. The Offered
Notes will be issued as fully-registered securities registered in the name of
Cede & Co., DTC's partnership nominee, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants ("DTC
Participants") deposit with DTC. DTC also facilitates the settlement among DTC
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in DTC
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations
S-2
<PAGE>
and certain other organizations. DTC is owned by a number of the DTC
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and the DTC Participants are on
file with the Securities and Exchange Commission.
Purchases of beneficial ownership interests in the Offered Notes under the
DTC system must be made by or through DTC Participants, which will receive a
credit for the Offered Notes on DTC's records. The ownership interest of each
beneficial owner of an Offered Note (a "Beneficial Owner") is in turn to be
recorded on the DTC Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of beneficial
ownership interests in the Offered Notes are to be accomplished by entries made
on the books of DTC Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their beneficial
ownership interests in the Offered Notes, except in the event that use of the
book-entry only system for the Offered Notes is discontinued as described
below.
To facilitate subsequent transfers, all Offered Notes deposited by DTC
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Offered Notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Offered Notes. DTC's records
reflect only the identity of the DTC Participants to whose accounts such
Offered Notes are credited, which may or may not be the Beneficial Owners. The
DTC Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants, by
DTC Participants to Indirect Participants, and by DTC Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Offered
Notes. Under its usual procedures, DTC mails an "Omnibus Proxy" to the Company
as soon as possible after the record date. The "Omnibus Proxy" assigns Cede &
Co.'s consenting or voting rights to those DTC Participants to whose accounts
the Offered Notes are credited on the record date identified in a listing
attached to the "Omnibus Proxy."
Principal and interest payments on the Offered Notes will be made to DTC.
DTC's practice is to credit DTC Participants' accounts on a payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on a payment date. Payments
by DTC Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such DTC Participant and not of DTC, the
Indenture Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payments of principal and
interest to DTC is the responsibility of the Indenture Trustee. Disbursement of
such payments to DTC Participants shall be the responsibility of DTC and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of the DTC Participants and Indirect Participants.
If DTC is at any time unwilling or unable to continue as securities
depository and a successor depository is not appointed by the Company within 90
days after notice of such condition, the Company will issue Offered Notes in
certificated form in exchange for each Offered Note issued in book-entry
S-3
<PAGE>
form. In addition, the Company may at any time determine that Offered Notes
will not be represented by book-entry notes, and, in such event, will issue
Offered Notes in certificated form in exchange for all Offered Notes then
issued in book-entry form. In any such instance, an owner of book-entry notes
will be entitled to physical delivery in certificated form of Offered Notes
equal in principal amount to such book-entry notes and to have such Offered
Notes registered in such owner's name. Offered Notes so issued in certificated
form will be issued in denominations of $1,000 and integral multiples of $1,000
in excess thereof and will be issued in registered form only, without coupons.
The information provided immediately above under this caption has been
provided by DTC. No representation is made by the Company or the Underwriters
as to the accuracy or adequacy of such information or as to the absence of
material adverse changes in such information subsequent to the date hereof.
For so long as the Offered Notes are registered in the name of DTC or its
nominee, Cede & Co., the Company and the Indenture Trustee will recognize only
DTC or its nominee, Cede & Co., as the registered owner of the Offered Notes
for all purposes, including payments, notices and voting.
The Company shall not have any responsibility or obligation with respect to
the accuracy of the records of DTC, its nominee or any DTC Participant or
Indirect Participant relating to any beneficial ownership interest in any
Offered Note or with respect to the payment to any DTC Participant or Indirect
Participant or any other person, other than a registered owner of an Offered
Note, of any amount with respect to the principal of, or interest on, any
Offered Note.
SAME-DAY SETTLEMENT AND PAYMENT.
Settlement for the Offered Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest on the
Offered Notes will be made by the Company in immediately available funds.
Secondary trading in long-term bonds and notes of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Offered
Notes will trade in DTC's Same-Day Funds Settlement System until maturity, and
secondary market trading activity in the Offered Notes will therefore be
required by DTC to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Offered Notes.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company and Salomon Brothers Inc, as
representative of the several underwriters named therein (the "Underwriters"),
the Company has agreed to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase, the principal amounts of the
Offered Notes set forth after their names below. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters will be obligated to purchase
all of the Offered Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
OFFERED
UNDERWRITER NOTES
- ----------- ------------
<S> <C>
Salomon Brothers Inc.............................................. $ 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................. 50,000,000
PaineWebber Incorporated.......................................... 50,000,000
------------
$150,000,000
============
</TABLE>
S-4
<PAGE>
The Underwriters have advised the Company that they propose initially to
offer the Offered Notes to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of .25 of 1% of the principal amount of
the Offered Notes. The Underwriters may allow and such dealers may reallow a
discount not in excess of .25 of 1% of the principal amount of the Offered
Notes to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute with respect to payments which such Underwriters may
be required to make in respect thereof.
The Company does not intend to apply for listing of the Offered Notes on a
national securities exchange. Each Underwriter may make a market in the Offered
Notes, but such Underwriter is not obligated to do so and may discontinue
market-making at any time without notice. No assurances can be given as to the
liquidity of, or that there will be a secondary market for, the Offered Notes.
Certain of the Underwriters engage or may in the future engage in
transactions with and perform services for the Company and certain of its
affiliates in the ordinary course of business.
S-5
<PAGE>
COMMONWEALTH EDISON COMPANY
DEBT SECURITIES
CUMULATIVE PREFERENCE STOCK
Commonwealth Edison Company (the "Company") may offer, from time to time, not
to exceed $1,030,000,000 aggregate initial offering price of its (i) Debt
Securities (the "Debt Securities"), consisting of First Mortgage Bonds (the
"Bonds"), in one or more series, and Notes (the "Notes"), in one or more
series, and (ii) Cumulative Preference Stock, without par value (the "New
Cumulative Preference Stock"), in one or more series. The Debt Securities and
New Cumulative Preference Stock (together, the "Securities") may be offered
separately or together, in separate series, in amounts, at prices and on terms
to be determined at the time or times of sale. The Bonds will be issued under,
and secured by, a mortgage which constitutes a lien on substantially all of the
properties and franchises of the Company. The Notes will be unsecured, and the
indenture under which they are to be issued contains no limitations on the
issuance by the Company of other indebtedness (whether secured or unsecured).
For each offering of Bonds (the "Offered Bonds") or Notes (the "Offered
Notes") for which this Prospectus is being delivered, there is an accompanying
Prospectus Supplement (the "Prospectus Supplement") that sets forth the
specific designation, aggregate principal amount, maturity or maturities, rate
or rates and times of payment of interest, sinking fund provisions, redemption
terms and any other special terms of the Offered Bonds or the Offered Notes, as
the case may be, and any planned listing thereof on a securities exchange
(although no assurance can be given as to the liquidity of, or the trading
market for, any of the Debt Securities). For each offering of New Cumulative
Preference Stock for which this Prospectus is being delivered (the "Offered
Preference"), there is an accompanying Prospectus Supplement that sets forth
the number of shares, public offering price, dividend rate (or method of
calculation thereof), redemption and sinking fund terms and any other special
terms of the Offered Preference, as well as any planned listing thereof on a
securities exchange (although no assurance can be given as to the liquidity of,
or the trading market for, any shares of the New Cumulative Preference Stock).
See "Recent Rate Proceedings" herein for certain other considerations relating
to an investment in the Securities.
The Company may sell the Securities to or through underwriters or dealers,
directly to other purchasers or through agents. The names of any underwriters,
dealers or agents involved in the distribution of the Offered Bonds, the
Offered Notes or the Offered Preference, as the case may be (the "Offered
Securities"), any applicable discounts, commissions or allowances, any initial
public offering price and the proceeds to the Company from the sale of the
Offered Securities are set forth in the Prospectus Supplement. See "Plan of
Distribution" herein.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is April 5, 1994.
<PAGE>
THE COMPANY
Commonwealth Edison Company (the "Company") is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. The Company's
electric service territory has an area of approximately 11,540 square miles and
an estimated population of approximately 8.1 million as of December 31, 1993
and approximately 8.2 million as of December 31, 1992. It includes the city of
Chicago, an area of about 225 square miles with an estimated population of
three million from which the Company derived approximately one-third of its
ultimate consumer revenues in the twelve months ended February 28, 1994. The
Company had approximately 3.3 million electric customers as of February 28,
1994. The Company's principal executive offices are located at 10 South
Dearborn Street, Post Office Box 767, Chicago, IL 60690-0767, and its telephone
number is 312/394-4321.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located at Citicorp Center, 500 West Madison
Street, Chicago, IL 60661 and Seven World Trade Center, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549 at prescribed rates. In addition,
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, NY, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, IL and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, CA, the exchanges
on which certain of the Company's securities are listed. The Company has filed
with the Commission a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, with respect to the Securities. This Prospectus does
not contain all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to such
Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No. 1-
1839) are incorporated in this Prospectus by reference and made a part hereof:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1993 (the "1993 Form 10-K"); and
(b) The Company's Current Report on Form 8-K/A-1 dated January 28, 1994
(the "January 28, 1994 Form 8-K/A-1 Report").
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after
the date of this Prospectus and prior to the termination of the offering or
offerings made by this Prospectus, shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the respective dates of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
2
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents that have been or
may be incorporated in this Prospectus by reference, other than certain
exhibits to such documents. Such requests should be directed to David A.
Scholz, Secretary, Commonwealth Edison Company, 37th Floor, One First National
Plaza, Post Office Box 767, Chicago, IL 60690-0767 (telephone number 312/394-
3126).
RECENT RATE PROCEEDINGS
The Company's revenues, net income, cash flows, plant carrying costs, ratios
of earnings to fixed charges and ratios of earnings to fixed charges and
preferred and preference stock dividend requirements have been affected
directly by various rate-related proceedings. These proceedings have related
principally to the rate base treatment of the Company's four most recently
completed nuclear generating units, but have also related to proceedings
concerning the reduction in the difference between the Company's summer and
non-summer residential rates that was effected in the summer of 1988, as well
as fuel reconciliation proceedings conducted by the Illinois Commerce
Commission ("ICC") principally concerning the recoverability of the costs of
the Company's western coal. The uncertainties associated with such proceedings
and issues, among other things, led to the Rate Matters Settlement and the Fuel
Matters Settlement (which are discussed below).
On November 4, 1993, a proposed settlement (the "Rate Matters Settlement")
became final concerning the proceedings relating to the Company's 1985 and 1991
ICC rate orders (which orders related principally to the recovery of costs
associated with the Company's four most recently completed nuclear generating
plants, Byron Units 1 and 2 and Braidwood Units 1 and 2), the proceedings
concerning the reduction in the difference between the Company's summer and
non-summer residential rates that was effected in the summer of 1988,
outstanding issues related to the appropriate interest rate and rate design to
be applied to a refund that was made in 1990 following the reversal of a
December 1988 ICC rate order, and a rider to the Company's rates that the
Company was required to file as a result of the change in the federal corporate
income tax rate made by the Tax Reform Act of 1986. Effective as of November 4,
1993, the Company reduced its rates by approximately $339 million annually and
commenced refunding approximately $1.26 billion (including revenue taxes), plus
interest at five percent on the unpaid balance, through temporarily reduced
rates over an initial refund period scheduled to be twelve months (to be
followed by a reconciliation period of no more than five months).
On November 15, 1993, a proposed settlement (the "Fuel Matters Settlement")
became final which relates to the ICC fuel reconciliation proceedings involving
the Company for the period from 1985 through 1988 and to future challenges by
the settling parties to the prudency of the Company's western coal costs for
the period from 1989 through 1992. Under the Fuel Matters Settlement, effective
as of December 2, 1993, the Company commenced paying approximately $108 million
(including revenue taxes) to its customers through temporarily reduced
collections under its fuel adjustment clause over a twelve-month period.
On February 10, 1994, the Company filed a request with the ICC to increase
electric operating revenues by approximately $460 million, or 7.9%, on an
annual basis above the level of revenues approved in the Rate Matters
Settlement. This request principally reflects the inclusion of Byron Unit 2 and
Braidwood Units 1 and 2 (collectively, the "Units") in the Company's rate base
as fully "used and useful," increased operation and maintenance expenses over
the level reflected in the ICC rate order issued on January 6, 1993 (as
subsequently amended, the "Remand Order"), increased contributions to the
external trust funds which the Company is required to fund to cover the
eventual decommissioning of its nuclear power plants and lower debt and equity
costs. The ICC has suspended the rates, appointed hearing examiners and ordered
an investigation. Under the Illinois Public Utilities Act, the ICC must decide
the case by early January 1995.
For additional information, including the accounting effects of the foregoing
settlements, see "Summary Information" and Notes A, B and C of Notes to Summary
Information.
3
<PAGE>
SUMMARY INFORMATION
The following summary information is qualified in its entirety by the
information appearing elsewhere in this Prospectus and by the information and
financial statements appearing in the documents incorporated in this Prospectus
by reference.
THE OFFERING
<TABLE>
<S> <C>
Issue................... Not to exceed $1,030,000,000 aggregate initial offer-
ing price of Securities, consisting of Bonds, Notes
and New Cumulative Preference Stock
Terms of Debt
Securities............. To be determined at time or times of sale
Terms of New Cumulative
Preference Stock....... To be determined at time or times of sale
Use of Proceeds......... For general corporate purposes of the Company,
including to discharge or refund outstanding long-term
debt and preference stock of the Company
</TABLE>
COMMONWEALTH EDISON COMPANY
<TABLE>
<S> <C>
Estimated Population of Service Area............................... 8,100,000
Customers (as of February 28, 1994)................................ 3,318,812
Sales (thousands of kilowatthours-12 months ended February 28,
1994)............................................................. 88,784,948
Net Electric Generating Capability, net of summer limitations
(kilowatts)....................................................... 21,965,000
Fuel Sources of Kilowatthour Generation (12 months ended February
28, 1994):
Nuclear........................................................... 74%
Coal.............................................................. 24
Oil............................................................... 1
Natural gas....................................................... 1
----------
100%
==========
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------------------------------------------------ FEBRUARY 28, 1994
1989(B) 1990(B) 1991(B) 1992(B) 1993(A)(B) (A)(B)(C)
---------- ---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Electric Operating
Revenues (thousands of
dollars)(1)............ $5,819,499(2) $5,310,819(2) $6,275,533(2) $6,026,321(2) $5,260,440(3) $5,304,215(3)
Net Income (thousands of
dollars)............... $ 693,683 $ 128,291 $ 94,887 $ 513,981 $ 112,440(4) $ 92,361
Net Income on Common
Stock (thousands of
dollars)............... $ 598,503 $ 45,796 $ 16,599 $ 443,442 $ 46,388(4) $ 27,036
Earnings per Common
Share.................. $ 2.83 $ 0.22 $ 0.08 $ 2.08 $ 0.22(4) $ 0.13
Ratios of Earnings to--
Fixed Charges (D)...... 2.49 1.42 1.59 2.06 1.19 1.19
Fixed Charges and
Preferred and
Preference Stock
Dividend Requirements
(D)................... 2.06 1.21 1.36 1.78 1.03 1.03
</TABLE>
- --------
See Notes (A) through (D) on pages 5 through 7.
(1) For the years 1989 and 1990, electric operating revenues have been
increased to reflect the reclassification of interchange sales which were
previously recorded net with purchased power.
(2) Reflects provisions for revenue refunds of $18.4 million for the year ended
December 31, 1992, $0.9 million for the year ended December 31, 1991 and
$536.4 million for the year ended December 31, 1990, relating in each case
to the Illinois Supreme Court's ("Supreme Court") reversal of the ICC's
December 1988 rate order and the Supreme Court's decision regarding Byron
Unit 1. During 1989, the Company recorded provisions for revenue refunds of
$31.8 million with respect to the Byron Unit 1 remand proceedings and the
summer/non-summer rate differential matter.
(3) Reflects provisions for revenue refunds of $1,281 million for the year
ended December 31, 1993 and $1,282 million for the twelve months ended
February 28, 1994, recording the effects of the Rate Matters Settlement and
the Fuel Matters Settlement, as discussed below in Note A on page 5 of this
Prospectus.
(4) In January 1993, the Company adopted an accounting standard which requires
an asset and liability approach for financial accounting and reporting for
income taxes as opposed to the deferred method that the Company had
previously used. The Company adopted the standard as a cumulative effect of
a change in an accounting principle, which increased net income and net
income on common stock for the year ended December 31, 1993 by $9.7
million, or $0.05 per common share.
4
<PAGE>
NOTES TO SUMMARY INFORMATION:
(A) On September 24, 1993, the Company's Board of Directors approved two
proposed settlements which the Company's management had reached with
parties involved in several of the proceedings and matters relating to the
level of the Company's rates for electric service. The Rate Matters
Settlement concerned the proceedings relating to the Company's 1985 and
1991 ICC rate orders (which orders relate to, among other things, the
recovery of costs associated with the Company's four most recently
completed nuclear generating plants, Byron Units 1 and 2 and Braidwood
Units 1 and 2), the proceedings relating to the reduction in the difference
between the Company's summer and non-summer residential rates that was
effected in the summer of 1988, outstanding issues relating to the
appropriate interest rate and rate design to be applied to a refund made by
the Company during 1990 relating to a December 1988 ICC rate order, and
matters related to a rider to the Company's rates that the Company was
required to file as a result of the change in the federal corporate income
tax rate made by the Tax Reform Act of 1986. The Fuel Matters Settlement
related to the ICC fuel reconciliation proceedings involving the Company
for the period from 1985 through 1988 and to future challenges by the
settling parties to the prudency of the Company's western coal costs for
the period from 1989 through 1992. Each of these settlements was subject to
appropriate action by the ICC or the courts having jurisdiction over the
proceedings.
As a result of subsequent ICC and judicial actions, the Rate Matters
Settlement became final on November 4, 1993. Under the Rate Matters
Settlement, effective as of November 4, 1993, the Company reduced its rates
by approximately $339 million annually and commenced refunding
approximately $1.26 billion (including revenue taxes), plus interest at
five percent on the unpaid balance, through temporarily reduced rates over
an initial refund period scheduled to be twelve months (to be followed by a
reconciliation period of no more than five months). The Company had
previously deferred the recognition of revenues during 1993 as a result of
developments in the proceedings related to the March 1991 ICC rate order,
which resulted in a reduction to 1993 net income of approximately $160
million. The recording of the effects of the Rate Matters Settlement in
October 1993 reduced the Company's 1993 net income and retained earnings by
approximately $292 million or $1.37 per common share, in addition to the
effect of the deferred recognition of revenues and after the partially
offsetting effect of recording approximately $269 million (or $1.26 per
common share) in deferred carrying charges, net of income taxes, authorized
in the Remand Order. In January 1994, a purported class action was filed in
the Circuit Court of Cook County, Illinois challenging the method in which
the refunds are being made to residential customers in the Rate Matters
Settlement. The Company does not believe that the complaint has any merit.
As a result of subsequent ICC actions, the Fuel Matters Settlement became
final on November 15, 1993. Under the Fuel Matters Settlement, effective as
of December 2, 1993, the Company commenced paying approximately $108
million (including revenue taxes) to its customers through temporarily
reduced collections under its fuel adjustment clause over a twelve-month
period. The Company recorded the effects of the Fuel Matters Settlement in
October 1993, which effects reduced the Company's net income and retained
earnings by approximately $62 million or $0.29 per common share.
For additional information regarding the proceedings and matters settled,
see Note B below and Notes 3, 17 and 19 of Notes to Financial Statements in
the January 28, 1994 Form 8-K/A-1 Report.
(B) The Company's revenues, net income, cash flows, plant carrying costs,
ratios of earnings to fixed charges and ratios of earnings to fixed charges
and preferred and preference stock dividend requirements have been affected
directly by various rate-related proceedings. During the periods presented
under the subcaption "Financial Information" in "Summary Information," the
Company was involved in proceedings concerning its October 1985 ICC rate
order (which related principally to the recovery of costs associated with
its Byron Unit 1 nuclear generating unit), proceedings concerning its March
1991 ICC rate order (which related principally to the recovery of costs
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associated with the Units), proceedings concerning the reduction in the
difference between the Company's summer and non-summer residential rates
that was effected in the summer of 1988, and ICC fuel reconciliation
proceedings principally concerning the recoverability of the costs of the
Company's western coal. In addition, there were outstanding issues related
to the appropriate interest rate and rate design to be applied to a refund
that was made in 1990 following the reversal of a December 1988 ICC rate
order and a rider to the Company's rates that the Company was required to
file as a result of the change in the federal corporate income tax rate made
by the Tax Reform Act of 1986. The uncertainties associated with such
proceedings and issues, among other things, led to the Rate Matters
Settlement and the Fuel Matters Settlement. See Note A for additional
information.
The proceedings following the Company's 1985 ICC rate order resulted in
additional plant cost disallowances related to Byron Unit 1 (approximately
$200 million) and associated refunds and interest (approximately $163
million), the income effects of which were largely recorded in October 1989
($62 million or $0.29 per common share) and the second quarter of 1990
($208 million or $0.98 per common share). An April 1992 Supreme Court
order, which resolved certain jurisdictional and interest rate issues,
resulted in additional provisions for refunds with interest and revenue
taxes and additional interest aggregating approximately $73 million (which
reduced net income by approximately $50 million or $0.24 per common share)
during 1992. Prior to the Rate Matters Settlement, an open issue in these
proceedings was the amount of refunds, if any, that the Company owed for
the period from January 1, 1989 through March 19, 1991, as a result of the
previously recorded plant cost disallowances. Although the Company had
received a favorable ICC order, which was issued on June 2, 1993, there was
no assurance that the order would be upheld on appeal.
The proceedings following the Company's 1991 ICC rate order resulted in
plant cost disallowances related to the Units and a suspension of the
second and third steps of the scheduled three-step rate increase (the first
step rate increase of $483 million was allowed to go into effect). The
disallowances, aggregating approximately $734 million, were recorded in
March and November 1991 and reduced net income by an aggregate of
approximately $551 million or $2.59 per common share. Following a Supreme
Court remand of the 1991 order to the ICC, the ICC issued the Remand Order
determining that the then effective $483 million rate increase under the
1991 order should be reduced by approximately $339 million to $144 million
and ordering the Company to make refunds to its customers over a six-month
period commencing February 15, 1993. On January 21, 1993, the Supreme Court
granted the Company's request for a stay of the effectiveness of the Remand
Order pending administrative and judicial review. Applications for
rehearing were denied by the ICC, and appeals were filed with the Illinois
Appellate Court ("Appellate Court"), which were pending until the Rate
Matters Settlement was finalized.
The proceedings related to the reduction in the differential between the
Company's summer and non-summer residential rates stem from two orders
entered by the ICC in April and June 1988. Both orders were intended to
reduce the differential without affecting the Company's overall revenues
provided under the then effective rates set forth in the Company's October
1985 ICC rate order. The Company billed under the rates allowed under the
June order. Those billings resulted in revenues through year-end 1988
approximately $150 million greater than would have been billed under the
specific charges set forth in the April order and approximately $5.7
million over what would have been billed under the October 1985 rate order.
As a result of the proceedings that followed, the Company refunded $5.7
million (in its May 1990 billing cycle); however, various intervenors
continued to seek additional refunds. The matter was pending before the
Appellate Court prior to the finalization of the Rate Matters Settlement.
The Illinois Public Utilities Act requires the ICC to hold annual public
hearings to determine whether each utility's fuel adjustment clause
reflects actual costs of fuel and power prudently purchased
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and to reconcile amounts collected with actual costs. Through its fuel
adjustment clause, the Company recovers from its customers the cost of the
fuel used to generate electricity and of purchased power as compared to
fuel costs included in base rates.
The Company is currently involved in proceedings relating to the amounts
collected under its fuel adjustment clause with respect to 1989 through
1992. Under the Fuel Matters Settlement, parties to the settlement have
agreed not to challenge the prudency of the Company's western coal costs
for the period from 1989 through 1992. The Company's western coal contracts
and its rail contracts for delivery of the western coal were renegotiated
during 1992 effective as of January 1, 1993, to provide, among other
things, for significant reductions in the delivered price of the coal over
the duration of the contracts. However, the renegotiated contracts provide
for the purchase of certain coal at prices substantially above currently
prevailing market prices and the Company has significant purchase
commitments under its contracts. For additional information relating to the
Company's commitments for the purchase of coal under long-term contracts,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Liquidity and Capital Resources," and
Notes 17 and 19 of Notes to Financial Statements in the January 28, 1994
Form 8-K/A-1 Report.
For additional information regarding the foregoing proceedings, see Notes 2
and 3 of Notes to Financial Statements in the June 30, 1993 Form 10-Q.
(C) On February 10, 1994, the Company filed a request with the ICC to increase
electric operating revenues by approximately $460 million, or 7.9%, on an
annual basis above the level of revenues approved in the Rate Matters
Settlement. This request principally reflects the inclusion of the Units in
the Company's rate base as fully "used and useful," increased operation and
maintenance expenses over the level reflected in the Remand Order,
increased contributions to the external trust funds which the Company is
required to fund to cover the eventual decommissioning of its nuclear power
plants and lower debt and equity costs. The ICC has suspended the rates,
appointed hearing examiners and ordered an investigation. Under the
Illinois Public Utilities Act, the ICC must decide the case by early
January 1995.
In the Remand Order, the rate determination was based upon, among other
things, findings by the ICC with respect to the extent to which the Units
were "used and useful" during the 1991 test year period of the rate order.
With respect to the "used and useful" issue, the ICC applied a needs and
economic benefits methodology, using a twenty percent reserve margin and
forecasted peak demand, and found Byron Unit 2 and Braidwood Units 1 and 2
to be 93%, 21% and 0%, respectively, "used and useful." The Company has not
recorded any disallowances related to the "used and useful" issue. The
Company considers the "used and useful" disallowance in the Remand Order to
be temporary. The ICC concluded in the Remand Order that the forecasts in
the record in that proceeding indicate that Braidwood Units 1 and 2 will be
fully "used and useful" within the reasonably foreseeable future.
(D) For purposes of computing the ratios of earnings to fixed charges and the
ratios of earnings to fixed charges and preferred and preference stock
dividend requirements: (i) earnings consist of net income before deducting
net provisions for income taxes (including deferred taxes and current
income taxes applicable to nonoperating activities), investment tax credits
deferred and fixed charges; (ii) fixed charges consist of interest on debt,
amortization of debt discount, premium and expense, and the estimated
interest component of nuclear fuel and other lease payments and rentals;
and (iii) preferred and preference stock dividend requirements represent an
amount equal to income, before income taxes, which would be required to
meet the dividends on preferred and preference stocks. For additional
information, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the January 28, 1994 Form 8-K/A-1
Report.
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USE OF PROCEEDS
The proceeds from the sale of Securities offered hereby will be used for
general corporate purposes, including to discharge or refund (by redemption or
by purchase on the open market, in private transactions, by tender offer or
otherwise) outstanding long-term debt and preference stock of the Company, to
finance the Company's ongoing capital improvement program, nuclear fuel
expenditures and contributions to nuclear decommissioning trusts, and to
supplement working capital. Long-term debt and preference stock to be
discharged or refunded is expected to consist of maturing debt and/or sinking
fund installments on outstanding preference stock and, should market conditions
and the terms of the related debt instrument or preference stock permit, debt
and/or preference stock to be refinanced with debt and/or preference stock
bearing lower interest or dividend rates. For information concerning the
Company's outstanding long-term debt and preference stock, see Statements of
Consolidated Capitalization in the January 28, 1994 Form 8-K/A-1 Report.
DESCRIPTION OF BONDS
GENERAL.
The Bonds will be issued under the Company's Mortgage dated July 1, 1923, as
amended and supplemented, and as to be further supplemented by one or more
Supplemental Indentures creating the respective series in which the Bonds are
to be issued. Continental Bank, National Association (the "Trustee") and M. J.
Kruger are the Trustees under such Mortgage, as amended and supplemented, and
Supplemental Indentures thereto (collectively hereinafter called the
"Mortgage"), copies of which are filed as exhibits to the Registration
Statement. The Mortgage provides generally for the issuance of first mortgage
bonds in series.
The following statements are brief summaries of certain of the provisions of
the Mortgage and reference is made to the aforementioned exhibits for a more
complete statement of such provisions. The terms "lien of the Mortgage,"
"mortgage date of acquisition," "permitted lien," "prior lien," "prior lien
bonds," "property additions" and "utilized under the Mortgage" are hereinafter
used with the meanings ascribed to such terms, respectively, by the Mortgage.
(Sections 1.27, 1.28, 1.39, 1.40, 1.41, 1.42 and 1.58) The Mortgage contains
provisions under which substantially all of the properties of the Company's
electric utility subsidiary, Commonwealth Edison Company of Indiana, Inc. (the
"Indiana Company"), might be subjected to the lien of the Mortgage if the
Company should so determine, as additional security for the Company's bonds,
whereupon such subsidiary would become a "mortgaged subsidiary," as defined in
the Mortgage. (Section 1.31) Since the Company has not as yet made any
determination as to causing the Indiana Company to become a mortgaged
subsidiary, those provisions of the Mortgage, hereinafter summarized, which
relate to a mortgaged subsidiary as well as to the Company, are stated as
though they relate to the Company only.
The Bonds will be issued only in fully registered certificated or book-entry
form, without coupons, in the denomination of $1,000 or any authorized multiple
of $1,000. It is expected that the Bonds will be delivered initially in
definitive form. The Company reserves the right, however, to make initial
delivery of the Bonds in temporary form. No service charge will be made for any
transfer or exchange of any Bonds, except, in the case of transfer, a charge
sufficient to reimburse the Company for any stamp or other tax or governmental
charge required to be paid will be made.
Principal of the Bonds and interest thereon will be payable in Chicago or in
New York City, except as may otherwise be set forth in the applicable
Prospectus Supplement. Interest on each registered Bond issued in certificated
form (with limited exceptions as provided in the Mortgage) will be paid to the
person in whose name such Bond is registered at the close of business on the
applicable record date specified in the Bond. Payment of interest on Bonds
issued in book-entry form will be made to The Depository Trust Company, New
York, New York, or its nominee.
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Any terms of the Bonds which are not summarized herein will be described in
the applicable Prospectus Supplement.
REDEMPTION PROVISIONS.
Any applicable redemption provisions of the Bonds will be fixed for each
series of Bonds at the time of sale of any such series.
SECURITY.
The Bonds will rank equally and ratably with all bonds, irrespective of
series, now outstanding or hereafter issued under the Mortgage. The Mortgage
constitutes a direct first mortgage lien on substantially all property and
franchises (other than expressly excepted property) now owned by the Company,
subject only to permitted liens. All property and franchises (other than
expressly excepted property and property which may be acquired by the Company
subsequent to the filing of a bankruptcy proceeding with respect to the Company
under the Bankruptcy Reform Act of 1978) hereafter acquired by the Company will
become subject to the lien of the Mortgage, subject only to permitted liens and
liens, if any, existing or placed on such after-acquired property at the time
of acquisition thereof.
There are expressly excepted from the lien of the Mortgage, whether now owned
or hereafter acquired, certain real estate not used in the public utility
business, real estate held by the Company in the name of a nominee, cash and
securities not specifically pledged under the Mortgage, receivables, contracts
(other than leases), materials and supplies not included in utility plant
accounts, merchandise, automobiles, trucks and other transportation equipment
and office furniture and equipment. (Divisions A and B of the Supplemental
Indenture dated August 1, 1944)
ISSUANCE OF ADDITIONAL BONDS.
The Mortgage provides that no bonds may be issued which, as to security, will
rank ahead of the Bonds, but, as hereinafter indicated, the Company may,
subject to certain limitations, acquire property subject to prior liens.
The aggregate principal amount of other bonds which may be issued under the
Mortgage and which as to security will rank equally with the Bonds is not
limited except as indicated below. Additional bonds of any series may be
issued, subject to the provisions of the Mortgage, in a principal amount equal
to (a) 66 2/3% of net property additions not previously utilized under the
Mortgage, (b) the amount of cash deposited with the Trustee as the basis for
the issuance of such bonds and (c) the amount of bondable bond retirements not
previously utilized under the Mortgage; provided, however, that no such bonds
in any event may be issued under (a) or (b), or under (c) if the bonds to be
issued bear a higher rate of interest than that borne by the bonds retired or
being retired (except in case such bonds retired or being retired mature within
two years), unless the net earnings of the Company for a twelve-month period
within the immediately preceding fifteen-month period shall have been equal to
at least two and one-half times the annual interest on all bonds then
outstanding under the Mortgage, including the bonds then applied for but not
including any bonds then being retired, and on all prior lien bonds then
outstanding but not including any prior lien bonds then being retired. For
purposes of such net earnings test, revenues include amounts billed subject to
refund including such amounts collected pursuant to the rate proceedings
discussed in Note B. The net earnings calculation under the Mortgage is not
affected by certain accounting write-offs related to plant costs. (For
additional information, see Note B on pages 5 through 7 of this Prospectus.)
(Sections 4.02, 4.03, 4.04, 1.32 and 1.33)
The Mortgage provides that cash deposited with the Trustee as a basis for the
issuance of bonds shall be (a) paid over to the Company in an amount, certified
to the Trustee, equal to 66 2/3% of the amount of net property additions not
previously utilized under the Mortgage, or in an amount equal to
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the amount of bondable bond retirements not previously utilized under the
Mortgage, or both, or (b) applied to the purchase or redemption of bonds.
(Section 9.02)
At February 28, 1994, the amount of net property additions, including nuclear
fuel, not previously utilized under the Mortgage was approximately $1,092
million (of which approximately $911 million was available to be utilized for
the issuance of additional bonds subject to compliance with other provisions),
and the amount of bondable bond retirements not previously utilized under the
Mortgage was approximately $3,272 million. Bonds covered by this Prospectus
will be issued on the basis of net property additions unless otherwise stated
in the applicable Prospectus Supplement.
"Bondable bond retirements" means an amount equal to the principal amount of
bonds retired by application of funds deposited with the Trustee or by
surrender of bonds to the Trustee for cancellation, whether or not such deposit
of funds or surrender of bonds is pursuant to a sinking fund or purchase fund.
(Section 1.10)
"Net earnings" means the earnings of the Company as defined in the Mortgage
after deducting all charges except: (a) charges for the amortization, write-
down or write-off of acquisition adjustments or intangibles; (b) property
losses charged to operations; (c) provisions for income and excess or other
profits taxes imposed on income after the deduction of interest charges, or
charges made in lieu of such taxes; (d) interest charges; and (e) amortization
of debt and stock discount and expense or premium. Any net profit or net loss
from merchandising and jobbing is to be deducted from operating expenses or
added to operating expenses, as the case may be. Net non-operating income from
property and securities not subject to the lien of the Mortgage may be included
in revenues but only to the extent of not more than 10% of the total of such
net earnings. No profits or losses on the disposition of property or securities
or on the reacquisition of securities shall be included in net earnings. The
net earnings calculation under the Mortgage is not affected by certain
accounting write-offs related to plant costs. (Section 1.32)
"Net property additions" means the amount of $50 million, plus the cost or
fair value as of the mortgage date of acquisition thereof, whichever is less,
of property additions, less all "current provisions for depreciation" made by
the Company after December 31, 1944, after deducting from such current
provisions for depreciation the amount of the "renewal fund requirement," if
any, for the year 1945 and each subsequent year. (Section 1.44)
"Current provisions for depreciation" for any period means the greater of:
(a) the total of the amounts appropriated by the Company for depreciation
during such period on all property of the character of property additions
not subject to a prior lien, increased or decreased, as the case may be, by
net salvage for such period, such amounts not to include, however,
provisions for depreciation charged to surplus, charges to income or
surplus for the amortization, write-down or write-off of acquisition
adjustments or intangibles, property losses charged to operations or
surplus, or charges to income in lieu of income and excess or other profits
taxes; and
(b) an amount equal to one-twelfth of 2% for each calendar month of such
period (or such lesser percentage as may, at stated intervals, be certified
by an independent engineer as adequate) of the original cost, as of the
beginning of such month, of all depreciable property of the character of
property additions not subject to a prior lien. (Section 1.18)
Except as set forth above, the Mortgage does not limit the amount of
additional bonds which can be issued; and it does not contain any restrictions
on the issuance of unsecured indebtedness, such as the Notes. In addition, the
Mortgage does not prohibit a merger or sale of substantially all of the
Company's assets or a comparable transaction, unless the lien of the Mortgage
is impaired, and does not address the effect on bondholders of a highly
leveraged transaction.
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RENEWAL FUND REQUIREMENT.
The Company covenants that it will, for each year, pay or cause to be paid to
the Trustee an amount of cash, as and for a renewal fund, equal to the excess,
if any, of current provisions for depreciation for such year over the cost or
fair value as of the mortgage date of acquisition thereof, whichever is less,
of property additions for such year, such amount, which will be the renewal
fund requirement for such year, to be subject to reduction by an amount equal
to the amount, certified to the Trustee, of net property additions or bondable
bond retirements, or both, not previously utilized under the Mortgage.
(Sections 6.01 and 6.02) There was no renewal fund requirement for any of the
years 1945 through 1988, 1991 or 1992, although there was a $140.7 million
requirement for 1989 and a $1 million requirement for 1990. In both 1989 and
1990, the renewal fund requirement was satisfied by certifying an equivalent
amount of net property additions.
ACQUISITION OF PROPERTY SUBJECT TO PRIOR LIENS.
The Company covenants that it will not acquire any property subject to a
prior lien if the principal amount of prior lien bonds outstanding thereunder
and under other prior liens upon such prior lien property exceeds 66 2/3% of
the fair value of such part of such property as shall consist of property of
the character of property additions, nor unless the net earnings of such
property for a twelve-month period within the immediately preceding fifteen-
month period shall have been at least two and one-half times the annual
interest on all prior lien bonds secured by prior liens on such property. The
Company also covenants that it will not transfer all or substantially all its
property to any other corporation, the property of which is subject to a prior
lien, unless the property of such other corporation could be acquired by the
Company under the provisions of such covenant with respect to the acquisition
of property subject to a prior lien. (Section 7.15)
The Company covenants that it will not issue additional prior lien bonds
under any prior lien, and that as soon as all prior lien bonds shall cease to
be outstanding under any prior lien, the Company will promptly procure or cause
to be procured the cancellation and discharge of such prior lien. The Company
further covenants that upon the discharge of a prior lien it will cause any
cash on deposit with the prior lien trustee (other than cash deposited for the
payment or redemption of outstanding prior lien bonds) to be deposited with the
Trustee, except to the extent required to be deposited with the trustee under
another prior lien. (Section 7.16)
MODIFICATION OF MORTGAGE.
In general, modifications or alterations of the Mortgage and of the rights
and obligations of the Company and of the bondholders, and waivers of
compliance with the Mortgage, may, with the approval of the Company, be made at
a meeting of bondholders upon the affirmative vote of 80% of the bonds entitled
to vote at the meeting with respect to the matter involved, but no such
modifications or alterations or waivers of compliance shall be made which will
permit the extension of the time or times of payment of the principal of or the
interest or the premium, if any, on any bonds, or the reduction in the
principal amount thereof or in the rate of interest or the amount of any
premium thereon, or any other modification in the terms of payment of such
principal, interest or premium, which terms of payment are unconditional, or,
otherwise than as permitted by the Mortgage, the creation of any lien ranking
prior to or on a parity with the lien of the Mortgage with respect to any of
the mortgaged property, all as more fully provided in the Mortgage. (Section
17.07)
CONCERNING THE TRUSTEES.
The Trustee, Continental Bank, National Association, provides general banking
services, including those as a depository, for the Company and certain of its
subsidiaries. The Trustee also has a commitment of $60 million in the Company's
lines of credit.
M. J. Kruger, Co-Trustee under the Mortgage, is an officer of the Trustee.
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RIGHTS UPON DEFAULT.
The Mortgage provides that in case any one or more of certain specified
events (defined as "completed defaults") shall occur and be continuing, the
Trustee or the holders of not less than 25% in principal amount of the bonds
may declare the principal of all bonds, if not already due, together with all
accrued and unpaid interest thereon, to be immediately due and payable. The
Trustee, upon request of the holders of a majority in principal amount of the
outstanding bonds, shall waive such default and rescind any such declaration if
such default is cured. (Sections 11.02 and 11.21)
The Mortgage further provides that upon the occurrence of one or more
completed defaults, the Trustees may proceed by such suits at law or in equity
to foreclose the lien of the Mortgage or to enforce any other appropriate
remedy as the Trustees, being advised by counsel, shall determine. (Section
11.05)
Bondholders have no right to enforce any remedy under the Mortgage unless the
Trustees have first had a reasonable opportunity to do so following notice of
default to the Trustee and request by the holders of not less than 25% in
principal amount of the bonds for action by the Trustees with offer of
indemnity satisfactory to the Trustees against costs, expenses and liabilities
that may be incurred thereby, but such provision does not impair the absolute
right of any bondholder to enforce payment of the principal of and interest on
such bondholder's bonds when due. (Section 11.20)
DEFAULT AND NOTICE THEREOF TO BONDHOLDERS.
The Mortgage provides that the following shall constitute completed defaults:
(a) default shall be made in the payment of any installment of interest
on any of the bonds when due and such default shall continue for 60 days;
(b) default shall be made in the payment of the principal of any of the
bonds when due, whether at maturity or by declaration or otherwise;
(c) default shall be made in the payment of any installment of interest
on any prior lien bonds when due, and such default shall continue for 30
days after written notice given to the Company (following the expiration of
the period of grace, if any, specified in the prior lien securing such
prior lien bonds) by the Trustee or to the Company and the Trustee by the
holders of not less than 5% in principal amount of the bonds;
(d) default shall be made in the payment of the principal of any prior
lien bonds when due, whether at maturity or by declaration or otherwise,
and such default shall continue for 30 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the holders of
not less than 5% in principal amount of the bonds;
(e) bankruptcy, receivership or similar proceedings shall be initiated by
the Company; or any judgment entered in such proceedings initiated against
the Company shall not have been vacated, set aside or stayed within 45 days
after the entry thereof; and
(f) default shall be made in the observance or performance of any other
of the covenants, conditions or agreements on the part of the Company
contained in the Mortgage or in the bonds or in any prior lien or prior
lien bonds, and such default shall continue for 90 days after written
notice to the Company by the Trustee or to the Company and the Trustee by
the holders of not less than 25% in principal amount of the bonds.
Within 90 days after the occurrence of any default which is known to the
Trustees, the Trustees shall give to the bondholders notice of such default
unless it shall have been cured; except that, in case of defaults in the
payment of principal of or interest on the bonds, or in the payment of any
sinking fund or purchase fund installment, the Trustees may withhold such
notice if and so long as the board
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of directors, the executive committee, or a trust committee of directors or
responsible officers of the Trustee, or any one or more of them, shall in good
faith determine that the withholding of such notice is in the interests of the
bondholders and the Co-Trustee shall in good faith determine that the
withholding of such notice is in the interests of the bondholders. (Sections
11.02 and 15.03)
CERTIFICATES AND OPINIONS.
Officers' certificates evidencing compliance with the covenants in the
Mortgage relating to the payment of taxes and the maintenance of insurance on
properties of the Company subject to the lien of the Mortgage must be filed as
exhibits to the certificate of the Company filed annually with the Trustee.
(Sections 2.01, 7.09 and 7.10(c)) In connection with the taking of various
actions by the Trustees or the Trustee upon application of the Company,
including the authentication and delivery of additional bonds (Article IV), the
release of property (Section 8.03), the reduction or withdrawal of cash
(Section 8.04) and other matters, the Mortgage requires that the Company
furnish to the Trustee orders, requests, resolutions, certificates of officers,
engineers, accountants and appraisers, and opinions of counsel and other
documents, the particular documents to be furnished in each case being
dependent upon the nature of the application.
DESCRIPTION OF NOTES
GENERAL.
The Notes will be issued under the Company's Indenture dated as of September
1, 1987, as amended and supplemented, and as to be further supplemented by one
or more Supplemental Indentures creating the respective series in which the
Notes are to be issued. Citibank, N.A., is the Trustee (the "Indenture
Trustee") under the Indenture and the Supplemental Indentures thereto
(collectively hereinafter called the "Indenture"), copies of which are filed as
exhibits to the Registration Statement. The Indenture provides generally for
the issuance of notes in series. The following statements are brief summaries
of the provisions of the Indenture and reference is made to such exhibits for a
more complete statement of such provisions.
The Notes will be issued only in fully registered certificated or book-entry
form (unless otherwise indicated in the Prospectus Supplement with respect to
any particular series of Notes) in the denomination of $1,000 or any authorized
multiple of $1,000. It is expected that the Notes will be delivered initially
in definitive form. The Company reserves the right, however, to make initial
delivery of the Notes in temporary form. No service charge will be made for any
transfer or exchange of any Notes, except the Company may require payment of a
sum sufficient to cover any tax or other governmental charge in connection
therewith.
Principal of the Notes and interest thereon will be payable in New York City,
except as may otherwise be set forth in the applicable Prospectus Supplement.
Interest on each registered Note issued in certificated form (with limited
exceptions as provided in the Indenture) will be paid to the person in whose
name such Note is registered at the close of business on the applicable record
date specified in the Note. Payment of interest on Notes issued in book-entry
form will be made to The Depository Trust Company, New York, New York, or its
nominee.
The Notes will be unsecured and will rank equally with the Company's
outstanding unsecured indebtedness. Substantially all of the properties and
franchises of the Company are subject to the lien of the Mortgage under which
the Company's first mortgage bonds are outstanding. (See "Description of
Bonds," subcaption "Security," herein.)
Any terms of the Notes which are not summarized herein will be described in
the applicable Prospectus Supplement.
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<PAGE>
SINKING FUND AND REDEMPTION PROVISIONS.
Any applicable sinking fund and redemption provisions of the Notes will be
fixed for each series of Notes at the time of sale of any such series.
ISSUANCE OF ADDITIONAL SECURITIES.
The Indenture does not limit the aggregate principal amount of notes which
may be issued thereunder. There are notes presently outstanding under the
Indenture. Neither the Indenture nor any of the other indentures under which
the Company's several series of debentures are outstanding contains any
limitation on the issuance by the Company of other securities either secured or
unsecured. In addition, the Indenture does not address the effect on
noteholders of a highly leveraged transaction.
In addition to the bonds now outstanding under the Company's Mortgage, bonds
of any series may hereafter be issued under the Mortgage, subject to certain
net earnings and other requirements. (See "Description of Bonds," subcaption
"Issuance of Additional Bonds," herein.)
MODIFICATION OF INDENTURE.
The Indenture provides that with the consent of the holders of a majority in
principal amount of the notes at the time outstanding under the Indenture, of
all series which are affected (or without such consent in the case of
amendments or modifications that do not affect the rights of any noteholder),
the Company and the Indenture Trustee may enter into supplemental indentures
for the purpose of amending or modifying, in any manner, the provisions of the
Indenture or of any supplemental indenture, provided that no such supplemental
indenture shall, without the consent of the holder of each outstanding note
affected thereby, among other things, (i) change the stated maturity of the
principal of, or any installment of interest on, any note, or reduce the
principal amount thereof or the interest thereon or any premium payable upon
the redemption thereof, or (ii) reduce the percentage in principal amount of
the outstanding notes, the consent of whose holders is required for any such
supplemental indenture. (Sections 11.01 and 11.02)
CONCERNING THE INDENTURE TRUSTEE.
The Indenture Trustee, Citibank, N.A., provides general banking services,
including those as a depository, for the Company. The Indenture Trustee also
has a commitment of $95 million in the Company's lines of credit and has issued
a letter of credit in the amount of $20 million on behalf of the Company.
EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT.
The Indenture provides that the following constitute "Events of Default" with
respect to the notes of any series:
(a) default in the payment of any interest upon any note of that series
when it becomes due and payable, and continuance of such default for a
period of 60 days;
(b) default in the payment of the principal of (or premium, if any, on)
any note of that series at its maturity;
(c) default in the deposit of any installment of any sinking fund or
similar payment with respect to notes of that series when and as payable,
and continuance of such default for a period of 60 days;
(d) the entry of a decree or order in bankruptcy, receivership or similar
proceedings initiated against the Company, and the continuance of any such
decree or order for a period of 45 consecutive days;
14
<PAGE>
(e) the institution by the Company of, or the consent by the Company to
the institution of, bankruptcy, insolvency or similar proceedings against
the Company; and
(f) default in the performance, or breach, of any other covenant or
warranty of the Company in the Indenture, and continuance of such default
or breach for a period of 90 days after notice to the Company by the
Indenture Trustee or to the Company and the Indenture Trustee by the
holders of at least 25% in principal amount of the outstanding notes of
that series. (Section 7.01)
The Indenture provides that within 90 days after the occurrence of any
default which is known to the Indenture Trustee, the Indenture Trustee shall
give to the noteholders notice of such default, unless such default shall have
been cured or waived; provided that, except in the case of a default in the
payment of the principal of (or premium, if any) or interest on any note of
such series or in the payment of any sinking or purchase fund installment, the
Indenture Trustee may withhold such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors or
responsible officers of the Indenture Trustee, or any one or more of them,
shall in good faith determine that the withholding of such notice is in the
interests of the holders of notes of such series; and provided, further, that
in the case of any default in the performance, or breach, of any covenant or
warranty referred to in clause (f) of the immediately preceding paragraph, no
such notice to holders shall be given until at least 60 days after the
occurrence thereof. (Section 8.02)
If an Event of Default occurs with respect to notes of any series and is
continuing, the Indenture Trustee or the holders of 25% in principal amount of
the outstanding notes of that series may declare the principal of all the notes
of that series due and payable. A majority in principal amount of the
outstanding notes of that series may rescind and annul such declaration if the
default has been cured. (Section 7.02)
The holders of a majority in principal amount of the outstanding notes of all
series affected by an Event of Default may waive any past default under the
Indenture and its consequences, except a default in the payment of the
principal of (or premium, if any) or interest on any note or in respect of a
covenant or provision of the Indenture which cannot be modified or amended
without the consent of the holder of each outstanding note affected. (Section
7.13)
If an Event of Default occurs and is continuing, the Indenture Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
holders of notes by such appropriate judicial proceedings as the Indenture
Trustee shall deem most effectual. (Section 7.03)
The Indenture provides that the holders of a majority in principal amount of
the outstanding notes issued under the Indenture have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee or exercising any trust or power conferred on the
Indenture Trustee. (Section 7.12) The Indenture Trustee is not obligated to
comply with any request or direction of noteholders pursuant to the Indenture
unless it has been offered indemnity against costs and liabilities which it
might incur in complying with such request or direction. (Section 8.03(e))
The Company is required to file with the Indenture Trustee annually an
officers' certificate specifying any defaults known to exist under the
Indenture. (Section 3.04)
SATISFACTION AND DISCHARGE OF THE NOTES AND THE INDENTURE.
Unless otherwise provided in the supplemental indenture creating a series of
notes, the Company shall be deemed to have paid and discharged the entire
indebtedness on all the outstanding notes of any such series when (a) either
(i)(1) the Company has deposited with the Indenture Trustee for such purpose an
amount sufficient to pay and discharge the entire indebtedness on all
outstanding notes of
15
<PAGE>
such series for principal (and premium, if any) and interest to the stated
maturity or any redemption date thereof, or (2) the Company has deposited with
the Indenture Trustee for such purpose such amount of direct obligations of, or
obligations the principal of and interest on which are fully guaranteed by, the
United States of America and which are not callable at the option of the issuer
thereof as will, together with the income to accrue thereon without
consideration of any reinvestment thereof, be sufficient to pay and discharge
the entire indebtedness on all outstanding notes of such series for principal
(and premium, if any) and interest to the stated maturity or any redemption
date thereof, or (ii) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified in the supplemental indenture
applicable to the notes of such series; (b) the Company has paid or caused to
be paid all other sums payable with respect to the outstanding notes of such
series; and (c) the Company has delivered certain certificates and an opinion
of counsel. (Section 6.03)
The Indenture shall cease to be of further effect (except as to any surviving
rights of registration of transfer or exchange of notes) when (a) either (i)
all notes theretofore authenticated and delivered and all coupons appertaining
thereto have been delivered to the Indenture Trustee for cancellation, or (ii)
all such notes not theretofore delivered to the Indenture Trustee for
cancellation have become due and payable, or will become due and payable at
their stated maturity within one year, or are to be called for redemption
within one year under arrangements satisfactory to the Indenture Trustee and
the Company has deposited with the Indenture Trustee for such purpose an amount
sufficient to pay and discharge the entire indebtedness on such notes for
principal (and premium, if any) and interest to the date of such deposit (in
the case of notes which have become due and payable), or to their stated
maturity or redemption date, as the case may be; (b) the Company has paid or
caused to be paid all other sums payable under the Indenture by the Company;
and (c) the Company has delivered certain certificates and an opinion of
counsel. (Section 6.01)
For federal income tax purposes, any such deposit may be treated as a taxable
exchange of the related notes for an issue of obligations of the trust or a
direct interest in the cash and securities held in the trust. In that case,
holders of such notes would recognize gain or loss as if the trust obligations
or the cash or securities deposited, as the case may be, had actually been
received by them in exchange for their notes. Such holders thereafter would be
required to include in income a share of the income, gain or loss of the trust.
The amount so required to be included in income could be a different amount
than would be includable in the absence of such deposit. Prospective investors
are urged to consult their own tax advisors as to the specific consequences to
them of such deposit.
DESCRIPTION OF STOCK
The authorized stock of the Company now consists of four classes: prior
preferred stock, par value $100 per share (the "Prior Preferred Stock") (no
shares outstanding); $1.425 convertible preferred stock, without par value--
stated value $31.80 per share (the "$1.425 Convertible Preferred Stock");
preference stock, without par value (the New Cumulative Preference Stock to
constitute one or more new series of such class); and common stock, par value
$12.50 per share. The number of outstanding shares of each class as of December
31, 1993 is set forth in the Statements of Consolidated Capitalization, and the
number of authorized shares of each class is set forth in Note 4 of Notes to
Financial Statements, in the January 28, 1994 Form 8-K/A-1 Report.
ISSUANCE IN SERIES.
The Board of Directors is authorized to provide for the issuance of shares of
the Prior Preferred Stock and the preference stock from time to time in series
and, as to each series, to fix the designation, dividend rate, redemption price
or prices, voluntary and involuntary liquidation prices, sinking fund
provisions, if any, and conversion provisions, if any, applicable to the shares
of such series.
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<PAGE>
DIVIDENDS.
Dividends are payable on the Prior Preferred Stock (if and when shares
thereof are issued) in preference to dividends on the $1.425 Convertible
Preferred Stock, the preference stock and the common stock; dividends are
payable on the $1.425 Convertible Preferred Stock in preference to dividends on
the preference stock and the common stock; and dividends are payable on the
preference stock in preference to dividends on the common stock. Dividends are
payable on the Prior Preferred Stock (if and when shares thereof are issued),
the $1.425 Convertible Preferred Stock and each series of preference stock
quarterly on the first day of February, May, August and November in each year.
Dividends are cumulative with respect to the shares of the Prior Preferred
Stock (if and when shares thereof are issued), the $1.425 Convertible Preferred
Stock and each series of preference stock. Accumulations of dividends do not
bear interest.
The dividend rates per share per annum are indicated by the title of the
$1.425 Convertible Preferred Stock and the respective titles of the following
outstanding series of preference stock: $1.90 series, $2.00 series, $1.96
series, $7.24 series, $8.40 series, $8.38 series, $8.20 series, $8.40 Series B,
$8.85 series, $9.25 series, $9.00 series and $6.875 series.
REDEMPTION AND REPURCHASE PROVISIONS.
Subject to the limitations hereinafter stated and except as otherwise
provided by the Board of Directors in respect of the shares of a particular
series of the Prior Preferred Stock or the preference stock, shares of any one
or more of such series, and shares of the $1.425 Convertible Preferred Stock,
may be redeemed, on not more than 60 nor less than 30 days' notice by mail, in
whole at any time or in part from time to time at the option of the Company, or
in part from time to time pursuant to any sinking fund or funds created for one
or more series of the Prior Preferred Stock or the preference stock, in each
case by payment of the then applicable redemption price of the shares to be
redeemed. Provision is made whereby, subject to certain conditions, all rights
of the holders of shares called for redemption (except the right to exercise
any then effective privilege of conversion and the right to receive the
redemption moneys) will terminate before the redemption date, upon the deposit
with a bank or trust company of the funds necessary for redemption.
If and so long as the Company shall be in default in the payment of any
quarterly dividend on shares of any series of the preference stock, or in the
making or setting aside of any payment under any sinking fund for any such
series, the Company may not (other than by the use of unapplied sinking fund
moneys) (1) redeem any shares of the preference stock unless all shares are
redeemed or (2) purchase or otherwise acquire for a consideration any such
shares, except pursuant to offers of sale made by holders of the preference
stock in response to an invitation for tenders given simultaneously by the
Company by mail to the holders of record of all shares of the preference stock
then outstanding. The Restated Articles of Incorporation of the Company contain
corresponding provisions applicable to the Prior Preferred Stock and, as to
dividend defaults, the $1.425 Convertible Preferred Stock.
See Notes 6 and 7 of Notes to Financial Statements in the January 28, 1994
Form 8-K/A-1 Report for information relating to the redemption provisions
applicable to the presently outstanding shares of $1.425 Convertible Preferred
Stock and of each presently outstanding series of preference stock.
SINKING FUNDS.
The $1.425 Convertible Preferred Stock and the $1.90 series, $2.00 series,
$1.96 series, $7.24 series, $8.40 series and $8.38 series of preference stock
do not have sinking funds. The $8.20 series, $8.40 Series B, $8.85 series,
$9.25 series, $9.00 series and $6.875 series of preference stock have mandatory
sinking funds and the $8.40 Series B and $9.00 series of preference stock also
have optional sinking funds. Each series of Prior Preferred Stock (if and when
shares thereof are issued) may have a
17
<PAGE>
sinking fund, at the discretion of the Board of Directors, along with such
other provisions as shall be fixed and determined by such Board. See Note 7 of
Notes to Financial Statements in the January 28, 1994 Form 8-K/A-1 Report for
information relating to the preference stock sinking fund provisions.
CONVERSION OF $1.425 CONVERTIBLE PREFERRED STOCK.
The shares of $1.425 Convertible Preferred Stock are convertible, at the
option of the respective holders, into shares of common stock of the Company
currently at the rate of 1.02 shares of common stock for each share of $1.425
Convertible Preferred Stock. Provision is made for adjustment of the conversion
price, under certain conditions, in order to protect the conversion rights
against dilution. Shares of the $1.425 Convertible Preferred Stock may be
converted at any time except that in case of call for redemption the conversion
rights will terminate on the tenth day prior to the redemption date. No payment
or adjustment with respect to dividends on shares of the $1.425 Convertible
Preferred Stock or on the common stock will be made in connection with any
conversion.
LIQUIDATION PREFERENCES.
In the event of dissolution, liquidation or winding up of the Company,
voluntary or involuntary, holders of the Prior Preferred Stock (if any shares
thereof are then issued) will be entitled to payment of the applicable
liquidation price or prices, out of the assets of the Company, in preference to
the holders of the $1.425 Convertible Preferred Stock, the preference stock and
the common stock; holders of the $1.425 Convertible Preferred Stock will be
entitled to such payment in preference to the holders of the preference stock
and the common stock; and holders of the preference stock will be entitled to
such payment in preference to the holders of the common stock.
In the event of voluntary or involuntary dissolution, liquidation or winding
up of the Company, holders of the common stock will be entitled to receive,
ratably, assets of the Company available for payment to stockholders remaining
after payment in full of the preferential amounts on the Prior Preferred Stock
(if any), the $1.425 Convertible Preferred Stock and preference stock on such
dissolution, liquidation or winding up.
The current per share voluntary liquidation prices of the outstanding shares
of the preference stock are: $8.20 series, $103 through October 31, 1997, and
$101 thereafter; $8.40 Series B, $101; $8.85 series, $103 through July 31,
1998, and $101 thereafter; $9.25 series, $105 through July 31, 1994, $103
through July 31, 1999, and $101 thereafter; $9.00 series, $106 through July 31,
1994, $105 through July 31, 1995, $104 through July 31, 1996, $103 through July
31, 1997, $102 through July 31, 1998, $101 through July 31, 1999, and $100
thereafter; $6.875 series, $106.875 through April 30, 1994, $105.75 through
April 30, 1995, $104.625 through April 30, 1996, $103.50 through April 30,
1997, $102.375 through April 30, 1998, $101.25 through April 30, 1999, and $100
thereafter; plus, in each case, accrued and unpaid dividends, if any, to the
date fixed for payment; and after such respective dates at the applicable
optional redemption prices (if any) for the respective series. The per share
voluntary liquidation prices of the outstanding shares of the $1.90 series,
$2.00 series, $1.96 series, $7.24 series, $8.40 series and $8.38 series of the
preference stock and the $1.425 Convertible Preferred Stock are the respective
optional redemption prices in effect on the date of liquidation. See Notes 6
and 7 of Notes to Financial Statements in the January 28, 1994 Form 8-K/A-1
Report for information concerning the involuntary liquidation prices applicable
to the presently outstanding shares of such stock.
VOTING RIGHTS.
Holders of shares at any time outstanding, regardless of class, are entitled
to one vote for each share held on each matter submitted to a vote at a meeting
of stockholders, with the right to cumulate votes in all elections for
directors.
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<PAGE>
Without the vote or consent of the holders of at least two-thirds of the
outstanding shares, if any, of the Prior Preferred Stock, no stock of any prior
or parity class may be created, nor may the Restated Articles of Incorporation
of the Company be amended so as to affect any of the preferences or rights of
the Prior Preferred Stock as a class. Without the vote or consent of the
holders of at least two-thirds of the outstanding shares of the preference
stock, no stock of any class, other than the Prior Preferred Stock, ranking
prior to or on a parity with the preference stock may be created, nor may the
Restated Articles of Incorporation of the Company be amended so as to affect
any of the preferences or rights of the preference stock as a class. The
Restated Articles of Incorporation contain corresponding provisions applicable
to the $1.425 Convertible Preferred Stock as a class. No amendment so affecting
a single series of either the Prior Preferred Stock or the preference stock
(when more than one series of such class is outstanding) nor any amendment of
the resolution of the Board of Directors establishing such series may be made
that affects any of the preferences or rights of the holders of the shares of
such series without the vote or consent of the holders of at least two-thirds
of the outstanding shares of such series, but in such case the class vote or
consent of the holders of shares of no other series will be required.
Without the vote or consent of the holders of a majority of the outstanding
shares, if any, of the Prior Preferred Stock, no shares of the class (in
addition to the 850,000 shares now authorized) or of any class ranking prior to
or on a parity with the Prior Preferred Stock may be issued (other than for the
retirement of a like amount of stock of such class or classes) if, after such
issue, the aggregate stated capital (including paid-in surplus) represented by
the outstanding shares of such class or classes (after giving effect to any
retirement of shares of such class or classes made in connection with such
issue) would exceed 75% of the aggregate stated capital (including paid-in
surplus) represented by the then outstanding shares of all subordinate classes,
plus consolidated retained earnings of the Company and consolidated
subsidiaries as of the end of the preceding fiscal year.
Without the vote or consent of the holders of a majority of the outstanding
shares, if any, of the Prior Preferred Stock, the $1.425 Convertible Preferred
Stock and the preference stock, each voting as a class, the Company may not
(except where the parties are in a parent-subsidiary relationship, or when
ordered by governmental commission or agency) consolidate with or merge into
any other corporation or sell all or substantially all of its property and
business.
PREEMPTIVE RIGHTS.
Holders of the Prior Preferred Stock, the $1.425 Convertible Preferred Stock,
the preference stock and the common stock have no preemptive rights to purchase
any securities of the Company.
MISCELLANEOUS.
The outstanding shares of the $1.425 Convertible Preferred Stock, the
preference stock and the common stock are, and the shares of the New Cumulative
Preference Stock offered hereby will be, when issued, fully paid and
nonassessable.
The Transfer Agent and Registrar for the New Cumulative Preference Stock will
be:
THE FIRST CHICAGO TRUST COMPANY OF NEW YORK
30 West Broadway
New York, New York 10007-2192
and
1 North State Street
Chicago, Illinois 60670-0123
19
<PAGE>
PLAN OF DISTRIBUTION
The Securities may be sold (i) by selecting and negotiating with a managing
underwriter or underwriters for the sale, (ii) by a sale directly to a limited
number of purchasers or to a single purchaser or (iii) through agents.
Securities may be sold outside the United States.
The Prospectus Supplement sets forth the manner and terms of the offering of
the Offered Securities, including the name or names of any underwriters,
dealers or agents, the purchase price or prices of the Offered Securities, the
proceeds to the Company from the sale of the Offered Securities, any initial
public offering price, any underwriting discount or commission and any
discounts, concessions or commissions allowed or reallowed or paid by any
underwriter to other dealers. Any initial public offering price and any
discounts, concessions or commissions allowed or reallowed or paid to dealers
may be changed from time to time. Unless otherwise indicated in the Prospectus
Supplement, any agent will be acting on a best efforts basis for the period of
its appointment.
Underwriters, dealers and agents who participate in the distribution of the
Securities, and their officers, directors and controlling persons, may be
entitled under agreements to be entered into with the Company to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect
to payments which such underwriters, dealers or agents may be required to make
in respect of such liabilities.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
any underwriter or underwriters to purchase the Offered Securities will be
subject to certain conditions precedent and such underwriter or underwriters
with respect to the sale of such Offered Securities will be obligated to
purchase all of such Offered Securities if any are purchased.
The Prospectus Supplement sets forth any planned listing of the Offered
Securities on a national securities exchange and indicates whether any
underwriters, dealers or agents intend to make a market in the Offered
Securities as permitted by applicable laws and regulations. No assurance can be
given as to the liquidity of or the trading market for the Securities.
LEGAL OPINIONS
The legality of the Securities will be passed upon by Sidley & Austin, One
First National Plaza, Chicago, Illinois 60603, counsel for the Company, and by
Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601, counsel for
the underwriters, dealers, purchasers or agents. Winston & Strawn acts from
time to time as counsel for the Company in certain matters. The statements as
to matters of law and legal conclusions made under "Description of Bonds,"
subcaption "Security," and "Description of Stock" herein are made on the
authority of Sidley & Austin.
EXPERTS
The financial statements and schedules included or incorporated by reference
in the 1993 Form 10-K and the January 28, 1994 Form 8-K/A-1 Report have been
audited by Arthur Andersen & Co., independent public accountants, as indicated
in their reports with respect thereto, and are incorporated herein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said reports.
20
<PAGE>
No dealer, salesman or other person has been authorized to give any informa-
tion or to make any representations other than those contained in this Pro-
spectus Supplement and the accompanying Prospectus in connection with the of-
fer contained in this Prospectus Supplement and the accompanying Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or by any of the Underwriters.
Neither the delivery of this Prospectus Supplement and the accompanying Pro-
spectus nor any sale made hereunder shall under any circumstances create an
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus Supplement and the accompanying Prospectus
shall not constitute an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person mak-
ing such offer or solicitation is not qualified to do so or to anyone to whom
it is unlawful to make such offer or solicitation.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Description of the Offered Notes........................................... S-2
Underwriting............................................................... S-4
PROSPECTUS
The Company................................................................ 2
Available Information...................................................... 2
Incorporation of Certain Information by
Reference................................................................. 2
Recent Rate Proceedings.................................................... 3
Summary Information........................................................ 4
Use of Proceeds............................................................ 8
Description of Bonds....................................................... 8
Description of Notes....................................................... 13
Description of Stock....................................................... 16
Plan of Distribution....................................................... 20
Legal Opinions............................................................. 20
Experts.................................................................... 20
</TABLE>
$150,000,000
COMMONWEALTH
EDISON COMPANY
7% NOTES DUE FEBRUARY 15, 1997
COMMONWEALTH EDISON LOGO
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PROSPECTUS SUPPLEMENT
DATED APRIL 5, 1994
