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Filed Pursuant to Rule 424(b)(4)
Registration No. 33-61343
PROSPECTUS
8,000,000 PREFERRED SECURITIES
COMED FINANCING I
8.48% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPrS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
COMMONWEALTH EDISON COMPANY
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The 8.48% Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby evidence preferred undivided beneficial interests in the assets
of ComEd Financing I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"). Commonwealth Edison Company, an Illinois
corporation ("ComEd" or the "Company"), will own all the common securities (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities") representing common undivided beneficial interests in the assets
of the Trust. The Trust exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in an equivalent principal amount
of 8.48% Subordinated Deferrable Interest Notes due September 30, 2035 (the
"Subordinated Notes") of ComEd. The
(continued on next page)
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SEE "RISK FACTORS" COMMENCING ON PAGE 5 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS
ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing on the New York Stock
Exchange, Inc. (the "New York Stock Exchange"). Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a 30-
day period after the initial delivery of the Preferred Securities. See
"Underwriting."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
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<S> <C> <C> <C>
Per Preferred Security.. $25.00 (3) $25.00
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Total................... $200,000,000 (3) $200,000,000
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</TABLE>
(1) Plus accrued distributions, if any, from September 26, 1995.
(2) ComEd and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Notes, ComEd has agreed to
pay to the Underwriters as compensation for their arranging the investment
therein of such proceeds, $.7875 per Preferred Security (or $6,300,000 in
the aggregate); provided, that such compensation for sales of 10,000 or
more Preferred Securities to a single purchaser will be $.50 per Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by ComEd are estimated to be
$500,000.
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
September 26, 1995.
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MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
FURMAN SELZ INCORPORATED
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
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The date of this Prospectus is September 19, 1995.
(SM)"TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPrS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
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(continued from previous page.)
Subordinated Notes will be unsecured obligations of ComEd and will be
subordinate and junior in right of payment to certain other indebtedness of
ComEd, as described herein. Upon an event of default under the Declaration (as
defined herein), the holders of the Preferred Securities will have a preference
over the holder of the Common Securities with respect to payments in respect of
distributions and payments upon liquidation, redemption and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 8.48% of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year commencing September 30, 1995 ("distributions"). The payment of
distributions out of moneys held by the Trust, and payments on liquidation of
the Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by ComEd (the "Preferred Securities Guarantee") to the extent the
Trust has funds available therefor as described under "Description of the
Preferred Securities Guarantee." The obligations of ComEd under the Preferred
Securities Guarantee are subordinate and junior in right of payment to all
other liabilities of ComEd and will rank pari passu with the most senior
preferred stock issued by ComEd. The obligations of ComEd under the
Subordinated Notes are subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined herein) of ComEd. The Senior
Indebtedness of ComEd aggregated approximately $8,234 million at July 31, 1995.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and
other payment dates on the Subordinated Notes, which will be the sole assets of
the Trust. As a result, if principal or interest is not paid on the
Subordinated Notes, no amounts will be paid on the Preferred Securities. If
ComEd does not make principal or interest payments on the Subordinated Notes,
the Trust will not have sufficient funds to make distributions on the Preferred
Securities, in which event the Preferred Securities Guarantee will not apply to
such distributions until the Trust has sufficient funds available therefor.
ComEd has the right to defer payments of interest on the Subordinated Notes
by extending the interest payment period on the Subordinated Notes, at any
time, for up to 20 consecutive quarters (each, an "Extension Period"). If
interest payments are so deferred, distributions will also be deferred. Despite
such deferral, distributions will continue to accrue with interest thereon (to
the extent permitted by applicable law) at an annual rate of 8.48% per annum,
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash interest payments attributable to such deferred income. There could be
multiple Extension Periods of varying lengths throughout the term of the
Subordinated Notes. See "Description of the Subordinated Notes--Option to
Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount." In the event of any such deferral, the
holders of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
The Subordinated Notes are redeemable by ComEd (in whole or in part) from
time to time, on or after September 30, 2000 or at any time in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If ComEd
redeems Subordinated Notes, the Trust must redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Notes so redeemed at $25 per Trust Security plus accrued and
unpaid distributions thereon (the "Redemption Price") to the date fixed for
redemption. See "Description of the Preferred Securities--Mandatory
Redemption." The Preferred Securities will be redeemed upon maturity of the
Subordinated Notes. The Subordinated Notes mature on September 30, 2035. In
addition, upon the occurrence of a Special Event (as defined herein) arising
from a change in law or a change in legal interpretation, unless the
Subordinated Notes are redeemed in the limited circumstances described below,
the Trust shall be dissolved with the result that the Subordinated Notes will
be distributed to the holders of the Preferred Securities, on a pro rata basis,
in lieu of any cash distribution. In the case of the occurrence of a Special
Event that is a Tax Event, ComEd will have the right in certain circumstances
to redeem the Subordinated Notes, which would result in the redemption by the
Trust of the Trust Securities in the same amount on a pro rata basis. If the
Subordinated Notes are distributed to the holders of the Preferred Securities,
ComEd will use its best efforts to have the Subordinated Notes listed on the
New York Stock Exchange or on such other exchange as the Preferred Securities
are then listed. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Subordinated Notes."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless in connection with such dissolution, the
Subordinated Notes are distributed to the holders of the Preferred Securities.
See "Description of the Preferred Securities--Liquidation Distribution Upon
Dissolution."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
IT IS EXPECTED THAT DELIVERY OF THE PREFERRED SECURITIES WILL BE MADE AGAINST
PAYMENT THEREFOR ON OR ABOUT THE DATE SPECIFIED IN THE LAST PARAGRAPH OF THE
COVER PAGE, WHICH IS THE FIFTH BUSINESS DAY FOLLOWING THE DATE HEREOF (SUCH
SETTLEMENT CYCLE BEING HEREIN REFERRED TO AS "T+5"). PURCHASERS OF THE
PREFERRED SECURITIES SHOULD NOTE THAT THE ABILITY TO SETTLE SECONDARY MARKET
TRADES OF THE PREFERRED SECURITIES ON THE DATE HEREOF AND THE NEXT SUCCEEDING
DAY MAY BE AFFECTED BY THE T+5 SETTLEMENT. SEE "UNDERWRITING."
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AVAILABLE INFORMATION
ComEd and the Trust have filed with the Securities and Exchange Commission
(the "Commission") a combined registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Subordinated Notes, the Preferred Securities and the
Preferred Securities Guarantee offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement. Statements or extracts presented in this Prospectus
from financial statements, contracts, agreements or other documents included as
exhibits to the Registration Statement are not necessarily complete. With
respect to each such financial statement, contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is hereby made to
the exhibit for a more complete description of the matter involved.
ComEd is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, information statements and other information with the
Commission. Such reports, information statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. Such reports, information
statements and other information concerning ComEd may also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60604 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104, the securities exchanges on which certain of ComEd's
securities are listed.
No separate financial statements of the Trust are included herein. ComEd does
not believe that such statements would be material to holders of the Preferred
Securities. The Trust is not currently subject to the informational reporting
requirements of the Exchange Act. The Trust will become subject to such
requirements upon the effectiveness of the Registration Statement of which this
Prospectus forms a part, although it intends to seek and expects to receive an
exemption therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by ComEd with the Commission (File No. 1-1839)
are incorporated in this Prospectus by reference and made a part hereof:
(i) ComEd's Annual Report on Form 10-K for the year ended December 31,
1994 (the "1994 Form 10-K Report");
(ii) ComEd's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1995 (the "March 31, 1995 Form 10-Q Report") and June 30,
1995 (the "June 30, 1995 Form 10-Q Report"); and
(iii) ComEd's Current Report on Form 8-K/A-1 dated January 27, 1995 (the
"January 27, 1995 Form 8-K Report").
All documents subsequently filed by ComEd pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the termination of the offering made by this Prospectus, shall be deemed to be
incorporated into 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
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<PAGE>
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
ComEd 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, 10 South Dearborn Street, P.O. Box
767, Chicago, Illinois 60690-0767 (telephone number 312/394-3126).
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Reference is made
to "Definitions" herein for the location herein of the definitions of certain
capitalized terms used herein.
Preferred Securities Offered. 8,000,000 8.48% Trust Originated Preferred
Securities evidencing preferred undivided beneficial interests in the assets of
the Trust are offered hereby. Holders of the Preferred Securities are entitled
to receive cumulative cash distributions at an annual rate of 8.48% of the
liquidation amount of $25 per Preferred Security, accruing from the date of
original issuance and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year commencing on September 30, 1995. The
distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and
other payment dates on the Subordinated Notes, which will be the sole assets of
the Trust. As a result, if principal or interest is not paid on the
Subordinated Notes, no amounts will be paid on the Preferred Securities. See
"Description of the Preferred Securities."
Subordinated Notes. The Trust will invest the proceeds from the issuance of
the Preferred Securities and Common Securities in an equivalent amount of 8.48%
Subordinated Deferrable Interest Notes due September 30, 2035 of ComEd. The
Subordinated Notes will be subordinate and junior in right of payment to all
Senior Indebtedness of ComEd. See "Description of the Subordinated Notes--
Subordination."
Preferred Securities Guarantee. Payment of distributions out of moneys held
by the Trust, and payments on liquidation of the Trust or the redemption of
Preferred Securities are guaranteed by ComEd to the extent the Trust has funds
available therefor. If ComEd does not make principal or interest payments on
the Subordinated Notes, the Trust will not have sufficient funds to make
distributions on the Preferred Securities, in which event the Preferred
Securities Guarantee will not apply to such distributions until the Trust has
sufficient funds available therefor. See "Description of the Preferred
Securities Guarantee" and "Effect of Obligations Under the Subordinated Notes
and the Preferred Securities Guarantee" herein. The obligations of ComEd under
the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other liabilities of ComEd and will rank pari passu with the
most senior preferred stock issued by ComEd. See "Risk Factors--Ranking of
Preferred Securities Guarantee and Subordinated Notes" and "Description of the
Preferred Securities Guarantee."
Interest Deferral. ComEd has the right to defer payments of interest on the
Subordinated Notes by extending the interest payment period on the Subordinated
Notes, at any time, for up to 20 consecutive quarters. If interest payments on
the Subordinated Notes are so deferred, distributions on the Preferred
Securities will also be deferred. During any deferral, distributions will
continue to accrue with interest thereon (to the extent permitted by law) as
described herein. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Notes. During an Extension Period,
holders of Preferred Securities will be required to include deferred interest
income in their gross income in advance of receipt of
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the cash interest payments attributable thereto. See "Description of the
Preferred Securities--Voting Rights," "Description of the Subordinated Notes--
Option to Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Original Issue Discount, Premium and Market Discount."
Redemption. The Subordinated Notes are redeemable by ComEd (in whole or in
part) from time to time, on or after September 30, 2000, or at any time in
certain circumstances upon the occurrence of a Tax Event. If the Subordinated
Notes are redeemed, the Trust must redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of Subordinated
Notes so redeemed. The Preferred Securities will be redeemed upon maturity of
the Subordinated Notes. See "Description of the Preferred Securities--Mandatory
Redemption."
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained or incorporated by reference elsewhere in this Prospectus
and should particularly consider the following matters:
RANKING OF PREFERRED SECURITIES GUARANTEE AND SUBORDINATED NOTES
ComEd's obligations under the Preferred Securities Guarantee are subordinate
and junior in right of payment to all liabilities of ComEd and pari passu with
the most senior preferred stock now or hereafter issued by ComEd and with any
guarantee now or hereafter entered into by ComEd in respect of any preferred
stock of any affiliate of ComEd. The obligations of ComEd under the
Subordinated Notes are subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined herein) of ComEd. No payment
of principal of (including redemption payments, if any), premium, if any, or
interest on, the Subordinated Notes may be made if (a) any Senior Indebtedness
of ComEd is not paid when due and any applicable grace period with respect to
such default has ended with such default not being cured or waived or ceasing
to exist, or (b) the maturity of any Senior Indebtedness has been accelerated
because of a default. At July 31, 1995, Senior Indebtedness of ComEd aggregated
approximately $8,234 million. There are no terms in the Preferred Securities,
the Subordinated Notes or the Preferred Securities Guarantee that limit ComEd's
ability to incur additional indebtedness, including indebtedness that ranks
senior to the Subordinated Notes or the Preferred Securities Guarantee. See
"Description of the Preferred Securities Guarantee" and "Description of the
Subordinated Notes--Subordination."
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee guarantees to the holders of the Preferred
Securities the payment of (i) any accrued and unpaid distributions which are
required to be paid on the Preferred Securities, to the extent the Trust shall
have funds available therefor, (ii) the Redemption Price, including all accrued
and unpaid distributions, to the date of the redemption, to the extent the
Trust has funds available therefor, with respect to any Preferred Securities
called for redemption by the Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Subordinated Notes to the holders of Preferred
Securities) the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of
payment therefor and (b) the amount of assets of the Trust remaining available
for distribution to holders of Preferred Securities in liquidation of the
Trust. The holders of a majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Preferred Guarantee Trustee (as
defined herein) or to direct the exercise of any trust or power conferred upon
the Preferred Guarantee Trustee under the Preferred Securities Guarantee. If
the Preferred Guarantee Trustee fails to enforce the Preferred Securities
Guarantee, any holder of Preferred Securities may institute a legal proceeding
directly against ComEd to enforce the Preferred Guarantee Trustee's rights
under the Preferred Securities Guarantee, without first instituting a legal
proceeding against
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the Trust, the Preferred Guarantee Trustee or any other person or entity. If
ComEd were to default in its obligation to pay amounts payable on the
Subordinated Notes, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Preferred Securities Guarantee for payment of such
amounts. Instead, holders of the Preferred Securities would rely on the
enforcement by the Property Trustee (as defined herein) of its rights as
registered holder of the Subordinated Notes against ComEd, pursuant to the
terms of the Subordinated Notes. See "Description of the Preferred Securities
Guarantee--Status of the Preferred Securities Guarantee" and "Description of
the Subordinated Notes--Subordination." The Declaration (as defined herein)
provides that each holder of Preferred Securities by acceptance thereof agrees
to the provisions of the Preferred Securities Guarantee and the Indenture (as
defined herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Notes against ComEd. In addition, the holders of a majority in
aggregate liquidation amount of the Preferred Securities will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it
as a holder of the Subordinated Notes. If the Property Trustee fails to enforce
its rights under the Subordinated Notes, a holder of Preferred Securities may
institute a legal proceeding directly against ComEd to enforce the Property
Trustee's rights under the Subordinated Notes without first instituting any
legal proceeding against the Property Trustee or any other person or entity,
including the Trust.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
ComEd has the right under the Indenture to defer payments of interest on the
Subordinated Notes by extending the interest payment period at any time, and
from time to time, on the Subordinated Notes. As a consequence of such an
extension, quarterly distributions on the Preferred Securities would be
deferred (but despite such deferral would continue to accrue with interest
thereon compounded quarterly) by the Trust during any such extended interest
payment period. Such right to extend the interest payment period for the
Subordinated Notes is limited to a period not exceeding 20 consecutive quarters
for any such extension. In the event that ComEd exercises this right to defer
payments of interest, then (a) ComEd shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) ComEd shall
not make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by ComEd
which rank pari passu with or junior to the Subordinated Notes and (c) ComEd
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantee). Prior to the termination of
any such Extension Period, ComEd may further defer payments of interest by
further extending the interest payment period, provided that such Extension
Period, together with all such previous and further extensions thereof, may not
exceed 20 consecutive quarters or extend beyond the maturity of the
Subordinated Notes. Upon the termination of any Extension Period and the
payment of all amounts then due, ComEd may select a new Extension Period, as if
no Extension Period had previously been declared, subject to the above
requirements. See "Description of the Preferred Securities--Distributions" and
"--Voting Rights" and "Description of the Subordinated Notes--Option to Extend
Interest Payment Period."
Should ComEd exercise its rights to defer payments of interest by extending
the interest payment period, each holder of Preferred Securities will continue
to accrue income (as original issue discount) for United States federal income
tax purposes in respect of the deferred interest allocable to its Preferred
Securities. As a
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result, holders of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive cash from the Trust related to such income if such holder disposes of
its Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. ComEd has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Subordinated Notes. However, should ComEd determine to
exercise such right in the future, the market price of the Preferred Securities
is likely to be affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of ComEd's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Subordinated Notes) may be more volatile
than other securities on which original issue discount accrues that do not have
such rights. See "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount."
SPECIAL EVENT DISTRIBUTION
Upon the occurrence of a Special Event, the Trust will be dissolved, except
in the limited circumstances described below, with the result that the
Subordinated Notes would be distributed to the holders of the Trust Securities
in connection with the liquidation of the Trust. In the case of a Special Event
that is a Tax Event, in certain circumstances ComEd shall have the right to
redeem the Subordinated Notes, in whole or in part, in which event the Trust
will redeem the Trust Securities on a pro rata basis to the same extent as the
Subordinated Notes are redeemed. See "Description of the Preferred Securities--
Special Event Redemption or Distribution" and "Certain Federal Income Tax
Consequences."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Notes that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Subordinated Notes that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Subordinated Notes upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Subordinated Notes
and should carefully review all the information regarding the Subordinated
Notes and ComEd contained herein. See "Description of the Preferred
Securities--Special Event Redemption or Distribution" and "Description of the
Subordinated Notes."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, ComEd Trustees (as defined herein), which voting rights are
vested exclusively in ComEd as the holder of the Common Securities. See
"Description of the Preferred Securities--Voting Rights."
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying
Subordinated Notes. A holder who disposes of his Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Subordinated Notes through the date of
disposition in income as ordinary income (i.e., OID (as defined herein)), and
to add such amount to his adjusted tax basis in his pro rata share of the
underlying Subordinated Notes deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include, in the
form of OID, all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount" and "--Sale of Preferred Securities."
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COMMONWEALTH EDISON COMPANY
ComEd is engaged principally in the production, purchase, transmission,
distribution and sale of electricity to a diverse base of residential,
commercial and industrial customers. ComEd's electric service territory has an
area of approximately 11,540 square miles and an estimated population of
approximately 8.2 million as of December 31, 1994 and approximately 8.1 million
as of December 31, 1993. It includes the city of Chicago, an area of about 225
square miles with an estimated population of three million from which ComEd
derived approximately one-third of its ultimate consumer revenues in the twelve
months ended June 30, 1995. ComEd had approximately 3.4 million electric
customers as of June 30, 1995. ComEd's principal executive offices are located
at 37th Floor, 10 South Dearborn Street, Post Office Box 767, Chicago, Illinois
60690-0767, and its telephone number is 312/394-4321.
COMED FINANCING I
The Trust is a statutory business trust formed under Delaware law pursuant to
the filing of a certificate of trust with the Delaware Secretary of State on
July 21, 1995. The Trust's business is defined in a Declaration of Trust,
executed by ComEd, as sponsor (the "Sponsor"), and the ComEd Trustees. The
Declaration of Trust will be amended and restated in its entirety (as so
amended and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The Declaration will be qualified as an indenture under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities.
ComEd will acquire all of the Common Securities in an aggregate liquidation
amount equal to 3% of the total capital of the Trust. The Trust exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Notes and (iii) engaging
in only those other activities necessary or incidental thereto. The Trust has a
term of approximately 45 years, but may terminate earlier as provided in the
Declaration.
The Trust's business and affairs will be conducted by the trustees (the
"ComEd Trustees") appointed by ComEd, as holder of the Common Securities. The
duties and obligations of the ComEd Trustees shall be governed by the
Declaration. Pursuant to the Declaration, the number of ComEd Trustees will
initially be three. Two of the ComEd Trustees (the "Regular Trustees") will be
persons who are employees or officers of, or affiliated with, ComEd. The third
trustee will be a financial institution unaffiliated with ComEd which maintains
a principal place of business in the State of Delaware that will serve as
property trustee under the Declaration and as indenture trustee for purposes of
the Trust Indenture Act (the "Property Trustee"). Wilmington Trust Company will
act as the Property Trustee until removed or replaced by the holder of the
Common Securities. Wilmington Trust Company will also act as indenture trustee
under the Preferred Securities Guarantee (the "Preferred Guarantee Trustee").
See "Description of the Preferred Securities Guarantee."
The Property Trustee will hold title to the Subordinated Notes for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture (as defined
herein) as the holder of the Subordinated Notes. In addition, the Property
Trustee will maintain exclusive control of a segregated non-interest bearing
bank account (the "Property Account") to hold all payments made in respect of
the Subordinated Notes for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities
out of funds from the Property Account. The Preferred Guarantee Trustee will
hold the Preferred Securities Guarantee for the benefit of the holders of the
Preferred Securities. ComEd, as the holder of all the Common Securities, will
have the right to appoint, remove or replace any ComEd Trustee and to increase
the number of ComEd Trustees, provided that the number of ComEd Trustees shall
be at least three, a majority of which shall be Regular Trustees. ComEd will
pay all fees and expenses related to the Trust, the offering of the Trust
Securities and the issuance of the Subordinated Notes. See "Description of the
Subordinated Notes--Miscellaneous."
8
<PAGE>
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), and
the Trust Indenture Act. See "Description of the Preferred Securities."
The trustee in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890. The
principal place of business of the Trust shall be c/o Commonwealth Edison
Company, 37th Floor, 10 South Dearborn Street, Chicago, Illinois 60690-0767
(telephone number 312/394-4321).
SELECTED FINANCIAL INFORMATION
The following information is qualified in its entirety by the information
appearing elsewhere in this Prospectus and by the information and financial
statements incorporated in this Prospectus by reference.
COMMONWEALTH EDISON COMPANY
<TABLE>
<S> <C>
Estimated Population of Service Area............................... 8,200,000
Customers (as of June 30, 1995).................................... 3,368,000
Sales (thousands of kilowatthours--12 months ended June 30, 1995).. 89,134,000
Net Electric Generating Capability, net of summer limitations
(kilowatts)....................................................... 21,965,000
Fuel Sources of Kilowatthour Generation (12 months ended June 30,
1995):
Nuclear ......................................................... 74%
Coal ............................................................ 23
Oil ............................................................. 1
Natural gas ..................................................... 2
----------
100%
==========
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TWELVE
MONTHS
YEAR ENDED DECEMBER 31 ENDED
------------------------------------------------------------------ JUNE 30,
1990(B) 1991(B) 1992(B) 1993(A)(B) 1994(A)(B) 1995(C)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Electric Operating
Revenues (thousands of
dollars)............... $5,310,819(1) $6,275,533(1) $6,026,321(1) $5,260,440(2) $6,277,521(2) $6,458,276
Net Income (thousands of
dollars)............... $ 128,291 $ 94,887 $ 513,981 $ 112,440(3) $ 423,946 $ 614,661
Net Income on Common
Stock (thousands of
dollars)............... $ 45,796 $ 16,599 $ 443,442 $ 46,388(3) $ 359,019 $ 546,988
Earnings per Common
Share.................. $ 0.22 $ 0.08 $ 2.08 $ 0.22(3) $ 1.68 $ 2.55
Ratios of Earnings to--
Fixed Charges(D)...... 1.42 1.59 2.06 1.19 1.99 2.47
Fixed Charges and
Preferred and
Preference Stock
Dividend
Requirements(D)...... 1.21 1.36 1.78 1.03 1.73 2.13
</TABLE>
--------
See Notes (A) through (D) on pages 10 through 11.
(1) Reflects provisions for revenue refunds of $536.4 million, $0.9 million and
$18.4 million for the years ended December 31, 1990, 1991 and 1992,
respectively, relating to the Illinois Supreme Court's ("Supreme Court")
reversal of the Illinois Commerce Commission's ("ICC") 1988 rate order and
the Supreme Court's decision regarding Byron Unit 1.
9
<PAGE>
(2) Reflects provisions for revenue refunds of $1,281 million and $16 million
for the years ended December 31, 1993 and 1994, respectively, recording the
effects of two settlements related to various proceedings and matters
concerning ComEd's rates and its fuel adjustment clause. See Note A for
additional information.
(3) In January 1993, ComEd 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 ComEd had previously
used. ComEd 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.
NOTES TO FINANCIAL INFORMATION:
(A) In November 1993, two settlements related to various proceedings and
matters concerning ComEd's rates and its fuel adjustment clause became
final. One settlement (the "Rate Matters Settlement") concerned the
proceedings relating to ComEd's 1985 and 1991 ICC rate orders (which orders
related to, among other things, the recovery of costs associated with
ComEd's four most recently completed nuclear generating units, Byron Units
1 and 2 and Braidwood Units 1 and 2), the proceedings concerning the
reduction in the difference between ComEd'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 made by ComEd during 1990 related to a 1988 ICC rate
order, and matters related to a rider to ComEd's rates that it 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 other settlement (the "Fuel Matters
Settlement") related to the ICC fuel reconciliation proceedings involving
ComEd for the period from 1985 through 1988 and to future challenges by the
settling parties to the prudence of ComEd's western coal costs for the
period from 1989 through 1992.
Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd
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 which ended in November 1994 (followed
by a reconciliation period of five months). ComEd had previously deferred
the recognition of revenues during 1993 as a result of developments in the
proceedings related to the 1991 ICC rate order, which resulted in a
reduction to 1993 net income of approximately $160 million or $0.75 per
common share. The recording of the effects of the Rate Matters Settlement in
October 1993 reduced 1993 net income by approximately $292 million or $1.37
per common share, in addition to the approximately $160 million 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 ICC rate
order issued on January 6, 1993 (as subsequently modified, the "Remand
Order"). The deferred recognition of revenues was eliminated in October 1993
at the time the provisions for revenue refunds related to the Rate Matters
Settlement, which reflected those deferred revenues, were recorded.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
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 which ended in November 1994.
The recording of the effects of the Fuel Matters Settlement in October 1993
reduced 1993 net income by approximately $62 million or $0.29 per common
share.
(B) During the periods presented under the subcaption "Financial Information"
in "Selected Financial Information," ComEd'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 were affected directly by the proceedings that are the subject
of the Rate Matters Settlement and the Fuel Matters Settlement. The
uncertainties associated with such proceedings and related issues, among
other things, led to the Rate Matters Settlement and the Fuel Matters
Settlement. See Note A for additional information.
10
<PAGE>
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 and to
reconcile amounts collected with actual costs. Through its fuel adjustment
clause, ComEd 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.
ComEd is currently involved in proceedings relating to the amounts
collected under its fuel adjustment clause with respect to 1993. ICC orders
have been issued in fuel reconciliation proceedings for years prior to
1993; however, certain intervenors have appealed the ICC order in the 1989
fuel reconciliation proceedings on issues relating to nuclear station
performance. Under the Fuel Matters Settlement, parties to the settlement
agreed not to challenge the prudence of ComEd's western coal costs for the
period from 1989 through 1992. ComEd'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 ComEd has substantial purchase commitments under its
contracts. For additional information relating to ComEd's commitments for
the purchase of coal, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources," and Notes 1 and 19 of Notes to Financial Statements in
the June 30, 1995 Form 10-Q Report.
(C) On January 9, 1995, the ICC issued its rate order (the "Rate Order") in the
proceedings relating to ComEd's February 10, 1994 rate increase request.
The Rate Order provides, among other things, for (i) an increase in ComEd's
total revenues of approximately $301.8 million (excluding add-on revenue
taxes) or 5.2%, on an annual basis, including a $303.2 million increase in
base rates, (ii) the collection of municipal franchise costs as an adder to
base rates until May 1, 1995, when ComEd began collecting such costs
prospectively on an individual municipality basis through a rider, and
(iii) the use of a rider, with annual review proceedings, to pass on to
ratepayers increases or decreases in estimated costs associated with the
decommissioning of ComEd's nuclear generating units. The rates provided in
the Rate Order became effective on January 14, 1995; however, they are
being collected subject to refund as a result of subsequent judicial
action. Intervenors and ComEd have filed appeals of the Rate Order with the
Illinois Appellate Court. As of June 30, 1995, electric operating revenues
of approximately $139 million (excluding revenue taxes) were subject to
refund.
In the Rate Order, the ICC also determined that Byron Unit 2 and Braidwood
Units 1 and 2 were 100% "used and useful" and that the previously
determined reasonable costs of such Units, as depreciated, should be
included in full in ComEd's rate base. The ICC also determined, however,
that ComEd's annual nuclear plant decommissioning cost collections from its
ratepayers should be reduced from the $127 million previously authorized in
the 1991 ICC rate order to $112.7 million. The $112.7 million annual
collection amount primarily resulted from the ICC's decision to exclude
from ComEd's costs subject to collection a contingency allowance. As noted
above, the Rate Order established a rider which allows annual adjustments
to decommissioning cost collections outside of the context of a traditional
rate proceeding. Such rider is intended to allow adjustments in
decommissioning cost recoveries from ratepayers as changes in cost
estimates become identifiable. On April 19, 1995, the ICC approved ComEd's
initial rider filing, which increased its annual collections to $113.5
million. Under Illinois law, decommissioning cost collections are required
to be deposited in external trust funds; and, consequently, such
collections do not add to the cash flows available for general corporate
purposes.
(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.
11
<PAGE>
CAPITALIZATION OF COMED
The following table sets forth the consolidated capitalization including
short-term borrowings and current maturities of ComEd at June 30, 1995, and as
adjusted to reflect the sale of the Preferred Securities offered hereby and the
application of the estimated net proceeds from such sale. See "Use of
Proceeds." The table should be read in conjunction with ComEd's consolidated
financial statements and notes thereto included in the documents incorporated
by reference herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AT JUNE 30, 1995
-------------------
AS ADJUSTED
ACTUAL (UNAUDITED)
------- -----------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Short-term borrowings...................................... $ 47 $ 7
Long-term borrowings including current maturities.......... 7,559 7,399
Company-obligated mandatorily redeemable preferred
securities of ComEd Financing I (1)....................... -- 200
Preferred and preference stocks without mandatory
redemption requirements................................... 508 508
Preference stock subject to mandatory redemption
requirements including current maturities................. 307 307
Common stock equity........................................ 5,431 5,431
------- -------
Total capitalization including short-term borrowings and
current maturities........................................ $13,852 $13,852
======= =======
</TABLE>
--------
(1) As described in this Prospectus, the sole assets of the Trust will be the
8.48% Subordinated Deferrable Interest Notes due September 30, 2035 of
ComEd with a principal amount of $206,190,000, and upon redemption of such
debt, the Preferred Securities will be mandatorily redeemable.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with ComEd's
financial statements, with the Preferred Securities shown on ComEd's
consolidated financial statements as Company-obligated mandatorily redeemable
preferred securities of ComEd Financing I.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by the
Trust in the Subordinated Notes of ComEd. ComEd will use the net proceeds from
the sale of such Subordinated Notes to pay approximately $140 million of short-
term commercial paper notes issued to discharge previously outstanding long-
term debt and to pay approximately $60 million on an outstanding bank loan. The
commercial paper bears interest at rates ranging from 5.89% to 6.13% and the
bank loan bears interest at a variable rate of interest (currently
approximately 6 1/2%). See "Capitalization of ComEd." For additional
information concerning ComEd's outstanding long-term debt, see the Statements
of Consolidated Capitalization in the June 30, 1995 Form 10-Q Report.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee will act as the indenture trustee for
purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust
12
<PAGE>
Indenture Act. The following summary of the principal terms and provisions of
the Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration, a copy of which is
filed as an exhibit to the Registration Statement, of which this Prospectus is
a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the Trust, to
issue the Preferred Securities, which represent preferred undivided beneficial
interests in the assets of the Trust, and the Common Securities, which
represent common undivided beneficial interests in the assets of the Trust. All
of the Common Securities will be owned by ComEd. The Common Securities rank
pari passu, and payments will be made thereon on a pro rata basis, with the
Preferred Securities, except that upon the occurrence and during the
continuation of a Declaration Event of Default, the rights of the holders of
the Common Securities to receive payment of periodic distributions and payments
upon liquidation, redemption and otherwise will be subordinated to the rights
to payment of the holders of the Preferred Securities. The Declaration does not
permit the issuance by the Trust of any securities other than the Trust
Securities or the incurrence of any indebtedness by the Trust. Pursuant to the
Declaration, the Property Trustee will own and hold the Subordinated Notes for
the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust, are guaranteed by ComEd
to the extent described under "Description of the Preferred Securities
Guarantee." The Preferred Guarantee Trustee will hold the Preferred Securities
Guarantee for the benefit of the holders of the Preferred Securities. The
Preferred Securities Guarantee does not cover payment of distributions on the
Preferred Securities when the Trust does not have sufficient available funds in
the Property Account to make such distributions.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 8.48% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears will bear interest at the rate of 8.48% per annum (to
the extent permitted by applicable law). The term "distributions" as used
herein includes any such interest payable unless otherwise stated.
Distributions on the Preferred Securities will be cumulative, will accrue
from September 26, 1995 and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year to the holders of record on
the applicable record date, commencing September 30, 1995 when, as and if
available for payment by the Property Trustee, except as otherwise described
below. The amount of distributions payable for any full quarterly period will
be computed on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarter, on the basis of the actual number of days
elapsed in such a 90-day quarter.
ComEd has the right under the Indenture to defer payments of interest on the
Subordinated Notes by extending the interest payment period from time to time
on the Subordinated Notes which, if exercised, would defer quarterly
distributions on the Preferred Securities (though such distributions would
continue to accrue interest since interest would continue to accrue on the
Subordinated Notes) during any such extended interest payment period. In the
event that ComEd exercises this right, then (a) ComEd shall not declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) ComEd
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued
by ComEd which rank pari passu with or junior to the Subordinated Notes, and
(c) ComEd shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Preferred Securities Guarantee). Prior to the
termination of any such Extension Period, ComEd may further extend the interest
payment period, provided that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive quarters
or extend beyond the maturity of the Subordinated Notes. Upon the
13
<PAGE>
termination of any Extension Period and the payment of all amounts then due,
ComEd may select a new Extension Period as if no Extension Period had
previously been declared, subject to the above requirements. See "--Voting
Rights" and "Description of the Subordinated Notes--Interest" and "--Option to
Extend Interest Payment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to holders of record
of the Preferred Securities, if funds are available therefor, as they appear on
the books and records of the Trust on the record date next following the
termination of such Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Subordinated Notes. See "Description of the
Subordinated Notes." The payment of distributions out of moneys held by the
Trust is guaranteed by ComEd to the extent set forth under "Description of the
Preferred Securities Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Notes. Such distributions will be paid through the Property
Trustee, who will hold amounts received in respect of the Subordinated Notes in
the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below. In the event the Preferred
Securities shall not continue to remain in book-entry only form, the Regular
Trustees shall have the right to select relevant record dates which shall be at
least one Business Day, but less than 60 Business Days, prior to the relevant
payment dates. In the event that any date on which distributions are to be made
on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking
institutions in Wilmington, Delaware or New York, New York are authorized or
required by law to close.
MANDATORY REDEMPTION
The Subordinated Notes will mature on September 30, 2035 and may be redeemed,
in whole or in part, at any time on or after September 30, 2000, or at any time
in certain circumstances upon the occurrence of a Tax Event. Upon the repayment
of the Subordinated Notes, whether at maturity or upon acceleration, redemption
or otherwise, the proceeds from such repayment or payment shall simultaneously
be applied to redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Notes so repaid or
redeemed at the Redemption Price; provided that, except in the case of payments
upon maturity, holders of Trust Securities shall be given not less than 30 nor
more than 60 days notice of such redemption. See "Description of the
Subordinated Notes." In the event that fewer than all of the outstanding
Preferred Securities are to be redeemed, the Preferred Securities will be
redeemed pro rata as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
from independent tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that, on or after the date of this Prospectus, as a
result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein or (b) any
amendment to, or change in, an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority, which
14
<PAGE>
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is
taken, in each case on or after the date of this Prospectus, there is more than
an insubstantial risk that (i) the Trust would be subject to United States
federal income tax with respect to interest accrued or received on the
Subordinated Notes, (ii) interest payable to the Trust on the Subordinated
Notes would not be deductible in whole or in part by ComEd for United States
federal income tax purposes or (iii) the Trust would be subject to more than a
de minimis amount of other taxes, duties or other governmental charges, which
change or amendment becomes effective on or after the date of this Prospectus.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
1940 Act (as hereinafter defined) to the effect that, as a result of the
occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus.
If, at any time, a Tax Event or an Investment Company Event (each, as defined
above, a "Special Event") shall occur and be continuing, the Trust shall,
except in the circumstances described below, be dissolved with the result that
Subordinated Notes with an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Trust Securities would be distributed to the
holders of the Trust Securities, in liquidation of such holders' interests in
the Trust on a pro rata basis, within 90 days following the occurrence of such
Special Event; provided, however, that in the case of the occurrence of a Tax
Event, as a condition of such dissolution and distribution, the Regular
Trustees shall have received an opinion from independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal Revenue Service, to the
effect that the holders of the Trust Securities will not recognize any gain or
loss for United States federal income tax purposes as a result of such
dissolution of the Trust and the distribution of the Subordinated Notes; and,
provided, further, that, if at the time there is available to the Trust the
opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, which has no adverse effect on
the Trust, ComEd or the holders of the Trust Securities, the Trust will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) ComEd has received an opinion (a "Redemption Tax
Opinion") from independent tax counsel experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial risk that ComEd
would be precluded from deducting the interest on the Subordinated Notes for
United States federal income tax purposes even after the Subordinated Notes
were distributed to the holders of Trust Securities in liquidation of such
holders' interests in the Trust as described above or (ii) the Regular Trustees
shall have been informed by such tax counsel that a No Recognition Opinion
cannot be delivered, ComEd shall have the right, upon not less than 30 nor more
than 60 days notice, to redeem the Subordinated Notes in whole or in part for
cash within 90 days following the occurrence of such Tax Event, and, following
such redemption, Trust Securities with an aggregate liquidation amount equal to
the aggregate principal amount of the Subordinated Notes so redeemed shall be
redeemed by the Trust at the Redemption Price on a pro rata basis; provided,
however, that, if at the time there is available to ComEd or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Trust, ComEd or the holders of the Trust Securities, ComEd or the Trust
will pursue such measure in lieu of redemption.
If Subordinated Notes are distributed to the holders of the Preferred
Securities, ComEd will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange as the
Preferred Securities are then listed.
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After the date for any distribution of Subordinated Notes upon dissolution of
the Trust, (i) the Preferred Securities and Preferred Securities Guarantee will
no longer be deemed to be outstanding, (ii) the depositary or its nominee, as
the record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Notes to be delivered
upon such distribution and (iii) any certificates representing Preferred
Securities and Preferred Securities Guarantee not held by the depositary or its
nominee will be deemed to represent Subordinated Notes having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to ComEd or its agent for
transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Notes that may be distributed in exchange for
the Preferred Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Subordinated Notes that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Securities for all quarterly distribution periods terminating on or prior
to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time, on
the redemption date, provided that ComEd has paid to the Property Trustee a
sufficient amount of cash in connection with the related redemption or maturity
of the Subordinated Notes, the Trust will irrevocably deposit with the
depositary funds sufficient to pay the applicable Redemption Price and will
give the depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of the Preferred Securities. See "--Book-Entry
Only Issuance--The Depository Trust Company." If notice of redemption shall
have been given and funds deposited as required, then immediately prior to the
close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay),
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of Preferred Securities is
improperly withheld or refused and not paid either by the Trust or by ComEd
pursuant to the Preferred Securities Guarantee, distributions on such Preferred
Securities will continue to accrue, from the original redemption date to the
actual date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as described
under "--Book-Entry Only Issuance--The Depository Trust Company" below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), ComEd or its affiliates
may, at any time and from time to time, purchase outstanding Preferred
Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities at that time
will be entitled to receive out of the assets of the Trust, after
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satisfaction of liabilities to creditors, distributions in an amount equal to
the aggregate of the stated liquidation amount of $25 per Preferred Security
plus accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such dissolution,
winding-up or termination, Subordinated Notes in an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Preferred Securities have been
distributed on a pro rata basis to the holders of Preferred Securities in
exchange for such Preferred Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions upon
any such dissolution pro rata with the holders of the Preferred Securities,
except that if a Declaration Event of Default has occurred and is continuing,
the Preferred Securities shall have a preference over the Common Securities.
Pursuant to the Declaration, the Trust shall terminate (i) on September 26,
2040, the expiration of the term of the Trust, (ii) upon the bankruptcy of
ComEd, (iii) upon the filing of a certificate of dissolution or its equivalent
with respect to ComEd, the filing of a certificate of cancellation with respect
to the Trust, or the revocation of the charter of ComEd and the expiration of
90 days after the date of revocation without a reinstatement thereof, (iv) upon
the distribution of the Subordinated Notes following the occurrence of a
Special Event, (v) upon the entry of a decree of a judicial dissolution of
ComEd or the Trust or (vi) upon the redemption of all of the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
(see "Description of the Subordinated Notes--Indenture Events of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities or its
consequences until all Declaration Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until
such Declaration Events of Default with respect to the Preferred Securities
have been so cured, waived or otherwise eliminated, the Property Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities and only the holders of the Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under the
Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property Trustee,
as the sole holder of the Subordinated Notes, will have the right under the
Indenture to declare the principal of, and interest on, the Subordinated Notes
to be immediately due and payable.
VOTING RIGHTS
Except as provided below, under the Trust Act, the Trust Indenture Act and
under "Description of the Preferred Securities Guarantee--Amendments and
Assignment" and as otherwise required by law and the Declaration, the holders
of the Preferred Securities will have no voting rights. In the event that ComEd
elects to defer payments of interest on the Subordinated Notes as described
above under "--Distributions," the holders of the Preferred Securities do not
have the right to appoint a special representative or trustee or otherwise act
to protect their interests.
The holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or to direct
the exercise of any trust or power conferred upon the Property Trustee under
the Declaration, including the right to direct the Property Trustee, as the
holder of the Subordinated Notes, to (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debt
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Trustee (as defined herein) under the Indenture with respect to the
Subordinated Notes, (ii) waive any past Indenture Event of Default which is
waivable under the Base Indenture (as defined herein), (iii) exercise any right
to rescind or annul a declaration that the principal of all the Subordinated
Notes shall be due and payable, or (iv) consent to any amendment, modification
or termination of the Indenture or the Subordinated Notes, where such consent
shall be required, provided that where a consent under the Indenture would
require the consent of more than a majority of the holders in principal amount
of Subordinated Notes affected thereby (a "Super-Majority"), only the holders
of at least the proportion in liquidation amount of the Preferred Securities
which the relevant Super-Majority represents of the aggregate principal amount
of the Subordinated Notes, may direct the Property Trustee to give such
consent. If the Property Trustee fails to enforce its rights under the
Declaration, a holder of Preferred Securities may institute a legal proceeding
directly against any person to enforce the Property Trustee's rights under the
Declaration without first instituting any legal proceeding against the Property
Trustee or any other person or entity. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Debt Trustee with respect to the Subordinated Notes. Such notice shall state
that such Indenture Event of Default also constitutes a Declaration Event of
Default. The Property Trustee shall not take any action described in clauses
(i), (ii), (iii) or (iv) above unless the Property Trustee has obtained an
opinion of independent tax counsel to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes and each holder of Trust Securities
will be treated as owning an undivided beneficial interest in the Subordinated
Notes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Notes, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination. The Property Trustee shall vote
with respect to such amendment, modification or termination as directed by a
majority in liquidation amount of the Preferred Securities and, if no
Declaration Event of Default has occurred and is continuing, a majority in
liquidation amount of the Common Securities, voting together as separate
classes, provided that where a consent under the Indenture would require the
consent of a Super-Majority, the Property Trustee may only give such consent at
the direction of the holders of at least the proportion in liquidation amount
of the Preferred Securities and Common Securities, respectively, which the
relevant Super-Majority represents of the aggregate principal amount of the
Subordinated Notes outstanding. The Property Trustee shall not take any such
action in accordance with the directions of the holders of the Trust Securities
unless the Property Trustee has obtained an opinion of independent tax counsel
to the effect that, as a result of such action, the Trust will not be
classified as other than a grantor trust for United States federal income tax
purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be mailed to each holder of record of Preferred Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents. No vote or consent of the
holders of Preferred Securities will be required for the Trust to redeem and
cancel Preferred Securities or distribute Subordinated Notes in accordance with
the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by ComEd or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with,
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ComEd shall not be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Holders of the Preferred Securities will have no rights to appoint or remove
the ComEd Trustees, who may be appointed, removed or replaced solely by ComEd,
as the direct or indirect holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed by a
majority of the Regular Trustees, provided that if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the Trust
Securities as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least 66 2/3% in liquidation amount of the Trust Securities
affected thereby, provided that a reduction of the principal amount or the
distribution rate, or a change in the payment dates or maturity of the
Preferred Securities, shall not be permitted without the consent of each holder
of Preferred Securities. In the event any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of 66 2/3% in liquidation amount of such
class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed to be an "investment
company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other body, except as described below. The Trust
may, with the consent of a majority of the Regular Trustees and without the
consent of the holders of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (x) expressly assumes
all of the obligations of the Trust with respect to the Trust Securities or (y)
substitutes for the Trust Securities other securities having substantially the
same terms as the Trust Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Trust Securities rank in priority
with respect to distributions and payments upon liquidation, redemption,
maturity and otherwise, (ii) ComEd expressly acknowledges a trustee of such
successor entity which possesses the same powers and duties as the Property
Trustee as the holder of the Subordinated Notes, (iii) the Preferred Securities
or any Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (vi) such
successor entity
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has a purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, ComEd has received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(A) such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
and (B) following such merger, consolidation, amalgamation or replacement,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) ComEd guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Preferred Securities Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
liquidation amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified for United States federal income tax purposes
as other than a grantor trust and each holder of Trust Securities not to be
treated as owning an undivided beneficial interest in the Subordinated Notes.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of Cede & Co. (DTC's nominee). One
or more fully registered global Preferred Securities certificates will be
issued, representing in the aggregate the total number of Preferred Securities,
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Preferred Security.
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 Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, 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 Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the Preferred
Securities is discontinued.
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To facilitate subsequent transfers, all the Preferred Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities 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 Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct 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.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount of
the interest of each Direct Participant in the Preferred Securities to be
redeemed; provided that if, as a result of such pro rata redemption, Direct
Participants would hold fractional interests in the Preferred Securities, DTC
will adjust the amount of the interest of each Direct Participant to be
redeemed to avoid such fractional interests.
Although voting with respect to the Preferred Securities is limited, in those
cases where a vote is required neither DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as in the case with securities
held for the account of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the
Trust, any trustee or ComEd, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions to
DTC is the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (with the consent
of ComEd) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that ComEd and the Trust believe to be reliable,
but ComEd and the Trust take no responsibility for the accuracy thereof.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of all such defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby; but the foregoing shall not relieve the Property
Trustee, upon the occurrence of a Declaration Event of Default, from exercising
the rights and powers vested in it by the Declaration. The Property Trustee
also serves as trustee under the Preferred Securities Guarantee.
REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers of
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Regular
Trustees may require) in respect of any tax or other government charges which
may be imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in such
a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized for United States
federal income tax purposes as other than a grantor Trust. ComEd is authorized
and directed to conduct its affairs so that the Subordinated Notes will be
treated as indebtedness of ComEd for United States federal income tax purposes.
In this connection, the Regular Trustees and ComEd are authorized to take any
action, not inconsistent with applicable law, the Declaration or the restated
articles of incorporation of ComEd, that each of the Regular Trustees and ComEd
determines in their discretion to be necessary or desirable for such purposes,
as long as such action does not materially and adversely affect the interests
of the holders of the Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by ComEd for the
benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. Wilmington Trust Company will act as the Preferred
Guarantee Trustee. The terms of the Preferred Securities Guarantee will be
those set forth therein and those made part thereof by the Trust Indenture Act.
The following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Preferred Securities Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part and the Trust
Indenture Act. The Preferred Securities Guarantee will be held by the Preferred
Guarantee Trustee for the benefit of the holders of the Preferred Securities.
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GENERAL
Pursuant to the Preferred Securities Guarantee, ComEd will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full to the
holders of the Preferred Securities the Guarantee Payments (as defined herein)
(without duplication of amounts theretofore paid by the Trust), to the extent
not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The following payments or
distributions with respect to the Preferred Securities to the extent not paid
or made by the Trust (the "Guarantee Payments") will be subject to the
Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions that are required to be paid on the Preferred Securities,
to the extent the Trust has funds available therefor, (ii) the Redemption
Price, including all accrued and unpaid distributions to the date of the
redemption, to the extent the Trust has funds available therefor, with respect
to any Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Notes to the
holders of Preferred Securities in exchange for Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on the Preferred Securities to the date of payment and (b)
the amount of assets of the Trust remaining available for distribution to
holders of Preferred Securities in liquidation of the Trust. ComEd's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by ComEd to the holders of Preferred Securities or by causing the Trust
to pay such amounts to such holders.
The Preferred Securities Guarantee will be a full and unconditional guarantee
of the Guarantee Payments with respect to the Preferred Securities from the
time of issuance of the Preferred Securities, but will not apply to the payment
of distributions and other payments on the Preferred Securities when the
Property Trustee does not have sufficient funds in the Property Account to make
such distributions or other payments. If ComEd does not make interest payments
on the Subordinated Notes held by the Property Trustee, the Trust will not make
distributions on the Preferred Securities issued by the Trust and will not have
funds available therefor. See "Description of the Subordinated Notes--Certain
Covenants."
ComEd has also agreed separately to irrevocably and unconditionally guarantee
the obligations of the Trust with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Preferred Securities
Guarantee, except that upon the occurrence and during the continuation of an
Indenture Event of Default, holders of Preferred Securities shall have priority
over holders of Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF COMED
In the Preferred Securities Guarantee, ComEd will covenant that, so long as
the Preferred Securities remain outstanding, if there shall have occurred and
is continuing any event that would constitute an event of default under the
Preferred Securities Guarantee or the Declaration, then (a) ComEd shall not
declare or pay any dividend on, or make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock, and (b) ComEd shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by ComEd which rank pari passu with or
junior to the Subordinated Notes.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount of
the outstanding Preferred Securities. The manner of obtaining any such approval
of holders of the Preferred Securities is set forth under "Description of the
Preferred Securities--Voting Rights." All guarantees and agreements contained
in the Preferred Securities Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of ComEd and shall inure to the benefit
of the Preferred Guarantee Trustee and the holders of the Preferred Securities
then outstanding.
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TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further force
and effect as to the Preferred Securities upon full payment of the Redemption
Price of all Preferred Securities, or upon distribution of the Subordinated
Notes to the holders of the Preferred Securities, and will terminate completely
upon full payment of the amounts payable upon liquidation of the Trust. See
"Description of the Subordinated Notes-- Indenture Events of Default" for a
description of the events of default and enforcement rights of the holders of
Subordinated Notes. The Preferred Securities Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Securities must repay to the Trust or ComEd, or their successors,
any sums paid to them under such Preferred Securities or the Preferred
Securities Guarantee.
EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur upon
the failure of ComEd to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of the Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under the
Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against ComEd to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
ComEd's obligations under the Preferred Securities Guarantee to make the
Guarantee Payments will constitute an unsecured obligation of ComEd and will
rank (i) subordinate and junior in right of payment to all other liabilities of
ComEd, including the Subordinated Notes, except those liabilities of ComEd made
pari passu or subordinate by their terms, (ii) pari passu with the most senior
preferred stock now or hereafter issued by ComEd and with any guarantee now or
hereafter entered into by ComEd in respect of any preferred stock of any
affiliate of ComEd, and (iii) senior to ComEd's common stock. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of
the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment and
not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity). The Preferred Securities Guarantee will be deposited with the
Preferred Guarantee Trustee to be held for the benefit of the holders of the
Preferred Securities. Except as otherwise noted herein, the Preferred Guarantee
Trustee has the right to enforce the Preferred Securities Guarantee on behalf
of the holders of the Preferred Securities. The Preferred Securities Guarantee
will not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Trust).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the Preferred Securities Guarantee and after the curing of all such
defaults that may have occurred, undertakes to perform only such duties as are
specifically set forth in the Preferred Securities Guarantee and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provisions,
the Preferred Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Preferred Securities Guarantee at the request of any
holder of Preferred
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Securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred thereby; but the foregoing shall not
relieve the Preferred Guarantee Trustee, upon the occurrence of an event of
default under the Preferred Securities Guarantee, from exercising the rights
and powers vested in it by the Preferred Securities Guarantee. The Preferred
Guarantee Trustee also serves as Property Trustee.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED NOTES
Set forth below is a description of the terms of the Subordinated Notes. The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture (the "Base
Indenture"), dated as of September 1, 1995, between ComEd and Wilmington Trust
Company, as Trustee (the "Debt Trustee"), as supplemented by a First
Supplemental Indenture, dated as of September 19, 1995 (the Base Indenture, as
so supplemented, is hereinafter referred to as the "Indenture"), the forms of
which are filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The terms of the Subordinated Notes will include those
stated in the Indenture and those made a part of the Indenture by reference to
the Trust Indenture Act. Certain capitalized terms used herein are defined in
the Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Subordinated Notes may be distributed to the
holders of Trust Securities in liquidation of the Trust. See "Description of
the Preferred Securities--Special Event Redemption or Distribution."
If the Subordinated Notes are distributed to the holders of the Trust
Securities, ComEd will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange as the
Preferred Securities are then listed.
GENERAL
The Subordinated Notes will be issued as unsecured subordinated debt
securities under the Indenture. The Subordinated Notes will be limited in
aggregate principal amount to approximately $206.2 million, such amount being
the sum of the aggregate stated liquidation amount of the Preferred Securities
and the capital contributed by ComEd in exchange for the Common Securities (the
"Payment").
The Subordinated Notes are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Notes will mature and become due
and payable, together with any accrued and unpaid interest thereon, including
Additional Interest (as defined herein), if any, on September 30, 2035.
If Subordinated Notes are distributed to holders of the Preferred Securities
in liquidation of such holders' interests in the Trust, such Subordinated Notes
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Subordinated Notes may be issued
in certificated form in exchange for a Global Security. See "--Book Entry and
Settlement." In the event Subordinated Notes are issued in certificated form,
such Subordinated Notes will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Subordinated Notes issued as a Global Security will be made to the
depositary for the Subordinated Notes. In the event Subordinated Notes are
issued in certificated form, principal and interest will be payable, the
transfer of the Subordinated Notes will be registrable and Subordinated Notes
will be exchangeable for Subordinated Notes of other denominations of a like
aggregate principal amount at the corporate trust office of the Debt Trustee in
Wilmington, Delaware; provided, that payment of interest may be made at the
option of ComEd by check mailed to the address of the persons entitled thereto.
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The Indenture does not contain provisions that afford holders of the
Subordinated Notes protection in the event of a highly leveraged transaction
involving ComEd.
SUBORDINATION
The Indenture provides that the Subordinated Notes are subordinated and
junior in right of payment to all Senior Indebtedness of ComEd, whether now
existing or hereafter incurred. No payment of principal of (including
redemption payments, if any), premium, if any, or interest on, the Subordinated
Notes may be made if (a) any Senior Indebtedness of ComEd is not paid when due
and any applicable grace period with respect to such default has ended with
such default not being cured or waived or ceasing to exist, or (b) the maturity
of any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of ComEd to creditors upon any dissolution, winding-up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all principal of,
premium, if any, and interest due or to become due on, all Senior Indebtedness
must be paid in full before the holders of the Subordinated Notes are entitled
to receive or retain any payment. The rights of the holders of the Subordinated
Notes will be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to such Senior Indebtedness until
all amounts owing on the Subordinated Notes are paid in full.
The term "Senior Indebtedness" means (i) any payment in respect of (a)
indebtedness of ComEd for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments issued by
ComEd including, without limitation, indebtedness evidenced by securities
issued pursuant to its Mortgage dated July 1, 1923, as supplemented, and
indentures with various trustees (other than the Indenture); (ii) all capital
lease obligations of ComEd; (iii) all obligations of ComEd issued or assumed as
the deferred purchase price of property, all conditional sale obligations of
ComEd and all obligations of ComEd under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of ComEd for the reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit transaction;
(v) all obligations of the type referred to in clauses (i) through (iv) above
of other persons for the payment of which ComEd is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of ComEd (whether or not such obligation is assumed by
ComEd), except for (1) any such indebtedness that is by its terms subordinated
to or pari passu with the Subordinated Notes, as the case may be, including all
other debt securities and guarantees in respect of those debt securities,
issued to any other trusts, partnerships or other entities affiliated with
ComEd which act as a financing vehicle of ComEd in connection with the issuance
of preferred securities by such entity or other securities which rank pari
passu with, or junior to, the Preferred Securities, and (2) any indebtedness
between or among ComEd and its affiliates. Such Senior Indebtedness shall
continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by ComEd. As of July 31, 1995, Senior Indebtedness of ComEd
aggregated approximately $8,234 million.
CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an Indenture
Event of Default or (ii) ComEd shall be in default with respect to its payment
of any obligations under the Preferred Securities Guarantee or the Common
Securities Guarantee, then (a) ComEd shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) ComEd shall
not make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by ComEd which rank pari passu
with or junior to the Subordinated Notes and (c) ComEd shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantee).
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If ComEd shall have given notice of its election of an Extension Period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) ComEd shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock, (b) ComEd shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by ComEd which rank
pari passu with or junior to the Subordinated Notes and (c) ComEd shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Preferred Securities Guarantee).
For so long as the Trust Securities remain outstanding, ComEd will covenant
(i) to directly or indirectly maintain 100% direct or indirect ownership of the
Common Securities of the Trust; provided, however, that any permitted successor
of ComEd under the Indenture may succeed to ComEd's ownership of such Common
Securities, (ii) not to cause, as sponsor of the Trust, or to permit, as holder
of the Common Securities, the dissolution, winding-up or termination of the
Trust, except in connection with a distribution of the Subordinated Notes as
provided in the Declaration and in connection with certain mergers,
consolidations or amalgamations and (iii) to use its reasonable efforts to
cause the Trust (a) to remain a statutory business trust, except in connection
with the distribution of Subordinated Notes to the holders of Trust Securities
in liquidation of the Trust, the redemption of all of the Trust Securities of
the Trust, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration, and (b) to otherwise continue to be classified as
a grantor trust for United States federal income purposes.
OPTIONAL REDEMPTION
ComEd shall have the right to redeem the Subordinated Notes, in whole or in
part, from time to time, on or after September 30, 2000, or at any time in
certain circumstances upon the occurrence of a Tax Event as described under
"Description of the Preferred Securities--Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days' notice, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Subordinated Notes would result in the
delisting of the Preferred Securities, ComEd may only redeem the Subordinated
Notes in whole.
INTEREST
Each Subordinated Note shall bear interest at the rate of 8.48% per annum
from the original date of issuance, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year (each, an "Interest Payment
Date"), commencing September 30, 1995, to the person in whose name such
Subordinated Note is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Subordinated Notes shall not continue to remain in book-entry only
form, ComEd shall have the right to select record dates which shall be not less
than fifteen days prior to each Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis
of the actual number of days elapsed in such 90-day quarter. In the event that
any date on which interest is payable on the Subordinated Notes is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
ComEd shall have the right at any time, and from time to time, during the
term of the Subordinated Notes to defer payments of interest by extending the
interest payment period for a period not exceeding 20
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consecutive quarters, at the end of which Extension Period, ComEd shall pay all
interest then accrued and unpaid (including any Additional Interest, together
with interest thereon at the rate specified for the Subordinated Notes to the
extent permitted by applicable law); provided, that, during any such Extension
Period, (a) ComEd shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock, (b) ComEd shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by ComEd which rank
pari passu with or junior to the Subordinated Notes and (c) ComEd shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Preferred Securities Guarantee). Prior to the termination of any such
Extension Period, ComEd may further defer payments of interest by extending the
interest payment period, provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity of the Subordinated Notes. Upon the
termination of any Extension Period and the payment of all amounts then due,
ComEd may select a new Extension Period, as if no Extension Period had
previously been declared, subject to the above requirements. No interest during
an Extension Period, except at the end thereof, shall be due and payable. ComEd
has no present intention of exercising its rights to defer payments of interest
by extending the interest payment period on the Subordinated Notes. If the
Property Trustee shall be the sole holder of the Subordinated Notes, ComEd
shall give the Regular Trustees and the Property Trustee notice of its
selection of such Extension Period one Business Day prior to the earlier of (i)
the next succeeding date on which distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to holders
of the Preferred Securities of the record date or the date such distribution is
payable, but in any event not less than one Business Day prior to such record
date. The Regular Trustees shall give notice of ComEd's selection of such
Extension Period to the holders of the Preferred Securities. If the Property
Trustee shall not be the sole holder of the Subordinated Notes, ComEd shall
give the holders of the Subordinated Notes notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the Interest
Payment Date or (ii) the date ComEd is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization or to holders
of the Subordinated Notes of the record or payment date of such related
interest payment, but in any event at least two Business Days before such
record date.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, ComEd will pay as additional interest ("Additional Interest")
such additional amounts as shall be required so that the net amounts received
and retained by the Trust after paying any such taxes, duties, assessments or
other governmental charges will be equal to the amounts the Trust would have
received had no such taxes, duties, assessments or other governmental charges
been imposed.
INDENTURE EVENTS OF DEFAULT
In case any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Notes, will have the right
to declare the principal of and the interest on the Subordinated Notes
(including any Additional Interest, if any) and any other amounts payable under
the Indenture to be forthwith due and payable and to enforce its other rights
as a creditor with respect to the Subordinated Notes.
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Subordinated Notes:
(a) failure for 30 days to pay interest on the Subordinated Notes,
including any Additional Interest in respect thereof, when due; provided,
however, that a valid extension of the interest payment period by ComEd
shall not constitute a default in the payment of interest for this purpose;
or
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(b) failure to pay principal or premium, if any, on the Subordinated
Notes when due whether at maturity, upon earlier redemption or otherwise;
or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series of subordinated debt securities)
contained in the Indenture for 90 days after written notice to ComEd from
the Debt Trustee or the holders of at least 25% in principal amount of the
outstanding Subordinated Notes; or
(d) certain events of bankruptcy, insolvency or reorganization of ComEd;
or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the Trust, except in connection with the distribution of Subordinated
Notes to the holders of Preferred Securities in liquidation of the Trust,
the redemption of all outstanding Trust Securities of the Trust and certain
mergers, consolidations or amalgamations permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debt Trustee. The
Debt Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Notes may declare the principal due and
payable immediately on default, but the holders of a majority in aggregate
outstanding principal amount may annul such declaration and waive the default
if the default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration and
any applicable premium has been deposited with the Debt Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Notes affected thereby may, on behalf of the holders of all the
Subordinated Notes, waive any past default, except (i) a default in the payment
of principal, premium, if any, or interest (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any applicable premium has been
deposited with the Debt Trustee) or (ii) a default in the covenant of ComEd not
to declare or pay dividends on, or make distributions with respect to, or
redeem, purchase or acquire any of its capital stock during an Extension
Period. An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Preferred Securities in certain circumstances have the
right to direct the Property Trustee to exercise its rights as the holder of
the Subordinated Notes. See "Description of the Preferred Securities--
Declaration Events of Default" and "--Voting Rights."
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
voluntary or involuntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Subordinated Notes will be
issued in the form of one or more global certificates (each, a "Global
Security") registered in the name of the depositary or its nominee. Except
under the limited circumstances described below, Subordinated Notes represented
by the Global Security will not be exchangeable for, and will not otherwise be
issuable as, Subordinated Notes in definitive form. The Global Securities
described above may not be transferred except by the depositary to a nominee of
the depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Notes in definitive form and will not be considered the holders (as defined in
the Indenture) thereof for any purpose under the Indenture, and no Global
Security representing Subordinated Notes shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the depositary or its nominee or to a successor depositary or its
nominee. Accordingly, each beneficial owner must rely on the procedures of the
depositary and, if such person is not a
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Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture.
If Subordinated Notes are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Trust, DTC will act as securities
depositary for the Subordinated Notes. For a description of DTC and the
specific terms of the depository arrangements, see "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
The description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Preferred Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. ComEd may appoint a
successor to DTC or any successor depositary in the event DTC or such successor
depositary is unable or unwilling to continue as depositary.
None of ComEd, the Trust, the Debt Trustee, any paying agent and any other
agent of ComEd or the Debt Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a Global Security for such Subordinated Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
A Global Security shall be exchangeable for Subordinated Notes registered in
the names of persons other than the depositary or its nominee only if (i) the
depositary notifies ComEd that it is unwilling or unable to continue as a
depositary for such Global Security and no successor depositary shall have been
appointed, or if at any time the depositary ceases to be registered or in good
standing under the Exchange Act (or other applicable statute or regulation) at
a time when the depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed by ComEd
within 90 days after ComEd receives such notice or becomes aware of such
condition, (ii) ComEd in its sole discretion determines that such Global
Security shall be so exchangeable or (iii) there shall have occurred an Event
of Default with respect to such Subordinated Notes. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Subordinated Notes registered in such names as the depositary shall direct. It
is expected that such instructions will be based upon directions received by
the depositary from its Participants with respect to ownership of beneficial
interests in such Global Security.
In the event the Subordinated Notes are not represented by one or more Global
Securities, certificates evidencing Subordinated Notes may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed) or exchange, at the office of the Note Registrar or at the office of
any transfer agent designated by ComEd for such purpose with respect to the
Subordinated Notes, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Note Registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of
the person making the request. ComEd has appointed the Debt Trustee as Note
Registrar with respect to the Subordinated Notes. ComEd may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that ComEd will be required
to maintain a transfer agent at the place of payment. ComEd may at any time
designate additional transfer agents with respect to the Subordinated Notes.
In the event of any redemption in part, ComEd shall not be required to (i)
issue, exchange or register the transfer of Subordinated Notes during a period
beginning at the opening of business 15 days before the date of the mailing of
a notice of redemption of less than all of the Subordinated Notes and ending at
the close of business on the date of such mailing and (ii) register the
transfer of or exchange any Subordinated Notes so selected for redemption, in
whole or in part, except the unredeemed portion of any Subordinated Notes being
redeemed in part.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium (if any) on the Subordinated Notes will
be made only against surrender to the Paying Agent of the Subordinated Notes.
Principal of and any premium and interest, if any,
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on Subordinated Notes will be payable, subject to any applicable laws and
regulations, at the office of such Paying Agent or Paying Agents as ComEd may
designate from time to time, except that at the option of ComEd payment of any
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Note Register with respect to the
Subordinated Notes. Payment of interest on the Subordinated Notes on any
Interest Payment Date will be made to the person in whose name the Subordinated
Note (or predecessor security) is registered at the close of business on the
Regular Record Date for such interest payment.
The Debt Trustee will act as Paying Agent with respect to the Subordinated
Notes. ComEd may at any time designate additional Paying Agents or rescind the
designation of any Paying Agents or approve a change in the office through
which any Paying Agent acts, except that ComEd will be required to maintain a
Paying Agent at the place of payment.
All moneys paid by ComEd to a Paying Agent for the payment of the principal
of or premium or interest, if any, on the Subordinated Notes which remain
unclaimed at the end of two years after such principal, premium, if any, or
interest shall have become due and payable will be repaid to ComEd and the
holder of such Subordinated Notes will thereafter look only to ComEd for
payment thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting ComEd and the Debt Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Subordinated Notes, to modify the Indenture or any supplemental indenture
affecting that series or the rights of the holders of the Subordinated Notes;
provided that no such modification may, without the consent of the holder of
each outstanding Subordinated Note affected thereby, (i) extend the fixed
maturity of the Subordinated Notes, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, without the consent of the
holder of the Subordinated Notes so affected or (ii) reduce the percentage of
Subordinated Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of each Subordinated
Note then outstanding and affected thereby.
In addition, ComEd and the Debt Trustee may execute, without the consent of
holders of the Subordinated Notes, any supplemental indenture for certain other
usual purposes including the creation of any new series of subordinated debt
securities.
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the Trust's or
ComEd's ability to merge or consolidate with or into any other corporation,
sell or convey all or substantially all of its assets to any person, firm or
corporation or otherwise engage in restructuring transactions.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, ComEd will be discharged from any and all
obligations in respect of the Subordinated Notes (except in each case for
certain obligations with respect to denominations and provisions for payment of
the Subordinated Notes and obligations to register the transfer or exchange of
Subordinated Notes, replace stolen, lost or mutilated Subordinated Notes,
maintain paying agencies and hold moneys for payment in trust) if ComEd (i)
deposits with the Debt Trustee, in trust, moneys or governmental obligations,
in an amount sufficient to pay all the principal of, and interest on, the
Subordinated Notes on the dates such payments are due in accordance with the
terms of such Subordinated Notes and (ii) delivers to the Debt Trustee an
opinion of counsel to the effect that, based upon ComEd's receipt from, or the
publication by, the Internal Revenue Service of a ruling or a change in law,
the holders of the Subordinated Notes will not recognize income, gain or loss
for United States federal income tax purposes as a result of the deposit,
31
<PAGE>
defeasance and discharge and will be subject to United States federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance or discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Notes will be governed by, and construed
in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties as
are specifically set forth in the Indenture and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provision, the Debt Trustee is under
no obligation to exercise any of the powers vested in it by the Indenture at
the request of any holder of Subordinated Notes, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby; but the foregoing shall not relieve the Debt
Trustee, upon the occurrence of an Indenture Event of Default, from exercising
the rights and powers vested in it by the Indenture. The Debt Trustee is not
required to expand or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debt Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
ComEd will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of ComEd; provided that, in the event of any such assignment, ComEd will remain
liable for all of their obligations. Subject to the foregoing, the Indenture
will be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The Indenture provides that it may not
otherwise be assigned by the parties thereto.
The Indenture will provide that ComEd will pay all fees and expenses related
to (i) the offering of the Trust Securities and the Subordinated Notes, (ii)
the organization, maintenance and dissolution of the Trust, (iii) the retention
of the ComEd Trustees and (iv) the enforcement by the Property Trustee of the
rights of holders of Preferred Securities.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED NOTES
AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the sole purposes of the Trust are to (i)
issue Trust Securities, (ii) invest the proceeds thereof in the Subordinated
Notes and (iii) engage in only those other activities necessary or incidental
thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Notes, such payments will be sufficient to cover distributions and
payments due on the Trust Securities primarily because (i) the aggregate
principal amount of Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the Trust Securities; (ii) the interest
rate and interest and other payment dates on the Subordinated Notes will match
the distribution rate and distribution and other payment dates for the Trust
Securities; (iii) ComEd shall pay for all costs and expenses of the Trust; and
(iv) the Declaration provides that the ComEd Trustees shall not cause or permit
the Trust to, among other things, engage in any activity that is not consistent
with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by ComEd as and to the extent
32
<PAGE>
set forth under "Description of the Preferred Securities Guarantee". If ComEd
does not make interest payments on the Subordinated Notes purchased by the
Trust, it is expected that the Trust will not have sufficient funds to pay
distributions on the Preferred Securities. The Preferred Securities Guarantee
is a full and unconditional guarantee from the time of its issuance, but does
not apply to any payment of distributions unless and until the Trust has
sufficient funds for the payment of such distributions.
If ComEd fails to make interest or other payments on the Subordinated Notes
when due (taking into account any Extension Period), the Declaration provides a
mechanism whereby the holders of the Preferred Securities, using the procedures
described in "Description of the Preferred Securities--Voting Rights," may
direct the Property Trustee to enforce its rights under the Subordinated Notes,
including proceeding directly against ComEd to enforce the Subordinated Notes.
If the Property Trustee fails to enforce its rights under the Subordinated
Notes, a holder of Preferred Securities may institute a legal proceeding
directly against ComEd to enforce the Property Trustee's rights under the
Subordinated Notes without first instituting any legal proceeding against the
Property Trustee or any other person or entity, including the Trust.
If ComEd fails to make payments under the Preferred Securities Guarantee, the
Preferred Securities Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Preferred Guarantee Trustee to enforce its
rights thereunder. If the Preferred Guarantee Trustee fails to enforce the
Preferred Securities Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against ComEd to enforce the Preferred
Guarantee Trustee's rights under the Preferred Securities Guarantee, without
first instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee or any other person or entity.
The above mechanisms and obligations, taken together, are equivalent to a
full and unconditional guarantee by ComEd of payments due on the Preferred
Securities. See "Description of the Preferred Securities Guarantee--General."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities to a holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States or any state thereof or the District of Columbia
or an estate or trust the income of which is subject to United States federal
income taxation regardless of source (a "Holder"). This summary does not
address the United States federal income tax consequences to persons other than
Holders.
This summary is based on the United States federal income tax laws,
regulations and rulings and decisions now in effect, all of which are subject
to change, possibly on a retroactive basis. This summary does not address the
tax consequences applicable to investors that may be subject to special tax
rules such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors or persons that will hold the Preferred Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a Holder. Further,
it does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to a Holder.
CLASSIFICATION OF COMED FINANCING I
Sidley & Austin, counsel to ComEd and special counsel to the Trust, is of the
opinion that, under current law and assuming full compliance with the terms of
the Indenture and the Declaration (and certain other
33
<PAGE>
documents), the Trust will be classified as a "grantor trust" for federal
income tax purposes and will not be classified as an association taxable as a
corporation or a partnership. Each Holder will be treated as owning an
undivided beneficial interest in the Subordinated Notes. Accordingly, each
Holder will be required to include in its gross income the original issue
discount ("OID") accrued with respect to its allocable share of Subordinated
Notes. Investors should be aware that the opinion of Sidley & Austin does not
address any other issue and is not binding on the Internal Revenue Service (the
"Service") or the courts.
ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT
Because of the option that ComEd has, under the terms of the Subordinated
Notes, to defer payments of interest by extending interest payment periods for
up to 20 quarters, the Subordinated Notes will be treated as issued with OID in
an amount equal to all of the stated interest payments on the Subordinated
Notes. Holders must include the OID attributable to the Subordinated Notes in
income on an economic accrual basis before the receipt of cash attributable to
the interest, regardless of their method of tax accounting. The amount of OID
that accrues in any month will approximately equal the amount of the interest
that accrues in that month at the stated interest rate. In the event that the
interest payment period is extended, Holders will continue to accrue OID
approximately equal to the amount of the interest payment due at the end of the
extended interest payment period on an economic accrual basis over the length
of the extended interest period. Corporate Holders will not be entitled to a
dividends-received deduction with respect to any income earned with respect to
the Preferred Securities.
To the extent a Holder acquires its Preferred Securities at a price that is
greater or less than the adjusted issue price of such Holder's share of
Subordinated Notes (which generally should approximate par plus accrued but
unpaid interest), the Holder will be deemed to have acquired its interest in
the Preferred Securities with acquisition premium or with market discount, as
the case may be. A Holder acquiring Preferred Securities at a premium will be
permitted to reduce the amount of OID required to be included in income to
reflect the acquisition premium. A Holder acquiring Preferred Securities at a
market discount will also include the amount of such discount in income in
accordance with the market discount rules described below.
A Holder acquiring Preferred Securities at a market discount generally will
be required to recognize ordinary income to the extent of accrued market
discount upon the retirement of the underlying Subordinated Notes or, to the
extent of any gain, upon the disposition of the Preferred Securities. Such
market discount would accrue ratably, or, at the election of the Holder, under
a constant yield method over the remaining term of the Subordinated Notes. A
Holder will also be required to defer the deduction of a portion of the
interest paid or accrued on indebtedness incurred to purchase or carry
Preferred Securities acquired with market discount. In lieu of the foregoing, a
Holder may elect to include market discount in income currently as it accrues
on all market discount instruments acquired by such Holder in the taxable year
of the election or thereafter, in which the interest deferral rule will not
apply. A Holder may elect, in lieu of applying the market discount or premium
rules described above, to account for all income under the Preferred Securities
as if it were OID.
RECEIPT OF SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution,"
Subordinated Notes may be distributed to Holders in exchange for the Preferred
Securities and in liquidation of the Trust. Such a distribution would be
treated as a non-taxable event to each Holder and each Holder would receive an
aggregate tax basis in the Subordinated Notes equal to such Holder's aggregate
tax basis in the Preferred Securities. A Holder's holding period in the
Subordinated Notes so received in liquidation of the Trust would include the
period for which the Preferred Securities were held by such Holder.
34
<PAGE>
SALE OF PREFERRED SECURITIES
A Holder that sells Preferred Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale. A Holder's adjusted tax basis in the Preferred
Securities generally will be its initial purchase price increased by original
issue discount previously includible in such Holder's gross income to the date
of disposition (and the accrual of market discount, if any) and decreased by
payments received on the Preferred Securities. Subject to the market discount
rules described above, any such gain or loss generally will be capital gain or
loss.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Notes. A Holder disposing of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest through the date of disposition in income as
ordinary income (i.e. OID), and to add such amount to its adjusted tax basis in
its Preferred Securities. To the extent the selling price is less than the
Holder's adjusted tax basis (which will include, in the form of OID, all
accrued but unpaid interest), a Holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
FOREIGN INVESTORS
Subject to the discussion of backup withholding below, interest (including
OID) with respect to the Preferred Securities paid to a nonresident alien
individual, foreign corporation, foreign partnership or foreign estate or trust
will be exempt from U.S. withholding tax, provided that the holder complies
with applicable certification requirements (and does not actually or
constructively own ten percent or more of the voting stock of ComEd and is not
a controlled foreign corporation related to ComEd or its affiliates).
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to Holders on Form 1099, which forms should be
mailed to Holders of Preferred Securities by January 31 following each calendar
year.
The Trust will be obligated to report annually to Cede & Co., as Holder of
record of the Preferred Securities, the OID with respect to the Preferred
Securities that accrued during that year. The Trust currently intends to report
such information on Form 1099 prior to January 31 following each calendar year
even though the Trust is not legally required to report to record Holders until
April 15 following each calendar year. The Underwriters have indicated to the
Trust that, to the extent that they hold Preferred Securities as nominees for
beneficial Holders, they currently expect to report to such beneficial Holders
on Forms 1099 by January 31 following each calendar year. Under current law,
Holders of Preferred Securities who hold as nominees for beneficial Holders
will not have any obligation to report information regarding the beneficial
Holders to the Trust. The Trust, moreover, will not have any obligation to
report to beneficial Holders who are not also record holders. Thus, beneficial
Holders of Preferred Securities who hold their Preferred Securities through the
Underwriters will receive Forms 1099 reflecting the income on their Preferred
Securities from such nominee Holders rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the Holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the Holder's federal income tax, provided that required
information is provided to the Service.
35
<PAGE>
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Dean Witter
Reynolds Inc., A.G. Edwards & Sons, Inc., Furman Selz Incorporated, PaineWebber
Incorporated, Salomon Brothers Inc and Smith Barney Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase the
number of Preferred Securities set forth opposite its name below. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Preferred
Securities offered hereby if any of the Preferred Securities are purchased. In
the event of default by an Underwriter, the Underwriting Agreement provides
that, in certain circumstances, the purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Merrill Lynch, Pierce,
Fenner & Smith Incorporated........... 740,000
Dean Witter Reynolds Inc....................... 740,000
A.G. Edwards & Sons, Inc....................... 740,000
Furman Selz Incorporated....................... 740,000
PaineWebber Incorporated....................... 740,000
Salomon Brothers Inc........................... 740,000
Smith Barney Inc............................... 740,000
Robert W. Baird & Co. Incorporated............. 100,000
Bear, Stearns & Co. Inc........................ 100,000
Alex. Brown & Sons Incorporated................ 100,000
Dillon, Read & Co. Inc......................... 100,000
Donaldson, Lufkin & Jenrette Securities
Corporation................................... 100,000
Everen Securities, Inc......................... 100,000
Oppenheimer & Co., Inc......................... 100,000
Piper Jaffray Inc.............................. 100,000
Prudential Securities Incorporated............. 100,000
Raymond James & Associates, Inc................ 100,000
Schroder Wertheim & Co. Incorporated........... 100,000
Advest, Inc.................................... 40,000
William Blair & Company........................ 40,000
J.C. Bradford & Co............................. 40,000
JW Charles Securities, Inc..................... 40,000
The Chicago Corporation........................ 40,000
Commerzbank Capital Markets Corporation........ 40,000
Cowen & Company................................ 40,000
Craigie Incorporated........................... 40,000
Crowell, Weedon & Co........................... 40,000
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Dain Bosworth Incorporated.......................... 40,000
Davenport & Co. of Virginia, Inc.................... 40,000
Doft & Co., Inc..................................... 40,000
Dougherty, Dawkins, Strand & Bigelow Inc............ 40,000
Fahnestock & Co. Inc................................ 40,000
First Albany Corporation............................ 40,000
First of Michigan Corporation....................... 40,000
Gardner Rich & Company.............................. 40,000
Gruntal & Co., Incorporated......................... 40,000
Interstate/Johnson Lane Corporation................. 40,000
Janney Montgomery Scott Inc......................... 40,000
Josephthal Lyon & Ross Incorporated................. 40,000
Kennedy, Cabot & Co................................. 40,000
Legg Mason Wood Walker, Incorporated................ 40,000
McDonald & Company Securities, Inc.................. 40,000
McGinn, Smith & Co., Inc............................ 40,000
Mesirow Financial, Inc.............................. 40,000
Morgan Keegan & Company, Inc........................ 40,000
The Ohio Company.................................... 40,000
Olde Discount Corporation........................... 40,000
Principal Financial Securities, Inc................. 40,000
Pryor, McClendon, Counts & Co., Inc................. 40,000
Rauscher Pierce Refsnes, Inc........................ 40,000
The Robinson-Humphrey Company, Inc.................. 40,000
Rodman & Renshaw, Inc............................... 40,000
Roney & Co.......................................... 40,000
Muriel Siebert & Co., Inc........................... 40,000
Stifel, Nicolaus & Company, Incorporated............ 40,000
Sutro & Co. Incorporated............................ 40,000
Tucker Anthony Incorporated......................... 40,000
US Clearing Corp.................................... 40,000
Utendahl Capital Partners, L.P...................... 40,000
Wheat, First Securities, Inc........................ 40,000
Yamaichi International (America), Inc............... 40,000
---------
Total.......................................... 8,000,000
=========
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $.50 per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $.30 per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will be used to purchase the Subordinated Notes of ComEd, the Underwriting
Agreement provides that ComEd will agree to pay as compensation ("Underwriters'
Compensation") to the Underwriters for the Underwriters' arranging the
investment therein of such proceeds, an amount in New York Clearing House (next
day) funds of $.7875 per Preferred Security (or $6,300,000 in the aggregate)
for the accounts of the several Underwriters, provided that such compensation
for sales of 10,000 or more Preferred Securities to any single purchaser will
be $.50 per Preferred Security. Therefore, to the extent of such sales, the
actual amount of Underwriters' Compensation will be less than the aggregate
amount specified in the preceding sentence.
37
<PAGE>
During a period of 30 days from the date of the pricing of the Preferred
Securities, neither the Trust nor ComEd will, without the prior written consent
of the Representatives, directly or indirectly, sell, offer to sell, contract
to sell, grant any option for the sale of, or otherwise dispose of, any
Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or the Subordinated Notes or any debt
securities substantially similar to the Subordinated Notes or any equity
securities substantially similar to the Preferred Securities (except for any
series of subordinated debt securities and the Preferred Securities offered
hereby).
The Preferred Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance. Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a 30
day period after the initial delivery of the Preferred Securities. The
Representatives have advised the Trust that the Underwriters intend to make a
market in the Preferred Securities prior to the commencement of trading on the
New York Stock Exchange. The Underwriters will have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
ComEd and the Trust have agreed to indemnify the Underwriters against, or to
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, ComEd in the ordinary course of business.
It is expected that delivery of the Preferred Securities will be made against
payment therefor on or about the date specified in the last paragraph of the
cover page hereof, which is the fifth business day following the date hereof.
Under Rule 15c6-1 recently adopted by the Commission under the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the Preferred Securities on the date
hereof or the next succeeding business day will be required, by virtue of the
fact that the Preferred Securities initially will settle in T+5, to specify
alternate arrangements to prevent a failed settlement.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, special Delaware counsel to the Trust. The validity of the Subordinated
Notes, the Preferred Securities Guarantee and certain matters relating thereto
will be passed upon on behalf of ComEd by Sidley & Austin, Chicago, Illinois.
Certain legal matters will be passed upon on behalf of the Underwriters by
their counsel. Certain United States federal income taxation matters will be
passed upon for ComEd and the Trust by Sidley & Austin.
EXPERTS
The financial statements and schedules included or incorporated by reference
in the 1994 Form 10-K Report, the January 27, 1995 Form 8-K Report, the March
31, 1995 Form 10-Q Report and the June 30, 1995 Form 10-Q Report have been
audited by Arthur Andersen LLP, independent certified 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. Reference is made to said reports included or
incorporated by reference in the 1994 Form 10-K Report and the January 27, 1995
Form 8-K Report, each of which includes an explanatory paragraph with respect
to a change in the method of accounting for postretirement health care benefits
and income taxes, as discussed in Notes 13 and 14 to the financial statements,
respectively.
38
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Additional Interest......................................................... 28
Base Indenture.............................................................. 25
Beneficial Owner............................................................ 20
Business Day................................................................ 14
Change in 1940 Act Law...................................................... 15
ComEd....................................................................... 1
ComEd Trustees.............................................................. 8
Commission.................................................................. 3
Common Securities........................................................... 1
Common Securities Guarantee ................................................ 23
Company..................................................................... 1
DTC......................................................................... 20
Debt Trustee................................................................ 25
Declaration................................................................. 8
Declaration Event of Default................................................ 17
Direct Participants......................................................... 20
Dissolution Tax Opinion..................................................... 14
distributions............................................................... 2
Exchange Act................................................................ 3
Extension Period............................................................ 2
Fuel Matters Settlement..................................................... 10
Global Security............................................................. 29
Guarantee Payments.......................................................... 23
Holder...................................................................... 33
ICC......................................................................... 9
Indenture................................................................... 25
Indenture Event of Default.................................................. 17
Indirect Participants....................................................... 20
Interest Payment Date....................................................... 27
Investment Company Event.................................................... 15
January 27, 1995 Form 8-K Report............................................ 3
June 30, 1995 Form 10-Q Report.............................................. 3
Liquidation Distribution.................................................... 17
March 31, 1995 Form 10-Q Report............................................. 3
New York Stock Exchange..................................................... 1
1940 Act.................................................................... 15
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1994 Form 10-K Report....................................................... 3
No Recognition Opinion...................................................... 15
OID......................................................................... 34
Participants................................................................ 20
Payment..................................................................... 25
Preferred Guarantee Trustee................................................. 8
Preferred Securities........................................................ 1
Preferred Securities Guarantee.............................................. 2
Property Account............................................................ 8
Property Trustee............................................................ 8
Rate Matters Settlement..................................................... 10
Rate Order.................................................................. 11
Redemption Price............................................................ 2
Redemption Tax Opinion...................................................... 15
Registration Statement...................................................... 3
Regular Trustees............................................................ 8
Remand Order................................................................ 10
Representatives............................................................. 36
Securities Act.............................................................. 3
Senior Indebtedness......................................................... 26
Service..................................................................... 34
Special Event............................................................... 15
Sponsor..................................................................... 8
Successor Securities........................................................ 19
Subordinated Notes.......................................................... 1
Super-Majority.............................................................. 18
Supreme Court............................................................... 9
Tax Event................................................................... 14
Trust....................................................................... 1
Trust Act................................................................... 9
Trust Indenture Act......................................................... 8
Trust Securities............................................................ 1
Underwriters................................................................ 36
Underwriters' Compensation.................................................. 37
Underwriting Agreement...................................................... 36
</TABLE>
39
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COMMONWEALTH EDISON
COMPANY, COMED FINANCING I OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF COMMONWEALTH
EDISON COMPANY OR COMED FINANCING I, SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
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
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 5
Commonwealth Edison Company............................................... 8
ComEd Financing I......................................................... 8
Selected Financial Information............................................ 9
Capitalization of ComEd................................................... 12
Accounting Treatment...................................................... 12
Use of Proceeds........................................................... 12
Description of the Preferred Securities................................... 12
Description of the Preferred Securities Guarantee......................... 22
Description of the Subordinated Notes..................................... 25
Effect of Obligations Under the Subordinated Notes and the Preferred
Securities Guarantee..................................................... 32
Certain Federal Income Tax Consequences................................... 33
Underwriting.............................................................. 36
Legal Matters............................................................. 38
Experts................................................................... 38
Definitions............................................................... 39
</TABLE>
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8,000,000
PREFERRED SECURITIES
COMED FINANCING I
8.48% TRUST ORIGINATED
PREFERRED SECURITIES(SM) ("TOPrS(SM)")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
COMMONWEALTH EDISON COMPANY
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
FURMAN SELZ INCORPORATED
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
SEPTEMBER 19, 1995
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