SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-6047 General Public Utilities Corporation 13-5516989
(a Pennsylvania corporation)
100 Interpace Parkway
Parsippany, New Jersey 07054-1149
Telephone (201) 263-6500
1-3141 Jersey Central Power & Light Company 21-0485010
(a New Jersey corporation)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (201) 455-8200
1-446 Metropolitan Edison Company 23-0870160
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
1-3522 Pennsylvania Electric Company 25-0718085
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Registrant Title of each class which registered
General Public Utilities Common Stock, par value
Corporation $2.50 per share New York Stock Exchange
Jersey Central Power & Cumulative Preferred
Light Company Stock, $100 stated value
4% Series New York Stock Exchange
7.88% Series E New York Stock Exchange
First Mortgage Bonds:
7 1/8% Series due 2004 New York Stock Exchange
6 3/8% Series due 2003 New York Stock Exchange
7 1/2% Series due 2023 New York Stock Exchange
6 3/4% Series due 2025 New York Stock Exchange
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Name of each exchange
Registrant Title of each class which registered
Jersey Central Power & Monthly Income Preferred
Light Company (cont.) Securities, 8.56%
Series A, $25 stated
Value (a) New York Stock Exchange
Metropolitan Edison Cumulative Preferred
Company Stock, $100 stated value:
3.90% Series New York Stock Exchange
Monthly Income Preferred
Securities, 9% Series A,
$25 stated value (b) New York Stock Exchange
Pennsylvania Electric Cumulative Preferred
Company Stock, $100 stated value:
4.40% Series B Philadelphia Stock
Exchange
3.70% Series C Philadelphia Stock
Exchange
4.05% Series D Philadelphia Stock
Exchange
4.70% Series E Philadelphia Stock
Exchange
4.50% Series F Philadelphia Stock
Exchange
4.60% Series G Philadelphia Stock
Exchange
Monthly Income Preferred
Securities, 8 3/4%
Series A, $25 stated
value (c) New York Stock Exchange
(a) Issued by JCP&L Capital, L.P., and unconditionally guaranteed by Jersey
Central Power & Light Company.
(b) Issued by Met-Ed Capital, L.P., and unconditionally guaranteed by
Metropolitan Edison Company.
(c) Issued by Penelec Capital, L.P., and unconditionally guaranteed by
Pennsylvania Electric Company.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of each registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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The aggregate market value of the registrants' voting stock held by
non-affiliates as of February 1, 1996 was:
Registrant Amount
General Public Utilities Corporation $4,061,904,941
The number of shares outstanding of each of the registrants' classes of
voting stock as of February 1, 1996 was as follows:
Shares
Registrant Title Outstanding
General Public Utilities Corporation Common Stock, $2.50 par value 120,429,424
Jersey Central Power & Light Company Common Stock, $10 par value 15,371,270
Metropolitan Edison Company Common Stock, no par value 859,500
Pennsylvania Electric Company Common Stock, $20 par value 5,290,596
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1996 Annual Meeting of Stockholders of General Public
Utilities Corporation (Part III)
_____________________________________________________________________________
This combined Form 10-K is separately filed by General Public Utilities
Corporation, Jersey Central Power & Light Company, Metropolitan Edison Company
and Pennsylvania Electric Company. Information contained herein relating to
any individual registrant is filed by such registrant on its own behalf. Each
registrant makes no representation as to information relating to the other
registrants.
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TABLE OF CONTENTS
Page
Number
Part I
Item 1. Business 1
Item 2. Properties 41
Item 3. Legal Proceedings 44
Item 4. Submission of Matters to a Vote of Security Holders 44
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 45
Item 6. Selected Financial Data 45
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 46
Item 8. Financial Statements and Supplementary Data 46
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 46
Part III
Item 10. Directors and Executive Officers of the Registrant 47
Item 11. Executive Compensation 52
Item 12. Security Ownership of Certain Beneficial Owners
and Management 58
Item 13. Certain Relationships and Related Transactions 59
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 59
Signatures 71
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PART I
ITEM 1. BUSINESS.
General Public Utilities Corporation (GPU or the Corporation), a
Pennsylvania corporation, organized in 1946, is a holding company registered
under the Public Utility Holding Company Act of 1935 (1935 Act). GPU does not
operate any utility properties directly, but owns all of the outstanding
common stock of three electric utilities serving customers in New Jersey -
Jersey Central Power & Light Company (JCP&L), incorporated under the laws of
New Jersey in 1925, - and in Pennsylvania - Metropolitan Edison Company
(Met-Ed), a Pennsylvania corporation incorporated in 1922, and Pennsylvania
Electric Company (Penelec), a Pennsylvania corporation incorporated in 1919.
The business of these subsidiaries (the Subsidiaries) consists predominantly
of the generation, transmission, distribution and sale of electricity. GPU
also owns all of the common stock of Energy Initiatives, Inc., EI Power, Inc.,
and EI Energy, Inc. (collectively, the "EI Group"), which develop, own and
operate generation, transmission and distribution facilities in the United
States and in foreign countries. GPU Service Corporation (GPUSC), a service
company; GPU Nuclear Corporation (GPUN), which operates and maintains the
nuclear units of the Subsidiaries; and GPU Generation Corporation (Genco),
which operates and maintains the fossil-fueled and hydroelectric units of the
Subsidiaries, are also wholly owned subsidiaries of GPU. Wholly owned
subsidiaries of the Subsidiaries are listed in Exhibit 21. The Subsidiaries
own all of the common stock of the Saxton Nuclear Experimental Corporation,
which owns a small demonstration nuclear reactor that has been partially
decommissioned. All of these companies together with their affiliates are
referred to as the "GPU System." The income of GPU consists almost
exclusively of earnings on the common stock of the Subsidiaries.
As a registered holding company system, the GPU System is subject to
regulation by the Securities and Exchange Commission (SEC) under the 1935 Act.
Retail rates, conditions of service, issuance of securities and other matters
are subject to regulation in the state in which each Subsidiary operates - in
New Jersey by the New Jersey Board of Public Utilities (NJBPU) and in
Pennsylvania by the Pennsylvania Public Utility Commission (PaPUC). The
Nuclear Regulatory Commission (NRC) regulates the construction, ownership and
operation of nuclear generating stations. The Subsidiaries are also subject
to wholesale rate and other regulation by the Federal Energy Regulatory
Commission (FERC) under the Federal Power Act. In addition, certain EI Group
foreign subsidiaries are subject to limited rate and other regulation (see
REGULATION).
INDUSTRY DEVELOPMENTS
The electric power markets have traditionally been served by integrated
regulated monopolies. Over the last few years, however, market forces
combined with state and federal actions, have laid the foundation for the
development of increased competition in the electric utility industry. The
electric utility industry is undergoing a major transition as it proceeds from
a traditional rate regulated environment based on cost recovery to some
combination of a competitive marketplace and modified regulation. The Public
Utility Regulatory Policies Act of 1978 (PURPA) facilitated the entry of
competitors into the electric generation business. Since then, more
competition has been introduced through various state actions and the Energy
Policy Act of 1992 (EPAct).
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The EPAct has fostered further competition among utility and nonutility
generators (NUGs) in the wholesale electric generation market, accelerating
the industry restructuring that has been underway since the enactment of
PURPA. Among its provisions, the EPAct allows the FERC, subject to certain
criteria, to order owners of electric transmission systems to provide third
parties with transmission access for wholesale power transactions. Although
the legislation did not give the FERC the authority to order retail
transmission access, movement toward opening the transmission network to
retail customers is currently under consideration in many states, including
New Jersey and Pennsylvania.
The competitive pressures resulting from the EPAct, coupled with
increasing customer demands for lower-priced electricity, are expected to
create opportunities to compete for new customers and revenues, as well as
increase risk which could lead to the loss of customers and reduction in
revenues from existing customers.
Operating in a competitive environment places new pressures on utility
profit margins and credit quality. Utilities with significantly higher cost
structures than are supportable in the marketplace will experience reduced
earnings as they attempt to meet their customers' demands for lower-priced
electricity. Competitive forces continue to influence some retail pricing.
In some cases, commercial and industrial customers have indicated their
intention to pursue competitively priced electricity from other providers, and
in some instances have obtained price concessions from utilities. This
prospect of increasing competition in the electric utility industry has
already led the major credit rating agencies to apply more stringent
guidelines in making credit rating determinations.
In response to competitive forces and regulatory changes, the GPU System
has from time to time considered, and expects to continue to consider, various
strategies designed to enhance its competitive position and to increase its
ability to adapt to, and anticipate changes in, its business. These
strategies may include business combinations with other companies, internal
restructurings involving the complete or partial separation of its wholesale
and retail businesses, acquisitions of other businesses (including foreign
utility companies), and additions to or dispositions of all or portions of its
generation, transmission or distribution businesses. No assurances can be
given as to whether any potential transaction of the type described above may
actually occur, or as to the ultimate effect thereof on the financial
condition or competitive position of the GPU System.
Regulatory Initiatives
During 1995, there were a number of major federal and state developments
in the area of competition within the electric utility industry as outlined
below:
- The FERC ruled that a power purchase agreement between Connecticut Power
& Light Co. and a NUG was invalid because the state law mandating the
agreement provided for the utility to pay rates in excess of its "avoided
costs," contrary to PURPA and the FERC's regulations. In February 1995,
the FERC found that the California Public Utilities Commission's (CPUC)
capacity procurement program also violated PURPA because, as designed, it
resulted in contract rates above the state utilities' avoided costs. The
FERC further expressed concerns that the CPUC had based its finding of
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capacity requirements on stale data. Following these two decisions,
other utilities, including the Subsidiaries, sought to have the FERC
determine that certain of their NUG power purchase agreements are void on
the same or similar grounds. The Subsidiaries have thus far been
unsuccessful in these efforts. In addition, the GPU System is, together
with other electric utilities, currently engaged in efforts to repeal
PURPA.
- Legislation was introduced in the U.S. Senate that would repeal Section
210 of PURPA. Under that section, certain qualifying NUGs can "lock-in"
long-term rates that may result in electric utilities being required to
purchase power at costs higher than available alternative sources of
energy. Similar legislation has been introduced in the House of
Representatives. Other legislation has been introduced which would,
among other things, repeal the 1935 Act and provide for the restructuring
of the electric utility industry.
- The FERC issued a Notice of Proposed Rulemaking (NOPR) on open access
nondiscriminatory transmission services by utilities and a supplemental
NOPR on recovery of stranded costs. The new rules, if adopted, would in
essence provide open access to the interstate electric transmission
network and thereby encourage a fully competitive wholesale electric
power market.
Among other things, the FERC's proposal would (1) require electric
utilities to file nondiscriminatory open access transmission tariffs
which would be available to all wholesale sellers and buyers of
electricity; (2) require utilities to accept service under these new
tariffs for their own wholesale transactions; and (3) permit utilities to
recover their legitimate and verifiable "stranded costs" incurred when a
franchise customer elects to purchase power from another supplier using
the utility's transmission system.
With respect to stranded costs, the FERC proposed to provide recovery
mechanisms where stranded costs result from municipalization or other
instances where former retail customers become wholesale customers, as
well as for wholesale stranded costs. The FERC stated that it would
expect the state regulatory agencies to provide for recovery of stranded
costs attributable to retail wheeling or direct access programs, and the
FERC would intervene only when such agencies lacked necessary authority.
In addition, while it does not provide for "corporate unbundling," which
the FERC defines as the disposing of ancillary services or creating
separate affiliates to manage transmission services, the proposed rule
does call for "functional unbundling" of transmission and ancillary
services.
- An SEC Staff report recommended a series of legislative and
administrative reforms to the 1935 Act. This included SEC Staff support
for repeal of the 1935 Act with a minimum one year transition period, and
a transfer of audit, reporting and certain other responsibilities to the
FERC while giving state agencies access to holding company books and
records. In the interim, the SEC Staff recommended that the SEC adopt a
series of administrative reforms that would streamline such things as the
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issuance of securities for routine financings and permit a wide range of
energy related diversification activities. The SEC Staff also
recommended that the SEC more flexibly interpret the 1935 Act's
integrated system requirements by allowing utility acquisitions and
specifically, combination electric and gas systems, where the affected
state commissions concur.
In response to the SEC Staff report, the SEC has adopted certain changes
which will streamline routine financings, and has proposed a number of
others. GPU and other registered holding companies are seeking to repeal
the 1935 Act because they believe it is a significant impediment to a
registered holding company's ability to be competitive.
- The NJBPU issued Phase I of the New Jersey Energy Master Plan (NJEMP)
promoting regulatory policy changes intended to move New Jersey's
electric and gas utilities into a competitive marketplace. In the Phase
I Report, the NJBPU recommended, among other things, (1) rate-flexibility
legislation to allow utilities to compete in order to retain and attract
customers in a changing regulatory environment; (2) alternative
regulation as an interim and possibly a long-term measure to allow market
forces to stimulate efficiency, productivity and innovation; (3) consumer
protection standards to ensure that captive ratepayers do not subsidize
competitive activities and to ensure that all ratepayers benefit from the
transition to greater competition; and (4) an integrated resource
planning and competitive supply-side procurement process to streamline
the regulatory review process, lower costs for all ratepayers, and ensure
that New Jersey's environmental and energy conservation goals are met in
a competitive marketplace. The Phase I Report also emphasized that
regulation must continue to guarantee access to safe, adequate and
reliable service at a reasonable cost; protect the public interest; meet
environmental and energy efficiency goals; assure system reliability; and
protect the financial integrity of utilities which have an obligation to
serve the public.
- The NJBPU initiated Phase II of the NJEMP and established working groups
to develop draft proposals and models by March 1996 on (1) competition
issues; (2) stranded assets; (3) regional issues such as the environment
and emissions standards; and (4) public policy issues, including social
programs and conservation. The NJEMP is being developed in three phases,
with Phase III expected to be completed by the end of 1996.
- The PaPUC has initiated an investigation into the role of competition in
Pennsylvania's electric utility industry and solicited comments on
various issues. Met-Ed and Penelec jointly filed responses suggesting,
among other things, that the PaPUC provide for the equitable recovery of
stranded investments, enable utilities to offer flexible pricing to
customers with competitive alternatives, and address regulatory
requirements that impose costs unequally on Pennsylvania utilities as
compared with unregulated or out-of-state suppliers. In August 1995, the
PaPUC released a staff report in which the staff decided not to recommend
retail wheeling at this time. Evidentiary hearings on this matter began
in December 1995 and the PaPUC is expected to present recommendations to
the Governor and state General Assembly in the spring of 1996.
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GPU System Initiatives
In response to the above federal and state regulatory developments, the
GPU System has undertaken a number of initiatives during 1995:
- GPU made investments aggregating approximately $160 million in foreign
utility companies and foreign generating facilities through the EI Group
(see EI GROUP, in MANAGEMENT'S DISCUSSION AND ANALYSIS).
- JCP&L and Met-Ed bought out a total of five NUG (JCP&L two NUGs; Met-Ed
three NUGs) power purchase contracts aggregating 540 MW (JCP&L 200 MW;
Met-Ed 340 MW) of capacity, which is expected to save ratepayers more
than $2 billion (JCP&L $0.7 billion; Met-Ed $1.3 billion) based on the
projected cost of alternative sources of energy over the terms of these
agreements. JCP&L and Met-Ed have agreed to pay the project developers
up to a total of $84 million (JCP&L $17 million; Met-Ed $67 million) to
cancel the contracts. JCP&L and Met-Ed have deferred the costs of these
buyouts and are seeking to recover these costs through their energy
adjustment clauses.
- The FERC accepted for filing, subject to possible rate refunds, the
Subsidiaries' proposed open access transmission tariffs. The FERC has
ordered that hearings be held on a number of aspects of these tariffs,
including whether they are consistent in certain respects with FERC
policy on open access and comparability of service. The tariffs provide
for both firm and interruptible service on a point-to-point basis.
Network service, where requested, will be negotiated on a case by case
basis.
- The Subsidiaries, along with six other electric utility members of the
Pennsylvania-New Jersey-Maryland Interconnection (PJM), filed with the
FERC a detailed plan to increase competition in the Mid-Atlantic region.
This comprehensive plan offers to all generators and wholesale buyers of
electricity, a regional energy market and open access to high-voltage
transmission lines which will result in greater availability of economic
energy for wholesale electricity buyers and sellers. The Subsidiaries
believe the plan will satisfy the goals of the FERC's NOPR on open access
nondiscriminatory transmission services, and if approved by the FERC,
open access transmission tariffs filed with the FERC under this plan
would supersede the Subsidiaries' open access transmission tariffs.
The sponsoring PJM companies intend to make a comprehensive filing with
the FERC consistent with this detailed plan by May 1996, and expect to
implement the new structure by year-end 1996. The Subsidiaries have been
advised that the Justice Department is reviewing possible antitrust
implications of merger activity among PJM members.
- The Subsidiaries and certain of the PJM companies have proposed the
formation of a wholesale market regional power pool managed by an
Independent System Operator (ISO). The power pool would function as a
spot market, with generators of electricity allowed to sell into the pool
and purchasers of electricity allowed to buy from the pool. It would
also accommodate contracts between specific buyers and sellers of power.
The ISO would be responsible for supporting regional transmission
planning and directing the operation of generation and transmission
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facilities to assure the reliability and integrity of the regional
electric grid.
The Subsidiaries have also proposed the use of a competitive transition
charge (CTC) as an equitable approach to recover stranded costs. The CTC
would be applied to all customers who depend on the electric system for
delivery of their electric supply. Efforts by utilities to mitigate
their stranded commitments could be required as part of the
implementation of a CTC. The Subsidiaries also support in their
proposals retail customer choice of energy suppliers, products and
services.
With the expectation that a segment of the industry will continue to be
regulated by the states, the proposals advocate the use of performance-
based rates to encourage utilities to reduce costs while maintaining
service reliability.
And in keeping with the public policy objectives associated with the
electric utility industry, such as access to basic service for low income
consumers, the proposals endorse the creation of a "public purpose
charge" that would be collected from all consumers.
Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation," applies to regulated
utilities that have the ability to recover their costs through rates
established by regulators and charged to customers. If a portion of the GPU
System's operations continues to be regulated, FAS 71 accounting may only be
applied to that portion. Insofar as the Subsidiaries are concerned,
potentially unrecoverable costs will most likely be related to generation
investment, purchased power contracts, and "regulatory assets," which are
deferred accounting transactions whose value depends on the Subsidiaries'
ability to recover such costs from their respective customers in the future.
In markets where there is excess capacity (as there currently is in the Mid-
Atlantic and surrounding regions which include New Jersey and Pennsylvania)
and many available sources of power supply, the market price of electricity is
expected to be lower than what would be necessary to support full recovery of
the investment in the generating facilities. Another significant exposure in
the transition to a competitive market results if the prices of a utility's
existing purchased power contracts, consisting primarily of contractual
obligations with NUGs, are higher than future market prices (see NONUTILITY
AND OTHER POWER PURCHASES). Utilities locked into expensive purchased power
arrangements may be forced to value the contracts at market prices and
recognize certain losses. The GPU System believes that to the extent that it
no longer qualifies for FAS 71 accounting treatment, a material adverse effect
on its results of operations and financial position may result from such a
valuation. At this time, it is difficult to project the future level of
stranded assets or other unrecoverable costs, if any, without knowing what the
market price of electricity will be, or to what extent regulators will allow
recovery of such costs from customers.
Corporate Realignment
In January 1996, GPU received regulatory approval from the SEC to form
Genco to operate and maintain the fossil-fueled and hydroelectric units owned
by the Subsidiaries as well as construct any new nonnuclear generation
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facilities which the Subsidiaries may need in the future. The Subsidiaries
had already received necessary regulatory approvals from the PaPUC and NJBPU.
THE SUBSIDIARIES
The electric generating and transmission facilities of the Subsidiaries
are physically interconnected and are operated as a single integrated and
coordinated system serving a population of approximately five million in
New Jersey and Pennsylvania. For the year 1995, the Subsidiaries' revenues
were about equally divided between Pennsylvania customers and New Jersey
customers. During 1995, sales to customers by customer class were as follows:
% Operating Revenues % KWH Sales
GPU JCP&L Met-Ed Penelec GPU JCP&L Met-Ed Penelec
Residential 42 45 42 36 36 41 35 29
Commercial 35 38 28 33 32 38 27 30
Industrial 21 16 28 27 29 21 36 34
Other* 2 1 2 4 3 - 2 7
100 100 100 100 100 100 100 100
* Rural electric cooperatives, municipalities, street and highway lighting,
and others.
The Subsidiaries also make interchange and spot market sales of
electricity to other utilities. Reference is made to System Statistics and
Company Statistics on pages F-3, F-66, F-94, and F-121, for additional
information concerning the GPU System's sales and revenues. Revenues of
JCP&L, Met-Ed and Penelec derived from their largest single customers
accounted for less than 3%, 2% and 1%, respectively, of their electric
operating revenues for the year and their 25 largest customers, in the
aggregate, accounted for approximately 9%, 13% and 12%, respectively, of such
revenues.
In January 1996, one of JCP&L's larger industrial customers, Anchor Glass
Company (Anchor), announced that it would be closing its Aberdeen, New Jersey
plant during 1996. Anchor accounts for approximately $4 million of JCP&L's
annual revenues.
The area served by the Subsidiaries extends from the Atlantic Ocean to
Lake Erie, is generally comprised of small communities, rural and suburban
areas and includes a wide diversity of industrial enterprises, as well as
substantial farming areas. JCP&L provides retail service in northern, western
and east central New Jersey having an estimated population of approximately
2.5 million. Met-Ed provides retail electric service in all or portions of 14
counties, in the eastern and south central parts of Pennsylvania, having an
estimated population of almost one million. Met-Ed also sells electricity at
wholesale to four municipalities having an estimated population of over
11,000. Penelec provides retail and wholesale electric service within a
territory located in western, northern and south central Pennsylvania
extending from the Maryland state line northerly to the New York state line,
with a population of about 1.5 million, approximately 24% of which is
concentrated in ten cities and twelve boroughs, all with populations over
5,000. Penelec also provides wholesale service to five municipalities in New
Jersey, and, as lessee of the property of the Waverly Electric Light & Power
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Company, also serves a population of about 13,700 in Waverly, New York and
vicinity.
The Subsidiaries' transmission facilities are physically interconnected
with neighboring nonaffiliated utilities in Pennsylvania, New Jersey,
Maryland, New York and Ohio. The Subsidiaries are members of PJM and the
Mid-Atlantic Area Council, an organization providing coordinated review of the
planning by utilities in the PJM area. The interconnection facilities are
used for substantial capacity and energy interchange and purchased power
transactions as well as emergency assistance.
THE EI GROUP
The EI Group is engaged in the development, ownership and operation of
generation, transmission and distribution facilities in the United States and
foreign countries. During 1995, the EI Group expanded its activities in the
following areas:
EI Power acquired from the Bolivian government, for approximately $47
million, a 50% ownership interest in Empresa Guaracachi S.A., a Bolivian
electric generating company having an aggregate capacity of 216 MW of gas-
fired and oil-fired generation.
EI Energy, together with the Australian Gas Light Company, acquired
Solaris Power (Solaris), an electric distribution company based in Melbourne,
Australia, for a total purchase price of approximately $712 million, of which
EI Energy's 50% share was $356 million. EI Energy made an equity investment
in Solaris of approximately $112 million; the balance of the purchase price
was provided through borrowings by Solaris from an Australian bank syndicate.
Solaris, which provides electric service to more than 230,000 customers in and
around Melbourne, was sold by the Government of Victoria through a competitive
bid as part of that state's privatization of the electric industry.
EI Power, along with its development partners, has completed the
financing for the acquisition of a 240 MW gas-fired generating plant in
Barranquilla, Colombia and the construction of a new 750 MW gas-fired plant
adjacent to the existing plant. Electricity generated by these plants will be
sold to Corporacion Electrica de la Costa Atlantica under a 20-year contract.
Total project costs, including the acquisition of the existing plant, are
approximately $750 million, of which EI Power's equity contribution is
expected to be approximately $65 million. The balance of the funds is being
provided by a group of lenders, including the Overseas Private Investment
Corporation (OPIC) and the U.S. Export-Import Bank (Eximbank) which have
agreed to fund an aggregate of $303 million (OPIC $150 million and Eximbank
$153 million) of project costs. EI Power has agreed to make additional equity
contributions to the project of up to $58 million under certain circumstances.
GPU has guaranteed all of EI Power's equity contribution commitments.
On March 1, 1996, President Clinton decertified the Republic of Colombia
under the Foreign Assistance Act of 1961 for that country's failure to comply
with the objectives of the 1988 United Nations anti-narcotics convention.
That Act generally governs the terms and conditions under which the United
States provides financial aid and support to foreign countries. On March 7,
1996, OPIC funded an additional $21 million of the Barranquilla project costs.
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Eximbank has stated that it is seeking to clarify whether the decertification
will affect its existing funding commitments to the project.
Loss of either OPIC or Eximbank financing for the Barranquilla project
would adversely affect the cost and schedule for the project and could result
in an event of default under the project's financing documents. In that
event, unless substitute financing acceptable to the other lenders could be
obtained, GPU could be required to immediately fund its equity contribution of
up to $123 million to the project.
At December 31, 1995, the EI Group had ownership interests in eleven
operating combined-cycle cogeneration plants located in the United States
(totaling 932 MW of capacity) and five operating generating facilities located
in Canada and South America (totaling 480 MW of capacity). The EI Group also
has a number of additional projects at various stages of development,
including a 300 MW gas-fired project and a 180 MW gas-fired project for which
long-term power purchase agreements have been executed with Georgia Power
Company and Wisconsin Public Service Company, respectively.
GPU has obtained SEC approval to finance investments in foreign utility
companies and exempt wholesale generators (both domestically and
internationally) up to an aggregate amount equal to 50% of GPU's average
consolidated retained earnings. At December 31, 1995, GPU has investments,
through the EI Group, in exempt wholesale generators and foreign utility
companies totaling approximately $300 million. This amount includes
investments made by the EI Group totaling $160 million, of which $81 million
was contributed by GPU; and GPU guarantee obligations aggregating $140
million. In addition, GPU has investments, through the EI Group, in
qualifying cogeneration facilities and project development activities
aggregating $124 million. Selected financial data for the EI Group is as
follows:
(In Millions)
1995* 1994 1993
Total assets $380 $130 $ 44
Capitalization:
Common equity $209 $118 $ 39
Notes payable 2 - -
Long-term debt 104 - -
Total $315 $118 $ 39
Purchase of investments $165 $ 74 $ 16
Net income/(loss) $ 9 $ (3) $ (2)
* Total assets includes approximately $62 million held by a minority owner.
NUCLEAR FACILITIES
The Subsidiaries have made investments in three major nuclear projects --
Three Mile Island Unit 1 (TMI-1) and Oyster Creek, both of which are operating
generation facilities, and Three Mile Island Unit 2 (TMI-2), which was damaged
during a 1979 accident. At December 31, 1995, the Subsidiaries' net
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investment, including nuclear fuel, in TMI-1 was $640 million (JCP&L $166
million; Met-Ed $318 million; Penelec $156 million) and $785 million for
Oyster Creek. The Subsidiaries' net investment in TMI-2 at December 31, 1995
was $95 million (JCP&L $85 million; Met-Ed $2 million; Penelec $8 million).
JCP&L is collecting revenues for TMI-2 on a basis which provides for the
recovery of its remaining investment in the plant by 2008. Met-Ed and Penelec
are collecting revenues for TMI-2 from their wholesale customers. TMI-1 and
TMI-2 are jointly owned by JCP&L, Met-Ed and Penelec in the percentages of
25%, 50% and 25%, respectively. Oyster Creek is owned by JCP&L.
Costs associated with the operation, maintenance and retirement of
nuclear plants have continued to be significant and less predictable than
costs associated with other sources of generation, in large part due to
changing regulatory requirements, safety standards, availability of nuclear
waste disposal facilities and experience gained in the construction and
operation of nuclear facilities. The GPU System may also incur costs and
experience reduced output at its nuclear plants because of the prevailing
design criteria at the time of construction and the age of the plants' systems
and equipment. In addition, for economic or other reasons, operation of these
plants for the full term of their now assumed lives cannot be assured. Also,
not all risks associated with ownership or operation of nuclear facilities may
be adequately insured or insurable. Consequently, the ability of electric
utilities to obtain adequate and timely recovery of costs associated with
nuclear projects, including replacement power, any unamortized investment at
the end of each plant's useful life (whether scheduled or premature), the
carrying costs of that investment and retirement costs, is not assured.
Management intends, in general, to seek recovery of any such costs through the
ratemaking process, but recognizes that recovery is not assured.
TMI-1
The operating license for TMI-1, a 786 MW pressurized water reactor,
expires in 2014. TMI-1 completed a 34-day scheduled refueling outage in
October 1995, and operated at a capacity factor of 92.8% for the year. Its
next refueling outage is scheduled to begin in September 1997.
Oyster Creek
The operating license for the Oyster Creek station, a 619 MW boiling
water reactor (as rerated in January 1995 from 610 MW), expires in 2009.
Oyster Creek operated at a 95.8% capacity factor for 1995. The station's next
refueling outage is scheduled to begin in September 1996 and is expected to
last approximately 6 to 8 weeks. This outage may be extended an additional 6
to 8 weeks in order to move spent nuclear fuel from the reactor's spent fuel
pool to an on-site dry storage facility.
TMI-2
The 1979 TMI-2 accident resulted in significant damage to, and
contamination of, the plant and a release of radioactivity to the environment.
The cleanup program was completed in 1990, and, after receiving NRC approval,
TMI-2 entered into long-term monitored storage in December 1993.
As a result of the accident and its aftermath, individual claims for
alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against the Corporation and the
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U.S. District Court for the Middle District of Pennsylvania. Some of the
Subsidiaries. Approximately 2,100 of such claims are pending in the claims
also seek recovery for injuries from alleged emissions of radioactivity before
and after the accident.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Subsidiaries had (a) primary financial protection in the form of
insurance policies with groups of insurance companies providing an aggregate
of $140 million of primary coverage, (b) secondary financial protection in the
form of private liability insurance under an industry retrospective rating
plan providing for up to an aggregate of $335 million in premium charges under
such plan, and (c) an indemnity agreement with the NRC for up to $85 million,
bringing their total primary, secondary and tertiary financial protection up
to an aggregate of $560 million. Under the secondary level, the Subsidiaries
are subject to a retrospective premium charge of up to $5 million per reactor,
or a total of $15 million (JCP&L, $7.5 million; Met-Ed, $5 million; Penelec,
$2.5 million).
The insurers of TMI-2 had been providing a defense against all TMI-2
accident-related claims against the Corporation and the Subsidiaries and their
suppliers (the defendants) under a reservation of rights with respect to any
award of punitive damages. However, in March 1994, the defendants in the
TMI-2 litigation and the insurers agreed that the insurers would withdraw
their reservation of rights, with respect to any award of punitive damages. A
trial of ten allegedly representative cases is scheduled to begin in June
1996.
In October 1995, the U.S. Court of Appeals for the Third Circuit ruled
that the Price-Anderson Act provides coverage under its primary and secondary
levels for punitive as well as compensatory damages, but that punitive damages
could not be recovered against the Federal Government under the third level of
financial protection. In so doing, the Court of Appeals referred to the
"finite fund" (the $560 million of financial protection under the Price-
Anderson Act) to which plaintiffs must resort to get compensatory as well as
punitive damages. The Corporation and its Subsidiaries have asked the U.S.
Supreme Court to review that portion of the Court of Appeals' decision that
punitive damages may be recovered in public liability actions under the Price-
Anderson Act. The Corporation and its Subsidiaries do not know whether
plaintiffs will appeal any aspect of the Court of Appeals' decision.
Based upon the Court of Appeals' decision, the Corporation and its
Subsidiaries believe that any liability to which they might be subject by
reason of the TMI-2 accident will not exceed their financial protection under
the Price-Anderson Act.
In February 1996, the U.S. Supreme Court denied a petition filed by the
Corporation and its Subsidiaries to review a finding by the Court of Appeals
that the standard of care owed by the defendants to a plaintiff was determined
by the specific level of radiation which was released into the environment, as
measured at the site boundary, rather than as measured at the specific site
where the plaintiff was located at the time of the accident (as the
Corporation and its Subsidiaries proposed). The Court of Appeals had also
held that each plaintiff still must demonstrate exposure to radiation released
during the TMI-2 accident and that such exposure had resulted in injuries.
There can be no assurance as to the outcome of this litigation.
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NUCLEAR PLANT RETIREMENT COSTS
Retirement costs for nuclear plants include decommissioning the
radiological portions of the plants and the cost of removal of nonradiological
structures and materials. The disposal of spent nuclear fuel is covered
separately by contracts with the U.S. Department of Energy (DOE). See the
NUCLEAR FUEL DISPOSAL FEE section of Note 2 to GPU's consolidated financial
statements for further information regarding nuclear fuel disposal costs.
In 1990, the Subsidiaries submitted a report, in compliance with NRC
regulations, setting forth a funding plan (employing the external sinking fund
method) for the decommissioning of their nuclear reactors. Under this plan,
the Subsidiaries intend to complete the funding for Oyster Creek and TMI-1 by
the end of the plants' license terms, 2009 and 2014, respectively. The TMI-2
funding completion date is 2014, consistent with TMI-2's remaining in long-
term storage and being decommissioned at the same time as TMI-1. Based on NRC
studies, a comparable funding target has been developed which takes into
account the accident. Under the NRC regulations, the funding targets (in 1995
dollars) are as follows:
(Millions)
Oyster
Creek TMI-1 TMI-2
JCP&L $189 $ 39 $ 63
Met-Ed - 79 125
Penelec - 39 62
Total $189 $157 $250
The NRC continues to study the levels of these funding targets. Management
cannot predict the effect that the results of this review will have on the
funding targets. The funding targets, while not considered cost estimates,
are reference levels designed to assure that licensees demonstrate adequate
financial responsibility for decommissioning. While the regulations address
activities related to the removal of the radiological portions of the plants,
they do not establish residual radioactivity limits nor do they address costs
related to the removal of nonradiological structures and materials.
The Subsidiaries charge to expense and contribute to external trusts
amounts collected from customers for nuclear plant decommissioning and
nonradiological costs. In addition, JCP&L has contributed amounts written off
for TMI-2 nuclear plant decommissioning in 1990, and Met-Ed and Penelec have
contributed amounts written off for TMI-2 nuclear plant decommissioning in
1991, to TMI-2's external trust (see TMI-2 Future Costs). Amounts deposited
in external trusts, including the interest earned on these funds, are
classified as Nuclear Decommissioning Trusts on the Balance Sheet.
In 1995, a consultant to GPUN performed site-specific studies of the TMI
site, including both Units 1 and 2, and of Oyster Creek, that considered
various decommissioning methods and estimated the cost of decommissioning the
radiological portions and the cost of removal of the nonradiological portions
of each plant, using the prompt removal/dismantlement method. GPUN management
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has reviewed the methodology and assumptions used in the site-specific
studies, is in agreement with them, and believes the results are reasonable as
follows:
(Millions)
Oyster
GPU Creek TMI-1 TMI-2
Radiological decommissioning $347 $295 $358
Nonradiological cost of removal 33 73 37*
Total $380 $368 $395
* Net of $3 million spent as of December 31, 1995.
(Millions)
Oyster
JCP&L Creek TMI-1 TMI-2
Radiological decommissioning $347 $74 $90
Nonradiological cost of removal 33 18 9*
Total $380 $92 $99
* Net of $750 thousand spent as of December 31, 1995.
(Millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $147 $179
Nonradiological cost of removal 37 19*
Total $184 $198
* Net of $1.5 million spent as of December 31, 1995.
(Millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $74 $89
Nonradiological cost of removal 18 9*
Total $92 $98
* Net of $750 thousand spent as of December 31, 1995.
The ultimate cost of retiring the GPU System's nuclear facilities may be
different from the cost estimates contained in these site-specific studies.
Such costs are subject to (a) the escalation of various cost elements
(including, but not limited to, general inflation), (b) the further
development of regulatory requirements governing decommissioning, (c) the
technology available at the time of decommissioning, and (d) the availability
of nuclear waste disposal facilities.
In February, 1996 the Financial Accounting Standards Board (FASB) issued
an Exposure Draft titled "Accounting for Certain Liabilities Related to
Closure or Removal of Long-Lived Assets," which includes nuclear plant
retirement costs. If the Exposure Draft's current provisions are finalized,
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Oyster Creek and TMI-1 future retirement costs will have to be recognized as a
liability currently, rather than recorded over the life of the plants (as is
currently the practice), with an offsetting asset recorded for amounts
collectible through rates. Any amounts not collectible through rates will
have to be charged to expense. For TMI-2, a liability has already been
recognized since the plant is no longer operating (see TMI-2 Future Costs).
Comments on the Exposure Draft are due by May 31, 1996, and a final statement
is expected to be effective for fiscal years beginning after December 15,
1996.
TMI-1 and Oyster Creek
JCP&L is collecting revenues for decommissioning, which are expected to
result in the accumulation of its share of the NRC funding target for each
plant. JCP&L is also collecting revenues, based on estimates of $15 million
for TMI-1 and $32 million for Oyster Creek adopted in previous rate orders
issued by the NJBPU, for its share of the cost of removal of nonradiological
structures and materials. The PaPUC previously granted Met-Ed revenues for
decommissioning costs of TMI-1 based on its share ($37 million) of the NRC
funding target and nonradiological cost of removal estimated in an earlier
1988 site-specific study to be $74 million (in 1995 dollars). The PaPUC also
permitted Penelec to increase the collection of revenues for decommissioning
costs for TMI-1 to a basis equivalent to that granted Met-Ed. Collections
from customers for retirement expenditures are deposited in external trusts.
Provision for the future expenditure of these funds has been made in
accumulated depreciation, amounting to $73 million (JCP&L $23 million; Met-Ed
$36 million; Penelec $14 million) for TMI-1 and $138 million for Oyster Creek
at December 31, 1995. TMI-1 and Oyster Creek retirement costs are charged to
depreciation expense over the expected service life of each nuclear plant, and
amounted to $15 million (JCP&L $3 million; Met-Ed $8 million; Penelec $4
million) and $13 million, respectively, for 1995.
Management believes that any TMI-1 and Oyster Creek retirement costs, in
excess of those currently recognized for ratemaking purposes, should be
recoverable under the current ratemaking process.
TMI-2 Future Costs
The estimated liabilities for TMI-2 Future Costs (reflected as Three Mile
Island Unit 2 Future Costs on the Balance Sheet) as of December 31, 1995 are
as follows:
(millions)
GPU JCP&L Met-Ed Penelec
Radiological Decommissioning $358 $ 90 $179 $ 89
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $413 $103 $207 $103
* Net of $3 million (JCP&L $750 thousand; Met-Ed $1.5 million; Penelec $750
thousand) spent as of December 31, 1995.
The liability recorded on the Balance Sheet for radiological
decommissioning and nonradiological cost of removal is based on the 1995 site-
specific study.
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Offsetting the $413 million liability is $271 million (JCP&L $53 million;
Met-Ed $147 million; Penelec $71 million) which is probable of recovery from
customers and included in Three Mile Island Unit 2 Deferred Costs on the
Balance Sheet, and $143 million (JCP&L $60 million; Met-Ed $57 million;
Penelec $26 million) in trust funds for TMI-2 and included in Nuclear
Decommissioning Trusts on the Balance Sheet. Of the $271 million still to be
recovered from customers, $66 million (JCP&L $17 million; Met-Ed $33 million;
Penelec $16 million) represents an increase from 1994 due to the 1995 site-
specific study. Earnings on trust fund deposits collected from customers are
included in amounts shown on the Balance Sheet under Three Mile Island Unit 2
Deferred Costs. TMI-2 decommissioning costs charged to expense in 1995
amounted to $14 million (JCP&L $3 million; Met-Ed $9 million; Penelec $2
million).
The NJBPU has granted JCP&L decommissioning revenues for the remainder of
the NRC funding target and allowances for the cost of removal of
nonradiological structures and materials. In 1993, the Pennsylvania Office of
Consumer Advocate filed a petition for review of a Met-Ed rate order with the
Pennsylvania Commonwealth Court seeking to set aside a March 1993 PaPUC rate
order which allowed Met-Ed to recover in the future certain TMI-2 retirement
costs. In 1994, the Commonwealth Court reversed that rate order and, as a
consequence, Met-Ed and Penelec recorded pre-tax charges totalling $128
million and $56 million, respectively. In September 1995, the Pennsylvania
Supreme Court reversed the Commonwealth Court decision. Met-Ed and Penelec
have therefore reversed the previous write-offs, resulting in the crediting of
pre-tax income for $128 million and $56 million, respectively. However,
notwithstanding the Supreme Court's decision, Met-Ed and Penelec have
determined that the recovery of the incremental monitored storage costs is no
longer probable, and have recorded pre-tax charges of $10 million and $4.7
million, respectively, during 1995.
At December 31, 1995, the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $63 million (JCP&L $16 million; Met-
Ed $32 million; Penelec $15 million), which is the difference between the 1995
TMI-1 and TMI-2 site-specific study estimates of $295 million and $358
million, respectively (JCP&L $74 million and $90 million; Met-Ed $147 million
and $179 million; Penelec $74 million and $89 million). In connection with
rate case resolutions at the time, JCP&L, Met-Ed and Penelec made
contributions to irrevocable external trusts relating to their shares of the
accident-related portions of the decommissioning liability. In 1990, JCP&L
contributed $15 million and in 1991, Met-Ed and Penelec contributed
$40 million and $20 million, respectively, to irrevocable external trusts.
These contributions were not recovered from customers and have been expensed.
The Subsidiaries will not pursue recovery from customers for any of these
amounts contributed in excess of the $63 million accident-related portion
referred to above.
JCP&L intends to seek recovery for any increases in TMI-2 retirement
costs, and Met-Ed and Penelec intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot
be assured.
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As a result of TMI-2's entering long-term monitored storage in late 1993,
the Subsidiaries are incurring incremental storage costs of approximately $1
million (JCP&L $250 thousand; Met-Ed $500 thousand; Penelec $250 thousand)
annually. The Subsidiaries estimate that the remaining storage costs will
total $18 million through 2014, the expected retirement date of TMI-1.
JCP&L's rates reflect its share of these costs.
INSURANCE
The GPU System has insurance (subject to retentions and deductibles) for
its operations and facilities including coverage for property damage,
liability to employees and third parties, and loss of use and occupancy
(primarily incremental replacement power costs). There is no assurance that
the GPU System will maintain all existing insurance coverages. Losses or
liabilities that are not completely insured, unless allowed to be recovered
through ratemaking, could have a material adverse effect on the financial
position of the GPU System.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station and for Oyster Creek totals
$2.7 billion per site. In accordance with NRC regulations, these insurance
policies generally require that proceeds first be used for stabilization of
the reactors and then to pay for decontamination and debris removal expenses.
Any remaining amounts available under the policies may then be used for repair
and restoration costs and decommissioning costs. Consequently, there can be
no assurance that in the event of a nuclear incident, property damage
insurance proceeds would be available for the repair and restoration of that
station.
The Price-Anderson Act limits the GPU System's liability to third parties
for a nuclear incident at one of its sites to approximately $8.9 billion.
Coverage for the first $200 million of such liability is provided by private
insurance. The remaining coverage, or secondary financial protection, is
provided by retrospective premiums payable by all nuclear reactor owners.
Under secondary financial protection, a nuclear incident at any licensed
nuclear power reactor in the country, including those owned by the GPU System,
could result in assessments of up to $79 million per incident for each of the
GPU System's two operating reactors, subject to an annual maximum payment of
$10 million per incident per reactor. In addition to the retrospective
premiums payable under Price-Anderson, the GPU System is also subject to
retrospective premium assessments of up to $69 million (JCP&L $41 million;
Met-Ed $19 million; Penelec $9 million) in any one year under insurance
policies applicable to nuclear operations and facilities.
The GPU System has insurance coverage for incremental replacement power
costs resulting from an accident-related outage at its nuclear plants.
Coverage commences after the first 21 weeks of the outage and continues for
three years beginning at $1.8 million for Oyster Creek and $2.6 million for
TMI-1 per week for the first year, decreasing to 80 percent of such amounts
for years two and three.
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NONUTILITY AND OTHER POWER PURCHASES
Pursuant to the requirements of PURPA and state regulatory directives,
the Subsidiaries have entered into power purchase agreements with NUGs for the
purchase of energy and capacity for periods up to 25 years each for JCP&L and
Penelec, and 26 years for Met-Ed. The majority of these agreements contain
certain contract limitations and subject the NUGs to penalties for
nonperformance. While a few of these facilities are dispatchable, most are
must-run and generally obligate the Subsidiaries to purchase, at the contract
price, the net output up to the contract limits. As of December 31, 1995,
facilities covered by these agreements having 1,624 MW (JCP&L 892 MW; Met-Ed
335 MW; Penelec 397 MW) of capacity were in service. Actual payments from
1993 through 1995, and estimated payments from 1996 through 2000 to NUGs,
assuming that all facilities which have existing agreements, or which have
obtained orders granting them agreements, enter service, are as follows:
Payments Under NUG Agreements
(Millions)
Total JCP&L Met-Ed Penelec
1993 $ 491 $ 292 $ 95 $ 104
1994 528 304 101 123
1995 670 381 131 158
* 1996 696 369 151 176
* 1997 739 400 155 184
* 1998 837 430 210 197
* 1999 931 442 211 278
* 2000 987 463 216 308
* Estimate
Of these amounts, payments to the projects which are not in service at
December 31, 1995 are estimated as follows:
Payments Under NUG Agreements Not In Service
(Millions)
Total JCP&L Met-Ed Penelec
1997 $ 40 $ 25 $ 15 $ -
1998 123 53 65 5
1999 202 58 68 76
2000 231 62 71 98
In the year 2000, NUG agreements, in the aggregate, will provide for the
purchase of approximately 2,062 MW (JCP&L 1,002 MW; Met-Ed 485 MW; Penelec 575
MW) of capacity and energy by the GPU System, at varying prices.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the System's energy supply needs which has caused
the Subsidiaries to change their supply strategy to seek shorter-term
agreements offering more flexibility. Due to the current availability of
excess capacity in the marketplace, the cost of near- to intermediate-term
(i.e., one to eight years) energy supply from generation facilities now in
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service is currently and is expected to continue to be priced below the costs
of new supply sources, at least for some time. The projected cost of energy
from new generation supply sources has also decreased due to improvements in
power plant technologies and reduced forecasted fuel prices. As a result of
these developments, the rates under virtually all of the Subsidiaries' NUG
agreements are substantially in excess of current and projected prices from
alternative sources.
The Subsidiaries are seeking to reduce the above market costs of these
NUG agreements by (1) attempting to convert must-run agreements to
dispatchable agreements; (2) attempting to renegotiate prices of the
agreements; (3) offering contract buyouts while seeking to recover the costs
through their energy adjustment clauses (see Managing Nonutility Generation,
in MANAGEMENT'S DISCUSSION AND ANALYSIS); and (4) initiating proceedings
before federal and state agencies, and in the courts, where appropriate. In
addition, the Subsidiaries intend to avoid, to the maximum extent practicable,
entering into any new NUG agreements that are not needed or not consistent
with current market pricing and are supporting legislative efforts to repeal
PURPA. These efforts may result in claims against the GPU System for
substantial damages. There can, however, be no assurance as to the extent to
which the Subsidiaries' efforts will be successful in whole or in part.
While the Subsidiaries thus far have been granted recovery of their NUG
costs from customers by the PaPUC and NJBPU, there can be no assurance that
the Subsidiaries will continue to be able to recover these costs throughout
the term of the related agreements. The GPU System currently estimates that
for 1998, when substantially all of these NUG projects are scheduled to be in
service, above market payments (benchmarked against the expected cost of
electricity produced by a new gas-fired combined-cycle facility) will range
from $240 million to $350 million (JCP&L $100 to $150 million; Met-Ed $50
million to $80 million; Penelec $90 million to $120 million). The amount of
these estimated above market payments may increase or decrease substantially
based upon, among other things, payment escalations in the contract terms,
changes in fuel prices and changes in the capital and operating cost of new
generating equipment.
In 1995, the Subsidiaries entered into a three-year fuel management
agreement with New Jersey Natural Energy Corporation, an affiliate of New
Jersey Natural Gas Company, to manage the Subsidiaries' natural gas purchases
and interstate pipeline capacity. The Subsidiaries' gas-fired facilities, as
well as up to approximately 1,100 MW (JCP&L 885 MW; Met-Ed 200 MW;
Penelec 15 MW) of NUG capacity, will be pooled and managed under this
agreement, allowing the Subsidiaries to reduce their power purchase expenses.
The Subsidiaries have conditional or final agreements with four NUGs (JCP&L
three NUGs; Met-Ed one NUG), having an aggregate capacity of approximately 430
MW (JCP&L 385 MW; Met-Ed 45 MW), to supply natural gas from the pool.
In 1995, Met-Ed and Penelec filed a petition for enforcement and
declaratory order with the FERC requesting that the FERC effectively
invalidate four contracts (Met-Ed two contracts; Penelec two contracts) with
NUGs, aggregating 487 MW (Met-Ed 327 MW; Penelec 160 MW) of capacity, on the
grounds that the PaPUC's implementation of PURPA directing Met-Ed and Penelec
to enter into these agreements was unlawful. The FERC has denied the
petition, and Met-Ed and Penelec have not determined whether they will seek
judicial review of the FERC's action. Subsequent to the FERC's decision,
Met-Ed bought out the contracts for two of these projects, totaling 327 MW.
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In 1993, the PaPUC ordered Penelec to enter into long-term contracts to
purchase a total of 160 MW from two NUGs commencing in 1997 or later.
Penelec's subsequent appeal of the PaPUC order to the Commonwealth Court was
denied, but the case was remanded back to the PaPUC to recalculate the avoided
costs to be paid for the power. In January 1996, a PaPUC Administrative Law
Judge (ALJ) issued a decision recommending a levelized avoided cost which is
in excess of current market prices. Penelec and other parties have filed
exceptions to the ALJ's decision.
In August 1995, the Pennsylvania Supreme Court granted Penelec's petition
to review the Commonwealth Court's decision which upheld the PaPUC order
requiring Penelec to enter into such power purchase agreements. Briefs have
been filed and oral argument was held in January 1996. These matters are
pending.
In March 1995, the U.S. Court of Appeals denied petitions for rehearing
filed by JCP&L, the NJBPU, and the New Jersey Division of Ratepayer Advocate
(Ratepayer Advocate), seeking reconsideration of the Court's earlier decision
prohibiting the NJBPU from reexamining its order approving the rates payable
to Freehold Cogeneration Associates (Freehold) under a long-term power
purchase agreement entered into pursuant to PURPA. The U.S. Supreme Court has
denied petitions for review filed by JCP&L and the Ratepayer Advocate. JCP&L
also petitioned the FERC to invalidate the agreement as unlawful under PURPA.
The FERC has denied JCP&L's petition and in February 1996 JCP&L requested the
U.S. Court of Appeals to review the FERC's decision. JCP&L is also seeking to
invalidate the Freehold power purchase agreement in a separate action pending
in New Jersey Superior Court. Freehold has moved to dismiss JCP&L's claim,
and the matter is pending. JCP&L believes that over the 20-year term of the
agreement, the above market costs of this contract will amount to
approximately $1.2 billion over alternative sources of energy.
In 1994, MidAtlantic Cogen Inc. requested the PaPUC to order Met-Ed to
enter into a long-term agreement to buy 322 MW of capacity and energy from its
Fairless Cogeneration Project. The PaPUC subsequently ordered that hearings
be held and assigned the matter to an ALJ. Met-Ed moved to dismiss
MidAtlantic's petition and, in February 1996, an ALJ issued a recommended
decision granting Met-Ed's request. This matter is pending before the PaPUC.
JCP&L has entered into agreements with other utilities to purchase
capacity and energy for various periods through 2004. These agreements will
provide for up to 1,085 MW in 1996, declining to 878 MW in 1999 and 696 MW in
2004. Payments pursuant to these agreements are estimated to be $174 million
in 1996, $164 million in 1997, $145 million in 1998, $124 million in 1999, and
$95 million in 2000. Applications for approval of three of these agreements
are pending before the NJBPU. These three agreements provide for the purchase
of up to 351 MW in 1996, increasing to 696 MW in 1999, with payments pursuant
to these agreements estimated to be $11 million in 1996, $37 million in 1997,
$57 million in 1998, $82 million in 1999, and $95 million in 2000.
In January 1996, JCP&L issued an all-supply source solicitation for the
short-term supply of energy and capacity to meet its minimum forecasted needs
from 1999 through 2002 (see New Energy Supplies, in MANAGEMENT'S DISCUSSION
AND ANALYSIS).
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RATE PROCEEDINGS
Pennsylvania
In January 1996, Met-Ed filed a preliminary Energy Cost Rate (ECR)
request with the PaPUC for an annual increase of $23.6 million, representing a
2.9% increase in overall retail customer charges. Met-Ed's request is
primarily attributable to an increase in payments under NUG contracts and
recovery of $17 million of buy-out costs for canceled NUG projects after
giving effect to lower energy costs resulting from an anticipated increase in
TMI-1 generation. The ECR change is proposed to go into effect April 1, 1996.
Also in January 1996, Penelec filed a preliminary ECR request with the
PaPUC for an annual increase of $31.9 million, representing a 3.8% increase in
overall retail customer charges. Penelec's request is primarily attributable
to an increase in payments under NUG contracts and the per unit cost of coal-
fired generation after giving effect to lower energy costs resulting from an
anticipated increase in TMI-1 generation. The ECR change is proposed to go
into effect April 1, 1996.
In September 1995, a Pennsylvania Supreme Court decision overturned a
1994 Commonwealth Court order and restored a 1993 PaPUC rate order allowing
Met-Ed to recover certain TMI-2 retirement costs from customers (see NUCLEAR
PLANT RETIREMENT COSTS - TMI-2 Future Costs).
In 1994, at the request of the PaPUC, the affected Pennsylvania electric
utilities have submitted to the PaPUC proposals for the establishment of a
nuclear performance standard. The matter is pending before the PaPUC.
New Jersey
In December 1995, JCP&L filed a petition with the NJBPU requesting a net
increase in overall retail customer rates of $36.5 million annually, or an
increase of 1.8%, effective March 1, 1996. The proposed increase is primarily
related to JCP&L's demand side management programs, levelized energy
adjustment clause (LEAC) charges, which include recovery of costs to buy out
NUG contracts, and other tariff revisions.
Concurrent with the its proposed March 1996 LEAC change, JCP&L filed a
petition with the NJBPU to implement a Manufactured Gas Plant Remediation
Adjustment Clause (RAC) for the recovery of underrecovered Manufactured Gas
Plant (MGP) costs. The RAC mechanism, which was approved by the NJBPU in
December 1994, provides for the recovery of MGP costs, net of insurance and
other recoveries, over rolling seven year periods with interest on any
unamortized balance. In its petition, JCP&L proposes to recover $44,000
annually through the RAC.
In July 1995, New Jersey adopted energy rate-flexibility legislation that
will enable electric utilities to offer rate discounts to certain customers.
If certain conditions are met, utilities may be permitted to recover from
customers, on a prospective basis following a base rate case, up to 50% of
revenue lost as a result of rate discounts. JCP&L has submitted its initial
compliance filing which sets forth JCP&L's minimum price for off-tariff rate
agreements applicable to commercial and industrial customers. The legislation
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also provides utilities with the opportunity to propose to the NJBPU
alternative ways to set rates. JCP&L expects to file such an alternative rate
plan with the NJBPU in 1996.
JCP&L's two operating nuclear units are subject to the NJBPU's annual
nuclear performance standard. Operation of these units at an aggregate annual
generating capacity factor below 65% or above 75% would trigger a charge or
credit based on replacement energy costs. At current cost levels, the maximum
annual effect of the performance standard charge at a 40% capacity factor
would be approximately $10 million before tax. While a capacity factor below
40% would generate no specific monetary charge, it would require the issue to
be brought before the NJBPU for review. The annual measurement period, which
begins in March of each year, coincides with that used for the LEAC.
The NJBPU has instituted a generic proceeding to address the appropriate
recovery of capacity costs associated with electric utility power purchases
from NUG projects. The proceeding was initiated, in part, to respond to
contentions of the Ratepayer Advocate that by permitting utilities to recover
such costs through the LEAC, an excess or "double" recovery may result when
combined with the recovery of the utilities' embedded capacity costs through
their base rates. In 1994, the NJBPU ruled that the LEAC periods prior to
March 1991 were considered closed but subsequent LEAC periods remain open for
further investigation. This matter is pending before a NJBPU Administrative
Law Judge. JCP&L estimates that the potential refund liability for the LEAC
periods from March 1991 through February 1996, the end of the most recent LEAC
period, is $55 million. There can be no assurance as to the outcome of this
proceeding.
CAPITAL PROGRAMS
General
During 1995, gross plant additions were approximately $459 million (JCP&L
$232 million; Met-Ed $101 million; Penelec $123 million; GPUSC $3 million)
attributable principally to improvements and modifications to existing
generation, transmission and distribution facilities, a new generation
facility, and clean air requirements. Expenditures for maturing obligations
totaled $91 million (JCP&L $47 million; Met-Ed $41 million; GPUSC $3 million)
in 1995. In addition, the EI Group made investments in 1995 totaling $165
million, consisting primarily of investments in generation facilities in South
America and an electric distribution business in Australia (see THE EI GROUP).
The principal categories of the 1996 anticipated Subsidiary construction
expenditures, which include anticipated expenditures by GPUSC and an allowance
for other funds used during construction, are as follows:
(In Millions)
1996
GPU JCP&L Met-Ed Penelec
Generation - Nuclear $ 57 $ 41 $11 $ 5
Nonnuclear 82 26 15 41
Total Generation 139 67 26 46
Transmission & Distribution 269 140 60 69
Other 83 49 11 9
Total $491 $256 $97 $124
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The anticipated increase in construction expenditures during 1996 is
principally attributable to expenditures associated with ongoing system
development and upgrading JCP&L's communication system. Gross plant additions
are expected to be approximately $437 million in 1997 (JCP&L $200 million;
Met-Ed $108 million; Penelec $116 million; GPUSC $13 million). The decrease
in construction expenditures during 1997 is largely due to the anticipated
completion in 1996 of JCP&L's communication system and a new generation
facility. During 1996 and 1997, GPU will continue to provide the EI Group
with capital contributions and credit support (in amounts which may be
substantial) as project investment opportunities arise. In addition,
expenditures for maturing obligations are expected to be $131 million for 1996
(JCP&L $36 million; Met-Ed $15 million; Penelec $75 million; GPUSC $3 million;
EI Group $2 million) and $158 million for 1997 (JCP&L $86 million; Met-Ed $40
million; Penelec $26 million; GPUSC $3 million; EI Group $3 million).
GPU and the Subsidiaries estimate that a substantial portion of their
anticipated total capital needs in each of 1996 and 1997 will be satisfied
through internally generated funds.
The Subsidiaries expect to obtain the remainder of these funds
principally through the sale, subject to market conditions, of first mortgage
bonds (FMBs). The Subsidiaries' FMB indentures and charters include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Subsidiaries may issue (see LIMITATIONS ON ISSUING ADDITIONAL
SECURITIES). Present plans call for the Subsidiaries to issue long-term debt
during the next three years to, among other things, finance construction
activities and fund the redemption of maturing senior securities.
The GPU System's gross plant additions exclude nuclear fuel requirements
provided under capital leases that amounted to $52 million (JCP&L $19 million;
Met-Ed $22 million; Penelec $11 million) in 1995. When consumed, the
presently leased material, which amounted to $152 million (JCP&L $88 million;
Met-Ed $43 million; Penelec $21 million) at December 31, 1995, is expected to
be replaced by additional leased material at a rate of between $40 million and
$45 million (JCP&L $20 million - $25 million; Met-Ed $13 million; Penelec $7
million) annually. In the event the replacement nuclear fuel needs cannot be
leased, the associated capital requirements would have to be met by other
means.
Over the next five years, assuming the continuation of existing retail
electric regulation, each of the Subsidiaries is expected to experience an
average growth in sales to customers of about 2% annually, principally due to
continued economic growth in the service territories and a slight increase in
customers. The Subsidiaries intend to provide for these increased energy
needs through a mix of economic supply sources.
In response to the increasingly competitive business climate and excess
capacity of nearby utilities, the GPU System's supply plan places an emphasis
on maintaining flexibility. Supply planning focuses increasingly on short- to
intermediate-term commitments, reliance on "spot" market purchases, and
avoidance of long-term firm commitments. GPU's present strategy includes
minimizing the financial exposure associated with new long-term purchase
commitments and the construction of new facilities by evaluating these options
in terms of an unregulated power market. As part of this strategy, GPU is
also evaluating the future financial viability of its generating assets,
including possible plant retirements, on an ongoing basis. The GPU System
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will take necessary actions to avoid adding new capacity which would result in
costs that may exceed future market prices. In addition, the Subsidiaries
will continue to seek regulatory support to renegotiate or buy out contracts
with NUGs where the pricing is in excess of projected prices of alternative
sources.
In February 1996, JCP&L announced plans to close the 58 MW Werner Unit 4
and 72 MW Gilbert Unit 3 generating plants due to high operating costs. The
combined remaining investment in these plants is approximately $15 million at
December 31, 1995. JCP&L has not determined whether it will seek recovery of
such costs through the ratemaking process.
Conservation and Load Management
The NJBPU and PaPUC continue to encourage the development of new
conservation and load-management programs. The benefits of some of these
programs may not, however, offset program costs and the Subsidiaries are
working to mitigate the impacts these programs can have on their competitive
position in the marketplace.
In New Jersey, JCP&L continues to conduct DSM programs approved in 1992
by the NJBPU. DSM includes utility-sponsored activities designed to improve
energy efficiency in customer electricity use and load-management programs
that reduce peak demand. These JCP&L programs have resulted in summer peak
demand reductions of 79 MW through 1995. In August 1995, JCP&L filed a
revised DSM plan for NJBPU approval covering programs for 1996 and 1997. This
filing is currently under review by the NJBPU.
In a December 1993 order, the PaPUC adopted guidelines for the recovery
of DSM costs and directed utilities to implement DSM programs. Met-Ed and
Penelec subsequently filed DSM programs that were expected to be approved by
the PaPUC in the first quarter of 1995. An industrial intervenor contested
the PaPUC's guidelines. In January 1995, the Commonwealth Court reversed the
PaPUC order and in February 1996 the Pennsylvania Supreme Court upheld the
Commonwealth Court's decision. As a result, the nature and scope of Met-Ed
and Penelec's DSM programs is uncertain at this time.
FINANCING ARRANGEMENTS
The Corporation and the Subsidiaries expect to have short-term debt
outstanding from time to time throughout 1996. The peak in short-term debt
outstanding is expected to occur in the spring, coinciding with normal cash
requirements for revenue tax payments.
The GPU System has $529 million of credit facilities, which includes a
Revolving Credit Agreement (Credit Agreement) with a consortium of banks. The
credit facilities generally provide for the payment of a commitment fee on the
unborrowed amount of 1/8 of 1% annually. Borrowings under these credit
facilities generally bear interest based on the prime rate or money market
rates. Notes issued under the Credit Agreement, which expires November 1,
1999, are limited to $250 million in total borrowings outstanding at any time
and are subject to various covenants and acceleration under certain
conditions. The Credit Agreement borrowing rates and facility fee are
dependent on the long-term debt ratings of the Subsidiaries.
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In 1995, GPU sold five million shares of common stock. The net proceeds
of $157.5 million were used to make cash capital contributions to the
Subsidiaries and to repay GPU short-term debt, a portion of which had been
incurred to acquire interests in a generating company in Bolivia and the
Solaris distribution business in Australia.
The Subsidiaries have regulatory authority to issue and sell FMBs, which
may be issued as secured medium-term notes, and preferred stock through
various periods into 1997. Under existing authorizations, JCP&L, Met-Ed and
Penelec may issue these senior securities in aggregate amounts of $225
million, $190 million and $160 million, respectively, of which $100 million
for each Subsidiary may consist of preferred stock. The Subsidiaries also
have regulatory authority to incur short-term debt, a portion of which may be
through the issuance of commercial paper.
In 1995, the Subsidiaries issued an aggregate of $338 million (JCP&L $50
million; Met-Ed $89 million; Penelec $199 million) principal amount of FMBs.
The proceeds from these issuances were used to refinance $128 million (Met-Ed
$29 million; Penelec $99 million) principal amount of higher cost FMBs, to
redeem at maturity $59 million (JCP&L $47 million; Met-Ed $12 million)
principal amount of FMBs, to moderate short-term debt levels and to fund
growth in capitalization. In addition, the EI Group has borrowed $68 million
under a credit agreement, the proceeds of which were used primarily to finance
the acquisition of Solaris (see THE EI GROUP).
JCP&L Capital, L.P., a special-purpose partnership in which a subsidiary
of JCP&L is the sole general partner, issued $125 million stated value of
mandatorily redeemable preferred securities. The proceeds from the issuance
were used to reduce JCP&L short-term debt and retire senior securities. Also
in 1995, JCP&L repurchased $6 million stated value of cumulative preferred
stock. The repurchased shares may be used to satisfy future sinking fund
requirements.
In March 1996, JCP&L and Penelec expect to redeem approximately $26
million and $25 million principal amount of 6 1/8% series and 6 1/4% series
FMBs, respectively, using lower cost short-term debt.
Present plans call for the Subsidiaries to issue long-term debt during
the next three years to finance construction activities, fund the redemption
of maturing senior securities, and depending on interest rates, refinance
outstanding senior securities. In addition, significant further investments
by the EI Group, or otherwise, may require GPU to issue additional debt and/or
new shares of common stock.
During 1995, the Subsidiaries refinanced their nuclear fuel lease
agreements with nonaffiliated fuel trusts. The new lease arrangements provide
that an aggregate of up to $210 million ($100 million for Oyster Creek and
$110 million for TMI-1) of nuclear fuel costs may be outstanding at any one
time. It is contemplated that when consumed, portions of the presently leased
material will be replaced by additional leased material. The Subsidiaries are
responsible for the disposal costs of nuclear fuel leased under these
agreements.
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LIMITATIONS ON ISSUING ADDITIONAL SECURITIES
The Subsidiaries' FMB indentures and/or charters contain provisions which
limit the total amount of securities evidencing secured indebtedness and/or
unsecured indebtedness which the Subsidiaries may issue, the more restrictive
of which are discussed below.
The Subsidiaries' FMB indentures require that, for a period of any twelve
consecutive months out of the fifteen calendar months immediately preceding
the issuance of additional FMBs, net earnings (before income taxes, with other
income limited to 5% of operating income before income taxes for JCP&L and
Met-Ed and 10% for Penelec) available for interest on FMBs shall have been at
least twice the annual interest requirements on all FMBs to be outstanding
immediately after such issuance. Moreover, the Subsidiaries' FMB indentures
restrict the ratio of the principal amount of FMBs which may be issued to not
more than 60% of available bondable value of property additions. In addition,
the indentures, in general, permit the Subsidiaries to issue additional FMBs
against a like principal amount of previously issued and retired FMBs.
At December 31, 1995, the net earnings requirement under the
Subsidiaries' FMB indentures, as described above, would have permitted JCP&L,
Met-Ed and Penelec to issue $1.3 billion, $537 million and $724 million,
respectively, principal amount of additional FMBs at an assumed 8% interest
rate. However, the Subsidiaries had bondable value of property additions
sufficient to permit JCP&L, Met-Ed and Penelec to only issue approximately
$330 million, $383 million and $236 million, respectively, principal amount of
additional FMBs. In addition, the Subsidiaries' FMB indentures would have
permitted JCP&L, Met-Ed and Penelec to issue approximately $316 million, $46
million and $107 million, respectively, of FMBs against a like principal
amount of previously issued and retired FMBs.
Among other restrictions, the Subsidiaries' charters provide that without
the consent of the holders of two-thirds of the outstanding preferred stock,
no additional shares of preferred stock may be issued unless, for a period of
any twelve consecutive months out of the fifteen calendar months immediately
preceding such issuance, the after-tax net earnings available for the payment
of interest on indebtedness shall have been at least one and one-half times
the aggregate of (a) the annual interest charges on indebtedness and (b) the
annual dividend requirements on all shares of preferred stock to be
outstanding immediately after such issuance. At December 31, 1995, these
provisions would have permitted JCP&L, Met-Ed and Penelec to issue $1.2
billion, $1.0 billion and $778 million, respectively, stated value of
cumulative preferred stock at an assumed 7.5% dividend rate.
The Subsidiaries' charters also provide that, without the consent of the
holders of a majority of the total voting power of the Subsidiaries'
outstanding preferred stock, the Subsidiaries may not issue or assume any
securities representing short-term unsecured indebtedness, except to refund
certain outstanding unsecured securities issued or assumed by the Subsidiaries
or to redeem all outstanding preferred stock, if immediately thereafter the
total principal amount of all outstanding unsecured debt securities having an
initial maturity of less than ten years (or within 3 years of maturity for
JCP&L) would exceed 10% of the aggregate of (a) the total principal amount of
all outstanding secured indebtedness issued or assumed by the Subsidiaries and
(b) the capital and surplus of the Subsidiaries. At December 31, 1995, these
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restrictions would have permitted JCP&L, Met-Ed and Penelec to have
approximately $288 million, $132 million and $147 million, respectively, of
unsecured indebtedness outstanding.
The Subsidiaries have obtained authorization from the SEC to incur short-
term debt (including indebtedness under the Credit Agreement and commercial
paper) up to the Subsidiaries' charter limitations.
REGULATION
As a registered holding company, GPU is subject to regulation by the SEC
under the 1935 Act. The GPU System companies are also subject to regulation
under the 1935 Act with respect to accounting, the issuance of securities, the
acquisition and sale of utility assets, securities or any other interest in
any business, the entering into, and performance of, service, sales and
construction contracts, and certain other matters. The SEC has determined
that the electric facilities of the Subsidiaries constitute a single
integrated public utility system under the standards of the 1935 Act. The
1935 Act also limits the extent to which the GPU System may engage in
nonutility businesses. Each Subsidiary's retail rates, conditions of service,
issuance of securities and other matters are subject to regulation in the
state in which such Subsidiary operates - in New Jersey by the NJBPU and in
Pennsylvania by the PaPUC. Additionally, Penelec, as lessee, operates the
facilities serving the village of Waverly, New York. Penelec's retail rates
for New York customers, as well as Penelec's New York operations and property,
are subject to regulation by the New York Public Service Commission. Although
Penelec does not render electric service in Maryland, the Public Service
Commission of Maryland has jurisdiction over the portion of Penelec's property
located in that state. Moreover, with respect to wholesale rates, the
transmission of electric energy, accounting, the construction and maintenance
of hydroelectric projects and certain other matters, the Subsidiaries are
subject to regulation by the FERC under the Federal Power Act. The NRC
regulates the construction, ownership and operation of nuclear generating
stations and other related matters. JCP&L is also subject, in certain
respects, to regulation by the PaPUC in connection with its participation in
the ownership and operation of certain facilities located in Pennsylvania.
(See ELECTRIC GENERATION AND THE ENVIRONMENT - Environmental Matters for
additional regulation to which the Subsidiaries are or may be subject.)
Solaris, EI Energy's electric distribution subsidiary in Australia, is
subject to regulation by the Office of the Regulator General. Solaris'
network and connection charges are subject to regulatory review every five
years, with the next review scheduled for January 1, 2000. In addition,
Solaris' franchise license becomes nonexclusive in stages through the year
2001, at which time all customers will be permitted to choose their source of
electric supply. Empresa Guaracachi S.A., EI Power's electric generation
subsidiary in Bolivia, is subject to regulation under the Electricity Law of
1994. Twice each year, the Superintendency of Electricity recalculates the
prices that Empresa Guaracachi S.A. and other electric generators may charge
for capacity based upon an estimated cost of constructing a new generating
unit. In addition, energy prices are recalculated semi-annually based upon a
projected cost of generation, including fuel and nonfuel variable operation
and maintenance costs.
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ELECTRIC GENERATION AND THE ENVIRONMENT
Fuel
The Subsidiaries utilized fuels in the generation of electric energy
during 1995 in approximately the following percentages:
GPU JCP&L Met-Ed Penelec
Coal 58% 20% 56% 88%
Nuclear 38% 71% 41% 13%
Gas 3% 7% 2% -
Oil 1% 3% - -
Other* - (1)% 1% (1)%
* Represents hydro and pumped storage (which is a net user of electricity).
Approximately 41% (JCP&L 56%; Met-Ed 40%; Penelec 32%) of the
Subsidiaries' total energy requirements in 1995 was supplied by purchases and
interchange from other utilities and NUGs. For 1996, the Subsidiaries estimate
that their generation of electric energy will be in the following proportions:
GPU JCP&L Met-Ed Penelec
Coal 62% 25% 55% 88%
Nuclear 34% 66% 41% 12%
Gas 3% 10% 2% -
Oil 1% 3% - -
Other* - (4)% 2% -
* Represents hydro and pumped storage.
The anticipated changes in 1996 fuel utilization percentages are
principally attributable to a refueling outage at Oyster Creek scheduled for
September 1996. Approximately 41% (JCP&L 60%; Met-Ed 38%; Penelec 27%) of the
Subsidiaries' 1996 energy requirements are expected to be supplied by
purchases and interchange from other utilities and NUGs.
Fossil: The Subsidiaries have entered into long-term contracts with
nonaffiliated mining companies for the purchase of coal for certain generating
stations in which they have ownership interests (JCP&L - 16.67% ownership
interest in Keystone; Met-Ed - 16.45% ownership interest in Conemaugh; and
Penelec - 50% ownership interest in Homer City). The contracts, which expire
between 1996 and 2004, require the purchase of either fixed or minimum amounts
of coal. The price of the coal under the contracts is based on adjustments of
indexed cost components. One of Penelec's contracts for Homer City also
includes a provision for the payment of postretirement benefits costs. The
Subsidiaries' share of the cost of coal purchased under these agreements is
expected to aggregate $115 million (JCP&L $20 million; Met-Ed $18 million;
Penelec $77 million) for 1996.
The Subsidiaries' coal-fired generating stations now in service are
estimated to require an aggregate of 167 million tons (JCP&L 15 million tons;
Met-Ed 41 million tons; Penelec 111 million tons) of coal over the next twenty
years. Of this total requirement, approximately 10 million tons (JCP&L 3
million tons; Penelec 7 million tons) are expected to be supplied by
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nonaffiliated mine-mouth coal companies with the balance supplied through
short- and long-term contracts and spot market purchases.
At the present time, adequate supplies of fossil fuels are readily
available to the Subsidiaries, but this situation could change rapidly as a
result of actions over which they have no control.
Nuclear: Preparation of nuclear fuel for generating station use involves
various manufacturing stages for which the GPU System contracts separately.
Stage I involves the mining and milling of uranium ores to produce natural
uranium concentrates. Stage II provides for the chemical conversion of the
natural uranium concentrates into uranium hexafluoride. Stage III involves
the process of enrichment to produce enriched uranium hexafluoride from the
natural uranium hexafluoride. Stage IV provides for the fabrication of the
enriched uranium hexafluoride into nuclear fuel assemblies for use in the
reactor core at the nuclear generating station.
For TMI-1, under normal operating conditions, there is, with minor
planned modifications, sufficient on-site storage capacity to accommodate
spent nuclear fuel through the end of its licensed life while maintaining the
ability to remove the entire reactor core. As a result of completion of an
interim spent fuel dry storage facility in early 1996, Oyster Creek also has
sufficient on-site storage capacity to accommodate, under normal operating
conditions, its spent nuclear fuel while maintaining the ability to remove the
entire reactor core.
Environmental Matters
The GPU System is subject to a broad range of federal, state and local
environmental and employee health and safety legislation and regulations. In
addition, the Subsidiaries are subject to licensing of hydroelectric projects
by the FERC and of nuclear power projects by the NRC. Such licensing and
other actions by federal agencies with respect to projects of the Subsidiaries
are also subject to the National Environmental Policy Act.
As a result of existing and proposed legislation and regulations, and
ongoing legal proceedings dealing with environmental matters, including but
not limited to acid rain, water quality, air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, the GPU System may be required to incur substantial additional costs
to construct new equipment, modify or replace existing and proposed equipment,
remediate, decommission or clean up waste disposal and other sites currently
or formerly used by it, including formerly owned MGPs and mine refuse piles
and generating facilities, and with regard to electromagnetic fields, postpone
or cancel the installation of, or replace or modify, utility plant, the costs
of which could be material. The consequences of environmental issues, which
could cause the postponement or cancellation of either the installation or
replacement of utility plant, are unknown. The GPU System believes the costs
described above should be recoverable through the ratemaking process but
recognizes that recovery cannot be assured.
Water: The federal Water Pollution Control Act (Clean Water Act)
generally requires, with respect to existing steam electric power plants, the
application of the best conventional or practicable pollutant control
technology available and compliance with state-established water quality
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standards. Additionally, water quality-based effluent limits (more stringent
than "technology" limits) may be applied to utility waste water discharges
based on receiving stream quality. With respect to future plants, the Clean
Water Act requires the application of the "best available demonstrated control
technology, processes, operating methods or other alternatives."
The U.S. Environmental Protection Agency (EPA) has adopted regulations
that establish thermal and other limitations for effluents discharged from
both existing and new steam electric generating stations. Standards of
performance are developed and enforcement of effluent limitations is
accomplished through the issuance by the EPA, or states authorized by the EPA,
of discharge permits that specify limitations to be applied. Discharge
permits are required for all of the Subsidiaries' steam generating stations.
JCP&L's discharge permits have expired, and timely reapplications have been
filed as required by regulations. Until new permits are issued, JCP&L's
currently expired permits remain in effect. JCP&L has also filed an
application with the New Jersey Department of Environmental Protection (NJDEP)
for a discharge permit for its Yards Creek pumped storage facility. Discharge
permits have been reissued for Met-Ed's Titus and York Haven stations and
administratively extended for the Portland station pending action by the
Pennsylvania Department of Environmental Protection (PaDEP) on timely
reapplication. Penelec has obtained all required discharge permits.
The discharge permit received by JCP&L for the Oyster Creek station may,
among other things, require the installation of a closed-cycle cooling system,
such as a cooling tower, to meet New Jersey state water quality-based thermal
effluent limitations. Although construction of such a system is not required
in order to meet the EPA's regulations setting effluent limitations for the
Oyster Creek station (such regulations would accept the use of the once-
through cooling system now in operation at this station), a closed-cycle
cooling system may be required in order to comply with the water quality
standards imposed by the NJDEP for water quality certification and
incorporated in the station's discharge permit. If a cooling tower is
required, the capital costs could exceed $150 million. In October 1994,
following six years of studies, the NJDEP issued a new Discharge to Surface
Water Permit for the Oyster Creek station. The new permit grants JCP&L a
variance from the New Jersey Surface Water Quality Standards. The variance
allows the continued operation of the existing once-through cooling system
without modifications such as cooling towers. The variance is effective
through October 1999. The NJDEP could revoke the variance at any time upon
failure to comply with the permit conditions.
The NJDEP has proposed thermal and other conditions for inclusion in the
discharge permits for JCP&L's Gilbert and Sayreville generating stations
which, among other things, could require JCP&L to install cooling towers
and/or modify the water intake/discharge systems at these facilities. JCP&L
has objected to these conditions and has requested an adjudicatory hearing
with respect thereto. Implementation of these permit conditions has been
stayed pending action on JCP&L's hearing request. JCP&L has made filings with
the NJDEP that, JCP&L believes, demonstrate compliance with state water
quality standards at the Gilbert generating station and justify the issuance
of a thermal variance at the Sayreville generating station to permit the
continued use of the present once-through cooling system. Based on the
NJDEP's review of these demonstrations, substantial modifications may be
required at these stations, which may result in material capital expenditures.
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The Subsidiaries are also subject to environmental and water diversion
requirements adopted by the Delaware River Basin Commission and the
Susquehanna River Basin Commission as administered by those commissions or the
PaDEP and the NJDEP.
In 1993, York Haven Power Company, a wholly-owned subsidiary of Met-Ed,
entered into an agreement with various agencies to construct a fish passage
facility at the York Haven hydroelectric project by the year 2000. The
present estimated installed cost of the facility is $8.5 million.
Construction is expected to begin in 1998.
Nuclear: Reference is made to NUCLEAR FACILITIES for information
regarding the TMI-2 accident, its aftermath and the GPU System's other nuclear
facilities.
New Jersey and Connecticut have established the Northeast Compact, to
construct a low level radioactive waste (radwaste) disposal facility in New
Jersey. The estimated cost to license and build the facility is $100 million.
GPUN's minimum expected $29.5 million share of the cost for this facility is
to be paid annually over a six-year period from 1992 to 1997. In a February
1993 rate order, the NJBPU authorized JCP&L to recover these amounts currently
from customers. Through December 1995, $6 million has been paid. The
development of the facility is expected to continue after 1997 which will most
likely result in additional costs in excess of $29.5 million.
Pennsylvania, Delaware, Maryland and West Virginia have established the
Appalachian Compact (which includes eleven nuclear power plants - 9 in
Pennsylvania and 2 in Maryland) to construct a facility for the disposal of
low level radwaste in those states, including low level radwaste from TMI-1.
To date $33 million, of a minimum estimated $88 million, of pre-construction
costs has been paid. The eleven plants have so far shared equally in the pre-
construction cost, including GPUN which has contributed $3 million. All
contributors, including nonutility radwaste producers within the compact that
make voluntary contributions, will receive certain credits from surcharges
paid by all depositors of waste over a ten-year period. The methodology for
the allocation of these credits has yet to be determined. In addition,
$50 million of estimated construction costs will be funded by an independent
contractor and recovered by the contractor through waste disposal fees
collected during the first five years of the facility's operation.
GPUN is currently shipping low level radwaste to the Barnwell, South
Carolina radwaste disposal site. The development of the Northeast Compact
disposal facility is expected to continue beyond 1997, the projected
completion date. The Appalachian Compact disposal facility is currently
scheduled to open in June 1999. Continuing delays in the completion of the
disposal facilities will require GPUN to perform an evaluation of its ability
to safely store radwaste beyond these dates.
The Subsidiaries have provided for future contributions to the
Decontamination and Decommissioning Fund (part of the EPAct) for the cleanup
of uranium enrichment plants operated by the Federal Government. The GPU
System's total liability at December 31, 1995 amounted to $36 million (JCP&L
$23 million; Met-Ed $9 million; Penelec $4 million). The Subsidiaries made
their initial payment in 1993. The remaining amount recoverable from
ratepayers at December 31, 1995 is $39 million (JCP&L $25 million; Met-Ed $9
million; Penelec $5 million).
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Air: The Subsidiaries are subject to certain state environmental
regulations of the NJDEP and the PaDEP. The Subsidiaries are also subject to
certain federal environmental regulations of the EPA.
Current Pennsylvania environmental regulations prescribe criteria that
generally limit the sulfur dioxide content of stack gas emissions from
Penelec's generating stations constructed before 1972 and stations constructed
after 1971 but before 1978, to 3.7 pounds and 1.2 pounds per million BTU of
heat input, respectively. In the case of Met-Ed's facilities, the sulfur
dioxide content of stack gas emissions is limited to 2.8 pounds or 3.7 pounds
per million BTU of heat input depending on location. On a weighted average
basis, the Subsidiaries have been able to obtain coal with a sulfur content
meeting these criteria. If, and to the extent that, the Subsidiaries cannot
continue to meet such limitations with processed coal, it may be necessary to
retrofit operating stations with sulfur dioxide control equipment that may
require substantial capital expenditures as well as substantial additional
operating costs. Such retrofitting would take approximately five years.
As a result of the Clean Air Act, which requires substantial reductions
in sulfur dioxide and nitrogen oxide (NOx) emissions by the years 1995 and
2000, it will be necessary for the GPU System to install and operate emission
control equipment as well as switch to slightly lower sulfur coal at some of
the GPU System's coal-fired plants in order to achieve compliance. To comply
with Title IV (the acid rain provisions) of the Clean Air Act, the GPU System
expects to spend up to $410 million (JCP&L $42 million; Met-Ed $158 million;
Penelec $210 million) for air pollution control equipment by the year 2000, of
which approximately $234 million (JCP&L $41 million; Met-Ed $100 million;
Penelec $93 million) has been spent as of December 31, 1995. The capital
costs of equipment are for the installation of scrubbers, low NOx burner
technology, selective noncatalytic reduction and particulate removal upgrades.
The capital costs of this equipment and the increased operating costs of the
affected stations are expected to be recoverable through the ratemaking
process but recovery is not assured. The second of two scrubbers was
completed at the Conemaugh station during 1995. This action is part of the
GPU System's plans to comply with Clean Air Act sulfur dioxide emission
limitations. In its January 1993 rate order, the PaPUC approved Met-Ed's
request for $24.5 million of current expenditures to be included in rate base
representing certain costs associated with the installation of scrubbers at
the Conemaugh station and other environmental compliance projects. The plan
for the Portland station is to meet its Phase I compliance obligation through
the use of sulfur dioxide emission allowances, including allowances allocated
directly to Portland station by the EPA and allowances resulting from the
installation of scrubbers at the Conemaugh station. Shawville station will
require lower sulfur coal and/or the purchase of emission allowances to meet
its Phase I requirements.
The GPU System's current strategy for Phase II compliance under Title IV
of the Clean Air Act is to evaluate the installation of scrubbers, the use of
fuel switching and allowances at the Keystone station and at the Homer City
Unit 3 station. Switching to lower sulfur coal and/or the purchasing of
allowances is currently planned for the Titus, Seward, Portland, Shawville and
Warren stations. Homer City Units 1 and 2 will use existing coal cleaning
technology. Additional control modifications are not expected to be necessary
for compliance with Title IV in Phase II at Conemaugh, Gilbert and Sayreville
stations.
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The GPU System continues to reassess its options for compliance with the
Clean Air Act including those that may result from the continued development
of the emission trading allowance market. The GPU System's compliance
strategy, especially with respect to Phase II, could change as a result of
further review, discussions with co-owners of jointly owned stations and
changes in federal and state regulatory requirements.
The ultimate impact of Title I of the Clean Air Act, which deals with the
attainment of ambient air quality standards, is highly uncertain. In
particular, this Title has established an ozone transport region that includes
12 northeast states and the District of Columbia identified as the Ozone
Transport Region (OTR). Pennsylvania and New Jersey are part of the OTR, and
will be required to control NOx emissions to a level that will provide for the
attainment of the ozone standard in the Northeast. As an initial step, major
sources of NOx were required to implement Reasonably Available Control
Technology (RACT) by May 31, 1995. Compliance with the PaDEP's RACT
regulations has been achieved through operational modifications and
installation of low NOx burners with separate overfire air at the Keystone,
Titus, Portland and Conemaugh stations. An extension of time has been
obtained to bring Homer City Units 1 and 2 into compliance with the PaDEP's
RACT regulations. The NJDEP's RACT regulations establish maximum allowable
emission rates for utility boilers based on fuel used and boiler type, and on
combustion turbines based on fuel used. Existing units are eligible for
emissions averaging upon approval of an averaging plan by the NJDEP. A
Memorandum of Understanding (MOU) has been signed by the members of the Ozone
Transport Commission (OTC). This calls for inner and outer zones with
seasonal NOx emission reductions of 65% and 55%, from 1990 emission levels,
respectively, by May 1, 1999. Met-Ed and Penelec will spend an estimated $10
million and $50 million, respectively, to meet the reductions set by the OTC.
The MOU also calls for a 75% reduction by May 2003, unless scientific data
shows this level of reduction is unnecessary to achieve the Clean Air Act's
2005 National Ambient Air Quality Standard (NAAQS) for ozone. The ultimate
impact of Title III of the Clean Air Act, which deals with emissions of
hazardous air pollutants, is also highly uncertain. Specifically, the EPA
has not completed a Clean Air Act study to determine whether it is appropriate
to regulate emissions of hazardous air pollutants from electric utility steam
generating units.
Both the EPA and the PaDEP are questioning the attainment of NAAQS for
sulfur dioxide in the vicinity of the Chestnut Ridge Energy Complex (Homer
City, Conemaugh, Keystone and Seward generating stations). The Homer City,
Conemaugh and Keystone stations are jointly owned with nonaffiliated
utilities. The EPA and the PaDEP have approved the use of a nonguideline air
quality model to evaluate the ambient air quality impacts of these generating
stations. This nonguideline model is more representative and less
conservative than the EPA guideline model and will be used in the development
of a compliance strategy for all generating stations in the Chestnut Ridge
Energy Complex.
The area around the Warren station has been designated as nonattainment
for sulfur dioxide. In early 1993, Penelec began a model evaluation study of
the area. The PaDEP and the EPA have approved the use of the nonguideline
model which is more representative than guideline models. A model evaluation
study has also been conducted at Shawville station. The results of this
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study, which remain subject to PaDEP approval, show attainment of the NAAQS at
the Shawville station with current Pennsylvania sulfur dioxide emission
limits.
The sulfur dioxide attainment issue has been taken into account as part
of the design of the Conemaugh station scrubbers. Met-Ed has initiated
ambient air quality modeling studies for its Portland and Titus stations that
will take several years to complete. While the results are uncertain, these
studies may result in a revised Pennsylvania State Implementation Plan (PaSIP)
in order to attain NAAQS for sulfur dioxide. If sulfur dioxide emissions need
to be reduced to meet the new PaSIP, Met-Ed will reevaluate its options
available for Portland and Titus stations.
Based on the results of the studies pursuant to compliance with NAAQS,
significant sulfur dioxide reductions may be required at one or more of these
stations which could result in significant capital and additional operating
expenditures.
Certain other environmental regulations limit the amount of particulate
matter emitted into the environment. The Subsidiaries have installed
equipment at their coal-fired generating stations and may find it necessary to
either upgrade or install additional equipment at certain of their stations to
consistently meet particulate emission requirements.
In the fall of 1993, the Clinton Administration announced its Climate
Change Action Plan intended to reduce greenhouse gas emissions to 1990 levels
by the year 2000. The Climate Change Action Plan relies heavily on voluntary
action by industry. GPU has joined approximately 150 other electric utility
companies by signing an accord that is part of the Department of Energy
Climate Challenge Program. The GPU System's program is expected to avoid or
reduce the equivalent of 8 million tons of carbon dioxide emissions between
1995 and 2000.
Title IV of the Clean Air Act requires Phase I and Phase II affected
units to install a continuous emission monitoring system (CEMS) and quality
assure the data for sulfur dioxide, nitrogen oxides, opacity and volumetric
flow. In addition, Title VIII requires all affected sources to monitor carbon
dioxide emissions. Monitoring systems have been installed and certified on
JCP&L, Met-Ed and Penelec's Phase I and Phase II affected units as required by
EPA, NJDEP and PaDEP regulations.
The PaDEP has a CEMS enforcement policy to ensure consistent compliance
with air quality regulations under federal and state statutes. The CEMS
enforcement policy includes matters such as visible emissions, sulfur dioxide
emission standards, nitrogen oxide emissions and a requirement to maintain
certified continuous emission monitoring equipment. In addition, this policy
provides a mechanism for the payment of certain prescribed amounts to the
Pennsylvania Clean Air Fund (Clean Air Fund) for air pollutant emission
excesses or monitoring failures. With respect to the operation of Met-Ed and
Penelec's generating stations for 1995, it is not anticipated that payments to
be made to the Clean Air Fund will be material in amount. The Clean Air Act
has also expanded the enforcement options available to the EPA and the states
and contains more stringent enforcement provisions and penalties. Moreover,
citizen suits can seek civil penalties for violations of this act.
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The EPA has established Best Available Retrofit Technology (BART) sulfur
dioxide emission standards to be used for Penelec's Shawville and Seward
stations under the applicable stack height regulations. Dependent upon the
Chestnut Ridge Compliance Strategy and the results of the Shawville model
evaluation study mentioned above, lower sulfur coal purchases may be necessary
for compliance. Discussions with the EPA and the PaDEP regarding this matter
are continuing.
In 1988, the Environmental Defense Fund (EDF), the New Jersey
Conservation Foundation, the Sierra Club and Pennsylvanians for Acid Rain
Control requested that the NJDEP and the NJBPU seek to reduce sulfur
deposition in New Jersey, either by reducing emissions from both in-state and
out-of-state sources, or by requiring that certain electricity imported into
New Jersey be generated from facilities meeting minimum emission standards.
JCP&L purchases a substantial portion of its net system requirements from
out-of-state coal-fired facilities, including the 1,700 MW Keystone station in
Pennsylvania in which it owns a 16.67% interest. In addition, coal-fired
generating facilities owned by Met-Ed and Penelec supply electric energy to
JCP&L and other New Jersey members of PJM. Hearings on the EDF petition were
held during 1989 and 1990, and the matter is pending before the NJDEP and the
NJBPU.
In New Jersey, where the bulk of the GPU System's oil-fired generating
capacity is located, NJDEP regulations establish that the maximum sulfur
content of No. 6 fuel oil may not exceed .3% for most of JCP&L's generating
stations and 1% for the balance. For No. 2 fuel oil, the sulfur content may
not exceed .2% for most of JCP&L's generating stations and .3% for the
balance.
In 1995, the Subsidiaries made capital expenditures of approximately
$93 million (JCP&L $36 million; Met-Ed $14 million; Penelec $43 million) in
response to environmental considerations and have budgeted approximately
$18 million (JCP&L $3 million; Met-Ed $3 million; Penelec $12 million) for
this purpose in 1996. The incremental annual operating and maintenance costs
for such equipment is expected to be immaterial.
Electromagnetic Fields: There have been a number of studies regarding
the possibility of adverse health effects from electric and power frequency
magnetic fields that are found everywhere there is electricity. While some of
the studies have indicated some association between exposure to magnetic
fields and cancer, other studies have indicated no such association. The
studies have not shown any causal relationship between exposure to magnetic
fields and cancer, or any other adverse health effects. In 1990, the EPA
issued a draft report that identifies magnetic fields as a possible
carcinogen, although it acknowledged that there is still scientific
uncertainty surrounding these fields and their possible link to adverse health
effects. On the other hand, a 1992 White House Office of Science and
Technology policy report states that "there is no convincing evidence in the
published literature to support the contention that exposures to extremely low
frequency electric and magnetic fields generated by sources such as household
appliances, video display terminals, and local power lines are demonstrable
health hazards." In 1994, results of a large-scale epidemiology study of
electric utility workers suggested a statistical relationship between brain
cancer and the class of workers who received the highest exposure. These
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findings conflicted with two earlier large-scale studies that found no such
relationship. Additional studies, which may foster a better understanding of
the subject, are presently underway.
Certain parties have alleged that the exposure to electric and magnetic
fields associated with the operation of transmission and distribution
facilities will produce adverse impacts upon public health and safety and upon
property values. Furthermore, regulatory actions under consideration by the
NJDEP and bills introduced in the Pennsylvania legislature could, if enacted,
establish a framework under which the intensity of the fields produced by
electric transmission and distribution lines would be limited or otherwise
regulated.
The Subsidiaries cannot determine at this time what effect, if any, this
matter will have on their respective results of operations and financial
position.
Residual Waste: PaDEP residual waste regulations became effective in
July 1992. These regulations impose additional restrictions on operating
existing ash disposal sites and for siting future disposal sites and will
increase the costs of establishing and operating these facilities. The main
objective of these regulations is to prevent degradation of groundwater and to
abate any existing degradation.
The regulations require, among other things, groundwater assessments of
landfills if existing groundwater monitoring indicates the possibility of
degradation. The assessments require the installation of additional
monitoring wells and the evaluation of one year's data. All of Penelec's
active landfills require assessments. If the assessments show degradation of
the groundwater, Penelec would be required to develop abatement plans.
Penelec and Met-Ed's landfills had preliminary permit modification
applications submitted to the PaDEP by July 1994, and complete permit
applications must be under evaluation by July 1997. Met-Ed's Portland and
Titus landfills have had preliminary assessments proposed which are currently
under review by the PaDEP. Additional data will be collected and evaluated to
determine if degradation has occurred and if development of abatement plans is
necessary. The Titus station ash disposal site was upgraded in 1991 and now
meets many of the lined facility requirements. The Portland station ash
disposal site will require significant modifications under the new
regulations. Various alternatives for upgrading the site are being evaluated,
including beneficial uses of coal ash.
Other compliance requirements at Penelec that may need to be implemented
in the future include the lining of currently unlined disposal sites and
storage impoundments. Impoundments also will eventually require groundwater
monitoring systems and assessments of impact on groundwater. Groundwater
abatement may be necessary at locations where pollution problems are
identified. The removal of all the residual waste ("clean closure") will be
done at some impoundments to eliminate the need for future monitoring and
abatement requirements. Storage impoundments must have implemented
groundwater monitoring plans by 2002, but the PaDEP can require this at any
time prior to this date or, at its discretion, defer full compliance beyond
2002 for some storage impoundments. Also being evaluated are the options for
beneficial use of ash authorized by the regulations and source reductions.
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Preliminary groundwater assessment plans have also been conducted at
Met-Ed's Portland and Titus stations' industrial waste treatment impoundments.
New groundwater monitoring wells were installed at the Titus station. The
Portland station assessment plan is pending with the PaDEP. Additional data
will be collected and evaluated to determine if abatement will be required.
The Portland station impoundments were upgraded in 1987 and meet the
requirements for lined impoundments. The Titus station impoundments will
require significant modifications by 2002.
There are also a number of issues still to be resolved regarding certain
waivers related to Penelec's existing landfill and storage impoundment
compliance requirements. These waivers could significantly reduce the cost of
many of Penelec's facility compliance upgrades.
Hazardous/Toxic Wastes: Under the Toxic Substances Control Act (TSCA),
the EPA has adopted certain regulations governing the use, storage, testing,
inspection and disposal of electrical equipment that contains polychlorinated
biphenyls (PCBs). Such regulations permit the continued use and servicing of
certain electrical equipment (including transformers and capacitors) that
contain PCBs. The Subsidiaries have met all requirements of the TSCA
necessary to allow the continued use of equipment containing PCBs and have
taken substantive voluntary actions to reduce the amount of PCB containing
electrical equipment in the System.
Prior to 1953, the Subsidiaries owned and operated MGPs in New Jersey and
Pennsylvania. Waste contamination associated with the operation and
dismantlement of these MGPs, are or may be present, both on-site and off-site.
Claims have been asserted against the Subsidiaries for the cost of
investigation and remediation of these sites. The amount of such remediation
costs and penalties may be significant and may not be covered by insurance. To
date, JCP&L has identified 17 former MGP sites and two off-site properties
where waste may have been sent. JCP&L has entered into cost sharing
agreements with New Jersey Natural Gas Company and Elizabethtown Gas Company
under which JCP&L is responsible for 60% of all costs incurred in connection
with the remediation of 12 of these sites. JCP&L has entered into
Administrative Consent Orders (ACOs) with the NJDEP for seven of these sites
and has entered into Memoranda of Agreement (MOAs) with the NJDEP for eight of
these sites. JCP&L anticipates entering into MOAs for the remaining sites.
The ACOs specify the agreed upon obligations of both JCP&L and the NJDEP for
remediation of the sites. The MOAs afford JCP&L greater flexibility in the
schedule for investigation and remediation of sites.
As of December 31, 1995, JCP&L has an estimated environmental liability
of $29 million recorded on its Balance Sheet relating to these sites. The
estimated liability is based upon ongoing site investigations and remediation
efforts, including capping the sites and pumping and treatment of ground
water. If the periods over which the remediation is currently expected to be
performed are lengthened, JCP&L believes that it is reasonably possible that
the future costs may range as high as $50 million. Estimates of these costs
are subject to significant uncertainties because: JCP&L does not presently own
or control most of these sites; the environmental standards have changed in
the past and are subject to future change; the accepted technologies are
subject to further development; and the related costs for these technologies
are uncertain. If JCP&L is required to utilize different remediation methods,
the costs could be materially in excess of $50 million.
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In December 1995, JCP&L filed a petition with the NJBPU to implement,
concurrent with the its proposed March 1996 LEAC change, a Manufactured Gas
Plant Remediation Adjustment Clause for the recovery of underrecovered MGP
costs (see RATE PROCEEDINGS - New Jersey).
In 1994, JCP&L filed a complaint with the New Jersey Superior Court
against several of its insurance carriers, relating to these MGP sites. JCP&L
requested the Court to order the insurance carriers to reimburse JCP&L for all
amounts it has paid, or may be required to pay, in connection with the
remediation of the sites. Pretrial discovery has begun in this case.
The Federal Resource Conservation and Recovery Act of 1976, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA) and the Superfund Amendment and Reauthorization Act of 1986 authorize
the EPA to issue an order compelling responsible parties to take cleanup
action at any location that is determined to present an imminent and
substantial danger to the public or to the environment because of an actual or
threatened release of one or more hazardous substances. Pennsylvania and New
Jersey have enacted legislation giving similar authority to the PaDEP and the
NJDEP, respectively. Because of the nature of the Subsidiaries' business,
various by-products and substances are produced and/or handled that are
classified as hazardous under one or more of these statutes. The Subsidiaries
generally provide for the treatment, disposal or recycling of such substances
through licensed independent contractors, but these statutory provisions also
impose potential responsibility for certain cleanup costs on the generators of
the wastes. The GPU System companies have been notified by the EPA and state
environmental authorities that they are among the potentially responsible
parties (PRPs) who may be jointly and severally liable to pay for the costs
associated with the investigation and remediation at 11 hazardous and/or toxic
waste sites (including those described below).
JCP&L MET-ED PENELEC GPUN GPU TOTAL
PRPs 6 4 2 1 1 11*
* In some cases, the Subsidiaries are named separately for the same site.
In addition, the Subsidiaries have been requested to voluntarily participate
in the remediation or supply information to the EPA and state environmental
authorities on several other sites for which they have not yet been named as
PRPs. The Subsidiaries have also been named in lawsuits requesting damages
for hazardous and/or toxic substances allegedly released into the environment.
At December 31, 1995, the Subsidiaries have liabilities recorded on their
balance sheets for environmental matters (in addition to the $29 million for
JCP&L's MGP sites) totaling $8.2 million (JCP&L $6.6 million; Met-Ed $900
thousand; Penelec $700 thousand).
JCP&L, Met-Ed and GPUN are among the more than 800 PRPs under CERCLA who
may be liable to pay for the cost associated with the investigation and
remediation of the Maxey Flats disposal site, located in Fleming County,
Kentucky. A negotiated settlement among all parties has been finalized and
cleanup efforts have begun. The interim remediation work is estimated to cost
$63 million, for which all responsible parties will be jointly and severally
liable. The estimated allocation, which is based upon a percentage of the
total volume of waste believed shipped to the site, is JCP&L $1.1 million,
Met-Ed $400 thousand and GPUN $150 thousand.
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In 1994, JCP&L received a letter from the EPA notifying it of potential
liability for the disposal of PCB liquids and related equipment at the Kansas
City, Missouri site of PCB Treatment, Incorporated. JCP&L's cleanup cost
obligation is currently estimated to be $1.3 million based upon a percentage
allocation of waste delivered by JCP&L to the site. The ultimate costs,
however, may range as high as $3.3 million if JCP&L becomes liable for the
potential nonpayment of other responsible parties. JCP&L is seeking
indemnification from its waste broker.
In 1988, JCP&L received a PRP notice from the NJDEP alleging that JCP&L
disposed of asbestos at the High Point Sanitary Landfill in Warren County, New
Jersey. JCP&L is one of over 20 PRPs at this site. By 1993, JCP&L made
payments totaling $131 thousand to the NJDEP for certain remediation
investigation and feasibility studies. The extent of JCP&L's obligation for
remediation costs, if any, will be subject to the results of additional
studies. There can be no assurance as to the outcome of this matter.
Met-Ed received a PRP notice from the PaDEP asserting that Met-Ed
disposed of hazardous waste at the Industrial Solvents & Chemical Company
site, a former solvents recycler. This site is being remediated under the
Pennsylvania Hazardous Sites Cleanup Act. Met-Ed made immaterial payments in
1995 to the PRP group for the removal of tanks, drums and other materials at
the site. A feasibility study to determine the extent of ground water
contamination is expected to be completed in 1996. Met-Ed cannot reasonably
estimate its remaining liability until the feasibility study results are
available and the PaDEP selects a remedy for ground water contamination.
Penelec has been named as a PRP by the EPA, along with over 1,000 other
PRPs, for allegedly disposing of hazardous materials at the Jack's
Creek/Sitken site, a former metals recycling and smelting operation in Mifflin
County, Pennsylvania. Penelec joined a PRP group, which is working on the
issues presented at the site. The PRP group is also exploring a settlement
with the EPA, but Penelec cannot predict the ultimate outcome of the
negotiations.
Pursuant to certain federal monitoring requirements, Penelec has reported
to the PaDEP that contaminates from coal mine refuse piles were identified in
storm water run-off at Penelec's Seward station property. Penelec signed a
Consent Order and is negotiating with the PaDEP to determine a schedule for
long-term remediation based on possible future operating scenarios, including
the installation of fluidized bed combustion technology. If the station is
reboilered using this technology, a low cost solution would be to mix the ash
from the reboilered station with the existing refuse. Early negotiations with
the PaDEP indicate that this approach would be acceptable. If the station is
not reboilered using such technology, remediation of the site may be required.
Based upon a conceptual engineering report prepared by Penelec, the cost of
remediation is estimated to range from $12 million to $25 million. These
costs are subject to uncertainties based on the extent of remediation and
available technologies. Penelec must notify the PaDEP by December 31, 1996 of
its decision.
The ultimate cost of remediation of these sites will depend upon changing
circumstances as site investigations continue, including (a) the existing
technology required for site cleanup, (b) the remedial action plan chosen and
(c) the extent of site contamination and the portion attributed to the GPU
System companies.
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The Corporation and its Subsidiaries are unable to estimate the extent of
possible remediation and associated costs of additional environmental matters.
Management believes the costs described above should be recoverable through
the ratemaking process but realizes recovery is not assured.
FRANCHISES AND CONCESSIONS
JCP&L operates pursuant to franchises in the territory served by it and
has the right to occupy and use the public streets and ways of the state with
its poles, wires and equipment upon obtaining the consent in writing of the
owners of the soil, and also to occupy the public streets and ways underground
with its conduits, cables and equipment, where necessary, for its electric
operation. JCP&L has the requisite legal franchise for the operation of its
electric business within the State of New Jersey, including in incorporated
cities and towns where designations of new streets, public ways, etc., may be
obtained upon application to such municipalities. JCP&L holds a FERC license
expiring in 2013 authorizing it to operate and maintain the Yards Creek pumped
storage hydroelectric station in which JCP&L has a 50% ownership interest.
Met-Ed and Penelec have the necessary franchise rights to furnish
electric service in the various respective municipalities or territories in
which each company now supplies such services. These electric franchise
rights, which are generally nonexclusive rights, consist generally of (a)
charter rights and (b) certificates of public convenience issued by the PaPUC
and/or "grandfather rights". Such electric franchise rights are free from
unduly burdensome restrictions and unlimited as to time, except in a few
relatively minor cases and except as otherwise described below. The secondary
franchise granted by the Borough of Boyertown to Met-Ed contains a provision
that the Borough shall have the right at any time to purchase the electric
system in the Borough at a valuation to be fixed by appraisers. Met-Ed holds
a FERC license expiring in 2014 for the continued operation and maintenance of
the York Haven hydroelectric project. Penelec holds a license from the FERC,
which expires in 2002, for the continued operation and maintenance of the
Piney hydroelectric project. In addition, Penelec and the Cleveland Electric
Illuminating Company hold a license expiring in 2015 for the Seneca Pumped
Storage Hydroelectric station in which Penelec has a 20% undivided interest.
For the same station, Penelec and the Cleveland Electric Illuminating Company
hold a Limited Power Permit issued by the Pennsylvania Water and Power
Resources Board which is unlimited as to time. For purposes of the Homer City
station, Penelec and New York State Electric & Gas Corporation hold a Limited
Power Permit issued by the Pennsylvania Water and Power Resources Board which
expires in 2017, but is renewable by the permittees until they have recovered
all capital invested by them in the project. Penelec also holds a Limited
Power Permit issued by the Pennsylvania Water and Power Resources Board for
its Shawville station which expires in 2003, but is renewable by Penelec until
it has recovered all capital invested in the project.
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EMPLOYEE RELATIONS
At February 29, 1996, the GPU System had 10,310 full-time employees
(JCP&L 3,049; Met-Ed 2,133; Penelec 2,216; all other companies 2,912). The
nonsupervisory production and maintenance employees of the Subsidiaries and
certain of their nonsupervisory clerical employees are represented for
collective bargaining purposes by local unions of the International
Brotherhood of Electrical Workers (IBEW) at JCP&L, Met-Ed and Penelec and the
Utility Workers Union of America (UWUA) at Penelec.
Penelec's five-year contracts with the IBEW and UWUA expire on May 14,
1998 and June 30, 1998, respectively. Met-Ed's three-year contract with the
IBEW expires on April 30, 1997. JCP&L's two-year contract with the IBEW
expires on October 31, 1996.
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ITEM 2. PROPERTIES.
Generating Stations
At December 31, 1995, the generating stations of the Subsidiaries had an
aggregate effective capability of 6,592,000 net kilowatts (KW), as follows:
Name of Year of Net KW
Station Subsidiary Installation (Summer)
COAL-FIRED:
Homer City(a) Penelec 1969-1977 942,000
Shawville Penelec 1954-1960 597,000
Portland Met-Ed 1958-1962 401,000
Keystone(b) JCP&L 1967-1968 283,000
Conemaugh(c) Met-Ed 1970-1971 280,000
Titus(d) Met-Ed 1951-1953 243,000
Seward Penelec 1950-1957 196,000
Warren Penelec 1948-1949 82,000
NUCLEAR:
TMI-1(e) All 1974 786,000
Oyster Creek(f) JCP&L 1969 619,000
GAS/OIL-FIRED:
Sayreville JCP&L 1930-1958 229,000
Gilbert(g) JCP&L 1930-1949 72,000
Combustion
Turbines(h) All 1960-1989 1,160,000
Werner(i) JCP&L 1953 58,000
Other(j) All 1968-1977 298,000
Hydroelectric(k) Met-Ed/Penelec 1905-1969 64,000
PUMPED STORAGE:(l)
Yards Creek JCP&L 1965 195,000
Seneca Penelec 1969 87,000
TOTAL 6,592,000
Aggregate Effective Capability by Subsidiary
Net KW
(Summer) (Winter)
JCP&L 2,704,000 3,068,000
Met-Ed 1,604,000 1,705,000
Penelec 2,284,000 2,365,000
TOTAL 6,592,000 7,138,000
(a) Represents Penelec's undivided 50% interest in the station.
(b) Represents JCP&L's undivided 16.67% interest in the station.
(c) Represents Met-Ed's undivided 16.45% interest in the station.
41
<PAGE>
(d) Effective June 19, 1995, the Titus station was rerated from 241,000 KW.
(e) Jointly owned by JCP&L, Met-Ed and Penelec in percentages of 25%, 50% and
25%, respectively.
(f) Effective January 17, 1995, the Oyster Creek station was rerated from
610,000 KW.
(g) Effective November 1, 1995, 45,000 KW of capability were retired. JCP&L
announced plans to close this station in 1996.
(h) JCP&L - 762,000 KW, Met-Ed - 266,000 KW and Penelec 132,000 KW.
(i) JCP&L announced plans to close this station in 1996.
(j) Consists of internal combustion and combined-cycle units (JCP&L - 290,000
KW, Met-Ed - 2,000 KW and Penelec - 6,000 KW).
(k) Consists of Met-Ed's York Haven station (19,000 KW) and Penelec's Piney
(27,000 KW) and Deep Creek stations (18,000 KW).
(l) Represents the Subsidiaries' undivided interests in these stations which
are net users rather than net producers of electric energy. Effective
June 1, 1995, the Yards Creek station was rerated from 190,000 KW.
The Subsidiaries' coal-fired, hydroelectric (other than the Deep Creek
station) and pumped storage stations (other than the Yards Creek station) are
located in Pennsylvania. The TMI-1 nuclear station is also located in
Pennsylvania. The Subsidiaries' gas-fired and oil-fired stations (other than
some combustion turbines in Pennsylvania), the Yards Creek pumped storage
station and the Oyster Creek nuclear station are located in New Jersey. The
Deep Creek hydroelectric station is located in Maryland.
Substantially all of the Subsidiaries' properties are subject to the lien
of their respective FMB indentures.
The peak loads of the GPU System and its Subsidiaries were as follows:
(In KW)
Company Date Peak Load
GPU Aug. 2, 1995 9,101,000
JCP&L July 9, 1993 4,564,000
Met-Ed Aug. 2, 1995 2,186,000
Penelec Dec. 11, 1995 2,589,000
42
<PAGE>
EI Group Facilities
The EI Group has ownership interests in sixteen natural gas-fired
cogeneration and other nonutility power production facilities located in the
United States, South America and Canada with an aggregate capability of
1,412,000 KW as follows:
U.S. Facilities
Name of Year of EI Ownership
Facility Location Installation Total KW Interest (KW)
Selkirk NY 1992/94 350,000 70,000
Lake* FL 1993 112,000 47,150
Pasco* FL 1993 112,000 56,000
Onondaga* NY 1993 80,000 40,000
Syracuse* NY 1992 80,000 3,500
Marcal* NJ 1989 65,000 32,500
Ada* MI 1991 29,000 290
Camarillo* CA 1988 27,000 13,500
Chino* CA 1987 27,000 13,500
FPB CA 1983 26,000 7,800
Berkeley* CA 1987 24,000 12,000
Total 932,000 296,240
Non-U.S. Facilities
Termobarran-
quilla* Colombia 1972-83 240,000 72,000
Guaracachi* Bolivia 1975-94 161,000 80,500
Aranjuez* Bolivia 1974-94 40,000 20,000
Karachipampa* Bolivia 1982 15,000 7,500
Brooklyn* Canada 1996 24,000 18,000
Total 480,000 198,000
Total capability 1,412,000 494,240
* The EI Group has operating responsibility for these facilities.
43
<PAGE>
Transmission and Distribution System
At December 31, 1995, the GPU System owned the following:
GPU System
JCP&L Met-Ed Penelec Total
Transmission and Distribution
Substations 296 288 468 1,052
Aggregate Installed Transformer
Capacity of Substations
(in kilovoltamperes - KVA) 20,893,974 11,827,100 15,914,320 48,635,394
Transmission System:
Lines (In Circuit Miles):
500 KV 18 188 235 441
345 KV - - 149 149
230 KV 570 383 650 1,603
138 KV - 3 11 14
115 KV 232 361 1,325 1,918
69 KV, 46 KV and 34.5 KV 1,760 472 364 2,596
Total 2,580 1,407 2,734 6,721
Distribution System:
Line Transformer Capacity (KVA) 9,618,670 5,654,976 6,213,003 21,486,649
Pole Miles of Overhead Lines 15,649 12,613 22,797 51,059
Trench Miles of Underground
Cable 6,738 1,943 1,834 10,515
In addition, Solaris provides service to more than 230,000 customers in
and around a 385 square mile area in Melbourne, Australia (see THE EI GROUP
under Item 1). Solaris owns a total of 3,629 pole miles of overhead lines.
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to NUCLEAR FACILITIES - TMI-2, RATE PROCEEDINGS, and
ELECTRIC GENERATION AND THE ENVIRONMENT - Environmental Matters under Item 1
and to Note 1 to GPU's consolidated financial statements contained in Item 8
for a description of certain pending legal proceedings involving the GPU
System.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
44
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
All of JCP&L, Met-Ed and Penelec's outstanding common stock is owned by
GPU. During 1995, the Subsidiaries paid dividends on their common stock to
GPU as follows: JCP&L $140 million, Met-Ed $95 million and Penelec $75
million.
In accordance with the Subsidiaries' FMB indentures, as supplemented,
the balances of retained earnings at December 31, 1995 that are restricted as
to the payment of dividends on their common stock are as follows:
JCP&L - $1.7 million Met-Ed - $3.4 million Penelec - $10 million
Stock Trading
General Public Utilities Corporation is listed as GPU on the New York
Stock Exchange. On February 1, 1996, there were approximately 46,300
registered holders of GPU common stock.
Dividends
GPU common stock dividend declaration dates are the first Thursdays of
April, June, October and December. Dividend payment dates fall on the last
Wednesdays of February, May, August and November. Dividend declarations and
quarterly stock price ranges for 1995 and 1994 are set forth below.
Common Stock
Dividends Declared Price Ranges*
1995 1994
1995 1994 Quarter High/Low High/Low
April $.47 $.45 First $30 5/8 26 1/4 $30 7/8 $27 5/8
June .47 .45 Second 31 28 1/4 31 5/8 26
October .47 .45 Third 31 1/4 28 1/8 27 1/2 23 3/4
December .47 .45 Fourth 34 30 5/8 26 7/8 24
* Based on New York Stock Exchange Composite Transactions as reported in the
Wall Street Journal.
ITEM 6. SELECTED FINANCIAL DATA.
See pages F-1 and F-2 for references to each registrant's Selected
Financial Data required by this item.
45
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See pages F-1 and F-2 for references to each registrant's Management's
Discussion and Analysis of Financial Condition and Results of Operations
required by this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and F-2 for references to each registrant's Financial
Statements and Quarterly Financial Data (unaudited) required by this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
46
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Identification of Directors
Information regarding GPU's directors is incorporated by reference to
pages 2 through 4 of GPU's Proxy Statement for the 1996 Annual Meeting of
Stockholders. The current directors of JCP&L, Met-Ed and Penelec, their ages,
positions held and business experience during the past five years are as
follows:
Year First
Name Age Position Elected
JCP&L:
J. R. Leva (a) 63 Chairman of the Board 1986
and Chief Executive Officer
D. Baldassari (b) 46 President 1982
R. C. Arnold (c) 58 Director 1989
J. G. Graham (d) 57 Vice President and Chief 1986
Financial Officer
M. P. Morrell (e) 47 Vice President 1993
G. E. Persson (f) 64 Director 1983
D. W. Myers (g) 51 Vice President and Comptroller 1994
S. C. Van Ness (h) 62 Director 1983
S. B. Wiley (i) 66 Director 1982
Year First Elected
Met-Ed/Penelec: Met-Ed Penelec
J. R. Leva (a) 63 Chairman of the Board 1992 1992
and Chief Executive Officer
F. D. Hafer (j) 54 President 1978 1994
J. G. Graham (d) 57 Vice President and 1986 1986
Chief Financial Officer
J. F. Furst (k) 49 Vice President 1994 1994
G. R. Repko (l) 50 Vice President 1994 1993
R. S. Zechman (m) 52 Vice President 1994 1994
R. C. Arnold (c) 58 Director 1989 1989
(a) Mr. Leva is also Chairman, President, Chief Executive Officer and a
director of GPUSC; Chairman, Chief Executive Officer and a director of
Genco; and Chairman and a director of GPUN, Energy Initiatives, Inc.
(EI), EI Power, Inc. (EI Power), and EI Energy, Inc. (EI Energy), all
subsidiaries of GPU. Prior to 1992, Mr. Leva served as President of
JCP&L since 1986. Mr. Leva is also a director of Utilities Mutual
Insurance Company.
(b) Mr. Baldassari was elected President of JCP&L in 1992. Prior to that,
Mr. Baldassari served as Vice President - Materials & Services of JCP&L
since 1990. Mr. Baldassari is also a director of GPUSC, GPUN, Genco and
First Morris Bank of Morristown, NJ.
(c) Mr. Arnold has been Executive Vice President-Power Supply of GPUSC since
1990. He is also a director of GPUSC and Genco.
47
<PAGE>
(d) Mr. Graham was elected Senior Vice President of GPU in 1989. He is also
Executive Vice President, Chief Financial Officer and a director of
GPUSC; Vice President and Chief Financial Officer of GPUN; and a
director of Genco, EI, EI Power and EI Energy. Mr. Graham is also a
director of Edisto Resources, Inc., Nuclear Electric Insurance Limited,
Nuclear Mutual Limited and Utilities Mutual Insurance Company.
(e) Mr. Morrell became Vice President - Regulatory and Public Affairs in
1994. Prior to that, Mr. Morrell served as Vice President of GPU since
1989. He is also a director of Utilities Mutual Insurance Company.
(f) Mrs. Persson serves as liaison (Special Assistant Director) between the
N.J. Division of Consumer Affairs and various State Boards. Prior to
1995, she was owner and President of Business Dynamics Associates of Red
Bank, NJ. Mrs. Persson is a member of the United States Small Business
Administration National Advisory Board, the New Jersey Small Business
Advisory Council, the Board of Advisors of Brookdale Community College
and the Board of Advisors of Georgian Court College.
(g) Prior to 1994, Mr. Myers served as Vice President and Treasurer of GPU,
GPUSC, JCP&L, Met-Ed and Penelec since 1993. He served as Vice
President and Comptroller of GPUN from 1986 to 1993.
(h) Mr. Van Ness has been affiliated with the law firm of Pico, Mack,
Kennedy, Jaffe, Perrella and Yoskin of Trenton, NJ since 1990. He is
also a director of The Prudential Insurance Company of America.
(i) Mr. Wiley has been a partner in the law firm of Wiley, Malehorn and
Sirota of Morristown, NJ since 1973. He is also Chairman of First
Morris Bank of Morristown, NJ.
(j) Mr. Hafer became President of Met-Ed and Penelec in 1994. Prior to
that, he was President of Met-Ed since 1986. Mr. Hafer is also a
director of GPUSC, GPUN, Genco, Meridian Bancorp, Meridian Bank of
Reading, PA and Utilities Mutual Insurance Company.
(k) Mr. Furst was elected Vice President - Rates & Marketing of Met-Ed and
Penelec in 1994. Prior to that, he served as Vice President - Customer
Services of Penelec since 1984.
(l) Mr. Repko was elected Vice President - Customer Services and Operations
of Met-Ed and Penelec in 1994. Prior to that, he served as Vice
President - Division Operations of Penelec from 1986 to 1993.
(m) Mr. Zechman was elected Vice President-Administration and Finance of
Met-Ed and Penelec in 1994. Prior to that, he served as Vice President
- Administrative Services of Met-Ed since 1992 and as Vice President -
Human Resources of Met-Ed from 1990 to 1992.
The directors of the Subsidiaries are elected at their respective annual
meetings of stockholders to serve until the next meeting of stockholders and
until their respective successors are duly elected and qualified. There are
no family relationships among the directors of the Subsidiaries.
48
<PAGE>
Identification of Executive Officers
The current executive officers of GPU, JCP&L, Met-Ed and Penelec, their
ages, positions held and business experience during the past five years are as
follows:
Year First
Name Age Position Elected
GPU:
J. R. Leva (a) 63 Chairman, President and Chief 1992
Executive Officer
I. H. Jolles (b) 57 Senior Vice President and General 1990
Counsel
J. G. Graham (c) 57 Senior Vice President and Chief 1987
Financial Officer
F. A. Donofrio (d) 53 Vice President, Comptroller and 1985
Chief Accounting Officer
P. C. Mezey (e) 56 Senior Vice President, GPUSC 1992
T. G. Howson (f) 47 Vice President and Treasurer 1994
M. A. Nalewako (g) 61 Secretary 1988
T. G. Broughton (h) 50 President, GPUN 1996
R. L. Wise (i) 52 President, Genco 1994
F. D. Hafer (j) 54 President, Met-Ed and Penelec 1994
D. Baldassari (k) 46 President, JCP&L 1992
B. L. Levy (l) 40 President and Chief Executive 1991
Officer, EI, EI Power and EI Energy
R. C. Arnold (m) 58 Executive Vice President, GPUSC 1990
JCP&L:
J. R. Leva (a) 63 Chairman of the Board and Chief 1992
Executive Officer
D. Baldassari (k) 46 President 1992
C. R. Fruehling 60 Vice President - Engineering and 1982
Operations
J. G. Graham (c) 57 Vice President and Chief 1987
Financial Officer
E. J. McCarthy (n) 57 Vice President - Customer Operations 1982
and Sales
M. P. Morrell (o) 47 Vice President - Regulatory 1993
and Public Affairs
T. G. Howson (f) 47 Vice President and Treasurer 1994
D. W. Myers (p) 51 Vice President - Operations Support 1994
and Comptroller
R. J. Toole (q) 53 Vice President - Generation 1990
J. J. Westervelt (r) 55 Vice President - Human Resources 1982
and Corporate Services
R. S. Cohen 53 Secretary and Corporate Counsel 1986
49
<PAGE>
Year First Elected
Name Age Position Met-Ed Penelec
Met-Ed/Penelec:
J. R. Leva (a) 63 Chairman of the Board and 1992 1992
Chief Executive Officer
F. D. Hafer (j) 54 President 1986 1994
J. G. Graham (c) 57 Vice President and Chief
Financial Officer 1987 1987
J. F. Furst (s) 49 Vice President - Rates and 1994 1984
Marketing
T. G. Howson (f) 47 Vice President and Treasurer 1994 1994
G. R. Repko (t) 50 Vice President - Customer 1994 1986
Services and Operations
R. J. Toole (q) 53 Vice President - Generation 1989 1996
R. S. Zechman (u) 52 Vice President - Administration 1990 1994
and Finance
D. L. O'Brien 53 Comptroller 1981 1994
W. A. Boquist II (v) 48 Vice President - Legal Services 1994 1994
C. B. Snyder (w) 50 Vice President - Public Affairs 1994 1994
W. C. Matthews II (x) 43 Secretary 1994 1990
(a) See Note (a) on page 47.
(b) Mr. Jolles is also Executive Vice President, General Counsel and a
director of GPUSC, General Counsel of GPUN and Genco, and a director of
EI, EI Power, EI Energy and Genco.
(c) See Note (d) on page 48.
(d) Mr. Donofrio was elected Vice President of GPU in 1989. He is also
Senior Vice President - Financial Controls of GPUSC and a director of
GPUSC.
(e) Mr. Mezey was elected Senior Vice President - System Services of GPUSC
in 1992 and is a director of EI, EI Power and EI Energy. He previously
served as Vice President of GPUSC from January 1991 through March 1992
and President of EI from February 1990 through December 1991.
(f) Mr. Howson is also Vice President and Treasurer of GPUSC, GPUN and
Genco. He served as Vice President - Materials, Services and Regulatory
Affairs and a director of JCP&L in 1992. Prior to that, he served as
Vice President - Corporate Strategic Planning for GPUSC since 1989.
(g) Mrs. Nalewako is also Secretary of GPUSC and Genco and Assistant
Secretary of GPUN, JCP&L, Met-Ed and Penelec.
(h) Mr. Broughton previously served as Executive Vice President for GPUN
since September 1995. Prior to that, he served as Vice President-TMI of
GPUN since 1991. Mr. Broughton is also a director of GPUSC and Genco.
50
<PAGE>
(i) Mr. Wise is also a director of GPUSC, GPUN, Genco, EI, EI Power and EI
Energy. He previously served as President, Fossil Generation-GPUSC
since 1994. Prior to that, Mr. Wise served as President and a director
of Penelec since December 1986. He is also a director of U.S. Bancorp
and U.S. National Bank of Johnstown, PA.
(j) See Note (j) on page 48.
(k) See Note (b) on page 47.
(l) Mr. Levy is also a director of EI, EI Power, EI Energy and Genco. He
has served as President, Chief Executive Officer and director of EI
since 1991. Prior to that, Mr. Levy served as Vice President - Business
Development of EI since 1985.
(m) See Note (c) on page 47.
(n) Mr. McCarthy became Vice President - Customer Operations and Sales in
1994. Prior to that, he served as Vice President - Customer Services of
JCP&L since 1982.
(o) See Note (e) on page 48.
(p) See Note (g) on page 48.
(q) Mr. Toole was also elected a Vice President and a director of Genco in
1996.
(r) Mr. Westervelt became Vice President - Human Resources and Corporate
Services in 1994. Prior to that, he served as Vice President - Human
Resources of JCP&L since 1982.
(s) See note (k) on page 48.
(t) See note (l) on page 48.
(u) See note (m) on page 48.
(v) Mr. Boquist also served as Corporate Counsel and Secretary of Met-Ed
from 1992 to 1994 and Assistant Secretary of Met-Ed from 1988 to 1992.
(w) Mrs. Snyder also served as Regional Director of Met-Ed from 1991 to
1994. Prior to that, she was Divisional Director of Met-Ed since 1990.
(x) Mr. Matthews was elected Secretary of Met-Ed and Penelec in 1994. Prior
to that, he served as Corporate Counsel and Secretary of Penelec from
1990.
The executive officers of the GPU System companies are elected each year
by their respective Boards of Directors at the first meeting of the Board held
following the annual meeting of stockholders. Executive officers hold office
until the next meeting of directors following the annual meeting of
stockholders and until their respective successors are duly elected and
qualified. There are no family relationships among the executive officers.
51
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item with respect to GPU is
incorporated by reference to pages 7 through 17 of GPU's Proxy Statement for
the 1996 Annual Meeting of Stockholders. The following table sets forth
remuneration paid, as required by this Item, to the most highly compensated
executive officers of JCP&L, Met-Ed and Penelec for the year ended December
31, 1995.
The managements of Met-Ed and Penelec were combined in a 1994
reorganization. Accordingly, the amounts shown below represent the aggregate
remuneration paid to such executive officers by Met-Ed and Penelec during
1995.
<TABLE>
Remuneration of Executive Officers
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Name and Annual Restricted All Other
Principal Compen- Stock/Unit LTIP Compen-
Position Year Salary Bonus sation(1) Awards (2) Payouts(3) sation
<S> <C> <C> <C> <C> <C> <C> <C>
J. R. Leva
Chairman of the Board
and Chief Executive
Officer (4) (4) (4) (4) (4) (4) (4)
JCP&L:
D. Baldassari 1995 $275,000 $86,000 $ 94 $ - $ 9,930 $19,425 (5)
President 1994 271,250 62,000 17 39,188 - 16,823
1993 253,750 57,000 - 41,850 - 15,436
M. P. Morrell 1995 151,700 45,000 712 - 11,033 7,162 (6)
Vice President - 1994 150,175 27,300 804 15,936 - 6,000
Regulatory and 1993 144,200 26,000 1,932 15,500 - 5,768
Public Affairs
E. J. McCarthy 1995 145,000 39,000 - - 9,930 6,074 (7)
Vice President - 1994 136,267 26,100 - 13,324 - 5,451
Customer Operations 1993 125,825 22,500 - 13,020 - 5,033
and Sales
D. W. Myers 1995 144,000 34,000 - - 10,665 5,280 (8)
Vice President - 1994 142,125 29,300 - 13,716 - 5,685
Operations Support 1993 135,125 22,400 - 13,950 - 5,405
and Comptroller
R. S. Cohen 1995 128,400 30,000 - - 9,930 5,459 (9)
Secretary and 1994 127,225 22,800 - 12,018 - 5,089
Corporate Counsel 1993 122,500 19,500 - 12,710 - 4,902
52
<PAGE>
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Name and Annual Restricted All Other
Principal Compen- Stock/Unit LTIP Compen-
Position Year Salary Bonus sation(1) Awards (2) Payouts(3) sation
Met-Ed/Penelec:
F. D. Hafer 1995 $280,000 $94,000 $ - $ - $40,454 $23,076 (10)
President 1994 275,250 77,000 - 39,841 - 19,733
1993 258,250 50,000 - 41,850 - 18,975
J. G. Herbein (11) 1995 149,500 62,000 - - 98,466 11,181 (12)
Vice President - 1994 148,025 34,000 - 14,238 - 9,861
Generation 1993 142,200 25,900 - 15,190 - 15,338
R. J. Toole 1995 143,500 53,650 - - 10,297 6,962 (13)
Vice President - 1994 142,125 30,100 - 13,716 - 5,685
Generation 1993 136,750 21,000 - 13,950 - 5,470
G. R. Repko 1995 147,100 48,000 - - 9,930 6,066 (14)
Vice President - 1994 142,225 32,000 - 14,630 - 5,689
Customer Services 1993 129,100 24,200 - 13,330 - 5,164
and Operations
R. S. Zechman 1995 142,500 46,000 - - 8,318 6,000 (15)
Vice President - 1994 132,500 31,000 - 13,324 - 5,300
Administration 1993 118,750 17,000 - 12,400 - 4,750
and Finance
</TABLE>
(1) "Other Annual Compensation" is composed entirely of the above-market
interest accrued on the pre-retirement portion of deferred compensation.
(2) The restricted units issued in 1995 under the 1990 Stock Plan for
Employees of GPU Corporation and Subsidiaries (the "1990 Stock Plan")
are performance based as shown in the "Long-Term Incentive Plans -
Awards in Last Fiscal Year" table (the "LTIP table"). Dividends are
paid or accrued on the aggregate restricted shares/units awarded under
the 1990 Stock Plan and reinvested.
The aggregate number and value (based on the stock price per share at
December 31, 1995) of nonvested restricted shares/units include the
amounts shown on the LTIP table and at the end of 1995 were:
Aggregate Aggregate
Shares/Units Value
JCP&L:
D. Baldassari 7,575 $257,550
M. P. Morrell 3,275 $111,350
E. J. McCarthy 2,915 $ 99,110
D. W. Myers 2,990 $101,660
R. S. Cohen 2,750 $ 93,500
Met-Ed/Penelec:
F. D. Hafer 8,875 $301,750
R. J. Toole 3,100 $105,400
G. R. Repko 3,000 $102,000
R. S. Zechman 2,815 $ 95,710
53
<PAGE>
(3) Consists of Performance Cash Incentive Awards paid on the 1990
restricted stock awards which have vested under the 1990 Stock Plan.
These amounts are designed to compensate recipients of restricted
stock/unit awards for the amount of federal and state income taxes that
are payable upon vesting of the restricted stock/unit awards. Amounts
for Mr. Herbein include Performance Cash Incentive Awards of $10,665 on
the 1990 restricted stock award, $57,901 on the 1992, 1993 and 1994
restricted stock awards which vested upon retirement and $29,900 paid in
cash in lieu of receiving restricted units in 1995.
(4) As noted above, Mr. Leva is Chairman and Chief Executive Officer of
General Public Utilities Corporation and its Subsidiaries. Mr. Leva is
compensated by GPUSC for his overall service on behalf of the GPU System
and accordingly is not compensated directly by the other subsidiary
companies for his services. Information with respect to Mr. Leva's
compensation is included on pages 11 through 13 in GPU's 1996 Proxy
Statement, which is incorporated herein by reference.
(5) Consists of employer matching contributions under the Savings Plan
($6,000), matching contributions under the non-qualified deferred
compensation plan ($7,480), the benefit of interest-free use of the non-
term portion of employer paid premiums for split-dollar life insurance
($5,851) and above-market interest accrued on the retirement portion of
deferred compensation ($94).
(6) Consists of employer matching contributions under the Savings Plan
($6,000), matching contributions under the non-qualified deferred
compensation plan ($1,160) and above-market interest accrued on the
retirement portion of deferred compensation ($2).
(7) Consists of employer matching contributions under the Savings Plan
($6,000), matching contributions under the non-qualified deferred
compensation plan ($8) and above-market interest accrued on the
retirement portion of deferred compensation ($66).
(8) Consists of employer matching contributions under the Savings Plan
($5,280).
(9) Consists of employer matching contributions under the Savings Plan
($5,136), matching contributions under the non-qualified deferred
compensation plan ($48) and above-market interest accrued on the
retirement portion of deferred compensation ($275).
(10) Consists of employer matching contributions under the Savings Plan
($6,000), matching contributions under the non-qualified deferred
compensation plan ($8,280), the benefit of interest-free use of the non-
term portion of employer paid premiums for split-dollar life insurance
($8,548) and above-market interest accrued on the retirement portion of
deferred compensation ($248).
(11) Mr. Herbein retired as Vice President - Generation of Penelec effective
December 31, 1995.
54
<PAGE>
(12) Consists of employer matching contributions under the Savings Plan
($4,600), matching contributions under the non-qualified deferred
compensation plan ($1,340) and above-market interest accrued on the
retirement portion of deferred compensation ($5,241).
(13) Consists of employer matching contributions under the Savings Plan
($5,740), matching contributions under the non-qualified deferred
compensation plan ($944) and above-market interest accrued on the
retirement portion of deferred compensation ($278).
(14) Consists of employer matching contributions under the Savings Plan
($6,000) and above-market interest accrued on the retirement portion of
deferred compensation ($66).
(15) Consists of employer matching contributions under the Savings Plan
($6,000).
Note: The split-dollar life insurance amounts reported in the "All Other
Compensation" column are equal to the present value of the interest-free use
of the current year employer paid premiums to the projected date the premiums
will be refunded to the respective GPU System companies.
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance Estimated future payouts
Number of or other under non-stock price-
shares, period until based plans(1)
units or maturation Threshold Target Maximum
Name other rights or payout ( $ or #) ($ or #) ($ or #)
<S> <C> <C> <C> <C> <C>
JCP&L:
D. Baldassari 2,845 5 year vesting $ 0 $ 96,730 $193,460
M. P. Morrell 1,055 5 year vesting $ 0 $ 35,870 $ 71,740
E. J. McCarthy 995 5 year vesting $ 0 $ 33,830 $ 67,660
D. W. Myers 995 5 year vesting $ 0 $ 33,830 $ 67,660
R. S. Cohen 880 5 year vesting $ 0 $ 29,920 $ 59,840
Met-Ed/Penelec:
F. D. Hafer 2,900 5 year vesting $ 0 $ 98,600 $197,200
J. G. Herbein - (2) 5 year vesting $ 0 $ 0 $ 0
R. J. Toole 1,025 5 year vesting $ 0 $ 34,850 $ 69,700
G. R. Repko 1,000 5 year vesting $ 0 $ 34,000 $ 68,000
R. S. Zechman 950 5 year vesting $ 0 $ 32,300 $ 64,600
</TABLE>
55
<PAGE>
(1) The restricted units issued in 1995 under the 1990 Stock Plan provide for
a performance adjustment to the aggregate number of units vesting for the
recipient based on the annualized GPU Total Shareholder Return (TSR)
percentile ranking against all companies in the Standard & Poor's
Electric Utility Index for the period between the award and vesting
dates. With a 55th percentile ranking, the performance adjustment would
be 100% as reflected in the "Target" column. In the event that the
percentile ranking is below the 55th percentile, the performance
adjustment would be reduced in steps reaching 0% at the 39th percentile
as reflected in the "Threshold" column. Should the TSR percentile
ranking exceed the 59th percentile, then the performance adjustment would
be increased in steps reaching 200% at the 90th percentile as reflected
in the "Maximum" column. The estimated future payouts above are computed
based on the number of restricted units awarded for 1995 multiplied by
the 1995 year-end market value of $34 per share. Actual payouts under
the Plan would be based on the actual number of shares issued and the
market value of those shares at the time the restrictions lapse and may
be different from those indicated above.
(2) The $29,900 in cash received by Mr. Herbein in lieu of receiving
restricted units in 1995 is included in the Summary Compensation Table
under LTIP Payouts.
Proposed Remuneration of Executive Officers
None of the named executive officers in the Summary Compensation Table
has an employment contract. The compensation of executive officers is
determined from time to time by the Personnel & Compensation Committee of the
GPU Board of Directors.
Retirement Plans
The GPU System pension plans provide for pension benefits, payable for
life after retirement, based upon years of creditable service with the GPU
System and the employee's career average compensation as defined below. Under
federal law, an employee's pension benefits that may be paid from a qualified
trust under a qualified pension plan such as the GPU System plans are subject
to certain maximum amounts. The GPU System companies also have adopted non-
qualified plans providing that the portion of a participant's pension benefits
which, by reason of such limitations or source, cannot be paid from such a
qualified trust shall be paid directly on an unfunded basis by the
participant's employer.
The following table illustrates the amount of aggregate annual pension
benefits from funded and unfunded sources resulting from employer
contributions to the qualified trust and direct payments payable upon
retirement in 1996 (computed on a single life annuity basis) to persons in
specified salary and years of service classifications:
56
<PAGE>
<TABLE>
ESTIMATED ANNUAL RETIREMENT BENEFITS
BASED UPON CAREER AVERAGE COMPENSATION(2) (3) (4)
(1996 Retirement)
<CAPTION>
Career
Average 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
Compensation(1) of Service of Service of Service of Service of Service of Service of Service of Service
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 9,378 $ 14,067 $ 18,756 $ 23,445 $ 28,134 $ 32,823 $ 37,236 $ 41 236
100,000 19,378 29,067 38,756 48,445 58,134 67,823 76,836 84,836
150,000 29,378 44,067 58,756 73,445 88,134 102,823 116,436 128,436
200,000 39,378 59,067 78,756 98,445 118,134 137,823 156,036 172,036
250,000 49,378 74,067 98,756 123,445 148,134 172,823 195,636 215,636
300,000 59,378 89,067 118,756 148,445 178,134 207,823 235,236 259,236
350,000 69,378 104,067 138,756 173,445 208,134 242,823 274,836 302,836
400,000 79,378 119,067 158,756 198,445 238,134 277,823 314,436 346,436
450,000 89,378 134,067 178,756 223,445 268,134 312,823 354,036 390,036
500,000 99,378 149,067 198,756 248,445 298,134 347,823 393,636 433,636
</TABLE>
(1) Career Average Compensation is the average annual compensation received
from January 1, 1984 to retirement and includes Salary and Bonus. The
Career Average Compensation amounts for the following named executive
officers differ by more than 10% from the three year average annual
compensation set forth in the Summary Compensation Table and are as
follows: JCP&L: Messrs. Baldassari - $175,136; Morrell - $128,798;
McCarthy - $125,601; Myers - $145,654; Cohen - $111,397 and
Met-Ed/Penelec: Messrs. Hafer - $249,444; Herbein - $140,854; Toole -
$127,434; Repko - $127,376; Zechman - $110,388.
(2) Years of Creditable Service at December 31, 1995: JCP&L: Messrs.
Baldassari - 26 years; Morrell - 24 years; McCarthy - 35 years; Myers -
15 years; Cohen - 27 years and Met-Ed/Penelec: Messrs. Hafer - 33
years; Herbein - 35 years; Toole - 29 years; Repko - 29 years; Zechman -
26 years.
(3) Based on an assumed retirement at age 65 in 1996. To reduce the above
amounts to reflect a retirement benefit assuming a continual annuity to
a surviving spouse equal to 50% of the annuity payable at retirement,
multiply the above benefits by 90%. The estimated annual benefits are
not subject to any reduction for Social Security benefits or other
offset amounts.
(4) Annual retirement benefits under the basic pension per the above table
cannot exceed 55% of the average compensation during the highest paid
thirty-six calendar months.
57
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item for GPU is incorporated by
reference to page 6 of the GPU Proxy Statement for the 1996 Annual Meeting of
Stockholders.
All of the outstanding shares of JCP&L (15,371,270), Met-Ed (859,500)
and Penelec (5,290,596) common stock are owned beneficially and of record by
the Company's parent, General Public Utilities Corporation, 100 Interpace
Parkway, Parsippany, NJ 07054.
The following table sets forth, as of February 1, 1996, the beneficial
ownership of equity securities of each of the directors and each of the
executive officers named in the Summary Compensation Tables, and of all
directors and executive officers of each of the respective GPU System
companies as a group. The shares owned by all directors and executive
officers as a group constitute less than 1% of the total shares outstanding.
Title of Amount and Nature of
Name Security Beneficial Ownership (1)
JCP&L:
J. R. Leva GPU Common Stock 4,376 Shares - Direct
GPU Common Stock 100 Shares - Indirect
J. G. Graham GPU Common Stock 4,321 Shares - Direct
GPU Common Stock 1,180 Shares - Indirect
R. C. Arnold GPU Common Stock 2,231 Shares - Direct
GPU Common Stock 3,943 Shares - Indirect
D. Baldassari GPU Common Stock 1,061 Shares - Direct
R. S. Cohen GPU Common Stock 882 Shares - Direct
E. J. McCarthy GPU Common Stock 869 Shares - Direct
M. P. Morrell GPU Common Stock 1,126 Shares - Direct
D. W. Myers GPU Common Stock 1,008 Shares - Direct
G. E. Persson GPU Common Stock None
S. C. Van Ness GPU Common Stock None
S. B. Wiley GPU Common Stock None
All Directors and GPU Common Stock 19,831 Shares - Direct
Officers as a Group GPU Common Stock 5,223 Shares - Indirect
Met-Ed/Penelec:
J. R. Leva GPU Common Stock 4,376 Shares - Direct
GPU Common Stock 100 Shares - Indirect
J. G. Graham GPU Common Stock 4,321 Shares - Direct
GPU Common Stock 1,180 Shares - Indirect
R. C. Arnold GPU Common Stock 2,231 Shares - Direct
GPU Common Stock 3,943 Shares - Indirect
J. F. Furst GPU Common Stock 670 Shares - Direct
F. D. Hafer GPU Common Stock 4,756 Shares - Direct
GPU Common Stock 124 Shares - Indirect
G. R. Repko GPU Common Stock 643 Shares - Direct
R. J. Toole GPU Common Stock 1,072 Shares - Direct
R. S. Zechman GPU Common Stock 947 Shares - Direct
All Directors and GPU Common Stock 22,317 Shares - Direct
Officers as a Group GPU Common Stock 5,347 Shares - Indirect
58
<PAGE>
(1) The number of shares owned and the nature of such ownership, not being
within the knowledge of the Company, have been furnished by each
individual.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See pages F-1 and F-2 for references to Financial Statements and
Financial Statement Schedules required by this item.
1. Exhibits:
3-A Articles of Incorporation of GPU, as amended through March
27, 1990 - Incorporated by reference to Exhibit 3-A, 1989
Annual Report on Form 10-K, SEC File No. 1-6047.
3-A-1 Articles of Amendment to Articles of Incorporation of GPU
dated May 5, 1995 - Incorporated by reference to Exhibit A-
4, Certificate Pursuant to Rule 24, SEC File No. 70-8569.
3-B By-Laws of GPU, as amended June 7, 1990 - Incorporated by
reference to Exhibit 3-A, 1990 Annual Report on Form 10-K,
SEC File No. 1-6047.
3-C Restated Certificate of Incorporation of JCP&L, as amended -
Incorporated by reference to Exhibit 3-A, 1990 Annual Report
on Form 10-K, SEC File No. 1-3141.
3-C-1 Certificate of Amendment to Restated Certificate of
Incorporation of JCP&L, dated June 19, 1992 - Incorporated
by reference to Exhibit A-2(a), Certificate Pursuant to Rule
24, SEC File No. 70-7949.
3-C-2 Certificate of Amendment to Restated Certificate of
Incorporation of JCP&L, dated June 19, 1992 - Incorporated
by reference to Exhibit A-2(a)(i), Certificate Pursuant to
Rule 24, SEC File No. 70-7949.
3-D By-Laws of JCP&L, as amended - Incorporated by reference to
Exhibit 3-B, 1993 Annual Report on Form 10-K, SEC File No.
1-3141.
3-E Restated Articles of Incorporation of Met-Ed - Incorporated
by reference to Exhibit B-18, 1991 Annual Report of GPU on
Form U5S, SEC File No. 30-126.
3-F By-Laws of Met-Ed dated July 27, 1995, as amended.
59
<PAGE>
3-G Restated Articles of Incorporation of Penelec as amended
through March 10, 1992 - Incorporated by reference to
Exhibit 3A, 1991 Annual Report on Form 10-K, SEC File No. 1-
3522.
3-H By-Laws of Penelec dated July 27, 1995, as amended.
4-A Indenture of JCP&L, dated March 1, 1946, between JCP&L and
United States Trust Company of New York, Successor Trustee,
as amended and supplemented by eight supplemental indentures
dated December 1, 1948 through June 1, 1960 - Incorporated
by reference to JCP&L's Instruments of Indebtedness Nos. 1
to 7, inclusive, and 9 and 10 filed as part of Amendment No.
1 to 1959 Annual Report of GPU on Form U5S, SEC File Nos.
30-126 and 1-3292.
4-A-1 Ninth Supplemental Indenture of JCP&L, dated November 1,
1962 - Incorporated by reference to Exhibit 2-C,
Registration No. 2-20732.
4-A-2 Tenth Supplemental Indenture of JCP&L, dated October 1,
1963 - Incorporated by reference to Exhibit 2-C,
Registration No. 2-21645.
4-A-3 Eleventh Supplemental Indenture of JCP&L, dated October 1,
1964 - Incorporated by reference to Exhibit 5-A-3,
Registration No. 2-59785.
4-A-4 Twelfth Supplemental Indenture of JCP&L, dated November 1,
1965 - Incorporated by reference to Exhibit 5-A-4,
Registration No. 2-59785.
4-A-5 Thirteenth Supplemental Indenture of JCP&L, dated August 1,
1966 - Incorporated by reference to Exhibit 4-C,
Registration No. 2-25124.
4-A-6 Fourteenth Supplemental Indenture of JCP&L, dated September
1, 1967 - Incorporated by reference to Exhibit 5-A-6,
Registration No. 2-59785.
4-A-7 Fifteenth Supplemental Indenture of JCP&L, dated October 1,
1968 - Incorporated by reference to Exhibit 5-A-7,
Registration No. 2-59785.
4-A-8 Sixteenth Supplemental Indenture of JCP&L, dated October 1,
1969 - Incorporated by reference to Exhibit 5-A-8,
Registration No. 2-59785.
4-A-9 Seventeenth Supplemental Indenture of JCP&L, dated June 1,
1970 - Incorporated by reference to Exhibit 5-A-9,
Registration No. 2-59785.
4-A-10 Eighteenth Supplemental Indenture of JCP&L, dated December
1, 1970 - Incorporated by reference to Exhibit 5-A-10,
Registration No. 2-59785.
60
<PAGE>
4-A-11 Nineteenth Supplemental Indenture of JCP&L, dated February
1, 1971 - Incorporated by reference to Exhibit 5-A-11,
Registration No. 2-59785.
4-A-12 Twentieth Supplemental Indenture of JCP&L, dated November
1, 1971 - Incorporated by reference to Exhibit 5-A-12,
Registration No. 2-59875.
4-A-13 Twenty-first Supplemental Indenture of JCP&L, dated August
1, 1972 - Incorporated by reference to Exhibit 5-A-13,
Registration No. 2-59785.
4-A-14 Twenty-second Supplemental Indenture of JCP&L, dated August
1, 1973 - Incorporated by reference to Exhibit 5-A-14,
Registration No. 2-59785.
4-A-15 Twenty-third Supplemental Indenture of JCP&L, dated October
1, 1973 - Incorporated by reference to Exhibit 5-A-15,
Registration No. 2-59785.
4-A-16 Twenty-fourth Supplemental Indenture of JCP&L, dated
December 1, 1973 - Incorporated by reference to Exhibit 5-A-
16, Registration No. 2-59785.
4-A-17 Twenty-fifth Supplemental Indenture of JCP&L, dated November
1, 1974 - Incorporated by reference to Exhibit 5-A-17,
Registration No. 2-59785.
4-A-18 Twenty-sixth Supplemental Indenture of JCP&L, dated March 1,
1975 - Incorporated by reference to Exhibit 5-A-18,
Registration No. 2-59785.
4-A-19 Twenty-seventh Supplemental Indenture of JCP&L, dated July
1, 1975 - Incorporated by reference to Exhibit 5-A-19,
Registration No. 2-59785.
4-A-20 Twenty-eighth Supplemental Indenture of JCP&L, dated October
1, 1975 - Incorporated by reference to Exhibit 5-A-20,
Registration No. 2-59785.
4-A-21 Twenty-ninth Supplemental Indenture of JCP&L, dated February
1, 1976 - Incorporated by reference to Exhibit 5-A-21,
Registration No. 2-59785.
4-A-22 Supplemental Indenture No. 29A of JCP&L, dated May 31, 1976
- Incorporated by reference to Exhibit 5-A-22, Registration
No. 2-59785.
4-A-23 Thirtieth Supplemental Indenture of JCP&L, dated June 1,
1976 - Incorporated by reference to Exhibit 5-A-23,
Registration No. 2-59785.
4-A-24 Thirty-first Supplemental Indenture of JCP&L, dated May 1,
1977 - Incorporated by reference to Exhibit 5-A-24,
Registration No. 2-59785.
61
<PAGE>
4-A-25 Thirty-second Supplemental Indenture of JCP&L, dated January
20, 1978 - Incorporated by reference to Exhibit 5-A-25,
Registration No. 2-60438.
4-A-26 Thirty-third Supplemental Indenture of JCP&L, dated January
1, 1979 - Incorporated by reference to Exhibit A-20(b),
Certificate Pursuant to Rule 24, SEC File No. 70-6242.
4-A-27 Thirty-fourth Supplemental Indenture of JCP&L, dated June 1,
1979 - Incorporated by reference to Exhibit A-28,
Certificate Pursuant to Rule 24, SEC File No. 70-6290.
4-A-28 Thirty-sixth Supplemental Indenture of JCP&L, dated October
1, 1979 - Incorporated by reference to Exhibit A-30,
Certificate Pursuant to Rule 24, SEC File No. 70-6354.
4-A-29 Thirty-seventh Supplemental Indenture of JCP&L, dated
September 1, 1984 - Incorporated by reference to Exhibit A-
1(cc), Certificate Pursuant to Rule 24, SEC File No. 70-
7001.
4-A-30 Thirty-eighth Supplemental Indenture of JCP&L, dated July 1,
1985 - Incorporated by reference to Exhibit A-1(dd),
Certificate Pursuant to Rule 24, SEC File No. 70-7109.
4-A-31 Thirty-ninth Supplemental Indenture of JCP&L, dated April
1, 1988 - Incorporated by reference to Exhibit A-1(a),
Certificate Pursuant to Rule 24, SEC File No. 70-7263.
4-A-32 Fortieth Supplemental Indenture of JCP&L, dated June 14,
1988 - Incorporated by reference to Exhibit A-1(ff),
Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-33 Forty-first Supplemental Indenture of JCP&L, dated April 1,
1989 - Incorporated by reference to Exhibit A-1(gg),
Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-34 Forty-second Supplemental Indenture of JCP&L, dated July 1,
1989 - Incorporated by reference to Exhibit A-1(hh),
Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-35 Forty-third Supplemental Indenture of JCP&L, dated March 1,
1991 - Incorporated by reference to Exhibit 4-A-35,
Registration No. 33-45314.
4-A-36 Forty-fourth Supplemental Indenture of JCP&L, dated March 1,
1992 - Incorporated by reference to Exhibit 4-A-36,
Registration No. 33-49405.
4-A-37 Forty-fifth Supplemental Indenture of JCP&L, dated October
1, 1992 - Incorporated by reference to Exhibit 4-A-37,
Registration No. 33-49405.
4-A-38 Forty-sixth Supplemental Indenture of JCP&L, dated April 1,
1993 - Incorporated by reference to Exhibit C-15, 1992
Annual Report of GPU on Form U5S, SEC File No. 30-126.
62
<PAGE>
4-A-39 Forty-seventh Supplemental Indenture of JCP&L, dated April
10, 1993 - Incorporated by reference to Exhibit C-16, 1992
Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-40 Forty-eighth Supplemental Indenture of JCP&L, dated April
15, 1993 - Incorporated by reference to Exhibit C-17, 1992
Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-41 Forty-ninth Supplemental Indenture of JCP&L, dated October
1, 1993 - Incorporated by reference to Exhibit C-18, 1993
Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-42 Fiftieth Supplemental Indenture of JCP&L, dated August 1,
1994 - Incorporated by reference to Exhibit C-19, 1994
Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-B Indenture of Met-Ed, dated November 1, 1944 with United
States Trust Company of New York, Successor Trustee, as
amended and supplemented by fourteen supplemental indentures
dated February 1, 1947 through June 1, 1957 - Incorporated
by reference to Met-Ed's Instruments of Indebtedness Nos. 1
to 14, inclusive and 16, filed as part of Amendment No. 1 to
1959 Annual Report of GPU on Form U5S, SEC File Nos. 30-126
and 1-3292.
4-B-1 Supplemental Indenture of Met-Ed, dated May 1, 1960 -
Incorporated by reference to Exhibit 2-C, Registration No.
2-16192.
4-B-2 Supplemental Indenture of Met-Ed, dated December 1, 1962 -
Incorporated by reference to Exhibit 2-E(1), Registration
No. 2-59678.
4-B-3 Supplemental Indenture of Met-Ed, dated March 20, 1964 -
Incorporated by reference to Exhibit 2-E(2), Registration
No. 2-59678.
4-B-4 Supplemental Indenture of Met-Ed, dated July 1, 1965 -
Incorporated by reference to Exhibit 2-E(3), Registration
No. 2-59678.
4-B-5 Supplemental Indenture of Met-Ed, dated June 1, 1966 -
Incorporated by reference to Exhibit 2-B-4, Registration No.
2-24883.
4-B-6 Supplemental Indenture of Met-Ed, dated March 22, 1968 -
Incorporated by reference to Exhibit 4-C-5, Registration No.
2-29644.
4-B-7 Supplemental Indenture of Met-Ed, dated September 1, 1968 -
Incorporated by reference to Exhibit 2-E(6), Registration
No. 2-59678.
4-B-8 Supplemental Indenture of Met-Ed, dated August 1, 1969 -
Incorporated by reference to Exhibit 2-E(7), Registration
No. 2-59678.
63
<PAGE>
4-B-9 Supplemental Indenture of Met-Ed, dated November 1, 1971 -
Incorporated by reference to Exhibit 2-E(8), Registration
No. 2-59678.
4-B-10 Supplemental Indenture of Met-Ed, dated May 1, 1972 -
Incorporated by reference to Exhibit 2-E(9), Registration
No. 2-59678.
4-B-11 Supplemental Indenture of Met-Ed, dated December 1, 1973 -
Incorporated by reference to Exhibit 2-E(10), Registration
No. 2-59678.
4-B-12 Supplemental Indenture of Met-Ed, dated October 30, 1974 -
Incorporated by reference to Exhibit 2-E(11), Registration
No. 2-59678.
4-B-13 Supplemental Indenture of Met-Ed, dated October 31, 1974 -
Incorporated by reference to Exhibit 2-E(12), Registration
No. 2-59678.
4-B-14 Supplemental Indenture of Met-Ed, dated March 20, 1975 -
Incorporated by reference to Exhibit 2-E(13), Registration
No. 2-59678.
4-B-15 Supplemental Indenture of Met-Ed, dated September 25, 1975 -
Incorporated by reference to Exhibit 2-E(15), Registration
No. 2-59678.
4-B-16 Supplemental Indenture of Met-Ed, dated January 12, 1976 -
Incorporated by reference to Exhibit 2-E(16), Registration
No. 2-59678.
4-B-17 Supplemental Indenture of Met-Ed, dated March 1, 1976 -
Incorporated by reference to Exhibit 2-E(17), Registration
No. 2-59678.
4-B-18 Supplemental Indenture of Met-Ed, dated September 28, 1977 -
Incorporated by reference to Exhibit 2-E(18), Registration
No. 2-62212.
4-B-19 Supplemental Indenture of Met-Ed, dated January 1, 1978 -
Incorporated by reference to Exhibit 2-E(19), Registration
No. 2-62212.
4-B-20 Supplemental Indenture of Met-Ed, dated September 1, 1978 -
Incorporated by reference to Exhibit 4-A(19), Registration
No. 33-48937.
4-B-21 Supplemental Indenture of Met-Ed, dated June 1, 1979 -
Incorporated by reference to Exhibit 4-A(20), Registration
No. 33-48937.
4-B-22 Supplemental Indenture of Met-Ed, dated January 1, 1980 -
Incorporated by reference to Exhibit 4-A(21), Registration
No. 33-48937.
64
<PAGE>
4-B-23 Supplemental Indenture of Met-Ed, dated September 1, 1981 -
Incorporated by reference to Exhibit 4-A(22), Registration
No. 33-48937.
4-B-24 Supplemental Indenture of Met-Ed, dated September 10, 1981 -
Incorporated by reference to Exhibit 4-A(23), Registration
No. 33-48937.
4-B-25 Supplemental Indenture of Met-Ed, dated December 1, 1982 -
Incorporated by reference to Exhibit 4-A(24), Registration
No. 33-48937.
4-B-26 Supplemental Indenture of Met-Ed, dated September 1, 1983 -
Incorporated by reference to Exhibit 4-A(25), Registration
No. 33-48937.
4-B-27 Supplemental Indenture of Met-Ed, dated September 1, 1984 -
Incorporated by reference to Exhibit 4-A(26), Registration
No. 33-48937.
4-B-28 Supplemental Indenture of Met-Ed, dated March 1, 1985 -
Incorporated by reference to Exhibit 4-A(27), Registration
No. 33-48937.
4-B-29 Supplemental Indenture of Met-Ed, dated September 1, 1985 -
Incorporated by reference to Exhibit 4-A(28), Registration
No. 33-48937.
4-B-30 Supplemental Indenture of Met-Ed, dated June 1, 1988 -
Incorporated by reference to Exhibit 4-A(29), Registration
No. 33-48937.
4-B-31 Supplemental Indenture of Met-Ed, dated April 1, 1990 -
Incorporated by reference to Exhibit 4-A(30), Registration
No. 33-48937.
4-B-32 Amendment dated May 22, 1990 to Supplemental Indenture of
Met-Ed, dated April 1, 1990 - Incorporated by reference to
Exhibit 4-A(31), Registration No. 33-48937.
4-B-33 Supplemental Indenture of Met-Ed, dated September 1, 1992 -
Incorporated by reference to Exhibit 4-A(32)(a),
Registration No. 33-48937.
4-B-34 Supplemental Indenture of Met-Ed, dated December 1, 1993 -
Incorporated by reference to Exhibit C-58, 1993 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-B-35 Supplemental Indenture of Met-Ed, dated July 15, 1995.
4-C Mortgage and Deed of Trust of Penelec dated January 1, 1942
between Penelec and United States Trust Company of New York,
Successor Trustee, and indentures supplemental thereto dated
March 7, 1942 through May 1, 1960 - Incorporated by
reference to Penelec's Instruments of Indebtedness Nos. 1-
20, inclusive, filed as a part of Amendment No. 1 to 1959
65
<PAGE>
Annual Report of GPU on Form U5S, SEC File Nos. 30-126 and
1-3292.
4-C-1 Supplemental Indentures to Mortgage and Deed of Trust of
Penelec dated May 1, 1961 through December 1, 1977 -
Incorporated by reference to Exhibit 2-D(1) to 2-D(19),
Registration No. 2-61502.
4-C-2 Supplemental Indenture of Penelec dated June 1, 1978 -
Incorporated by reference to Exhibit 4-A(2), Registration
No. 33-49669.
4-C-3 Supplemental Indenture of Penelec dated June 1, 1979 -
Incorporated by reference to Exhibit 4-A(3), Registration
No. 33-49669.
4-C-4 Supplemental Indenture of Penelec dated September 1, 1984 -
Incorporated by reference to Exhibit 4-A(4), Registration
No. 33-49669.
4-C-5 Supplemental Indenture of Penelec dated December 1, 1985 -
Incorporated by reference to Exhibit 4-A(5), Registration
No. 33-49669.
4-C-6 Supplemental Indenture of Penelec dated December 1, 1986 -
Incorporated by reference to Exhibit 4-A(6), Registration
No. 33-49669.
4-C-7 Supplemental Indenture of Penelec dated May 1, 1989 -
Incorporated by reference to Exhibit 4-A(7), Registration
No. 33-49669.
4-C-8 Supplemental Indenture of Penelec dated December 1, 1990-
Incorporated by reference to Exhibit 4-A(8), Registration
No. 33-45312
4-C-9 Supplemental Indenture of Penelec dated March 1, 1992 -
Incorporated by reference to Exhibit 4-A(9), Registration
No. 33-45312.
4-C-10 Supplemental Indenture of Penelec, dated June 1, 1993 -
Incorporated by reference to Exhibit C-73, 1993 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-C-11 Supplemental Indenture of Penelec, dated November 1, 1995.
4-D Subordinated Debenture Indenture of JCP&L dated May 1, 1995
- Incorporated by reference to Exhibit A-8(a), Certificate
Pursuant to Rule 24, SEC File No. 70-8495.
4-E Subordinated Debenture Indenture of Met-Ed dated August 1,
1994 - Incorporated by reference to Exhibit A-8(a),
Certificate Pursuant to Rule 24, SEC File No. 70-8401.
66
<PAGE>
4-F Subordinated Debenture Indenture of Penelec dated July 1,
1994 - Incorporated by reference to Exhibit A-8(a),
Certificate Pursuant to Rule 24, SEC File No. 70-8403.
4-G Amended and Restated Limited Partnership Agreement of JCP&L
Capital, L.P., dated May 11, 1995 - Incorporated by
reference to Exhibit A-5(a), Certificate Pursuant to Rule
24, SEC File No. 70-8495.
4-H Action Creating Series A Preferred Securities of JCP&L
Capital, L.P., dated May 11, 1995 - Incorporated by
reference to Exhibit A-6(a), Certificate Pursuant to Rule
24, SEC File No. 70-8495.
4-I Payment and Guarantee Agreement of JCP&L, dated May 18, 1995
- Incorporated by reference to Exhibit B-1(a), Certificate
Pursuant to Rule 24, SEC File No. 70-8495.
4-J Amended and Restated Limited Partnership Agreement of Met-Ed
Capital, L.P., dated August 16, 1994 - Incorporated by
reference to Exhibit A-5(a), Certificate Pursuant to Rule
24, SEC File No. 70-8401.
4-K Action Creating Series A Preferred Securities of Met-Ed
Capital, L.P., dated August 16, 1994 - Incorporated by
reference to Exhibit A-6(a), Certificate Pursuant to Rule
24, SEC File No. 70-8401.
4-L Payment and Guarantee Agreement of Met-Ed, dated August 23,
1994 - Incorporated by reference to Exhibit B-1(a),
Certificate Pursuant to Rule 24, SEC File No. 70-8401.
4-M Amended and Restated Limited Partnership Agreement of
Penelec Capital, L.P., dated June 27, 1994 - Incorporated by
reference to Exhibit A-5(a), Certificate Pursuant to Rule
24, SEC File No. 70-8403.
4-N Action Creating Series A Preferred Securities of Penelec
Capital, L.P., dated June 27, 1994 - Incorporated by
reference to Exhibit A-6(a), Certificate Pursuant to Rule
24, SEC File No. 70-8403.
4-O Payment and Guarantee Agreement of Penelec, dated July 5,
1994 - Incorporated by reference to Exhibit B-1(a),
Certificate Pursuant to Rule 24, SEC File No. 70-8403.
10-A GPU System Companies Deferred Compensation Plan dated June
1, 1995.
10-B GPU System Companies Master Directors' Benefits Protection
Trust dated September 1, 1995.
10-C GPU System Companies Master Executives' Benefits Protection
Trust dated September 1, 1995.
67
<PAGE>
10-D Employee Incentive Compensation Plan of JCP&L dated April 1,
1995.
10-E Employee Incentive Compensation Plan of Met-Ed dated April
1, 1995.
10-F Employee Incentive Compensation Plan of Penelec dated April
1, 1995.
10-G Incentive Compensation Plan for Elected Officers of JCP&L
dated January 1, 1995.
10-H Incentive Compensation Plan for Elected Officers of Met-Ed
dated January 1, 1995.
10-I Incentive Compensation Plan for Elected Officers of Penelec
dated January 1, 1995.
10-J Deferred Remuneration Plan for Outside Directors of JCP&L
dated September 1, 1995.
10-K JCP&L Supplemental and Excess Benefits Plan dated January 1,
1995.
10-L Met-Ed Supplemental and Excess Benefits Plan dated January
1, 1995.
10-M Penelec Supplemental and Excess Benefits Plan dated January
1, 1995.
10-N Letter agreement dated November 22, 1995 relating to
supplemental pension benefits for J.R. Leva.
10-O Letter agreement dated September 18, 1995 relating to terms
of employment and pension benefits for I.H. Jolles.
10-P Letter agreement dated November 22, 1995 relating to
supplemental pension benefits for J.G. Graham.
10-Q GPU Restricted Stock Plan for Outside Directors -
Incorporated by reference to Exhibit 10-A, 1994 Annual
Report on Form 10-K, SEC File No. 1-6047.
10-R Retirement Plan for Outside Directors of GPU - Incorporated
by reference to Exhibit 10-B, 1994 Annual Report on Form 10-
K, SEC File No. 1-6047.
10-S Deferred Remuneration Plan for Outside Directors of GPU -
Incorporated by reference to Exhibit 10-C, 1994 Annual
Report on Form 10-K, SEC File No. 1-6047.
10-T Amended and Restated Nuclear Material Lease Agreement, dated
November 17, 1995, between Oyster Creek Fuel Corp. and JCP&L
- Incorporated by reference to Exhibit B-2(a)(i),
Certificate Pursuant to Rule 24, SEC File No. 70-7862.
68
<PAGE>
10-U Amended and Restated Nuclear Material Lease Agreement, dated
November 17, 1995, between TMI-1 Fuel Corp. and JCP&L -
Incorporated by reference to Exhibit B-2(a)(ii), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
10-V Letter Agreement, dated November 17, 1995, from JCP&L
relating to Oyster Creek Nuclear Material Lease Agreement -
Incorporated by reference to Exhibit B-2(b)(i), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
10-W Letter Agreement, dated November 17, 1995, from JCP&L
relating to JCP&L TMI-1 Nuclear Material Lease Agreement -
Incorporated by reference to Exhibit B-2(b)(ii), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
10-X Amended and Restated Trust Agreement, dated November 17,
1995, between United States Trust Company of New York, as
Owner Trustee, Lord Fuel Corp., as Trustor and Beneficiary,
and JCP&L, Met-Ed and Penelec - Incorporated by reference to
Exhibit B-3(i), Certificate Pursuant to Rule 24, SEC File
No. 70-7862.
10-Y Amended and Restated Nuclear Material Lease Agreement, dated
November 17, 1995, between TMI-1 Fuel Corp. and Met-Ed -
Incorporated by reference to Exhibit B-2(a)(iii),
Certificate Pursuant to Rule 24, SEC File No. 70-7862.
10-Z Letter Agreement, dated November 17, 1995, from Met-Ed
relating to Met-Ed TMI-1 Nuclear Material Lease Agreement -
Incorporated by reference to Exhibit B-2(b)(i), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
10-AA Amended and Restated Nuclear Material Lease Agreement, dated
November 17, 1995, between TMI-1 Fuel Corp. and Penelec -
Incorporated by reference to Exhibit B-2(a)(iv), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
10-BB Letter Agreement, dated November 17, 1995, from Penelec
relating to Penelec Nuclear Material Lease Agreement -
Incorporated by reference to Exhibit B-2(b)(i), Certificate
Pursuant to Rule 24, SEC File No. 70-7862.
12 Statements Showing Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
A - JCP&L
B - Met-Ed
C - Penelec
21 Subsidiaries of the Registrant
A - JCP&L
B - Met-Ed
C - Penelec
69
<PAGE>
23 Consent of Independent Accountants
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
27 Financial Data Schedule
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
(b) Reports on Form 8-K:
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
For the month of October 1995, dated October 4, 1995,
under Item 5 (Other Events).
For the month of October 1995, dated October 20, 1995,
under Item 5 (Other Events), as amended by Form 8-K/A
No. 1, dated October 27, 1995.
A - GPU
For the month of December 1995, dated December 13,
1995, under Item 5 (Other Events).
70
<PAGE>
GENERAL PUBLIC UTILITIES CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENERAL PUBLIC UTILITIES CORPORATION
Dated: March 11, 1996 BY: /s/ J. R. Leva
J. R. Leva, Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ J. R. Leva March 11, 1996
J. R. Leva, Chairman (Chief Executive
Officer) President and Director
/s/ J. G. Graham March 11, 1996
J. G. Graham, Senior Vice President
(Chief Financial Officer)
/s/ F. A. Donofrio March 11, 1996
F. A. Donofrio, Vice President and
Comptroller (Chief Accounting Officer)
/s/ L. J. Appell, Jr. March 11, 1996
L. J. Appell, Jr., Director
/s/ T. H. Black March 11, 1996
T. H. Black, Director
/s/ H. F. Henderson, Jr. March 11, 1996
H. F. Henderson, Jr., Director
/s/ J. M. Pietruski March 11, 1996
J. M. Pietruski, Director
/s/ C. A. Rein March 11, 1996
C. A. Rein, Director
/s/ P. R. Roedel March 11, 1996
P. R. Roedel, Director
/s/ C. A. H. Trost March 11, 1996
C. A. H. Trost, Director
/s/ P. K. Woolf March 11, 1996
P. K. Woolf, Director
71
<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The Signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
JERSEY CENTRAL POWER & LIGHT COMPANY
Dated: March 11, 1996 BY: /s/ D. Baldassari
D. Baldassari, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ J. R. Leva March 11, 1996
J. R. Leva, Chairman
(Principal Executive Officer) and Director
/s/ D. Baldassari March 11, 1996
D. Baldassari, President
(Principal Operating Officer) and Director
/s/ J. G. Graham March 11, 1996
J. G. Graham, Vice President
(Principal Financial Officer) and Director
/s/ D. W. Myers March 11, 1996
D. W. Myers, Vice President-Comptroller
(Principal Accounting Officer) and Director
/s/ R. C. Arnold March 11, 1996
R. C. Arnold, Director
/s/ M. P. Morrell March 11, 1996
M. P. Morrell, Vice President and Director
/s/ G. E. Persson March 11, 1996
G. E. Persson, Director
/s/ S. C. Van Ness March 11, 1996
S. C. Van Ness, Director
/s/ S. B. Wiley March 11, 1996
S. B. Wiley, Director
72
<PAGE>
METROPOLITAN EDISON COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The Signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
METROPOLITAN EDISON COMPANY
Dated: March 11, 1996 BY: /s/ F. D. Hafer
F. D. Hafer, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ J. R. Leva March 11, 1996
J. R. Leva, Chairman (Principal Executive
Officer) and Director
/s/ F. D. Hafer March 11, 1996
F. D. Hafer, President (Principal
Operating Officer) and Director
/s/ J. G. Graham March 11, 1996
J. G. Graham, Vice President (Principal
Financial Officer) and Director
/s/ D. L. O'Brien March 11, 1996
D. L. O'Brien, Comptroller (Principal
Accounting Officer)
/s/ J. F. Furst March 11, 1996
J. F. Furst, Vice President and
Director
/s/ G. R. Repko March 11, 1996
G. R. Repko, Vice President and Director
/s/ R. S. Zechman March 11, 1996
R. S. Zechman, Vice President and Director
/s/ R. C. Arnold March 11, 1996
R. C. Arnold, Director
73
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The Signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
PENNSYLVANIA ELECTRIC COMPANY
Dated: March 11, 1996 BY: /s/ F. D. Hafer
F. D. Hafer, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ J. R. Leva March 11, 1996
J. R. Leva, Chairman (Principal Executive
Officer) and Director
/s/ F. D. Hafer March 11, 1996
F. D. Hafer, President (Principal
Operating Officer) and Director
/s/ J. G. Graham March 11, 1996
J. G. Graham, Vice President (Principal
Financial Officer) and Director
/s/ D. L. O'Brien March 11, 1996
D. L. O'Brien, Comptroller (Principal
Accounting Officer)
/s/ J. F. Furst March 11, 1996
J. F. Furst, Vice President and
Director
/s/ G. R. Repko March 11, 1996
G. R. Repko, Vice President and Director
/s/ R. S. Zechman March 11, 1996
R. S. Zechman, Vice President and Director
/s/ R. C. Arnold March 11, 1996
R. C. Arnold, Director
74
<PAGE>
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
GENERAL PUBLIC UTILITIES CORPORATION
Supplementary Data Page
System Statistics F-3
Selected Financial Data F-4
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-5
Quarterly Financial Data F-23
Financial Statements
Report of Independent Accountants F-24
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-25
Balance Sheets as of December 31, 1995 and 1994 F-26
Statements of Retained Earnings for the Years Ended
December 31, 1995, 1994 and 1993 F-28
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-29
Notes to Financial Statements F-30
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1993-1995 F-65
JERSEY CENTRAL POWER & LIGHT COMPANY
Supplementary Data Page
Company Statistics F-66
Selected Financial Data F-67
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-68
Quarterly Financial Data F-74
Financial Statements
Report of Independent Accountants F-75
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-76
Balance Sheets as of December 31, 1995 and 1994 F-77
Statements of Retained Earnings for the Years Ended
December 31, 1995, 1994 and 1993 F-79
Statement of Capital Stock as of December 31, 1995 F-80
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-82
Statement of Long-Term Debt as of December 31, 1995 F-83
Notes to Financial Statements F-84
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1993-1995 F-93
F-1
<PAGE>
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
METROPOLITAN EDISON COMPANY
Supplementary Data Page
Company Statistics F-94
Selected Financial Data F-95
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-96
Quarterly Financial Data F-103
Financial Statements
Report of Independent Accountants F-104
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-105
Balance Sheets as of December 31, 1995 and 1994 F-106
Statements of Retained Earnings for the Years Ended
December 31, 1995, 1994 and 1993 F-108
Statement of Capital Stock and Preferred Securities
as of December 31, 1995 F-109
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-110
Statement of Long-Term Debt as of December 31, 1995 F-111
Notes to Financial Statements F-112
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1993-1995 F-120
PENNSYLVANIA ELECTRIC COMPANY
Supplementary Data Page
Company Statistics F-121
Selected Financial Data F-122
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-123
Quarterly Financial Data F-130
Financial Statements
Report of Independent Accountants F-131
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-132
Balance Sheets as of December 31, 1995 and 1994 F-133
Statements of Retained Earnings for the Years Ended
December 31, 1995, 1994 and 1993 F-135
Statement of Capital Stock and Preferred Securities
as of December 31, 1995 F-136
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-137
Statement of Long-Term Debt as of December 31, 1995 F-138
Notes to Financial Statements F-139
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1993-1995 F-148
Schedules other than those listed above have been omitted since they are not
required, are inapplicable or the required information is presented in the
Financial Statements or Notes thereto.
F-2
<PAGE>
<TABLE>
General Public Utilities Corporation and Subsidiary Companies
SYSTEM STATISTICS
<CAPTION>
For The Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Capacity at System Peak (In MW):
Company owned................................ 6,637 6,655 6,735 6,718 6,737 6,870
Contracted................................... 3,604 3,416 3,236 3,360 3,045 2,270
Total capacity (a)....................... 10,241 10,071 9,971 10,078 9,782 9,140
Hourly Peak Load (In MW):
Summer peak.................................. 9,101 8,521 8,533 8,067 8,271 7,634
Winter peak.................................. 7,861 7,683 7,167 7,173 7,119 6,847
Reserve at system peak (%)................... 12.5 18.2 16.9 24.9 18.3 19.7
Load factor (%) (b).......................... 57.5 61.7 60.9 62.3 61.1 64.4
Sources of Energy (In Thousands of MWH):
Coal......................................... 17,500 16,548 16,969 18,123 17,942 18,767
Nuclear...................................... 11,582 10,216 10,614 11,449 8,598 9,585
Gas, hydro & oil............................. 1,019 1,071 575 409 1,187 1,490
Net generation........................... 30,101 27,835 28,158 29,981 27,727 29,842
Utility purchases and interchange............ 10,297 10,326 11,984 11,931 14,255 13,648
Nonutility purchases......................... 10,712 8,810 8,383 8,070 5,934 3,150
Total sources of energy.................. 51,110 46,971 48,525 49,982 47,916 46,640
Company use, line loss, etc.................. (5,357) (4,313) (5,166) (4,843) (4,775) (4,325)
Total electric energy sales.............. 45,753 42,658 43,359 45,139 43,141 42,315
Fuel Expense (In Millions):
Coal......................................... $251 $260 $266 $266 $285 $299
Nuclear...................................... 74 65 66 69 60 67
Gas & oil.................................... 38 39 32 21 44 54
Total.................................... $363 $364 $364 $356 $389 $420
Power Purchased and Interchanged (In Millions):
Utility purchases and interchange............ $ 351 $367 $406 $430 $508 $481
Nonutility purchases......................... 671 528 491 471 343 190
Total.................................... $1,022 $895 $897 $901 $851 $671
Electric Energy Sales (In Thousands of MWH):
Residential.................................. 14,802 14,788 14,498 13,725 13,852 13,369
Commercial................................... 13,544 13,301 12,919 12,333 12,336 11,760
Industrial................................... 11,982 11,983 11,699 11,901 12,035 12,344
Other........................................ 1,143 1,245 1,221 1,303 1,369 1,239
Sales to customers....................... 41,471 41,317 40,337 39,262 39,592 38,712
Sales to other utilities..................... 4,282 1,341 3,022 5,877 3,549 3,603
Total.................................... 45,753 42,658 43,359 45,139 43,141 42,315
Operating Revenues (In Millions):
Residential.................................. $1,542 $1,503 $1,465 $1,339 $1,341 $1,211
Commercial................................... 1,258 1,215 1,169 1,079 1,060 951
Industrial................................... 780 774 755 752 753 709
Other........................................ 73 78 89 89 93 86
Revenues from customers.................. 3,653 3,570 3,478 3,259 3,247 2,957
Sales to other utilities..................... 101 24 67 127 84 108
Total electric revenues.................. 3,754 3,594 3,545 3,386 3,331 3,065
Other revenues............................... 51 56 51 48 41 39
Total.................................... $3,805 $3,650 $3,596 $3,434 $3,372 $3,104
Price per KWH (In Cents):
Residential.................................. 10.35 10.18 10.07 9.73 9.67 9.06
Commercial................................... 9.25 9.12 9.04 8.72 8.59 8.09
Industrial................................... 6.51 6.46 6.47 6.32 6.25 5.75
Total sales to customers..................... 8.77 8.64 8.61 8.28 8.20 7.64
Total sales.................................. 8.17 8.43 8.17 7.49 7.72 7.24
Kilowatt-hour Sales per Residential Customer... 8,539 8,646 8,575 8,215 8,374 8,146
Customers at Year-End (In Thousands)........... 1,976 1,949 1,925 1,901 1,879 1,863
(a) Summer ratings at December 31, 1995 of owned and contracted capacity were 6,592 MW and 3,832 MW, respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year to the peak load occurring during the year.
</TABLE>
F-3
<PAGE>
<TABLE>
General Public Utilities Corporation and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION>
For The Years Ended December 31, 1995 * 1994 ** 1993 1992 1991 *** 1990
<S> <C> <C> <C> <C> <C> <C>
Common Stock Data
Earnings per average common share $ 3.79 $ 1.42 $ 2.65 $ 2.27 $ 2.49 $ 2.51
Cash dividends paid per share $ 1.86 $ 1.775 $ 1.65 $ 1.575 $ 1.45 $ 1.25
Book value per share $ 24.66 $ 22.31 $ 22.69 $ 21.46 $ 20.81 $ 19.83
Closing market price per share $ 34 $ 26 1/4 $ 30 7/8 $ 27 5/8 $ 27 1/4 $ 22 3/4
Common shares outstanding (In Thousands):
Average 116,214 115,160 111,779 110,840 110,798 110,763
At year-end 120,619 115,315 115,041 110,857 110,815 110,775
Market price to book value at year-end 138% 118% 136% 129% 131% 115%
Price/earnings ratio 9.0 18.5 11.7 12.2 10.9 9.1
Return on average common equity 16.0% 6.3% 11.9% 10.7% 12.0% 12.9%
Financial Data (In Thousands)
Operating revenues $3,804,656 $3,649,516 $3,596,090 $3,434,153 $3,371,599 $3,104,224
Other operation and maintenance expense 963,609 1,076,925 909,786 856,773 891,314 834,455
Net income 440,135 163,688 295,673 251,636 275,882 278,234
Net utility plant in service 5,862,390 5,730,962 5,512,057 5,244,039 5,064,254 4,833,045
Cash construction expenditures 461,860 585,916 495,517 460,073 467,050 490,546
Total assets 9,869,698 9,209,777 8,829,255 7,730,738 7,408,834 6,935,440
Long-term debt 2,567,898 2,345,417 2,320,384 2,221,617 1,992,499 1,935,956
Long-term obligations under
capital leases 11,696 16,982 23,320 24,094 27,210 27,546
Subsidiary-obligated mandatorily
redeemable preferred securities 330,000 205,000 - - - -
Cumulative preferred stock with
mandatory redemption 134,000 150,000 150,000 150,000 100,000 100,000
* Results for 1995 reflect the reversal of $104.9 million (after-tax), or $0.91 per share, of certain future TMI-2
retirement costs written off in 1994. The reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court
decision that overturned a 1994 lower court order, and restored a 1993 PaPUC order allowing for the recovery of such
costs. Partially offsetting this increase was a charge to income of $8.4 million (after-tax), or $0.07 per share, of TMI-
2 monitored storage costs deemed not probable of recovery through ratemaking.
** Results for 1994 reflect a net decrease in earnings of $164.7 million (after-tax), or $1.43 per share, due to a write-off
of certain future TMI-2 retirement costs ($104.9 million, or $0.91 per share); charges for costs related to early
retirement programs ($76.1 million, or $0.66 per share); a write-off of Penelec's postretirement benefit costs believed
not probable of recovery in rates ($10.6 million, or $0.09 per share); and net interest income from refunds of previously
paid federal income taxes related to the tax retirement of TMI-2 ($26.9 million, or $0.23 per share).
*** Results for 1991 reflect an increase in earnings of $58.2 million (after-tax), or $0.53 per share, for an accounting
change recognizing unbilled revenues and a decrease in earnings of $56.2 million (after-tax), or $0.51 per share, for
estimated TMI-2 costs.
</TABLE>
F-4<PAGE>
General Public Utilities Corporation and Subsidiary Companies
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income in 1995 was $440.1 million, or $3.79 per share, compared to
1994 net income of $163.7 million, or $1.42 per share. The increase in net
income was primarily due to the net effect of several 1995 and 1994
nonrecurring items. GPU's return on average common equity was 16.0% in 1995
compared to 6.3% in 1994.
Excluding these nonrecurring items, net income for 1995 would have been
$343.6 million, or $2.95 per share, compared to 1994 net income of $328.4
million, or $2.85 per share. Return on average common equity for 1995 and
1994, on this basis, would have been 12.7% and 12.1%, respectively.
Contributing to this increase were higher new customer sales, partially offset
by higher depreciation and financing expenses.
The 1995 nonrecurring items consisted of a reversal of $104.9 million
(after-tax), or $0.91 per share, of certain future Three Mile Island Unit 2
(TMI-2) retirement costs written off by Metropolitan Edison Company (Met-Ed)
and Pennsylvania Electric Company (Penelec) in 1994. The reversal of this
write-off resulted from a 1995 Pennsylvania Supreme Court decision that
overturned a 1994 Pennsylvania Commonwealth Court order, and restored a 1993
Pennsylvania Public Utility Commission (PaPUC) order allowing Met-Ed to
recover such TMI-2 retirement costs from customers. Partially offsetting this
increase was a charge to income of $8.4 million (after-tax), or $0.07 per
share, for TMI-2 monitored storage costs deemed not probable of recovery
through ratemaking.
The 1994 nonrecurring items included the above mentioned TMI-2 write-off
of $104.9 million (after-tax), or $0.91 per share. Also in 1994, there was a
charge to income of $76.1 million (after-tax), or $0.66 per share, for early
retirement program costs; a write-off of $10.6 million (after-tax), or $0.09
per share, for certain postretirement benefit (OPEB) costs; and net interest
income of $26.9 million (after-tax), or $0.23 per share, resulting from
refunds of previously paid federal income taxes related to the tax retirement
of TMI-2.
Net income in 1994 was $163.7 million, or $1.42 per share, compared to
net income in 1993 of $295.7 million, or $2.65 per share. The 1994 earnings
reduction was attributable to the 1994 nonrecurring items mentioned above.
Also, in 1993 there was a write-off of $15.4 million (after-tax), or $0.14 per
share, for the cancellation of proposed power supply and transmission
facilities agreements between the Subsidiaries and Duquesne Light Company.
Excluding these nonrecurring items, net income for 1994 would have been $328.4
million, or $2.85 per share, compared to 1993 net income of $311.1 million, or
$2.79 per share.
Earnings in 1994 were also positively affected by higher sales resulting
from an increase in new customers and colder winter weather as compared to the
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previous year, and higher revenues attributable to a February 1993 retail base
rate increase at Jersey Central Power & Light Company (JCP&L). These
increases were partially offset by increases in other operation and
maintenance (O&M) expense.
OPERATING REVENUES:
Operating revenues increased 4.3% to $3.8 billion in 1995 after
increasing 1.5% to $3.65 billion in 1994. The components of these changes are
as follows:
(In Millions)
1995 1994
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 14.7 $ 30.6
Rate increases - 20.8
Energy revenues 141.6 (.9)
Other revenues (1.2) 2.9
Increase in revenues $155.1 $ 53.4
Kilowatt-hour revenues
1995
The increase in KWH revenues was due to an increase in new residential
and commercial customer sales, partially offset by lower weather-related
sales.
1994
The increase in KWH revenues was due primarily to an increase in sales
resulting from new customer additions in the residential and commercial
sectors, and colder winter weather as compared to the previous year.
1995 MWH Customer Sales by Service Class
Residential 36%
Commercial 32%
Industrial/Other 32%
Energy revenues
1995 and 1994
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. Energy revenues in 1995 increased primarily from additional sales
to other utilities and higher energy cost rates.
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Other revenues
1995 and 1994
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
1995 and 1994
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Subsidiaries' energy
adjustment clauses. However, earnings in 1994 benefitted from lower reserve
capacity expense (which is a component of PP&I) resulting from the replacement
of expiring utility purchase power contracts at lower rates.
Fuel and Deferral of energy costs, net
1995 and 1994
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
1995
The decrease in other O&M expense was due to a $127 million (pre-tax)
charge in 1994 related to the early retirement programs. Partially offsetting
this decrease was a 1995 write-off of $14.7 million (pre-tax) for TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
1994
The increase in other O&M expense was due primarily to a $127 million
(pre-tax) charge for the early retirement programs. The increase was also due
to higher emergency and winter storm repairs and the accrual of additional
payroll expense under an expanded employee incentive compensation program
designed to tie pay increases more closely to business results and enhance
productivity.
Depreciation and amortization
1995
The increase in depreciation and amortization expense was due primarily
to additions to plant in service.
Taxes, other than income taxes
1995 and 1994
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
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OTHER INCOME AND DEDUCTIONS:
Other income/(expense), net
1995 and 1994
In the third quarter of 1995, Met-Ed and Penelec reversed $183.9 million
(pre-tax) of certain future TMI-2 retirement costs written off in 1994. The
reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court
decision that overturned a 1994 Pennsylvania Commonwealth Court order, and
restored a 1993 PaPUC order allowing Met-Ed to recover such costs from
customers. The 1995 increase also included higher EI Group income of $14.3
million (pre-tax), which includes an $11.8 million (pre-tax) gain on the sale
of securities.
In 1994, Penelec expensed $18.6 million (pre-tax) for certain OPEB costs
believed not probable of recovery in rates. Of this amount, $14.6 million was
written off as a result of a PaPUC order disallowing a nonaffiliated utility
to collect such costs, and $4 million was charged to expense for OPEB costs
related to employees who participated in the early retirement programs. Also,
the Subsidiaries recorded interest income of $59.4 million (pre-tax) resulting
from refunds of previously paid federal income taxes related to the tax
retirement of TMI-2.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
1995 and 1994
In 1994, the Subsidiaries recognized interest expense related to the tax
retirement of TMI-2. The tax retirement of TMI-2 resulted in a $13.8 million
(pre-tax) charge to interest expense on additional amounts owed for tax years
in which depreciation deductions with respect to TMI-2 had been taken.
Dividends on subsidiary-obligated mandatorily redeemable preferred securities
1995 and 1994
Through special-purpose partnerships, Met-Ed and Penelec issued in 1994
$100 million and $105 million, respectively, and in May 1995, JCP&L issued
$125 million, of mandatorily redeemable preferred securities.
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs:
The Subsidiaries' capital needs were $553 million in 1995, consisting of
cash construction expenditures of $462 million and amounts for maturing
obligations of $91 million. In addition, the EI Group made investments in
1995 totaling $165 million, consisting primarily of investments in generating
facilities in South America and an electric distribution business in Australia
(see EI GROUP).
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General Public Utilities Corporation and Subsidiary Companies
During 1995, construction expenditures were used primarily to maintain
and improve existing generation, transmission and distribution facilities,
build a new generation facility, and for various clean air compliance
projects. In 1996, construction expenditures for the Subsidiaries are
estimated to be $491 million, consisting primarily of $418 million for ongoing
system development, $26 million for upgrading JCP&L's communication system,
and $15 million for the continued construction of new generation facilities.
Expenditures for maturing obligations will total $131 million in 1996, and
$158 million in 1997. In the late 1990s, construction expenditures are
expected to include substantial amounts for additional clean air requirements
and other System needs. Management estimates that approximately three-fourths
of the GPU System's 1996 capital needs will be satisfied through internally
generated funds.
Cash Construction Expenditures
(In millions of dollars)
1991 1992 1993 1994 1995 1996
$467 $460 $496 $586 $462 $491*
* Estimate
The Subsidiaries' capital leases consist primarily of leases for nuclear
fuel. Nuclear fuel capital leases at December 31, 1995 totaled $152 million.
In 1995, the Subsidiaries refinanced the Oyster Creek and TMI-1 nuclear fuel
leases to provide for aggregate borrowings of up to $210 million ($100 million
for Oyster Creek and $110 million for TMI-1) outstanding at any one time.
These nuclear fuel leases have initial terms of three years expiring in
November 1998, and are renewable annually thereafter at the lender's option
for a period up to 20 years. When consumed, portions of the presently leased
material will be replaced by additional leased material at a rate of between
$40 million and $45 million annually. In the event the needed nuclear fuel
cannot be leased, the associated capital requirements would have to be met by
other means.
Financing:
In 1995, GPU sold five million shares of common stock. The net proceeds
of $157.5 million were used to make cash capital contributions to the
Subsidiaries and to repay GPU short-term debt, a portion of which had been
incurred to acquire interests in a generating company in Bolivia and a
distribution business in Australia.
The Subsidiaries have regulatory authority to issue and sell first
mortgage bonds (FMBs), which may be issued as secured medium-term notes, and
preferred stock through various periods into 1997. Under existing
authorizations, JCP&L, Met-Ed and Penelec may issue these senior securities in
aggregate amounts of $225 million, $190 million and $160 million,
respectively, of which $100 million for each Subsidiary may consist of
preferred stock. The Subsidiaries also have regulatory authority to incur
short-term debt, a portion of which may be through the issuance of commercial
paper.
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In 1995, the Subsidiaries issued an aggregate of $338 million principal
amount of FMBs. The proceeds from these issuances were used to refinance $128
million principal amount of higher cost FMBs, to redeem at maturity $59
million principal amount of FMBs, to moderate short-term debt levels and to
fund growth in capitalization. In addition, the EI Group has borrowed $68
million under a credit agreement, the proceeds of which were used primarily to
finance the acquisition of an electric distribution business in Australia (see
EI GROUP). JCP&L Capital L.P., a special-purpose partnership in which a
subsidiary of JCP&L is the sole general partner, issued $125 million stated
value of mandatorily redeemable preferred securities (carried on the balance
sheet as Subsidiary-obligated mandatorily redeemable preferred securities).
The proceeds from the issuance were used to reduce JCP&L short-term debt and
retire senior securities. Also in 1995, JCP&L repurchased, in the market, $6
million stated value of cumulative preferred stock. The repurchased shares
may be used to satisfy future sinking fund requirements.
The Subsidiaries' bond indentures and articles of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Subsidiaries may issue. The Subsidiaries' interest and
preferred dividend coverage ratios are currently in excess of indenture and
charter restrictions.
The GPU System's cost of capital and ability to obtain external financing
are affected by the Subsidiaries' security ratings, which are periodically
reviewed by the three major credit rating agencies. The GPU System's senior
securities ratings have remained constant since August 1994. The
Subsidiaries' FMBs are currently rated at an equivalent of BBB+ or higher by
the three major credit rating agencies, while the preferred stock and
mandatorily redeemable preferred securities issues have been assigned an
equivalent of BBB or higher. In addition, the Subsidiaries' commercial paper
is rated as having good to high credit quality.
In October 1995, the Standard & Poor's (S&P) rating outlook (which is
used to assess the potential direction of an issuer's long-term debt rating
over the intermediate to longer-term) for Met-Ed was revised to "positive"
from "stable." According to S&P, this outlook reflects expectations of modest
financial improvement based on gradual economic growth, the successful buyout
of some expensive nonutility generation (NUG) contracts, and continued strong
nuclear operations. It also reflects the Pennsylvania Supreme Court's reversal
of a lower court order that had disallowed recovery of certain future TMI-2
retirement costs. The S&P rating outlook for JCP&L and Penelec remained as
"stable," and reflects manageable construction programs, minimal rate relief
requirements and expectations of modest strengthening in the service area
economies. The S&P business positions assigned to the Subsidiaries remained
unchanged throughout the year at "low average" to "average." The business
position is a financial benchmarking standard for rating the debt of electric
utilities to reflect the changing risk profiles resulting primarily from the
intensifying competitive pressures in the industry.
Present plans call for the Subsidiaries to issue long-term debt during
the next three years to finance construction activities, fund the redemption
of maturing senior securities, and depending on interest rates, refinance
outstanding senior securities. In addition, significant further investments
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by the EI Group, or otherwise, may require GPU to issue additional debt and/or
new shares of common stock.
Capitalization:
The GPU System's target capitalization ratios are designed to provide
credit quality ratings that permit capital market access at reasonable costs.
The targets and actual capitalization ratios are as follows:
Target Range 1995 1994 1993
Common equity 46-49% 47% 44% 47%
Preferred equity 8-10 9 8 5
Notes payable and
long-term debt 46-41 44 48 48
100% 100% 100% 100%
In 1995, the quarterly dividend on GPU common stock was increased by 4.4%
to an annualized rate of $1.88 per share. GPU's payout rate in 1995 was 63%
of earnings (excluding the nonrecurring items). Management will continue to
review its dividend policy to determine how to best serve the long-term
interests of shareholders.
EI GROUP
The EI Group (Energy Initiatives, EI Power, and EI Energy) is engaged in
the development, ownership and operation of generation, transmission and
distribution facilities in the United States and foreign countries. GPU has
obtained SEC approval to finance investments in foreign utility companies and
exempt wholesale generators (both domestically and internationally) up to an
aggregate amount equal to 50% of GPU's average consolidated retained earnings.
At December 31, 1995, GPU has investments, through the EI Group, in exempt
wholesale generators and foreign utility companies totaling approximately $300
million. The $300 million includes investments made by the EI Group totaling
$160 million, of which $81 million was contributed by GPU; and GPU guarantee
obligations aggregating $140 million. In addition, GPU has investments,
through the EI Group, in qualifying cogeneration facilities and project
development activities aggregating $124 million. Selected financial data for
the EI Group is as follows:
(In Millions)
1995* 1994 1993
Total assets $380 $130 $ 44
Capitalization:
Common equity $209 $118 $ 39
Notes payable 2 - -
Long-term debt 104 - -
Total $315 $118 $ 39
Purchase of investments $165 $ 74 $ 16
Net income/(loss) $ 9 $ (3) $ (2)
* Total assets includes approximately $62 million held by a minority owner.
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In 1995, EI Power acquired from the Bolivian government, for
approximately $47 million, a 50% ownership interest in Empresa Guaracachi
S.A., a Bolivian electric generating company having an aggregate capacity of
216 MW of gas-fired and oil-fired generation.
In 1995, EI Energy, together with the Australian Gas Light Company,
acquired Solaris Power (Solaris), an electric distribution company based in
Melbourne, Australia, for a total purchase price of approximately $712
million, of which EI Energy's 50% share was $356 million. EI Energy has made
an equity investment in Solaris of approximately $112 million; the balance of
the purchase price was provided through borrowings by Solaris from an
Australian bank syndicate. Solaris, which provides electric service to more
than 230,000 customers in and around Melbourne, was sold by the Government of
Victoria through a competitive bid as part of that state's privatization of
the electric industry.
In 1995, EI Power, along with its development partners, completed the
financing for the acquisition of a 240 MW gas-fired generating plant in
Barranquilla, Colombia and the construction of a new 750 MW gas-fired plant
adjacent to the existing plant. Electricity generated by these plants will be
sold to Corporacion Electrica de la Costa Atlantica under a 20-year contract.
Total project costs, including the acquisition of the existing plant, are
approximately $750 million, of which EI Power's equity contribution is
expected to be approximately $65 million. EI Power has agreed to make
additional equity contributions to the project of up to $58 million under
certain circumstances.
At December 31, 1995, the EI Group had ownership interests in eleven
operating combined-cycle cogeneration plants located in the United States
(totaling 932 MW of capacity) and five operating generating facilities located
in Canada and South America (totaling 480 MW of capacity). The EI Group also
has a number of additional projects at various stages of development,
including a 300 MW gas-fired project and a 180 MW gas-fired project for which
long-term power purchase agreements have been executed with Georgia Power
Company and Wisconsin Public Service Company, respectively.
Management expects that the EI Group will be a source of future earnings
growth and intends to make additional investments in these types of business
activities. The timing and amounts of these investments, however, will depend
upon appropriate opportunities.
The following remaining sections of MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are being presented for GPU
and for each of the Subsidiaries on a combined basis.
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COMPETITIVE ENVIRONMENT
Recent Regulatory Actions:
The electric power markets have traditionally been served by integrated
regulated monopolies. Over the last few years, however, market forces
combined with state and federal actions, have laid the foundation for the
development of increased competition in the electric utility industry.
In 1995, the Federal Energy Regulatory Commission (FERC) issued a Notice
of Proposed Rulemaking (NOPR) on open access nondiscriminatory transmission
services by utilities and a supplemental NOPR on recovery of stranded costs.
The new rules, if adopted, would in essence provide open access to the
interstate electric transmission network and thereby encourage a fully
competitive wholesale electric power market.
Among other things, the FERC's proposal would (1) require electric
utilities to file nondiscriminatory open access transmission tariffs which
would be available to all wholesale sellers and buyers of electricity; (2)
require utilities to accept service under these new tariffs for their own
wholesale transactions; and (3) permit utilities to recover their legitimate
and verifiable "stranded costs" incurred when a franchise customer elects to
purchase power from another supplier using the utility's transmission system.
In addition, while the proposed rule does not provide for "corporate
unbundling", which the FERC defines as the disposing of ancillary services or
creating separate affiliates to manage transmission services, it does call for
"functional unbundling" of transmission and ancillary services.
With respect to stranded costs, the FERC proposed to provide recovery
mechanisms where stranded costs result from municipalization or other
instances where former retail customers become wholesale customers, as well as
for wholesale stranded costs. The state regulatory agencies would be expected
to provide for recovery of stranded costs attributable to retail wheeling or
direct access programs, and the FERC would intervene only when such agencies
lacked necessary authority.
In September 1995, the FERC accepted for filing, subject to possible rate
refunds, the Subsidiaries' proposed open access transmission tariffs. The
FERC has ordered that hearings be held on a number of aspects of these
tariffs, including whether they are consistent in certain respects with FERC
policy on open access and comparability of service. The tariffs provide for
both firm and interruptible service on a point-to-point basis. Network
service, where requested, will be negotiated on a case by case basis.
In November 1995, the Subsidiaries, along with six other electric utility
members of the Pennsylvania-New Jersey-Maryland Interconnection (PJM Power
Pool), filed with the FERC a detailed plan to increase competition in the Mid-
Atlantic region. This comprehensive plan offers to all generators and
wholesale buyers of electricity, a regional energy market and open access to
high-voltage transmission lines which will result in greater availability of
economic energy for wholesale electricity buyers and sellers. The
Subsidiaries believe the plan will satisfy the goals of the FERC's NOPR on
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General Public Utilities Corporation and Subsidiary Companies
open access nondiscriminatory transmission services, and if approved by the
FERC, open access transmission tariffs filed with the FERC under this plan
would supersede the Subsidiaries' open access transmission tariffs.
The sponsoring PJM companies intend to make a comprehensive filing with
the FERC consistent with this detailed plan by May 1996, and expect to
implement the new structure by year-end 1996. The Subsidiaries have been
advised that the Justice Department is reviewing possible antitrust
implications of merger activity among PJM members.
In April 1995, legislation was introduced in the U.S. Senate that would
repeal Section 210 of the Public Utility Regulatory Policies Act of 1978
(PURPA). Under that section of PURPA, certain qualifying NUGs can "lock-in"
long-term rates that may result in electric utilities being required to
purchase power at costs higher than available alternative sources of energy.
Similar legislation has been introduced in the House of Representatives.
In October 1995, legislation was introduced in the U.S. Senate that
largely reflects a 1995 Securities and Exchange Commission (SEC) Staff report
recommending a series of legislative and administrative reforms to the Public
Utility Holding Company Act of 1935 (Holding Company Act). The SEC Staff
recommended that the SEC support repeal of the Holding Company Act with a
minimum one year transition period, and a transfer of audit, reporting and
certain other responsibilities to the FERC while giving state agencies access
to holding company books and records. In the interim, the SEC Staff
recommended that the SEC adopt a series of administrative reforms that would
streamline such things as the issuance of securities for routine financings
and permit a wide range of energy-related diversification activities. The SEC
Staff also recommended that the SEC more flexibly interpret the Holding
Company Act's integrated system requirements by allowing utility acquisitions
and specifically, combination electric and gas systems, where the affected
state commissions concur.
In response to the SEC Staff report, the SEC has adopted certain changes
which will streamline routine financings, and has proposed a number of others.
GPU and other registered holding companies believe that repeal of the Holding
Company Act is necessary to remove a significant impediment to a registered
holding company's ability to be competitive.
In May 1995, the New Jersey Board of Public Utilities (NJBPU) issued
Phase I of the New Jersey Energy Master Plan (NJEMP) promoting regulatory
policy changes intended to move New Jersey's electric and gas utilities into a
competitive marketplace. In the Phase I Report, the NJBPU recommended, among
other things, (1) rate-flexibility legislation to allow utilities to compete
in order to retain and attract customers in a changing regulatory environment;
(2) alternative regulation as an interim and possibly a long-term measure to
allow market forces to stimulate efficiency, productivity and innovation; (3)
consumer protection standards to ensure that captive ratepayers do not
subsidize competitive activities and to ensure that all ratepayers benefit
from the transition to greater competition; and (4) an integrated resource
planning and competitive supply-side procurement process to streamline the
regulatory review process, lower costs for all ratepayers, and ensure that New
Jersey's environmental and energy conservation goals are met in a competitive
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General Public Utilities Corporation and Subsidiary Companies
marketplace. The Phase I Report also emphasized that regulation must continue
to guarantee access to safe, adequate and reliable service at a reasonable
cost; protect the public interest; meet environmental and energy efficiency
goals; assure system reliability; and protect the financial integrity of
utilities which have an obligation to serve the public.
In August 1995, the NJBPU initiated Phase II of the NJEMP. Four working
groups have been established to develop draft proposals and models by March
1996. The subjects for each of the groups are as follows: (1) competition
issues; (2) stranded assets; (3) regional issues such as the environment and
emissions standards; and (4) public policy issues, including social programs
and conservation. The NJEMP is being developed in three phases, with Phase
III expected to be completed by the end of 1996.
In July 1995, New Jersey adopted energy rate-flexibility legislation that
will enable electric utilities to offer rate discounts to certain customers
and allow these customers access to competitive markets. If certain
conditions are met, utilities may be permitted to recover from customers 50%
of revenue lost as a result of rate discounts. The legislation also provides
utilities with the opportunity to propose to the NJBPU alternative ways to set
rates. JCP&L has submitted its initial compliance filing which sets forth
JCP&L's minimum price for off-tariff rate agreements applicable to commercial
and industrial customers.
In 1994, the PaPUC initiated an investigation into the role of
competition in Pennsylvania's electric utility industry and solicited comments
on various issues. Met-Ed and Penelec jointly filed responses suggesting,
among other things, that the PaPUC provide for the equitable recovery of
stranded investments, enable utilities to offer flexible pricing to customers
with competitive alternatives, and address regulatory requirements that impose
costs unequally on Pennsylvania utilities as compared with unregulated or out-
of-state suppliers. In August 1995, the PaPUC released a Staff report in
which the Staff decided not to recommend retail wheeling at this time.
Evidentiary hearings on this matter began in December 1995 and the PaPUC is
expected to present recommendations in the spring of 1996.
In response to these state proceedings, the Subsidiaries have proposed
the formation of a wholesale market regional power pool managed by an
independent system operator. The power pool would function as a spot market,
with generators of electricity allowed to sell into the pool and purchasers of
electricity allowed to buy from the pool. It would also accommodate contracts
between specific buyers and sellers of power. The power pool operator would
be responsible for supporting regional transmission planning and directing the
operation of generation and transmission facilities to assure the reliability
and integrity of the regional electric grid.
The Subsidiaries have also proposed the use of a competitive transition
charge (CTC) as an equitable approach to recover stranded costs. The CTC
would be applied to all customers who depend on the electric system for
delivery of their electric supply. Efforts by utilities to mitigate their
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General Public Utilities Corporation and Subsidiary Companies
stranded commitments could be required as part of the CTC. The Subsidiaries
also support in their proposals retail customer choice for such things as
energy supplier, products and services.
With the expectation that a segment of the industry will continue to be
regulated by the states, the proposals advocate the use of performance-based
rates to encourage utilities to reduce costs while maintaining service
reliability.
And in keeping with the public policy objectives associated with the
electric utility industry, including such things as access to basic service
for low income consumers, the proposals endorse the creation of a "public
purpose charge" that would be collected from all consumers.
Managing the Transition:
GPU has identified five strategic objectives to guide the GPU System over
the next several years: (1) strengthen and increase the distribution
business; (2) maximize existing generation asset values consistent with
competitive market economics; (3) internally and externally position GPU for
industry deregulation and restructuring; (4) seek earnings growth outside the
traditional regulated businesses, including making investments in the EI
Group; and (5) develop a culture that will prepare the GPU System for
competition.
On January 26, 1996, GPU received regulatory approval from the SEC to
form a new subsidiary, GPU Generation Corporation (Genco), to operate,
maintain and repair the nonnuclear generation facilities owned by the
Subsidiaries as well as construct any new nonnuclear generation facilities
which the Subsidiaries may need in the future. In 1994, the Subsidiaries
received regulatory approval from the PaPUC and NJBPU to enter into an
operating agreement with Genco.
The Subsidiaries entered into a three-year fuel management agreement with
New Jersey Natural Energy Corporation, an affiliate of New Jersey Natural Gas
Company, to manage the Subsidiaries' natural gas purchases and interstate
pipeline capacity. The Subsidiaries' gas-fired facilities, as well as up to
approximately 1,100 MW (JCP&L 885 MW; Met-Ed 200 MW; Penelec 15 MW) of NUG
capacity, will be pooled and managed under this agreement, allowing the
Subsidiaries to reduce their power purchase expenses. The Subsidiaries have
conditional or final agreements with four NUGs (JCP&L three NUGs; Met-Ed one
NUG), having an aggregate capacity of approximately 430 MW (JCP&L 385 MW; Met-
Ed 45 MW), to supply natural gas from the pool. Also, because the gas pool
will help to reduce fuel costs, some of the Subsidiaries' gas-fired generating
stations may at times be more economical in the PJM Power Pool's dispatching
order. As a result, the Subsidiaries may be able to reduce their dependence
upon more expensive purchased power and increase their energy sales to the PJM
Power Pool and other utilities.
In response to competitive forces and regulatory changes, the GPU System
has from time to time considered, and expects to continue to consider, various
strategies designed to enhance its competitive position and to increase its
ability to adapt to, and anticipate changes in, its business.
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General Public Utilities Corporation and Subsidiary Companies
These strategies may include business combinations with other companies,
internal restructurings involving the complete or partial separation of its
wholesale and retail businesses, acquisitions of other businesses, and
additions to or dispositions of all or portions of its generation,
transmission or distribution businesses. No assurances can be given as to
whether any potential transaction of the type described above may actually
occur, or as to the ultimate effect thereof on the financial condition or
competitive position of the GPU System.
Nonutility Generation Agreements:
As competition in the electric utility industry increases as a result of
regulatory actions, and customers are given a choice for their electric
supplier, the price of the GPU System's electricity will be critical. GPU is
attempting to assess the impact that these and other changes will have on its
financial condition and results of operations. For additional information
regarding the other changes that may have an adverse effect on the
Subsidiaries, see the COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
section of Note 1 to GPU's Consolidated Financial Statements.
Due to the current availability of excess capacity in the marketplace,
the cost of near- to intermediate-term (i.e., one to eight years) energy
supply from generation facilities now in service is currently and is expected
to continue to be priced below the costs of new supply sources, at least for
some time. The projected cost of energy from new generation supply sources
has also decreased due to improvements in power plant technologies and reduced
forecasted fuel prices. As a result of these developments, the rates under
virtually all of the Subsidiaries' NUG agreements are substantially in excess
of current and projected prices from alternative sources.
Pursuant to the requirements of PURPA and state regulatory directives,
the Subsidiaries have entered into power purchase agreements with NUGs for the
purchase of energy and capacity. While the Subsidiaries thus far have been
granted recovery of their NUG costs from customers by the PaPUC and NJBPU,
there can be no assurance that the Subsidiaries will continue to be able to
recover these costs throughout the terms of the related agreements. The GPU
System currently estimates that for 1998, when substantially all of these NUG
projects are scheduled to be in service, above market payments (benchmarked
against the expected cost of electricity produced by a new gas-fired combined-
cycle facility) will range from $240 million to $350 million (JCP&L $100
million to $150 million; Met-Ed $50 million to $80 million; Penelec $90
million to $120 million). The amount of these estimated above-market payments
may increase or decrease substantially based upon, among other things, payment
escalations in the contract terms, changes in fuel prices and changes in the
capital and operating cost of new generating equipment.
The Subsidiaries intend to avoid, to the maximum extent practicable,
entering into any new NUG agreements that are not needed or not consistent
with current market pricing and are supporting legislative efforts to repeal
PURPA. The Subsidiaries are also attempting to renegotiate, and in some cases
buyout, existing high cost long-term NUG agreements (see Managing Nonutility
Generation).
F-17
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
THE GPU SUPPLY PLAN
The GPU supply plan is prepared on a GPU System basis. Under existing
retail regulation, supply planning in the electric utility industry is
directly related to projected growth in the franchise service territory. At
this time, management cannot estimate the timing and extent to which retail
electric competition will affect the GPU supply plan. As GPU prepares to
operate in a competitive environment, its supply plan currently focuses on
maintaining the Subsidiaries' existing customer base by offering competitively
priced electricity.
Over the next five years, assuming the continuation of existing retail
electric regulation, each of the Subsidiaries is projected to experience an
average growth in sales to customers of about 2% annually, principally due to
continued economic growth in the service territories and a slight increase in
customers. To meet this growth, actual and projected capacity and sources of
energy are as follows:
Capacity
1995 2000
MW % MW %
Coal 3,024 29 3,024 27
Nuclear 1,405 13 1,405 13
Gas, Hydro & Oil 2,163 21 2,079 19
Contracted Purchases 3,832 37 3,287 30
Uncommitted Sources - - 1,239 11
Total 10,424 100 11,034 100
Sources of Energy
1995 2000
GWH % GWH %
Coal 17,500 34 18,631 35
Nuclear 11,582 23 9,930 19
Gas, Hydro & Oil 1,018 2 1,405 3
Contracted Purchases 16,598 32 17,183 33
Spot Market & Interchange
Purchases 4,411 9 5,127 10
Total 51,109 100 52,276 100
In response to the increasingly competitive business climate and excess
capacity of nearby utilities, the GPU System's supply plan places an emphasis
on maintaining flexibility. Supply planning focuses increasingly on short- to
intermediate-term commitments, reliance on "spot" market purchases, and
avoidance of long-term firm commitments. GPU's present strategy includes
minimizing the financial exposure associated with new long-term purchase
commitments and the construction of new facilities by evaluating these options
in terms of an unregulated power market. As part of this strategy, GPU is
also evaluating the future financial viability of its generating assets,
including possible plant retirements, on an ongoing basis. The GPU System
will take necessary actions to avoid adding new capacity which would result in
F-18
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
costs that may exceed future market prices. In addition, GPU will continue to
seek regulatory support to renegotiate or buy out contracts with NUGs where
the pricing is in excess of projected market prices.
New Energy Supplies:
The GPU System's supply plan includes contracted capacity from NUGs, the
replacement of expiring utility purchase contracts at lower costs, the
construction of new peaking units, the repowering of existing generation
facilities, and the continued promotion of economic energy-conservation and
load-management programs. The supply plan also includes the addition of
approximately 1,239 MW (primarily related to JCP&L) of currently uncommitted
capacity. Additional capacity needs are principally related to the expiration
of existing commitments rather than new customer load.
The Subsidiaries have contracts and anticipated commitments with NUGs
under which a total of 1,624 MW (JCP&L 892 MW; Met-Ed 335 MW; Penelec 397 MW)
of capacity are currently in service and about an additional 438 MW (JCP&L 110
MW; Met-Ed 150 MW; Penelec 178 MW) are currently scheduled to be in service by
2000.
In January 1996, JCP&L issued an all-supply source solicitation for the
short-term supply of energy and capacity to meet its minimum forecasted needs
through 2002. The solicitation will seek contracts to purchase about 600 MW
of capacity beginning in 1999, increasing to approximately 800 MW by 2002.
JCP&L plans to meet any energy and capacity needs, over and above its short-
term supply minimum forecast, by purchasing energy options which could be
exercised as needed. JCP&L will continue to evaluate additional economic
purchase opportunities as both demand and supply market conditions evolve and
conduct further solicitations to fulfill, if warranted, a significant part of
the uncommitted sources identified in GPU's supply plan.
JCP&L is constructing a 141 MW gas-fired combustion turbine at its
Gilbert generating station. This estimated $50 million project, of which $34
million has been spent, is expected to be in-service by mid-1996. An industry
trade group representing the NUGs has appealed the issuance of an air permit
by the New Jersey Department of Environmental Protection, and the NJBPU's
order to the Appellate Division of New Jersey Superior Court. There can be no
assurance as to the outcome of this proceeding.
Penelec has determined that it will not continue funding a proposed $146
million research and development project with the U.S. Department of Energy to
repower its 82 MW Warren generating station. In 1995, Penelec wrote off
approximately $2 million of costs related to this project.
Managing Nonutility Generation:
The Subsidiaries are seeking to reduce the above market costs of NUG
agreements, by (1) attempting to convert must-run agreements to dispatchable
agreements; (2) attempting to renegotiate prices of the agreements; (3)
offering contract buyouts while seeking to recover the costs through their
F-19
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
energy adjustment clauses; and (4) initiating proceedings before federal and
state agencies, and in the courts, where appropriate. In addition, the
Subsidiaries intend to avoid, to the maximum extent practicable, entering into
any new NUG agreements that are not needed or not consistent with current
market pricing and are supporting legislative efforts to repeal PURPA. These
efforts may result in claims against the GPU System for substantial damages.
There can, however, be no assurance as to what extent the Subsidiaries'
efforts will be successful in whole or in part.
During 1995, JCP&L and Met-Ed bought out a total of five NUG (JCP&L two
NUGs; Met-Ed three NUGs) power purchase contracts aggregating 540 MW (JCP&L
200 MW; Met-Ed 340 MW) of capacity, which is expected to save ratepayers more
than $2 billion (JCP&L $0.7 billion; Met-Ed $1.3 billion) based on the
projected cost of alternative sources of energy over the terms of these
agreements. JCP&L and Met-Ed have agreed to pay the project developers up to
a total of $84 million (JCP&L $17 million; Met-Ed $67 million) to cancel the
contracts. The Subsidiaries have deferred the costs of these buyouts and are
seeking to recover these costs through their energy adjustment clauses.
In 1995, Met-Ed and Penelec filed a petition for enforcement and
declaratory order with the FERC requesting that the FERC effectively
invalidate four contracts (Met-Ed two contracts; Penelec two contracts) with
NUGs, aggregating 487 MW (Met-Ed 327 MW; Penelec 160 MW) of capacity, on the
grounds that the PaPUC's implementation of PURPA directing Met-Ed and Penelec
to enter into these agreements was unlawful. The FERC has denied the
petition, and Met-Ed and Penelec have not determined whether they will seek
judicial review of the FERC's action. Subsequent to the FERC's decision,
Met-Ed bought out the contracts for two of these projects, totaling 327 MW.
In 1994, Penelec requested the Pennsylvania Supreme Court to review a
Commonwealth Court decision upholding a PaPUC order requiring Penelec to
purchase a total of 160 MW from two NUGs. The PaPUC had ordered Penelec in
1993 to enter into power purchase agreements with the developers for 80 MW of
power each under long-term contracts commencing in 1997 or later. The
Commonwealth Court denied Penelec's appeal of the PaPUC order, but remanded
the case back to the PaPUC to recalculate the avoided costs to be paid for the
power. In May 1995, the PaPUC assigned the matter to an Administrative Law
Judge (ALJ) for a recommended decision, and hearings have been scheduled by
the ALJ. In August 1995, the Pennsylvania Supreme Court granted Penelec's
petition for review of the Commonwealth Court's decision. Briefs have been
filed and oral argument was held in January 1996.
In March 1995, the U.S. Court of Appeals denied petitions for rehearing
filed by JCP&L, the NJBPU, and the New Jersey Division of Ratepayer Advocate,
seeking reconsideration of the Court's earlier decision prohibiting the NJBPU
from reexamining its order approving the rates payable to Freehold
Cogeneration Associates (Freehold) under a long-term power purchase agreement
entered into pursuant to PURPA. The U.S. Supreme Court has denied petitions
for review filed by JCP&L and the Ratepayer Advocate. JCP&L also petitioned
the FERC to invalidate the agreement as unlawful under PURPA. The FERC has
denied JCP&L's petition and JCP&L intends to seek judicial review of the
FERC's decision. JCP&L is also seeking to invalidate the Freehold power
F-20
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
purchase agreement in a separate action pending in a New Jersey Superior
Court. Freehold has moved to dismiss JCP&L's claim, and the matter is
pending.
In 1994, MidAtlantic Cogen Inc. requested the PaPUC to order Met-Ed to
enter into a long-term agreement to buy capacity and energy from its Fairless
Cogeneration Project. In 1994, the Pennsylvania Commonwealth Court granted
the PaPUC's application to revise its order for the purpose of reevaluating
MidAtlantic's right to sell power to Met-Ed. The PaPUC subsequently ordered
that hearings be held and assigned the matter to an ALJ. Met-Ed has moved to
dismiss MidAtlantic's petition. MidAtlantic has filed a cross-motion for
summary judgment. The motions are pending before the PaPUC.
ENVIRONMENTAL ISSUES
The federal Clean Air Act Amendments of 1990 (Clean Air Act) require
substantial reductions in sulfur dioxide and nitrogen oxide (NOx) emissions
by the year 2000. The Subsidiaries' plan includes installing and operating
emission control equipment at some of their coal-fired facilities as well as
switching to lower sulfur coal at other coal-fired facilities.
To comply with the Clean Air Act, the Subsidiaries expect to spend up to
$410 million (JCP&L $42 million; Met-Ed $158 million; Penelec $210 million)
for air pollution control equipment by the year 2000. During 1994 and 1995,
scrubbers were installed at the jointly owned Conemaugh station which are
expected to reduce sulfur dioxide emissions by 95%. Met-Ed's share of the
total project costs was approximately $57 million. Through December 31, 1995,
the Subsidiaries have made capital expenditures of approximately $234 million
(JCP&L $41 million; Met-Ed $95 million; Penelec $98 million) (including the
Conemaugh scrubbers) to comply with the Clean Air Act requirements.
In 1994, the Ozone Transport Commission (OTC), consisting of
representatives of 12 northeast states (including New Jersey and Pennsylvania)
and the District of Columbia, proposed reductions in NOx emissions it believes
necessary to meet ambient air quality standards for ozone and the statutory
deadlines set by the Clean Air Act. The Subsidiaries expect that the U.S.
Environmental Protection Agency will approve the state implementation plans
consistent with the proposal, and that as a result, they will spend an
estimated $60 million (Met-Ed $14 million; Penelec $46 million) (included in
the Clean Air Act total mentioned above), beginning in 1997, to meet the
seasonal reductions agreed upon by the OTC. The OTC has stated that it
anticipates that additional NOx reductions will be necessary to meet the Clean
Air Act's 2005 National Ambient Air Quality Standards for ozone. However, the
specific requirements that will have to be met at that time have not been
finalized. The Subsidiaries are unable to determine what additional costs, if
any, will be incurred.
In developing its least-cost plan to comply with the Clean Air Act, the
GPU System will continue to evaluate major capital investments compared to
participation in the emission allowance market, and the use of low-sulfur fuel
or the retirement of facilities. These and other compliance alternatives may
result in the substitution of increased operating expenses for capital costs.
F-21
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
At this time, costs associated with the capital invested in this pollution
control equipment and the increased operating costs of the affected plants are
expected to be recoverable through the current ratemaking process, but
management recognizes that recovery is not assured.
For more information, see the ENVIRONMENTAL MATTERS section of Note 1 to
GPU's Consolidated Financial Statements.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS
As a result of the TMI-2 accident and its aftermath, individual claims
for alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against GPU and the Subsidiaries.
Approximately 2,100 of such claims are pending in the United States District
Court for the Middle District of Pennsylvania. Some of the claims also seek
recovery for injuries from alleged emissions of radioactivity before and after
the accident. For more information, see the TMI-2 section of Note 1 to GPU's
Consolidated Financial Statements.
EFFECTS OF INFLATION
Under traditional ratemaking, the GPU System is affected by inflation
since the regulatory process results in a time lag during which increased
operating expenses are not fully recovered. As competition and deregulation
accelerate, there can be no assurance as to the recovery of increased
operating expense or utility plant investments. The GPU System is committed
to long-term cost control and continues to seek and implement measures to
reduce or limit the growth of operating expenses and capital expenditures,
including the associated effects of inflation.
Although currently operating in a regulated environment, the GPU System
is focusing less on the ratemaking process, and is actively trying to find new
ways to increase revenues, improve performance and reduce costs to facilitate
the competitive pricing of its products and services.
F-22
<PAGE>
<TABLE>
General Public Utilities Corporation and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
First Quarter Second Quarter
In Thousands Except
Per Share Data 1995 1994* 1995 1994**
<S> <C> <C> <C> <C>
Operating revenues........................ $913,972 $937,209 $864,648 $873,533
Operating income.......................... 133,660 156,596 126,318 45,700
Net income................................ 75,497 122,902 60,980 (125,342)
Earnings per share........................ .65 1.07 .53 (1.09)
Third Quarter Fourth Quarter
In Thousands Except
Per Share Data 1995*** 1994 1995 1994
Operating revenues........................ $1,095,082 $994,672 $930,954 $844,102
Operating income.......................... 184,581 169,014 115,992 117,215
Net income................................ 234,278 111,299 69,380 54,829
Earnings per share........................ 2.02 .97 .59 .47
* Results for the first quarter of 1994 reflect an increase in earnings of $26.9 million
(after-tax), or $0.23 per share, resulting from net interest income on refunds of
previously paid federal income taxes related to the tax retirement of TMI-2.
** Results for the second quarter of 1994 reflect the write-off of $104.9 million
(after-tax), or $0.91 per share, of certain future TMI-2 retirement costs; charges
of $76.1 million (after-tax), or $0.66 per share, for costs related to early
retirement programs; and a Penelec write-off of $10.6 million (after-tax), or $0.09
per share, for postretirement benefit costs believed not probable of recovery in
rates.
*** Results for the third quarter of 1995 reflect the reversal of $104.9 million (after-tax),
or $0.91 per share, of certain future TMI-2 retirement costs written off in the second
quarter of 1994. The reversal of this write-off resulted from a 1995 Pennsylvania
Supreme Court decision that overturned a 1994 lower court order, and restored a 1993
PaPUC order allowing for the recovery of such costs. Partially offsetting this increase
was a charge to income of $8.4 million (after-tax), or $0.07 per share, of TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
</TABLE>
F-23<PAGE>
General Public Utilities Corporation and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
General Public Utilities Corporation
Parsippany, New Jersey
We have audited the consolidated financial statements and financial statement
schedule of General Public Utilities Corporation and Subsidiary Companies as
listed in the index on page F-1 of this Form 10-K. These financial statements
and financial statement schedule are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of General Public
Utilities Corporation and Subsidiary Companies as of December 31, 1995 and
1994 and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. In addition, in our opinion,
the financial statement schedule referred to above, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
January 31, 1996
F-24
<PAGE>
<TABLE>
General Public Utilities Corporation and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Revenues................................... $3,804,656 $3,649,516 $3,596,090
Operating Expenses:
Fuel............................................... 363,211 363,834 363,643
Power purchased and interchanged................... 1,022,361 894,560 897,185
Deferral of energy costs, net...................... (5,902) (29,025) (6,598)
Other operation and maintenance.................... 963,609 1,076,925 909,786
Depreciation and amortization...................... 377,650 353,705 359,898
Taxes, other than income taxes..................... 349,221 348,945 344,221
Total operating expenses...................... 3,070,150 3,008,944 2,868,135
Operating Income Before Income Taxes................. 734,506 640,572 727,955
Income taxes....................................... 173,955 152,047 200,179
Operating Income..................................... 560,551 488,525 527,776
Other Income and Deductions:
Allowance for other funds used during construction. 5,113 4,712 4,831
Other income/(expense), net........................ 216,110 (152,236) (7,579)
Income taxes....................................... (90,751) 66,369 2,756
Total other income and deductions............. 130,472 (81,155) 8
Income Before Interest Charges and
Preferred Dividends................................ 691,023 407,370 527,784
Interest Charges and Preferred Dividends:
Interest on long-term debt......................... 188,321 183,186 187,847
Other interest..................................... 30,364 39,227 20,612
Allowance for borrowed funds used during
construction...................................... (9,558) (7,115) (5,105)
Dividends on subsidiary-obligated mandatorily
redeemable preferred securities................... 24,816 7,692 -
Preferred stock dividends of subsidiaries.......... 16,945 20,692 28,757
Total interest charges and preferred dividends 250,888 243,682 232,111
Net Income........................................... $ 440,135 $ 163,688 $ 295,673
Earnings Per Average Common Share.................... $ 3.79 $ 1.42 $ 2.65
Average Common Shares Outstanding (In Thousands)..... 116,214 115,160 111,779
Cash Dividends Paid Per Share........................ $ 1.86 $ 1.775 $ 1.65
The accompanying notes are an integral part of the consolidated financial statements.
F-25<PAGE>
General Public Utilities Corporation and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
ASSETS
Utility Plant:
In service, at original cost....................... $9,295,630 $8,879,630
Less, accumulated depreciation..................... 3,433,240 3,148,668
Net utility plant in service................... 5,862,390 5,730,962
Construction work in progress...................... 313,471 340,248
Other, net......................................... 193,356 195,388
Net utility plant.............................. 6,369,217 6,266,598
Other Property and Investments:
Nuclear decommissioning trusts..................... 362,957 260,482
EI Group investments, net.......................... 288,044 115,538
Nuclear fuel disposal fund......................... 95,393 82,920
Other, net......................................... 39,505 33,553
Total other property and investments........... 785,899 492,493
Current Assets:
Cash and temporary cash investments................ 18,422 26,731
Special deposits................................... 14,877 10,226
Accounts receivable:
Customers, net................................... 278,643 248,728
Other............................................ 69,773 56,903
Unbilled revenues.................................. 128,749 113,581
Materials and supplies, at average cost or less:
Construction and maintenance..................... 194,769 184,644
Fuel............................................. 39,795 55,498
Deferred energy costs.............................. 13,208 8,728
Deferred income taxes.............................. 27,064 18,399
Prepayments........................................ 42,746 62,164
Total current assets........................... 828,046 785,602
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs.......... 368,712 157,042
Unamortized property losses...................... 105,729 108,699
Income taxes recoverable through future rates.... 527,584 561,498
Other............................................ 437,683 370,402
Total regulatory assets........................ 1,439,708 1,197,641
Deferred income taxes.............................. 330,186 428,897
Other.............................................. 116,642 38,546
Total deferred debits and other assets......... 1,886,536 1,665,084
Total Assets................................... $9,869,698 $9,209,777
The accompanying notes are an integral part of the consolidated financial
statements.
F-26<PAGE>
General Public Utilities Corporation and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
LIABILITIES AND CAPITAL
Capitalization:
Common stock....................................... $ 314,458 $ 314,458
Capital surplus.................................... 746,449 663,418
Retained earnings.................................. 2,004,072 1,775,759
Total.......................................... 3,064,979 2,753,635
Less, reacquired common stock, at cost............. 90,345 181,051
Total common stockholders' equity.............. 2,974,634 2,572,584
Cumulative preferred stock:
With mandatory redemption........................ 134,000 150,000
Without mandatory redemption..................... 98,116 98,116
Subsidiary-obligated mandatorily redeemable
preferred securities............................. 330,000 205,000
Long-term debt..................................... 2,567,898 2,345,417
Total capitalization........................... 6,104,648 5,371,117
Current Liabilities:
Securities due within one year..................... 131,246 91,165
Notes payable...................................... 123,890 347,408
Obligations under capital leases................... 159,565 157,168
Accounts payable................................... 318,394 317,259
Taxes accrued...................................... 46,613 80,027
Interest accrued................................... 69,456 66,628
Other.............................................. 259,280 213,041
Total current liabilities...................... 1,108,444 1,272,696
Deferred Credits and Other Liabilities:
Deferred income taxes.............................. 1,466,060 1,438,743
Unamortized investment tax credits................. 145,375 156,262
Three Mile Island Unit 2 future costs.............. 413,031 341,139
Regulatory liabilities............................. 97,999 122,144
Other.............................................. 534,141 507,676
Total deferred credits and other liabilities... 2,656,606 2,565,964
Commitments and Contingencies (Note 1)
Total Liabilities and Capital.................. $9,869,698 $9,209,777
The accompanying notes are an integral part of the consolidated financial
statements.
F-27<PAGE>
General Public Utilities Corporation and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
Balance at beginning of year....................... $1,775,759 $1,813,490 $1,716,196
Net income....................................... 440,135 163,688 295,673
Cash dividends declared on common stock.......... (218,288) (207,215) (189,150)
Net unrealized gain on investments............... 5,731 6,549 -
Other adjustments, net........................... 735 (753) (9,229)
Balance at end of year............................. $2,004,072 $1,775,759 $1,813,490
The accompanying notes are an integral part of the consolidated financial
statements.
F-28<PAGE>
General Public Utilities Corporation and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
Operating Activities:
Net income.......................................... $ 440,135 $ 163,688 $ 295,673
Adjustments to reconcile income to cash provided:
Depreciation and amortization..................... 381,618 363,099 362,536
Amortization of property under capital leases..... 57,324 56,793 62,816
Three Mile Island Unit 2 costs.................... (170,005) 183,944 -
Voluntary enhanced retirement programs............ - 126,964 -
Nuclear outage maintenance costs, net............. 7,407 (7,425) (5,266)
Deferred income taxes and investment tax
credits, net.................................... 115,278 (80,139) 63,334
Deferred energy costs, net........................ (6,061) (28,463) (5,971)
Accretion income.................................. (12,520) (14,855) (16,786)
Allowance for other funds used during
construction.................................... (5,113) (4,713) (4,831)
Changes in working capital:
Receivables....................................... (54,993) 6,799 (32,221)
Materials and supplies............................ 9,323 316 20,278
Special deposits and prepayments.................. 14,401 25,696 (38,571)
Payables and accrued liabilities.................. (40,150) (59,798) (104,072)
Other, net.......................................... (70,452) (3,311) (32,465)
Net cash provided by operating activities...... 666,192 728,595 564,454
Investing Activities:
Cash construction expenditures...................... (461,860) (585,916) (495,517)
Contributions to decommissioning trusts............. (37,541) (33,575) (84,546)
EI Group investments................................ (164,831) (73,835) (16,426)
Other, net.......................................... (3,834) (17,429) 9,822
Net cash used for investing activities......... (668,066) (710,755) (586,667)
Financing Activities:
Issuance of long-term debt.......................... 403,656 178,787 947,485
Increase/(Decrease) in notes payable, net........... (223,962) 131,574 114,705
Retirement of long-term debt........................ (192,664) (197,232) (752,250)
Capital lease principal payments.................... (50,611) (61,002) (56,424)
Issuance of common stock............................ 157,545 - 132,500
Issuance of subsidiary-obligated mandatorily
redeemable preferred securities................... 121,063 197,917 -
Redemption of preferred stock of subsidiaries....... (6,049) (62,763) (163,734)
Dividends paid on common stock...................... (215,413) (204,233) (184,616)
Net cash provided/(required) by
financing activities......................... (6,435) (16,952) 37,666
Net increase/(decrease) in cash and temporary cash
investments from above activities................... (8,309) 888 15,453
Cash and temporary cash investments, beginning of year 26,731 25,843 10,390
Cash and temporary cash investments, end of year...... $ 18,422 $ 26,731 $ 25,843
Supplemental Disclosure:
Interest and preferred dividends paid............... $ 254,906 $ 271,303 $ 254,489
Income taxes paid................................... $ 187,361 $ 124,274 $ 157,226
New capital lease obligations incurred.............. $ 54,478 $ 43,246 $ 57,609
Common stock dividends declared but not paid........ $ 54,718 $ 51,843 $ 48,861
The accompanying notes are an integral part of the consolidated financial
statements.
F-29</TABLE>
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Public Utilities Corporation (the Corporation) is a holding
company registered under the Public Utility Holding Company Act of 1935. The
Corporation does not directly operate any utility properties, but owns all the
outstanding common stock of three electric utilities -- Jersey Central Power &
Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and Pennsylvania
Electric Company (Penelec) (the Subsidiaries). The Subsidiaries serve areas
of New Jersey and Pennsylvania with a population of approximately five
million, with revenues about equally divided between New Jersey and
Pennsylvania customers. The Corporation also owns all the common stock of GPU
Service Corporation (GPUSC), a service company; GPU Nuclear Corporation
(GPUN), which operates and maintains the nuclear units of the Subsidiaries;
and Energy Initiatives, Inc., EI Power, Inc. and EI Energy, Inc.,
(collectively, the "EI Group") which develop, own and operate generation,
transmission and distribution facilities in the United States and in foreign
countries. All of these companies considered together with their subsidiaries
are referred to as the "GPU System."
Note 1, "Commitments and Contingencies," and Note 2, "Summary of
Significant Accounting Policies," are being presented on a combined basis; the
separate disclosures relating to the Corporation and each of the Subsidiaries
have been combined and are presented below. The remaining Notes continue to
be presented separately for the Corporation and for each of the Subsidiaries.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Subsidiaries have made investments in three major nuclear projects--
Three Mile Island Unit 1 (TMI-1) and Oyster Creek, both of which are
operational generating facilities, and Three Mile Island Unit 2 (TMI-2), which
was damaged during a 1979 accident. TMI-1 and TMI-2 are jointly owned by
JCP&L, Met-Ed and Penelec in the percentages of 25%, 50% and 25%,
respectively. Oyster Creek is owned by JCP&L. At December 31, the
Subsidiaries' net investment in TMI-1 and Oyster Creek, including nuclear
fuel, was as follows:
Net Investment (Millions)
TMI-1 Oyster Creek
1995
JCP&L $166 $785
Met-Ed 318 -
Penelec 156 -
Total $640 $785
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Net Investment (Millions)
TMI-1 Oyster Creek
1994
JCP&L $162 $817
Met-Ed 311 -
Penelec 154 -
Total $627 $817
The Subsidiaries' net investment in TMI-2 at December 31, 1995 was $95
million (JCP&L, Met-Ed and Penelec's shares are $85 million, $2 million, and
$8 million, respectively). The Subsidiaries' net investment in TMI-2 at
December 31, 1994 was $103 million (JCP&L, Met-Ed and Penelec's shares are $89
million, $6 million, and $8 million, respectively). JCP&L is collecting
revenues for TMI-2 on a basis which provides for the recovery of its remaining
investment in the plant by 2008. Met-Ed and Penelec are collecting revenues
for TMI-2 related to their wholesale customers.
Costs associated with the operation, maintenance and retirement of
nuclear plants continue to be significant and less predictable than costs
associated with other sources of generation, in large part due to changing
regulatory requirements, safety standards, availability of nuclear waste
disposal facilities and experience gained in the construction and operation of
nuclear facilities. The GPU System may also incur costs and experience
reduced output at its nuclear plants because of the prevailing design criteria
at the time of construction and the age of the plants' systems and equipment.
In addition, for economic or other reasons, operation of these plants for the
full term of their now-assumed lives cannot be assured. Also, not all risks
associated with the ownership or operation of nuclear facilities may be
adequately insured or insurable. Consequently, the ability of electric
utilities to obtain adequate and timely recovery of costs associated with
nuclear projects, including replacement power, any unamortized investment at
the end of each plant's useful life (whether scheduled or premature), the
carrying costs of that investment and retirement costs, is not assured (see
NUCLEAR PLANT RETIREMENT COSTS). Management intends, in general, to seek
recovery of such costs through the ratemaking process, but recognizes that
recovery is not assured (see COMPETITION AND THE CHANGING REGULATORY
ENVIRONMENT).
TMI-2:
The 1979 TMI-2 accident resulted in significant damage to, and
contamination of, the plant and a release of radioactivity to the environment.
The cleanup program was completed in 1990, and after receiving Nuclear
Regulatory Commission (NRC) approval, TMI-2 entered into long-term monitored
storage in December 1993.
As a result of the accident and its aftermath, individual claims for
alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against the Corporation and the
Subsidiaries. Approximately 2,100 of such claims are pending in the United
States District Court for the Middle District of Pennsylvania. Some of the
claims also seek recovery for injuries from alleged emissions of radioactivity
before and after the accident.
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At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Subsidiaries had (a) primary financial protection in the form of
insurance policies with groups of insurance companies providing an aggregate
of $140 million of primary coverage, (b) secondary financial protection in the
form of private liability insurance under an industry retrospective rating
plan providing for up to an aggregate of $335 million in premium charges under
such plan, and (c) an indemnity agreement with the NRC for up to $85 million,
bringing their total primary, secondary and tertiary financial protection up
to an aggregate of $560 million. Under the secondary level, the Subsidiaries
are subject to a retrospective premium charge of up to $5 million per reactor,
or a total of $15 million (JCP&L, Met-Ed and Penelec's shares are $7.5
million, $5 million and $2.5 million, respectively).
The insurers of TMI-2 had been providing a defense against all TMI-2
accident-related claims against the Corporation and the Subsidiaries and their
suppliers (the defendants) under a reservation of rights with respect to any
award of punitive damages. However, in March 1994, the defendants in the
TMI-2 litigation and the insurers agreed that the insurers would withdraw
their reservation of rights with respect to any award of punitive damages. A
trial of ten allegedly representative cases is scheduled to begin in June
1996.
In October 1995, the U.S. Court of Appeals for the Third Circuit ruled
that the Price-Anderson Act provides coverage under its primary and secondary
levels for punitive as well as compensatory damages, but that punitive damages
could not be recovered against the Federal Government under the third level of
financial protection. In so doing, the Court of Appeals referred to the
"finite fund" (the $560 million of financial protection under the Price-
Anderson Act) to which plaintiffs must resort to get compensatory as well as
punitive damages. The Corporation and its Subsidiaries have asked the U.S.
Supreme Court to review that portion of the Court of Appeals' decision that
punitive damages may be recovered in public liability actions under the Price-
Anderson Act. The Corporation and its Subsidiaries do not know whether
plaintiffs will appeal any aspect of the Court of Appeals' decision.
Based upon the Court of Appeals' decision, the Corporation and its
Subsidiaries believe that any liability to which they might be subject by
reason of the TMI-2 accident will not exceed their financial protection under
the Price-Anderson Act.
The Court of Appeals also found that the standard of care owed by the
defendants to a plaintiff was determined by the specific level of radiation
which was released into the environment, as measured at the site boundary,
rather than as measured at the specific site where the plaintiff was located
at the time of the accident (as the Corporation and its Subsidiaries
proposed). The Court of Appeals had also held that each plaintiff still must
demonstrate exposure to radiation released during the TMI-2 accident and that
such exposure had resulted in injuries. The Corporation and its Subsidiaries
have requested that the U.S. Supreme Court review this issue. They do not
know if whether plaintiffs will do so as well.
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There can be no assurance as to the outcome of this litigation.
NUCLEAR PLANT RETIREMENT COSTS
Retirement costs for nuclear plants include decommissioning the
radiological portions of the plants and the cost of removal of nonradiological
structures and materials. As described in the NUCLEAR FUEL DISPOSAL FEE
section of Note 2, the disposal of spent nuclear fuel is covered separately by
contracts with the U.S. Department of Energy (DOE).
In 1990, the Subsidiaries submitted a report, in compliance with NRC
regulations, setting forth a funding plan (employing the external sinking fund
method) for the decommissioning of their nuclear reactors. Under this plan,
the Subsidiaries intend to complete the funding for Oyster Creek and TMI-1 by
the end of the plants' license terms, 2009 and 2014, respectively. The TMI-2
funding completion date is 2014, consistent with TMI-2's remaining in long-
term storage and being decommissioned at the same time as TMI-1. Based on NRC
studies, a comparable funding target has been developed for TMI-2 which takes
the accident into account. Under the NRC regulations, the funding targets (in
1995 dollars) are as follows:
(Millions)
Oyster
Creek TMI-1 TMI-2
JCP&L $189 $ 39 $ 63
Met-Ed - 79 125
Penelec - 39 62
Total $189 $157 $250
The NRC continues to study the levels of these funding targets. Management
cannot predict the effect that the results of this review will have on the
funding targets. The funding targets, while not considered cost estimates,
are reference levels designed to assure that licensees demonstrate adequate
financial responsibility for decommissioning. While the regulations address
activities related to the removal of the radiological portions of the plants,
they do not establish residual radioactivity limits nor do they address costs
related to the removal of nonradiological structures and materials.
The Subsidiaries charge to expense and contribute to external trusts
amounts collected from customers for nuclear plant decommissioning and
nonradiological costs. In addition, JCP&L has contributed amounts written off
for TMI-2 nuclear plant decommissioning in 1990, and Met-Ed and Penelec have
contributed amounts written off for TMI-2 nuclear plant decommissioning in
1991, to TMI-2's external trust (see TMI-2 Future Costs). Amounts deposited
in external trusts, including the interest earned on these funds, are
classified as Nuclear Decommissioning Trusts on the Balance Sheet.
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General Public Utilities Corporation and Subsidiary Companies
In 1995, a consultant to GPUN performed site-specific studies of the TMI
site, including both Units 1 and 2, and of Oyster Creek, that considered
various decommissioning methods and estimated the cost of decommissioning the
radiological portions and the cost of removal of the nonradiological portions
of each plant, using the prompt removal/dismantlement method. GPUN management
has reviewed the methodology and assumptions used in the site-specific
studies, is in agreement with them, and believes the results are reasonable as
follows:
(Millions)
Oyster
GPU Creek TMI-1 TMI-2
Radiological decommissioning $347 $295 $358
Nonradiological cost of removal 33 73 37*
Total $380 $368 $395
* Net of $3 million spent as of December 31, 1995.
(Millions)
Oyster
JCP&L Creek TMI-1 TMI-2
Radiological decommissioning $347 $74 $90
Nonradiological cost of removal 33 18 9*
Total $380 $92 $99
* Net of $.75 million spent as of December 31, 1995.
(Millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $147 $179
Nonradiological cost of removal 37 19*
Total $184 $198
* Net of $1.5 million spent as of December 31, 1995.
(Millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $74 $89
Nonradiological cost of removal 18 9*
Total $92 $98
* Net of $.75 million spent as of December 31, 1995.
The ultimate cost of retiring the GPU System's nuclear facilities may be
different from the cost estimates contained in these site-specific studies.
Such costs are subject to (a) the escalation of various cost elements
(including, but not limited to, general inflation), (b) the further
development of regulatory requirements governing decommissioning, (c) the
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technology available at the time of decommissioning, and (d) the availability
of nuclear waste disposal facilities.
The Financial Accounting Standards Board (FASB) is reviewing the utility
industry's accounting practices for closure and removal of long-lived assets,
including nuclear plant retirement costs. If the FASB's tentative conclusions
are adopted, Oyster Creek and TMI-1 future retirement costs will have to be
recognized as a liability currently, rather than recorded over the life of the
plants (as is currently the practice), with an offsetting asset recorded for
amounts collectible through rates. Any amounts not collectible through rates
will have to be charged to expense. For TMI-2, a liability has already been
recognized since the plant is no longer operating (see TMI-2 Future Costs).
The FASB is expected to release an Exposure Draft in early 1996, and a final
statement is expected to be effective for fiscal years beginning after
December 15, 1996.
TMI-1 and Oyster Creek:
JCP&L is collecting revenues for decommissioning, which are expected to
result in the accumulation of its share of the NRC funding target for each
plant. JCP&L is also collecting revenues, based on its share ($3.83 million)
of an estimate of $15.3 million for TMI-1 and $31.6 million for Oyster Creek
adopted in previous rate orders issued by the New Jersey Board of Public
Utilities (NJBPU), for its share of the cost of removal of nonradiological
structures and materials. The Pennsylvania Public Utility Commission (PaPUC)
previously granted Met-Ed revenues for decommissioning costs of TMI-1 based on
its share ($37 million) of the NRC funding target and nonradiological cost of
removal estimated in an earlier 1988 site-specific study to be $74 million (in
1995 dollars). The PaPUC also approved a rate change for Penelec which
increased the collection of revenues for decommissioning costs for TMI-1 to a
basis equivalent to that granted Met-Ed. Collections from customers for
retirement expenditures are deposited in external trusts. Provision for the
future expenditure of these funds has been made in accumulated depreciation,
amounting to $73 million (JCP&L, Met-Ed and Penelec's shares are $23 million,
$36 million and $14 million, respectively) for TMI-1 and $138 million for
Oyster Creek at December 31, 1995. TMI-1 and Oyster Creek retirement costs
are charged to depreciation expense over the expected service life of each
nuclear plant, and amounted to $15 million (JCP&L, Met-Ed and Penelec's shares
are $3 million, $8 million and $4 million, respectively) and $13 million,
respectively, for 1995.
Management believes that any TMI-1 and Oyster Creek retirement costs, in
excess of those currently recognized for ratemaking purposes, should be
recoverable under the current ratemaking process.
TMI-2 Future Costs:
The estimated liabilities for TMI-2 Future Costs (reflected as Three Mile
Island Unit 2 Future Costs on the Balance Sheet) as of December 31, are as
follows:
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General Public Utilities Corporation and Subsidiary Companies
(Millions)
GPU JCP&L Met-Ed Penelec
1995
Radiological Decommissioning $358 $ 90 $179 $ 89
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $413 $103 $207 $103
* Net of $3 million (JCP&L, Met-Ed and Penelec's shares are $.75 million,
$1.5 million and $.75 million, respectively) spent as of December 31, 1995.
(Millions)
GPU JCP&L Met-Ed Penelec
1994
Radiological Decommissioning $250 $63 $125 $62
Nonradiological Cost of Removal 72* 18 36 18
Incremental Monitored Storage 19 5 9 5
Total $341 $86 $170 $85
* Net of $2 million spent (JCP&L, Met-Ed and Penelec's shares are $.5
million, $1 million and $.5 million, respectively) as of December 31, 1994.
The 1995 liability recorded on the Balance Sheet for radiological
decommissioning and nonradiological cost of removal is based on the 1995 site-
specific study. The 1994 liability for radiological decommissioning was based
on the NRC funding target, while the 1994 liability for nonradiological cost
of removal was based on the 1988 site-specific study for TMI-1 ($74 million).
Offsetting the $413 million liability is $271 million (JCP&L, Met-Ed and
Penelec's shares are $53 million, $147 million and $71 million, respectively)
which is probable of recovery from customers and included in Three Mile Island
Unit 2 Deferred Costs on the Balance Sheet, and $143 million (JCP&L, Met-Ed
and Penelec's shares are $60 million, $57 million and $26 million,
respectively) in trust funds for TMI-2 and included in Nuclear Decommissioning
Trusts on the Balance Sheet. Of the $271 million still to be recovered from
customers, $66 million (JCP&L, Met-Ed and Penelec's shares are $17 million,
$33 million and $16 million, respectively) represents an increase from 1994
due to the 1995 site-specific study. Earnings on trust fund deposits
collected from customers are included in amounts shown on the Balance Sheet
under Three Mile Island Unit 2 Deferred Costs. TMI-2 decommissioning costs
charged to expense in 1995 amounted to $14 million (JCP&L, Met-Ed and
Penelec's shares are $3 million, $9 million and $2 million, respectively).
The NJBPU has granted JCP&L decommissioning revenues for the remainder of
the NRC funding target and allowances for the cost of removal of
nonradiological structures and materials. In 1993, a PaPUC rate order
permitted Met-Ed future recovery of certain TMI-2 retirement costs, based on
the NRC funding target, and the cost of removal of nonradiological structures
and materials, based on the 1988 site-specific study. The Pennsylvania Office
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General Public Utilities Corporation and Subsidiary Companies
of Consumer Advocate appealed that order to the Commonwealth Court, which
reversed the PaPUC order in 1994. Consequently, Met-Ed recorded pre-tax
charges totaling $127.6 million during 1994. Penelec, which is also subject
to PaPUC regulation, recorded pre-tax charges of $56.3 million during 1994 for
its share of such costs applicable to its retail customers. These charges
appear in the Other Income and Deductions section of the 1994 Consolidated
Statement of Income and are composed of $121 million (Met-Ed and Penelec's
shares are $82.6 million and $38.4 million, respectively) for radiological
decommissioning costs, $48.2 million (Met-Ed and Penelec's shares are $35
million and $13.2 million, respectively) for the nonradiological cost of
removal and $14.7 million (Met-Ed and Penelec's shares are $10 million and
$4.7 million, respectively) for incremental monitored storage costs. In
September 1995, the Pennsylvania Supreme Court reversed the Commonwealth Court
decision. Met-Ed and Penelec have therefore reversed the previous write-offs,
resulting in pre-tax income of $127.6 million and $56.3 million, respectively,
being credited to the Other Income and Deductions section of the 1995
Consolidated Statement of Income. However, notwithstanding the Supreme
Court's decision, Met-Ed and Penelec have determined that the recovery of the
incremental monitored storage costs is no longer probable, and have recorded
pre-tax charges to operating income of $10 million and $4.7 million,
respectively, during 1995.
At December 31, 1995 the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $63 million (JCP&L, Met-Ed and
Penelec's shares are $16 million, $32 million and $15 million, respectively),
which is the difference between the 1995 TMI-1 and TMI-2 site-specific study
estimates of $295 million and $358 million, respectively (JCP&L, Met-Ed and
Penelec's shares are $74 million and $90 million, $147 million and $179
million, and $74 million and $89 million, respectively). In connection with
rate case resolutions at the time, JCP&L, Met-Ed and Penelec made
contributions to irrevocable external trusts relating to their shares of the
accident-related portions of the decommissioning liability. In 1990, JCP&L
contributed $15 million and in 1991, Met-Ed and Penelec contributed
$40 million and $20 million respectively, to irrevocable external trusts.
These contributions were not recovered from customers and have been expensed.
The Subsidiaries will not pursue recovery from customers for any of these
amounts contributed in excess of the $63 million accident-related portion
referred to above.
JCP&L intends to seek recovery for any increases in TMI-2 retirement
costs, and Met-Ed and Penelec intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot
be assured.
As a result of TMI-2's entering long-term monitored storage in late 1993,
the Subsidiaries are incurring incremental storage costs of approximately $1
million (JCP&L, Met-Ed and Penelec's shares are $.25 million, $.5 million, and
$.25 million, respectively) annually. The Subsidiaries estimate that the
remaining storage costs will total $18 million through 2014, the expected
retirement date of TMI-1. JCP&L's rates reflect its share of these costs.
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General Public Utilities Corporation and Subsidiary Companies
INSURANCE
The GPU System has insurance (subject to retentions and deductibles) for
its operations and facilities including coverage for property damage,
liability to employees and third parties, and loss of use and occupancy
(primarily incremental replacement power costs). There is no assurance that
the GPU System will maintain all existing insurance coverages. Losses or
liabilities that are not completely insured, unless allowed to be recovered
through ratemaking, could have a material adverse effect on the financial
position of the GPU System.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station and for Oyster Creek totals
$2.7 billion per site. In accordance with NRC regulations, these insurance
policies generally require that proceeds first be used for stabilization of
the reactors and then to pay for decontamination and debris removal expenses.
Any remaining amounts available under the policies may then be used for repair
and restoration costs and decommissioning costs. Consequently, there can be
no assurance that in the event of a nuclear incident, property damage
insurance proceeds would be available for the repair and restoration of that
station.
The Price-Anderson Act limits the GPU System's liability to third parties
for a nuclear incident at one of its sites to approximately $8.9 billion.
Coverage for the first $200 million of such liability is provided by private
insurance. The remaining coverage, or secondary financial protection, is
provided by retrospective premiums payable by all nuclear reactor owners.
Under secondary financial protection, a nuclear incident at any licensed
nuclear power reactor in the country, including those owned by the GPU System,
could result in assessments of up to $79 million per incident for each of the
GPU System's two operating reactors, subject to an annual maximum payment of
$10 million per incident per reactor. In addition to the retrospective
premiums payable under Price-Anderson, the GPU System is also subject to
retrospective premium assessments of up to $69 million (JCP&L, Met-Ed and
Penelec's shares are $41 million, $19 million and $9 million, respectively) in
any one year under insurance policies applicable to nuclear operations and
facilities.
The GPU System has insurance coverage for incremental replacement power
costs resulting from an accident-related outage at its nuclear plants.
Coverage commences after the first 21 weeks of the outage and continues for
three years beginning at $1.8 million for Oyster Creek and $2.6 million for
TMI-1 per week for the first year, decreasing to 80 percent of such amounts
for years two and three.
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
Nonutility Generation Agreements:
Pursuant to the requirements of the federal Public Utility Regulatory
Policies Act (PURPA) and state regulatory directives, the Subsidiaries have
entered into power purchase agreements with nonutility generators (NUGs) for
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General Public Utilities Corporation and Subsidiary Companies
the purchase of energy and capacity for periods up to 25 years for JCP&L, 26
years for Met-Ed, and 25 years for Penelec. The majority of these agreements
contain certain contract limitations and subject the NUGs to penalties for
nonperformance. While a few of these facilities are dispatchable, most are
must-run and generally obligate the Subsidiaries to purchase, at the contract
price, the net output up to the contract limits. As of December 31, 1995,
facilities covered by these agreements having 1,624 MW (JCP&L, Met-Ed and
Penelec's shares are 892 MW, 335 MW and 397 MW, respectively) of capacity were
in service. Actual payments from 1993 through 1995, and estimated payments
from 1996 through 2000 to NUGs, assuming that all facilities which have
existing agreements, or which have obtained orders granting them agreements,
enter service, are as follows:
Payments Under NUG Agreements
(Millions)
Total JCP&L Met-Ed Penelec
1993 $ 491 $ 292 $ 95 $ 104
1994 528 304 101 123
1995 670 381 131 158
* 1996 696 369 151 176
* 1997 739 400 155 184
* 1998 837 430 210 197
* 1999 931 442 211 278
* 2000 987 463 216 308
* Estimate
Of these amounts, payments to the projects which are not in service at
December 31, 1995 are estimated as follows:
Payments Under NUG Agreements Not In Service
(Millions)
Total JCP&L Met-Ed Penelec
1997 $ 40 $ 25 $ 15 $ -
1998 123 53 65 5
1999 202 58 68 76
2000 231 62 71 98
In the year 2000 these agreements, in the aggregate, will provide
approximately 2,062 MW (JCP&L 1,002 MW, Met-Ed 485 MW and Penelec 575 MW) of
capacity and energy to the GPU System, at varying prices.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the System's energy supply needs which has caused
the Subsidiaries to change their supply strategy to seek shorter-term
agreements offering more flexibility. Due to the current availability of
excess capacity in the marketplace, the cost of near- to intermediate-term
(i.e., one to eight years) energy supply from generation facilities now in
service is currently and is expected to continue to be priced below the costs
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General Public Utilities Corporation and Subsidiary Companies
of new supply sources, at least for some time. The projected cost of energy
from new generation supply sources has also decreased due to improvements in
power plant technologies and reduced forecasted fuel prices. As a result of
these developments, the rates under virtually all of the Subsidiaries' NUG
agreements are substantially in excess of current and projected prices from
alternative sources.
The Subsidiaries are seeking to reduce the above market costs of these
NUG agreements by (1) attempting to convert must-run agreements to
dispatchable agreements; (2) attempting to renegotiate prices of the
agreements; (3) offering contract buyouts while seeking to recover the costs
through their energy adjustment clauses (see Managing Nonutility Generation,
in Management's Discussion and Analysis of Financial Condition and Results of
Operations) and (4) initiating proceedings before federal and state agencies,
and in the courts, where appropriate. In addition, the Subsidiaries intend to
avoid, to the maximum extent practicable, entering into any new NUG agreements
that are not needed or not consistent with current market pricing and are
supporting legislative efforts to repeal PURPA. These efforts may result in
claims against the GPU System for substantial damages. There can, however, be
no assurance as to the extent to which the Subsidiaries' efforts will be
successful in whole or in part.
While the Subsidiaries thus far have been granted recovery of their NUG
costs from customers by the PaPUC and NJBPU, there can be no assurance that
the Subsidiaries will continue to be able to recover these costs throughout
the term of the related agreements. The GPU System currently estimates that
for 1998, when substantially all of these NUG projects are scheduled to be in
service, above market payments (benchmarked against the expected cost of
electricity produced by a new gas-fired combined cycle facility) will range
from $240 million to $350 million (JCP&L $100 to $150 million; Met-Ed $50
million to $80 million; and Penelec $90 million to $120 million). The amount
of these estimated above-market payments may increase or decrease
substantially based upon, among other things, payment escalations in the
contract terms, changes in fuel prices and changes in the capital and
operating cost of new generating equipment.
Regulatory Assets and Liabilities:
In accordance with Statement of Financial Accounting Standards No. 71
(FAS 71), "Accounting for the Effects of Certain Types of Regulation," the GPU
System's financial statements reflect assets and costs based on current cost-
based ratemaking regulation. Continued accounting under FAS 71 requires that
the following criteria be met:
a) A utility's rates for regulated services provided to its customers
are established by, or are subject to approval by, an independent
third-party regulator;
b) The regulated rates are designed to recover specific costs of
providing the regulated services or products; and
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General Public Utilities Corporation and Subsidiary Companies
c) In view of the demand for the regulated services and the level of
competition, direct and indirect, it is reasonable to assume that
rates set at levels that will recover a utility's costs can be
charged to and collected from customers. This criteria requires
consideration of anticipated changes in levels of demand or
competition during the recovery period for any capitalized costs.
A utility's operations can cease to meet those criteria for various
reasons, including deregulation, a change in the method of regulation, or a
change in the competitive environment for the utility's regulated services.
Regardless of the reason, a utility whose operations cease to meet those
criteria should discontinue application of FAS 71 and report that
discontinuation by eliminating from its Balance Sheet the effects of any
actions of regulators that had been recognized as assets and liabilities
pursuant to FAS 71, but which would not have been recognized as assets and
liabilities by enterprises in general.
In accordance with the provisions of FAS 71, the Subsidiaries have
deferred certain costs pursuant to actions of the NJBPU, PaPUC and Federal
Energy Regulatory Commission (FERC) and are recovering or expect to recover
such costs in electric rates charged to customers. Regulatory assets are
reflected in the Deferred Debits and Other Assets section of the Consolidated
Balance Sheet, and regulatory liabilities are reflected in the Deferred
Credits and Other Liabilities section of the Consolidated Balance Sheet.
Regulatory assets and liabilities, as reflected in the December 31, 1995
Consolidated Balance Sheet, were as follows:
GPU (In Thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $ 527,584 $94,931
TMI-2 deferred costs 368,712 -
Unamortized property losses 105,729 -
NUG contract termination costs 84,132 -
Other postretirement benefits 58,362 -
N.J. unit tax 51,518 -
Unamortized loss on reacquired debt 50,198 -
Load and demand-side management programs 48,071 -
DOE enrichment facility decommissioning 38,519 -
Manufactured gas plant remediation 29,608 -
Nuclear fuel disposal fee 21,946 -
N.J. low-level radwaste disposal 21,778 -
Storm damage 18,294 -
Oyster Creek deferred costs 4,830 -
Other 10,427 3,068
Total $1,439,708 $97,999
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JCP&L (In Thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $134,787 $36,343
TMI-2 deferred costs 138,472 -
Unamortized property losses 100,176 -
NUG contract termination costs 17,482 -
Other postretirement benefits 32,390 -
N.J. unit tax 51,518 -
Unamortized loss on reacquired debt 34,285 -
Load and demand side management programs 48,071 -
DOE enrichment facility decommissioning 24,503 -
Manufactured gas plant remediation 29,608 -
Nuclear fuel disposal fee 23,165 -
N.J. low-level radwaste disposal 21,778 -
Storm damage 18,294 -
Oyster Creek deferred costs 4,830 -
Other 5,369 1,254
Total $684,728 $37,597
Met-Ed (In Thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $178,513 $24,765
TMI-2 deferred costs 149,004 -
Unamortized property losses 3,273 -
NUG contract termination costs 66,650 -
Other postretirement benefits 25,972 -
Unamortized loss on reacquired debt 6,945 -
DOE enrichment facility decommissioning 9,344 -
Nuclear fuel disposal fee (1,025) -
Other 1,299 1,696
Total $439,975 $26,461
Penelec (In Thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $214,284 $33,823
TMI-2 deferred costs 81,236 -
Unamortized property losses 2,280 -
Unamortized loss on reacquired debt 8,968 -
DOE enrichment facility decommissioning 4,672 -
Nuclear fuel disposal fee (194) -
Other 3,759 118
Total $315,005 $33,941
Income taxes recoverable/refundable through future rates: Represents amounts
deferred due to the implementation of FAS 109, "Accounting for Income Taxes,"
in 1993.
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TMI-2 deferred costs: Represents costs that are recoverable through rates for
the Subsidiaries' remaining investment in the plant and fuel core,
radiological decommissioning and the cost of removal of nonradiological
structures and materials in accordance with the 1995 site-specific study, and
JCP&L's share of long-term monitored storage costs. For additional
information, see TMI-2 Future Costs.
Unamortized property losses: Consists mainly of costs associated with JCP&L's
Forked River Project, which are included in rates.
NUG contract termination costs: Represents one-time costs incurred for
terminating power purchase contracts with NUGs, for which rate recovery has
been granted or is probable (see Managing Nonutility Generation, in
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
Other postretirement benefits: Includes costs associated with the adoption of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," which are deferred in accordance with Emerging Issues Task Force
Issue 92-12, "Accounting for OPEB Costs by Rate-Regulated Enterprises."
N.J. unit tax: JCP&L received NJBPU approval in 1993 to recover, with
interest, over a ten-year period on an annuity basis, $71.8 million of Gross
Receipts and Franchise Tax not previously recovered from customers.
Unamortized loss on reacquired debt: Represents premiums and expenses incurred
in the early redemption of long-term debt. In accordance with FERC
regulations, reacquired debt costs are amortized over the remaining original
life of the retired debt.
Load and demand-side management (DSM) programs: Consists of load management
costs that are currently being recovered, with interest, through JCP&L's
retail base rates pursuant to a 1993 NJBPU order, and other DSM program
expenditures that are recovered annually. Also includes provisions for lost
revenues between base rate cases and performance incentives.
DOE enrichment facility decommissioning: These costs, representing payments
to the DOE over a 15-year period beginning in 1994, are currently being
collected through the Subsidiaries' energy adjustment clauses.
Manufactured gas plant remediation: Consists of costs being recovered
associated with the investigation and remediation of several gas manufacturing
plants. For additional information, see ENVIRONMENTAL MATTERS.
Nuclear fuel disposal fee: Represents amounts recoverable through rates for
estimated future disposal costs for spent nuclear fuel at Oyster Creek and
TMI-1 in accordance with the Nuclear Waste Policy Act of 1982.
N.J. low-level radwaste disposal: Represents the accrual of the estimated
assessment for the siting of a disposal facility for low-level waste from
Oyster Creek, less amortization as allowed in JCP&L's rates.
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Storm damage: Relates to incremental noncapital costs associated with various
storms in the JCP&L service territory that are not recoverable through
insurance. These amounts were deferred based upon past rate recovery
precedent. An annual amount for recovery of storm damage expense is included
in JCP&L's retail base rates.
Oyster Creek deferred costs: Consists of replacement power and operation and
maintenance (O&M) costs deferred in accordance with orders from the NJBPU.
JCP&L has been granted recovery of these costs through rates at an annual
amount until fully amortized.
Amounts related to the decommissioning of TMI-1 and Oyster Creek, which
are not included in Regulatory Assets on the Balance Sheet, are separately
disclosed in NUCLEAR PLANT RETIREMENT COSTS.
The Subsidiaries continue to be subject to cost-based ratemaking
regulation. However, in the event that either all or a portion of their
operations are no longer subject to these provisions, the related regulatory
assets, net of regulatory liabilities, would have to be written off. In
addition, any above market costs of purchased power commitments would have to
be expensed (see Nonutility Generation Agreements), and increased depreciation
expense would have to be recorded for any differences created by the use of a
regulated depreciation method that is different from that which would have
been used under generally accepted accounting principles for enterprises in
general. The Corporation is unable to estimate when and to what extent FAS 71
may no longer be applicable.
ENVIRONMENTAL MATTERS
As a result of existing and proposed legislation and regulations, and
ongoing legal proceedings dealing with environmental matters, including but
not limited to acid rain, water quality, air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, the GPU System may be required to incur substantial additional costs
to construct new equipment, modify or replace existing and proposed equipment,
remediate, decommission or clean up waste disposal and other sites currently
or formerly used by it, including formerly owned manufactured gas plants, mine
refuse piles and generating facilities, and with regard to electromagnetic
fields, postpone or cancel the installation of, or replace or modify, utility
plant, the costs of which could be material.
To comply with the federal Clean Air Act Amendments of 1990 (Clean Air
Act), the Subsidiaries expect to spend up to $410 million (JCP&L, Met-Ed and
Penelec's shares are $42 million, $163 million, and $205 million,
respectively) for air pollution control equipment by the year 2000, of which
approximately $234 million (JCP&L, Met-Ed and Penelec's shares are $41
million, $100 million, and $93 million, respectively) has already been spent.
In developing its least-cost plan to comply with the Clean Air Act, the GPU
System will continue to evaluate major capital investments compared to
participation in the emission allowance market and the use of low-sulfur fuel
or retirement of facilities. In 1994, the Ozone Transport Commission (OTC),
consisting of representatives of 12 northeast states (including New Jersey and
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Pennsylvania) and the District of Columbia, proposed reductions in nitrogen
oxide (NOx) emissions it believes necessary to meet ambient air quality
standards for ozone and the statutory deadlines set by the Clean Air Act. The
Subsidiaries expect that the U.S. Environmental Protection Agency (EPA) will
approve state implementation plans consistent with the proposal, and that as a
result, they will spend an estimated $60 million (Met-Ed and Penelec's shares
are $14 million and $46 million, respectively) (included in the Clean Air Act
total), beginning in 1997, to meet the seasonal reductions agreed upon by the
OTC. The OTC has stated that it anticipates that additional NOx reductions
will be necessary to meet the Clean Air Act's 2005 National Ambient Air
Quality Standard for ozone. However, the specific requirements that will have
to be met at that time have not been finalized. The Subsidiaries are unable
to determine what additional costs, if any, will be incurred.
The GPU System companies have been notified by the EPA and state
environmental authorities that they are among the potentially responsible
parties (PRPs) who may be jointly and severally liable to pay for the costs
associated with the investigation and remediation at 11 hazardous and/or toxic
waste sites, broken down by company as follows:
JCP&L MET-ED PENELEC GPUN GPU TOTAL
PRPs 6 4 2 1 1 11*
* In some cases, the Subsidiaries are named separately for the same site.
In addition, the Subsidiaries have been requested to voluntarily participate
in the remediation or supply information to the EPA and state environmental
authorities on several other sites for which they have not yet been named as
PRPs. The Subsidiaries have also been named in lawsuits requesting damages
for hazardous and/or toxic substances allegedly released into the environment.
The ultimate cost of remediation will depend upon changing circumstances as
site investigations continue, including (a) the existing technology required
for site cleanup, (b) the remedial action plan chosen and (c) the extent of
site contamination and the portion attributed to the GPU System companies.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection (NJDEP) for the investigation and remediation of 17
formerly owned manufactured gas plant sites. JCP&L has also entered into
various cost-sharing agreements with other utilities for most of the sites.
As of December 31, 1995, JCP&L has an estimated environmental liability of $29
million recorded on its Balance Sheet relating to these sites. The estimated
liability is based upon ongoing site investigations and remediation efforts,
including capping the sites and pumping and treatment of ground water. If the
periods over which the remediation is currently expected to be performed are
lengthened, JCP&L believes that it is reasonably possible that the future
costs may range as high as $50 million. Estimates of these costs are subject
to significant uncertainties because: JCP&L does not presently own or control
most of these sites; the environmental standards have changed in the past and
are subject to future change; the accepted technologies are subject to further
development; and the related costs for these technologies are uncertain. If
JCP&L is required to utilize different remediation methods, the costs could be
materially in excess of $50 million.
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In 1993, the NJBPU approved a mechanism similar to JCP&L's Levelized
Energy Adjustment Clause (LEAC) for the recovery of future manufactured gas
plant remediation costs when expenditures exceed prior collections. The NJBPU
decision also provided for interest on any overrecovery to be credited to
customers until the overrecovery is eliminated and for future costs to be
amortized over seven years with interest. JCP&L is pursuing reimbursement of
the remediation costs from its insurance carriers. In 1994, JCP&L filed a
complaint with the Superior Court of New Jersey against several of its
insurance carriers, relative to these manufactured gas plant sites. JCP&L
requested the Court to order the insurance carriers to reimburse JCP&L for all
amounts it has paid, or may be required to pay, in connection with the
remediation of the sites. Pretrial discovery has begun in this case.
The GPU System companies are unable to estimate the extent of possible
remediation and associated costs of additional environmental matters. Also
unknown are the consequences of environmental issues, which could cause the
postponement or cancellation of either the installation or replacement of
utility plant.
OTHER COMMITMENTS AND CONTINGENCIES
The GPU System's construction programs, for which substantial commitments
have been incurred and which extend over several years, contemplate
expenditures of $491 million (JCP&L, Met-Ed, Penelec and GPUSC's shares are
$256 million, $97 million, $124 million and $14 million, respectively) during
1996. As a consequence of reliability, licensing, environmental and other
requirements, additions to utility plant may be required relatively late in
their expected service lives. If such additions are made, current
depreciation allowance methodology may not make adequate provision for the
recovery of such investments during their remaining lives. Management intends
to seek recovery of such costs through the ratemaking process, but recognizes
that recovery is not assured.
The Subsidiaries have entered into long-term contracts with nonaffiliated
mining companies for the purchase of coal for certain generating stations in
which they have ownership interests. The contracts, which expire at various
dates between 1996 and 2004, require the purchase of either fixed or minimum
amounts of the stations' coal requirements. The price of the coal under the
contracts is based on adjustments of indexed cost components. One of
Penelec's contracts for the Homer City station also includes a provision for
the payment of postretirement benefit costs. The Subsidiaries' share of the
cost of coal purchased under these agreements is expected to aggregate $115
million (JCP&L, Met-Ed and Penelec's shares are $20 million, $18 million and
$77 million, respectively) for 1996.
JCP&L has entered into agreements with other utilities to purchase
capacity and energy for various periods through 2004. These agreements will
provide for up to 1,085 MW in 1996, declining to 878 MW in 1999 and 696 MW in
2004. For the years 1996, 1997, 1998, 1999 and 2000, payments pursuant to
these agreements are estimated to be $174 million, $164 million, $145 million,
$124 million and $95 million, respectively.
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JCP&L is constructing a 141 MW gas-fired combustion turbine at its
Gilbert generating station. This estimated $50 million project, of which $34
million has been spent, is expected to be in-service by mid-1996. In 1995,
the NJDEP issued an air permit for the facility based, in part, on the NJBPU's
1994 order which found that New Jersey's Electric Facility Need Assessment Act
is not applicable and that construction of this facility, without a market
test, is consistent with New Jersey energy policies. An industry trade group
representing NUGs has appealed the NJDEP's issuance of the air permit and the
NJBPU's order to the Appellate Division of the New Jersey Superior Court.
There can be no assurance as to the outcome of this proceeding.
The NJBPU has instituted a generic proceeding to address the appropriate
recovery of capacity costs associated with electric utility power purchases
from NUG projects. The proceeding was initiated, in part, to respond to
contentions of the Division of the Ratepayer Advocate that by permitting
utilities to recover such costs through the LEAC, an excess or "double"
recovery may result when combined with the recovery of the utilities' embedded
capacity costs through their base rates. In 1994, the NJBPU ruled that the
LEAC periods prior to March 1991 were considered closed but subsequent LEAC
periods remain open for further investigation. This matter is pending before
a NJBPU Administrative Law Judge. JCP&L estimates that the potential refund
liability for the LEAC periods from March 1991 through February 1996, the end
of the current LEAC period, is $55 million. There can be no assurance as to
the outcome of this proceeding.
JCP&L's two operating nuclear units are subject to the NJBPU's annual
nuclear performance standard. Operation of these units at an aggregate annual
generating capacity factor below 65% or above 75% would trigger a charge or
credit based on replacement energy costs. At current cost levels, the maximum
annual effect on net income of the performance standard charge at a 40%
capacity factor would be approximately $10 million before tax. While a
capacity factor below 40% would generate no specific monetary charge, it would
require the issue to be brought before the NJBPU for review. The annual
measurement period, which begins in March of each year, coincides with that
used for the LEAC.
As of December 31, 1995, approximately 52% of the GPU System's workforce
was represented by unions for collective bargaining purposes. JCP&L
employees' collective bargaining agreement is due to expire in 1996,
representing 45% of the GPU System's union employees.
Niagara Mohawk Power Corporation (NIMO) has filed with the New York
Public Service Commission a proposed restructuring plan that it claims may be
needed to avoid seeking reorganization under Chapter XI of the Bankruptcy
Code. Energy Initiatives has ownership interests, with an aggregate book
value of approximately $35 million, in three NUG projects which have long-term
purchase power agreements with NIMO. In the restructuring plan, NIMO has
insisted on renegotiating all of its contracts with NUGs, and has claimed that
it has the right to use eminent domain to condemn NUG facilities, if such
negotiations are not successful. There can be no assurance as to the outcome
of this matter.
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General Public Utilities Corporation and Subsidiary Companies
NIMO has also initiated actions in federal and state court seeking to
invalidate numerous NUG contracts or limit the amount of annual generation
produced by the NUG, and is withholding allegedly "excess" payments made in
respect of "over generation" under these contracts, including the contracts
for two of Energy Initiatives' projects. NIMO alleges to have overpaid Energy
Initiatives approximately $10 million for the years 1993 through 1995. Energy
Initiatives has filed motions to dismiss these complaints and is vigorously
defending these actions. There can be no assurance as to the outcome of these
proceedings.
At December 31, 1995, the EI Group had investments totalling $160 million
in facilities located in four foreign countries. Although management attempts
to mitigate the risk of investing in certain foreign countries by securing
political risk insurance, the EI Group faces additional risks inherent to
operating in such locations, including foreign currency fluctuations (see EI
GROUP, in Management's Discussion and Analysis of Financial Condition and
Results of Operations).
In March 1995, the FASB issued FAS 121, "Accounting for the Impairment of
Long-Lived Assets," which is effective for fiscal years beginning after
June 15, 1995. FAS 121 requires that long-lived assets, identifiable
intangibles, capital leases and goodwill be reviewed for impairment whenever
events occur or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable. In addition, FAS 121 requires that
regulatory assets meet the recovery criteria of FAS 71, "Accounting for the
Effects of Certain Types of Regulation," on an ongoing basis in order to avoid
a writedown (see Regulatory Assets and Liabilities).
The implementation of FAS 121 by the GPU System in 1995 did not have an
impact on results of operations because management believes the carrying
amounts of all assets are probable of recovery from customers. However, as
the Subsidiaries enter a more competitive environment, some assets could be
subject to impairment, thereby necessitating writedowns, which could have a
material adverse effect on the GPU System's results of operations and
financial condition.
The FASB exposure draft relating to closure and removal of long-lived
assets (see NUCLEAR PLANT RETIREMENT COSTS), applies to all long-lived assets,
including fossil-fueled generating plants. For these assets, a liability will
have to be recognized wherever a legal or constructive obligation exists to
perform dismantlement or removal activities.
During the normal course of the operation of their businesses, in
addition to the matters described above, the GPU System companies are from
time to time involved in disputes, claims and, in some cases, as defendants in
litigation in which compensatory and punitive damages are sought by the
public, customers, contractors, vendors and other suppliers of equipment and
services and by employees alleging unlawful employment practices. While
management does not expect that the outcome of these matters will have a
material effect on the GPU System's financial position or results of
operations, there can be no assurance that this will continue to be the case.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenues and expenses during the reporting period. Actual
results could differ from those estimates.
SYSTEM OF ACCOUNTS
Certain reclassifications of prior years' data have been made to conform
with the current presentation. The Subsidiaries' accounting records are
maintained in accordance with the Uniform System of Accounts prescribed by the
FERC and adopted by the PaPUC and NJBPU.
CONSOLIDATION
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany transactions and accounts are
eliminated in consolidation. The GPU System uses the equity method of
accounting for investments in affiliates in which it has the ability to
exercise significant influence (generally evidenced by a 20% to 50% ownership
interest), and consolidates its wholly-owned subsidiaries, and any affiliates
in which it has a controlling financial interest (generally evidenced by a
greater than 50% ownership interest). All other investments are accounted for
using the cost method.
CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52
(FAS 52), "Foreign Currency Translation," balance sheet accounts of the GPU
System's foreign operations are translated from foreign currencies into U.S.
dollars at either year-end rates or historical rates, while income statement
accounts are translated at the weighted average exchange rates for the period.
The resulting translation adjustments are not material and are included in
Retained Earnings. Any gains and losses resulting from foreign currency
transactions would be included in net income.
REVENUES
The Subsidiaries recognize electric operating revenues for services
rendered (including an estimate of unbilled revenues) to the end of the
respective accounting period.
DEFERRED ENERGY COSTS
Energy costs are recognized in the period in which the related energy
clause revenues are billed.
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General Public Utilities Corporation and Subsidiary Companies
UTILITY PLANT
It is the policy of the GPU System to record additions to utility plant
(material, labor, overhead and an allowance for funds used during
construction) at cost. The cost of current repairs and minor replacements is
charged to appropriate operating and maintenance expense and clearing
accounts, and the cost of renewals is capitalized. The original cost of
utility plant retired or otherwise disposed of is charged to accumulated
depreciation.
DEPRECIATION
The GPU System provides for depreciation at annual rates determined and
revised periodically, on the basis of studies, to be sufficient to depreciate
the original cost of depreciable property over estimated remaining service
lives, which are generally longer than those employed for tax purposes. The
Subsidiaries used depreciation rates which, on an aggregate composite basis,
resulted in annual rates as follows:
GPU JCP&L Met-Ed Penelec
1995 3.22% 3.64% 3.07% 2.61%
1994 3.16% 3.62% 3.04% 2.49%
1993 3.19% 3.59% 2.91% 2.74%
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
The Uniform System of Accounts defines AFUDC as "the net cost for the
period of construction of borrowed funds used for construction purposes and a
reasonable rate on other funds when so used." AFUDC is recorded as a charge
to construction work in progress, and the equivalent credits are to interest
charges for the pre-tax cost of borrowed funds and to other income for the
allowance for other funds. While AFUDC results in an increase in utility
plant and represents current earnings, it is realized in cash through
depreciation or amortization allowances only when the related plant is
recognized in rates. On an aggregate composite basis, the annual rates
utilized were as follows:
GPU JCP&L Met-Ed Penelec
1995 8.05% 8.04% 8.62% 7.78%
1994 6.45% 5.35% 7.31% 7.19%
1993 6.80% 7.80% 7.48% 4.91%
AMORTIZATION POLICIES
Accounting for TMI-2 and Forked River Investments:
JCP&L is collecting annual revenues for the amortization of TMI-2 of
$9.6 million. This level of revenue will be sufficient to recover the
remaining investment by 2008. Met-Ed and Penelec have collected all of their
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TMI-2 investment attributable to retail customers. At December 31, 1995,
$86 million is included in Unamortized Property Losses on the Balance Sheet
for JCP&L's Forked River project. JCP&L is collecting annual revenues for the
amortization of this project of $11.2 million, which will be sufficient to
recover its remaining investment by the year 2006. Because the Subsidiaries
have not been provided revenues for a return on the unamortized balances of
the damaged TMI-2 facility and the cancelled Forked River project, these
investments are being carried at their discounted present values. The related
annual accretion, which represents the carrying charges that are accrued as
the asset is written up from its discounted value, is recorded in Other
Income/(Expense), Net on the Income Statement.
Nuclear Fuel:
Nuclear fuel is amortized on a unit-of-production basis. Rates are
determined and periodically revised to amortize the cost over the useful life.
The Subsidiaries have provided for future contributions to the
Decontamination and Decommissioning Fund (part of the Energy Policy Act of
1992) for the cleanup of enrichment plants operated by the Federal Government.
The total liability at December 31, 1995 amounted to $36 million (JCP&L,
Met-Ed and Penelec's shares are $23 million, $9 million and $4 million,
respectively) and is primarily reflected in Deferred Credits and Other
Liabilities - Other. Utilities with nuclear plants will contribute annually,
based on an assessment computed on prior enrichment purchases, over a 15-year
period. The Subsidiaries made their initial payment to this fund in 1993, and
they are recovering the remaining amounts through their fuel clauses. At
December 31, 1995, $39 million (JCP&L, Met-Ed and Penelec's shares are $25
million, $9 million and $5 million, respectively) is recorded on the Balance
Sheet in Regulatory Assets - Other.
NUCLEAR OUTAGE MAINTENANCE COSTS
The GPU System accrues incremental nuclear outage maintenance costs
anticipated to be incurred during scheduled nuclear plant refueling outages.
NUCLEAR FUEL DISPOSAL FEE
The Subsidiaries are providing for estimated future disposal costs for
spent nuclear fuel at Oyster Creek and TMI-1 in accordance with the Nuclear
Waste Policy Act of 1982. The Subsidiaries entered into contracts in 1983
with the DOE for the disposal of spent nuclear fuel. The total liability
under these contracts, including interest, at December 31, 1995, all of which
relates to spent nuclear fuel from nuclear generation through April 1983,
amounted to $162 million (JCP&L, Met-Ed and Penelec's shares are $121 million,
$27 million and $14 million, respectively), and is reflected in Deferred
Credits and Other Liabilities - Other. As the actual liability is
substantially in excess of the amount recovered to date from ratepayers, the
Subsidiaries have reflected such excess of $22 million (JCP&L, Met-Ed and
Penelec's shares are $23 million, ($1) million and ($0.2) million,
respectively) at December 31, 1995 in Regulatory Assets - Other. The rates
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General Public Utilities Corporation and Subsidiary Companies
presently charged to customers provide for the collection of these costs, plus
interest, over remaining periods of 11 years for JCP&L and Met-Ed, and two
years for Penelec.
The Subsidiaries are collecting one mill per kilowatt-hour from their
customers for spent nuclear fuel disposal costs resulting from nuclear
generation subsequent to April 1983. These amounts are remitted quarterly to
the DOE.
INCOME TAXES
The GPU System companies file a consolidated federal income tax return.
All participants are jointly and severally liable for the full amount of any
tax, including penalties and interest, which may be assessed against the
group. Each subsidiary is allocated the tax reduction attributable to GPU
expenses, in proportion to the average common stock equity investment of GPU
in such subsidiary, during the year. In addition, each subsidiary will
receive in current cash payments the benefit of its own net operating loss
carrybacks to the extent that the other subsidiaries can utilize such net
operating loss carrybacks to offset the tax liability they would otherwise
have on a separate return basis (after taking into account any investment tax
credits they could utilize on a separate return basis). This method of
allocation does not allow any subsidiary to pay more than its separate return
liability.
Deferred income taxes, which result primarily from liberalized
depreciation methods, deferred energy costs, decommissioning funds and
discounted Forked River and TMI-2 investments, are provided for differences
between book and taxable income. Investment tax credits (ITC) are amortized
over the estimated service lives of the related facilities.
Effective January 1, 1993, the GPU System implemented Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes" which requires the use of the liability method of financial accounting
and reporting for income taxes. Under FAS 109, deferred income taxes reflect
the impact of temporary differences between the amounts of assets and
liabilities recognized for financial reporting purposes and the amounts
recognized for tax purposes.
STATEMENTS OF CASH FLOWS
For the purpose of the consolidated statements of cash flows, temporary
investments include all unrestricted liquid assets, such as cash deposits and
debt securities, with maturities generally of three months or less.
3. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1995 and 1994, the GPU System had $124 million and $347
million of short-term notes outstanding, respectively, of which $60 million in
1994 was commercial paper and the remainder was issued under bank lines of
credit (credit facilities). The GPU System's weighted average interest rate
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on short term borrowings was 5.9% and 6.2% at December 31, 1995 and 1994,
respectively.
The GPU System has $529 million of credit facilities, which includes a
Revolving Credit Agreement (Credit Agreement) with a consortium of banks. The
credit facilities generally provide for the payment of a commitment fee on the
unborrowed amount of 1/8 of 1% annually. Borrowings under these credit
facilities generally bear interest based on the prime rate or money market
rates. Notes issued under the Credit Agreement, which expires November 1,
1999, are limited to $250 million in total borrowings outstanding at any time
and subject to various covenants and acceleration under certain conditions.
The Credit Agreement borrowing rates and facility fee are dependent on the
long-term debt ratings of the Subsidiaries.
4. LONG-TERM DEBT
At December 31, 1995, the GPU System had long-term debt outstanding, as
follows:
Interest Rates
5.35% to 7% to 9% to
Maturities 6.9% 8.85% 9.48% Total
(In Thousands)
First mortgage bonds:
1996-2005 $ 667,575 $ 514,191 $ 120,000 $1,301,766
2006-2015 177,120 118,500 - 295,620
2016-2025 253,500 645,000 50,000 948,500
Total $1,098,195 $1,277,691 $ 170,000 2,545,886
Amounts due within one year (115,701)
Total 2,430,185
Other long-term debt (net of $5,545 due within one year) 141,429
Unamortized net discount (3,716)
Total $2,567,898
For the years 1996, 1997, 1998, 1999 and 2000, the GPU System has
long-term debt maturities of $121 million, $148 million, $140 million, $36
million and $126 million, respectively. Substantially all of the utility
plant owned by the Subsidiaries is subject to the lien of their respective
mortgages.
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General Public Utilities Corporation and Subsidiary Companies
The estimated fair value of the GPU System's long-term debt, as of
December 31, 1995 and 1994 was as follows:
(In Thousands)
Carrying Fair
Amount Value
1995 $2,567,898 $2,712,102
1994 $2,345,417 $2,142,854
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
GPU System for debt of the same remaining maturities and credit qualities.
5. SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
JCP&L Capital, L.P., Met-Ed Capital, L.P. and Penelec Capital, L.P., are
special-purpose partnerships in which a subsidiary of JCP&L, Met-Ed and
Penelec, respectively, is the sole general partner. The following issues of
mandatorily redeemable preferred securities (Preferred Securities) were
outstanding at December 31, 1995:
Issue Securities Total
Company Series Price Outstanding (In Thousands)
JCP&L Capital 8.56% $25 5,000,000 $125,000
Met-Ed Capital 9.00% $25 4,000,000 100,000
Penelec Capital 8.75% $25 4,200,000 105,000
Total $330,000
The fair value of the Preferred Securities based on market price quotations at
December 31, 1995 and 1994 is $106 million and $98 million, respectively, for
Met-Ed Capital; $110 million and $101 million, respectively, for Penelec
Capital; and $131 million for JCP&L Capital at December 31, 1995.
In 1995, JCP&L Capital, L.P. issued $125 million of Preferred Securities
and in 1994, Met-Ed Capital, L.P. and Penelec Capital, L.P. issued $100
million and $105 million, respectively, of Preferred Securities. The proceeds
from the sales of the Preferred Securities were then lent to JCP&L, Met-Ed and
Penelec which, in turn, issued their deferrable interest subordinated
debentures to the partnerships. JCP&L, Met-Ed and Penelec are taking tax
deductions for the interest paid on the subordinated debentures.
The Preferred Securities of JCP&L Capital, L.P. mature in 2044, while
those of Met-Ed Capital, L.P. and Penelec Capital, L.P. mature in 2043. The
Preferred Securities are redeemable at the option of JCP&L beginning in 2000,
and at the option of Met-Ed and Penelec beginning in 1999, at 100 percent of
their principal amount, or earlier under certain limited circumstances,
including the loss of the tax deduction for interest paid on the subordinated
debentures. The partnerships' sole assets are the subordinated debentures.
JCP&L, Met-Ed and Penelec have fully and unconditionally guaranteed payment of
F-54
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
distributions, to the extent there is sufficient cash on hand to permit such
payments and legally available funds, and payments on liquidation or
redemption of their respective partnerships' Preferred Securities.
Distributions on the Preferred Securities (and interest on the subordinated
debentures) may be deferred for up to 60 months, but JCP&L, Met-Ed and Penelec
may not pay dividends or redeem or acquire any of their preferred or common
stock until deferred payments on their respective subordinated debentures are
paid in full.
6. CAPITAL STOCK
COMMON STOCK
The following table presents information relating to the common stock
($2.50 par value) of the Corporation:
1995 1994
Authorized shares 350,000,000 150,000,000
Issued shares 125,783,338 125,783,338
Reacquired shares 5,359,997 10,575,086
Outstanding shares 120,423,341 115,208,252
Restricted units 195,499 107,063
In 1995 and 1993, the Corporation sold five million and four million
additional shares of common stock, respectively, for net proceeds of $157.5
million and $128.7 million, respectively. The issuances resulted in credits
to capital surplus totaling $71.9 million and $60.2 million, in 1995 and 1993
respectively. In 1995, 1994 and 1993, under the Corporation's Dividend
Reinvestment Plan, capital surplus was credited $2.7 million, $2.3 million and
$2.1 million, respectively, for shares sold. No shares of common stock were
reacquired in 1995 or 1994.
In 1995 and 1994, pursuant to the 1990 Restricted Stock Plan, the
Corporation issued to officers restricted units representing rights to receive
shares of common stock, on a one-for-one basis, at the end of the vesting or
restriction period. Beginning with units awarded in 1995, the units will be
adjusted at the end of the vesting or restriction period based on the
Corporation's performance over the restriction period. The shares issuable at
the end of the vesting period could range from 0% to 200% of the originally
issued units. The restricted units do not affect the issued and outstanding
shares of common stock until conversion at the end of the restriction period.
However, the restricted units are considered common stock equivalents and
therefore are included in average common shares outstanding for the earnings
per share computation on the income statement. The restricted units accrue
dividends on a quarterly basis. In 1995 and 1994, the Corporation awarded to
plan participants 83,600 and 34,595 restricted units, respectively. In 1995
and 1994, the Corporation issued a total of 30,558 and 6,275 shares,
respectively, from previously reacquired shares.
F-55
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
PREFERRED STOCK
At December 31, 1995, the Subsidiaries had the following issues of
cumulative preferred stock outstanding:
Stated Value Shares Stated Value
Series per Share Outstanding (In Thousands)
With mandatory redemption:
7.52% $100 440,000 $ 44,000
8.48% $100 500,000 50,000
8.65% $100 500,000 50,000
Total 1,440,000 144,000
Securities due within one year (10,000)
Total $134,000
Without mandatory redemption:
3.70% - 4.70% $100 723,912 $ 72,391
7.88% $100 250,000 25,000
Total 973,912 97,391
Premium 725
Total $ 98,116
The fair value of the preferred stock with mandatory redemption, based on
market price quotations at December 31, 1995 and 1994, is $146.6 million and
$140.1 million, respectively.
The 7.52% and 8.65% Series are callable at various prices above their
stated values beginning in 2002 and 2000, respectively. The 7.52% Series is
to be redeemed ratably over twenty years beginning in 1998. The 8.65% Series
is to be redeemed ratably over six years beginning in 2000. The 8.48% Series
is not callable and is to be redeemed ratably over five years beginning in
1996. The outstanding shares with mandatory redemption have aggregate
redemption requirements of $65 million for the years 1996 through 2000.
The outstanding shares of preferred stock without mandatory redemption
are callable at various prices above their stated values. At December 31,
1995, the aggregate amount at which these shares could be called by the
Subsidiaries was $102 million.
During 1995, JCP&L repurchased in the market 60,000 shares of its 7.52%
cumulative preferred stock with mandatory redemption, with a stated value of
$6 million. JCP&L's total cost of the redemption was $6.1 million, which
resulted in a $.1 million charge to Retained Earnings.
During 1994, Met-Ed and Penelec redeemed their 7.68% (aggregate stated
value of $35 million) and 8.36% (aggregate stated value of $25 million)
cumulative preferred stock, respectively. Met-Ed's total cost of the
redemption was $36 million, which resulted in a $1.2 million charge to
Retained Earnings. Penelec's total cost of the redemption was $26 million,
resulting in a $1.1 million charge to Retained Earnings.
F-56
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
During 1993, the Subsidiaries redeemed preferred stock as follows: JCP&L
redeemed all of its outstanding 8.12% Series and 8% Series cumulative
preferred stock (aggregate stated value of $50 million) at a total cost of
$52.4 million. Met-Ed redeemed all of its outstanding 8.32% Series H, 8.32%
Series J, 8.12% Series I and its 8.12% cumulative preferred stock (aggregate
stated value of $81 million) at a total cost of $85.3 million. Penelec
redeemed all of its outstanding 8.12% Series I cumulative preferred stock
(aggregate stated value of $25 million) at a total cost of $26 million. These
redemptions resulted in a net $6.9 million charge to Retained Earnings.
At December 31, 1995 and 1994, the Subsidiaries were authorized to issue
37,035,000 shares of cumulative preferred stock. If dividends on any of the
preferred stock of any of the Subsidiaries are in arrears for four quarters,
the holders of preferred stock, voting as a class, are entitled to elect a
majority of the board of directors of that Subsidiary until all dividends in
arrears have been paid. A Subsidiary may not redeem preferred stock unless
dividends on all of that Subsidiary's preferred stock for all past quarterly
dividend periods have been paid or declared and set aside for payment.
7. INCOME TAXES
Effective January 1, 1993, the GPU System implemented FAS 109,
"Accounting for Income Taxes." The cumulative effect of this accounting
change on net income was immaterial. As of December 31, 1995 and 1994, the
balance sheet reflected $528 million and $562 million, respectively, of income
taxes recoverable through future rates (primarily related to liberalized
depreciation), and a regulatory liability for income taxes refundable through
future rates of $95 million and $106 million, respectively (related to
unamortized ITC), substantially due to the recognition of amounts not
previously recorded.
F-57
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
A summary of the components of deferred taxes as of December 31, 1995 and
1994 is as follows:
(In Millions)
Deferred Tax Assets Deferred Tax Liabilities
1995 1994 1995 1994
Current: Current:
Unbilled revenue $ 23 $ 16 Revenue taxes $ 16 $ 18
Other 4 2 Deferred energy 7 4
Total $ 27 $ 18 Total $ 23 $ 22
Noncurrent: Noncurrent:
Unamortized ITC $ 95 $106 Liberalized
Decommissioning 62 131 depreciation:
Contribution in aid previously flowed
of construction 23 25 through $ 301 $ 333
Other 150 167 future revenue
Total $330 $429 requirements 209 229
Subtotal 510 562
Liberalized
depreciation 817 767
Forked River 11 54
Other 128 56
Total $1,466 $1,439
The reconciliations from net income to book income subject to tax and
from the federal statutory rate to combined federal and state effective tax
rates are as follows:
(In Millions)
1995 1994 1993
Net income $440 $164 $296
Preferred stock dividends 17 21 29
Income tax expense 265 86 197
Book income subject to tax $722 $271 $522
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 4 - 4
Other (2) (3) (1)
Effective income tax rate 37% 32% 38%
F-58
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
Federal and state income tax expense is comprised of the following:
(In Millions)
1995 1994 1993
Provisions for taxes currently payable $154 $162 $127
Deferred income taxes:
Liberalized depreciation 31 31 32
New Jersey revenue tax (2) 32 32
Deferral of energy costs 1 12 6
Accretion income 5 11 7
Decommissioning 71 (76) -
VERP 24 (51) -
Other (8) (21) 5
Deferred income taxes, net 122 (62) 82
Amortization of ITC, net (11) (14) (12)
Income tax expense $265 $ 86 $197
In 1994, the GPU System and the Internal Revenue Service (IRS) reached an
agreement to settle the Corporation's claim for 1986 that TMI-2 has been
retired for tax purposes. The Corporation's Subsidiaries have received net
refunds totaling $17 million, which have been credited to their customers.
Also in 1994, the GPU System received net interest from the IRS totaling $46
million (before income taxes), associated with the refund settlement, which
was credited to income. The IRS has completed its examinations of the GPU
System's federal income tax returns through 1989. The years 1990 through 1992
are currently being audited.
8. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses
consisted of the following:
(In Millions)
1995 1994 1993
Maintenance $253 $271 $275
Other taxes:
New Jersey unit tax $209 $204 $202
Pennsylvania state gross receipts 74 70 68
Real estate and personal property 23 21 21
Other 43 54 53
Total $349 $349 $344
F-59
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
9. EMPLOYEE BENEFITS
Pension Plans:
The GPU System maintains defined benefit pension plans covering
substantially all employees. The GPU System's policy is to currently fund net
pension costs within the deduction limits permitted by the Internal Revenue
Code.
A summary of the components of net periodic pension cost follows:
(In Millions)
1995 1994 1993
Service cost-benefits earned during the period $ 30.0 $ 34.8 $ 28.6
Interest cost on projected benefit obligation 109.8 95.4 91.8
Less: Expected return on plan assets (112.9) (104.4) (96.6)
Amortization (1.4) (1.4) (2.2)
Net periodic pension cost $ 25.5 $ 24.4 $ 21.6
The above 1994 amounts do not include a pre-tax charge to earnings of
$97 million resulting from the Voluntary Enhanced Retirement Programs (VERP).
The actual return on the plans' assets for the years 1995, 1994 and 1993
were gains of $322.0 million, $13.8 million and $145.9 million, respectively.
The funded status of the plans and related assumptions at December 31,
1995 and 1994 were as follows:
(In Millions)
1995 1994
Accumulated benefit obligation (ABO):
Vested benefits $ 1,172.8 $ 1,118.2
Nonvested benefits 133.7 120.5
Total ABO 1,306.5 1,238.7
Effect of future compensation levels 237.7 182.6
Projected benefit obligation (PBO) $ 1,544.2 $ 1,421.3
Plan assets at fair value $ 1,596.1 $ 1,279.9
PBO (1,544.2) (1,421.3)
Plan assets in excess of (less than) PBO 51.9 (141.4)
Less: Unrecognized net (gain) loss (64.9) 72.5
Unrecognized prior service cost (credit) 5.2 (0.6)
Unrecognized net transition asset (5.8) (6.6)
Adjustment required to recognize
minimum liability (0.2) (1.2)
Accrued pension liability $ (13.8) $ (77.3)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
Annual increase in compensation levels 5.5 6.0
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<PAGE>
General Public Utilities Corporation and Subsidiary Companies
In 1995, changes in assumptions, primarily the decrease in the discount
rate assumption from 8% to 7.5%, resulted in a $67 million increase in the PBO
as of December 31, 1995. The assets of the plans are held in a Master Trust
and generally invested in common stocks and fixed income securities. The
unrecognized net loss represents actual experience different from that
assumed, which is deferred and not included in the determination of pension
cost until it exceeds certain levels. Both the unrecognized prior service
cost resulting from retroactive changes in benefits and the unrecognized net
transition asset arising out of the adoption of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions," are being
amortized to pension cost over the average remaining service periods for
covered employees.
At December 31, 1995 and 1994, GPUSC had accumulated pension obligations
in excess of amounts accrued; as a result, additional minimum liabilities in
the amounts of $.1 million and $.7 million, net of deferred income taxes of
$.1 million and $.5 million, respectively, are reflected as reductions in
Retained Earnings.
Savings Plans:
The GPU System also maintains savings plans for substantially all
employees. These plans provide for employee contributions up to specified
limits. The GPU System's savings plans provide for various levels of matching
contributions. The matching contributions for the GPU System for 1995, 1994
and 1993 were $13.4 million, $12.7 million and $12.2 million, respectively.
Postretirement Benefits Other Than Pensions:
The GPU System provides certain retiree health care and life insurance
benefits for substantially all employees who reach retirement age while
working for the GPU System. Health care benefits are administered by various
organizations. A portion of the costs are borne by the participants.
Effective January 1, 1993, the GPU System adopted Statement of Financial
Accounting Standards No. 106 (FAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FAS 106 requires that the
estimated cost of these benefits, which are primarily for health care, be
accrued during the employee's active working career. The GPU System has
elected to amortize the unfunded transition obligation existing at January 1,
1993 over a period of 20 years. The unrecognized net loss represents actual
experience different from that assumed, which is deferred and not included in
the determination of postretirement benefit cost until it exceeds certain
levels. The unrecognized prior service cost resulting from retroactive
changes in benefits is being amortized to postretirement benefit cost over the
average remaining service periods for covered employees.
F-61
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
A summary of the components of the net periodic postretirement benefit cost
for 1995, 1994 and 1993 follows:
(In Millions)
1995 1994 1993
Service cost-benefits attributed to service
during the period $ 13.4 $ 14.6 $ 12.5
Interest cost on the accumulated postretirement
benefit obligation 43.4 37.0 34.3
Expected return on plan assets (11.0) (7.0) (3.4)
Amortization of transition obligation 17.4 18.1 18.1
Other amortization, net 1.3 2.1 -
Net periodic postretirement benefit cost 64.5 64.8 61.5
Less, deferred for future recovery (15.0) (15.8) (27.5)
Postretirement benefit cost, net of deferrals $ 49.5 $ 49.0 $ 34.0
The above 1994 amounts do not include a pre-tax charge to earnings of
$30 million relating to the VERP.
The actual return on the plans' assets for the years 1995, 1994 and 1993
was a gain of $27.9 million, $2.3 million and $3.9 million, respectively.
The funded status of the plans at December 31, 1995 and 1994, was as
follows:
(In Millions)
1995 1994
Accumulated Postretirement Benefit Obligation:
Retirees $ 361.6 $ 291.7
Fully eligible active plan participants 32.4 67.2
Other active plan participants 232.4 197.6
Total accumulated postretirement
benefit obligation (APBO) $ 626.4 $ 556.5
APBO $(626.4) $(556.5)
Plan assets at fair value 191.3 129.0
APBO in excess of plan assets (435.1) (427.5)
Less: Unrecognized net loss 65.0 46.9
Unrecognized prior service cost 2.3 2.5
Unrecognized transition obligation 295.9 313.3
Accrued postretirement benefit liability $ (71.9) $ (64.8)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
The GPU System intends to continue funding amounts for postretirement
benefits with an independent trustee, as deemed appropriate from time to time.
The plan assets include equities and fixed income securities.
F-62
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
In 1995, the decrease in the health-care cost trend rate assumptions
resulted in a $51 million decrease in the APBO, which was partially offset by
an increase of $42 million in the APBO caused by the decrease in the discount
rate assumption from 8% to 7.5%. The accumulated postretirement benefits
obligation was determined by application of the terms of the medical and life
insurance plans, including the effects of established maximums on covered
costs, together with relevant actuarial assumptions and health-care cost trend
rates of 12% for those not eligible for Medicare and 9% for those eligible for
Medicare, then decreasing gradually to 6% in 2000 and thereafter. These costs
also reflect the implementation of a cost cap of 6% for individuals who retire
after December 31, 1995 and reach age 65. The effect of a 1% annual increase
in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $65 million as of December
31, 1995 and the aggregate of the service and interest cost components of net
periodic postretirement health-care cost by approximately $8 million.
In JCP&L's 1993 base rate proceeding, the NJBPU allowed JCP&L to collect
$3 million annually of the incremental postretirement benefit costs, charged
to expense, recognized as a result of FAS 106. Based on the final order and
in accordance with Emerging Issues Task Force (EITF) Issue 92-12, "Accounting
for OPEB Costs by Rate-Regulated Enterprises," JCP&L is deferring the amounts
above that level. Met-Ed is deferring the incremental postretirement benefit
costs, charged to expense, associated with the adoption of FAS 106 and in
accordance with EITF Issue 92-12, as authorized by the PaPUC in its 1993 base
rate order.
In 1994, the Pennsylvania Commonwealth Court reversed a PaPUC order that
allowed a nonaffiliated utility, outside a base rate proceeding, to defer
certain incremental postretirement benefit costs for future recovery from
customers. As a result of the Court's decision, in 1994, Penelec determined
that its FAS 106 costs, including costs deferred since January 1993, were not
likely to be recovered and charged $18.8 million to expense. In addition,
$4 million of Penelec's unrecognized transition obligation resulting from
employees who elected to participate in the VERP was also written off in 1994.
In 1995, Penelec recorded a charge to income of approximately $9 million,
which represents continued amortization of the transition obligation along
with current accruals of FAS 106 expense for active employees.
10. JOINTLY OWNED STATIONS
Each participant in a jointly owned station finances its portion of the
investment and charges its share of operating expenses to the appropriate
expense accounts. The Subsidiaries participated with nonaffiliated utilities
in the following jointly owned stations at December 31, 1995:
F-63
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
Balance (In Millions)
% Accumulated
Station Owner Ownership Investment Depreciation
Homer City Penelec 50 $458.2 $161.6
Conemaugh Met-Ed 16.45 144.3 34.3
Keystone JCP&L 16.67 91.4 21.9
Yards Creek JCP&L 50 28.9 7.4
Seneca Penelec 20 16.4 4.8
11. LEASES
The GPU System's capital leases consist primarily of leases for nuclear
fuel. Nuclear fuel capital leases at December 31, 1995 and 1994 totaled
$152 million and $148 million, respectively (net of amortization of
$189 million and $112 million, respectively). The recording of capital leases
has no effect on net income because all leases, for ratemaking purposes, are
considered operating leases.
The Subsidiaries have nuclear fuel lease agreements with nonaffiliated
fuel trusts. In 1995, the Subsidiaries refinanced the Oyster Creek and TMI-1
nuclear fuel leases to provide for aggregate borrowings of up to $210 million
($100 million for Oyster Creek and $110 million for TMI-1) outstanding at any
one time. Reductions in nuclear fuel financing costs are expected through the
new credit facilities. It is contemplated that when consumed, portions of the
presently leased material will be replaced by additional leased material. The
Subsidiaries are responsible for the disposal costs of nuclear fuel leased
under these agreements. These nuclear fuel leases have initial terms of three
years expiring in November 1998, and are renewable annually thereafter at the
lender's option for a period up to 20 years. Subject to certain conditions of
termination, the Subsidiaries are required to purchase all nuclear fuel then
under lease at a price that will allow the lessor to recover its net
investment. Lease expense consists of an amount designed to amortize the cost
of the nuclear fuel as consumed plus interest costs. For the years ended
December 31, 1995, 1994 and 1993, these amounts were $57 million, $50 million
and $66 million, respectively.
JCP&L and Met-Ed have sold and leased back substantially all of their
respective ownership interests in the Merrill Creek Reservoir project. The
minimum lease payments under these operating leases, which have remaining
terms of 37 years, average approximately $3 million annually for each company.
F-64
<PAGE>
<TABLE>
General Public Utilities Corporation and Subsidiary Companies
GENERAL PUBLIC UTILITIES CORPORATION
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance (1) (2)
at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for doubtful
accounts $ 7,430 $14,634 $ 5,789(a) $19,671(b) $ 8,182
Allowance for inventory
obsolescence 4,923 - - 1 550(d) 3,373
Year Ended December 31, 1994
Allowance for doubtful
accounts $ 7,361 $14,105 $ 5,031(a) $19,067(b) $ 7,430
Allowance for inventory
obsolescence 5,681 - 814(e) 1,572(d) 4,923
Year Ended December 31, 1993
Allowance for doubtful
accounts $ 7,433 $13,768 $ 4,393(a) $18,233(b) $ 7,361
Allowance for inventory
obsolescence 7,168 80 56(c) 1,623(d) 5,681
____________________________
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Sale of inventory previously written off.
(d) Inventory written off.
(e) Sale of inventory previously written off at Met-Ed ($466), and reestablishment of zero
value inventory at JCP&L ($348).
</TABLE>
F-65
<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
COMPANY STATISTICS
<CAPTION>
For the Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Capacity at Company Peak (In MW):
Company-owned............................... 2,749 2,765 2,839 2,826 2,836 2,821
Contracted.................................. 2,462 2,403 2,033 2,364 1,995 1,600
Total capacity (a)....................... 5,211 5,168 4,872 5,190 4,831 4,421
Hourly Peak Load (In MW):
Summer peak................................. 4,554 4,292 4,564 4,149 4,376 4,047
Winter peak................................. 3,260 3,242 3,129 3,135 3,222 2,879
Reserve at Company peak (%)................. 14.4 20.4 6.7 25.1 10.4 9.2
Load factor (%) (b)......................... 47.1 50.8 49.1 51.7 49.3 51.3
Sources of Energy (In Thousands of MWH):
Coal........................................ 1,929 1,738 1,983 1,985 1,926 1,863
Nuclear ................................... 6,791 5,275 6,151 6,259 4,362 5,625
Gas, hydro & oil............................ 861 757 460 270 1,066 1,161
Net generation........................... 9,581 7,770 8,594 8,514 7,354 8,649
Utility purchases and interchange........... 6,304 6,966 7,253 7,173 9,498 8,961
Nonutility purchases........................ 5,850 4,920 4,820 5,274 3,579 1,893
Total sources of energy.................. 21,735 19,656 20,667 20,961 20,431 19,503
Company use, line loss, etc................. (1,749) (1,405) (2,026) (2,075) (1,799) (1,404)
Total electric energy sales............... 19,986 18,251 18,641 18,886 18,632 18,099
Fuel expense (In Millions):
Coal........................................ $ 26 $ 26 $28 $26 $ 28 $ 25
Nuclear..................................... 44 35 42 41 32 41
Gas & oil................................... 31 34 29 18 41 49
Total..................................... $101 $ 95 $99 $85 $101 $115
Power Purchased and Interchanged (In Millions):
Utility purchases and interchange........... $279 $295 $310 $325 $390 $348
Nonutility purchases........................ 382 304 292 316 216 121
Total ................................... $661 $599 $602 $641 $606 $469
Electric Energy Sales (In Thousands of MWH):
Residential................................. 7,112 7,094 6,983 6,568 6,757 6,497
Commercial.................................. 6,611 6,586 6,474 6,207 6,243 6,104
Industrial.................................. 3,562 3,673 3,689 3,723 3,816 3,790
Other....................................... 77 76 369 389 383 382
Sales to customers....................... 17,362 17,429 17,515 16,887 17,199 16,773
Sales to other utilities.................... 2,624 822 1,126 1,999 1,433 1,326
Total.................................... 19,986 18,251 18,641 18,886 18,632 18,099
Operating Revenues (In Millions):
Residential................................. $ 881 $ 855 $ 835 $ 735 $ 750 $ 665
Commercial.................................. 742 721 699 630 620 559
Industrial.................................. 315 322 321 306 309 281
Other....................................... 21 21 40 40 39 37
Revenues from customers.................. 1,959 1,919 1,895 1,711 1,718 1,542
Sales to other utilities.................... 62 19 31 53 45 54
Total electric revenues.................. 2,021 1,938 1,926 1,764 1,763 1,596
Other revenues.............................. 15 15 10 10 10 9
Total.................................... $2,036 $1,953 $1,936 $1,774 $1,773 $1,605
Price per KWH (In Cents):
Residential................................. 12.31 12.06 11.90 11.15 11.11 10.24
Commercial.................................. 11.20 10.92 10.78 10.08 9.93 9.16
Industrial.................................. 8.45 8.78 8.70 8.20 8.08 7.43
Total sales to customers.................... 11.24 11.00 10.80 10.09 9.99 9.19
Total sales................................. 10.08 10.61 10.31 9.30 9.47 8.82
Kilowatt-hour Sales per Residential Customer.. 8,559 8,690 8,669 8,264 8,585 8,303
Customers at Year-End (In Thousands).......... 940 924 911 897 887 881
(a) Summer ratings at December 31, 1995 of owned and contracted capacity were 2,704 MW and 2,211 MW, respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year to the peak load occurring during the year.
</TABLE>
F-66<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
SELECTED FINANCIAL DATA
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1995 1994* 1993 1992 1991** 1990
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $2,035,928 $1,952,425 $1,935,909 $1,774,071 $1,773,219 $1,604,962
Other operation and
maintenance expense 475,448 526,623 460,128 424,285 433,562 398,598
Net income 199,089 162,841 158,344 117,361 153,523 126,532
Earnings available
for common stock 184,632 148,046 141,534 96,757 134,083 110,219
Net utility plant
in service 2,641,565 2,620,212 2,558,160 2,429,756 2,365,987 2,234,243
Cash construction
expenditures 217,805 243,878 197,059 218,874 241,774 271,588
Total assets 4,464,979 4,336,640 4,269,155 3,886,904 3,695,645 3,531,898
Long-term debt 1,192,945 1,168,444 1,215,674 1,116,930 1,022,903 927,686
Long-term obligations
under capital leases 2,402 4,362 6,966 4,645 5,471 4,459
Company-obligated mandatorily
redeemable preferred securities 125,000 - - - - -
Cumulative preferred stock
with mandatory redemption 134,000 150,000 150,000 150,000 100,000 100,000
Return on average
common equity 13.1% 11.2% 11.1% 8.0% 11.9% 10.5%
* Results for 1994 reflect a net decrease in earnings of $23.0 million (after-tax) due to charges for
costs related to early retirement programs ($30.4 million); and net interest income from refunds of
previously paid federal income taxes related to the tax retirement of TMI-2 ($7.4 million).
** Results for 1991 reflect an increase in earnings of $27.1 million (after-tax) for an accounting
change recognizing unbilled revenues and a decrease in earnings of $5.7 million (after-tax) for
estimated
TMI-2 costs.
</TABLE>
F-67<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's earnings in 1995 were $184.6 million, compared to 1994
earnings of $148 million. Contributing to this earnings increase were higher
new customer sales, partially offset by lower weather-related sales; and lower
other operation and maintenance expenses (O&M) due primarily to a $30.4
million (after-tax) charge in 1994 for early retirement programs. Also in
1994, the Company recognized net interest income of $7.4 million (after-tax)
resulting from refunds of previously paid federal income taxes related to the
tax retirement of Three Mile Island Unit 2 (TMI-2).
The Company's return on average common equity was 13.1% in 1995 compared
to 11.2% in 1994.
Earnings in 1994 were $148 million, compared to 1993 earnings of $141.5
million. This earnings increase was due principally to higher new customer
sales, colder winter weather in 1994, and an increase in revenues resulting
from a February 1993 retail base rate case. Also contributing to this
earnings increase were reduced reserve capacity expense, net interest income
of $7.4 million (after-tax) related to the TMI-2 tax refunds, and a
performance award for the operation of the Company's nuclear generating
stations. Partially offsetting these increases were a charge of $30.4 million
(after-tax) related to the 1994 early retirement programs and increased O&M
expenses, which included higher emergency and winter storm repairs.
OPERATING REVENUES:
Operating revenues increased 4.3% to $2.04 billion in 1995 after
increasing 0.9% to $1.95 billion in 1994. The components of these changes are
as follows:
(In Millions)
1995 1994
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 11.4 $ 21.5
Rate increase - 20.8
Energy revenues 72.3 (31.0)
Other revenues (0.2) 5.2
Increase in revenues $ 83.5 $ 16.5
Kilowatt-hour revenues
1995
The increase in KWH revenues was due to increases in new residential and
commercial customer sales, partially offset by lower weather-related sales.
F-68
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
1994
The increase in KWH revenues was due to increases in new residential and
commercial customer sales, and colder winter weather as compared to the
previous year.
1995 MWH Customer Sales by Service Class
Residential 41%
Commercial 38%
Industrial/Other 21%
Energy revenues
1995 and 1994
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. Energy revenues in 1995 increased primarily from additional sales
to other utilities and higher energy cost rates.
Other revenues
1995 and 1994
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
1995 and 1994
The increase in power purchased and interchanged (PP&I) expense was due
largely to higher nonutility generation purchases.
Generally, changes in the energy component of PP&I expense do not
significantly affect earnings since these cost increases are substantially
recovered through the Company's energy adjustment clause. However, 1995
earnings were negatively affected by higher reserve capacity expense (which is
a component of PP&I) resulting primarily from a Pennsylvania-New Jersey-
Maryland (PJM Power Pool) prior year adjustment and one-time net charges of
$3.6 million (pre-tax) from another utility. Earnings in 1994 benefitted
from lower reserve capacity expense resulting primarily from the expiration of
a power purchase contract with another utility and a reduction in purchases
from affiliated companies.
Fuel and Deferral of energy and capacity costs, net
1995 and 1994
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
F-69
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
Other operation and maintenance
1995 and 1994
The decrease in other O&M expense was due primarily to a $46.9 million
(pre-tax) charge in 1994 related to the early retirement programs and lower
1995 winter storm repairs.
1994
The increase in other O&M expense was primarily attributable to a $46.9
million (pre-tax) charge for the early retirement programs. Also contributing
to the increase were higher emergency and winter storm repairs and the accrual
of additional payroll expense under an expanded employee incentive
compensation program designed to tie pay increases more closely to business
results and enhance productivity.
Depreciation and amortization
1995
The increase in depreciation and amortization expense was due to
additions to plant in service, partially offset by lower regulatory asset
amortizations.
1994
Depreciation and amortization expense increased due to additions to plant
in service and higher regulatory asset amortizations.
Taxes, other than income taxes
1995 and 1994
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
OTHER INCOME AND DEDUCTIONS:
Other income, net
1995 and 1994
In 1994, the Company recorded interest income of $14.7 million (pre-tax)
resulting from refunds of previously paid federal income taxes related to the
tax retirement of TMI-2. Also in 1994, there was a write-off of $4.2 million
(pre-tax) for a cancelled project.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
1995 and 1994
In 1994, the Company recognized interest expense related to the tax
retirement of TMI-2. The tax retirement of TMI-2 resulted in a $3.3 million
(pre-tax) charge to interest expense on additional amounts owed for tax years
in which depreciation deductions with respect to TMI-2 had been taken.
F-70
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
Dividends on company-obligated mandatorily redeemable preferred securities
1995
Through a special-purpose partnership, the Company issued $125 million
stated value of mandatorily redeemable preferred securities.
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs:
The Company's capital needs were $265 million in 1995, consisting of cash
construction expenditures of $218 million and amounts for maturing obligations
of $47 million.
During 1995, construction expenditures were used primarily to maintain
and improve existing generation, transmission and distribution facilities,
continue with the construction of a new generation facility, and for various
clean air compliance projects. In 1996, construction expenditures for the
Company are estimated to be $256 million, consisting primarily of $202 million
for ongoing system development, $26 million for upgrading the communication
system, and $15 million for the continued construction of a new generation
facility. Expenditures for maturing obligations will total $36 million in
1996, and $86 million in 1997. Management estimates that approximately three-
fourths of the Company's 1996 capital needs will be satisfied through
internally generated funds.
Cash Construction Expenditures
(In millions of dollars)
1991 1992 1993 1994 1995 1996
$242 $219 $197 $244 $218 $256*
* Estimate
The Company and its affiliates' capital leases consist primarily of
leases for nuclear fuel. The Company's share of nuclear fuel capital leases
at December 31, 1995 totaled $88 million. In 1995, the Company and its
affiliates refinanced the Oyster Creek and TMI-1 nuclear fuel leases to
provide for aggregate borrowings of up to $210 million ($100 million for
Oyster Creek and $110 million for TMI-1) outstanding at any one time. These
nuclear fuel leases have initial terms of three years expiring in November
1998, and are renewable annually thereafter at the lender's option for a
period up to 20 years. When consumed, portions of the presently leased
material will be replaced by additional leased material at a rate of between
$20 million and $25 million annually. In the event the needed nuclear fuel
cannot be leased, the associated capital requirements would have to be met by
other means.
Financing:
In 1995, GPU sold five million shares of common stock. The net proceeds
of $157.5 million were used to make cash capital contributions to the GPU
F-71
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
System, of which the Company's share was $75 million, and to repay GPU short-
term debt.
The Company has regulatory authority to issue and sell first mortgage
bonds (FMBs), which may be issued as secured medium-term notes, and preferred
stock through June 1997. Under existing authorizations, the Company may issue
these senior securities in the amount of up to $225 million, of which $100
million may consist of preferred stock. The Company also has regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
In 1995, the Company issued $50 million principal amount of FMBs, the
proceeds of which were used to moderate short-term debt levels. JCP&L Capital
L.P., a special-purpose partnership in which a subsidiary of the Company is
the sole general partner, issued $125 million stated value of mandatorily
redeemable preferred securities (carried on the balance sheet as Company-
obligated mandatorily redeemable preferred securities). The proceeds from the
issuance were used to reduce short-term debt and retire senior securities.
Also in 1995, the Company repurchased, in the market, $6 million stated value
of cumulative preferred stock. The repurchased shares may be used to satisfy
future sinking fund requirements.
The Company's FMB indenture and certificate of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Company may issue. The Company's interest and preferred
dividend coverage ratios are currently in excess of indenture and charter
restrictions.
The Company's cost of capital and ability to obtain external financing
are affected by its security ratings, which are periodically reviewed by the
three major credit rating agencies. The Company's senior securities ratings
have remained constant since August 1994. The Company's FMBs are currently
rated at an equivalent of BBB+ by the three major credit rating agencies,
while the preferred stock and mandatorily redeemable preferred securities
issues have been assigned an equivalent of BBB. In addition, the Company's
commercial paper is rated as having good credit quality.
The Standard & Poor's (S&P) rating outlook for the Company has remained
at "stable," and reflects a manageable construction program, minimal rate
relief requirements and expectations of modest strengthening in the service
area economy. The rating outlook is used to assess the potential direction of
an issuer's long-term debt rating over the intermediate to longer-term. The
S&P business position assigned to the Company has remained unchanged
throughout the year at "low average". The business position is a financial
benchmarking standard for rating the debt of electric utilities to reflect the
changing risk profiles resulting primarily from the intensifying competitive
pressures in the industry.
The Company may issue long-term debt during the next three years to
finance construction activities, fund the redemption of maturing senior
securities, and depending on interest rates, refinance outstanding senior
securities.
F-72
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
Capitalization:
The Company's target capitalization ratios are designed to provide credit
quality ratings that permit capital market access at reasonable costs. The
targets and actual capitalization ratios are as follows:
Target Range 1995 1994 1993
Common equity 48-51% 49% 47% 47%
Preferred equity 8-10 10 7 7
Notes payable and
long-term debt 44-39 41 46 46
100% 100% 100% 100%
The following remaining sections of MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are being presented on a
combined basis, and are included in the GPU section of this Form 10-K.
COMPETITIVE ENVIRONMENT: See GPU page F-13.
Recent Regulatory Actions: See GPU page F-13.
Managing the Transition: See GPU pages F-16.
Nonutility Generation Agreements: See GPU page F-17.
THE GPU SUPPLY PLAN: See GPU page F-18.
New Energy Supplies: See GPU page F-19.
Managing Nonutility Generation: See GPU page F-19.
ENVIRONMENTAL ISSUES: See GPU pages F-21.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS: See GPU page F-22.
EFFECTS OF INFLATION: See GPU page F-22.
F-73
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
QUARTERLY FINANCIAL DATA (Unaudited)
In Thousands
First Quarter Second Quarter
1995 1994* 1995 1994**
Operating revenues $468,034 $486,910 $453,081 $458,897
Operating income 57,227 71,521 61,834 29,270
Net income 36,211 53,097 36,796 5,175
Earnings available
for common stock 32,512 49,398 33,210 1,476
In Thousands
Third Quarter Fourth Quarter
1995 1994 1995 1994
Operating revenues $625,479 $567,827 $489,334 $438,791
Operating income 119,457 99,304 52,702 54,183
Net income 95,447 74,573 30,635 29,996
Earnings available
for common stock 91,861 70,875 27,049 26,297
* Results for the first quarter of 1994 reflect an increase in earnings of
$7.4 million (after-tax) resulting from net interest income on refunds of
previously paid federal income taxes related to the tax retirement of
TMI-2.
** Results for the second quarter of 1994 reflect a decrease in earnings of
$30.4 million (after-tax) for costs related to early retirement programs.
F-74
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Jersey Central Power & Light Company
Morristown, New Jersey
We have audited the consolidated financial statements and financial statement
schedule of Jersey Central Power & Light Company and Subsidiary Company as
listed in the index on page F-1 of this Form 10-K. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jersey Central
Power & Light Company and Subsidiary Company as of December 31, 1995 and 1994
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
January 31, 1996
F-75
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For the Years Ended December 31, 1995 1994 1993
Operating Revenues $2,035,928 $1,952,425 $1,935,909
Operating Expenses:
Fuel 101,110 94,503 98,683
Power purchased and interchanged:
Affiliates 17,950 18,661 23,681
Others 642,858 579,948 578,131
Deferral of energy and capacity
costs, net (5,949) (19,448) 28,726
Other operation and maintenance 475,448 526,623 460,128
Depreciation and amortization 194,976 191,042 182,945
Taxes, other than income taxes 226,994 231,070 228,690
Total operating expenses 1,653,387 1,622,399 1,600,984
Operating Income Before Income Taxes 382,541 330,026 334,925
Income taxes 91,321 75,748 77,995
Operating Income 291,220 254,278 256,930
Other Income and Deductions:
Allowance for other funds
used during construction 1,803 893 2,471
Other income, net 14,889 21,995 6,281
Income taxes (5,905) (9,372) (2,847)
Total other income and deductions 10,787 13,516 5,905
Income Before Interest Charges and
Dividends on Preferred Securities 302,007 267,794 262,835
Interest Charges and Dividends
on Preferred Securities:
Interest on long-term debt 92,602 93,477 100,246
Other interest 9,709 14,726 6,530
Allowance for borrowed funds
used during construction (6,021) (3,250) (2,285)
Dividends on company-obligated
mandatorily redeemable preferred
securities 6,628 - -
Total interest charges and dividends
on preferred securities 102,918 104,953 104,491
Net Income 199,089 162,841 158,344
Preferred stock dividends 14,457 14,795 16,810
Earnings Available for Common Stock $ 184,632 $ 148,046 $ 141,534
The accompanying notes are an integral part of the consolidated financial
statements.
F-76
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
ASSETS
Utility Plant:
In service, at original cost $4,311,458 $4,119,617
Less, accumulated depreciation 1,669,893 1,499,405
Net utility plant in service 2,641,565 2,620,212
Construction work in progress 157,885 136,884
Other, net 111,023 123,349
Net utility plant 2,910,473 2,880,445
Other Property and Investments:
Nuclear decommissioning trusts 225,200 165,511
Nuclear fuel disposal fund 95,393 82,920
Other, net 7,218 6,906
Total other property and investments 327,811 255,337
Current Assets:
Cash and temporary cash investments 922 1,041
Special deposits 7,358 4,608
Accounts receivable:
Customers, net 150,002 126,760
Other 21,912 16,936
Unbilled revenues 66,389 59,288
Materials and supplies, at average cost or less:
Construction and maintenance 95,949 95,937
Fuel 18,693 18,563
Deferred energy costs 5,290 (148)
Deferred income taxes 12,142 10,454
Prepayments 20,869 45,880
Total current assets 399,526 379,319
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 138,472 138,294
Unamortized property losses 100,176 104,451
Income taxes recoverable through
future rates 134,787 132,642
Other 311,293 309,230
Total regulatory assets 684,728 684,617
Deferred income taxes 122,082 122,944
Other 20,359 13,978
Total deferred debits and other assets 827,169 821,539
Total Assets $4,464,979 $4,336,640
The accompanying notes are an integral part of the consolidated financial
statements.
F-77<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153,713 $ 153,713
Capital surplus 510,769 435,715
Retained earnings 816,770 772,240
Total common stockholder's equity 1,481,252 1,361,668
Cumulative preferred stock:
With mandatory redemption 134,000 150,000
Without mandatory redemption 37,741 37,741
Company-obligated mandatorily
redeemable preferred securities 125,000 -
Long-term debt 1,192,945 1,168,444
Total capitalization 2,970,938 2,717,853
Current Liabilities:
Securities due within one year 35,710 47,439
Notes payable 800 110,356
Obligations under capital leases 90,329 102,059
Accounts payable:
Affiliates 31,885 34,283
Other 111,225 118,369
Taxes accrued 10,516 22,561
Interest accrued 28,718 29,765
Other 75,069 75,159
Total current liabilities 384,252 539,991
Deferred Credits and Other Liabilities:
Deferred income taxes 607,188 598,843
Unamortized investment tax credits 66,874 72,928
Three Mile Island Unit 2 future costs 103,271 85,273
Nuclear Fuel Disposal Fee 121,121 114,374
Regulatory liabilities 37,597 41,732
Other 173,738 165,646
Total deferred credits and
other liabilities 1,109,789 1,078,796
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $4,464,979 $4,336,640
The accompanying notes are an integral part of the consolidated financial
statements.
F-78<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $772,240 $724,194 $644,899
Net income 199,089 162,841 158,344
Total 971,329 887,035 803,243
Cash dividends on capital stock:
Cumulative preferred stock
(at the annual rates
indicated below):
4% Series ($4.00 a share) (500) (500) (500)
8.12% Series ($8.12 a share) - - (1,015)
8% Series ($8.00 a share) - - (1,000)
7.88% Series E ($7.88 a share) (1,970) (1,970) (1,970)
8.48% Series I ($8.48 a share) (4,240) (4,240) (4,240)
8.65% Series J ($8.65 a share) (4,325) (4,325) (4,325)
7.52% Series K ($7.52 a share) (3,422) (3,760) (3,760)
Common stock (not declared on a
per share basis) (140,000) (100,000) (60,000)
Total (154,457) (114,795) (76,810)
Other adjustments, net (102) - (2,239)
Balance at end of year $ 816,770 $ 772,240 $724,194
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-79<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENT OF CAPITAL STOCK
<CAPTION>
December 31, 1995 (In Thousands)
<S> <C>
Cumulative preferred stock, without par value, 15,600,000 shares authorized
(1,815,000 shares issued and outstanding) (a), (b) & (c):
Cumulative preferred stock - no mandatory redemption:
125,000 shares, 4% Series, callable at $106.50 a share $ 12,500
250,000 shares, 7.88% Series E, callable at $103.65 a share 25,000
Premium on cumulative preferred stock 241
Total cumulative preferred stock - no mandatory redemption $ 37,741
Cumulative preferred stock - with mandatory redemption (d):
500,000 shares, 8.48% Series I $ 50,000
500,000 shares, 8.65% Series J 50,000
440,000 shares, 7.52% Series K 44,000
Subtotal 144,000
Amount due in one year (d) (10,000)
Total cumulative preferred stock - with mandatory
redemption $134,000
Common stock, par value $10 a share, 16,000,000 shares authorized,
15,371,270 shares issued and outstanding $153,713
Company-obligated mandatorily redeemable preferred securities,
8.56% Series A, $25 stated value, 5,000,000 shares authorized,
5,000,000 shares issued and outstanding (e) (f) $125,000
(a) The 7.52% and 8.65% Series are callable at various prices above their stated values
beginning in 2002 and 2000, respectively. The 7.52% Series is to be redeemed
ratably over twenty years beginning in 1998. The 8.65% Series is to be redeemed
ratably over six years beginning in 2000. The 8.48% Series is not callable and is
to be redeemed ratably over five years beginning in 1996. Each issue of cumulative
preferred stock with mandatory redemption provisions provides that the Company may,
at its option, redeem an amount of shares equal to its mandatory sinking fund
requirement at such time as the mandatory sinking fund redemption is made. No
shares of preferred stock were issued in the three years ended December 31, 1995.
(b) During 1995, the Company repurchased in the market 60,000 shares of its 7.52%
Series of cumulative preferred stock with mandatory redemption (aggregate stated
value of $6,000,000), at a total cost of $6.1 million. This resulted in a $.1
million charge to retained earnings. During 1993, the Company redeemed all of its
outstanding 8.12% Series of cumulative preferred stock (aggregate stated value of
$25 million), at a total cost of $26.1 million. Also during 1993, the Company
redeemed all of its outstanding 8% Series of cumulative preferred stock (aggregate
stated value of $25 million), at a total cost of $26.3 million. These redemptions
resulted in a net $2.2 million charge to retained earnings. No other shares of
preferred stock were redeemed in the three years ended December 31, 1995.
F-80<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENT OF CAPITAL STOCK (continued)
(c) If dividends on any of the preferred stock are in arrears for four quarters, the
holders of preferred stock, voting as a class, are entitled to elect a majority of
the board of directors until all dividends in arrears have been paid. No
redemptions of preferred stock may be made unless dividends on all preferred stock
for all past quarterly dividend periods have been paid or declared and set aside
for payment. Stated value of the Company's cumulative preferred stock is $100 per
share.
(d) The outstanding shares with mandatory redemption have aggregate redemption
requirements of $65.8 million the years 1996 through 2000 as of December 31, 1995.
(e) JCP&L Capital L.P. is a special-purpose partnership in which a subsidiary of the
Company is the sole general partner. In 1995, JCP&L Capital L.P. issued $125
million of mandatorily redeemable preferred securities (Preferred Securities). The
proceeds from the sale of the Preferred Securities were then lent to the Company
which, in turn, issued deferrable interest subordinated debentures to the
partnership. The Company is taking a tax deduction for the interest paid on the
subordinated debentures while gaining some preferred equity recognition from the
credit rating agencies for the Preferred Securities.
(f) The issued and outstanding Preferred Securities of JCP&L Capital L.P. mature in
2044 and are redeemable after May 18, 2000, at 100% of the principal amount, or
earlier under certain limited circumstances, including the loss of the tax
deduction for the interest paid on the subordinated debentures. The partnership's
sole assets are the subordinated debentures. The Company has fully and
unconditionally guaranteed payment of distributions, to the extent there is
sufficient cash on hand to permit such payments and legally available funds, and
payments on liquidation or redemption of the Preferred Securities. Distribution on
the Preferred Securities (and interest on the subordinated debentures) may be
deferred for up to 60 months, but the Company may not pay dividends or redeem or
acquire any of its preferred or common stock until deferred payments are paid in
full.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-81<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> (In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Activities:
Net income $ 199,089 $ 162,841 $ 158,344
Adjustments to reconcile income to cash provided:
Depreciation and amortization 212,609 209,823 199,201
Amortization of property under capital leases 31,963 27,876 34,333
Voluntary enhanced retirement programs - 46,862 -
Nuclear outage maintenance costs, net 16,239 (16,182) 1,323
Deferred income taxes and investment tax
credits, net (3,264) 35,426 39,139
Deferred energy and capacity costs, net (6,511) (19,166) 29,305
Accretion income (12,520) (13,541) (14,500)
Allowance for other funds used during construction (1,803) (893) (2,471)
Changes in working capital:
Receivables (35,318) 24,579 (25,579)
Materials and supplies (2,642) 1,221 10,218
Special deposits and prepayments 22,261 20,282 (24,672)
Payables and accrued liabilities (47,634) (103,485) (111,061)
Other, net (29,816) (19,537) (26,938)
Net cash provided by operating activities 342,653 356,106 266,642
Investing Activities:
Cash construction expenditures (217,805) (243,878) (197,059)
Contributions to decommissioning trusts (18,793) (17,237) (18,896)
Other, net (7,114) (15,417) (7,695)
Net cash used for investing activities (243,712) (276,532) (223,650)
Financing Activities:
Issuance of long-term debt 49,625 - 548,600
(Decrease) increase in notes payable, net (109,700) 110,500 (5,700)
Retirement of long-term debt (47,439) (60,008) (408,527)
Capital lease principal payments (26,991) (31,531) (30,011)
Redemption of preferred stock (6,049) - (52,375)
Issuance of company-obligated mandatorily
redeemable preferred securities 121,063 - -
Dividends paid on common stock (140,000) (100,000) (60,000)
Dividends paid on preferred stock (14,569) (14,795) (17,818)
Contributions from parent corporation 75,000 - -
Net cash required by financing activities (99,060) (95,834) (25,831)
Net (decrease) increase in cash and temporary
cash investments from above activities (119) (16,260) 17,161
Cash and temporary cash investments, beginning of year 1,041 17,301 140
Cash and temporary cash investments, end of year $ 922 $ 1,041 $ 17,301
Supplemental Disclosure:
Interest paid $ 106,673 $ 109,094 $ 129,868
Income taxes paid $ 93,662 $ 44,619 $ 42,605
New capital lease obligations incurred $ 18,264 $ 37,699 $ 18,919
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-82<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENT OF LONG-TERM DEBT
December 31, 1995 (In Thousands)
<CAPTION>
First Mortgage Bonds - Series as noted (a) & (b):
<S> <C> <C> <C> <C>
6 1/8% due 1996 $ 25,701 7.90% due 2007 $ 40,000
6.90% due 1997 30,000 7 1/8% due 2009 6,300
6 5/8% due 1997 25,874 7.10% due 2015 12,200
6.70% due 1997 20,000 9.20% due 2021 50,000
7 1/4% due 1998 24,191 8.55% due 2022 30,000
6.04% due 2000 40,000 8.82% due 2022 12,000
9% due 2002 50,000 8.85% due 2022 38,000
6 3/8% due 2003 150,000 8.32% due 2022 40,000
7 1/8% due 2004 160,000 7.98% due 2023 40,000
6.78% due 2005 50,000 7 1/2% due 2023 125,000
8.25% due 2006 50,000 8.45% due 2025 50,000
6 3/4% due 2025 150,000
Subtotal $ 1,219,266
Amount due within one year (a) (25,701) $1,193,565
Other long-term debt (net of $9 thousand due within one year) 3,058
Unamortized net discount on long-term debt (3,678)
Total long-term debt $1,192,945
(a) For the years 1996, 1997, 1998 and 2000 the Company has long-term debt maturities of
$25.7 million, $75.9 million, $24.2 million, and $40.0 million, respectively. The
Company has no long-term debt maturities in 1999.
(b) Substantially all of the utility plant owned by the Company is subject to the lien of its
mortgage.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-83<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Jersey Central Power & Light Company (the Company), which was
incorporated under the laws of New Jersey in 1925, is a wholly-owned
subsidiary of General Public Utilities Corporation (GPU), a holding company
registered under the Public Utility Holding Company Act of 1935. The
Company's business is the generation, transmission, distribution and sale of
electricity. The Company owns all of the common stock of JCP&L Preferred
Capital, Inc., which is the sole general partner of JCP&L Capital L.P., a
special-purpose partnership. The Company is affiliated with Metropolitan
Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec). The
Company, Met-Ed and Penelec are referred to herein as the "Company and its
affiliates." The Company is also affiliated with GPU Service Corporation
(GPUSC), a service company; GPU Nuclear Corporation (GPUN), which operates and
maintains the nuclear units of the Company and its affiliates; and Energy
Initiatives, Inc., EI Power, Inc., and EI Energy, Inc. (collectively, the "EI
Group"), which develop, own and operate generation, transmission and
distribution facilities in the United States and in foreign countries. All of
the Company's affiliates are wholly-owned subsidiaries of GPU. The Company
and its affiliates, as well as GPUSC, GPUN and the EI Group, are referred to
herein as the "GPU System."
Note 1, "Commitments and Contingencies," and Note 2, "Summary of Significant
Accounting Policies," are being presented for GPU, the Company and its
affiliates on a combined basis and are included in the GPU section of this
Form 10-K.
Note 1 - Commitments and Contingencies: See GPU page F-30.
Nuclear Facilities: See GPU page F-30.
Nuclear Plant Retirement Costs: See GPU page F-33.
Insurance: See GPU page F-38.
Competition and the Changing Regulatory
Environment: See GPU page F-38.
Environmental Matters: See GPU page F-44.
Other Commitments and Contingencies: See GPU page F-46.
Note 2 - Summary of Significant Accounting Policies:
See GPU page F-49.
F-84
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
3. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1995 and 1994, the Company had $1 million and $110
million of short-term notes outstanding, respectively, of which $33 million in
1994 was commercial paper and the remainder was issued under bank lines of
credit (credit facilities). The Company's weighted average interest rate on
short term borrowings was 6% and 6.2% at December 31, 1995 and 1994,
respectively.
GPU and the Company and its affiliates have $529 million of credit
facilities, which includes a Revolving Credit Agreement (Credit Agreement)
with a consortium of banks. The credit facilities generally provide for the
payment of a commitment fee on the unborrowed amount of 1/8 of 1% annually.
Borrowings under these credit facilities generally bear interest based on the
prime rate or money market rates. Notes issued under the Credit Agreement,
which expires November 1, 1999, are limited to $250 million in total
borrowings outstanding at any time and subject to various covenants and
acceleration under certain conditions. The Credit Agreement borrowing rates
and facility fee are dependent on the long-term debt ratings of the Company
and its affiliates.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments, as of
December 31, 1995 and 1994, are as follows:
(In Millions)
Carrying Fair
Amount Value
December 31, 1995:
Cumulative preferred stock
with mandatory redemption $ 134 $ 147
Company-obligated mandatorily
redeemable preferred securities 125 131
Long-term debt 1,193 1,261
December 31, 1994:
Cumulative preferred stock
with mandatory redemption $ 150 $ 140
Long-term debt 1,168 1,051
The fair values of the Company's financial instruments are estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for instruments of the same remaining
maturities and credit qualities.
5. INCOME TAXES
Effective January 1, 1993, the Company implemented FAS 109, "Accounting
for Income Taxes." The cumulative effect of this accounting change on net
F-85
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
income was immaterial. As of December 31, 1995 and 1994, the balance sheet
reflected $135 million and $132 million, respectively, of income taxes
recoverable through future rates (primarily related to liberalized
depreciation), and a regulatory liability for income taxes refundable through
future rates of $36 million and $40 million, respectively (related to
unamortized ITC), substantially due to the recognition of amounts not
previously recorded.
A summary of the components of deferred taxes as of December 31, 1995
and 1994 is as follows:
(In Millions)
Deferred Tax Assets Deferred Tax Liabilities
1995 1994 1995 1994
Current: Current:
Unbilled revenue $ 12 $ 10 Revenue taxes $ 16 $ 18
Deferred energy 3 -
Total $ 12 $ 10 Total $ 19 $ 18
Noncurrent: Noncurrent:
Unamortized ITC $ 36 $ 40 Liberalized
Decommissioning 26 25 depreciation:
Contribution in aid previously flowed
of construction 19 20 through $ 77 $ 86
Other 41 38 future revenue
Total $122 $123 requirements 42 46
Subtotal 119 132
Liberalized
depreciation 393 383
Forked River 11 54
Other 84 29
Total $607 $598
The reconciliations from net income to book income subject to tax and
from the federal statutory rate to combined federal and state effective tax
rates are as follows:
(In Millions)
1995 1994 1993
Net income $199 $163 $158
Income tax expense 97 85 81
Book income subject to tax $296 $248 $239
Federal statutory rate 35% 35% 35%
Other (2) (1) (1)
Effective income tax rate 33% 34% 34%
F-86
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
Federal and state income tax expense is comprised of the following:
(In Millions)
1995 1994 1993
Provisions for taxes currently payable $100 $ 50 $ 42
Deferred income taxes:
Liberalized depreciation 8 13 19
NUG buyout costs 6 - -
Gain/Loss on reacquired debt - 6 9
New Jersey revenue tax (2) 32 32
Deferral of energy costs 1 9 (8)
Abandonment loss - Forked River (4) (5) (4)
Nuclear outage maintenance costs (6) 6 -
Accretion income 5 6 6
Unbilled revenue (2) 2 5
VERP 3 (15) -
Other (6) (12) (14)
Deferred income taxes, net 3 42 45
Amortization of ITC, net ( 6) ( 7) ( 6)
Income tax expense $ 97 $ 85 $ 81
In 1994, the GPU System and the Internal Revenue Service (IRS) reached
an agreement to settle the claim for 1986 that TMI-2 has been retired for tax
purposes. The Company and its affiliates have received net refunds totaling
$17 million, of which the Company's share is $4 million, which have been
credited to their customers. Also in 1994, the GPU System received net
interest from the IRS totaling $46 million, of which the Company's share is
$11.5 million (before income taxes), associated with the refund settlement,
which was credited to income. The IRS has completed its examinations of the
GPU System's federal income tax returns through 1989. The years 1990 through
1992 are currently being audited.
6. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses
consisted of the following:
(In Millions)
1995 1994 1993
Maintenance $128 $132 $135
Other taxes:
New Jersey unit tax $209 $204 $202
Real estate and personal property 8 7 6
Other 10 20 21
Total $227 $231 $229
F-87
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
For the years 1995, 1994 and 1993, the cost to the Company of services
rendered to it by GPUSC amounted to approximately $43 million, $48 million and
$39 million, respectively, of which approximately $35 million, $37 million and
$29 million, respectively, was charged to income. For the years 1995, 1994
and 1993, the cost to the Company of services rendered to it by GPUN amounted
to approximately $186 million, $268 million and $227 million, respectively of
which approximately $148 million, $205 million and $184 million, respectively
was charged to income. For the years 1995, 1994 and 1993, the Company
purchased $23 million, $22 million and $23 million, respectively, in energy
from a cogeneration project in which an affiliate has a 50 percent partnership
interest.
7. EMPLOYEE BENEFITS
Pension Plans:
The Company maintains defined benefit pension plans covering
substantially all employees. The Company's policy is to currently fund net
pension costs within the deduction limits permitted by the Internal Revenue
Code.
A summary of the components of net periodic pension cost follows:
(In Millions)
1995 1994 1993
Service cost-benefits earned during the period $ 7.3 $ 8.8 $ 8.7
Interest cost on projected benefit obligation 32.9 29.0 29.4
Less: Expected return on plan assets (35.2) (33.3) (32.1)
Amortization (0.3) (0.5) (0.4)
Net periodic pension cost $ 4.7 $ 4.0 $ 5.6
The above 1994 amounts do not include a pre-tax charge to earnings of
$38 million resulting from the Voluntary Enhanced Retirement Programs (VERP).
The actual return on the plans' assets for the years 1995, 1994 and 1993
were gains of $101.3 million, $4.4 million and $48.0 million, respectively.
The funded status of the plans and related assumptions at December 31,
1995 and 1994 were as follows:
F-88
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
(In Millions)
1995 1994
Accumulated benefit obligation (ABO):
Vested benefits $ 359.8 $ 335.9
Nonvested benefits 30.4 34.3
Total ABO 390.2 370.2
Effect of future compensation levels 69.9 55.9
Projected benefit obligation (PBO) $ 460.1 $ 426.1
Plan assets at fair value $ 494.4 $ 403.7
PBO (460.1) (426.1)
Plan assets in excess of (less than) PBO 34.3 (22.4)
Less: Unrecognized net (gain) loss (32.2) 13.3
Unrecognized prior service cost 2.4 3.5
Unrecognized net transition asset (2.1) (2.5)
Prepaid (accrued) pension cost $ 2.4 $ (8.1)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
Annual increase in compensation levels 5.5 6.0
In 1995, changes in assumptions, primarily the decrease in the discount
rate assumption from 8% to 7.5%, resulted in a $19 million increase in the PBO
as of December 31, 1995. The assets of the plans are held in a Master Trust
and generally invested in common stocks and fixed income securities. The
unrecognized net (gain) loss represents actual experience different from that
assumed, which is deferred and not included in the determination of pension
cost until it exceeds certain levels. Both the unrecognized prior service
cost resulting from retroactive changes in benefits and the unrecognized net
transition asset arising out of the adoption of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions," are being
amortized to pension cost over the average remaining service periods for
covered employees.
Savings Plans:
The Company also maintains savings plans for substantially all employees.
These plans provide for employee contributions up to specified limits. The
Company's savings plans provide for various levels of matching contributions.
The matching contributions for the Company for 1995, 1994 and 1993 were $3.2
million, $2.4 million and $2.4 million, respectively.
Postretirement Benefits Other Than Pensions:
The Company provides certain retiree health care and life insurance
benefits for substantially all employees who reach retirement age while
working for the Company. Health care benefits are administered by various
organizations. A portion of the costs are borne by the participants.
F-89
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (FAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FAS 106 requires that the
estimated cost of these benefits, which are primarily for health care, be
accrued during the employee's active working career. The Company has elected
to amortize the unfunded transition obligation existing at January 1, 1993
over a period of 20 years. The unrecognized net loss represents actual
experience different from that assumed, which is deferred and not included in
the determination of postretirement benefit cost until it exceeds certain
levels. The unrecognized prior service cost resulting from retroactive
changes in benefits is being amortized to postretirement benefit cost over the
average remaining service periods for covered employees.
A summary of the components of the net periodic postretirement benefit
cost for 1995, 1994 and 1993 follows:
(In Millions)
1995 1994 1993
Service cost-benefits attributed to service
during the period $ 3.0 $ 3.3 $ 3.4
Interest cost on the accumulated postretirement
benefit obligation 11.2 9.4 10.4
Expected return on plan assets (2.3) (1.7)
(0.7)
Amortization of transition obligation 5.0 5.2 5.7
Other amortization, net 0.5 0.4 -
Net periodic postretirement benefit cost 17.4 16.6 18.8
Less, deferred for future recovery (4.0) (7.8)
(9.6)
Postretirement benefit cost, net of deferrals $ 13.4 $ 8.8 $ 9.2
The above 1994 amounts do not include a pre-tax charge to earnings of
$9 million relating to the VERP. The amount deferred for future recovery does
not include $5.0 million of allocated postretirement benefit costs from the
Company's affiliates for 1995.
The actual return on the plans' assets for the years 1995, 1994 and 1993
was a gain of $5.7 million, $0.6 million and $0.9 million, respectively.
The funded status of the plans at December 31, 1995 and 1994, was as
follows:
F-90
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
(In Millions)
1995 1994
Accumulated Postretirement Benefit Obligation:
Retirees $ 89.2 $ 72.0
Fully eligible active plan participants 18.9 24.7
Other active plan participants 53.4 47.1
Total accumulated postretirement
benefit obligation (APBO) $ 161.5 $ 143.8
APBO $(161.5) $(143.8)
Plan assets at fair value 39.7 26.0
APBO in excess of plan assets (121.8) (117.8)
Less: Unrecognized net loss 12.9 7.5
Unrecognized transition obligation 85.3 90.0
Accrued postretirement benefit liability $ (23.6) $ (20.3)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
The Company intends to continue funding amounts for postretirement
benefits with an independent trustee, as deemed appropriate from time to time.
The plan assets include equities and fixed income securities.
In 1995, the decrease in the health-care cost trend rate assumptions
resulted in a $13 million decrease in the APBO, which was partially offset by
an increase of $11 million in the APBO caused by the decrease in the discount
rate assumption from 8% to 7.5%. The accumulated postretirement benefits
obligation was determined by application of the terms of the medical and life
insurance plans, including the effects of established maximums on covered
costs, together with relevant actuarial assumptions and health-care cost trend
rates of 12% for those not eligible for Medicare and 9% for those eligible for
Medicare, then decreasing gradually to 6% in 2000 and thereafter. These costs
also reflect the implementation of a cost cap of 6% for individuals who retire
after December 31, 1995 and reach age 65. The effect of a 1% annual increase
in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $17 million as of December
31, 1995 and the aggregate of the service and interest cost components of net
periodic postretirement health-care cost by approximately $2 million.
In the Company's 1993 base rate proceeding, the NJBPU allowed the Company
to collect $3 million annually of the incremental postretirement benefit
costs, charged to expense, recognized as a result of FAS 106. Based on the
final order and in accordance with Emerging Issues Task Force Issue 92-12,
"Accounting for OPEB Costs by Rate-Regulated Enterprises," the Company is
deferring the amounts above that level.
F-91
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
8. JOINTLY OWNED STATIONS
Each participant in a jointly owned station finances its portion of the
investment and charges its share of operating expenses to the appropriate
expense accounts. The Company participated with affiliated and nonaffiliated
utilities in the following jointly owned stations at December 31, 1995:
Balance (In Millions)
% Accumulated
Station Ownership Investment Depreciation
Three Mile Island Unit 1 25 $214.4 $ 70.1
Keystone 16.67 91.4 21.9
Yards Creek 50 28.9 7.4
9. LEASES
The Company's capital leases consist primarily of leases for nuclear
fuel. Nuclear fuel capital leases at December 31, 1995 and 1994 totaled $88
million and $99 million, respectively (net of amortization of $127 million and
$68 million, respectively). The recording of capital leases has no effect on
net income because all leases, for ratemaking purposes, are considered
operating leases.
The Company and its affiliates have nuclear fuel lease agreements with
nonaffiliated fuel trusts. In 1995, the Company and its affiliates refinanced
the Oyster Creek and TMI-1 nuclear fuel leases to provide for aggregate
borrowings of up to $210 million ($100 million for Oyster Creek and $110
million for TMI-1) outstanding at any one time. Reductions in nuclear fuel
financing costs are expected through the new credit facilities. It is
contemplated that when consumed, portions of the presently leased material
will be replaced by additional leased material. The Company and its
affiliates are responsible for the disposal costs of nuclear fuel leased under
these agreements. These nuclear fuel leases have initial terms of three years
expiring in November 1998, and are renewable annually thereafter at the
lender's option for a period up to 20 years. Subject to certain conditions of
termination, the Company and its affiliates are required to purchase all
nuclear fuel then under lease at a price that will allow the lessor to recover
its net investment. Lease expense consists of an amount designed to amortize
the cost of the nuclear fuel as consumed plus interest costs. For the years
ended December 31, 1995, 1994 and 1993, these amounts were $35 million, $28
million and $34 million, respectively.
The Company has sold and leased back substantially all of its ownership
interest in the Merrill Creek Reservoir Project. The minimum lease payments
under this operating lease, which has a remaining term of 37 years, average
approximately $3 million annually.
F-92
<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
JERSEY CENTRAL POWER & LIGHT COMPANY
AND SUBSIDIARY COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for Doubtful
Accounts $1,359 $5,076 $2,480(a) $6,957(b) $1,958
Allowance for Inventory
Obsolescence 348 - - 151(d) 197
Year Ended December 31, 1994
Allowance for Doubtful
Accounts $1,143 $5,447 $1,972(a) $7,203(b) $1,359
Allowance for Inventory
Obsolescence - - 348(e) - 348
Year Ended December 31, 1993
Allowance for Doubtful
Accounts $1,320 $5,274 $1,748(a) $7,199(b) $1,143
Allowance for Inventory
Obsolescence 857 - 32(c) 889(d) -
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Sale of inventory previously written off.
(d) Inventory written off.
(e) Reestablishment of zero value inventory.
</TABLE>
F-93<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
COMPANY STATISTICS
<CAPTION>
For The Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Capacity at Company Peak (In MW):
Company owned................................ 1,604 1,602 1,602 1,602 1,613 1,613
Contracted................................... 492 499 676 609 677 501
Total capacity (a)....................... 2,096 2,101 2,278 2,211 2,290 2,114
Hourly Peak Load (In MW):
Summer peak.................................. 2,186 2,000 1,944 1,845 1,978 1,773
Winter peak.................................. 2,012 1,954 1,940 1,834 1,842 1,772
Reserve at Company peak (%).................. (4.1) 5.1 17.2 19.8 15.8 19.2
Load Factor (%) (b).......................... 61.4 66.6 67.2 67.6 63.2 68.3
Sources of Energy (In Thousands of MWH):
Coal......................................... 4,334 4,547 4,283 4,809 4,829 4,903
Nuclear...................................... 3,194 3,294 2,975 3,460 2,824 2,640
Gas, hydro & oil............................. 253 194 42 64 85 224
Net generation............................ 7,781 8,035 7,300 8,333 7,738 7,767
Utility purchases and interchange............ 3,087 2,295 3,398 3,319 3,477 3,343
Nonutility purchases......................... 2,066 1,654 1,623 1,333 1,135 929
Total sources of energy................... 12,934 11,984 12,321 12,985 12,350 12,039
Company use, line loss, etc.................. (856) (660) (884) (479) (982) (856)
Total electric energy sales............... 12,078 11,324 11,437 12,506 11,368 11,183
Fuel expense (In Millions):
Coal......................................... $61 $71 64 $72 $ 88 $ 85
Nuclear...................................... 20 20 16 19 19 17
Gas & oil.................................... 6 3 2 2 2 4
Total...................................... $87 $94 $82 $93 $109 $106
Power Purchased and Interchanged (In Millions):
Utility purchases and interchange............ $ 84 $ 80 $108 $105 $122 $113
Nonutility purchases......................... 131 101 95 78 66 52
Total...................................... $215 $181 $203 $183 $188 $165
Electric Energy Sales (In Thousands of MWH):
Residential.................................. 3,925 3,921 3,800 3,567 3,542 3,383
Commercial................................... 3,011 2,921 2,794 2,638 2,618 2,506
Industrial................................... 3,957 3,861 3,664 3,589 3,502 3,496
Other........................................ 209 211 284 329 320 333
Sales to customers........................ 11,102 10,914 10,542 10,123 9,982 9,718
Sales to other utilities..................... 976 410 895 2,383 1,386 1,465
Total..................................... 12,078 11,324 11,437 12,506 11,368 11,183
Operating Revenues (In Millions):
Residential.................................. $339 $327 $322 $306 $301 $271
Commercial................................... 229 215 209 201 197 177
Industrial................................... 228 215 207 213 209 193
Other........................................ 13 12 18 22 21 20
Revenues from customers................... 809 769 756 742 728 661
Sales to other utilities..................... 26 12 27 63 45 44
Total electric revenues................... 835 781 783 805 773 705
Other revenues............................... 20 20 18 17 15 15
Total..................................... $855 $801 $801 $822 $788 $720
Price per KWH (In Cents):
Residential.................................. 8.54 8.39 8.42 8.60 8.45 8.01
Commercial................................... 7.54 7.38 7.46 7.63 7.51 7.07
Industrial................................... 5.74 5.55 5.68 5.95 5.96 5.50
Total sales to customers..................... 7.23 7.07 7.16 7.34 7.27 6.80
Total sales.................................. 6.86 6.92 6.83 6.45 6.78 6.30
Kilowatt-hour Sales per Residential Customer... 9,609 9,741 9,573 9,139 9,203 8,921
Customers at Year-End (In Thousands)........... 465 458 451 445 437 431
(a) Summer ratings at December 31, 1995 of owned and contracted capacity were 1,604 MW and 767 MW, respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year to the peak load occurring during the year.
</TABLE>
F-94<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION> (In Thousands)
For the Years Ended December 31, 1995* 1994** 1993 1992 1991*** 1990
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 854,674 $ 801,303 $ 801,487 $ 821,823 $ 788,462 $ 719,387
Other operation and
maintenance expense 229,559 258,656 210,822 208,756 224,315 207,044
Net income 148,540 731 77,875 73,077 62,341 93,191
Earnings available
for common stock 147,596 (2,229) 70,915 62,788 52,052 82,902
Net utility plant
in service 1,477,030 1,437,250 1,361,409 1,290,628 1,226,436 1,152,815
Cash construction
expenditures 112,554 159,717 142,380 130,641 121,840 121,673
Total assets 2,437,165 2,236,279 2,172,543 1,811,689 1,726,388 1,619,920
Long-term debt 603,268 529,783 546,319 496,440 386,404 427,468
Long-term obligations
under capital leases 1,032 2,174 3,557 2,643 2,555 2,497
Company-obligated mandatorily
redeemable preferred securities 100,000 100,000 - - - -
Return on average
common equity 23.5% (0.4%) 12.2% 11.8% 9.4% 16.0%
* Results for 1995 reflect the reversal of $72.8 million (after-tax) of certain future TMI-2 retirement costs written off in
1994. The reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court decision that overturned a 1994 lower
court order, and restored a 1993 PaPUC order allowing for the recovery of such costs. Partially offsetting this increase
was a charge to income of $5.7 million (after-tax) of TMI-2 monitored storage costs deemed not probable of recovery through
ratemaking.
** Results for 1994 reflect a net decrease in earnings of $79.9 million (after-tax) due to a write-off of certain future TMI-2
retirement costs ($72.8 million); charges for costs related to early retirement programs ($20.1 million); and net interest
income from refunds of previously paid federal income taxes related to the tax retirement of TMI-2 ($13.0 million).
*** Results for 1991 reflect an increase in earnings of $14.9 million (after-tax) for an accounting change recognizing unbilled
revenues and a decrease in earnings of $33.5 million (after-tax) for estimated TMI-2 costs.
</TABLE>
F-95<PAGE>
Metropolitan Edison Company and Subsidiary Companies
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's 1995 earnings were $147.6 million, compared to a net loss
of $2.2 million for 1994. The increase in earnings was primarily due to the
net effect of several 1995 and 1994 nonrecurring items. The Company's return
on average common equity was 23.5% in 1995 compared to (0.4)% in 1994.
Excluding these nonrecurring items, earnings for 1995 would have been
$80.5 million, compared to 1994 earnings of $77.7 million. Return on average
common equity for 1995 and 1994, on this basis, would have been 13.4% and
11.6%, respectively. Contributing to this increase were higher customer sales
and lower operation and maintenance (O&M) expenses, partially offset by higher
depreciation and financing expenses.
The 1995 nonrecurring items consisted of a reversal of $72.8 million
(after-tax) of certain future Three Mile Island Unit 2 (TMI-2) retirement
costs written off in 1994. The reversal of this write-off resulted from a
1995 Pennsylvania Supreme Court decision that overturned a 1994 Pennsylvania
Commonwealth Court order, and restored a 1993 Pennsylvania Public Utility
Commission (PaPUC) order allowing the Company to recover its share of such
costs from customers. Partially offsetting this increase was a $5.7 million
(after-tax) charge to income for the Company's share of TMI-2 monitored
storage costs deemed not probable of recovery through ratemaking.
The 1994 nonrecurring items included the above mentioned TMI-2 write-off
of $72.8 million (after-tax). Also in 1994, there was a charge to income of
$20.1 million (after-tax) for early retirement program costs; and net interest
income of $13 million (after-tax) resulting from refunds of previously paid
federal income taxes related to the tax retirement of TMI-2.
In 1994, the Company had a net loss of $2.2 million, compared to earnings
in 1993 of $70.9 million. The 1994 earnings reduction was attributable to the
1994 nonrecurring items mentioned above. Also, in 1993 there was a write-off
of $4.8 million (after-tax) for the cancellation of proposed power supply and
transmission facilities agreements. Excluding these nonrecurring items,
earnings for 1994 would have been $77.7 million, compared to 1993 earnings of
$75.7 million.
OPERATING REVENUES:
Operating revenues increased 6.7% to $854.7 million in 1995 after
decreasing slightly to $801.3 million in 1994. The components of these
changes are as follows:
F-96
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
(In Millions)
1995 1994
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 4.8 $ 0.4
Energy revenues 46.4 (2.2)
Other revenues 2.2 1.6
Increase/(decrease) in revenues $ 53.4 $ (0.2)
Kilowatt-hour revenues
1995
The increase in KWH revenues was due to an increase in new residential
and commercial customer sales and higher industrial customer usage, partially
offset by lower weather-related sales.
1994
The increase in KWH revenues was due principally to an increase in
customer usage and an increase in new residential customer sales, partially
offset by lower sales to other utilities.
1995 MWH Customer Sales by Service Class
Residential 35%
Commercial 27%
Industrial/Other 38%
Energy revenues
1995 and 1994
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. Energy revenues in 1995 increased primarily from higher energy cost
rates and additional sales to other utilities. The 1994 decrease was due
primarily to lower electric sales to other utilities, partially offset by
higher sales to customers.
Other revenues
1995 and 1994
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
1995 and 1994
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Company's energy
adjustment clause. However, 1995 and 1994 earnings benefitted from lower
F-97
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
reserve capacity expense (which is a component of PP&I). Contributing to the
1995 increase in PP&I were higher nonutility generation (NUG) purchases and
higher interchange purchases from affiliated companies.
Fuel and Deferral of energy costs, net
1995 and 1994
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
1995
The decrease in other O&M expense was due primarily to a $35.2 million
(pre-tax) charge in 1994 related to the early retirement programs. Partially
offsetting this decrease was a 1995 write-off of $10 million (pre-tax) for
TMI-2 monitored storage costs deemed not probable of recovery through
ratemaking.
1994
The increase in other O&M expense was due primarily to a $35.2 million
(pre-tax) charge for the early retirement programs. The increase was also due
to higher emergency and winter storm repairs and the accrual of additional
payroll expense under an expanded employee incentive compensation program
designed to tie pay increases more closely to business results and enhance
productivity.
Depreciation and amortization
1995
The increase in depreciation and amortization expense was due primarily
to additions to plant in service and adjustments for TMI-2 decommissioning.
Taxes, other than income taxes
1995 and 1994
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
OTHER INCOME AND DEDUCTIONS:
Other income/(expense), net
1995 and 1994
In the third quarter of 1995, the Company reversed $127.6 million (pre-
tax) of certain future TMI-2 retirement costs written off in 1994. The
reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court
decision that overturned a 1994 Pennsylvania Commonwealth Court order, and
restored a 1993 PaPUC order allowing the Company to recover its share of such
costs from customers.
F-98
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
Also, in 1994 the Company recorded interest income of $29.8 million (pre-
tax) resulting from refunds of previously paid federal income taxes related to
the tax retirement of TMI-2.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
1995 and 1994
In 1994, the Company recognized interest expense related to the tax
retirement of TMI-2. The tax retirement of TMI-2 resulted in a $7 million
(pre-tax) charge to interest expense on additional amounts owed for tax years
in which depreciation deductions with respect to TMI-2 had been taken.
Dividends on company-obligated mandatorily redeemable preferred securities
1995 and 1994
In 1994, through a special-purpose partnership, the Company issued $100
million stated value of mandatorily redeemable preferred securities.
Preferred stock dividends
1995 and 1994
In 1994 and 1993, the Company redeemed $35 million and $81 million stated
value of preferred stock, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs:
The Company's capital needs were $154 million in 1995, consisting of cash
construction expenditures of $113 million and amounts for maturing obligations
of $41 million.
During 1995, construction expenditures were used primarily to maintain
and improve existing generation, transmission and distribution facilities, and
for various clean air compliance projects. In 1996, construction expenditures
for the Company are estimated to be $97 million, consisting primarily of
ongoing system development. Expenditures for maturing obligations will total
$15 million in 1996, and $40 million in 1997. In the late 1990s, construction
expenditures are expected to include substantial amounts for additional clean
air requirements and other Company needs. Management estimates that a
significant portion of the Company's 1996 capital needs will be satisfied
through internally generated funds.
Cash Construction Expenditures
(In millions of dollars)
1991 1992 1993 1994 1995 1996
$122 $131 $142 $160 $113 $ 97*
* Estimate
F-99
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
The Company and its affiliates' capital leases consist primarily of
leases for nuclear fuel. The Company's share of the TMI-1 nuclear fuel
capital lease at December 31, 1995 was $43 million. In 1995, the Company and
its affiliates refinanced the TMI-1 nuclear fuel lease to provide for
aggregate borrowings of up to $110 million outstanding at any one time. The
nuclear fuel lease has an initial term of three years expiring in November
1998, and is renewable annually thereafter at the lender's option for a period
up to 20 years. When consumed, portions of the presently leased material will
be replaced by additional leased material at a rate of $13 million annually.
In the event the needed nuclear fuel cannot be leased, the associated capital
requirements would have to be met by other means.
Financing:
In 1995, GPU sold five million shares of common stock. The net proceeds
of $157.5 million were used to make cash capital contributions to the GPU
System, of which the Company's share was $25 million, and to repay GPU short-
term debt.
The Company has regulatory authority to issue and sell first mortgage
bonds (FMBs), which may be issued as secured medium-term notes, and preferred
stock through December 1997. Under existing authorizations, the Company may
issue these senior securities in the amount of up to $190 million, of which
$100 million may consist of preferred stock. The Company also has regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
In 1995, the Company issued $89 million principal amount of FMBs. The
proceeds from these issuances were used to refinance $29 million principal
amount of maturing higher cost FMBs, to redeem at maturity $12 million
principal amount of FMBs, to moderate short-term debt levels and to fund
growth in capitalization.
The Company's FMB indenture and articles of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Company may issue. The Company's interest and preferred
dividend coverage ratios are currently in excess of indenture and charter
restrictions.
The Company's cost of capital and ability to obtain external financing
are affected by its security ratings, which are periodically reviewed by the
three major credit rating agencies. The Company's senior securities ratings
have remained constant since August 1994. The Company's FMBs are currently
rated at an equivalent of BBB+ or higher by the three major credit rating
agencies, while the preferred stock and mandatorily redeemable preferred
securities issues have been assigned an equivalent of BBB or higher. In
addition, the Company's commercial paper is rated as having good to very good
credit quality.
In October 1995, the Standard & Poor's (S&P) rating outlook (which is
used to assess the potential direction of an issuer's long-term debt rating
over the intermediate to longer-term) for Met-Ed was revised to "positive"
from "stable". According to S&P, this outlook reflects expectations of modest
F-100
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
financial improvement based on gradual economic growth, the successful buyout
of some expensive NUG contracts, and continued strong nuclear operations. It
also reflects the Pennsylvania Supreme Court's reversal of a lower court order
that had disallowed recovery of certain future TMI-2 retirement costs. The
S&P business position assigned to the Company remained unchanged throughout
the year at "low average". The business position is a financial benchmarking
standard for rating the debt of electric utilities to reflect the changing
risk profiles resulting primarily from the intensifying competitive pressures
in the industry.
Present plans call for the Company to issue long-term debt during the
next three years to finance construction activities, fund the redemption of
maturing senior securities, and depending on interest rates, refinance
outstanding senior securities.
Capitalization:
The Company's target capitalization ratios are designed to provide credit
quality ratings that permit capital market access at reasonable costs. The
targets and actual capitalization ratios are as follows:
Target Range 1995 1994 1993
Common equity 46-49% 47% 46% 48%
Preferred equity 8-10 9 10 5
Notes payable and
long-term debt 46-41 44 44 47
100% 100% 100% 100%
F-101
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
The following remaining sections of MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are being presented on a
combined basis, and are included in the GPU section of this Form 10-K.
COMPETITIVE ENVIRONMENT: See GPU page F-13.
Recent Regulatory Actions: See GPU page F-13.
Managing the Transition: See GPU page F-16.
Nonutility Generation Agreements: See GPU page F-17.
THE GPU SUPPLY PLAN: See GPU page F-18.
New Energy Supplies: See GPU page F-19.
Managing Nonutility Generation: See GPU page F-19.
ENVIRONMENTAL ISSUES: See GPU page F-21.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS: See GPU page F-22.
EFFECTS OF INFLATION: See GPU page F-22.
F-102
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (Unaudited)
In Thousands
First Quarter Second Quarter
1995 1994* 1995 1994**
Operating revenues $205,749 213,159 $190,342 $196,674
Operating income 31,155 39,914 28,335 8,808
Net income 16,384 37,802 12,617 (75,109)
Earnings available
for common stock 16,148 36,894 12,381 (76,017)
In Thousands
Third Quarter Fourth Quarter
1995*** 1994 1995 1994
Operating revenues $241,664 $204,903 $216,919 $186,567
Operating income 35,121 32,258 37,194 30,516
Net income 97,391 20,453 22,148 17,585
Earnings available
for common stock 97,155 19,545 21,912 17,349
* Results for the first quarter of 1994 reflect an increase in earnings of
$13.0 million (after-tax) resulting from net interest income on refunds
of previously paid federal income taxes related to the tax retirement of
TMI-2.
** Results for the second quarter of 1994 reflect the write-off of $72.8
million (after-tax) of certain future TMI-2 retirement costs; and charges
of $20.1 million (after-tax) for costs related to early retirement
programs.
*** Results for the third quarter of 1995 reflect the reversal of $72.8
million (after-tax) of certain future TMI-2 retirement costs written off
in the second quarter of 1994. The reversal of this write-off resulted
from a 1995 Pennsylvania Supreme Court decision that overturned a 1994
lower court order, and restored a 1993 PaPUC order allowing for the
recovery of such costs. Partially offsetting this increase was a charge
to income of $5.7 million (after-tax) of TMI-2 monitored storage costs
deemed not probable of recovery through ratemaking.
F-103
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Metropolitan Edison Company
Reading, Pennsylvania
We have audited the consolidated financial statements and financial statement
schedule of Metropolitan Edison Company and Subsidiary Companies as listed in
the index on page F-2 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Metropolitan
Edison Company and Subsidiary Companies as of December 31, 1995 and 1994 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
January 31, 1996
F-104
<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Revenues $854,674 $801,303 $801,487
Operating Expenses:
Fuel 87,477 94,260 82,037
Power purchased and interchanged:
Affiliates 31,411 17,834 15,298
Others 184,319 162,693 187,723
Deferral of energy costs, net (1,041) (15,518) (12,179)
Other operation and maintenance 229,559 258,656 210,822
Depreciation and amortization 99,588 86,063 86,490
Taxes, other than income taxes 54,870 51,817 53,834
Total operating expenses 686,183 655,805 624,025
Operating Income Before Income Taxes 168,491 145,498 177,462
Income taxes 36,686 34,002 49,528
Operating Income 131,805 111,496 127,934
Other Income and Deductions:
Allowance for other funds used during
construction 1,304 1,978 1,491
Other income/(expense), net 129,660 (98,953) (5,581)
Income taxes (55,364) 42,748 2,480
Total other income and deductions 75,600 (54,227) (1,610)
Income Before Interest Charges and
Dividends on Preferred Securities 207,405 57,269 126 324
Interest Charges and Dividends on Preferred Securities:
Interest on long-term debt 45,844 43,270 42,887
Other interest 5,147 11,937 6,990
Allowance for borrowed funds used during
construction (1,126) (1,869) (1,428)
Dividends on company-obligated mandatorily
redeemable preferred securities 9,000 3,200 -
Total interest charges and dividends
on preferred securities 58,865 56,538 48,449
Net Income 148,540 731 77,875
Preferred stock dividends 944 2,960 6,960
Earnings/(Loss) Available for Common Stock $147,596 $ (2,229) $ 70,915
The accompanying notes are an integral part of the consolidated financial
statements.
F-105<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
ASSETS
Utility Plant:
In service, at original cost $2,240,951 $2,137,996
Less, accumulated depreciation 763,921 700,746
Net utility plant in service 1,477,030 1,437,250
Construction work in progress 83,353 105,035
Other, net 45,587 37,275
Net utility plant 1,605,970 1,579,560
Other Property and Investments:
Nuclear decommissioning trusts 95,317 65,100
Other, net 9,899 9,567
Total other property and investments 105,216 74,667
Current Assets:
Cash and temporary cash investments 1,810 9,246
Special deposits 1,256 1,896
Accounts receivable:
Customers, net 60,739 53,421
Other 22,151 16,736
Unbilled revenues 31,509 25,112
Materials and supplies, at average cost or less:
Construction and maintenance 39,337 39,365
Fuel 9,817 16,843
Deferred income taxes 7,868 4,720
Prepayments 6,549 7,522
Total current assets 181,036 174,861
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 149,004 5,534
Income taxes recoverable through future rates 178,513 201,679
Other 112,458 41,668
Total regulatory assets 439,975 248,881
Deferred income taxes 91,356 149,892
Other 13,612 8,418
Total deferred debits and other assets 544,943 407,191
Total Assets $2,437,165 $2,236,279
The accompanying notes are an integral part of the consolidated financial
statements.
F-106<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66,273 $ 66,273
Capital surplus 370,200 341,616
Retained earnings 248,434 190,742
Total common stockholder's equity 684,907 598,631
Cumulative preferred stock 23,598 23,598
Company-obligated mandatorily
redeemable preferred securities 100,000 100,000
Long-term debt 603,268 529,783
Total capitalization 1,411,773 1,252,012
Current Liabilities:
Securities due within one year 15,019 40,517
Notes payable 22,390 -
Obligations under capital leases 43,600 33,810
Accounts payable:
Affiliates 10,559 14,571
Other 91,538 96,061
Taxes accrued 19,615 40,435
Deferred energy credits 1,417 1,950
Interest accrued 19,359 19,006
Other 40,635 21,636
Total current liabilities 264,132 267,986
Deferred Credits and Other Liabilities:
Deferred income taxes 380,135 371,841
Unamortized investment tax credits 33,387 35,470
Three Mile Island Unit 2 future costs 206,489 170,593
Nuclear fuel disposal fee 27,360 25,836
Regulatory liabilities 26,461 37,534
Other 87,428 75,007
Total deferred credits and other liabilities 761,260 716,281
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2,437,165 $2,236,279
The accompanying notes are an integral part of the consolidated financial
statements.
F-107<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
Balance at beginning of year $190,742 $229,677 $182,569
Net income 148,540 731 77,875
Total 339,282 230,408 260,444
Cash dividends on capital stock:
Cumulative preferred stock
(at the annual rates
indicated below):
3.90% Series ($3.90 a share) (459) (459) (459)
4.35% Series ($4.35 a share) (145) (145) (145)
3.85% Series ($3.85 a share) (112) (112) (112)
3.80% Series ($3.80 a share) (69) (69) (69)
4.45% Series ($4.45 a share) (159) (159) (159)
8.12% Series ($8.12 a share) - - (649)
7.68% Series G ($7.68 a share) - (2,016) (2,688)
8.32% Series H ($8.32 a share) - - (1,040)
8.12% Series I ($8.12 a share) - - (1,015)
8.32% Series J ($8.32 a share) - - (624)
Common stock (not declared on a
per share basis) (95,000) (35,000) (20,000)
Total (95,944) (37,960) (26,960)
Net unrealized gain/(loss) on investments 5,119 (489) -
Other adjustments, net (23) (1,217) (3,807)
Balance at end of year $248,434 $190,742 $229,677
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-108<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CAPITAL STOCK AND PREFERRED SECURITIES
<CAPTION>
December 31, 1995 (In Thousands)
<S> <C>
Cumulative preferred stock, no par value, 10,000,000 shares authorized, 233,912 shares
issued and outstanding (without mandatory redemption) (a):
3.90% Series, 117,729 shares outstanding, callable at $105.625 a share $ 11,773
4.35% Series, 33,249 shares outstanding, callable at $104.25 a share 3,325
3.85% Series, 29,175 shares outstanding, callable at $104.00 a share 2,917
3.80% Series, 18,122 shares outstanding, callable at $104.70 a share 1,812
4.45% Series, 35,637 shares outstanding, callable at $104.25 a share 3,564
Subtotal 23,391
Premium on cumulative preferred stock 207
Total preferred stock $ 23,598
Common stock, no par value, 900,000 shares authorized, 859,500 shares
issued and outstanding $ 66,273
Company-obligated mandatorily redeemable preferred securities, 9.00% Series A,
without par value, 5,000,000 securities authorized, 4,000,000 securities
issued and outstanding (b) (c): $100,000
(a) If dividends on any shares of preferred stock are in arrears for four quarters, the
holders of preferred stock, voting as a class, are entitled to elect a majority of the
Board of Directors until all dividends in arrears have been paid. No redemptions of
preferred stock may be made unless dividends on all preferred stock for all past
quarterly dividend periods have been paid or declared and set aside for payment. During
1994, the Company redeemed its 7.68% Series G (aggregate stated value $35 million)
cumulative preferred stock. The Company's total cost of redemption was $36 million,
which resulted in a $1.2 million charge to retained earnings. During 1993, the Company
redeemed all of its outstanding 8.12% Series, 8.32% Series H, 8.12% Series I and 8.32%
Series J of cumulative preferred stock (aggregate stated value of $81 million) at a
total cost of $85.3 million. This resulted in a net charge of $3.8 million to retained
earnings. No other shares of capital stock have been sold or redeemed during the three
years ended December 31, 1995. Stated value of the Company's cumulative preferred stock
is $100 per share.
(b) Met-Ed Capital, L.P. is a special-purpose partnership in which a subsidiary of the
Company is the sole general partner. In 1994, Met-Ed Capital, L.P. issued $100 million
of mandatorily redeemable preferred securities (Preferred Securities). The proceeds
from the sale of the Preferred Securities were then lent to the Company which, in turn,
issued deferrable interest subordinated debentures to the partnership. The Company is
taking a tax deduction for the interest paid on the subordinated debentures while
gaining some preferred equity recognition from the credit rating agencies for the
Preferred Securities.
(c) The issued and outstanding Preferred Securities of Med-Ed Capital, L.P. mature in 2043
and are redeemable after August 23, 1999, at 100% of the principal amount, or earlier
under certain limited circumstances, including the loss of the tax deduction for the
interest paid on the subordinated debentures. The partnership's sole assets are the
subordinated debentures. The Company has fully and unconditionally guaranteed payment
of distributions, to the extent there is sufficient cash on hand to permit such payments
and legally available funds, and payments on liquidation or redemption of the Preferred
Securities. Distribution on the Preferred Securities (and interest on the subordinated
debentures) may be deferred for up to 60 months, but the Company may not pay dividends
or redeem or acquire any of its preferred or common stock until deferred payments are
paid in full.
The accompanying notes are an integral part of the consolidated financial statements.
F-109<PAGE>
</TABLE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> (In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Activities:
Net income $ 148,540 $ 731 $ 77,875
Adjustments to reconcile income to cash provided:
Depreciation and amortization 84,848 80,501 77,372
Amortization of property under capital leases 13,667 14,795 13,903
Three Mile Island Unit 2 costs (118,209) 127,640 -
Voluntary enhanced retirement programs - 35,246 -
Nuclear outage maintenance costs, net (5,931) 5,895 (4,394)
Deferred income taxes and investment
tax credits, net 68,827 (53,993) 12,371
Deferred energy costs, net (1,041) (15,518) (12,179)
Accretion income - (1,114) (1,486)
Allowance for other funds used during construction (1,304) (1,978) (1,491)
Changes in working capital:
Receivables (19,130) 5,498 (3,537)
Materials and supplies 7,053 944 (3,604)
Special deposits and prepayments 1,615 (4,593) 602
Payables and accrued liabilities (10,021) 28,364 (5,989)
Other, net (36,318) 7,753 (9,114)
Net cash provided by operating activities 132,596 230,171 140,329
Investing Activities:
Cash construction expenditures (112,554) (159,717) (142,380)
Contributions to decommissioning trusts (13,485) (10,633) (46,239)
Other, net (300) 79 8,183
Net cash used for investing activities (126,339) (170,271) (180,436)
Financing Activities:
Issuance of long-term debt 87,911 49,687 268,170
Increase/(Decrease) in notes payable, net 22,390 (81,600) 69,800
Retirement of long-term debt (40,519) (26,016) (221,015)
Redemption of preferred stock - (36,595) (85,346)
Capital lease principal payments (12,531) (15,168) (12,524)
Issuance of company-obligated mandatorily
redeemable preferred securities - 96,732 -
Contributions from parent corporation 25,000 - 50,000
Dividends paid on common stock (95,000) (35,000) (20,000)
Dividends paid on preferred stock (944) (3,632) (8,624)
Net cash provided/(required) by financing
activities (13,693) (51,592) 40,461
Net increase/(decrease) in cash and temporary cash
investments from above activities (7,436) 8,308 354
Cash and temporary cash investments, beginning of year 9,246 938 584
Cash and temporary cash investments, end of year $ 1,810 $ 9,246 $ 938
Supplemental Disclosure:
Interest paid $ 57,606 $ 77,636 $ 41,372
Income taxes paid $ 47,343 $ 15,179 $ 55,539
New capital lease obligations incurred $ 22,316 $ 3,126 $ 24,780
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-110<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF LONG-TERM DEBT
December 31, 1995 (In Thousands)
<CAPTION>
First mortgage bonds - Series as noted (a)(b):
<S> <C> <C> <C> <C> <C> <C>
5 3/4% due 1996 $15,000 6.77% due 2005 $ 30,000
7.47% due 1997 20,000 7.35% due 2005 20,000
9.2% due 1997 20,000 6.36% due 2006 17,000
7.05% due 1999 30,000 6.40% due 2006 33,000
6.2% due 2000 30,000 6% due 2008 8,700
9.48% due 2000 20,000 6.1% due 2021 28,500
8.05% due 2002 30,000 8.6% due 2022 30,000
6.6% due 2003 20,000 8.8% due 2022 30,000
7.22% due 2003 40,000 6.97% due 2023 30,000
9.1% due 2003 30,000 7.65% due 2023 30,000
6.34% due 2004 40,000 8.15% due 2023 60,000
Subtotal $612,200
Amount due within one year (15,000) $597,200
Other long-term debt (net of $19 thousand due within one Year) 6,115
Unamortized net discount on long-term debt (47)
Total long-term debt $603,268
(a) Substantially all of the properties of the Company are subject to the lien of the
mortgage.
(b) For the years 1996, 1997, 1999 and 2000, the Company has long-term debt maturities of
$15.0 million, $40.0 million, $30.0 million and $50.0 million, respectively. The
Company has no long-term debt maturities in 1998.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-111<PAGE>
Metropolitan Edison Company and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Metropolitan Edison Company (the Company), a Pennsylvania corporation,
incorporated in 1922, is a wholly-owned subsidiary of General Public Utilities
Corporation (GPU), a holding company registered under the Public Utility
Holding Company Act of 1935. The Company's business is the generation,
transmission, distribution and sale of electricity. The Company owns all of
the common stock of York Haven Power Company, the owner of a small
hydroelectric generating station, and Met-Ed Preferred Capital, Inc., which is
the sole general partner of Met-Ed Capital, L.P., a special-purpose
partnership. The Company is affiliated with Jersey Central Power & Light
Company (JCP&L) and Pennsylvania Electric Company (Penelec). The Company,
JCP&L and Penelec are referred to herein as the "Company and its affiliates."
The Company is also affiliated with GPU Service Corporation (GPUSC), a service
company; GPU Nuclear Corporation (GPUN), which operates and maintains the
nuclear units of the Company and its affiliates; and Energy Initiatives, Inc.,
EI Power, Inc., and EI Energy Inc. (collectively, the "EI Group"), which
develop, own and operate generation, transmission and distribution facilities
in the United States and foreign countries. All of the Company's affiliates
are wholly-owned subsidiaries of GPU. The Company and its affiliates, as well
as GPUSC, GPUN and the EI Group, are referred to herein as the "GPU System."
Note 1, "Commitments and Contingencies," and Note 2, "Summary of Significant
Accounting Policies," are being presented for GPU, the Company and its
affiliates on a combined basis and are included in the GPU section of this
Form 10-K.
Note 1 - Commitments and Contingencies: See GPU page F-30.
Nuclear Facilities: See GPU page F-30.
Nuclear Plant Retirement Costs: See GPU page F-33.
Insurance: See GPU page F-38.
Competition and the Changing Regulatory
Environment: See GPU page F-38.
Environmental Matters: See GPU page F-44.
Other Commitments and Contingencies: See GPU page F-46.
Note 2 - Summary of Significant Accounting Policies:
See GPU page F-49.
3. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1995, the Company had $22 million of short-term notes
outstanding which was issued under bank lines of credit (credit facilities).
The Company's weighted average interest rate on short-term borrowings was 5.6%
at December 31, 1995. The Company had no short-term notes outstanding at
December 31, 1994.
F-112
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
GPU and the Company and its affiliates have $529 million of credit
facilities, which includes a Revolving Credit Agreement (Credit Agreement)
with a consortium of banks. The credit facilities generally provide for the
payment of a commitment fee on the unborrowed amount of 1/8 of 1% annually.
Borrowings under these credit facilities generally bear interest based on the
prime rate or money market rates. Notes issued under the Credit Agreement,
which expires November 1, 1999, are limited to $250 million in total
borrowings outstanding at any time and subject to various covenants and
acceleration under certain conditions. The Credit Agreement borrowing rates
and facility fee are dependent on the long-term debt ratings of the Company
and its affiliates.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments, as of
December 31, 1995 and 1994, are as follows:
(In Millions)
Carrying Fair
Amount Value
December 31, 1995:
Company-obligated mandatorily
redeemable preferred securities $100 $106
Long-term debt 603 645
December 31, 1994:
Company-obligated mandatorily
redeemable preferred securities $100 $ 98
Long-term debt 530 485
The fair values of the Company's financial instruments are estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for instruments of the same remaining
maturities and credit qualities.
5. INCOME TAXES
Effective January 1, 1993, the Company implemented FAS 109, "Accounting
for Income Taxes." The cumulative effect of this accounting change on net
income was immaterial. As of December 31, 1995 and 1994, the balance sheet
reflected $179 million and $202 million, respectively, of income taxes
recoverable through future rates (primarily related to liberalized
depreciation), and a regulatory liability for income taxes refundable through
future rates of $25 million and $30 million, respectively (related to
unamortized ITC), substantially due to the recognition of amounts not
previously recorded.
A summary of the components of deferred taxes as of December 31, 1995
and 1994 is as follows:
F-113
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
(In Millions)
Deferred Tax Assets Deferred Tax Liabilities
1995 1994 1995 1994
Noncurrent:
Current: Liberalized
Unbilled revenue $ 6 $ 3 depreciation:
Other 2 2 previously flowed
Total $ 8 $ 5 through $100 $116
future revenue
Noncurrent: requirements 76 86
Unamortized ITC $25 $ 30
Decommissioning 23 71 Subtotal 176 202
Contribution in aid Liberalized
of construction 2 2 depreciation 182 163
Other 41 47 Other 22 7
Total $91 $150 Total $380 $372
The reconciliations from net income to book income subject to tax and
from the federal statutory rate to combined federal and state effective tax
rates are as follows:
(In Millions)
1995 1994 1993
Net income $149 $ 1 $ 78
Income tax expense 92 (9) 47
Book income subject to tax $241 $ (8) $125
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 6 32 6
Amortization of ITC (1) 22 (2)
Other (2) 20 (1)
Effective income tax rate 38% 109% 38%
Federal and state income tax expense is comprised of the following:
(In Millions)
1995 1994 1993
Provisions for taxes currently payable $23 $ 45 $35
Deferred income taxes:
Liberalized depreciation 10 6 8
Deferral of energy costs - 6 4
Decommissioning 46 (52) -
VERP 8 (15) -
Unbilled revenue (4) 2 -
NUG buyout costs 8 - -
Other 3 2 3
Deferred income taxes, net 71 (51) 15
Amortization of ITC, net (2) (3) (3)
Income tax expense $92 $ (9) $47
F-114
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
In 1994, the GPU System and the Internal Revenue Service (IRS) reached
an agreement to settle the claim for 1986 that TMI-2 has been retired for tax
purposes. The Company and its affiliates have received net refunds totaling
$17 million, of which the Company's share is $9 million, which have been
credited to their customers. Also in 1994, the GPU System received net
interest from the IRS totaling $46 million, of which the Company's share is
$23 million (before income taxes), associated with the refund settlement,
which was credited to income. The IRS has completed its examinations of the
GPU System's federal income tax returns through 1989. The years 1990 through
1992 are currently being audited.
6. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses
consisted of the following:
(In Millions)
1995 1994 1993
Maintenance $54 $59 $59
Other taxes:
Pennsylvania state gross receipts $35 $32 $32
Real estate and personal property 7 6 7
Capital stock 7 7 8
Other 6 7 6
Total $55 $52 $53
For the years 1995, 1994 and 1993, the cost to the Company of services
rendered to it by GPUSC amounted to approximately $27 million, $27 million and
$23 million, respectively, of which approximately $23 million, $22 million and
$19 million, respectively, were charged to income. For the years 1995, 1994,
and 1993, the cost to the Company of services rendered to it by GPUN amounted
to approximately $81 million, $77 million and $88 million, respectively, of
which approximately $69 million, $65 million and $74 million, respectively,
were charged to income.
7. EMPLOYEE BENEFITS
Pension Plans:
The Company maintains defined benefit pension plans covering
substantially all employees. The Company's policy is to currently fund net
pension costs within the deduction limits permitted by the Internal Revenue
Code.
A summary of the components of net periodic pension cost follows:
F-115
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
(In Millions)
1995 1994 1993
Service cost-benefits earned during the period $ 4.4 $ 4.7 $ 4.9
Interest cost on projected benefit obligation 20.2 17.7 18.8
Less: Expected return on plan assets (20.3) (19.1) (19.3)
Amortization (0.1) (0.3) (0.3)
Net periodic pension cost $ 4.2 $ 3.0 $ 4.1
The above 1994 amounts do not include a pre-tax charge to earnings of
$26 million resulting from the Voluntary Enhanced Retirement Programs (VERP).
The actual return on the plans' assets for the years 1995, 1994 and 1993
were gains of $59.4 million, $2.5 million and $29.2 million, respectively.
The funded status of the plans and related assumptions at December 31,
1995 and 1994 were as follows:
(In Millions)
1995 1994
Accumulated benefit obligation (ABO):
Vested benefits $ 220.9 $ 212.4
Nonvested benefits 24.0 19.7
Total ABO 244.9 232.1
Effect of future compensation levels 42.4 30.9
Projected benefit obligation (PBO) $ 287.3 $ 263.0
Plan assets at fair value $ 293.1 $ 234.6
PBO (287.3) (263.0)
Plan assets in excess of (less than) PBO 5.8 (28.4)
Less: Unrecognized net (gain) loss (7.6) 15.9
Unrecognized prior service cost 3.5 2.3
Unrecognized net transition asset (1.3) (1.4)
Prepaid (accrued) pension cost $ 0.4 $ (11.6)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
Annual increase in compensation levels 5.5 6.0
In 1995, changes in assumptions, primarily the decrease in the discount
rate assumption from 8% to 7.5%, resulted in a $12 million increase in the PBO
as of December 31, 1995. The assets of the plans are held in a Master Trust
and generally invested in common stocks and fixed income securities. The
unrecognized net (gain) loss represents actual experience different from that
assumed, which is deferred and not included in the determination of pension
cost until it exceeds certain levels. Both the unrecognized prior service
cost resulting from retroactive changes in benefits and the unrecognized net
transition asset arising out of the adoption of Statement of Financial
F-116
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
Accounting Standards No. 87, "Employers' Accounting for Pensions," are being
amortized to pension cost over the average remaining service periods for
covered employees.
Savings Plans:
The Company also maintains savings plans for substantially all employees.
These plans provide for employee contributions up to specified limits. The
Company's savings plans provide for various levels of matching contributions.
The matching contributions for the Company for 1995, 1994 and 1993 were $2.7
million, $2.2 million and $1.8 million, respectively.
Postretirement Benefits Other Than Pensions:
The Company provides certain retiree health care and life insurance
benefits for substantially all employees who reach retirement age while
working for the Company. Health care benefits are administered by various
organizations. A portion of the costs are borne by the participants.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (FAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FAS 106 requires that the
estimated cost of these benefits, which are primarily for health care, be
accrued during the employee's active working career. The Company has elected
to amortize the unfunded transition obligation existing at January 1, 1993
over a period of 20 years. The unrecognized net loss represents actual
experience different from that assumed, which is deferred and not included in
the determination of postretirement benefit cost until it exceeds certain
levels. The unrecognized prior service cost resulting from retroactive
changes in benefits is being amortized to postretirement benefit cost over the
average remaining service periods for covered employees.
A summary of the components of the net periodic postretirement benefit
cost for 1995, 1994 and 1993 follows:
(In Millions)
1995 1994 1993
Service cost-benefits attributed to service
during the period $ 2.0 $ 2.3 $ 2.2
Interest cost on the accumulated postretirement
benefit obligation 8.3 7.1 7.4
Expected return on plan assets (1.4) (1.2) (0.7)
Amortization of transition obligation 3.4 3.4 3.9
Other amortization, net 0.3 0.5 -
Net periodic postretirement benefit cost 12.6 12.1 12.8
Less, deferred for future recovery (5.6) (8.3) (7.8)
Postretirement benefit cost, net of deferrals $ 7.0 $ 3.8 $ 5.0
The above 1994 amounts do not include a pre-tax charge to earnings of
$9 million relating to the VERP. The amount deferred for future recovery does
not include $1.8 million of allocated postretirement benefit costs from the
Company's affiliates for 1995.
F-117
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
The actual return on the plans' assets for the years 1995, 1994 and 1993
was a gain of $3.3 million, $0.4 million and $0.7 million, respectively.
The funded status of the plans at December 31, 1995 and 1994, was as
follows:
(In Millions)
1995 1994
Accumulated Postretirement Benefit Obligation:
Retirees $ 80.2 $ 65.0
Fully eligible active plan participants 3.5 11.3
Other active plan participants 39.2 30.9
Total accumulated postretirement
benefit obligation (APBO) $ 122.9 $ 107.2
APBO $(122.9) $(107.2)
Plan assets at fair value 21.9 14.1
APBO in excess of plan assets (101.0) ( 93.1)
Less: Unrecognized net loss 17.7 11.7
Unrecognized transition obligation 57.4 59.6
Accrued postretirement benefit liability $ (25.9) $ (21.8)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
The Company intends to continue funding amounts for postretirement
benefits with an independent trustee, as deemed appropriate from time to time.
The plan assets include equities and fixed income securities.
In 1995, the decrease in the health-care cost trend rate assumptions
resulted in a $9 million decrease in the APBO, which was partially offset by
an increase of $8 million in the APBO caused by the decrease in the discount
rate assumption from 8% to 7.5%. The accumulated postretirement benefits
obligation was determined by application of the terms of the medical and life
insurance plans, including the effects of established maximums on covered
costs, together with relevant actuarial assumptions and health-care cost trend
rates of 12% for those not eligible for Medicare and 9% for those eligible for
Medicare, then decreasing gradually to 6% in 2000 and thereafter. These costs
also reflect the implementation of a cost cap of 6% for individuals who retire
after December 31, 1995 and reach age 65. The effect of a 1% annual increase
in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $12 million as of December
31, 1995 and the aggregate of the service and interest cost components of net
periodic postretirement health-care cost by approximately $1 million.
The Company is deferring the incremental postretirement benefit costs,
charged to expense, associated with the adoption of FAS 106 and in accordance
with Emerging Issues Task Force Issue 92-12, "Accounting for OPEB Costs by
Rate-Regulated Enterprises," as authorized by the PaPUC in its 1993 base rate
order.
F-118
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
8. JOINTLY OWNED STATIONS
Each participant in a jointly owned station finances its portion of the
investment and charges its share of operating expenses to the appropriate
expense accounts. The Company participated with affiliated and nonaffiliated
utilities in the following jointly owned stations at December 31, 1995:
Balance (In Millions)
% Accumulated
Station Ownership Investment Depreciation
Conemaugh 16.45 $144.3 $ 34.3
Three Mile Island Unit 1 50 425.8 150.5
9. LEASES
The Company's capital leases consist primarily of leases for nuclear
fuel. Nuclear fuel capital leases at December 31, 1995 and 1994 totaled
$43 million and $33 million, respectively (net of amortization of $41 million
and $29 million, respectively). The recording of capital leases has no effect
on net income because all leases, for ratemaking purposes, are considered
operating leases.
The Company and its affiliates have nuclear fuel lease agreements with
nonaffiliated fuel trusts. In 1995, the Company and its affiliates refinanced
the Oyster Creek and TMI-1 nuclear fuel leases to provide for aggregate
borrowings of up to $210 million ($100 million for Oyster Creek and $110
million for TMI-1) outstanding at any one time. Reductions in nuclear fuel
financing costs are expected through the new credit facilities. It is
contemplated that when consumed, portions of the presently leased material
will be replaced by additional leased material. The Company and its
affiliates are responsible for the disposal costs of nuclear fuel leased under
these agreements. These nuclear fuel leases have initial terms of three years
expiring in November 1998, and are renewable annually thereafter at the
lender's option for a period up to 20 years. Subject to certain conditions of
termination, the Company and its affiliates are required to purchase all
nuclear fuel then under lease at a price that will allow the lessor to recover
its net investment. Lease expense consists of an amount designed to amortize
the cost of the nuclear fuel as consumed plus interest costs. For the years
ended December 31, 1995, 1994 and 1993, these amounts were $15 million, $15
million and $25 million, respectively.
The Company has sold and leased back substantially all of its ownership
interest in the Merrill Creek Reservoir Project. The minimum lease payments
under this operating lease, which has a remaining term of 37 years, average
approximately $3 million annually.
F-119
<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
METROPOLITAN EDISON COMPANY
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Allowance for Doubtful
Accounts $4,889 $3,040 $1,793(a) $6,650(b) $3,072
Allowance for Inventory
Obsolescence 4,575 - - 1,399(d) 3,176
Year Ended December 31, 1994
Allowance for Doubtful
Accounts $4,889 $5,525 $1,573(a) $7,098(b) $4,889
Allowance for Inventory
Obsolescence 5,681 - 466(c) 1,572(d) 4,575
Year Ended December 31, 1993
Allowance for Doubtful
Accounts $4,889 $5,260 $1,308(a) $6,568(b) $4,889
Allowance for Inventory
Obsolescence 5,946 80 24(c) 369(d) 5,681
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Sale of inventory previously written off.
(d) Inventory written off.
</TABLE>
F-120<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
COMPANY STATISTICS
<CAPTION>
For The Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Capacity at Company Peak (In MW):
Company owned............................... 2,365 2,369 2,369 2,371 2,512 2,512
Contracted.................................. 868 778 636 418 224 199
Total capacity (a)........................ 3,233 3,147 3,005 2,789 2,736 2,711
Hourly Peak Load (In MW):
Summer peak................................. 2,495 2,309 2,208 2,140 2,153 2,078
Winter peak................................. 2,589 2,514 2,342 2,355 2,325 2,282
Reserve at Company peak (%)................. 24.9 25.2 28.3 18.4 17.7 18.8
Load factor (%) (b)......................... 67.6 69.4 70.5 69.3 70.6 71.4
Sources of Energy (In Thousands of MWH):
Coal........................................ 11,237 10,263 10,703 11,329 11,187 12,001
Nuclear..................................... 1,597 1,647 1,488 1,730 1,412 1,320
Gas, hydro & oil............................ (95) 120 73 75 36 105
Net generation........................... 12,739 12,030 12,264 13,134 12,635 13,426
Utility purchases and interchange........... 3,071 2,468 2,219 2,723 2,197 2,134
Nonutility purchases........................ 2,796 2,236 1,940 1,463 1,220 328
Total sources of energy.................. 18,606 16,734 16,423 17,320 16,052 15,888
Company use, line loss, etc................. (2,751) (2,248) (2,256) (2,289) (1,992) (2,065)
Total electric energy sales.............. 15,855 14,486 14,167 15,031 14,060 13,823
Fuel expense (In Millions):
Coal........................................ $164 $163 $174 $168 $169 $189
Nuclear..................................... 10 10 8 9 9 9
Gas & oil................................... 1 2 1 1 1 1
Total..................................... $175 $175 $183 $178 $179 $199
Power Purchased and Interchanged (In Millions):
Utility purchases and interchange........... $ 43 $ 35 $ 31 $ 51 $ 45 $ 52
Nonutility purchases........................ 158 123 104 77 61 17
Total..................................... $201 $158 $135 $128 $106 $ 69
Electric Energy Sales (In Thousands of MWH):
Residential................................. 3,765 3,773 3,715 3,590 3,553 3,489
Commercial.................................. 3,922 3,794 3,651 3,488 3,475 3,150
Industrial.................................. 4,463 4,449 4,346 4,589 4,718 5,058
Other....................................... 857 958 568 585 666 524
Sales to customers....................... 13,007 12,974 12,280 12,252 12,412 12,221
Sales to other utilities.................... 2,848 1,512 1,887 2,779 1,648 1,602
Total.................................... 15,855 14,486 14,167 15,031 14,060 13,823
Operating Revenues (In Millions):
Residential................................. $322 $321 $308 $298 $290 $274
Commercial.................................. 287 279 261 248 244 215
Industrial.................................. 237 237 227 233 236 236
Other....................................... 39 45 31 27 32 29
Revenues from customers.................. 885 882 827 806 802 754
Sales to other utilities.................... 68 36 52 62 43 43
Total electric revenues.................. 953 918 879 868 845 797
Other revenues.............................. 28 27 29 28 21 21
Total.................................... $981 $945 $908 $896 $866 $818
Price per KWH (In Cents):
Residential................................. 8.52 8.51 8.30 8.27 8.16 7.86
Commercial.................................. 7.29 7.34 7.17 7.11 7.01 6.83
Industrial.................................. 5.33 5.32 5.24 5.08 4.99 4.66
Total sales to customers.................... 6.79 6.80 6.74 6.58 6.46 6.17
Total Sales................................. 6.00 6.34 6.21 5.77 6.00 5.77
Kilowatt-hour Sales per Residential Customer.. 7,620 7,678 7,607 7,393 7,369 7,278
Customers at Year-End (In Thousands).......... 571 567 563 559 555 551
(a) Winter ratings at December 31, 1995 of owned and contracted capacity were 2,365 MW and 868 MW,
respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year to the peak load occurring
during the year.
F-121
</TABLE>
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1995* 1994** 1993 1992 1991*** 1990
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 981,329 $ 944,744 $ 908,280 $ 896,337 $ 865,552 $ 817,923
Other operation and
maintenance expense 266,347 294,316 241,252 226,179 234,648 230,461
Net income 111,010 31,799 95,728 99,744 106,595 108,712
Earnings available
for common stock 109,466 28,862 90,741 94,080 100,406 99,898
Net utility plant
in service 1,692,850 1,621,818 1,542,276 1,473,293 1,419,726 1,392,332
Cash construction
expenditures 130,512 174,464 150,252 110,629 101,328 97,578
Total assets 2,473,570 2,381,054 2,301,340 1,892,715 1,862,249 1,801,522
Long-term debt 642,487 616,490 524,491 582,647 542,392 536,402
Long-term obligations
under capital leases 5,277 6,741 7,745 7,691 8,260 7,724
Company-obligated mandatorily
redeemable preferred securities 105,000 105,000 - - - -
Return on average
common equity 15.8% 4.2% 13.5% 14.5% 15.1% 16.4%
* Results for 1995 reflect the reversal of $32.1 million (after-tax) of certain future TMI-2 retirement costs
written off in 1994. The reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court decision
that overturned a 1994 lower court order, and restored a 1993 PaPUC order allowing for the recovery of such
costs. Partially offsetting this increase was a charge to income of $2.7 million (after-tax) of TMI-2
monitored storage costs deemed not probably of recovery through ratemaking.
** Results for 1994 reflect a net decrease in earnings of $61.8 million (after-tax) due to a write-off of
certain future TMI-2 retirement costs ($32.1 million); charges for costs related to early retirement
programs ($25.6 million); a write-off of postretirement benefit costs believed not probable of recovery
in rates ($10.6 million); and net interest income from refunds of previously paid federal income taxes
related to the tax retirement of TMI-2 ($6.5 million).
*** Results for 1991 reflect an increase in earnings of $16.2 million (after-tax) for an accounting change
recognizing unbilled revenues and a decrease in earnings of $16.8 million (after-tax) for estimated TMI-2
costs.
</TABLE>
F-122
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's 1995 earnings were $109.5 million, compared to 1994
earnings of $28.9 million. The increase in earnings was primarily due to the
net effect of several 1995 and 1994 nonrecurring items. The Company's return
on average common equity was 15.8% in 1995 compared to 4.2% in 1994.
Excluding these nonrecurring items, earnings for 1995 would have been
$80.1 million, compared to 1994 earnings of $90.7 million. Return on average
common equity for 1995 and 1994, on this basis, would have been 11.8% and
12.5%, respectively. Contributing to this earnings decrease were higher other
operation and maintenance (O&M) expenses and increased financing expenses.
The 1995 nonrecurring items consisted of a reversal of $32.1 million
(after-tax) of certain future Three Mile Island Unit 2 (TMI-2) retirement
costs written off in 1994. The reversal of this write-off resulted from a
1995 Pennsylvania Supreme Court decision that overturned a 1994 Pennsylvania
Commonwealth Court order, and restored a 1993 Pennsylvania Public Utility
Commission (PaPUC) order allowing an affiliate (Met-Ed) to recover its share
of such costs from customers. Partially offsetting this increase was a $2.7
million (after-tax) charge to income for the Company's share of TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
The 1994 nonrecurring items included the above mentioned TMI-2 write-off
of $32.1 million (after-tax). Also in 1994, there was a charge to income of
$25.6 million (after-tax) for early retirement program costs; a write-off of
$10.6 million (after-tax) for certain postretirement benefit (OPEB) costs; and
net interest income of $6.5 million (after-tax) resulting from refunds of
previously paid federal income taxes related to the tax retirement of TMI-2.
Earnings in 1994 were $28.9 million, compared to earnings in 1993 of
$90.7 million. This earnings reduction was attributable to the 1994
nonrecurring items mentioned above and increased other O&M expenses. Also, in
1993 there was a write-off of $4.4 million (after-tax) for the cancellation of
proposed power supply and transmission facilities agreements.
OPERATING REVENUES:
Operating revenues increased 3.9% to $981.3 million in 1995 after
increasing 4.0% to $944.7 million in 1994. The components of these changes
are as follows:
F-123
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
(In Millions)
1995 1994
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 1.7 $ 1.6
Energy revenues 32.3 39.7
Other revenues 2.6 (4.9)
Increase in revenues $ 36.6 $ 36.4
Kilowatt-hour revenues
1995
The increase in KWH revenues was due to increases in new commercial and
residential customer sales.
1994
The increase in KWH revenues was due principally to increases in new
commercial and wholesale customer sales, and higher usage by wholesale
customers. In 1993, the Company successfully negotiated power supply
agreements at lower rates with some wholesale customers previously served by
the Company's affiliates. This was in response to offers made by other
utilities seeking to provide electric service to these customers. These
increases were mostly offset by decreased industrial customer usage and
decreased capacity sales to affiliated companies.
1995 MWH Customer Sales by Service Class
Residential 29%
Commercial 30%
Industrial 34%
Other 7%
Energy revenues
1995 and 1994
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. Energy revenues in 1995 increased from additional sales to other
utilities and higher energy cost rates. The 1994 increase was due primarily
to higher energy cost rates and the reclassification in 1993 of certain
transmission service revenues.
Other revenues
1995 and 1994
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
F-124
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
OPERATING EXPENSES:
Power purchased and interchanged
1995 and 1994
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Company's energy
adjustment clause. The increase in PP&I expense was due largely to higher
nonutility generation purchases.
Fuel and Deferral of energy costs, net
1995 and 1994
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
1995
The decrease in other O&M expense was due to a $44.9 million (pre-tax)
charge in 1994 related to the early retirement programs. Partially offsetting
this decrease were a 1995 write-off of $4.7 million (pre-tax) for TMI-2
monitored storage costs deemed not probable of recovery through ratemaking and
severance payments in 1995 resulting from the management combination of the
Company and Met-Ed.
1994
The increase in other O&M expense was due primarily to a $44.9 million
(pre-tax) charge for the early retirement programs. The increase was also due
to higher emergency and winter storm repairs and the accrual of additional
payroll expense under an expanded employee incentive compensation program
designed to tie pay increases more closely to business results and enhance
productivity.
Depreciation and amortization
1995
The increase in depreciation and amortization expense was due primarily
to additions to plant in service.
1994
The decrease in depreciation and amortization expense was due largely to
lower TMI-2 amortization and the recognition in 1993 of TMI-2 nonradiological
retirement costs. The lower TMI-2 amortization was attributable to the
Company completing, in 1993, its recovery of the TMI-2 investment from retail
customers.
F-125
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
Taxes, other than income taxes
1995 and 1994
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
OTHER INCOME AND DEDUCTIONS:
Other income/(expense), net
1995 and 1994
In the third quarter of 1995, the Company reversed $56.3 million (pre-
tax) of certain future TMI-2 retirement costs written off in 1994. The
reversal of this write-off resulted from a 1995 Pennsylvania Supreme Court
decision that overturned a 1994 Pennsylvania Commonwealth Court order, and
restored a 1993 PaPUC order allowing Met-Ed to recover its share of such costs
from customers.
In 1994, the Company expensed $18.6 million (pre-tax) for certain OPEB
costs believed not probable of recovery in rates. Of this amount, $14.6
million was written off as a result of a PaPUC order disallowing a
nonaffiliated utility to collect such costs, and $4 million was charged to
expense for OPEB costs related to employees who participated in the early
retirement programs. Also, the Company recorded interest income of $14.9
million (pre-tax) resulting from refunds of previously paid federal income
taxes related to the tax retirement of TMI-2.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
1995 and 1994
In 1994, the Company recognized interest expense related to the tax
retirement of TMI-2. The tax retirement of TMI-2 resulted in a $3.5 million
(pre-tax) charge to interest expense on additional amounts owed for tax years
in which depreciation deductions with respect to TMI-2 had been taken. Also
contributing to the 1995 increase were higher average short-term debt levels
and increased interest rates.
Dividends on company-obligated mandatorily redeemable preferred securities
1995 and 1994
In 1994, through a special-purpose partnership, the Company issued $105
million stated value of mandatorily redeemable preferred securities.
Preferred stock dividends
1995 and 1994
In 1994 and 1993, the Company redeemed in each year $25 million stated
value of preferred stock.
F-126
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs:
The Company's capital needs were $131 million in 1995, consisting of cash
construction expenditures. During 1995, construction expenditures were used
primarily to maintain and improve existing generation, transmission and
distribution facilities, and for various clean air compliance projects. In
1996, construction expenditures for the Company are estimated to be $124
million, consisting primarily of $117 million for ongoing system development.
Expenditures for maturing obligations will total $75 million in 1996, and $26
million in 1997. In the late 1990s, construction expenditures are expected to
include substantial amounts for additional clean air requirements and other
Company needs. Management estimates that approximately three-fourths of the
Company's 1996 capital needs will be satisfied through internally generated
funds.
Cash Construction Expenditures
(In millions of dollars)
1991 1992 1993 1994 1995 1996
$101 $111 $150 $174 $131 $124*
* Estimate
The Company and its affiliates' capital leases consist primarily of
leases for nuclear fuel. The Company's share of the TMI-1 nuclear fuel
capital lease at December 31, 1995 was $21 million. In 1995, the Company and
its affiliates refinanced the TMI-1 nuclear fuel lease to provide for
aggregate borrowings of up to $110 million outstanding at any one time. The
nuclear fuel lease has an initial term of three years expiring in November
1998, and is renewable annually thereafter at the lender's option for a period
up to 20 years. When consumed, portions of the presently leased material will
be replaced by additional leased material at a rate of $7 million annually.
In the event the needed nuclear fuel cannot be leased, the associated capital
requirements would have to be met by other means.
Financing:
In 1995, GPU sold five million shares of common stock. The net proceeds
of $157.5 million were used to make cash capital contributions to the GPU
System, of which the Company's share was $20 million, and to repay GPU short-
term debt.
The Company has regulatory authority to issue and sell first mortgage
bonds (FMBs), which may be issued as secured medium-term notes, and preferred
stock through June 1997. Under existing authorizations, the Company may issue
these senior securities in the amount of up to $160 million, of which $100
million may consist of preferred stock. The Company also has regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
In 1995, the Company issued $199 million principal amount of FMBs. The
proceeds from these issuances were used to refinance $99 million principal
F-127
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
amount of higher cost FMBs, to moderate short-term debt levels and to fund
growth in capitalization.
The Company's FMB indenture and articles of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Company may issue. The Company's interest and preferred
dividend coverage ratios are currently in excess of indenture and charter
restrictions.
The Company's cost of capital and ability to obtain external financing
are affected by its security ratings, which are periodically reviewed by the
three major credit rating agencies. The Company's senior securities ratings
have remained constant since August 1994. The Company's FMBs are currently
rated at an equivalent A- or higher by the three major credit rating agencies,
while the preferred stock and mandatorily redeemable preferred securities
issues have been assigned an equivalent of BBB+ or higher. In addition, the
Company's commercial paper is rated as having good to high credit quality.
The Standard & Poor's (S&P) rating outlook for the Company has remained
at "stable" and reflects a manageable construction program, minimal rate
relief requirements and expectations of modest strengthening in the service
area economy. The rating outlook is used to assess the potential direction of
an issuer's long-term debt rating over the intermediate to longer-term. The
S&P business position assigned to the Company remained unchanged throughout
the year at "average". The business position is a financial benchmarking
standard for rating the debt of electric utilities to reflect the changing
risk profiles resulting primarily from the intensifying competitive pressures
in the industry.
Present plans call for the Company to issue long-term debt during the
next three years to finance construction activities, fund the redemption of
maturing senior securities, and depending on interest rates, refinance
outstanding senior securities.
Capitalization:
The Company's target capitalization ratios are designed to provide credit
quality ratings that permit capital market access at reasonable costs. The
targets and actual capitalization ratios are as follows:
Target Range 1995 1994 1993
Common equity 45-48% 45% 43% 48%
Preferred equity 8-10 9 9 4
Notes payable and
long-term debt 47-42 46 48 48
100% 100% 100% 100%
F-128
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
The following remaining sections of MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS are being presented on a
combined basis, and are included in the GPU section of this Form 10-K.
COMPETITIVE ENVIRONMENT: See GPU page F-13.
Recent Regulatory Actions: See GPU page F-13.
Managing the Transition: See GPU page F-16.
Nonutility Generation Agreements: See GPU page F-17.
THE GPU SUPPLY PLAN See GPU page F-18.
New Energy Supplies: See GPU page F-19.
Managing Nonutility Generation: See GPU page F-19.
ENVIRONMENTAL ISSUES See GPU page F-21.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS See GPU page F-22.
EFFECTS OF INFLATION See GPU page F-22.
F-129
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (Unaudited)
In Thousands
First Quarter Second Quarter
1995 1994* 1995 1994**
Operating revenues $253,412 $247,180 $238,451 $227,122
Operating income 46,110 46,017 37,218 8,749
Net income 30,566 38,965 20,276 (46,671)
Earnings available
for common stock 30,180 38,057 19,890 (47,580)
In Thousands
Third Quarter Fourth Quarter
1995*** 1994 1995 1994
Operating revenues $249,234 $240,267 $240,232 $230,175
Operating income 30,911 38,238 27,822 33,228
Net income 50,015 24,351 10,153 15,154
Earnings available
for common stock 49,629 23,617 9,767 14,768
* Results for the first quarter of 1994 reflect an increase in earnings of
$6.5 million (after-tax) resulting from net interest income on refunds of
previously paid federal income taxes related to the tax retirement of
TMI-2.
** Results for the second quarter of 1994 reflect the write-off of $32.1
million (after-tax) of certain future TMI-2 retirement costs; charges of
$25.6 million (after-tax) for costs related to early retirement programs;
and a write-off $10.6 million (after-tax) for postretirement benefit
costs believed not probable of recovery in rates.
*** Results for the third quarter of 1995 reflect the reversal of
$32.1 million (after-tax) of certain future TMI-2 retirement costs
written off in the second quarter of 1994. The reversal of this write-
off resulted from a 1995 Pennsylvania Supreme Court decision that
overturned a 1994 lower court order, and restored a 1993 PaPUC order
allowing for the recovery of such costs. Partially offsetting this
increase was a charge to income of $2.7 million (after-tax) of TMI-2
monitored storage costs deemed not probable of recovery through
ratemaking.
F-130
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Pennsylvania Electric Company
Reading, Pennsylvania
We have audited the consolidated financial statements and financial statement
schedule of Pennsylvania Electric Company and Subsidiary Companies as listed
in the index on page F-2 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pennsylvania
Electric Company and Subsidiary Companies as of December 31, 1995 and 1994 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
January 31, 1996
F-131
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION> (In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Revenues $981,329 $944,744 $908,280
Operating Expenses:
Fuel 174,624 175,071 182,923
Power purchased and interchanged:
Affiliates 5,927 6,310 3,606
Others 195,184 151,919 131,791
Deferral of energy costs, net 1,088 5,941 (23,145)
Other operation and maintenance 266,347 294,316 241,252
Depreciation and amortization 83,086 76,600 90,463
Taxes, other than income taxes 67,064 66,058 61,697
Total operating expenses 793,320 776,215 688,587
Operating Income Before Income Taxes 188,009 168,529 219,693
Income taxes 45,948 42,297 72,656
Operating Income 142,061 126,232 147,037
Other Income and Deductions:
Allowance for other funds used during
construction 2,006 1,841 869
Other income/(expense), net 56,454 (71,287) (7,021)
Income taxes (24,431) 31,369 3,420
Total other income and deductions 34,029 (38,077) (2,732)
Income Before Interest Charges and Dividends
on Preferred Securities 176,090 88,155 144,305
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 49,875 46,439 44,714
Other interest 8,428 7,421 5,255
Allowance for borrowed funds used during
construction (2,411) (1,996) (1,392)
Dividends on company-obligated mandatorily
redeemable preferred securities 9,188 4,492 -
Total interest charges and dividends
on preferred securities 65,080 56,356 48,577
Net Income 111,010 31,799 95,728
Preferred stock dividends 1,544 2,937 4,987
Earnings Available for Common Stock $109,466 $ 28,862 $ 90,741
The accompanying notes are an integral part of the consolidated financial
statements.
F-132
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
ASSETS
Utility Plant:
In service, at original cost $2,667,842 $2,549,316
Less, accumulated depreciation 974,992 927,498
Net utility plant in service 1,692,850 1,621,818
Construction work in progress 72,233 98,329
Other, net 30,876 27,717
Net utility plant 1,795,959 1,747,864
Other Property and Investments:
Nuclear decommissioning trusts 42,440 29,871
Other, net 6,545 4,596
Total other property and investments 48,985 34,467
Current Assets:
Cash and temporary cash investments 1,367 1,191
Special deposits 2,718 3,242
Accounts receivable:
Customers, net 67,454 68,547
Other 29,033 21,897
Unbilled revenues 30,851 29,181
Materials and supplies, at average cost or less:
Construction and maintenance 53,237 49,342
Fuel 11,285 20,092
Deferred energy costs 9,335 10,826
Deferred income taxes 4,602 3,157
Prepayments 10,328 4,726
Total current assets 220,210 212,201
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 81,236 13,214
Income taxes recoverable through future rates 214,284 227,177
Other 19,485 23,752
Total regulatory assets 315,005 264,143
Deferred income taxes 78,754 114,231
Other 14,657 8,148
Total deferred debits and other assets 408,416 386,522
Total Assets $2,473,570 $2,381,054
The accompanying notes are an integral part of the consolidated financial
statements.
F-133<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1995 1994
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105,812 $ 105,812
Capital surplus 285,486 261,671
Retained earnings 327,814 290,786
Total common stockholder's equity 719,112 658,269
Cumulative preferred stock 36,777 36,777
Company-obligated mandatorily redeemable
preferred securities 105,000 105,000
Long-term debt 642,487 616,490
Total capitalization 1,503,376 1,416,536
Current Liabilities:
Securities due within one year 75,009 9
Notes payable 27,100 111,052
Obligations under capital leases 22,751 17,957
Accounts payable:
Affiliates 13,806 10,668
Others 66,687 62,642
Taxes accrued 16,019 13,347
Interest accrued 19,567 16,356
Vacations accrued 9,976 12,004
Other 19,448 13,311
Total current liabilities 270,363 257,346
Deferred Credits and Other Liabilities:
Deferred income taxes 462,354 454,026
Unamortized investment tax credits 45,114 47,864
Three Mile Island Unit 2 future costs 103,271 85,273
Nuclear fuel disposal fee 13,680 12,918
Regulatory liabilities 33,941 42,878
Other 41,471 64,213
Total deferred credits and other liabilities 699,831 707,172
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2,473,570 $2,381,054
The accompanying notes are an integral part of the consolidated financial
statements.
F-134<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
Balance at beginning of year $290,786 $328,290 $278,482
Net income 111,010 31,799 95,728
Total 401,796 360,089 374,210
Cash dividends on capital stock:
Cumulative preferred stock (at the
annual rates indicated below):
4.40% Series B ($ 4.40 a share) (250) (250) (250)
3.70% Series C ($ 3.70 a share) (359) (359) (359)
4.05% Series D ($ 4.05 a share) (258) (258) (258)
4.70% Series E ($ 4.70 a share) (135) (135) (135)
4.50% Series F ($ 4.50 a share) (193) (193) (193)
4.60% Series G ($ 4.60 a share) (349) (349) (349)
8.36% Series H ($ 8.36 a share) - (1,393) (2,090)
8.12% Series I ($ 8.12 a share) - - (1,353)
Common stock (not declared on
a per share basis) (75,000) (65,000) (40,000)
Total (76,544) (67,937) (44,987)
Net unrealized gain/(loss) on investments 2,593 (278) -
Other adjustments, net (31) (1,088) (933)
Balance at end of year $327,814 $290,786 $328,290
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-135<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CAPITAL STOCK AND PREFERRED SECURITIES
<CAPTION>
December 31, 1995 (In Thousands)
<S> <C>
Cumulative preferred stock, without par value, 11,435,000 shares
authorized, 365,000 shares issued and outstanding, without
mandatory redemption (a):
56 810 shares, 4.40% Series B (callable at $108.25 per share) $ 5,681
97 054 shares, 3.70% Series C (callable at $105.00 per share) 9,705
63 696 shares, 4.05% Series D (callable at $104.53 per share) 6,370
28 739 shares, 4.70% Series E (callable at $105.25 per share) 2,874
42 969 shares, 4.50% Series F (callable at $104.27 per share) 4,297
75 732 shares, 4.60% Series G (callable at $104.25 per share) 7,573
Subtotal - Cumulative preferred stock issued 36,500
Premium on cumulative preferred stock 277
Total cumulative preferred stock $ 36,777
Common stock, par value $20 per share, 5,400,000 shares
authorized, 5,290,596 shares issued and outstanding $105,812
Company-obligated mandatorily redeemable preferred
securities, 8.75% Series A, without par value, 5,000,000
securities authorized, 4,200,000 securities issued and
outstanding (b)(c): $105,000
(a) If dividends on any shares of preferred stock are in arrears for four
quarters, the holders of preferred stock, voting as a class, are entitled
to elect a majority of the board of directors until all dividends in
arrears have been paid. No redemptions of preferred stock may be made
unless dividends on all preferred stock for all past quarterly dividend
periods have been paid or declared and set aside for payment. During 1994,
the Company redeemed its 8.36% Series H (aggregated stated value $25
million) cumulative preferred stock. The Company's total cost of
redemption was $26.1 million, which resulted in a $1.1 million charge to
retained earnings. During 1993, the Company redeemed its 8.12% Series I
(aggregated stated value $25 million) cumulative preferred stock. The
Company's total cost of redemption was $25.9 million, which resulted in a
$0.9 million charge to retained earnings. No other shares of capital stock
have been sold or redeemed during the three year period ended December 31,
1995. Stated value of the Company's cumulative preferred stock is $100 per
share.
(b) Penelec Capital, L.P. is a special-purpose partnership in which a
subsidiary of the Company is the sole general partner. In 1994, Penelec
Capital, L.P. issued $105 million of mandatorily redeemable preferred
securities (Preferred Securities). The proceeds from the sale of the
Preferred Securities were then lent to the Company which, in turn, issued
deferrable interest subordinated debentures to the partnership. The
Company is taking tax deductions for the interest paid on the subordinated
debentures while gaining some preferred equity recognition from the credit
rating agencies for the Preferred Securities.
(c) The issued and outstanding Preferred Securities of Penelec Capital, L.P.
mature in 2043 and are redeemable after July 4, 1999 at 100% or the
principal amount, or earlier under certain limited circumstances, including
the loss of the tax deduction for interest paid on the subordinated
debentures. The Company has fully and unconditionally guaranteed payment
of distributions, to the extent there is sufficient cash on hand to permit
such payments and legally available funds, and payments on liquidation or
redemption of the Preferred Securities. Distribution on the Preferred
Securities (and interest on the subordinated debentures)may be deferred for
a period of up to 60 months, but the Company may not pay dividends or
redeem or acquire any of its preferred or common stock until deferred
payments are paid in full.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-136
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Operating Activities:
Net income $ 111,010 $ 31,799 $ 95,728
Adjustments to reconcile income to cash provided:
Depreciation and amortization 77,635 69,615 82,951
Amortization of property under capital leases 7,777 8,553 8,183
Three Mile Island Unit 2 costs (51,796) 56,304 -
Voluntary enhanced retirement program - 44,856 -
Nuclear outage maintenance costs, net (2,901) 2,862 (2,195)
Deferred income taxes and investment tax
credits, net 42,514 (50,451) 18,612
Deferred energy costs, net 1,491 6,221 (23,097)
Accretion income - (200) (800)
Allowance for other funds used
during construction (2,006) (1,842) (869)
Changes in working capital:
Receivables (7,713) (15,945) (7,894)
Materials and supplies 4,912 (1,849) 13,664
Special deposits and prepayments (5,078) 1,644 (1,777)
Payables and accrued liabilities 8,241 (12,804) 1,356
Other, net 1,178 12,803 (5,798)
Net cash provided by operating activities 185,264 151,566 178,064
Investing Activities:
Cash construction expenditures (130,512) (174,464) (150,252)
Contributions to decommissioning trusts (5,263) (5,705) (19,411)
Other, net (323) 134 5,806
Net cash used for investing activities (136,098) (180,035) (163,857)
Financing Activities:
Issuance of long-term debt 197,997 129,100 119,220
Increase (decrease) in notes payable, net (83,952) 8,774 54,205
Capital lease principal payments (7,172) (8,734) (7,492)
Issuance of company-obligated mandatorily
redeemable preferred securities - 101,185 -
Contributions from parent corporation 20,000 - -
Retirement of long-term debt (99,319) (108,008) (108,008)
Redemption of preferred stock - (26,168) (26,013)
Dividends paid on common stock (75,000) (65,000) (40,000)
Dividends paid on preferred stock (1,544) (3,111) (5,156)
Net cash provided (required) by
financing activities (48,990) 28,038 (13,244)
Net increase/(decrease) in cash and temporary
cash investments from above activities 176 (431) 963
Cash and temporary cash investments, beginning
of year 1,191 1,622 659
Cash and temporary cash investments, end of year $ 1,367 $ 1,191 $ 1,622
Supplemental Disclosure:
Interest paid $ 60,524 $ 55,221 $ 45,939
Income taxes paid $ 43,685 $ 59,881 $ 52,565
New capital lease obligations incurred $ 11,160 $ 2,400 $ 13,317
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-137<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF LONG-TERM DEBT
December 31, 1995 (In Thousands)
<CAPTION>
First Mortgage Bonds-Series as noted (a)(b):
<S> <C> <C> <C> <C> <C> <C>
6 1/4% due 1996 $25,000 6.7 % due 2005 $30,000
6.80 % due 1996 20,000 6.35 % due 2006 40,000
7.45 % due 1996 30,000 8.05 % due 2006 10,000
6 1/4% due 1997 26,000 6 1/8% due 2007 4,110
7 7/8% due 1998 30,000 6.55 % due 2009 50,000
6.15 % due 2000 30,000 5.35 % due 2010 12,310
8.70 % due 2001 30,000 5.35 % due 2010 12,000
7.40 % due 2002 10,000 5.80 % due 2020 20,000
7.43 % due 2002 30,000 8.33 % due 2022 20,000
7.92 % due 2002 10,000 7.49 % due 2023 30,000
7.40 % due 2003 10,000 8.38 % due 2024 40,000
6.60 % due 2003 30,000 8.61 % due 2025 30,000
7.48 % due 2004 40,000 7.53 % due 2025 40,000
6.10 % due 2004 30,000 6.05 % due 2025 25,000
Subtotal $714,420
Amounts due within one year (75,000) $639,420
Other long-term debt (net of $9 thousand due within one year) 3,058
Unamortized net premium on long-term debt 9
Total long-term debt $642,487
(a) Substantially all of the properties owned by the Company are subject to the
lien of the mortgage.
(b) For the years 1996, 1997, 1998 and 2000 the Company has total long-term debt
maturities of $75.0 million, $26.0 million, $30.0 million and $30.0 million,
respectively. The Company has no long-term debt maturities in 1999.
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-138<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pennsylvania Electric Company (the Company), a Pennsylvania corporation
incorporated in 1919, is a wholly-owned subsidiary of General Public Utilities
Corporation (GPU), a holding company registered under the Public Utility
Holding Company Act of 1935. The Company's business is the generation,
transmission, distribution and sale of electricity. The Company owns all of
the common stock of Penelec Preferred Capital, Inc., which is the sole general
partner of Penelec Capital, L.P., a special-purpose partnership. The Company
also has two minor wholly-owned subsidiaries. The Company is affiliated with
Jersey Central Power & Light Company (JCP&L) and Metropolitan Edison Company
(Met-Ed). The Company, JCP&L and Met-Ed are referred to herein as the
"Company and its affiliates." The Company is also affiliated with GPU Service
Corporation (GPUSC), a service company; GPU Nuclear Corporation (GPUN), which
operates and maintains the nuclear units of the Company and its affiliates;
and Energy Initiatives, Inc., EI Power, Inc., and EI Energy, Inc.
(collectively, the "EI Group"), which develop, own and operate generation,
transmission and distribution facilities in the United States and foreign
countries. All of the Company's affiliates are wholly-owned subsidiaries of
GPU. The Company and its affiliates are referred to herein as the "GPU
System."
Note 1, "Commitments and Contingencies," and Note 2, "Summary of Significant
Accounting Policies," are being presented for GPU, the Company and its
affiliates on a combined basis and are included in the GPU section of this
Form 10-K.
Note 1 - Commitments and Contingencies: See GPU page F-30.
Nuclear Facilities: See GPU page F-30.
Nuclear Plant Retirement Costs: See GPU page F-33.
Insurance: See GPU page F-38.
Competition and the Changing Regulatory
Environment: See GPU page F-38.
Environmental Matters: See GPU page F-44.
Other Commitments and Contingencies: See GPU page F-46.
Note 2 - Summary of Significant Accounting Policies:
See GPU page F-49.
F-139
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
3. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1995 and 1994, the Company had $27 million and $111 million
of short-term notes outstanding, respectively, of which $27 million in 1994
was commerical paper and the remainder was issued under bank lines of credit
(credit facilities). The Company's weighted average interest rate on short-
term borrowings was 5.9% and 6.2% at December 31, 1995 and 1994, respectively.
GPU and the Company and its affiliates have $529 million of credit
facilities, which includes a Revolving Credit Agreement (Credit Agreement)
with a consortium of banks. The credit facilities generally provide for the
payment of a commitment fee on the unborrowed amount of 1/8 of 1% annually.
Borrowings under these credit facilities generally bear interest based on the
prime rate or money market rates. Notes issued under the Credit Agreement,
which expires November 1, 1999, are limited to $250 million in total
borrowings outstanding at any time and subject to various covenants and
acceleration under certain conditions. The Credit Agreement borrowing rates
and facility fee are dependent on the long-term debt ratings of the Company
and its affiliates.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments, as of
December 31, 1995 and 1994, are as follows:
(In Millions)
Carrying Fair
Amount Value
December 31, 1995:
Company-obligated mandatorily
redeemable preferred securities $ 105 $ 110
Long-term debt 642 678
December 31, 1994:
Company-obligated mandatorily
redeemable preferred securities $ 105 $ 101
Long-term debt 616 577
The fair values of the Company's financial instruments are estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for instruments of the same remaining
maturities and credit qualities.
5. INCOME TAXES
Effective January 1, 1993, the Company implemented FAS 109, "Accounting
for Income Taxes." The cumulative effect of this accounting change on net
income was immaterial. As of December 31, 1995 and 1994, the balance sheet
reflected $214 million and $228 million, respectively, of income taxes
recoverable through future rates (primarily related to liberalized
depreciation), and a regulatory liability for income taxes refundable through
F-140
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
future rates of $34 million and $36 million, respectively (related to
unamortized ITC), substantially due to the recognition of amounts not
previously recorded.
A summary of the components of deferred taxes as of December 31, 1995
and 1994 is as follows:
(In Millions)
Deferred Tax Assets Deferred Tax Liabilities
1995 1994 1995 1994
Current: Current:
Unbilled revenue $ 5 $ 3 Deferred energy $ 4 $ 4
Total $ 5 $ 3 Total $ 4 $ 4
Noncurrent: Noncurrent:
Unamortized ITC $34 $ 36 Liberalized
Decommissioning 13 35 depreciation:
Contribution in aid previously flowed
of construction 3 3 through $121 $131
Other 29 40 future revenue
Total $79 $114 requirements 91 97
Subtotal 212 228
Liberalized
depreciation 229 217
Other 21 9
Total $462 $454
The reconciliations from net income to book income subject to tax and
from the federal statutory rate to combined federal and state effective tax
rates are as follows:
(In Millions)
1995 1994 1993
Net income $111 $32 $ 96
Income tax expense 70 11 69
Book income subject to tax $181 $43 $165
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 6 1 7
Other ( 2) (10) -
Effective income tax rate 39% 26% 42%
F-141
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
Federal and state income tax expense is comprised of the following:
(In Millions)
1995 1994 1993
Provisions for taxes currently payable $28 $ 61 $51
Deferred income taxes:
Liberalized depreciation 12 12 8
Deferral of energy costs - (3) 11
Accretion income - 5 -
Decommissioning 21 (24) -
VERP 13 (21) -
Other (1) (15) 3
Deferred income taxes, net 45 (46) 22
Amortization of ITC, net (3) (4) (4)
Income tax expense $70 $ 11 $69
In 1994, the GPU System and the Internal Revenue Service (IRS) reached
an agreement to settle the claim for 1986 that TMI-2 has been retired for tax
purposes. The Company and its affiliates have received net refunds totaling
$17 million, of which the Company's share is $4 million, which have been
credited to their customers. Also in 1994, the GPU System received net
interest from the IRS totaling $46 million, of which the Company's share is
$11.5 million (before income taxes), associated with the refund settlement,
which was credited to income. The IRS has completed its examinations of the
GPU System's federal income tax returns through 1989. The years 1990 through
1992 are currently being audited.
6. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses
consisted of the following:
(In Millions)
1995 1994 1993
Maintenance $71 $80 $81
Other taxes:
Pennsylvania state gross receipts $39 $38 $36
Real estate and personal property 8 8 8
Capital stock 9 9 9
Other 11 11 9
Total $67 $66 $62
For the years 1995, 1994 and 1993, the cost to the Company of services
rendered to it by GPUSC amounted to approximately $38 million, $40 million and
$37 million, respectively, of which approximately $31 million, $31 million and
$25 million, respectively, were charged to income. For the years 1995, 1994
F-142
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
and 1993, the cost to the Company of services rendered to it by GPUN amounted
to approximately $41 million, $40 million and $46 million, respectively, of
which approximately $36 million, $33 million and $38 million, respectively,
were charged to income.
7. EMPLOYEE BENEFITS
Pension Plans:
The Company maintains defined benefit pension plans covering
substantially all employees. The Company's policy is to currently fund net
pension costs within the deduction limits permitted by the Internal Revenue
Code.
A summary of the components of net periodic pension cost follows:
(In Millions)
1995 1994 1993
Service cost-benefits earned during the period $ 8.9 $ 10.2 $ 8.0
Interest cost on projected benefit obligation 34.9 30.6 29.9
Less: Expected return on plan assets (35.6) (32.4) (30.4)
Amortization 0.3 0.5 0.1
Net periodic pension cost $ 8.5 $ 8.9 $ 7.6
The above 1994 amounts do not include a pre-tax charge to earnings of
$33 million resulting from the Voluntary Enhanced Retirement Programs (VERP).
The actual return on the plans' assets for the years 1995, 1994 and 1993
were gains of $100.3 million, $4.2 million and $46.1 million, respectively.
The funded status of the plans and related assumptions at December 31,
1995 and 1994 were as follows:
(In Millions)
1995 1994
Accumulated benefit obligation (ABO):
Vested benefits $ 364.4 $ 358.0
Nonvested benefits 44.1 38.6
Total ABO 408.5 396.6
Effect of future compensation levels 73.3 57.0
Projected benefit obligation (PBO) $ 481.8 $ 453.6
Plan assets at fair value $ 496.8 $ 401.3
PBO (481.8) (453.6)
Plan assets in excess of (less than) PBO 15.0 (52.3)
Less: Unrecognized net (gain) loss (18.8) 27.3
Unrecognized prior service cost 3.8 1.8
Unrecognized net transition obligation 3.0 3.5
Prepaid (accrued) pension cost $ 3.0 $ (19.7)
F-143
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
Annual increase in compensation levels 5.5 6.0
In 1995, changes in assumptions, primarily the decrease in the discount
rate assumption from 8% to 7.5%, resulted in a $20 million increase in the PBO
as of December 31, 1995. The assets of the plans are held in a Master Trust
and generally invested in common stocks and fixed income securities. The
unrecognized net (gain) loss represents actual experience different from that
assumed, which is deferred and not included in the determination of pension
cost until it exceeds certain levels. Both the unrecognized prior service
cost resulting from retroactive changes in benefits and the unrecognized net
transition obligation arising out of the adoption of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions," are being
amortized to pension cost over the average remaining service periods for
covered employees.
Savings Plans:
The Company also maintains savings plans for substantially all employees.
These plans provide for employee contributions up to specified limits. The
Company's savings plans provide for various levels of matching contributions.
The matching contributions for the Company for 1995, 1994 and 1993 were $2.5
million, $3.0 million and $3.0 million, respectively.
Postretirement Benefits Other Than Pensions:
The Company provides certain retiree health care and life insurance
benefits for substantially all employees who reach retirement age while
working for the Company. Health care benefits are administered by various
organizations. A portion of the costs are borne by the participants.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (FAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FAS 106 requires that the
estimated cost of these benefits, which are primarily for health care, be
accrued during the employee's active working career. The Company has elected
to amortize the unfunded transition obligation existing at January 1, 1993
over a period of 20 years. The unrecognized net loss represents actual
experience different from that assumed, which is deferred and not included in
the determination of postretirement benefit cost until it exceeds certain
levels. The unrecognized prior service cost resulting from retroactive
changes in benefits is being amortized to postretirement benefit cost over the
average remaining service periods for covered employees.
A summary of the components of the net periodic postretirement benefit
cost for 1995, 1994 and 1993 follows:
F-144
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
(In Millions)
1995 1994 1993
Service cost-benefits attributed to service
during the period $ 4.3 $ 4.6 $ 3.6
Interest cost on the accumulated postretirement
benefit obligation 15.6 13.4 12.2
Expected return on plan assets (4.3) (2.3) (1.2)
Amortization of transition obligation 6.2 6.5 6.5
Other amortization, net 0.5 0.8 -
Net periodic postretirement benefit cost 22.3 23.0 21.1
Net write-off (deferral) 1.3 9.0 (10.1)
Postretirement benefit cost, net of deferrals $ 23.6 $ 32.0 $ 11.0
The above 1994 amounts do not include a pre-tax charge to earnings of
$12 million relating to the VERP.
The actual return on the plans' assets for the years 1995, 1994 and 1993
was a gain of $11.1 million, $0.8 million and $1.3 million, respectively.
The funded status of the plans at December 31, 1995 and 1994, was as
follows:
(In Millions)
1995 1994
Accumulated Postretirement Benefit Obligation:
Retirees $ 139.7 $ 111.3
Fully eligible active plan participants 6.0 21.4
Other active plan participants 79.6 67.2
Total accumulated postretirement
benefit obligation (APBO) $ 225.3 $ 199.9
APBO $(225.3) $(199.9)
Plan assets at fair value 75.3 53.1
APBO in excess of plan assets (150.0) (146.8)
Less: Unrecognized net loss 25.0 15.9
Unrecognized prior service cost 2.3 2.5
Unrecognized transition obligation 106.1 112.4
Accrued postretirement benefit liability $ (16.6) $ (16.0)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 8.0
The Company intends to continue funding amounts for postretirement
benefits with an independent trustee, as deemed appropriate from time to time.
The plan assets include equities and fixed income securities.
In 1995, the decrease in the health-care cost trend rate assumptions
resulted in an $18 million decrease in the APBO, which was partially offset by
F-145
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
an increase of $15 million in the APBO caused by the decrease in the discount
rate assumption from 8% to 7.5%. The accumulated postretirement benefits
obligation was determined by application of the terms of the medical and life
insurance plans, including the effects of established maximums on covered
costs, together with relevant actuarial assumptions and health-care cost trend
rates of 12% for those not eligible for Medicare and 9% for those eligible for
Medicare, then decreasing gradually to 6% in 2000 and thereafter. These costs
also reflect the implementation of a cost cap of 6% for individuals who retire
after December 31, 1995 and reach age 65. The effect of a 1% annual increase
in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $23 million as of December
31, 1995 and the aggregate of the service and interest cost components of net
periodic postretirement health-care cost by approximately $3 million.
In 1994, the Pennsylvania Commonwealth Court reversed a PaPUC order that
allowed a nonaffiliated utility, outside a base rate proceeding, to defer
certain incremental postretirement benefit costs for future recovery from
customers. As a result of the Court's decision, in 1994, the Company
determined that its FAS 106 costs, including costs deferred since January
1993, were not likely to be recovered and charged $18.8 million to expense.
In addition, $4 million of the Company's unrecognized transition obligation
resulting from employees who elected to participate in the VERP was also
written off in 1994. In 1995, the Company recorded a charge to income of
approximately $9 million, which represents continued amortization of the
transition obligation along with current accruals of FAS 106 expense for
active employees.
8. JOINTLY OWNED STATIONS
Each participant in a jointly owned station finances its portion of the
investment and charges its share of operating expenses to the appropriate
expense accounts. The Company participated with affiliated and nonaffiliated
utilities in the following jointly owned stations at December 31, 1995:
Balance (In Millions)
% Accumulated
Station Ownership Investment Depreciation
Homer City 50 $458.2 $161.6
Three Mile Island Unit 1 25 213.3 78.3
Seneca 20 16.4 4.8
9. LEASES
The Company's capital leases consist primarily of leases for nuclear
fuel. Nuclear fuel capital leases at December 31, 1995 and 1994 totaled $21
million and $16 million, respectively (net of amortization of $21 million and
$15 million, respectively). The recording of capital leases has no effect on
net income because all leases, for ratemaking purposes, are considered
operating leases.
F-146
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
The Company and its affiliates have nuclear fuel lease agreements with
nonaffiliated fuel trusts. In 1995, the Company and its affiliates refinanced
the Oyster Creek and TMI-1 nuclear fuel leases to provide for aggregate
borrowings of up to $210 million ($100 million for Oyster Creek and $110
million for TMI-1) outstanding at any one time. Reductions in nuclear fuel
financing costs are expected through the new credit facilities. It is
contemplated that when consumed, portions of the presently leased material
will be replaced by additional leased material. The Company and its
affiliates are responsible for the disposal costs of nuclear fuel leased under
these agreements. These nuclear fuel leases have initial terms of three years
expiring in November 1998, and are renewable annually thereafter at the
lender's option for a period up to 20 years. Subject to certain conditions of
termination, the Company and its affiliates are required to purchase all
nuclear fuel then under lease at a price that will allow the lessor to recover
its net investment. Lease expense consists of an amount designed to amortize
the cost of the nuclear fuel as consumed plus interest costs. These amounts
were $7 million for each of the years ended December 31, 1995, 1994 and 1993.
F-147
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
PENNSYLVANIA ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful
accounts $1,182 $6,518 $1,516(a) $6,064(b) $3,152
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1994
Allowance for doubtful
accounts $1,329 $3,133 $1,486(a) $4,766(b) $1,182
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1993
Allowance for doubtful
accounts $1,224 $3,234 $1,337(a) $4,466(b) $1,329
Allowance for inventory
obsolescence 365 - - 365(c) -
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
</TABLE>
F-148
<PAGE>
Page 1 of 2
Exhibits to be Filed by EDGAR
3-F By-Laws of Met-Ed dated July 27, 1995, as amended.
3-H By-Laws of Penelec dated July 27, 1995, as amended.
4-B-35 Supplemental Indenture of Met-Ed, dated July 15, 1995.
4-C-11 Supplemental Indenture of Penelec, dated November 1, 1995.
10-A GPU System Companies Deferred Compensation Plan dated June 1, 1995.
10-B GPU System Companies Master Directors' Benefits Protection Trust
dated September 1, 1995.
10-C GPU System Companies Master Executives' Benefits Protection Trust
dated September 1, 1995.
10-D Employee Incentive Compensation Plan of JCP&L dated April 1, 1995.
10-E Employee Incentive Compensation Plan of Met-Ed dated April 1, 1995.
10-F Employee Incentive Compensation Plan of Penelec dated April 1, 1995.
10-G Incentive Compensation Plan for Elected Officers of JCP&L dated
January 1, 1995.
10-H Incentive Compensation Plan for Elected Officers of Met-Ed dated
January 1, 1995.
10-I Incentive Compensation Plan for Elected Officers of Penelec dated
January 1, 1995.
10-J Deferred Remuneration Plan for Outside Directors of JCP&L dated
September 1, 1995.
10-K JCP&L Supplemental and Excess Benefits Plan dated January 1, 1995.
10-L Met-Ed Supplemental and Excess Benefits Plan dated January 1, 1995.
10-M Penelec Supplemental and Excess Benefits Plan dated January 1, 1995.
10-N Letter agreement dated November 22, 1995 relating to supplemental
pension benefits for J.R. Leva.
10-O Letter agreement dated September 18, 1995 relating to terms of
employment and pension benefits for I.H. Jolles.
10-P Letter agreement dated November 22, 1995 relating to supplemental
pension benefits for J.G. Graham.
<PAGE>
Page 2 of 2
Exhibits to be Filed by EDGAR
12 Statements Showing Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
A - JCP&L
B - Met-Ed
C - Penelec
21 Subsidiaries of the Registrant
A - JCP&L
B - Met-Ed
C - Penelec
23 Consent of Independent Accountants
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
27 Financial Data Schedule
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
<PAGE>
Exhibit 3-F
METROPOLITAN EDISON COMPANY
By-Laws
Offices
1. The principal office of the corporation shall be located at
2800 Pottsville Pike, Muhlenberg Township, Berks County, Pennsylvania. The
corporation may also have offices at such other places, either within or
without the Commonwealth of Pennsylvania, as the Board of Directors may from
time to time designate or the business of the corporation may require.
Seal
2. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization, and the words "Incorporated
Pennsylvania". The corporate seal may be affixed to any certificates of
stock, bonds, debentures, notes or other engraved, lithographed or printed
instruments, by engraving, lithographing or printing thereon such seal or a
facsimile thereof, and such seal or facsimile thereof so engraved,
lithographed or printed thereon shall have the same force and effect, for all
purposes, as if such corporate seal had been affixed thereto by indentation.
Shareholders' Meetings
3. All meetings of the shareholders shall be held at the principal
office of the corporation or at such other place as shall be stated in the
notice of the meeting. All meetings of the shareholders shall be presided
over by the President or, in the event of his absence or disability, by any
Vice President, except when by statute, the Certificate of Incorporation or
any amendment thereof, the election of a presiding officer by the shareholders
present at the meeting is required.
4. The annual meeting of shareholders shall be held on the second
Monday in May of each year, if not a legal holiday, and if a legal holiday,
then on the next business day following at two o'clock (Standard Time or
Daylight Saving Time, whichever is in effect at the time) in the afternoon.
At the annual meeting the shareholders shall elect a Board of Directors of the
corporation and transact such other business as may properly be brought before
the meeting. Notice of the time and place thereof shall be given by mail at
least ten (10) days prior to the meeting, to each shareholder of record
entitled to vote thereat, at his address as the same shall appear on the books
of the corporation.
5. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite for and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided by
law, by the Certificate of Incorporation or any amendment thereto, or by these
1
<PAGE>
By-Laws. If, however, the holders of a majority of such stock shall not
be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or by proxy, shall
have power, by a majority vote of those present, to adjourn the meeting from
time to time without notice other than announcement at the meeting, until
the holders of the amount of stock requisite to constitute a quorum shall
be present in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which might have been transacted at the meeting as originally noticed.
6. At all meetings of the shareholders each shareholder having the
right to vote shall be entitled to vote in person or by proxy appointed by an
instrument executed in writing by such shareholder, or by his duly appointed
attorney, but no proxy dated more than eleven (11) months prior to any meeting
or election shall confer the right to vote thereat. Each holder of record of
stock having voting power shall be entitled to one vote for each share of
stock standing in the name of such holder on the stock transfer books of the
corporation, provided that at all elections of directors of the corporation
each such holder shall be entitled to as many votes as shall equal the number
of shares of stock such holder is entitled to vote, multiplied by the number
of directors to be elected, and may cast all such votes for a single director
or may distribute them among the number of directors to be voted for, or any
two or more of them, as such holder may see fit. The vote for directors, and
upon the demand of any shareholder or duly authorized proxy, the vote upon any
question before the meeting, shall be by ballot. All elections shall be
determined and all questions decided by a plurality vote, except when by
statute or the Certificate of Incorporation or any amendments thereto a larger
vote of the shareholders shall be required. Any action which may be taken at
a meeting of the shareholders may be taken without a meeting if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
of the shareholders who would be entitled to vote at a meeting for such
purpose and shall be filed with the Secretary of the Corporation.
7. Nothing herein contained shall be construed to enlarge, limit or
impair the voting rights of the holders of the Preferred Stock of the
corporation, as set forth in the terms of the capital stock of the corporation
as the same now exist or may hereafter be amended.
8. Special meetings of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation
or any amendment thereto, may be called by the President, or by a majority of
the Board of Directors or by a majority of the Executive Committee, and shall
be called by the President or the Secretary at the request in writing of the
shareholders holding a majority of the entire capital stock of the corporation
issued and outstanding and entitled to vote, upon ten (10) days' written or
printed notice to each shareholder of record entitled to vote thereat, stating
the place, day and hour of such meeting and the business proposed to be
transacted thereat. No business shall be transacted at such meetings except
with respect to matters specified in the notice, provided however, that if all
the shareholders of the corporation entitled to vote shall be present in
person or by proxy any business pertaining to the affairs of the corporation
may be transacted.
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Directors
9. The business and affairs of the corporation shall be managed by
its Board of Directors, which shall consist of not less than five (5) nor more
than ten (10) directors as shall be fixed from time to time by a resolution
adopted by a majority of the entire Board of Directors, or by the consent of
the shareholders, provided, however, that no decrease in the number of
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director. Each director shall be at least twenty-one years of
age. Directors need not be shareholders of the corporation. Directors shall
be elected at the annual meeting of shareholders, or, if any such election
shall not be held, at a shareholders' meeting called and held in accordance
with the provisions of the Business Corporation Law of the Commonwealth of
Pennsylvania. Each director shall serve until the next annual meeting of
shareholders and thereafter until his successor shall have been elected and
shall qualify. If all the directors shall, severally or collectively, consent
in writing to any action to be taken by the corporation, such action shall be
as valid a corporate action as though it had been authorized at a meeting of
the Board of Directors.
10. Unless otherwise required by law, in the absence of fraud, no
contract or transaction between the corporation and one or more of its
directors or officers or between the corporation and any corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers or have a financial or other
interest, shall be void or voidable solely for that reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors that authorizes the contract or transaction, or solely
because his or their votes are counted for that purpose, if:
(a) the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors and the Board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though the
disinterested directors are less than a quorum;
(b) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon and the contract or transaction is specifically
approved in good faith by vote of those shareholders; or
(c) the contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified by the Board of Directors
or the shareholders.
No director or officer shall be liable to account to the corporation for any
profit realized by him from or through any such contract or transaction of the
corporation by reason of his interest as aforesaid in such contract or
transaction if such contract or transaction shall be authorized, approved or
ratified as aforesaid.
Meetings of the Board
11. At all meetings of the Board of Directors a majority of the
directors shall constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which there is a
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quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation or
any amendment thereto or by these By-Laws.
12. The first meeting of the Board of Directors held next after the
annual meeting of shareholders at which directors shall have been directed,
shall be held for the purpose of organization, the election of officers and
the transaction of any other business which may come before the meeting.
13. Regular meetings of the Board of Directors shall be held, without
notice except for the purpose of taking action on matters as to which notice
is in the By-Laws required to be given, at such time and place as the Board of
Directors may from time to time determine; but in any event at intervals of
not more than three months.
14. Special meetings of the Board of Directors may be called by the
Chairman of the Board or by the President or, in the absence or disability of
the Chairman of the Board and the President, by a Vice President, or by any
two directors and may be held at the time and place designated in the call and
notice of the meeting. The Secretary, or other officer performing his duties,
shall give notice either personally or by telephone or by telegram at least
twenty-four hours before the meeting, or by mail at least three (3) days
before the meeting. Meetings may be held at any time and place without such
notice if all the directors are present or if those not present waive notice
in writing, either before or after the meeting.
15. Any regular or special meeting may be adjourned to any other time
at the same or any other place by a majority of the directors present at the
meeting whether or not a quorum shall be present at such meeting, and no
notice of the adjourned meeting shall be required other than announcement at
the meeting.
Compensation of Directors
16. Directors, as such shall not receive any stated salary for their
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular and special
meeting of the Board; but nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of board committees may be allowed
like compensation for attending committee meetings.
Committees
17. The Board of Directors may by vote of the majority of the whole
Board create an Executive Committee consisting of three or more of their own
number to hold office for such period as the Board shall determine. The
Chairman of the Board and the President shall each be a member of the
Executive Committee, and the Chairman of the Board shall be chairman thereof
and the remaining members shall be elected by a majority vote of the whole
Board of Directors. The Board of Directors by a majority vote of the whole
Board may fill any vacancies in the Executive Committee and may designate one
or more alternate members who shall serve on the Executive Committee in the
absence of any regular members of such Committee.
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Such Executive Committee shall advise with and aid the officers of
the corporation in all matters concerning its interest and the management of
its business, and shall, between meetings of the Board of Directors, have all
the power of the Board of Directors in the management of the business and
affairs of the corporation, and shall have the power to authorize the seal of
the corporation to be affixed to all papers that may require it. The taking
of any action by the Executive Committee shall be conclusive evidence that the
Board of Directors was not at the time of such action in session.
The Executive Committee shall cause to be kept regular minutes of
its proceedings, which may be transcribed in the regular minute book of the
corporation, and all such proceedings shall be reported to the Board of
Directors at its next succeeding meeting, and shall be subject to revision or
alteration by the Board of Directors, provided that no rights of third persons
shall be affected by such revision or alteration. A majority of the Executive
Committee shall constitute a quorum at any meeting. The Executive Committee
may, from time to time, subject to the approval of the Board of Directors,
prescribe rules and regulations for the calling and conduct of meetings of the
Committee, and other matters relating to its procedure and the exercise of its
powers.
From time to time the Board of Directors may appoint any other
committee or committees for any purpose or purposes, which committees shall
have such powers and such tenure of office as shall be specified in the
resolution of appointment. The chief executive officer of the corporation
shall be a member ex officio of all committees of the board unless the
resolution appointing a particular committee specifically excludes such ex
officio membership by the chief executive officer.
Officers
18. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, a Treasurer, one or more Assistant
Treasurers, a Comptroller, and one or more Assistant Comptrollers. The Board
of Directors may at any regular or special meeting appoint from among their
own number, a Chairman of the Board of Directors.
19. The Board of Directors, at its first meeting after the election of
Directors by the shareholders, shall choose a President from among their own
number, and a Secretary, a Treasurer, a Comptroller, and such Vice Presidents,
Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers as it
shall deem necessary, none of whom need be members of the Board of Directors.
Such officers of the corporation shall hold office until the first
meeting of the Board of Directors after the next succeeding annual meeting of
shareholders and until their successors are chosen and qualified in their
stead. The President may not occupy any other such office. Except as above
set forth any two such offices may be occupied by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
20. The Board of Directors may appoint such other officers and agents
as it shall deem necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
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21. The salary or other compensation of the officers, other than the
assistant officers, shall be fixed by the Board of Directors. The salaries or
other compensation of the assistant officers and all other employees shall, in
the absence of any action by the Board, be fixed by the President or such
other officers or executives as may be designated by the President.
22. Any officers or agents elected or appointed by the Board of
Directors may be removed at any time, with or without cause, by vote of a
majority of the whole Board of Directors.
Chairman of the Board
23. In the event that the Board of Directors shall appoint a Chairman
of the Board of Directors as herein provided, he shall, unless otherwise
directed by the Board of Directors, be the chief executive officer of the
corporation with authority, among other things, to sign in the name and on
behalf of the corporation any and all contracts, agreements, and other
instruments and documents pertaining to matters which arise in the normal
conduct or ordinary course of business of the corporation, shall hold office
until the next annual meeting of shareholders, shall preside at all meetings
of the Board of Directors and shall have and exercise such powers and perform
such duties as may be assigned and conferred upon him by the Board of
Directors.
President
24. The President, in the absence, or during the disability, of a
Chairman of the Board of Directors functioning as the chief executive officer
of the corporation, shall be the chief executive officer of the corporation.
He shall, except as otherwise provided herein or by law, preside at all
meetings of the Board of Directors, the Executive Committee and the
shareholders. Subject to the control of the Board of Directors and any
Chairman of the Board of Directors functioning as chief executive officer of
the corporation, he shall have general supervision, direction and control of
the business and affairs of the corporation. He shall have such powers and
duties as are usually vested in the office of President of a corporation, and
shall perform such other and further duties as may from time to time be
assigned to him by the Board of Directors. He may sign in the name and on
behalf of the corporation any and all contracts, agreements and other
instruments and documents pertaining to matters which arise in the normal
conduct or ordinary course of business of the corporation.
Vice President and Vice Presidents
25. If there be one Vice President he shall, at the request or in the
absence or disability of the President, have supervision, direction and
control of the business of the corporation and exercise the duties and
functions of the President. He shall also have such powers and perform such
other duties as may be prescribed from time to time by law, the Certificate of
Incorporation or any amendment thereof, the By-Laws, the Board of Directors or
the President. If there be more than one Vice President, the Board of
Directors shall assign to each of them the general scope of their respective
duties, subject to detailed specification thereof made from time to time, by
the President, and the Board shall designate which Vice President shall
exercise the duties and functions of the President during his absence or
disability, and the Board may designate such Vice President as the Executive
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Vice President. Any Vice President may sign in the name and on behalf of
the corporation contracts, agreements or other instruments, and documents
pertaining to matters which arise in the normal conduct or ordinary course
of business of the corporation, except in cases where the signing thereof
shall be expressly and exclusively delegated by the Board of Directors or
the Executive Committee to some other officer or agent of the corporation.
Secretary and Assistant Secretaries
26. The Secretary shall attend all meetings of the Board of Directors,
the Executive Committee, and the shareholders, and shall record all votes and
the minutes of all proceedings in a book or books to be kept by him for that
purpose, and shall perform like duties for other board committees when
required. He shall give, or cause to be given, notice of all meetings of the
shareholders, the Board of Directors and the Executive Committee, and shall
perform such other duties as may be prescribed by the Board of Directors or
President. He shall be sworn to the faithful discharge of his duty. Any
records kept by him shall be the property of the corporation and shall be
restored to the corporation in case of his death, resignation, retirement or
removal from office. He shall be the custodian of the seal of the corporation
and, when authorized by the Board of Directors or by the President or a Vice
President, shall affix the seal to all instruments requiring it and shall
attest the same and/or the execution of such instruments as required. He
shall have control of the stock ledger, stock certificate book and other
formal records and documents relating to the corporate affairs of the
corporation.
The Assistant Secretary or Assistant Secretaries shall assist the
Secretary in the performance of his duties, and shall exercise and perform his
powers and duties in his absence or disability, and shall also exercise such
powers and duties as may be conferred or required by the Board of Directors,
or by the President.
Treasurer and Assistant Treasurers
27. The Treasurer shall have the custody of the corporate funds and
securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
He shall disburse the funds of the corporation in such manner as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and directors at the regular
meetings of the Board of Directors, or whenever they may require it, a report
of cash receipts and disbursements and an account of all his transactions as
Treasurer.
He shall give the corporation a bond, if required by the Board of
Directors, in such sum and with such sureties as may be satisfactory to the
Board of Directors, for the faithful performance of the duties of his office,
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
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He shall perform all duties generally incident to the office of
Treasurer, and shall have other powers and duties as from time to time may be
prescribed by law, by the By-Laws, or by the Board of Directors.
The Assistant Treasurer or Assistant Treasurers shall assist the
Treasurer in the performance of his duties, and shall exercise and perform his
powers and duties in his absence or disability and shall also exercise and
perform such duties as may be conferred or required by the Board of Directors,
or by the President.
Comptroller and Assistant Comptrollers
28. The Comptroller of the corporation shall have full control of all
the books of account of the corporation and keep a true and accurate record of
all property owned by it, of its debts and its revenues and expenses and shall
keep all accounting records of the corporation, other than the records of
receipts and disbursements and those relating to the deposit or custody of
money and securities of the corporation which shall be kept by the Treasurer,
and shall also make reports to the President and directors at the regular
meetings of the Board of Directors or whenever they may require them and
others of or relating to the financial condition of the corporation.
The Assistant Comptroller or Assistant Comptrollers shall assist
the Comptroller in the performance of his duties and shall exercise and
perform his powers and duties in his absence or disability and shall also
exercise such powers and perform such duties as may be conferred or required
by the Board of Directors, or by the President.
Vacancies
29. If the office of any director becomes vacant, for any reason,
including vacancies resulting from an increase in the number of directors, the
directors then in office, although less than a quorum, by a majority vote, may
choose a successor or successors who shall hold office for the unexpired term
in respect of which such vacancy occurred.
If the office of any officer of the corporation shall become
vacant for any reason, the Board of Directors may choose a successor or
successors who shall hold office for the unexpired term in respect of which
such vacancy occurred.
Resignations
30. Any officer or any director of the corporation may resign at any
time, such resignation to be made in writing and to take effect from the time
of its receipt by the corporation, unless some time be fixed in the
resignation, and then from that time.
Duties of Officers May Be Delegated
31. In case of the absence of any officer of the corporation, or for
any other reason the Board of Directors may deem sufficient, the Board of
Directors may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer.
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Indemnification of Directors and Officers
32. (a) A director shall not be personally liable for monetary
damages as such for any action taken, or any failure to take any action, on or
after January 27, 1987 unless the director has breached or failed to perform
the duties of his office under Section 1721 of the Business Corporation Law,
as the same may be amended from time to time, and the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. The
provisions of this subsection (a) shall not apply to the responsibility or
liability of a director pursuant to any criminal statute, or the liability of
a director for the payment of taxes pursuant to local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, whether formal or informal, and whether brought by or in the
right of the corporation or otherwise, by reason of the fact that he was a
director, officer or employee of the corporation (and may indemnify any person
who was an agent of the corporation), or a person serving at the request of
the corporation as a director, officer, partner, fiduciary or trustee of
another Company, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the fullest extent permitted by law, including without
limitation indemnification against expenses (including attorneys' fees and
disbursements), damages, punitive damages, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such proceeding unless the act or failure to act giving rise
to the claim for indemnification is finally determined by a court to have
constituted willful misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys'
fees and disbursements) actually and reasonably incurred in defending a civil
or criminal action, suit or proceeding on behalf of any person entitled to
indemnification under subsection (b) in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation, and may pay such expenses in
advance on behalf of any agent on receipt of a similar undertaking. The
financial ability of such person to make such repayment shall not be a
prerequisite to the making of an advance.
(d) For purposes of this Section: (i) the corporation shall be
deemed to have requested an officer, director, employee or agent to serve as
fiduciary with respect to an employee benefit plan where the performance by
such person of duties to the corporation also imposes duties on, or otherwise
involves services by, such person as a fiduciary with respect to the plan;
(ii) excise taxes assessed with respect to any transaction with an employee
benefit plan shall be deemed "fines"; and (iii) action taken or omitted by
such person with respect to an employee benefit plan in the performance of
duties for a purpose reasonably believed to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the corporation.
(e) To further effect, satisfy or secure the indemnification
obligations provided herein or otherwise, the corporation may maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other fund or account, enter into
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indemnification agreements, pledge or grant a security interest in any
assets or properties of the corporation, or use any other mechanism or
arrangement whatsoever in such amounts, at such costs, and upon such other
terms and conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be
deemed a contract between the corporation and the person entitled to
indemnification under this Section pursuant to which the corporation and each
such person intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall not limit, but may expand, any
rights or obligations in respect of any proceeding whether commenced prior to
or after such change to the extent such proceeding pertains to actions or
failures to act occurring prior to such change.
(g) The indemnification, as authorized by this Section, shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any statute, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action in
any official capacity and as to action in any other capacity while holding
such office. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall continue as to a person who has ceased
to be an officer, director, employee or agent in respect of matters arising
prior to such time and shall inure to the benefit of the heirs, executors and
administrators of such person.
Stock of Other Corporations
33. The Board of Directors shall have the right to authorize any
officer or other person on behalf of the corporation to attend, act and vote
at meetings of the shareholders of any corporation in which the corporation
shall hold or own stock, and to exercise thereat any and all the rights and
powers incident to the ownership of such stock and to execute waivers of
notice of such meetings and calls therefor; and authority may be given to
exercise the same either on one or more designated occasions, or generally on
all occasions until revoked by the Board of Directors. In the event that the
Board of Directors shall fail to give such authority, such authority may be
exercised by the President in person or by proxy appointed by him on behalf of
the corporation.
Certificates of Stock
34. (a) Shares of the corporation shall be represented by
certificates or, except as limited by law, uncertificated shares.
(b) The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as they are
issued. They shall be in a form approved by the Board of Directors. They
shall exhibit the holder's name and number of shares and shall be signed by
the President or a Vice President and the Treasurer or an Assistant Treasurer
and the seal of the corporation shall be affixed thereto. Such certificates
may, in addition to the foregoing, be signed by a transfer agent or an
assistant transfer agent and by a registrar, who shall have been duly
appointed for the purpose by the Board of Directors. When such certificates
are signed by a transfer agent or an assistant transfer agent and by a
registrar, the signature of the President, Vice President, Treasurer and
Assistant Treasurer upon any such certificates may be affixed by engraving or
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printing thereon a facsimile of such signature, in lieu of actual signature,
and such facsimile signature so engraved or printed thereon shall have the
same force and effect, as if such officer had actually signed the same. In
case any officer who has signed, or whose facsimile signature has been
affixed to, any such certificate shall cease to be such officer before such
certificate shall have been issued by the corporation,such certificate may
nevertheless be issued and delivered as though the person who signed such
certificate, or whose facsimile signature has been affixed thereto, had not
ceased to be such officer of the corporation at the date of the issue.
(c) Uncertificated shares may be issued upon initial issuance of
shares or upon transfer of certificated shares after surrender thereof to the
corporation. Within a reasonable time after issuance or transfer of
uncertificated shares, the corporation shall send to the registered owner the
information required to be set forth on the face of the certificate by Section
34(b) above.
Transfers of Stock
35. Transfers of stock shall be made on the books of the corporation,
only by the person named in the certificate or by attorney, lawfully
constituted in writing, and upon surrender of the certificate therefor.
Fixing Record Date
36. The Board of Directors may close the stock transfer books of the
corporation for a period not exceeding forty days preceding the date of any
meetings of shareholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, during which period no
transfer of stock shall be made on the books of the corporation; provided,
however, that in case of any such closing of the stock transfer books, notice
thereof shall be mailed to the shareholders affected at least ten days before
the closing thereof. In lieu of so closing the stock transfer books, the
Board of Directors may fix in advance a date, not exceeding forty days
preceding the date of any meeting of shareholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of shareholders entitled to vote at any such
meeting and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, and in
such case only shareholders (of the class or classes entitled to vote or
participate in such dividend, allotment of rights, or change, conversion or
exchange of capital stock, as the case may be), of record on the date so fixed
shall be entitled to vote at such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or
to exercise such rights, as the case may be, notwithstanding any transfer of
stock on the books of the corporation after any such record date fixed as
aforesaid.
Registered Shareholders
37. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to, or interest
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in, such share on the part of any other person, whether or not it shall have
express or other notice thereof, except as expressly otherwise provided by
the statutes of the Commonwealth of Pennsylvania.
Lost Certificates
38. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact, whereupon a new
certificate may be issued, of the same tenor and for the same number of shares
as the one alleged to be lost or destroyed; provided, however, that the Board
of Directors may require, as a condition to the issuance of a new certificate,
a bond of indemnity in such form and amount and with such surety or sureties,
or without surety, as the Board of Directors shall determine to be sufficient
to indemnify the corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate or the
issuance of any such new certificate, and may also require the advertisement
of such loss in such manner as the Board of Directors may prescribe.
Inspection of Books
39. The Board of Directors shall have power to determine whether and
to what extent, and at what time and places and under what conditions and
regulations, the accounts and books of the corporation (other than the books
required by statute to be open to the inspection of shareholders), or any of
them, shall be open to the inspection of shareholders, and no shareholders
shall have any right to inspect any account or book or document of the
corporation, except as such right may be conferred by the statutes of the
Commonwealth of Pennsylvania or by resolution of the Board of Directors or of
the shareholders.
Checks, Bonds, Debentures, Notes and Other Instruments
40. All checks of the corporation shall be signed by such person or
persons (who may but need not be an officer or officers of the corporation) as
the Board of Directors may from time to time designate, either directly or
through such officers of the corporation as shall, by resolution of the Board
of Directors, be authorized to designate such person or persons.
All bonds, debentures, notes and other instruments requiring a
seal shall be signed on behalf of the corporation by the President or a Vice
President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer. In case any officer who has signed any such bonds,
debentures, notes or other instruments shall cease to be such officer before
such bonds, debentures, notes or other instruments shall have been delivered
by the corporation, such bonds, debentures, notes or other instruments may
nevertheless be adopted by the corporation and be issued and delivered as
though the person who signed the same had not ceased to be such officer of the
corporation.
To the extent authorized by the Board of Directors, the signatures
of the persons and officers referred to in the two preceding paragraphs may be
made by engraving, lithographing or printing on the instruments there referred
to facsimiles of such signatures in lieu of actual signatures and such
facsimile signatures so engraved, lithographed or printed thereon shall have
the same force and effect as if such persons had actually signed the same.
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Receipt for Securities
41. All receipts for stocks, bonds or other securities received by the
corporation shall be signed by the Treasurer or an Assistant Treasurer, or by
such other person or persons as the Board of Directors or Executive Committee
shall designate.
Fiscal Year
42. The fiscal year shall begin the first day of January in each year.
Dividends
43. Dividends upon the capital stock of the corporation may be
declared by the Board of Directors at any regular or special meeting, out of
surplus or net profits of the corporation legally available for such purpose.
The Board of Directors shall have power to fix and determine, and
from time to time to vary, the amount to be reserved as working capital; to
determine whether any, and if any, what part of any, surplus shall be declared
and paid as dividends, to determine the date or dates for the declaration or
payment of dividends; and to direct and determine the use and disposition of
any surplus. Before payment of any dividend or making any distribution of
surplus there may be set aside out of the surplus of the corporation such sum
or sums as the directors from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interests
of the corporation.
Directors' Annual Statement
44. As soon as practicable after the close of each fiscal year the
Board of Directors shall submit to the shareholders a full and clear statement
of the business and result of operations of the corporation for such previous
fiscal year and of its financial condition at the end of such year.
Notices
45. Whenever under the provisions of law or these By-Laws notice is
required to be given to any director, officer or shareholder, it shall be
sufficient if given to such person either personally or by sending a copy
thereof through the mail or by telegram, charges prepaid, to the person's
address appearing on the books of the corporation or supplied by such person
to the corporation for the purpose of notice. If the notice is sent by mail
or telegram, it shall be deemed to have been given to the person entitled
thereto when deposited in the United States mail or with the telegraph office
for transmission to such person.
A director, officer or shareholder may waive in writing any notice
required to be given to such person under these By-Laws.
Judges of Election
46. In advance of any meeting of the shareholders for the election of
directors, the Board of Directors may appoint judges of election, who need
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not,except as otherwise provided by statute, be shareholders, to act at
such meeting or any adjournment thereof. If judges of election be not so
appointed, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The
number of judges shall be one or three. No person who is a candidate for the
office shall act as a judge. In case any person appointed as judge fails to
appear or fails or refuses to act, the vacancy may be filled by appointment
made at the meeting by the chairman. The judge or judges so appointed shall,
before entering upon the discharge of their duties, be sworn to faithfully
execute the duties of judges at such meeting. The judge or judges so
appointed shall determine the number of shares outstanding and the voting
power of each, the share represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, receive votes or
ballots, hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes, determine the
result, and do such acts as may be proper to conduct the election or vote with
fairness to all shareholders. Judges of election shall perform their duties
impartially, in good faith, to the best of their ability, and as expeditiously
as is practical. If there be three judges of election, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all. On the request of the chairman of the meeting, or
of any shareholder, the judge or judges shall make a report in writing of any
question or matter determined by such judge or judges, and execute a
certificate of any fact found. Any such report or certificate shall be prima
facie evidence of the facts stated therein.
Participation In Meetings By Telephone
47. At any meeting of the Board of Directors or the Executive
Committee or any other committee designated by the Board of Directors, one or
more directors may participate in such meeting, in lieu of attendance in
person, by means of conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each
other.
Inapplicability of Section 910 of the
Pennsylvania Business Corporation Law
48. Effective December 23, 1983, Section 910 of the Pennsylvania
Business Corporation Law added by Pennsylvania Act No. 92 of 1983 (effective
December 23, 1983) shall not be applicable to the corporation. This By-Law 48
shall remain effective until rescinded by amendment to the Articles of
Incorporation.
Previous By-Laws Repealed and Superseded
49. All presently existing By-Laws of the corporation are hereby
repealed and superseded by these By-Laws; provided, however, that any actions
taken or rights which have accrued under prior By-Laws shall be valid and
enforceable.
Amendments
50. These By-Laws may be added to, altered, amended or repealed by the
shareholders at any annual or special meeting, or by the Board of Directors at
any regular or special meeting; provided, however, that any By-Laws made by
the Board of Directors may be altered or repealed by the shareholders.
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I, , Secretary of Metropolitan
Edison Company, a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, hereby certify that the foregoing is a true and
complete copy of the By-Laws of said Metropolitan Edison Company duly adopted
and now in force.
WITNESS my hand and the seal of said Company this day of
, 19
Secretary
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Exhibit 3-H
PENNSYLVANIA ELECTRIC COMPANY
BY-LAWS
__________
OFFICES
1. The principal office of the corporation shall be located at 1001
Broad Street in the City of Johnstown, Cambria County, Pennsylvania. The
corporation may also have offices at such other places, either within or
without the Commonwealth of Pennsylvania, as the Board of Directors may from
time to time designate or the business of the corporation may require.
SEAL
2. The corporate seal shall have inscribed thereon the name of the
corporation, enclosed in a circle and the words "Corporate Seal" within the
space thus enclosed. The corporate seal may be affixed to any certificates of
stock, bonds, debentures, notes or other engraved, lithographed or printed
instruments, by engraving, lithographing or printing thereon such seal or a
facsimile thereof, and such seal or facsimile thereof so engraved,
lithographed or printed thereon shall have the same force and effect, for all
purposes, as if such corporate seal had been affixed thereto by indentation.
SHAREHOLDERS' MEETINGS
3. All meetings of the shareholders shall be held at the principal
office of the corporation or at such other place as shall be stated in the
notice of the meeting. All meetings of the shareholders shall be presided
over by the President or, in the event of his absence or disability, by any
Vice President, except when by statute, the Articles of Incorporation or any
amendment thereof, the election of a presiding officer by the shareholders
present at the meeting is required.
4. The annual meeting of shareholders shall be held on the third
Thursday in March of each year, if not a legal holiday, and if a legal
holiday, then on the next business day following, at two o'clock (Standard
Time or Daylight Saving Time, whichever is in effect at the time) in the
afternoon. At the annual meeting the shareholders shall elect a Board of
Directors of the corporation and transact such other business as may properly
be brought before the meeting. Notice of the time and place thereof shall be
given by mail at least ten (10) days prior to the meeting, to each shareholder
of record entitled to vote thereat, at his address as the same shall appear on
the books of the corporation.
5. Except as otherwise provided by law or the Articles of
Incorporation or any amendment thereto: (a) the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the vote which
the shareholders are entitled to cast on the particular matter shall
constitute a quorum for the purpose of considering such matter; and (b) if
however, the
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holders of the number of shares requisite to constitute a quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or by proxy, shall have power, by
a majority vote of those present, to adjourn the meeting from time to time
without notice other than announcement at the meeting, until the holders of
the number of shares requisite to constitute a quorum shall be present in
person or by proxy. At any adjourned meeting at which a quorum shall be
present, in person or by proxy, any business may be transacted which might
have been transacted at the meeting as originally noticed.
6. At all meetings of the shareholders each shareholder having the
right to vote shall be entitled to vote in person or by proxy appointed by an
instrument executed in writing by such shareholder, or by his duly appointed
attorney, but no proxy dated more than eleven (11) months prior to any meeting
or election shall confer the right to vote thereat. Each holder of record of
stock having voting power shall be entitled to one vote for each share of
stock standing in the name of such holder on the stock transfer books of the
corporation, except as otherwise provided by law or the Articles of
Incorporation or any amendment thereto. The vote for directors, and upon the
demand of any shareholder or duly authorized proxy, the vote upon any question
before the meeting, shall be by ballot. All elections shall be determined by
a plurality vote, except when by statute or the Articles of Incorporation or
any amendment thereto a larger vote of the shareholders shall be required.
Any action which may be taken at a meeting of the shareholders or of a class
of shareholders may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all of the
shareholders who would be entitled to vote at a meeting for such purpose and
shall be filed with the Secretary of the corporation.
7. Nothing herein contained shall be construed to enlarge, limit or
impair the voting rights of the holders of the Preferred Stock of the
corporation, as set forth in the Articles of Incorporation of the corporation
as the same now exist or may hereafter be amended.
8. Special meetings of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation or
any amendment thereto, may be called by the President, or by a majority of the
Board of Directors or by a majority of the Executive Committee, and shall be
called by the President or the Secretary at the request in writing of one or
more shareholders who, by statute or the Articles of Incorporation or any
amendment thereto are entitled to call such meeting, upon at least ten (10)
days' written or printed notice to each shareholder of record entitled to vote
thereat, stating the place, day and hour of such meeting and the business
proposed to be transacted thereat. No business shall be transacted at any
such meeting except with respect to matters specified in the notice, provided
however, that if all the shareholders of the corporation entitled to vote
shall be present in person or by proxy any business pertaining to the affairs
of the corporation may be transacted.
DIRECTORS
9. The business and affairs of the corporation shall be managed by
its Board of Directors. In addition to the powers and authorities by these
By-Laws expressly conferred upon them, the Board of Directors may exercise all
such
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powers of the corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or any amendment thereto or by
these By-Laws directed or required to be exercised or done by the
shareholders. The number of directors shall be eight (8). Directors need not
be shareholders or residents of the Commonwealth of Pennsylvania. Each
director shall be elected to serve until the next annual meeting of
shareholders and until his successor shall be elected and shall qualify. Any
action which may be taken at a meeting of the directors may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the directors and shall be filed with the Secretary
of the corporation.
10. A. Unless otherwise required by law, in the absence of fraud,
no contract or transaction between the corporation and one or more of its
directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for such reason, or solely because the
director or officer is present at or participates in the meeting of the Board
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(1) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors and the Board
authorizes the contract or transaction by a vote sufficient for such purpose
without counting the vote of the interested director or directors; or
(2) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors or
the shareholders.
B. Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors which authorizes a
contract or transaction specified in subsection A of this section.
C. No director or officer shall be liable to account to the
corporation for any profits realized by and from or through any such
transaction or contract of the corporation authorized, ratified or approved as
aforesaid by reason of the fact that he or any firm of which he is a member or
employee, or any corporation of which he is a shareholder, director, officer
or employee was interested in such transaction or contract.
MEETINGS OF THE BOARD
11. At all meetings of the Board of Directors a majority of the
directors in office shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Articles of Incorporation
or any amendment thereto or by these By-Laws.
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12. The first meeting of the Board of Directors held next after the
annual meeting of shareholders at which directors shall have been elected,
shall be held for the purpose of organization, the election of officers and
the transaction of any other business which may come before the meeting.
13. Regular meetings of the Board of Directors shall be held without
notice at such time and place as the Board of Directors may from time to time
determine.
14. Special meetings of the Board of Directors may be called by the
Chairman of the Board or by the President or, in the absence or disability of
the Chairman of the Board and the President, by a Vice President, or by any
two directors and may be held at the time and place designated in the call and
notice of the meeting. The Secretary, or other officer performing his duties,
shall give notice either personally or by telephone or by telegram at least
twenty-four hours before the meeting or by mail, at least three (3) days
before the meeting. Such notice may, but need not, specify the business to be
transacted or the purpose of the meeting. Meetings may be held at any time
and place without such notice if all the directors are present or if those not
present waive notice in writing, either before or after the meeting.
15. Any regular or special meeting may be adjourned to any other time
at the same or any other place by a majority of the directors present at the
meeting, whether or not a quorum shall be present at such meeting, and no
notice of the adjourned meeting shall be required other than announcement at
the meeting.
COMPENSATION OF DIRECTORS
16. Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular and special
meeting of the Board; but nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of board committees may be allowed
like compensation for attending committee meetings.
COMMITTEES
17. The Board of Directors may by vote of a majority of the whole
Board create an Executive Committee consisting of three or more of their own
number to hold office for such period as the Board shall determine. The
Chairman of the Board and the President shall each be a member of the
Executive Committee, and the Chairman of the Board shall be Chairman thereof
and the remaining members shall be elected by a majority vote of the whole
Board of Directors. The Board of Directors by a majority vote of the whole
Board may fill any vacancies in the Executive Committee and may designate one
or more alternate members who shall serve on the Executive Committee in the
absence of any regular member or members of such committee.
Such Executive Committee shall advise with and aid the officers of the
corporation in all matters concerning its interest and the management of its
business, and shall, between meetings of the Board of Directors, have all the
power of the Board of Directors in the management of the business and affairs
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of the corporation, and shall have power to authorize the seal of the
corporation to be affixed to all papers which may require it. The taking of
any action by the Executive Committee shall be conclusive evidence that the
Board of Directors was not in session at the time of such action. Any action
which may be taken at a meeting of the Executive Committee may be taken without
a meeting if a consent or consents in writing setting forth the action so taken
shall be signed by all of the members of the Committee and shall be filed with
the Secretary of the corporation.
The Executive Committee shall cause to be kept regular minutes of its
proceedings, which may be transcribed in the regular minute book of the
corporation, and all such proceedings shall be reported to the Board of
Directors at its next succeeding meeting, and shall be subject to revision or
alteration by the Board of Directors, provided that no rights of third persons
shall be affected by such revision or alteration. A majority of the Executive
Committee shall constitute a quorum at any meeting. The Executive Committee
may, from time to time, subject to the approval of the Board of Directors,
prescribe rules and regulations for the calling and conduct of meetings of the
Committee, and other matters relating to its procedure and the exercise of its
powers.
From time to time the Board of Directors may appoint any other committee
or committees consisting of one or more of their own number for any purpose or
purposes, which committee or committees shall have such powers and such tenure
of office as shall be specified in the resolution of appointment. The Board
of Directors by a majority vote of the whole Board may fill any vacancies on
any such committee or committees so appointed and may with respect to any such
committee designate one or more alternate members who shall serve in the
absence of any regular member or members on such committee. The chief
executive officer of the corporation shall be a member ex officio of all such
committees of the Board, unless the resolution appointing a particular
committee specifically excludes such ex officio membership by the chief
executive officer.
OFFICERS
18. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, a Treasurer, one or more Assistant
Treasurers, a Comptroller, and one or more Assistant Comptrollers. The Board
of Directors may at any regular or special meeting appoint from among their
own number, a Chairman of the Board of Directors.
19. The Board of Directors, at its first meeting after the election of
Directors by the shareholders, shall choose a President from among their own
number, and a Secretary, a Treasurer, a Comptroller, and such Vice Presidents,
Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers as it
shall deem necessary, none of whom need be members of the Board of Directors.
Such officers of the corporation shall hold office until the first meeting of
the Board of Directors after the next succeeding annual meeting of
shareholders and until their successors are chosen and qualified in their
stead. The President may not occupy any other such office. Except as above
set forth any two such offices may be occupied by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
20. The Board of Directors may appoint such other officers and agents
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as it shall deem necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
21. The salary or other compensation of the officers, other than the
assistant officers, shall be fixed by the Board of Directors. The salaries or
other compensation of the assistant officers and all other employees shall, in
the absence of any action by the Board, be fixed by the President or such
other officers or executives as may be designated by the President.
22. Any officers or agents elected or appointed by the Board of
Directors may be removed at any time, with or without cause, by vote of the
Board of Directors.
CHAIRMAN OF THE BOARD
23. In the event that the Board of Directors shall appoint a Chairman
of the Board of Directors as herein provided, he shall, unless otherwise
directed by the Board of Directors, be the chief executive officer of the
corporation, with authority, among other things, to sign in the name and on
behalf of the corporation any and all contracts, agreements, and other
instruments and documents pertaining to matters which arise in the normal
conduct or ordinary course of business of the corporation, shall hold office
until the next annual meeting of shareholders, shall preside at all meetings
of the Board of Directors, and shall have and exercise such powers and perform
such duties as may be assigned and conferred upon him by the Board of
Directors.
PRESIDENT
24. The President, at the request or in the absence or disability of a
Chairman of the Board of Directors functioning as the chief executive officer
of the corporation, shall be the chief executive officer of the corporation.
He shall, except as otherwise provided herein or by law, preside at all
meetings of the Board of Directors, the Executive Committee and the
shareholders. Subject to the control of the Board of Directors and any
Chairman of the Board of Directors functioning as chief executive officer of
the corporation, he shall have general supervision, direction and control of
the business and affairs of the corporation. He shall have such powers and
duties as are usually vested in the office of President of a corporation, and
shall perform such other and further duties as may from time to time be
assigned to him by the Board of Directors. He may sign in the name and on
behalf of the corporation any and all contracts, agreements and other
instruments and documents pertaining to matters which arise in the normal
conduct or ordinary course of business of the corporation.
VICE PRESIDENT AND VICE PRESIDENTS
25. If there be one Vice President he shall, at the request or in the
absence or disability of the President, have supervision, direction and
control of the business of the corporation and exercise the duties and
functions of the President. He shall also have such powers and perform such
other duties as may be prescribed from time to time by law, the Articles of
Incorporation or any amendment thereof, the By-Laws, the Board of Directors or
the President. If there be more than one Vice President, the Board of
Directors shall assign to each of them the general scope of their respective
duties, subject to detailed
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specification thereof made from time to time by the President, and the Board
shall designate which Vice President shall exercise the duties and functions
of the President during his absence or disability, and the Board may designate
such Vice President as the Executive Vice President. Any Vice President may
sign in the name and on behalf of the corporation contracts, agreements or
other instruments, and documents pertaining to matters which arise in the
normal conduct or ordinary course of business of the corporation, except in
cases where the signing thereof shall be expressly and exclusively delegated
by the Board of Directors or the Executive Committee to some other officer or
agent of the corporation.
SECRETARY AND ASSISTANT SECRETARIES
26. The Secretary shall attend all meetings of the Board of Directors,
the Executive Committee, and the shareholders, and shall record all votes and
the minutes of all proceedings in a book or books to be kept by him for that
purpose, and shall perform like duties for other board committees when
required. He shall give, or cause to be given, notice of all meetings of the
shareholders, the Board of Directors and the Executive Committee, and shall
perform such other duties as may be prescribed by the Board of Directors or
President. He shall be sworn to the faithful discharge of his duty. Any
records kept by him shall be the property of the corporation and shall be
restored to the corporation in case of his death, resignation, retirement or
removal from office. He shall be the custodian of the seal of the corporation
and, when authorized by the Board of Directors or by the President or a Vice
President, shall affix the seal to all instruments requiring it and shall
attest the same and/or the execution of such instruments as required. He
shall have control of the stock ledger, stock certificate book and other
formal records and documents relating to the corporate affairs of the
corporation.
The Assistant Secretary or Assistant Secretaries shall assist the
Secretary in the performance of his duties, and shall exercise and perform his
powers and duties in his absence or disability, and shall also exercise such
powers and duties as may be conferred or required by the Board of Directors,
or by the President.
TREASURER AND ASSISTANT TREASURERS
27. The Treasurer shall have the custody of the corporate funds and
securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
He shall disburse the funds of the corporation in such manner as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and directors at the regular
meetings of the Board of Directors, or whenever they may require it, a report
of cash receipts and disbursements and an account of all his transactions as
Treasurer.
He shall give the corporation a bond, if required by the Board of
Directors, in such sum and with such sureties as may be satisfactory to the
Board of Directors, for the faithful performance of the duties of his office,
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and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation. He shall perform all duties generally incident
to the office of the Treasurer, and shall have other powers and duties as from
time to time may be prescribed by law, by the By-Laws, or by the Board of
Directors.
The Assistant Treasurer or Assistant Treasurers shall assist the
Treasurer in the performance of his duties, and shall exercise and perform his
powers and duties in his absence or disability and shall also exercise and
perform such duties as may be conferred or required by the Board of Directors,
or by the President.
COMPTROLLER AND ASSISTANT COMPTROLLERS
28. The Comptroller of the corporation shall have full control of all
the books of account of the corporation and keep a true and accurate record of
all property owned by it, of its debts and its revenues and expenses and shall
keep all accounting records of the corporation, other than the records of
receipts and disbursements and those relating to the deposit or custody of
money and securities of the corporation which shall be kept by the Treasurer,
and shall also make reports to the President and directors (at the regular
meetings of the Board of Directors or whenever they may require them) and
others of or relating to the financial condition of the corporation.
The Assistant Comptroller or Assistant Comptrollers shall assist the
Comptroller in the performance of his duties and shall exercise and perform
his powers and duties in his absence or disability and shall also exercise
such powers and perform such duties as may be conferred or required by the
Board of Directors, or by the President.
VACANCIES
29. If the office of any director becomes vacant, for any reason,
including vacancies resulting from an increase in the number of directors, the
directors then in office, although less than a quorum, by a majority vote,
may fill such vacancy and each person so selected shall hold office for the
unexpired term in respect of which such vacancy occurred; provided, however,
that in case of any vacancy in the office of a director occurring among the
directors elected by the holders of the shares of Preferred Stock, as a class
pursuant to the Articles of Incorporation of the corporation as the same now
exist or may hereafter be amended, the remaining directors elected by the
holders of the shares of Preferred Stock, by affirmative vote of a majority
thereof, or the remaining director so elected if there be but one, may elect a
successor or successors to hold office for the unexpired term of the director
or directors whose place or places shall be vacant. Likewise in case of any
vacancy in the office of a director occurring among the directors elected by
the holders of the shares of Common Stock pursuant to the terms of Paragraph
10 of Article 6th of the Articles of Incorporation or any amendment thereto of
the corporation, the remaining directors elected by the holders of the shares
of Common Stock, by affirmative vote of a majority thereof, or the remaining
director so elected if there be but one, may elect a successor or successors
to hold office for the unexpired term of the director or directors whose place
or places shall be vacant.
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If the office of any officer of the corporation shall become vacant for
any reason, the Board of Directors may choose a successor or successors who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
RESIGNATIONS
30. Any officer or any director of the corporation may resign at any
time, such resignation to be made in writing and to take effect from the time
of its receipt by the corporation, unless some time be fixed in the
resignation, and then from that time.
DUTIES OF OFFICERS MAY BE DELEGATED
31. In case of the absence of any officer of the corporation, or for
any other reason the Board of Directors may deem sufficient, the Board of
Directors may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
32. (a) A director shall not be personally liable for monetary damages
as such for any action taken, or any failure to take any action, on or after
January 27, 1987 unless the director has breached or failed to perform the
duties of his office under Section 1721 of the Pennsylvania Business
Corporation Law and the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. The provisions of this subsection (a)
shall not apply to the responsibility or liability of a director pursuant to
any criminal statute, or the liability of a director for the payment of taxes
pursuant to local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, whether formal or informal, and whether brought by or in the
right of the corporation or otherwise, by reason of the fact that he was a
director, officer or employee of the corporation (and may indemnify any person
who was an agent of the corporation), or a person serving at the request of
the corporation as a director, officer, partner, fiduciary or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise to the fullest extent permitted by law, including without
limitation indemnification against expenses (including attorneys' fees and
disbursements), damages, punitive damages, judgements, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such proceeding unless the act or failure to act giving rise
to the claim for indemnification is finally determined by a court to have
constituted willful misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys'
fees and disbursements) actually and reasonably incurred in defending a civil
or criminal action, suit or proceeding on behalf of any person entitled to
indemnification under subsection (b) in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation, and may pay such expenses in
advance on behalf
9
<PAGE>
of any agent on receipt of a similar undertaking. The financial ability of
such person to make such repayment shall not be a prerequisite to the making
of an advance.
(d) For purposes of this Section: (i) the corporation shall be
deemed to have requested an officer, director, employee or agent to serve as
fiduciary with respect to an employee benefit plan where the performance by
such person of duties to the corporation also imposes duties on, or otherwise
involves services by, such person as a fiduciary with respect to the plan;
(ii) excise taxes assessed with respect to any transaction with an employee
benefit plan shall be deemed "fines"; and (iii) action taken or omitted by
such person with respect to an employee benefit plan in the performance of
duties for a purpose reasonably believed to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the corporation.
(e) To further effect, satisfy or secure the indemnification
obligations provided herein or otherwise, the corporation may maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security interest in any assets
or properties of the corporation, or use any other mechanism or arrangement
whatsoever in such amounts, at such costs, and upon such other terms and
conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be
deemed a contract between the corporation and the person entitled to
indemnification under this Section pursuant to which the corporation and each
such person intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall not limit, but may expand, any
rights or obligations in respect of any proceeding whether commenced prior to
or after such change to the extent such proceeding pertains to actions or
failures to act occurring prior to such change.
(g) The indemnification, as authorized by this Section, shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any statute, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action in
any official capacity and as to action in any other capacity while holding
such office. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall continue as to a person who has
ceased to be an officer, director, employee or agent in respect of matters
arising prior to such time and shall inure to the benefit of the heirs,
executors and administrators of such person.
STOCK OF OTHER CORPORATIONS
33. The Board of Directors shall have the right to authorize any
officer or other person on behalf of the corporation to attend, act and vote
at meetings of the stockholders of any corporation in which the corporation
shall hold or own stock, and to exercise thereat any and all the rights and
powers incident to the ownership of such stock and to execute waivers of
notice of such meetings and calls therefor; and authority may be given to
exercise the same either on one or more designated occasions, or generally on
all occasions until revoked by the
10
<PAGE>
Board of Directors. In the event that the Board of Directors shall fail to
give such authority, such authority may be exercised by the President in
person or by proxy appointed by him on behalf of the corporation.
CERTIFICATES OF STOCK
34. (a) Shares of the corporation shall be represented by
certificates or, except as limited by law, uncertificated shares.
(b) The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as they are
issued. They shall be in a form approved by the Board of Directors. They
shall exhibit the holder's name and number of shares and shall be signed by
the President or a Vice President and the Treasurer or an Assistant Treasurer
and the seal of the corporation shall be affixed thereto. Such certificates
may, in addition to the foregoing, be signed by a transfer agent or by a
registrar, who shall have been duly appointed for the purpose by the Board
of Directors. When such certificates are signed by a transfer agent or by
a registrar, the signature of the President, Vice President, Treasurer and
Assistant Treasurer upon any such certificates may be affixed by engraving,
lithographing or printing thereon a facsimile of such signature, in lieu of
actual signature, and such facsimile signature so engraved, lithographed or
printed thereon shall have the same force and effect, as if such officer had
actually signed the same. In case any officer who has signed, or whose
facsimile signature has been affixed to, any such certificate shall cease to
be such officer before such certificate shall have been issued by the
corporation, such certificate may nevertheless be issued, and delivered as
though the person who signed such certificate, or whose facsimile signature
has been affixed thereto, had not ceased to be such officer of the corporation
at the date of the issue.
(c) Uncertificated shares may be issued upon initial issuance of
shares or upon transfer of certificated shares after surrender thereof to the
corporation. Within a reasonable time after issuance or transfer of
uncertificated shares, the corporation shall send to the registered owner the
information required to be set forth on the face of the certificate by Section
34 (b) above.
TRANSFERS OF STOCK
35. Transfers of stock shall be made on the books of the corporation,
only by the person named in the certificate or by attorney, lawfully
constituted in writing, and upon surrender of the certificate therefor.
FIXING RECORD DATE
36. Unless otherwise restricted by law or the Articles of
Incorporation or any amendment thereto, the Board of Directors may fix a time,
not more than fifty days prior to the date of any meeting of shareholders, or
the date fixed for the payment of any dividend or distribution, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of shares will be made or go into effect, as a record date for the
determination of the shareholders entitled to notice of, or to vote at, any
such meeting, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to exercise the
rights in respect to any such change,
11
<PAGE>
conversion, or exchange of shares. In such case, only such shareholders as
shall be shareholders of record on the date so fixed shall be entitled to
notice of, or to vote at, such meeting or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed, as aforesaid. Unless a record date
is fixed by the Board of Directors for the determination of shareholders
entitled to receive notice of, or vote at, a shareholders' meeting,
transferees of shares which are transferred on the books of the corporation
within ten days next preceding the date of such meeting shall not be entitled
to notice of or to vote at such meeting.
REGISTERED SHAREHOLDERS
37. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not it shall have
express or other notice thereof, except as expressly otherwise provided by the
statutes of the Commonwealth of Pennsylvania.
LOST CERTIFICATES
38. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact, whereupon a new
certificate may be issued of the same tenor and for the same number of shares
as the one alleged to be lost or destroyed; provided, however, that the Board
of Directors may require, as a condition to the issuance of a new certificate,
a bond of indemnity in such form and amount and with such surety or sureties,
or without surety, as the Board of Directors shall determine to be sufficient
to indemnify the corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate or the
issuance of any such new certificate, and may also require the advertisement
of such loss in such manner as the Board of Directors may prescribe.
INSPECTION OF BOOKS
39. The Board of Directors shall have power to determine whether and
to what extent, and at what time and places and under what conditions and
regulations, the accounts and books of the corporation (other than the books
required by statute to be open to the inspection of shareholders), or any of
them, shall be open to the inspection of shareholders, and no shareholders
shall have any right to inspect any account or book or document of the
corporation, except as such right may be conferred by the statutes of the
Commonwealth of Pennsylvania or by resolution of the Board of Directors or of
the shareholders.
CHECKS, BONDS, DEBENTURES, NOTES AND OTHER INSTRUMENTS
40. All checks of the corporation shall be signed by such person or
persons (who may but need not be an officer or officers of the corporation) as
the Board of Directors may from time to time designate, either directly or
through such officers of the corporation as shall, by resolution of the Board
of Directors, be authorized to designate such person or persons. If
authorized by the Board of Directors, the signatures of such persons, or any
of them, upon any checks for the payment of money may be made by engraving,
12
<PAGE>
lithographing or printing thereon a facsimile of such signatures, in lieu of
actual signatures, and such facsimile signatures so engraved, lithographed
or printed thereon shall have the same force and effect as if such persons
had actually signed the same.
All bonds, debentures, notes and other instruments which are to have a
seal shall be signed on behalf of the corporation by the President or Vice
President, and the seal of the corporation, or a facsimile thereof if so
authorized by the Board of Directors, shall be impressed thereon or affixed
thereto by engraving, lithographing or printing and attested by the signature
of the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer. When such bonds, debentures, notes or other instruments are
authenticated by the signature of an officer of or other authorized signer for
an indenture trustee, the signature thereon of the President or Vice President
and/or the signature thereon of the Secretary or Assistant Secretary or the
Treasurer or Assistant Treasurer may, if so authorized by the Board of
Directors, be affixed by engraving, lithographing, or printing thereon a
facsimile of such one or more signatures, in lieu of actual signatures, and
such facsimile signatures so engraved, lithographed or printed thereon shall
have the same force and effect as if they were the actual signatures of and
were manually signed by such officers. In case any officer who has signed, or
whose facsimile signature has been affixed to, any such bonds,
debentures, notes or other instruments shall cease to be such officer before
such bonds, debentures, notes or other instruments shall have been delivered
by the corporation, such bonds, debentures, notes or other instruments may
nevertheless be issued and delivered as though the person who signed, or whose
facsimile signature has been affixed to, the same had not ceased to be such
officer of the corporation.
RECEIPT FOR SECURITIES
41. All receipts for stocks, bonds or other securities received by the
corporation shall be signed by the Treasurer or an Assistant Treasurer, or by
such other person or persons as the Board of Directors or Executive Committee
shall designate.
FISCAL YEAR
42. The fiscal year shall begin the first day of January in each year.
DIVIDENDS
43. Dividends upon the capital stock of the corporation may be
declared by the Board of Directors at any regular or special meeting, out of
surplus of the corporation legally available for such purpose.
The Board of Directors shall have power to fix and determine, and from
time to time to vary, the amount to be reserved as working capital; to
determine whether any, and if any, what part of any, surplus shall be declared
and paid as dividends, to determine the date or dates for the declaration or
payment of dividends; and to direct and determine the use and disposition of
any surplus. Before payment of any dividend or making any distribution of
surplus there may be set aside out of the surplus of the corporation such sum
or sums as the directors from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
13
<PAGE>
for such other purpose as the directors shall think conducive to the interests
of the corporation.
44. Reserved
NOTICES
45. Whenever under the provisions of law or the Articles of
Incorporation or any amendment thereto or these By-Laws notice is required to
be given to any director, officer or shareholder, it shall be sufficient if
given to such person either personally or by sending a copy thereof through
the mail or by telegram, charges prepaid, to the person's address appearing
on the books of the corporation or supplied by such person to the corporation
for the purpose of notice. If the notice is sent by mail or telegram, it
shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with the telegraph office for
transmission to such person.
Whenever any written notice is required to be given under the provisions
of law or the Articles of Incorporation or any amendment thereto or these By-
Laws, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
JUDGES OF ELECTION
46. In advance of any meeting of the shareholders, the Board of
Directors may appoint judges of election, who need not, except as otherwise
provided by statute, be shareholders, to act at such meeting or any
adjournment thereof. If judges of election be not so appointed, the chairman
of any such meeting may, and on the request of any shareholder or his proxy
shall, make such appointment at the meeting. The number of judges shall be
one or three. No person who is a candidate for office shall act as a judge.
In case any person appointed as judge fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made at the meeting by the Board
of Directors in advance of the convening of the meeting, or at the meeting by
the chairman. The judge or judges so appointed shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result, and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. Judges of
election shall perform their duties impartially, in good faith, to the best of
their ability, and as expeditiously as is practical. If there be three judges
of election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all. On the request of
the chairman of the meeting, or of any shareholder or proxy for a shareholder,
the judge or judges shall make a report in writing of any challenge or
question or matter determined by such judge or judges, and execute a
certificate of any fact found. Any such report or certificate shall be prima
facie evidence of the facts stated therein.
PARTICIPATION IN MEETINGS BY TELEPHONE
47. At any meeting of the Board of Directors or the Executive
Committee or any other committee designated by the Board of Directors, one or
more directors may participate in such meeting, in lieu of attendance in
person, by means of conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each
other.
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INAPPLICABILITY OF SECTION 910 OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
48. Effective December 23, 1983, Section 910 of the Pennsylvania
Business Corporation Law added by Pennsylvania Act No. 92 of 1983
(effective December 23, 1983) shall not be applicable to the corporation.
This By-Law 48 shall remain effective until rescinded by amendment to the
Articles of Incorporation.
PREVIOUS BY-LAWS REPEALED AND SUPERSEDED
49. All presently existing By-Laws of the corporation are hereby
repealed and superseded by these By-Laws; provided, however, that any actions
taken or rights which have accrued under prior By-Laws shall be valid and
enforceable.
AMENDMENTS
50. These By-Laws may be added to, altered, amended or repealed by the
shareholders at any annual or special meeting, or by the Board of Directors at
any regular or special meeting; provided, however, that any By-Laws made by
the Board of Directors may be altered or repealed by the shareholders.
**********************
The undersigned Secretary of
Pennsylvania Electric Company, a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania, hereby certifies that the foregoing
is a true and complete copy of the By-Laws of said Pennsylvania Electric
Company duly adopted and now in force.
WITNESS my hand and seal of said corporation this
day of
___________________________
SECRETARY
15
<PAGE>
Exhibit 4-B-35
METROPOLITAN EDISON COMPANY
TO
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee.
SUPPLEMENTAL INDENTURE
Dated as of July 15, 1995
IBJ SCHRODER BANK & TRUST COMPANY
hereby certifies that its Residence
and Post Office Address is
One State Street, Borough of Manhattan,
City of New York, New York 10004
IBJ SCHRODER BANK & TRUST COMPANY
By Barbara McCloskey<PAGE>
THIS SUPPLEMENTAL INDENTURE, made as of the fifteenth day of
July, 1995, between METROPOLITAN EDISON COMPANY, a corporation of
the Commonwealth of Pennsylvania, hereinafter sometimes referred
to as the "Company", party of the first part, and IBJ SCHRODER
BANK & TRUST COMPANY, a banking corporation of the State of New
York, as Trustee under the Mortgage hereinafter referred to,
hereinafter sometimes referred to as the "Trustee", party of the
second part;
WHEREAS, the Company has heretofore executed and delivered to
Guaranty Trust Company of New York, as Trustee, its Indenture
dated November 1, 1944 (hereinafter sometimes referred to as the
"Original Indenture"), which was duly amended and supplemented by
various indentures supplemental thereto, and which is hereby
further supplemented by this Supplemental Indenture, all of which
are herein collectively referred to as the "Mortgage"; and
WHEREAS, under date of March 6, 1981, J. Henry Schroder Bank
& Trust Company (now IBJ Schroder Bank & Trust Company) became
successor Trustee under the Mortgage; and
WHEREAS, the Company has entered into a Pollution Control
Facilities Loan Agreement (hereinafter sometimes referred to as
the "Agreement") dated as of July 15, 1995 with the Northampton
County Industrial Development Authority (hereinafter sometimes
referred to as the "Authority"), a public instrumentality of the
Commonwealth of Pennsylvania and a body corporate and politic,
organized by the County of Northampton, Pennsylvania and duly
existing under the Pennsylvania Economic Development Financing
Law, as amended, pursuant to which the proceeds of the issuance<PAGE>
- 2 -
by the Authority of its Pollution Control Revenue Refunding
Bonds, 1995 Series A (Metropolitan Edison Company Project)
(hereinafter sometimes referred to as the "Authority Bonds")
under a Trust Indenture dated as of July 15, 1995 (hereinafter
sometimes referred to as the "Authority Indenture") between the
Authority and United States Trust Company of New York, as Trustee
(hereinafter sometimes referred to as the "Authority Trustee")
are to be used to provide funds to pay a portion of the costs of
refunding the $28,500,000 principal amount of the Authority's
Pollution Control Revenue Bonds, 1985 Series A (Metropolitan
Edison Company Project) which provided financing for the
acquisition and construction of certain pollution control and
sewage and solid waste disposal facilities (hereinafter sometimes
referred to as the "Project Facilities") at the Company's
Portland Generating Station in Northampton County, Pennsylvania;
and
WHEREAS, to satisfy obligations under the Agreement, the
Company desires by this Supplemental Indenture to create, and to
define, in so far as the same is permitted by the Original
Indenture, the form of and certain other matters with respect to
the series of bonds to be issued under the Mortgage, to be
designated "First Mortgage Bonds, 6.10% Series A due 2021"
(hereinafter sometimes referred to as the "bonds of the New
Series"), and to provide for the issuance thereof only as fully
registered bonds; and<PAGE>
- 3 -
WHEREAS, all conditions and requirements necessary to make
this Supplemental Indenture a valid, binding and legal
instrument, in accordance with its terms, and for the purposes
herein expressed, have been done, performed and fulfilled, and
the execution and delivery hereof, in the form and terms hereof,
have been in all respects duly authorized:
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That
in consideration of the premises, and of the sum of One Dollar
($1.00) to the Company duly paid by the Trustee at or before the
ensealing and delivery of these presents, and for other valuable
considerations, the receipt whereof is hereby acknowledged, the
Company hereby covenants and agrees to and with the Trustee and
its successors in the trusts under the Mortgage, as follows:<PAGE>
- 4 -
ARTICLE I.
Creation of First Mortgage Bonds,
6.10% Series A due 2021, and
Specification of Certain Matters with Respect Thereto
SECTION 1. The Company hereby creates a series of bonds,
limited in principal amount, as herein provided, to be issued
under and secured by the Mortgage, and to be designated and to be
distinguished from bonds of all other series by the title "First
Mortgage Bonds, 6.10% Series A due 2021".
SECTION 2. Bonds of the New Series for the aggregate
principal amount of Twenty-eight Million Five Hundred Thousand
Dollars ($28,500,000) may forthwith be executed by the Company
and delivered to the Trustee and shall be authenticated by the
Trustee and delivered to or upon the order of the Company upon
receipt by the Trustee of the consideration and supporting
documentation required to be delivered to the Trustee in
connection with the issuance of bonds as provided in the
Mortgage.
SECTION 3. Each bond of the New Series shall be dated the
date of its authentication, and shall bear interest from the
interest payment date to which interest has been paid or duly
provided for with respect to bonds of the New Series next
preceding the date of its authentication, unless its
authentication date is (i) an interest payment date to which
interest has been paid, in which case it shall be dated and bear
interest from such date, (ii) prior to January 15, 1996, in which
case it shall be dated and bear interest from July 15, 1995, or<PAGE>
- 5 -
(iii) after the last day (other than a Saturday or Sunday or a
day on which the Trustee is authorized to be closed) of the
calendar month next preceding an interest payment date, in which
event it shall be dated and bear interest from the next interest
payment date. Unless previously redeemed or repurchased pursuant
to the provisions hereof and of the Mortgage, each bond of the
New Series shall be payable on July 15, 2021, in such coin or
currency of the United States of America as at the time of
payment is legal tender for the payment of public and private
debts, and shall bear interest payable in like coin or currency
at the rate of 6.10% per annum and from the respective dates
specified in the form of the bonds of the New Series, payable
semi-annually on January 15 and July 15 of each year (commencing
on January 15, 1996) until maturity, and at maturity at the
highest rate of interest borne by any of the bonds outstanding
under the Mortgage from such date of maturity until they shall be
paid or payment thereof shall have been duly provided for, and
(to the extent that payment of such interest is enforceable under
applicable law) interest on any overdue installment of interest
shall be payable at the highest rate of interest borne by any of
the bonds outstanding under said Mortgage. Except as otherwise
provided in any agreement entered into as hereinafter provided,
principal of and interest on the bonds of the New Series shall be
payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York.<PAGE>
- 6 -
The Company and the Trustee may enter into a written
agreement with an institutional holder of any bond of the New
Series providing, so long as such holder or any nominee of such
holder is the holder of any such bond, for payment of principal
thereof and interest thereon to be made by the Company directly
to such holder by check mailed to an address specified therefor
or by bank wire or interbank transfer of immediately available
funds for credit to a bank account specified therefor, or at such
other address as such holder shall have designated to the Company
and the Trustee in writing for such purpose, in each case without
surrender or presentation of such bond to the Company or the
Trustee or the making of any notation thereon, except that any
bond to be paid or redeemed in full shall be surrendered at the
office or agency of the Company in the Borough of Manhattan, The
City of New York for cancellation in order to receive payment,
provided that under such agreement such holder shall agree that
(a) before disposing of any such bond, such holder will make a
notation thereon of all principal payments previously made
thereon and of the date to which interest thereon has been paid
and (b) such holder will indemnify the Company and the Trustee
against any and all costs, expenses and liabilities arising out
of any payment of principal of any such holder's bonds without
presentment thereof to the Trustee. Any such agreement shall
also provide that the holder of the bonds shall, within three
business days of the payment of principal thereof or of interest
thereon or default therein, give to the Trustee written notice of<PAGE>
- 7 -
the receipt of the payment of such principal or interest or of a
default in such payment, as the case may be. The Company hereby
authorizes the Trustee (and any paying agent for the bonds of the
New Series) to comply with each such agreement so delivered to
the Trustee, notwithstanding the provisions of the Mortgage and
of the bonds of the New Series, to place a legend on any bonds of
the New Series which are subject to any such agreement describing
the terms thereof. The Trustee shall be entitled to presume,
without any obligation to verify independently, that the Company
has made all payments related to principal (other than payment or
redemption in full or repurchase of any bonds of the New Series)
and interest on bonds of the New Series directly to the holder
thereof who has entered into such agreement unless such holder
shall otherwise notify the Trustee.
The bonds of the New Series shall be issuable only as fully
registered bonds in the denominations of $5,000 and any integral
multiple thereof, and may be exchanged, in the manner and subject
to the limitations provided in the Mortgage, for a like aggregate
principal amount of bonds of the New Series of other authorized
denominations without charge except for any tax or taxes or other
governmental charges incident to such exchange.
Bonds of the New Series are subject to redemption at the
option of the Company, on any date on or after July 15, 2005, in
whole or in part by lot at the applicable optional redemption
price shown below as a percentage of the principal amount, plus
interest accrued to the redemption date:<PAGE>
- 8 -
Redemption Date Optional Redemption
(both dates inclusive) Price
July 15, 2005 through July 14, 2006 102%
July 15, 2006 through July 14, 2007 101%
July 15, 2007 and thereafter 100%
Bonds of the New Series shall be redeemable at the option of
the Company in whole, at any time prior to maturity, at 100% of
the principal amount thereof, together with accrued interest to
the redemption date if any one or more of the following events
shall
have occurred, as evidenced in each case by a certificate of the
Company delivered to the Trustee to the effect that one of such
events has occurred, and describing the same: (i) the Company
shall have determined that the continued operation of the Project
Facilities is impracticable, uneconomical or undesirable for any
reason; or (ii) all or substantially all of the Project
Facilities shall have been condemned or taken by a competent
authority; or (iii) the operation of the Project Facilities shall
have been enjoined or shall have been otherwise prohibited by, or
shall conflict with, any order or rule of any court of competent
jurisdiction or any federal, state or local regulatory body,
administrative agency or other governmental body having
jurisdiction over the Project Facilities.
Bonds of the New Series are subject to mandatory redemption
in whole, or, if less than all of the Authority Bonds are then
subject to mandatory redemption pursuant to Section 6.05 of the
Authority Indenture, in part in an amount equal to the Authority<PAGE>
- 9 -
Bonds then subject to redemption, upon a redemption date (which
date shall be fixed by the Company, after receipt by the Trustee
and the Company of a written demand for redemption by the
Authority Trustee, in a written notice mailed by the Company to
the Trustee and to the Authority Trustee at least forty-five (45)
days prior to the date so fixed) which shall be within 120 days
(or, in the absence of a written notice mailed by the Company, as
aforesaid, on the 120th day) after a final determination by a
court of competent jurisdiction or an administrative agency, to
the effect that, as a result of a failure by the Company to
observe or perform any covenant, condition or agreement on its
part to be observed or performed under the Agreement or the
inaccuracy of any representation by the Company under the
Agreement, the interest payable on Authority Bonds is includable
for Federal income tax purposes in the holder's gross income,
other than any holder of Authority Bonds who is a "substantial
user" of the Project Facilities or a "related person" within the
meaning of Section 147(a) of the Internal Revenue Code of 1986,
as amended (the "Code") to the extent necessary in order to
redeem Authority Bonds so that interest payable on the Authority
Bonds remaining outstanding after such redemption of Authority
Bonds would not, in the opinion of recognized bond counsel, be
included in the gross income of any holders, other than a holder
of an Authority Bond who is a "substantial user" of the Project
Facilities or a "related person" within the meaning of Section
147(a) of the Code. No determination by any court or<PAGE>
- 10 -
administrative agency shall be considered final unless the
Company shall have been given timely notice of the proceeding
which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through a
holder of an Authority Bond, to a degree it deems sufficient and
until the conclusion of any appellate review or rehearing sought
by any party to such proceeding or the expiration of the time for
seeking such review or hearing. The Company shall not redeem
bonds of the New Series if it receives a written cancellation of
the written demand from the Authority Trustee. Any such written
demand from the Authority Trustee or a cancellation of such
written demand shall be executed on behalf of such Authority
Trustee by its President or a Vice President or a trust officer
and shall be deemed received by the Trustee when delivered at its
corporate trust office in the Borough of Manhattan, The City of
New York. The Trustee may conclusively rely as to the truth of
the statements contained therein, upon any such demand or
cancellation.
Bonds of the New Series shall be subject to redemption as a
whole, as more fully provided in Section 8.08 of the Mortgage, at
100% of the principal amount thereof, together with accrued
interest to the redemption date, in the event (a) that all the
outstanding common stock of the Company shall be acquired by some
governmental body or instrumentality and the Company elects to
redeem all the bonds of all series, the redemption date in any
such event to be not more than one hundred twenty (120) days<PAGE>
- 11 -
after the date on which all said stock is so acquired, or (b)
that all or substantially all of the mortgaged property
constituting bondable property which at the time shall be subject
to the lien of the Mortgage as a first lien shall be released
from the lien of the Mortgage pursuant to the provisions thereof,
and available moneys in the hands of the Trustee, including any
moneys deposited by the Company for the purpose, are sufficient
to redeem all the bonds of all series at the redemption prices
(together with accrued interest to the date of redemption)
specified therein applicable to the redemption thereof upon the
happening of such event.
Notice with respect to any redemption of the bonds of the New
Series shall be mailed by the Company to the Authority, the
Authority Trustee and the Trustee not less than forty-five (45)
days and not more than ninety (90) days prior to the redemption
date and shall specify the matters set forth in the penultimate
sentence of the first paragraph and, if applicable, the second
sentence of the third paragraph of Section 8.02 of the Original
Indenture. Each holder of bonds of the New Series by the
acceptance of such bonds waives the right to any publication of a
notice of such redemption in any newspaper as specified in
Section 8.02 of the Original Indenture.
Any redemption of the bonds of the New Series may be effected
out of cash deposited pursuant to Sections 5.06, 5.07 and 5.08 or
Article IX of the Original Indenture, the premium, if any, and
accrued interest in case of any such redemption to be provided<PAGE>
- 12 -
for by the Company pursuant to the provisions of Section 8.07 of
the Original Indenture.
Bonds of the New Series are subject to mandatory repurchase
by the Company prior to maturity at 100% of the principal amount
thereof, plus interest accrued to the repurchase date, in whole,
upon a repurchase date (which date shall be fixed by the Company
in a written notice mailed by the Company to the Trustee and to
the Authority Trustee) which shall be within ten (10) days after
receipt by the Trustee and the Company of a written demand for
repurchase by the Authority Trustee, stating that the principal
of all Authority Bonds then outstanding under the Authority
Indenture has been declared to be immediately due and payable
pursuant to the provisions of Section 8.02 thereof, due to an
event of default under Section 8.01 A, B or C thereof.
SECTION 4. So long as any of the bonds of the New Series
shall be secured by the lien of the Mortgage, the term "minimum
provision for depreciation" when used for any purposes under the
Mortgage and with reference to any period of time shall mean an
amount computed pursuant to the provisions of Article I, Section
5 of the Supplemental Indenture dated March 1, 1952.
SECTION 5. So long as any of the bonds of the New Series
shall be secured by the lien of the Mortgage, clause (A)(II) of
Section 1.06 of the Original Indenture shall be deemed amended as
set forth in the quotation contained in Article I, Section 4 of
the Supplemental Indenture dated May 1, 1960.<PAGE>
- 13 -
SECTION 6. So long as any of the bonds of the New Series
shall be secured by the lien of the Mortgage, the first sentence
of Section 5.20 of the Original Indenture shall be deemed amended
as set forth in the quotation contained in Article I, Section 6
of the Supplemental Indenture dated December 1, 1950.
SECTION 7. So long as any of the bonds of the New Series
shall be secured by the lien of the Mortgage, the Company will
keep and perform the covenants and agreements set forth in
Article I, Section 7 of the Supplemental Indenture dated June 1,
1957, irrespective of whether any of the bonds of the series
created by such Supplemental Indenture shall be then outstanding.
SECTION 8. So long as any of the bonds of the New Series
shall be secured by the lien of the Mortgage, the Company will
keep and perform the covenants set forth in Article I, Section 4
of the Supplemental Indenture dated March 1, 1952, irrespective
of whether any of the bonds of the series created by such
Supplemental Indenture shall be then outstanding.
SECTION 9. The Company covenants and agrees that,
notwithstanding Section 2.03 of the Original Indenture, it will
not charge any sum for or in connection with any exchange or
registration of transfer of any bond of the New Series, but may
require the payment of a sum sufficient to cover any tax or taxes
or other governmental charges incident to any exchange or
registration of transfer thereof.<PAGE>
- 14 -
ARTICLE II.
Form of the Bonds of the New Series
The form of the bonds of the New Series and the Trustee's
authentication certificate to be endorsed thereupon shall be
substantially as follows, the denominations and numbers thereof
to be appropriately inserted:
[FORM OF FACE OF BONDS OF THE NEW SERIES]
METROPOLITAN EDISON COMPANY
(Incorporated under the laws
of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, 6.10% SERIES A
DUE July 15, 2021
$ No.
METROPOLITAN EDISON COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter called the "Company"),
for value received, hereby promises to pay to
or registered assigns, DOLLARS on
July 15, 2021, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of
payment is legal tender for the payment of public or private
debts, and to pay interest thereon semi-annually on January 15
and July 15 of each year (commencing on January 15, 1996), at the
rate of 6.10% per annum, at said office or agency in like coin or
currency, from July 15, 1995, or from the most recent interest
payment date to which interest has been paid or duly provided for
with respect to bonds of the aforesaid series (subject to certain<PAGE>
- 15 -
exceptions provided in the Mortgage hereinafter mentioned), until
this bond shall mature, according to its terms or on prior
redemption, repurchase or by declaration or otherwise, and at the
highest rate of interest borne by any of the bonds outstanding
under the Mortgage hereinafter mentioned from such date of
maturity until this bond shall be paid or the payment hereof
shall have been duly provided for, and (to the extent that
payment of such interest is enforceable under applicable law) to
pay interest on any overdue installment of interest at the
highest rate of interest borne by any of the bonds outstanding
under said Mortgage.
Reference is hereby made to the further provisions of this
bond set forth on the reverse hereof. Such further provisions
shall for all purposes have the same effect as though fully set
forth at this place.
This bond shall not become valid or obligatory for any
purpose until IBJ Schroder Bank & Trust Company, or its
successor, as Trustee under the Mortgage, shall have signed the
certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, METROPOLITAN EDISON COMPANY has caused
this bond to be signed in its name by its President or one of its
Vice Presidents and its corporate seal, or a facsimile thereof,
to be affixed hereto and attested by its Secretary or one of its
Assistant Secretaries.<PAGE>
- 16 -
DATED: METROPOLITAN EDISON
COMPANY
By
Vice President
ATTEST:
Secretary<PAGE>
- 17 -
[FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE
ON BONDS OF THE NEW SERIES]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein
designated, provided for in the within-mentioned Mortgage.
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
By
Authorized Officer
[FORM OF REVERSE OF BONDS OF THE NEW SERIES]
METROPOLITAN EDISON COMPANY
(Incorporated under the laws
of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, 6.10% SERIES A DUE July 15, 2021
This bond is one of an issue of bonds of the Company (herein
referred to as the "bonds"), not limited in principal amount
except as in the Mortgage hereinafter mentioned provided,
issuable in series, which different series and bonds of the same
series may mature at different times, may bear interest at
different rates, and may otherwise vary as in the Mortgage
hereinafter mentioned provided, and is one of a series known as
its First Mortgage Bonds, 6.10% Series A due July 15, 2021
(herein referred to as "bonds of the New Series"), all bonds of<PAGE>
- 18 -
all series issued and to be issued under and equally and ratably
secured (except in so far as any sinking or analogous fund,
established in accordance with the provisions of the Mortgage
hereinafter mentioned, may afford additional security for the
bonds of any particular series) by an Indenture dated November 1,
1944 (herein, together with all indentures supplemental thereto,
called the "Mortgage"), under which IBJ Schroder Bank & Trust
Company is successor Trustee (herein called the "Trustee"), and
to which Mortgage reference is made for a description of the
property mortgaged, the nature and extent of the security, the
rights of the holders of the bonds and of the Company in respect
thereof, the rights, duties and immunities of the Trustee, and
the terms and conditions upon which the bonds are, and are to be,
issued and secured.
The Mortgage contains provisions permitting the holders of
not less than seventy-five per centum (75%) in principal amount
of all the bonds at the time outstanding, determined and
evidenced as provided in the Mortgage, or in case the rights
under the Mortgage of the holders of bonds of one or more, but
less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of the
outstanding bonds of such one or more series affected, except
that if any such action would affect the bonds of two or more
series, the holders of not less than seventy-five per centum
(75%) in principal amount of outstanding bonds of such two or<PAGE>
- 19 -
more series, which need not include seventy-five per centum (75%)
in principal amount of outstanding bonds of each of such series,
determined and evidenced as provided in the Mortgage, on behalf
of the holders of all the bonds, to waive any past default under
the Mortgage and its consequences except a completed default, as
defined in the Mortgage, in respect of the payment of the
principal of or interest on any bond or default arising from the
creation of any lien ranking prior to or equal with the lien of
the Mortgage on any of the mortgaged property, subject to the
condition that, in the case the rights of the holders of less
than all of the series of bonds outstanding shall be affected, no
waiver of any past default or its consequences shall be effective
unless approved by the holders of not less than a majority of all
the bonds at the time outstanding. The Mortgage also contains
provisions permitting the Company and the Trustee, with the
consent of the holders of not less than seventy-five per centum
(75%) in principal amount of all the bonds at the time
outstanding, determined and evidenced as provided in the
Mortgage, or in case the rights under the Mortgage of the holders
of bonds of one or more, but less than all, of the series of
bonds outstanding shall be affected, then with the consent of the
holders of not less than seventy-five per centum (75%) in
principal amount of the outstanding bonds of such one or more
series affected, except that if any such action would affect the
bonds of two or more series, the holders of not less than
seventy-five per centum (75%) in principal amount of outstanding<PAGE>
- 20 -
bonds of such two or more series, which need not include seventy-
five per centum (75%) in principal amount of outstanding bonds of
each of such series, determined and evidenced as provided in the
Mortgage, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Mortgage or modifying in any manner the rights
of the holders of the bonds and coupons; provided, however, that
no such supplemental indenture shall (i) extend the fixed
maturity of any bonds, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount
thereof, without the consent of the holder of each bond so
affected, or (ii) reduce the aforesaid percentage of bonds, the
holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of all bonds then
outstanding, or (iii) permit the creation of any lien ranking
prior to or equal with the lien of the Mortgage on any of the
mortgaged property, or (iv) deprive the holder of any outstanding
bond of the lien of the Mortgage on any of the mortgaged
property. Any such waiver or consent by the holder of this bond
(unless effectively revoked as provided in the Mortgage) shall be
conclusive and binding upon such holder and upon all future
holders of this bond, irrespective of whether or not any notation
of such waiver or consent is made upon this bond.
No reference herein to the Mortgage and no provision of this
bond or of the Mortgage shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the<PAGE>
- 21 -
principal of and interest on this bond at the time and place and
at the rate and in the coin or currency herein prescribed.
The bonds of the New Series are issuable only in fully
registered form and in denominations of $5,000, and any integral
multiple of $5,000.
In the manner and subject to the limitations provided in the
Mortgage, bonds of such series may be exchanged for a like
aggregate principal amount of bonds of such series of other
authorized denominations without charge except for any tax or
taxes or other governmental charges incident to such exchange.
Bonds of the New Series are subject to redemption at the
option of the Company, on any date on or after July 15, 2005, in
whole or in part by lot at the applicable optional redemption
price shown below as a percentage of the principal amount, plus
interest accrued to the redemption date:
Redemption Date Optional Redemption
(both dates inclusive) Price
July 15, 2005 through July 14, 2006 102%
July 15, 2006 through July 14, 2007 101%
July 15, 2007 and thereafter 100%
Bonds of the New Series shall be redeemable at the option of
the Company in whole, at any time prior to maturity at 100% of
the principal amount thereof, together with accrued interest to
the redemption date if any one or more of the following events
shall have occurred, as evidenced in each case by a certificate
of the Company delivered to the Trustee to the effect that one of
such events has occurred, and describing the same: (i) the<PAGE>
- 22 -
Company shall have determined that the continued operation of the
pollution control and sewage and solid waste disposal facilities
(the "Project Facilities") which are the subject of a Pollution
Control Facilities Loan Agreement (the "Agreement") dated as of
July 15, 1995 entered into by the Company with the Northampton
County Industrial Development Authority (the "Authority") is
impracticable, uneconomical or undesirable for any reason; or
(ii) all or substantially all of the Project Facilities shall
have been condemned or taken by a competent authority; or (iii)
the operation of the Project Facilities shall have been enjoined
or shall have been otherwise prohibited by, or shall conflict
with, any order or rule of any court of competent jurisdiction or
of any federal, state or local regulatory body, administrative
agency or other governmental body having jurisdiction over the
Project Facilities.
Bonds of the New Series are subject to mandatory redemption
in whole, or, if less than all of the Authority Bonds are then
subject to mandatory redemption pursuant to Section 6.05 of the
Authority Indenture, in part in an amount equal to the Authority
Bonds then subject to redemption, upon a redemption date (which
date shall be fixed by the Company, after receipt by the Trustee
and the Company of a written demand for redemption by the
Authority Trustee, in a written notice mailed by the Company to
the Trustee and to the Authority Trustee at least forty-five (45)
days prior to the date so fixed) which shall be within 120 days
(or, in the absence of a written notice mailed by the Company, as<PAGE>
- 23 -
aforesaid, on the 120th day) after a final determination by a
court of competent jurisdiction or an administrative agency, to
the effect that, as a result of a failure by the Company to
observe or perform any covenant, condition or agreement on its
part to be observed or performed under the Agreement or the
inaccuracy of any representation by the Company under the
Agreement, the interest payable on Authority Bonds is includable
for Federal income tax purposes in the holder's gross income,
other than any holder of Authority Bonds who is a "substantial
user" of the Project Facilities or a "related person" within the
meaning of Section 147(a) of the Internal Revenue Code of 1986,
as amended (the "Code") to the extent necessary in order to
redeem Authority Bonds so that interest payable on the Authority
Bonds remaining outstanding after such redemption of Authority
Bonds would not, in the opinion of recognized bond counsel, be
included in the gross income of any holders, other than a holder
of an Authority Bond who is a "substantial user" of the Project
Facilities or a "related person" within the meaning of Section
147(a) of the Code. No determination by any court or
administrative agency shall be considered final unless the
Company shall have been given timely notice of the proceeding
which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through a
holder of an Authority Bond, to a degree it deems sufficient and
until the conclusion of any appellate review or rehearing sought
by any party to such proceeding or the expiration of the time for<PAGE>
- 24 -
seeking such review or hearing. The Company shall not redeem
bonds of the New Series if it receives a written cancellation of
the written demand from the Authority Trustee. Any such written
demand from the Authority Trustee or a cancellation of such
written demand shall be executed on behalf of such Authority
Trustee by its President or a Vice President or a trust officer
and shall be deemed received by the Trustee when delivered at its
corporate trust office in the Borough of Manhattan, The City of
New York. The Trustee may conclusively rely as to the truth of
the statements contained therein, upon any such demand or
cancellation.
Bonds of the New Series shall be subject to redemption as a
whole, as more fully provided in Section 8.08 of the Mortgage, at
100% of the principal amount thereof, together with accrued
interest to the redemption date, in the event (a) that all the
outstanding common stock of the Company shall be acquired by some
governmental body or instrumentality and the Company elects to
redeem all the bonds of all series, the redemption date in any
such event to be not more than one hundred twenty days after the
date on which all said stock is so acquired, or (b) that all or
substantially all of the mortgaged property (constituting
bondable property as defined in the Mortgage) which at the time
shall be subject to the lien of the Mortgage as a first lien
shall be released from the lien of the Mortgage pursuant to the
provisions thereof, and available moneys in the hands of IBJ
Schroder Bank & Trust Company, or its successor, as Trustee,<PAGE>
- 25 -
including any moneys deposited by the Company for the purpose,
are sufficient to redeem all the bonds of all series at the
redemption prices (together with accrued interest to the date of
redemption) specified therein applicable to the redemption
thereof upon the happening of such event.
Notice with respect to any redemption of the bonds of the New
Series shall be mailed by the Company to the Authority, the
Authority Trustee (as defined hereinbelow) and the Trustee not
less than forty-five (45) days and not more than ninety (90)
days prior to the redemption date and shall specify the matters
set forth in the penultimate sentence of the first paragraph and,
if applicable, the second sentence of the third paragraph of
Section 8.02 of the Original Indenture. Each holder of bonds of
the New Series by the acceptance of such bonds waives the right
to any publication of a notice of such redemption in any
newspaper as specified in Section 8.02 of the Original Indenture.
Redemption of the bonds of the New Series may be effected,
out of cash deposited pursuant to Sections 5.06, 5.07 and 5.08,
and Article IX of the Mortgage, the premium, if any, and accrued
interest in case of any such redemption to be paid out of cash
deposited by the Company for the purpose.
The Mortgage provides that any notice of redemption of bonds
may state that it is subject to the receipt of the redemption
moneys by the Trustee before the date fixed for redemption and
such notice shall be of no effect unless such moneys are received
before such date.<PAGE>
- 26 -
The Mortgage provides that if the Company shall deposit with
the Trustee in trust for the purpose, funds sufficient to pay the
principal of all of the bonds of any series, or such of the bonds
of any series as have been or are to be called for redemption and
premium, if any, thereon, and all interest payable on such bonds
(or portions) to the date on which they become due and payable at
maturity or upon redemption or otherwise, and complies with the
other provisions of the Mortgage in respect thereof, then from
the date of such deposit such bonds (or portions) shall no longer
be secured by the lien of the Mortgage.
The Mortgage provides that, upon any partial redemption of a
fully registered bond, upon surrender thereof endorsed for
transfer, new bonds of the same series and of authorized
denominations in principal amount equal to the unredeemed portion
of such fully registered bond will be delivered without charge in
exchange therefor.
The principal hereof may be declared or may become due prior
to the express date of the maturity hereof on the conditions, in
the manner and at the time set forth in the Mortgage, upon the
occurrence of a completed default as in the Mortgage provided.
Bonds of the New Series are subject to mandatory repurchase
by the Company prior to maturity at 100% of the principal amount
thereof, plus interest accrued to the repurchase date, in whole,
upon a repurchase date (which date shall be fixed by the Company
in a written notice mailed by the Company to the Trustee and to
the Authority Trustee) which shall be within ten (10) days after<PAGE>
- 27 -
receipt by the Trustee and the Company of a written demand for
repurchase by the Authority Trustee, stating that the principal
of all Authority Bonds then outstanding under the Authority
Indenture has been declared to be immediately due and payable
pursuant to the provisions of Section 8.02 thereof, due to an
event of default under Section 8.01 A, B or C thereof.
No recourse shall be had for the payment of the principal or
interest on this bond, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the
Mortgage or under or upon any obligation, covenant or agreement
contained in the Mortgage, against any incorporator, or any past,
present or future subscriber to the capital stock, stockholder,
officer or director, as such, of the Company or of any
predecessor or successor corporation, either directly or through
the Company or any predecessor or successor corporation, under
any present or future rule of law, statute or constitution or by
the enforcement of any assessment or otherwise, all such
liability of incorporators, subscribers, stockholders, officers
and directors, as such, being waived and released by the holder
and owner hereof by the acceptance of this bond and being
likewise waived and released by the terms of the Mortgage.
ARTICLE III.
Subjecting Certain Property Specifically
to the Lien of the Mortgage
AND THIS SUPPLEMENTAL INDENTURE FURTHER WITNESSETH: That in
consideration of the premises, and of the sum of One Dollar<PAGE>
- 28 -
($1.00) to the Company duly paid by the Trustee at or before the
ensealing and delivery of these presents, Metropolitan Edison
Company has granted, bargained, sold, aliened, enfeoffed,
released, conveyed, assigned, transferred, pledged, set over and
confirmed, and by these presents does grant, bargain, sell,
alien, enfeoff, release, convey, assign, transfer, pledge, set
over and confirm, unto IBJ Schroder Bank & Trust Company, as
Trustee, and to its successors and assigns forever, all of the
following described property, to wit:
All property, real, personal and mixed, tangible and
intangible, owned by the Company, or in which it owns an
interest, on the date of the execution hereof, or (subject to the
provisions of Article XIII of the Mortgage) which may hereafter
be acquired by it, wheresoever situate, and necessary or
appropriate to the public utility plant and business of the
Company and to its operation as a going concern, except such
property as is hereinafter expressly excepted and excluded from
the lien and operation of the Mortgage. The property
covered by the lien of the Mortgage shall include particularly,
among other property, without prejudice to the generality of the
language hereinbefore or hereinafter contained, the following
described property:
WHITEFORD SUBSTATION SITE
ALL THAT CERTAIN tract of land in the Township of
Sprinettsbury, County of York and Commonwealth of Pennsylvania,
being the same premises granted and conveyed unto Metropolitan<PAGE>
- 29 -
Edison Company by York Zamias Limited Partnership, by Deed dated
February 6, 1990, and recorded in Record Book 105N, page 731,
York County Records.<PAGE>
- 30 -
SEVENTH STREET SUBSTATION SITE
ALL THOSE CERTAIN lots or pieces of ground in the City of
Reading, County of Berks and Commonwealth of Pennsylvania, being
the same premises granted and conveyed unto The Reading Electric
Light and Power Company by:
(1) Arthur V. Arrowsmith and Mary Arrowsmith, his
wife, by Deed dated May 28, 1891, and recorded
in Deed Book Volume 210, page 415, Berks County
records; and
(2) Andrew J. Hain and Ellen Hain, his wife, by
Deed dated October 15, 1885, and recorded in
Deed Book Volume 164, page 180, Berks County
Records; and
(3) George Culver and Ella Culver, his wife, by
Deed dated December 5, 1890, and recorded in
Deed Book Volume 191, page 553, Berks County
Records; and
(4) Sarah A. Heck, by Deed dated February 27, 1886,
and recorded in Deed Book Volume 167, page 25,
Berks County Records; and
(5) Anna E. Clymer, widow of William Clymer,
deceased, by Deed dated June 16, 1893, and
recorded in Deed Book Volume 222, page 119,
Berks County Records.
The Reading Electric Light and Power Company conveyed all its
real property unto Metropolitan Edison Company by Deed dated<PAGE>
- 31 -
October 16, 1967, and recorded May 5, 1993 in Record Book 2412,
page 1638, Berks County Records.
(Formerly all the above real property was leased by The
Reading Electric Light and Power Company to Metropolitan Electric
Company (to which the Company is successor) and was included in
Indenture dated November 1, 1944 and therein identified as Parcel
Number Thirty-Four.)
THREE MILE ISLAND EMERGENCY OFFSITE FACILITY
ALL THAT CERTAIN tract of land in the Township of
Susquehanna, County of Dauphin and Commonwealth of Pennsylvania,
being the same premises granted and conveyed unto Metropolitan
Edison Company, et al, by Dauphin County Industrial Development
Authority, by Deed dated December 20, 1993, and recorded January
6, 1994 in Record Book 2143, page 74, Dauphin County Records.
SECOND.
Also all power houses, plants, buildings, distributing
stations, substations, transforming stations and other structures
for or used for or intended for use in connection with the
manufacture, generation, transmission or furnishing of
electricity, and the machinery, fixtures, fittings and equipment
thereof or appurtenant thereto, including, without limiting the
generality of the foregoing, all dynamos, engines, turbines,
boilers, pumps, generators, transformers, converters, regulators,
exciters, meters, shafting and belting and all other apparatus
and appliances for generating or producing electricity, which are
owned by the Company, or in which it owns an interest, on the<PAGE>
- 32 -
date of the execution hereof or (subject to the provisions of
Article XIII of the Mortgage) which may be hereafter acquired by
it, wheresoever situate, and necessary or appropriate to the
public utility plant and business of the Company and to its
operation as a going concern, except such property as is
hereinafter expressly excepted and excluded from the lien and
operation of the Mortgage.
THIRD.
Also all transmission and distribution lines and systems,
whether underground, surface or overhead, for or used for or
intended for use in connection with the transmission and
distribution of electricity, and the conduits, poles, cross arms,
insulators, transformers, cables, wires, meters, fixtures, tools,
supplies and all other apparatus and appliances connected
therewith or appurtenant thereto which are owned by the Company,
or in which it owns an interest, on the date of the execution
hereof or (subject to the provisions of Article XIII of the
Mortgage) which may be hereafter acquired by it.
FOURTH.
Also all franchises, immunities, privileges, permits,
licenses, easements and rights of way authorizing, permitting or
facilitating the erection, maintenance or operation upon, over or
under any streets, avenues, highways, alleys, lanes, walks, parks
and other public places in any county, city, borough, town,
township or village, or upon, over or under any private property
of poles, towers, wires, conduits, mains, pipes or other<PAGE>
- 33 -
structures or apparatus for the transmission or distribution of
electricity or otherwise relating to the business of producing,
transmitting and distributing electricity, which are owned by the
Company, or in which it owns an interest, on the date of the
execution hereof or (subject to the provisions of Article XIII of
the Mortgage) which may be hereafter acquired by it.
GENERAL SUBJECT CLAUSES.
SUBJECT, HOWEVER, to the reservations, mining rights,
exceptions, conditions, limitations and restrictions contained in
the several deeds, franchises and contracts or other instruments
through which the Company acquired or claims title to or enjoys
the use of said properties; to statutory and municipal
requirements relating to land and buildings; to the rights of the
public and others in streets, roads and highways, opened, or laid
out but unopened, crossing or bounding any of the said parcels;
to the rights of owners abutting thereon in any stream, drain or
ditch crossing or bounding any of the said parcels; to the rights
of the Commonwealth of Pennsylvania in and to any of the lands
located in any streams or rivers abutting any of the said
parcels; and to the rights of electric, gas, telephone, telegraph
and pipeline companies to maintain and operate pole lines and gas
and petroleum products, mains and pipes over or through any of
the said parcels or on or in the streets, roads or highways
abutting thereon as the same existed at the time of acquisition
of said parcels by the Company; and to any easements visible on
the ground at the time of such acquisition, but not evidenced by
recorded agreements or grants.<PAGE>
- 34 -
EXCEPTED PROPERTY.
EXPRESSLY EXCEPTING AND EXCLUDING, HOWEVER, from this
Supplemental Indenture and from the lien and operation hereof,
all property of every kind and type excepted and excluded from
the Mortgage by subdivisions II (to the extent that such real
estate is still owned by the Company) and III under the heading
"Excepted Property" therein to the extent there indicated and
reference is hereby made to said Mortgage for a description
thereof.
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in any wise appertaining to the
property covered by this Supplemental Indenture or intended so to
be, or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of
Section 9.01 of the Mortgage) the tolls, rents, revenues, issues,
earnings, income, product and profits thereof, and all the
estate, right, title and interest and claim whatsoever, at law as
well as in equity, which the Company now has or may hereafter
acquire in and to the property covered by this Supplemental
Indenture or intended so to be and every part and parcel thereof.
TO HAVE AND TO HOLD the property covered by this Supplemental
Indenture or intended so to be to the Trustee, its successors and
assigns, forever, upon and subject to the trusts, uses,
conditions, covenants and provisions of the Mortgage.<PAGE>
- 35 -
ARTICLE IV.
Miscellaneous
SECTION 1. The Trustee, for itself and its successors in
said trusts, hereby accepts the conveyance, transfer and
assignment of the property included in this Supplemental
Indenture upon the trusts, terms and conditions expressed in the
Mortgage.
SECTION 2. In addition to any other credit, payment or
satisfaction to which the Company is entitled in respect of the
bonds of the New Series, the Company shall be entitled to credits
against amounts otherwise payable in respect of bonds of the New
Series in an amount corresponding to the principal amount of any
Authority Bond surrendered to the Authority Trustee by the
Company or the Authority, or purchased by the Authority Trustee,
for cancellation and the amount of money held by the Authority
Trustee and available and irrevocably designated for the payment
of principal or redemption price of, and/or interest on, the
Authority Bonds, other than payments of principal or interest on
the Authority Bonds made under the Bond Insurance Policy (as
defined in the Authority Indenture) and the Authority Trustee
shall make notation on the bonds of the New Series of any such
credit.
SECTION 3. This Supplemental Indenture shall be
simultaneously executed in several counterparts, and all such<PAGE>
- 36 -
counterparts executed and delivered, each as an original, shall
constitute but one and the same instrument.
SECTION 4. The recitals of fact contained herein and in the
bonds of the New Series (other than the Trustee's certificate of
authentication) shall be taken as the statements of the Company
and the Trustee assumes no responsibility for the correctness of
the same.
IN WITNESS WHEREOF, METROPOLITAN EDISON COMPANY, party of the
first part, has caused this instrument to be signed in its name
and behalf by a Vice President and its corporate seal to be
hereunto affixed and attested by its Secretary, and IBJ SCHRODER
BANK & TRUST COMPANY, party of the second part, in token of its
acceptance of the trust hereby created, has caused this
instrument to be signed in its name and behalf by an Assistant
Vice President and its corporate seal to be hereunto affixed and
attested by its corporate seal to be hereunto affixed and
attested by its Assistant Secretary, all as of the day and year
first above written.
METROPOLITAN EDISON COMPANY
By
R.S. Zechman, Vice President
Attest:
W. C. Matthews, Secretary<PAGE>
- 37 -
Signed, sealed and delivered by said
Metropolitan Edison Company in the
presence of: Jeffrey A. Franklin
Eleanor C. Reed<PAGE>
- 38 -
IBJ SCHRODER BANK & TRUST COMPANY
By
Barbara McCloskey, Assistant Vice
President
Attest:
Kerry A. Monaghan, Assistant Secretary
Signed, sealed and delivered by said
IBJ Schroder Bank & Trust Company
in the presence of:
COMMONWEALTH OF PENNSYLVANIA )
: ss.
COUNTY OF BERKS )
On the day of July, 1995, before me, a Notary Public
of the State and County aforesaid, the undersigned officer,
personally appeared R. S. ZECHMAN, who, being by me duly sworn,
acknowledged himself to be a Vice President of Metropolitan
Edison Company, a corporation, and that he as such Vice President
of the said corporation, being duly authorized to do so, executed
the foregoing Supplemental Indenture for the purposes therein
contained by signing the name of the corporation by himself as
Vice President.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
Kathryn M. Zweizig<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF KINGS )
On the 24th day of July, 1995, before me, a Notary Public of
the State and County aforesaid, the undersigned officer,
personally appeared BARBARA MCCLOSKEY, who, being by me duly
sworn, acknowledged herself to be Assistant Vice President of IBJ
SCHRODER BANK & TRUST COMPANY, a corporation, and that she as
such Assistant Vice President of the said corporation, being duly
authorized to do so, executed the foregoing Supplemental
Indenture for the purposes therein contained by signing the name
of the corporation by herself as Assistant Vice President.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
Jane Shaheen<PAGE>
Exhibit 4-C-11
EXECUTED IN COUNTERPARTS
OF WHICH THIS IS COUNTERPART
NO.
PENNSYLVANIA ELECTRIC COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK, SUCCESSOR TRUSTEE
____________________
SUPPLEMENTAL INDENTURE
(First Mortgage Bonds, 5.35% and 5.80% Series A due 2010
and 2020)
(First Mortgage Bonds, 6.05% Series B due 2025 and)
(First Mortgage Bonds, 5.35% Series C due 2010)
____________________
Dated as of November 1, 1995<PAGE>
TABLE OF CONTENTS
PAGE
Parties 1
Recitals 1
Granting Clauses 4
Excepted Property 7
Habendum 7
Subject Clause 7
Grant in Trust 8
ARTICLE I
BONDS OF THE NEW SERIES
SECTION 1.01 Creation of bonds of the New Series 8
SECTION 1.02 Dating of bonds of the New Series;
date from which bonds of the New Series bear
interest 9
SECTION 1.03 Payment of principal and interest; record
dates 10
SECTION 1.04 Redemption of bonds of the New Series A 11
SECTION 1.05 Redemption of bonds of the New Series B 14
SECTION 1.06 Redemption of bonds of the New Series C 17
SECTION 1.07 Limitations on transfer 19
SECTION 1.08 No charge for exchange or transfer 19
ARTICLE II
FORM OF THE BONDS OF THE NEW SERIES
SECTION 2.01 Form of the bonds of the New Series A 20
SECTION 2.02 Form of the bonds of the New Series B 24
SECTION 2.03 Form of the bonds of the New Series C 29
ARTICLE III
USE OF FACSIMILE SIGNATURES AND CORPORATE SEAL
Manual or facsimile signatures and corporate seal on bonds
of the New Series 34
ARTICLE IV
CREDITS WITH RESPECT TO PRINCIPAL OF AND
INTEREST ON BONDS OF EACH SERIES OF THE NEW SERIES
SECTION 4.01 Credits with respect to bonds of New Series A 35
SECTION 4.02 Credits with respect to bonds of New Series B 36
SECTION 4.03 Credits with respect to bonds of New Series C 37<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 5.01 Covenants of the Company 38
SECTION 5.02 Indemnification of Trustee 39
SECTION 5.03 Table of contents and titles of Articles
not part 39
SECTION 5.04 Original Indenture confirmed as amended
and supplemented 39
SECTION 5.05 Execution in counterparts 39
Names and Addresses of debtor and secured party 39
Testimonium 40
Signatures and seals 40
Acknowledgments 41
Certificate of Residence 42
Schedule A A-1<PAGE>
SUPPLEMENTAL INDENTURE, dated as of November 1, 1995,
made and entered into by and between PENNSYLVANIA ELECTRIC
COMPANY, a corporation of the Commonwealth of Pennsylvania
(hereinafter sometimes called the "Company"), party of the first
part, and UNITED STATES TRUST COMPANY OF NEW YORK, a bank and
trust company organized under the Banking Law of the State of New
York (hereinafter sometimes called the "Trustee"), as successor
trustee under the Mortgage and Deed of Trust hereinafter referred
to, party of the second part.
WHEREAS, the Company heretofore executed and delivered
its Mortgage and Deed of Trust (hereinafter called the "Original
Indenture"), dated as of the first day of January, 1942, to
Bankers Trust Company, as trustee, to secure the First Mortgage
Bonds of the Company, unlimited in aggregate principal amount and
issuable in series, from time to time, in the manner and subject
to the conditions set forth in the Mortgage (as hereinafter
defined) and by said Original Indenture granted and conveyed unto
the Trustee, upon the trusts, uses and purposes specifically
therein set forth, certain real estate, franchises and other
property therein described, including property acquired after the
date thereof, except as therein otherwise provided; and
WHEREAS, United States Trust Company of New York is now
acting as successor trustee under the Original Indenture and the
indentures amendatory and supplemental thereto hereinafter
enumerated; and
WHEREAS, indentures supplemental to and amendatory of
the Original Indenture have been executed and delivered by the
Company and the Trustee, namely, Supplemental Indentures dated
March 7, 1942, April 28, 1943, August 20, 1943, August 30, 1943,
August 31, 1943, April 26, 1944, April 19, 1945, October 25,
1945, as of June 1, 1946, as of November 1, 1949, as of
October 1, 1951, as of August 1, 1952, as of June 1, 1953, as of
March 1, 1954, as of April 30, 1956, as of May 1, 1956, as of
March 1, 1958, as of August 1, 1959, as of May 1, 1960, as of
May 1, 1961, October 1, 1964, November 1, 1966, as of June 1,
1967, as of August 1, 1968, as of May 1, 1969, as of April 1,
1970, as of December 1, 1971, as of July 1, 1973, as of June 1,
1974, as of December 1, 1974, as of August 1, 1975, as of
December 1, 1975, as of April 1, 1976, as of June 1, 1976, as of
July 1, 1976, as of November 1, 1976, as of November 30, 1977, as
of December 1, 1977, as of June 1, 1978, as of June 1, 1979, as
of September 1, 1984, as of December 1, 1985, as of December 1,
1986, as of May 1, 1989, as of December 1, 1990, as of March 1,
1992 and as of June 1, 1993, respectively; and the Original
Indenture as supplemented and amended by said Supplemental
Indentures and by this Supplemental Indenture is hereinafter
referred to as the "Mortgage"; and
WHEREAS, the Original Indenture and certain of said
Supplemental Indentures have been duly recorded in mortgage books
in the respective Offices of the Recorders of Deeds in and for
the Counties of Pennsylvania in which this Supplemental Indenture
1<PAGE>
is to be recorded, and in the mortgage records of Garrett County,
Maryland; and
WHEREAS, the Mortgage provides for the issuance of
bonds thereunder in one or more series, the form of each series
of bonds and of the coupons to be attached to the coupon bonds,
if any, of each series to be substantially in the forms set forth
therein with such omissions, variations and insertions as are
authorized or permitted by the Mortgage and determined and
specified by the Board of Directors of the Company; and
WHEREAS, the Company has entered into a Pollution
Control Facilities Loan Agreement dated as of November 1, 1995
(the "Cambria Agreement") with The Cambria County Industrial
Development Authority (the "Cambria Authority"), a public
instrumentality of the Commonwealth of Pennsylvania and a body
corporate and politic organized under the Pennsylvania Economic
Development Financing Law (formerly known as the Pennsylvania
Industrial and Commercial Development Authority Law, as amended)
(the "Act"), pursuant to which the proceeds of the issuance by
the Cambria Authority of its (i) "Pollution Control Revenue
Refunding Bonds, 1995 Series A (Pennsylvania Electric Company
Project)" in the aggregate principal amount of $32,310,000 (the
"Cambria 1995 Series A Bonds") and (ii) "Pollution Control
Revenue Refunding Bonds, 1995 Series B (Pennsylvania Electric
Company Project)" in the aggregate principal amount of
$25,000,000 (the "Cambria 1995 Series B Bonds") (the Cambria 1995
Series A Bonds and the Cambria 1995 Series B Bonds are
hereinafter sometimes collectively referred to as the "Cambria
Authority Bonds") issued under the Cambria Authority's Trust
Indenture dated as of November 1, 1995 (the "Cambria Authority
Indenture") to United States Trust Company of New York, as
trustee (the "Cambria Authority Trustee"), are to be used to pay
a portion of the costs of refunding, through optional redemption,
the Cambria Authority's (i) "Pollution Control Revenue Bonds,
1977 Series A (Pennsylvania Electric Company Project)" in the
aggregate principal amount of $12,310,000, (ii) "Pollution
Control Revenue Bonds, 1985 Series A (Pennsylvania Electric
Company Project)" in the aggregate principal amount of
$20,000,000, and (iii) "Environmental Improvement Revenue Bonds,
1986 Series B (Pennsylvania Electric Company Project)" in the
aggregate principal amount of $25,000,000, all of which were
issued to finance certain air or water pollution control
facilities or sewage or solid waste disposal facilities (the
"Cambria Project Facilities") at or in connection with various
electric generating stations owned in whole or in part by the
Company in various counties in Pennsylvania; and
WHEREAS, the Company has entered into a Pollution
Control Facilities Loan Agreement dated as of November 1, 1995
(the "Indiana Agreement") with the Indiana County Industrial
Development Authority (the "Indiana Authority"), a public
instrumentality of the Commonwealth of Pennsylvania and a body
corporate and politic organized under the Act, pursuant to which
the proceeds of the issuance by the Indiana Authority of its
"Pollution Control Revenue Refunding Bonds, 1995 Series
2<PAGE>
(Pennsylvania Electric Company Project)" in the aggregate
principal amount of $12,000,000 (the "Indiana 1995 Series Bonds")
issued under the Indiana Authority's Trust Indenture dated as of
November 1, 1995 (the "Indiana Authority Indenture") to United
States Trust Company of New York, as trustee (the "Indiana
Authority Trustee"), are to be used to pay a portion of the costs
of refunding, through optional redemption, the Indiana
Authority's "Pollution Control Revenue Bonds, 1976 Series A
(Pennsylvania Electric Company Homer City Project)" in the
aggregate principal amount of $12,000,000 which were issued to
finance certain air or water pollution control facilities or
sewage or solid waste disposal facilities (the "Indiana Project
Facilities" and together with the Cambria Project Facilities, the
"Project Facilities") at or in connection with the Homer City
Station owned in part by the Company and located in Center
Township, Indiana County, Pennsylvania; and
WHEREAS, to satisfy its obligations under the Cambria
Agreement and the Indiana Agreement to repay loans from the
Cambria Authority with respect to the Cambria 1995 Series A Bonds
and the Cambria 1995 Series B Bonds and from the Indiana
Authority with respect to the Indiana 1995 Series Bonds, the
Company by appropriate corporate action in conformity with the
terms of the Mortgage has duly determined to create three
separate series of bonds, which shall be designated as "First
Mortgage Bonds, 5.35% and 5.80% Series A due 2010 and 2020"
(hereinafter sometimes referred to as the "New Series A Bonds" or
the "bonds of the New Series A" or the "bonds of the New Series A
due 2010 and 2020"), "First Mortgage Bonds, 6.05% Series B due
2025" (hereinafter sometimes referred to as the "New Series B
Bonds" or the "bonds of the New Series B" or the "bonds of the
New Series B due 2025") and "First Mortgage Bonds, 5.35% Series C
due 2010" (hereinafter sometimes referred to as the "New Series C
Bonds" or the "bonds of the New Series C" or the "bonds of the
New Series C due 2010"), respectively, which said bonds of the
New Series A, bonds of the New Series B and bonds of the New
Series C are to be substantially in the forms set forth in
Article II hereof with the insertion of numbers, denominations,
dated dates, maturities, redemption prices and interest rates as
determined in accordance with the terms of the Mortgage; and
WHEREAS, all acts and things prescribed by law and by
the charter and by-laws of the Company necessary to make the
bonds of the New Series A, the bonds of the New Series B and the
bonds of the New Series C (hereinafter sometimes collectively
referred to as the "bonds of the New Series" or individually
referred to as the "bonds of each series of the New Series") when
executed by the Company and authenticated by the Trustee, as in
the Mortgage provided, valid, binding and legal obligations of
the Company, entitled in all respects to the security of the
Mortgage, have been performed or will have been performed prior
to execution of such bonds of the New Series by the Company and
authentication thereof by the Trustee; and
3<PAGE>
WHEREAS, provision is made in Sections 5.11 and 17.01
of the Original Indenture for such further instruments and
indentures supplemental to the Original Indenture as may be
necessary or proper (a) to carry out more effectually the
purposes of the Original Indenture; (b) expressly to subject to
the lien of the Original Indenture any property acquired after
the date of the Original Indenture and intended to be covered
thereby, with the same force and effect as though included in the
granting clauses thereof; (c) to set forth the terms and
provisions of any series of bonds to be issued and the forms of
the bonds and coupons, if any, of such series; (d) to add such
further covenants, restrictions or conditions for the protection
of the mortgaged and pledged property and the holders of bonds as
the Board of Directors of the Company and the Trustee shall
consider to be for the protection of the holders of bonds; and
(e) to cure any ambiguity of the Original Indenture which shall
not adversely affect the interests of the holders of the bonds;
and
WHEREAS, the Company has acquired additional property;
and it is desired to add certain further covenants, restrictions
and conditions for the protection of the mortgaged and pledged
property and the holders of bonds which the Board of Directors of
the Company and the Trustee consider to be for the protection of
the holders of bonds; and the Company desires to issue the bonds
of the New Series; and the Company and the Trustee deem it
advisable to enter into this Supplemental Indenture for the
purposes of carrying out the purposes of the Original Indenture,
of expressly subjecting additional property to the lien of the
Mortgage, of setting forth the terms and provisions of the New
Series A Bonds, the New Series B Bonds and the New Series C Bonds
and the forms of the bonds of the New Series A, the bonds of the
New Series B and the bonds of the New Series C, and of setting
forth such further covenants, restrictions and conditions; and
WHEREAS, it was intended by the execution and delivery
of the Original Indenture and the aforesaid Supplemental
Indentures to subject to the lien of the Original Indenture, and
to grant to the Trustee a security interest in, all of the
property, real, personal and mixed, then owned by the Company or
thereafter acquired by the Company, as and to the extent set
forth therein, subject to the provisions thereof, except such
property as was therein expressly excepted and excluded from the
lien and operation thereof; and it is the intention of the
parties hereto, by the execution and delivery of this
Supplemental Indenture, to provide the Trustee with further
assurances by also creating in favor of the Trustee a security
interest, pursuant to the provisions of the Uniform Commercial
Code, in such of the aforesaid property as may by law be
subjected to such a security interest, except such thereof as is
expressly excepted and excluded as aforesaid or herein; and
4<PAGE>
WHEREAS, the execution and delivery of this
Supplemental Indenture have been duly authorized by the Board of
Directors of the Company at a meeting duly called and held
according to law, and all conditions and requirements necessary
to make this Supplemental Indenture a valid, binding and legal
instrument in accordance with its terms, for the purposes herein
expressed, and the execution and delivery hereof, in the form and
terms hereof, have been in all respects duly authorized;
NOW, THEREFORE, in order further to secure the payment
of the principal and interest of all bonds issued and to be
issued under the Original Indenture and any indenture
supplemental thereto, including this Supplemental Indenture,
according to their tenor, purport and effect and the performance
and observance of all the covenants and conditions in said bonds
and the Original Indenture and indentures supplemental thereto,
including this Supplemental Indenture, contained, and for and in
consideration of the premises and of the sum of One Dollar
($1.00), lawful money of the United States of America, to the
Company duly paid by the Trustee at or before the unsealing and
delivery hereof, and other valuable consideration, the receipt
whereof is hereby acknowledged, and intending to be legally bound
hereby, the Company has executed and delivered this Supplemental
Indenture, and hath granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over and
confirmed, and granted a security interest therein, and by these
presents doth grant, bargain, sell, release, convey, assign,
transfer, mortgage, pledge, set over and confirm, and grant a
security interest therein, subject to the provisions of the
Mortgage, unto United States Trust Company of New York, as
Trustee, and to its successors in the trust and to its and their
assigns forever, all the properties of the Company described or
mentioned below, that is to say:
All property, real, personal and mixed, tangible and
intangible, owned by the Company on the date of the execution
hereof or which may be hereafter acquired by it (except such
property as is in the Original Indenture or in any indenture
supplemental thereto, including this Supplemental Indenture,
expressly excepted from the lien and operation of the Original
Indenture).
The property covered by this Supplemental Indenture
shall include particularly, among other property, without
prejudice to the generality of the language hereinbefore or
hereinafter contained, the following described property:
All the electric generating stations, station sites,
stations, electric reserve generating stations, substations,
substation sites, steam plants, hot water plants, hydro-electric
stations, hydro-electric station sites, electric transmission
lines, electric distribution systems, steam distribution systems,
hot water distribution systems, regulator stations, regulator
station sites, office buildings, storeroom buildings, warehouse
buildings, boiler houses, plants, plant sites, service plants,
5<PAGE>
coal, other mineral land mining rights and privileges, coal
storage yards, pole yards, electric works, power houses,
generators, turbines, boilers, engines, furnaces, dynamos,
buildings, structures, transformers, meters, towers, poles, tower
lines, cables, pole lines, tanks, storage holders, regulators,
pipes, pipe-lines, mains, pipe fittings, valves, drips,
connections, tunnels, conduits, gates, motors, wires, switch
racks, switches, brackets, insulators, and all equipment,
improvements, machinery, appliances, devices, appurtenances,
supplies and miscellaneous property for generating, producing,
transforming, converting, storing and distributing electric
energy, steam and hot water, together with all furniture and
fixtures located in the aforesaid buildings, and all land on
which the same or any part thereof are situated;
And all of the real estate, leases, leaseholds (except
the last day of the term of each lease and leasehold), and lands
owned by the Company, including land located on or adjacent to
any river, stream or other water, together with all flowage
rights, flooding rights, water rights, riparian rights, dams and
dam sites and rights, flumes, canals, races, raceways, head works
and diversion works;
And all of the municipal and other franchises,
licenses, consents, ordinances, permits, privileges, rights,
servitudes, easements and rights-of-way and other rights in or
relating to real estate or the occupancy of the same, owned by
the Company;
And all of the other property, real, personal or mixed,
owned by the Company, forming a part of any of the foregoing
property or used or enjoyed or capable of being used or enjoyed
in connection therewith or in anywise appertaining thereto,
whether developed or undeveloped, or partially developed, or
whether now equipped and operating or not and wherever situated,
and all of the Company's right, title and interest in and to the
land on which the same or any part thereof are situated or
adjacent thereto;
And all rights for or relating to the construction,
maintenance or operation of any of the foregoing property
through, over, under or upon any public streets or highways or
other lands, public or private;
And (except as in the Original Indenture or in any
indenture supplemental thereto, including this Supplemental
Indenture, expressly excepted) all the right, title and interest
of the Company presently held or hereafter acquired in and to all
other property of any of the foregoing kinds or any other kind or
nature appertaining to and/or used and/or occupied and/or enjoyed
in connection with any property hereinbefore described;
6<PAGE>
And all the items of the kinds hereinabove mentioned
including those thereof now owned by the Company and those
thereof hereafter acquired by the Company;
Without limitation of the generality of the foregoing,
all of the parcels of land and interests in land situate as set
forth in Schedule A, attached hereto and hereby made a part
hereof, and buildings and improvements thereon erected, owned by
the Company, and whether used or not used in connection with the
Company's operations, all of which real estate was conveyed to
the Company or its predecessors in title as set forth by the
conveyances set forth in said Schedule A to which conveyances
reference is made for a more particular description;
Also all other land and the buildings and improvements
thereon erected hereafter acquired;
TOGETHER WITH all and singular the tenements,
hereditaments and appurtenances belonging or in anywise
appertaining to the aforesaid property or any part thereof, with
the reversion and reversions, remainder or remainders and
(subject to the provisions of Section 9.01 of the Original
Indenture) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which
the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel
thereof.
IT IS HEREBY AGREED by the Company that all the
property, rights and franchises hereafter acquired by the Company
(except any in the Original Indenture or in any indenture
supplemental thereto, including this Supplemental Indenture,
expressly excepted) shall (subject to the provisions of Section
9.01 of the Original Indenture), to the extent permitted by law,
be as fully embraced within this Supplemental Indenture as if
such property, rights and franchises were now owned by the
Company and/or specifically described herein and conveyed hereby;
PROVIDED THAT, in addition to the reservations and
exceptions herein elsewhere contained, any property hereinbefore
mentioned which has been released by the Trustee from the lien of
the Mortgage or disposed of by the Company in accordance with the
provisions of the Mortgage prior to the date of the execution and
delivery of this Supplemental Indenture, and the following, are
not and are not intended to be granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed hereunder or to have a security interest
created therein, and are hereby expressly excepted from this
Supplemental Indenture and from the lien and operation of the
Mortgage, viz.: (1) cash and shares of stock and certificates or
evidence of interest therein and obligations (including bonds,
notes and other securities) not in the Original Indenture or in
any indenture supplemental thereto, including this Supplemental
7<PAGE>
Indenture, specifically pledged or covenanted so to be or
deposited or delivered hereunder or under any other supplemental
indenture; (2) any goods, wares, merchandise, equipment,
materials or supplies held or acquired for the purpose of sale or
resale in the usual course of business or for consumption in the
operation of any properties of the Company, and automobiles and
trucks; and (3) all judgments, contracts, accounts and choses in
action, the proceeds of which the Company is not obligated as in
the Original Indenture provided to deposit with the Trustee
hereunder; provided, however, that the property and rights
expressly excepted from this Supplemental Indenture in the above
subdivisions (2) and (3) shall (to the extent permitted by law)
cease to be so excepted, in the event that the Trustee or a
receiver or trustee shall take possession of the mortgaged and
pledged property in the manner provided in Article X of the
Original Indenture, by reason of the occurrence of a completed
default, as defined in said Article X of the Original Indenture;
TO HAVE AND TO HOLD all such properties, real, personal
and mixed, granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over or confirmed,
or in which a security interest has been granted, by the Company
as aforesaid, or intended so to be, unto the Trustee and its
successors in the trust created in the Original Indenture and its
and their assigns forever;
SUBJECT, HOWEVER, to the reservations, exceptions,
conditions, limitations and restrictions contained in the several
deeds, servitudes, franchises and contracts or other instruments
through which the Company acquired and/or claims title to and/or
enjoys the use of the properties mentioned above; and subject
also to such servitudes, easements, rights and privileges in,
over, on, and/or through said properties as have been granted to
other persons prior to the date of the execution and delivery of
this Supplemental Indenture; and subject also to encumbrances of
the character in the Original Indenture defined as "excepted
encumbrances" insofar as the same may attach to any of the
property embraced herein;
IN TRUST NEVERTHELESS upon the terms, trusts, uses and
purposes specifically set forth in the Mortgage;
AND IT IS HEREBY FURTHER COVENANTED AND AGREED, and the
Company and the Trustee have mutually agreed, in consideration of
the premises, as follows:
ARTICLE I
BONDS OF THE NEW SERIES
SECTION 1.01. (a) The Company hereby creates a series
of serial bonds, limited in principal amount, as hereinafter
8<PAGE>
provided, to be issued under and secured by the Mortgage, to be
designated and to be distinguished from bonds of all other series
by the title "First Mortgage Bonds, 5.35% and 5.80% Series A due
2010 and 2020." The aggregate principal amount of the bonds of
the New Series A which may be initially authenticated and
delivered shall be limited to THIRTY-TWO MILLION THREE HUNDRED
TEN THOUSAND DOLLARS ($32,310,000.00) and shall mature and bear
interest and be limited in aggregate principal amount as to each
maturity as set forth below:
Aggregate Principal Maturity Date Interest Rate
Amount (November 1) Per Annum
$12,310,000 2010 5.35%
$20,000,000 2020 5.80%
Except as provided in Sections 2.03, 2.04, 2.05, 8.03 and 17.04
of the Original Indenture, no bonds of the New Series A shall be
authenticated and delivered after such initial issue. Bonds of
the New Series A of each maturity shall be issued only as one
single registered Bond.
(b) The Company hereby creates a series of bonds,
limited in principal amount, as hereinafter provided, to be
issued under and secured by the Mortgage, to be designated and to
be distinguished from bonds of all other series by the title
"First Mortgage Bonds, 6.05% Series B due 2025." The aggregate
principal amount of the bonds of the New Series B which may be
initially authenticated and delivered shall be limited to TWENTY-
FIVE MILLION DOLLARS ($25,000,000.00). Except as provided in
Sections 2.03, 2.04, 2.05, 8.03 and 17.04 of the Original
Indenture, no bonds of the New Series B shall be authenticated
and delivered after such initial issue. Bonds of the New
Series B shall be issued only as one single registered Bond.
(c) The Company hereby creates a series of bonds,
limited in principal amount, as hereinafter provided, to be
issued under and secured by the Mortgage, to be designated and to
be distinguished from bonds of all other series by the title
"First Mortgage Bonds, 5.35% Series C due 2010." The aggregate
principal amount of the bonds of the New Series C which may be
initially authenticated and delivered shall be limited to TWELVE
MILLION DOLLARS ($12,000,000.00). Except as provided in Sections
2.03, 2.04, 2.05, 8.03 and 17.04 of the Original Indenture, no
bonds of the New Series C shall be authenticated and delivered
after such initial issue. Bonds of the New Series C shall be
issued only as one single registered Bond.
SECTION 1.02. Each bond of each series of the New
Series shall be dated the date of its authentication and shall
bear interest from the interest payment date to which interest
has been paid or duly provided for next preceding the date of
9<PAGE>
authentication, unless the date of authentication (i) is an
interest payment date to which interest has been paid, in which
event it shall be dated and bear interest from the date of
authentication, (ii) is prior to May 1, 1996, in which event it
shall be dated and bear interest from November 1, 1995, or (iii)
is after the fifteenth day (whether or not a business day) of the
calendar month next preceding an interest payment date and prior
to an interest payment date, in which event it shall be dated and
bear interest from the next interest payment date.
SECTION 1.03. (a) Unless previously redeemed pursuant
to the provisions hereof and of the Mortgage, each bond of the
New Series A shall be payable on the applicable maturity thereof,
in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of
public and private debts, and shall bear interest, payable in
like coin or currency, at the applicable rate per annum specified
in Section 1.01(a) hereof and from the date specified in
Section 1.02 hereof, payable semi-annually on May 1 and November
1 of each year until paid or provided for, with interest on
overdue interest payable at the applicable rate per annum
specified in Section 1.01(a) hereof. Principal of, interest on
and redemption premium, if any, on the bonds of the New Series A
shall be payable at the "office" or agency of the Company in the
Borough of Manhattan, The City of New York. Interest on the
bonds of the New Series A shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
(b) Unless previously redeemed pursuant to the
provisions hereof and of the Mortgage, each bond of the New
Series B shall be payable on the maturity thereof, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, and shall bear interest, payable in like coin or
currency, at the rate per annum specified in Section 1.01(b)
hereof and from the date specified in Section 1.02 hereof,
payable semi-annually on May 1 and November 1 of each year until
paid or provided for, with interest on overdue interest payable
at the rate per annum specified in Section 1.01(b) hereof.
Principal of, interest on and redemption premium, if any, on the
bonds of the New Series B shall be payable at the "office" or
agency of the Company in the Borough of Manhattan, The City of
New York. Interest on the bonds of the New Series B shall be
computed on the basis of a 360-day year consisting of twelve
30-day months.
(c) Unless previously redeemed pursuant to the
provisions hereof and of the Mortgage, each bond of the New
Series C shall be payable on the maturity thereof, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, and shall bear interest, payable in like coin or
currency, at the rate per annum specified in Section 1.01(c)
hereof and from the date specified in Section 1.02 hereof,
10<PAGE>
payable semi-annually on May 1 and November 1 of each year until
paid or provided for, with interest on overdue interest payable
at the rate per annum specified in Section 1.01(c) hereof.
Principal of, interest on and redemption premium, if any, on the
bonds of the New Series C shall be payable at the "office" or
agency of the Company in the Borough of Manhattan, The City of
New York. Interest on the bonds of the New Series C shall be
computed on the basis of a 360-day year consisting of twelve
30-day months.
SECTION 1.04. (a) Each bond of the New Series A
maturing in 2020 shall be subject to redemption prior to maturity
at the option of the Company, on and after November 1, 2005, in
whole or in part by lot, at the applicable optional redemption
price shown below as a percentage of the principal amount, plus
interest accrued to the applicable redemption date:
Redemption Date Optional Redemption
(both dates inclusive) Price
November 1, 2005 through October 31, 2006 102%
November 1, 2006 through October 31, 2007 101%
November 1, 2007 and thereafter 100%
Except as described under Sections 1.04(b) and 1.04(d) hereof,
the bonds of the New Series A maturing in 2010 are not subject to
redemption prior to the maturity date.
(b) Each bond of the New Series A shall also be
subject to extraordinary redemption at the option of the Company
in whole at any time at an extraordinary redemption price of 100%
of the principal amount of the bonds of the New Series A to be
redeemed, plus interest accrued to the date of redemption, if:
(i) the Company shall have determined that
the continued operation of the Cambria Project Facilities is
impracticable, uneconomical or undesirable for any reason;
(ii) all or substantially all of the
Cambria Project Facilities shall have been condemned or
taken by a competent authority;
(iii) the operation of the Cambria Project
Facilities shall have been enjoined or shall have been
otherwise prohibited by, or shall conflict with, any order
or rule of any court of competent jurisdiction or any
federal, state or local regulatory body, administrative
agency or other governmental body having jurisdiction over
the Cambria Project Facilities; or
(iv) (A) all of the outstanding common stock of
the Company shall be acquired by some governmental body or
instrumentality and the Company elects to redeem all of the bonds
issued under the Mortgage or (B) all or substantially all of the
11<PAGE>
mortgaged property constituting bondable property which at the
time shall be subject to the lien of the Mortgage as a first lien
shall be released from the lien of the Mortgage pursuant to the
provisions thereof, and available moneys in the hands of the
Trustee are sufficient to redeem all of the bonds issued under
the Mortgage.
(c) Notwithstanding the provisions of clauses (a)
or (b) of this Section 1.04, bonds of the New Series A may be
redeemed only if the Company directs the Cambria Authority to
effect a redemption of an equal principal amount of the Cambria
1995 Series A Bonds of like maturity and interest rate.
(d) Bonds of the New Series A are subject to
mandatory redemption in whole, or, if less than all of the
Cambria 1995 Series A Bonds are then subject to mandatory
redemption pursuant to Section 6.05 of the Cambria Authority
Indenture, in part, in an amount equal to the Cambria 1995
Series A Bonds of like maturity and interest rate then subject to
redemption, upon a redemption date (which date shall be fixed by
the Company, after receipt by the Trustee and the Company of a
written demand for redemption by the Cambria Authority Trustee,
in a written notice mailed by the Company to the Trustee and to
the Cambria Authority Trustee at least forty-five (45) days prior
to the date so fixed) which shall be within 120 days (or, in the
absence of a written notice mailed by the Company as aforesaid,
on the 120th day) after a final determination upon the issuance
of a published or private ruling or technical advice by the
Internal Revenue Service or a judicial decision in a proceeding
by any court of competent jurisdiction in the United States, to
the effect that, as a result of a failure by the Company to
perform or observe any covenant, condition or agreement on its
part to be performed or observed under the Cambria Agreement or
the inaccuracy of any representation by the Company under the
Cambria Agreement, the interest paid or payable on any Cambria
1995 Series A Bonds to any owner of such Cambria 1995 Series A
Bonds for federal income tax purposes, other than a "substantial
user" of the financed facilities or a "related person" within the
meaning of Section 147(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), is or was includable in the gross income
for federal income tax purposes under the Code, to the extent
necessary in order that the interest payable on the Cambria 1995
Series A Bonds remaining outstanding after such redemption of the
Cambria 1995 Series A Bonds would not, in the opinion of
nationally recognized bond counsel, be included in the gross
income of any holder thereof, other than a holder of a Cambria
1995 Series A Bond who is a "substantial user" of the financed
facilities or a "related person" within the meaning of Section
147(a) of the Code. No determination by any court or
administrative agency shall be considered final for the purposes
of this paragraph unless the Company shall have been given timely
notice of the proceeding which resulted in such determination and
an opportunity to participate in such proceeding, either directly
or through a holder of a Cambria 1995 Series A Bond to the degree
12<PAGE>
the Company deems sufficient and until the conclusion of any
appellate review or rehearing sought by any party to such
proceeding or the expiration of the time for seeking such review
or rehearing. The Company shall not redeem any bonds of the New
Series A if it receives a written cancellation of the written
demand from the Cambria Authority Trustee. Any such written
demand from the Cambria Authority Trustee or a cancellation of
such written demand shall be executed on behalf of such Cambria
Authority Trustee by its President or a Vice President or a trust
officer and shall be deemed received by the Trustee when
delivered at its corporate trust office in the Borough of
Manhattan, The City of New York. The Trustee may conclusively
rely as to the truth of the statements contained therein, upon
any such demand or cancellation.
(e) Notice with respect to any redemption of the
bonds of the New Series A shall be mailed by the Company to the
Cambria Authority, the Cambria Authority Trustee and the Trustee
not less than thirty (30) days and not more than ninety (90) days
prior to the redemption date and shall specify the matters set
forth in the penultimate sentence of the first paragraph, and if
applicable, the second sentence of the third paragraph of Section
8.02 of the Original Indenture.
(f) If at the time of the mailing of any such
notice of redemption pursuant to subsection (a) or (b) of this
Section 1.04, the Company shall not have irrevocably directed the
Trustee to apply funds deposited with the Trustee, or held by it
available to be used, for the redemption of bonds of the New
Series A, to redeem all of bonds of the New Series A called for
redemption, including accrued interest to the date fixed for
redemption, such notice shall state that it is subject to the
receipt of the redemption moneys by the Trustee before the date
fixed for redemption and such notice shall be of no effect unless
such moneys are so received before such date.
(g) Bonds of the New Series A shall be subject to
mandatory repurchase by the Company prior to maturity at a
purchase price of 100% of the principal amount thereof, plus
interest accrued to the repurchase date, in whole, upon a
repurchase date (which date shall be fixed by the Company in a
written notice mailed by the Company to the Trustee, the Cambria
Authority and the Cambria Authority Trustee and which date shall
be the same date as the date fixed by the Company for the
repurchase of the bonds of the New Series B pursuant to
Section 1.05(g) hereof) which shall be within ten (10) days after
receipt by the Trustee and the Company of a written demand for
repurchase by the Cambria Authority Trustee stating that the
principal of all Cambria 1995 Series A Bonds then outstanding
under the Cambria Authority Indenture have been declared to be
immediately due and payable pursuant to the provisions of the
first sentence of Section 8.02 thereof.
13<PAGE>
SECTION 1.05. (a) Each bond of the New Series B shall
be subject to redemption prior to maturity at the option of the
Company, on and after November 1, 2005, in whole or in part by
lot, at the applicable optional redemption price shown below as a
percentage of the principal amount, plus interest accrued to the
applicable redemption date:
Redemption Date Optional Redemption
(both dates inclusive) Price
November 1, 2005 through October 31, 2006 102%
November 1, 2006 through October 31, 2007 101%
November 1, 2007 and thereafter 100%
(b) Each bond of the New Series B shall also be
subject to extraordinary redemption at the option of the Company
in whole at any time at an extraordinary redemption price of 100%
of the principal amount of the bonds of the New Series B to be
redeemed, plus interest accrued to the date of redemption, if:
(i) the Company shall have determined that
the continued operation of the Cambria Project Facilities is
impracticable, uneconomical or undesirable for any reason;
(ii) all or substantially all of the
Cambria Project Facilities shall have been condemned or
taken by a competent authority;
(iii) the operation of the Cambria Project
Facilities shall have been enjoined or shall have been
otherwise prohibited by, or shall conflict with, any order
or rule of any court of competent jurisdiction or any
federal, state or local regulatory body, administrative
agency or other governmental body having jurisdiction over
the Cambria Project Facilities; or
(iv) (A) all of the outstanding common
stock of the Company shall be acquired by some governmental
body or instrumentality and the Company elects to redeem all
of the bonds issued under the Mortgage or (B) all or
substantially all of the mortgaged property constituting
bondable property which at the time shall be subject to the
lien of the Mortgage as a first lien shall be released from
the lien of the Mortgage pursuant to the provisions thereof,
and available moneys in the hands of the Trustee are
sufficient to redeem all of the bonds issued under the
Mortgage.
(c) Notwithstanding the provisions of clauses (a)
or (b) of this Section 1.05, bonds of the New Series B may be
redeemed only if the Company directs the Cambria Authority to
effect a redemption of an equal principal amount of the Cambria
1995 Series B Bonds.
14<PAGE>
(d) Bonds of the New Series B are subject to
mandatory redemption in whole, or, if less than all of the
Cambria 1995 Series B Bonds are then subject to mandatory
redemption pursuant to Section 6.05 of the Cambria Authority
Indenture, in part, in an amount equal to the Cambria 1995 Series
B Bonds then subject to redemption, upon a redemption date (which
date shall be fixed by the Company, after receipt by the Trustee
and the Company of a written demand for redemption by the Cambria
Authority Trustee, in a written notice mailed by the Company to
the Trustee and to the Cambria Authority Trustee at least
forty-five (45) days prior to the date so fixed) which shall be
within 120 days (or, in the absence of a written notice mailed by
the Company as aforesaid, on the 120th day) after a final
determination upon the issuance of a published or private ruling
or technical advice by the Internal Revenue Service or a judicial
decision in a proceeding by any court of competent jurisdiction
in the United States, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
condition or agreement on its part to be performed or observed
under the Cambria Agreement or the inaccuracy of any
representation by the Company under the Cambria Agreement, the
interest paid or payable on any Cambria 1995 Series B Bonds to
any owner of such Cambria 1995 Series B Bonds for federal income
tax purposes, other than a "substantial user" of the financed
facilities or a "related person" within the meaning of Section
147(a) of the Code, is or was includable in the gross income for
federal income tax purposes under the Code, to the extent
necessary in order that the interest payable on the Cambria 1995
Series B Bonds remaining outstanding after such redemption of the
Cambria 1995 Series B Bonds would not, in the opinion of
nationally recognized bond counsel, be included in the gross
income of any holder thereof, other than a holder of a Cambria
1995 Series B Bond who is a "substantial user" of the financed
facilities or a "related person" within the meaning of Section
147(a) of the Code. No determination by any court or
administrative agency shall be considered final for the purposes
of this paragraph unless the Company shall have been given timely
notice of the proceeding which resulted in such determination and
an opportunity to participate in such proceeding, either directly
or through a holder of a Cambria 1995 Series B Bond to the degree
the Company deems sufficient and until the conclusion of any
appellate review or rehearing sought by any party to such
proceeding or the expiration of the time for seeking such review
or rehearing. The Company shall not redeem any bonds of the New
Series B if it receives a written cancellation of the written
demand from the Cambria Authority Trustee. Any such written
demand from the Cambria Authority Trustee or a cancellation of
such written demand shall be executed on behalf of such Cambria
Authority Trustee by its President or a Vice President or a trust
officer and shall be deemed received by the Trustee when
delivered at its corporate trust office in the Borough of
Manhattan, The City of New York. The Trustee may conclusively
rely as to the truth of the statements contained therein, upon
any such demand or cancellation.
15<PAGE>
(e) Notice with respect to any redemption of the
bonds of the New Series B shall be mailed by the Company to the
Cambria Authority, the Cambria Authority Trustee and the Trustee
not less than thirty (30) days and not more than ninety (90) days
prior to the applicable redemption date and shall specify the
matters set forth in the penultimate sentence of the first
paragraph, and if applicable, the second sentence of the third
paragraph of Section 8.02 of the Original Indenture.
(f) If at the time of the mailing of any such
notice of redemption pursuant to subsection (a) or (b) of this
Section 1.05, the Company shall not have irrevocably directed the
Trustee to apply funds deposited with the Trustee, or held by it
available to be used, for the redemption of bonds of the New
Series B, to redeem all of bonds of the New Series B called for
redemption, including accrued interest to the date fixed for
redemption, such notice shall state that it is subject to the
receipt of the redemption moneys by the Trustee before the date
fixed for redemption and such notice shall be of no effect unless
such moneys are so received before such date.
(g) Bonds of the New Series B shall be subject to
mandatory repurchase by the Company prior to maturity at a
purchase price of 100% of the principal amount thereof, plus
interest accrued to the repurchase date, in whole, upon a
repurchase date (which date shall be fixed by the Company in a
written notice mailed by the Company to the Trustee, the Cambria
Authority and the Cambria Authority Trustee and which date shall
be the same date as the date fixed by the Company for the
repurchase of the bonds of the New Series A pursuant to
Section 1.04(g) hereof) which shall be within ten (10) days after
receipt by the Trustee and the Company of a written demand for
repurchase by the Cambria Authority Trustee stating that the
principal of all Cambria 1995 Series B Bonds then outstanding
under the Cambria Authority Indenture have been declared to be
immediately due and payable pursuant to the provisions of the
first sentence of Section 8.02 thereof.
SECTION 1.06. (a) Each bond of the New Series C shall
be subject to extraordinary redemption at the option of the
Company in whole at any time at an extraordinary redemption price
of 100% of the principal amount of the bonds of the New Series C
to be redeemed, plus interest accrued to the date of redemption,
if:
(i) the Company shall have determined that
the continued operation of the Indiana Project Facilities is
impracticable, uneconomical or undesirable for any reason;
(ii) all or substantially all of the
Indiana Project Facilities shall have been condemned or
taken by a competent authority;
16<PAGE>
(iii) the operation of the Indiana Project
Facilities shall have been enjoined or shall have been
otherwise prohibited by, or shall conflict with, any order
or rule of any court of competent jurisdiction or any
federal, state or local regulatory body, administrative
agency or other governmental body having jurisdiction over
the Indiana Project Facilities; or
(iv) (A) all of the outstanding common
stock of the Company shall be acquired by some governmental
body or instrumentality and the Company elects to redeem all
of the bonds issued under the Mortgage or (B) all or
substantially all of the mortgaged property constituting
bondable property which at the time shall be subject to the
lien of the Mortgage as a first lien shall be released from
the lien of the Mortgage pursuant to the provisions thereof,
and available moneys in the hands of the Trustee are
sufficient to redeem all of the bonds issued under the
Mortgage.
(b) Notwithstanding the provisions of clause (a)
of this Section 1.06, bonds of the New Series C may be redeemed
only if the Company directs the Indiana Authority to effect a
redemption of an equal principal amount of the Indiana 1995
Series Bonds.
(c) Bonds of the New Series C are subject to
mandatory redemption in whole, or, if less than all of the
Indiana 1995 Series Bonds are then subject to mandatory
redemption pursuant to Section 6.05 of the Indiana Authority
Indenture, in part, in an amount equal to the Indiana 1995 Series
Bonds then subject to redemption, upon a redemption date (which
date shall be fixed by the Company, after receipt by the Trustee
and the Company of a written demand for redemption by the Indiana
Authority Trustee, in a written notice mailed by the Company to
the Trustee and to the Indiana Authority Trustee at least
forty-five (45) days prior to the date so fixed) which shall be
within 120 days (or, in the absence of a written notice mailed by
the Company as aforesaid, on the 120th day) after a final
determination upon the issuance of a published or private ruling
or technical advice by the Internal Revenue Service or a judicial
decision in a proceeding by any court of competent jurisdiction
in the United States, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
condition or agreement on its part to be performed or observed
under the Indiana Agreement or the inaccuracy of any
representation by the Company under the Indiana Agreement, the
interest paid or payable on any Indiana 1995 Series Bonds to any
owner of such Indiana 1995 Series Bonds for federal income tax
purposes, other than a "substantial user" of the financed
facilities or a "related person" within the meaning of Section
147(a) of the Code, is or was includable in the gross income for
federal income tax purposes under the Code, to the extent
necessary in order that the interest payable on the Indiana 1995
17<PAGE>
Series Bonds remaining outstanding after such redemption of the
Indiana 1995 Series Bonds would not, in the opinion of nationally
recognized bond counsel, be included in the gross income of any
holder thereof, other than a holder of an Indiana 1995
Series Bond who is a "substantial user" of the financed
facilities or a "related person" within the meaning of Section
147(a) of the Code. No determination by any court or
administrative agency shall be considered final for the purposes
of this paragraph unless the Company shall have been given timely
notice of the proceeding which resulted in such determination and
an opportunity to participate in such proceeding, either directly
or through a holder of an Indiana 1995 Series Bond to the degree
the Company deems sufficient and until the conclusion of any
appellate review or rehearing sought by any party to such
proceeding or the expiration of the time for seeking such review
or rehearing. The Company shall not redeem any bonds of the New
Series C if it receives a written cancellation of the written
demand from the Indiana Authority Trustee. Any such written
demand from the Indiana Authority Trustee or a cancellation of
such written demand shall be executed on behalf of such Indiana
Authority Trustee by its President or a Vice President or a trust
officer and shall be deemed received by the Trustee when
delivered at its corporate trust office in the Borough of
Manhattan, The City of New York. The Trustee may conclusively
rely as to the truth of the statements contained therein, upon
any such demand or cancellation.
(d) Notice with respect to any redemption of the
bonds of the New Series C shall be mailed by the Company to the
Indiana Authority, the Indiana Authority Trustee and the Trustee
not less than thirty (30) days and not more than ninety (90) days
prior to the applicable redemption date and shall specify the
matters set forth in the penultimate sentence of the first
paragraph, and if applicable, the second sentence of the third
paragraph of Section 8.02 of the Original Indenture.
(e) If at the time of the mailing of any such
notice of redemption pursuant to subsection (a) of this Section
1.06, the Company shall not have irrevocably directed the Trustee
to apply funds deposited with the Trustee, or held by it
available to be used, for the redemption of bonds of the New
Series C, to redeem all of bonds of the New Series C called for
redemption, including accrued interest to the date fixed for
redemption, such notice shall state that it is subject to the
receipt of the redemption moneys by the Trustee before the date
fixed for redemption and such notice shall be of no effect unless
such moneys are so received before such date.
(f) Bonds of the New Series C shall be subject to
mandatory repurchase by the Company prior to maturity at a
purchase price of 100% of the principal amount thereof, plus
interest accrued to the repurchase date, in whole, upon a
repurchase date (which date shall be fixed by the Company in a
written notice mailed by the Company to the Trustee and to the
18<PAGE>
Indiana Authority Trustee) which shall be within ten (10) days
after receipt by the Trustee and the Company of a written demand
for repurchase by the Indiana Authority Trustee stating that the
principal of all Indiana 1995 Series Bonds then outstanding under
the Indiana Authority Indenture have been declared to be
immediately due and payable pursuant to the provisions of the
first sentence of Section 8.02 thereof.
SECTION 1.07. The last sentence of Section 2.03 of the
Original Indenture shall not apply to bonds of each series of the
New Series. In case less than all of the bonds of any series of
the New Series at the time outstanding are called for redemption,
the Company shall not be required to transfer any bonds of such
series of the New Series, for a period of ten (10) days before
the mailing of a notice of redemption of bonds of such series of
the New Series selected for redemption, to transfer any bond of
such series of the New Series called for redemption in its
entirety or to transfer any portion of a bond of such series of
the New Series which portion has been called for redemption.
SECTION 1.08. The Company covenants and agrees that,
notwithstanding Section 2.03 of the Original Indenture, it will
not charge any sum for or in connection with any exchange or
transfer of any bond of any series of the New Series, but may
require the payment of a sum sufficient to cover any tax or taxes
or other governmental charges incident to any exchange, transfer
or registration thereof.
19<PAGE>
ARTICLE II
FORM OF THE BONDS OF THE NEW SERIES
SECTION 2.01. The form of the bonds of the New Series
A and the Trustee's authentication certificate to be endorsed
thereon shall be substantially as follows, the maturity date or
dates, denominations, redemption prices and interest rates
thereof to be appropriately inserted.
[FORM OF FACE OF NEW SERIES A BONDS]
PENNSYLVANIA ELECTRIC COMPANY
FIRST MORTGAGE BOND, 5.35% and 5.80% SERIES A DUE 2010 and 2020
$ No.
PENNSYLVANIA ELECTRIC COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter called the "Company"),
for value received, hereby promises to pay to United States Trust
Company of New York, as Trustee under the Trust Indenture dated
as of November 1, 1995 of the Cambria County Industrial
Development Authority, or registered assigns, _______________
Dollars on ________, _____, unless this Bond shall have been duly
called for previous redemption in whole or in part and payment of
the redemption price shall have been duly made or provided for,
at the office or agency of the Company in the Borough of
Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay to
the registered holder hereof interest thereon, at said office or
agency, in like coin or currency, from the interest payment date
to which interest has been paid or duly provided for, or unless
no interest has been paid or provided for on this bond, in which
case from November 1, 1995, or from the next interest payment
date in the case the date of authentication of this bond is after
the fifteenth day (whether or not a business day) of the calendar
month next preceding an interest payment date and prior to such
interest payment date, until said principal sum has been paid or
provided for, at the rate or rates per annum provided for in
Section 1.01(a) of the Supplemental Indenture dated as of
November 1, 1995, supplementing the Mortgage, on May 1 and
November 1 of each year, and, to the extent permitted by law, to
pay interest on overdue interest at the rate per annum above
specified.
Interest on this bond shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
20<PAGE>
Reference is hereby made to the further provisions of
this bond set forth on the reverse hereof. Such further
provisions shall for all purposes have the same effect as though
fully set forth at this place.
This bond shall not become valid or obligatory for any
purpose until UNITED STATES TRUST COMPANY OF NEW YORK, the
Trustee under the Mortgage, or its successor thereunder, shall
have signed the certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY has
caused this bond to be signed in its name by the manual or
facsimile signature of its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature
of its Secretary or one of its Assistant Secretaries.
Dated:
PENNSYLVANIA ELECTRIC COMPANY
By
(Vice) President
Attest:
(Assistant) Secretary
21<PAGE>
[FORM OF REVERSE OF NEW SERIES A BONDS]
This bond is one of an issue of bonds of the Company
(hereinafter referred to as the "bonds"), not limited in
principal amount, issuable in series, which different series may
mature at different times, may bear interest at different rates,
and may otherwise vary as in the Mortgage hereinafter mentioned
provided, and is one of a series known as its First Mortgage
Bonds, 5.35% and 5.80% Series A due 2010 and 2020 (herein called
the "bonds of the New Series A due 2010 and 2020"), all bonds of
all series issued and to be issued under and equally and ratably
secured (except insofar as any sinking fund or analogous fund,
established in accordance with the provisions of the Mortgage
hereinafter mentioned, may afford additional security for the
bonds of any particular series) by a Mortgage and Deed of Trust
(herein, together with any indentures supplemental thereto,
called the "Mortgage") dated as of January 1, 1942, executed by
the Company to UNITED STATES TRUST COMPANY OF NEW YORK, as
successor Trustee to BANKERS TRUST COMPANY (herein called the
"Trustee"), to which reference is made for a description of the
property mortgaged and pledged, the nature and extent of the
security, the rights and limitations of rights of the holders of
the bonds and of the Company in respect thereof, the rights,
duties and immunities of the Trustee, and the terms and
conditions upon which the bonds are, and are to be, issued and
secured. The bonds of the New Series A due 2010 and 2020 are
described in the Supplemental Indenture dated as of November 1,
1995 between the Company and the Trustee.
The Mortgage contains provisions permitting the Company
and the Trustee, with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the
bonds at the time outstanding (determined as provided in the
Mortgage) evidenced as in the Mortgage provided, or in case the
rights under the Mortgage of the holders of bonds of one or more,
but less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of the bonds at
the time outstanding of the series affected (determined as
provided in the Mortgage) evidenced as in the Mortgage provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Mortgage or modifying in any manner the rights of the holders
of the bonds and coupons thereunto appertaining; provided,
however, that no such supplemental indenture shall (i) extend the
fixed maturity of any bonds, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal
amount thereof, without the consent of the holder of each bond so
affected, or (ii) reduce the aforesaid percentage of bonds, the
holders of which are required to consent to any such supplemental
indenture without the consent of the holders of all bonds then
outstanding. Any such consent by the registered holder of this
bond (unless effectively revoked as provided in the Mortgage)
22<PAGE>
shall be conclusive and binding upon such holder and upon all
future holders of this bond, irrespective of whether or not any
notation of such waiver or consent is made upon this bond.
No reference herein to the Mortgage and no provision of
this bond or of the Mortgage shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and interest on this bond at the time and place and
at the rate and in the coin or currency herein prescribed.
The bonds of the New Series A due 2010 and 2020 of like
maturity and interest rate are issuable only in fully registered
form and shall be issued only as one single Bond.
The bonds of the New Series A due 2010 and 2020 may be
redeemed at the option of the Company and are otherwise subject
to redemption and mandatory repurchase by the Company at the
times and upon the terms and conditions set forth in the
Mortgage.
The Mortgage provides that if the Company shall deposit
with the Trustee in trust for the purpose funds sufficient to pay
the principal of all of the bonds of any series, or such of the
bonds of any series as have been or are to be called for
redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and
payable, at maturity or upon redemption or otherwise, and
complies with the other provisions of the Mortgage in respect
thereof, then from the date of such deposit such bonds shall no
longer be entitled to any lien or benefit under the Mortgage.
The principal hereof may be declared or may become due
prior to the express date of the maturity hereof on the
conditions, in the manner and at the time set forth in the
Mortgage, upon the occurrence of a completed default as in the
Mortgage provided.
This bond is transferable as prescribed in and subject
to the limitations contained in the Mortgage by the registered
holder hereof in person, or by his duly authorized attorney, at
the office or agency of the Company in said Borough of Manhattan,
upon surrender and cancellation of this bond, and thereupon, a
new fully registered bond or bonds of authorized denominations of
the same series of like maturity and interest rate and for the
same aggregate principal amount will be issued to the transferee
in exchange herefor as provided in the Mortgage without charge
except for any tax or taxes or other governmental charges
incident to such transfer. The Company and the Trustee, any
paying agent and any bond registrar may deem and treat the person
in whose name this bond is registered as the absolute owner
hereof, whether or not this bond shall be overdue, for the
purpose of receiving payment and for all other purposes and
neither the Company nor the Trustee nor any paying agent nor any
bond registrar shall be affected by any notice to the contrary.
23<PAGE>
No recourse shall be had for the payment of the
principal of or interest on this bond, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect
of the Mortgage, against any incorporator or any past, present or
future subscriber to the capital stock, stockholder, officer or
director, as such, of the Company or of any successor
corporation, either directly or through the Company or any
successor corporation, under any rule of law, statute or
constitution or by the enforcement of any assessment or
otherwise, all such liability of incorporators, subscribers,
stockholders, officers and directors, as such, being waived and
released by the holder and owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein
designated, provided for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By: ___________________________________
Authorized Officer
[END OF FORM OF BOND OF NEW SERIES A]
SECTION 2.02. The form of the bonds of the New Series
B and the Trustee's authentication certificate to be endorsed
thereon shall be substantially as follows, the maturity date or
dates, denominations, redemption prices and interest rates
thereof to be appropriately inserted.
24<PAGE>
[FORM OF FACE OF NEW SERIES B BONDS]
PENNSYLVANIA ELECTRIC COMPANY
FIRST MORTGAGE BOND, 6.05% SERIES B DUE 2025
$ No.
PENNSYLVANIA ELECTRIC COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter called the "Company"),
for value received, hereby promises to pay to United States Trust
Company of New York, as Trustee under the Trust Indenture dated
as of November 1, 1995 of the Cambria County Industrial
Development Authority, or registered assigns, _______________
Dollars on ________, ____ unless this Bond shall have been duly
called for previous redemption in whole or in part and payment of
the redemption price shall have been duly made or provided for,
at the office or agency of the Company in the Borough of
Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay to
the registered holder hereof interest thereon, at said office or
agency, in like coin or currency, from the interest payment date
to which interest has been paid or duly provided for, or unless
no interest has been paid or provided for on this bond, in which
case from November 1, 1995, or from the next interest payment
date in the case the date of authentication of this bond is after
the fifteenth day (whether or not a business day) of the calendar
month next preceding an interest payment date and prior to such
interest payment date, until said principal sum has been paid or
provided for, at the rate or rates per annum provided for in
Section 1.01(b) of the Supplemental Indenture dated as of
November 1, 1995, supplementing the Mortgage, on May 1 and
November 1 of each year, and, to the extent permitted by law, to
pay interest on overdue interest at the rate per annum above
specified.
Interest on this bond shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
Reference is hereby made to the further provisions of
this bond set forth on the reverse hereof. Such further
provisions shall for all purposes have the same effect as though
fully set forth at this place.
This bond shall not become valid or obligatory for any
purpose until UNITED STATES TRUST COMPANY OF NEW YORK, the
Trustee under the Mortgage, or its successor thereunder, shall
have signed the certificate of authentication endorsed hereon.
25<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY has
caused this bond to be signed in its name by the manual or
facsimile signature of its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature
of its Secretary or one of its Assistant Secretaries.
Dated:
PENNSYLVANIA ELECTRIC COMPANY
By
(Vice) President
Attest:
(Assistant) Secretary
26<PAGE>
[FORM OF REVERSE OF NEW SERIES B BONDS]
This bond is one of an issue of bonds of the Company
(hereinafter referred to as the "bonds"), not limited in
principal amount, issuable in series, which different series may
mature at different times, may bear interest at different rates,
and may otherwise vary as in the Mortgage hereinafter mentioned
provided, and is one of a series known as its First Mortgage
Bonds, 6.05% Series B due 2025 (herein called the "bonds of the
New Series B due 2025"), all bonds of all series issued and to be
issued under and equally and ratably secured (except insofar as
any sinking fund or analogous fund, established in accordance
with the provisions of the Mortgage hereinafter mentioned, may
afford additional security for the bonds of any particular
series) by a Mortgage and Deed of Trust (herein, together with
any indentures supplemental thereto, called the "Mortgage") dated
as of January 1, 1942, executed by the Company to UNITED STATES
TRUST COMPANY OF NEW YORK, as successor Trustee to BANKERS TRUST
COMPANY (herein called the "Trustee"), to which reference is made
for a description of the property mortgaged and pledged, the
nature and extent of the security, the rights and limitations of
rights of the holders of the bonds and of the Company in respect
thereof, the rights, duties and immunities of the Trustee, and
the terms and conditions upon which the bonds are, and are to be,
issued and secured. The bonds of the New Series B due 2025 are
described in the Supplemental Indenture dated as of November 1,
1995 between the Company and the Trustee.
The Mortgage contains provisions permitting the Company
and the Trustee, with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the
bonds at the time outstanding (determined as provided in the
Mortgage) evidenced as in the Mortgage provided, or in case the
rights under the Mortgage of the holders of bonds of one or more,
but less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of the bonds at
the time outstanding of the series affected (determined as
provided in the Mortgage) evidenced as in the Mortgage provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Mortgage or modifying in any manner the rights of the holders
of the bonds and coupons thereunto appertaining; provided,
however, that no such supplemental indenture shall (i) extend the
fixed maturity of any bonds, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal
amount thereof, without the consent of the holder of each bond so
affected, or (ii) reduce the aforesaid percentage of bonds, the
holders of which are required to consent to any such supplemental
indenture without the consent of the holders of all bonds then
outstanding. Any such consent by the registered holder of this
bond (unless effectively revoked as provided in the Mortgage)
27<PAGE>
shall be conclusive and binding upon such holder and upon all
future holders of this bond, irrespective of whether or not any
notation of such waiver or consent is made upon this bond.
No reference herein to the Mortgage and no provision of
this bond or of the Mortgage shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and interest on this bond at the time and place and
at the rate and in the coin or currency herein prescribed.
The bonds of the New Series B due 2025 are issuable
only in fully registered form and shall be issued only as one
single Bond.
The bonds of the New Series B due 2025 may be redeemed
at the option of the Company and are otherwise subject to
redemption and mandatory repurchase by the Company at the times
and upon the terms and conditions set forth in the Mortgage.
The Mortgage provides that if the Company shall deposit
with the Trustee in trust for the purpose funds sufficient to pay
the principal of all of the bonds of any series, or such of the
bonds of any series as have been or are to be called for
redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and
payable, at maturity or upon redemption or otherwise, and
complies with the other provisions of the Mortgage in respect
thereof, then from the date of such deposit such bonds shall no
longer be entitled to any lien or benefit under the Mortgage.
The principal hereof may be declared or may become due
prior to the express date of the maturity hereof on the
conditions, in the manner and at the time set forth in the
Mortgage, upon the occurrence of a completed default as in the
Mortgage provided.
This bond is transferable as prescribed in and subject
to the limitations contained in the Mortgage by the registered
holder hereof in person, or by his duly authorized attorney, at
the office or agency of the Company in said Borough of Manhattan,
upon surrender and cancellation of this bond, and thereupon, a
new fully registered bond or bonds of authorized denominations of
the same series and for the same aggregate principal amount will
be issued to the transferee in exchange herefor as provided in
the Mortgage without charge except for any tax or taxes or other
governmental charges incident to such transfer. The Company and
the Trustee, any paying agent and any bond registrar may deem and
treat the person in whose name this bond is registered as the
absolute owner hereof, whether or not this bond shall be overdue,
for the purpose of receiving payment and for all other purposes
and neither the Company nor the Trustee nor any paying agent nor
any bond registrar shall be affected by any notice to the
contrary.
28<PAGE>
No recourse shall be had for the payment of the
principal of or interest on this bond, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect
of the Mortgage, against any incorporator or any past, present or
future subscriber to the capital stock, stockholder, officer or
director, as such, of the Company or of any successor
corporation, either directly or through the Company or any
successor corporation, under any rule of law, statute or
constitution or by the enforcement of any assessment or
otherwise, all such liability of incorporators, subscribers,
stockholders, officers and directors, as such, being waived and
released by the holder and owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein
designated, provided for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By: ___________________________________
Authorized Officer
[END OF FORM OF BOND OF NEW SERIES B]
SECTION 2.03. The form of the bonds of the New Series
C and the Trustee's authentication certificate to be endorsed
thereon shall be substantially as follows, the maturity date or
dates, denominations, redemption prices and interest rates
thereof to be appropriately inserted.
29<PAGE>
[FORM OF FACE OF NEW SERIES C BONDS]
PENNSYLVANIA ELECTRIC COMPANY
FIRST MORTGAGE BOND, 5.35% SERIES C DUE 2010
$ No.
PENNSYLVANIA ELECTRIC COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter called the "Company"),
for value received, hereby promises to pay to United States Trust
Company of New York, as Trustee under the Trust Indenture dated
as of November 1, 1995 of the Indiana County Industrial
Development Authority, or registered assigns, _______________
Dollars on ________, ____ unless this Bond shall have been duly
called for previous redemption in whole or in part and payment of
the redemption price shall have been duly made or provided for,
at the office or agency of the Company in the Borough of
Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay to
the registered holder hereof interest thereon, at said office or
agency, in like coin or currency, from the interest payment date
to which interest has been paid or duly provided for, or unless
no interest has been paid or provided for on this bond, in which
case from November 1, 1995, or from the next interest payment
date in the case the date of authentication of this bond is after
the fifteenth day (whether or not a business day) of the calendar
month next preceding an interest payment date and prior to such
interest payment date, until said principal sum has been paid or
provided for, at the rate or rates per annum provided for in
Section 1.01(c) of the Supplemental Indenture dated as of
November 1, 1995, supplementing the Mortgage, on May 1 and
November 1 of each year, and, to the extent permitted by law, to
pay interest on overdue interest at the rate per annum above
specified.
Interest on this bond shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
Reference is hereby made to the further provisions of
this bond set forth on the reverse hereof. Such further
provisions shall for all purposes have the same effect as though
fully set forth at this place.
This bond shall not become valid or obligatory for any
purpose until UNITED STATES TRUST COMPANY OF NEW YORK, the
Trustee under the Mortgage, or its successor thereunder, shall
have signed the certificate of authentication endorsed hereon.
30<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY has
caused this bond to be signed in its name by the manual or
facsimile signature of its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature
of its Secretary or one of its Assistant Secretaries.
Dated:
PENNSYLVANIA ELECTRIC COMPANY
By
(Vice) President
Attest:
(Assistant) Secretary
31<PAGE>
[FORM OF REVERSE OF NEW SERIES C BONDS]
This bond is one of an issue of bonds of the Company
(hereinafter referred to as the "bonds"), not limited in
principal amount, issuable in series, which different series may
mature at different times, may bear interest at different rates,
and may otherwise vary as in the Mortgage hereinafter mentioned
provided, and is one of a series known as its First Mortgage
Bonds, 5.35% Series C due 2010 (herein called the "bonds of the
New Series C due 2010"), all bonds of all series issued and to be
issued under and equally and ratably secured (except insofar as
any sinking fund or analogous fund, established in accordance
with the provisions of the Mortgage hereinafter mentioned, may
afford additional security for the bonds of any particular
series) by a Mortgage and Deed of Trust (herein, together with
any indentures supplemental thereto, called the "Mortgage") dated
as of January 1, 1942, executed by the Company to UNITED STATES
TRUST COMPANY OF NEW YORK, as successor Trustee to BANKERS TRUST
COMPANY (herein called the "Trustee"), to which reference is made
for a description of the property mortgaged and pledged, the
nature and extent of the security, the rights and limitations of
rights of the holders of the bonds and of the Company in respect
thereof, the rights, duties and immunities of the Trustee, and
the terms and conditions upon which the bonds are, and are to be,
issued and secured. The bonds of the New Series C due 2010 are
described in the Supplemental Indenture dated as of November 1,
1995 between the Company and the Trustee.
The Mortgage contains provisions permitting the Company
and the Trustee, with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the
bonds at the time outstanding (determined as provided in the
Mortgage) evidenced as in the Mortgage provided, or in case the
rights under the Mortgage of the holders of bonds of one or more,
but less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of the bonds at
the time outstanding of the series affected (determined as
provided in the Mortgage) evidenced as in the Mortgage provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Mortgage or modifying in any manner the rights of the holders
of the bonds and coupons thereunto appertaining; provided,
however, that no such supplemental indenture shall (i) extend the
fixed maturity of any bonds, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal
amount thereof, without the consent of the holder of each bond so
affected, or (ii) reduce the aforesaid percentage of bonds, the
holders of which are required to consent to any such supplemental
indenture without the consent of the holders of all bonds then
outstanding. Any such consent by the registered holder of this
bond (unless effectively revoked as provided in the Mortgage)
shall be conclusive and binding upon such holder and upon all
future holders of this bond, irrespective of whether or not any
notation of such waiver or consent is made upon this bond.
32<PAGE>
No reference herein to the Mortgage and no provision of
this bond or of the Mortgage shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and interest on this bond at the time and place and
at the rate and in the coin or currency herein prescribed.
The bonds of the New Series C due 2010 are issuable
only in fully registered form and shall be issued only as one
single Bond.
The bonds of the New Series C due 2010 may be redeemed
at the option of the Company and are otherwise subject to
redemption and mandatory repurchase by the Company at the times
and upon the terms and conditions set forth in the Mortgage.
The Mortgage provides that if the Company shall deposit
with the Trustee in trust for the purpose funds sufficient to pay
the principal of all of the bonds of any series, or such of the
bonds of any series as have been or are to be called for
redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and
payable, at maturity or upon redemption or otherwise, and
complies with the other provisions of the Mortgage in respect
thereof, then from the date of such deposit such bonds shall no
longer be entitled to any lien or benefit under the Mortgage.
The principal hereof may be declared or may become due
prior to the express date of the maturity hereof on the
conditions, in the manner and at the time set forth in the
Mortgage, upon the occurrence of a completed default as in the
Mortgage provided.
This bond is transferable as prescribed in and subject
to the limitations contained in the Mortgage by the registered
holder hereof in person, or by his duly authorized attorney, at
the office or agency of the Company in said Borough of Manhattan,
upon surrender and cancellation of this bond, and thereupon, a
new fully registered bond or bonds of authorized denominations of
the same series and for the same aggregate principal amount will
be issued to the transferee in exchange herefor as provided in
the Mortgage without charge except for any tax or taxes or other
governmental charges incident to such transfer. The Company and
the Trustee, any paying agent and any bond registrar may deem and
treat the person in whose name this bond is registered as the
absolute owner hereof, whether or not this bond shall be overdue,
for the purpose of receiving payment and for all other purposes
and neither the Company nor the Trustee nor any paying agent nor
any bond registrar shall be affected by any notice to the
contrary.
33<PAGE>
No recourse shall be had for the payment of the
principal of or interest on this bond, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect
of the Mortgage, against any incorporator or any past, present or
future subscriber to the capital stock, stockholder, officer or
director, as such, of the Company or of any successor
corporation, either directly or through the Company or any
successor corporation, under any rule of law, statute or
constitution or by the enforcement of any assessment or
otherwise, all such liability of incorporators, subscribers,
stockholders, officers and directors, as such, being waived and
released by the holder and owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein
designated, provided for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By: ___________________________________
Authorized Officer
[END OF FORM OF BOND OF NEW SERIES C]
ARTICLE III
USE OF FACSIMILE SIGNATURES AND CORPORATE SEAL
Any or all signatures of the officers of the Company
upon any series of the bonds of the New Series may be either
manual or facsimile signatures. The corporate seal of the
Company to be affixed on any bond of the New Series may be
facsimile seal.
34<PAGE>
ARTICLE IV
CREDITS WITH RESPECT TO PRINCIPAL OF AND
INTEREST ON BONDS OF EACH SERIES OF THE NEW SERIES
SECTION 4.01. (a) In addition to any other credit,
payment or satisfaction to which the Company is entitled with
respect to the bonds of the New Series A of like maturity and
interest rate, the Company shall be entitled to credits against
amounts otherwise payable in respect of bonds of such New Series
A of like maturity and interest rate in an amount corresponding
to (i) the principal amount of any Cambria 1995 Series A Bonds of
such like maturity and interest rate surrendered to the Cambria
Authority Trustee by the Company or by the Cambria Authority or
purchased by the Cambria Authority Trustee for cancellation and
(ii) the amount of money held by the Cambria Authority Trustee
and available and irrevocably designated for the payment of
principal or redemption price of, and/or interest on, the Cambria
1995 Series A Bonds of such like maturity and interest rate
regardless of the source of payment to the Cambria Authority
Trustee of such moneys, and the Cambria Authority Trustee shall
make notation on such bonds of the New Series A of any such
credit; provided, however, that the Company shall not be entitled
to any such credit with respect to payment of principal or
redemption price of, and/or interest on, the Cambria 1995 Series
A Bonds of such like maturity and interest rate made by the Bond
Insurer (as such term is defined in the Cambria Authority
Indenture) pursuant to the terms of the 1995 Series A Bond
Insurance Policy (as such term is defined in the Cambria
Authority Indenture).
(b) The Company shall be entitled to a cash credit
against its obligation to pay interest on the bonds of the New
Series A of like maturity and interest rate equal to interest
paid on the Cambria 1995 Series A Bonds of such like maturity and
interest rate out of (i) the proceeds of the original issuance of
such Cambria 1995 Series A Bonds of such like maturity and
interest rate and the earnings on the investment of such
proceeds, as provided in the Cambria Authority Indenture which
are held by the Cambria Authority Trustee at the time of the
interest payment date, and (ii) such other moneys held at the
time of an interest payment date by the Cambria Authority Trustee
and available for the payment of interest on the Cambria 1995
Series A Bonds of such like maturity and interest rate and the
Cambria Authority Trustee shall make notation on the bonds of the
New Series A of any such credit.
(c) A certificate of the Company signed by the
President or any Vice President, and by the Secretary or any
Assistant Secretary, and consented to by the Cambria Authority
Trustee stating that the Company is entitled to a credit under
this Section 4.01 and setting forth the basis therefor in
reasonable detail, shall be conclusive evidence of such
entitlement, and the Trustee shall accept such certificate
without further investigation or verification of the matters
stated therein.
35<PAGE>
SECTION 4.02. (a) In addition to any other credit,
payment or satisfaction to which the Company is entitled with
respect to the bonds of the New Series B, the Company shall be
entitled to credits against amounts otherwise payable in respect
of bonds of such New Series B in an amount corresponding to (i)
the principal amount of any Cambria 1995 Series B Bonds
surrendered to the Cambria Authority Trustee by the Company or by
the Cambria Authority or purchased by the Cambria Authority
Trustee for cancellation and (ii) the amount of money held by the
Cambria Authority Trustee and available and irrevocably
designated for the payment of principal or redemption price of,
and/or interest on, the Cambria 1995 Series B Bonds regardless of
the source of payment to the Cambria Authority Trustee of such
moneys, and the Cambria Authority Trustee shall make notation on
the bonds of the New Series B of any such credit; provided,
however, that the Company shall not be entitled to any such
credit with respect to payment of principal or redemption price
of, and/or interest on, the Cambria 1995 Series B Bonds made by
the Bond Insurer (as such term is defined in the Cambria
Authority Indenture) pursuant to the terms of the 1995 Series B
Bond Insurance Policy (as such term is defined in the Cambria
Authority Indenture).
(b) The Company shall be entitled to a cash credit
against its obligation to pay interest on the bonds of the New
Series B equal to interest paid on the Cambria 1995 Series B
Bonds out of (i) the proceeds of the original issuance of such
Cambria 1995 Series B Bonds and the earnings on the investment of
such proceeds, as provided in the Cambria Authority Indenture
which are held by the Cambria Authority Trustee at the time of
the interest payment date, and (ii) such other moneys held at the
time of an interest payment date by the Cambria Authority Trustee
and available for the payment of interest on the Cambria 1995
Series B Bonds and the Cambria Authority Trustee shall make
notation on the bonds of the New Series B of any such credit.
(c) A certificate of the Company signed by the
President or any Vice President, and by the Secretary or any
Assistant Secretary, and consented to by the Cambria Authority
Trustee stating that the Company is entitled to a credit under
this Section 4.02 and setting forth the basis therefor in
reasonable detail, shall be conclusive evidence of such
entitlement, and the Trustee shall accept such certificate
without further investigation or verification of the matters
stated therein.
36<PAGE>
SECTION 4.03. (a) In addition to any other credit,
payment or satisfaction to which the Company is entitled with
respect to the bonds of the New Series C, the Company shall be
entitled to credits against amounts otherwise payable in respect
of bonds of such New Series C in an amount corresponding to (i)
the principal amount of any Indiana 1995 Series Bonds surrendered
to the Indiana Authority Trustee by the Company or by the Indiana
Authority or purchased by the Indiana Authority Trustee for
cancellation and (ii) the amount of money held by the Indiana
Authority Trustee and available and irrevocably designated for
the payment of principal or redemption price of, and/or interest
on, the Indiana 1995 Series Bonds regardless of the source of
payment to the Indiana Authority Trustee of such moneys, and the
Indiana Authority Trustee shall make notation on the bonds of the
New Series C of any such credit; provided, however, that the
Company shall not be entitled to any such credit with respect to
payment of principal or redemption price of, and/or interest on,
the Indiana 1995 Series Bonds made by the Bond Insurer (as such
term is defined in the Indiana Authority Indenture) pursuant to
the terms of the Bond Insurance Policy (as such term is defined
in the Indiana Authority Indenture).
(b) The Company shall be entitled to a cash credit
against its obligation to pay interest on the bonds of the New
Series C equal to interest paid on the Indiana 1995 Series Bonds
out of (i) the proceeds of the original issuance of such Indiana
1995 Series Bonds and the earnings on the investment of such
proceeds, as provided in the Indiana Authority Indenture which
are held by the Indiana Authority Trustee at the time of the
interest payment date, and (ii) such other moneys held at the
time of an interest payment date by the Indiana Authority Trustee
and available for the payment of interest on the Indiana 1995
Series Bonds and the Indiana Authority Trustee shall make
notation on the bonds of the New Series C of any such credit.
(c) A certificate of the Company signed by the
President or any Vice President, and by the Secretary or any
Assistant Secretary, and consented to by the Indiana Authority
Trustee stating that the Company is entitled to a credit under
this Section 4.03 and setting forth the basis therefor in
reasonable detail, shall be conclusive evidence of such
entitlement, and the Trustee shall accept such certificate
without further investigation or verification of the matters
stated therein.
37<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 5.01. The Company covenants and agrees that,
so long as any of the bonds of the New Series A, of the New
Series B and of the New Series C shall be secured by the lien of
the Mortgage, the following provisions of the following aforesaid
Supplemental Indentures shall be effective, and the Company will
observe and perform each and all of the conditions and of its
covenants and agreements therein set forth, as if the bonds of
the New Series A, of the New Series B and of the New Series C
were specified therein:
(a) Section 1 of Article II of the Supplemental
Indenture dated as of November 1, 1949, as amended by paragraph
(a) of Section 2.01 of Article II of the Supplemental Indenture
dated as of August 1, 1959.
(b) Section 2 of Article II of the Supplemental
Indenture dated as of November 1, 1949.
(c) Section 1 of Article III of the Supplemental
Indenture dated as of October 1, 1951.
(d) Section 2 of Article II of the supplemental
Indenture dated as of June 1, 1953. Subsection (D) thereof as
heretofore amended is hereby further amended to read as follows:
"(D) the provisions of this Section shall be
effective only so long as any of the 1996 Series or of the
1997 Series or of the July 1, 2006 Series or of the December
1, 2007 Series A or of the December 1, 2007 Series B or of
the Series A due 2015 or of the Series due 2016 or of the
Secured Medium-Term Notes, Series B or of the Secured
Medium-Term Notes, Series C or of the Secured Medium-Term
Notes, Series D bonds shall be outstanding, and may be
waived by the holders of not less than 75% in aggregate
principal amount of all bonds specifically entitled to the
benefit of the covenants set forth in this Section (which
need not include 75% in principal amount of the then
outstanding 1996 Series or the 1997 Series or the July 1,
2006 Series or the December 1, 2007 Series A or the December
1, 2007 Series B or the Series A due 2015 or the Series due
2016 or the Secured Medium-Term Notes, Series B or the
Secured Medium-Term Notes, Series C or the Secured Medium-
Term Notes, Series D bonds or any other series of bonds
specifically entitled to the benefit of such covenants),
outstanding at the time of such acquisition, by a consent
given in writing or given at a meeting of the holders of the
1996 Series and the 1997 Series and the July 1, 2006 Series
and the December 1, 2007 Series A and the December 1, 2007
Series B and the Series A due 2015 and the Series due 2016
and the Secured Medium-Term Notes, Series B and the Secured
Medium-Term Notes, Series C and the Secured Medium-Term
38<PAGE>
Notes, Series D bonds and such other bonds, if any, held
pursuant to the applicable provisions of Article XVI of the
Original Indenture. Moreover, none of the provisions of
subsection (B) of this Section shall be applicable to any
acquisition of property ordered, approved or permitted by
the Securities and Exchange Commission under the provisions
of the Public Utility Holding Company Act of 1935 as then in
force, or by any successor regulatory body of the United
States of America having jurisdiction in the premises."
(e) Section 2 of Article II of the Supplemental
Indenture dated as of May 1, 1956.
SECTION 5.02. The Trustee shall be entitled to rely
conclusively on each notice delivered to it by the Cambria
Authority Trustee or the Indiana Authority Trustee, as the case
may be, or the Company pursuant to the terms of this Supplemental
Indenture for all purposes under the Mortgage. The Trustee shall
have no duty or responsibility to the Company or to the holder or
holders of the bonds of the New Series A, of the New Series B and
of the New Series C from time to time to verify independently the
information contained in any such notice or with respect to the
determinations or calculations of interest which may from time to
time or at any given time be due on the bonds of the New
Series A, of the New Series B and of the New Series C.
SECTION 5.03. The table of contents and the titles of
the Articles of this Supplemental Indenture shall not be deemed
to be any part thereof.
SECTION 5.04. As amended and supplemented by the
aforesaid indentures supplemental thereto and by this
Supplemental Indenture, the Original Indenture is in all respects
ratified and confirmed and the Original Indenture and the
aforesaid indentures supplemental thereto and this Supplemental
Indenture shall be read, taken and construed as one and the same
instrument.
SECTION 5.05. This Supplemental Indenture shall be
simultaneously executed in several counterparts, and all such
counterparts executed and delivered, each as an original, shall
constitute but one and the same instrument.
The debtor and its mailing address are Pennsylvania
Electric Company, 2800 Pottsville Pike, Reading, Pennsylvania
19605. The secured party and an address of the secured party
from which information concerning the security interest may be
obtained are United States Trust Company of New York, Trustee,
114 West 47th Street, New York, New York 10036.
39<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY,
party of the first part, has caused this instrument to be signed
in its name and behalf by its President or a Vice President, and
its corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary, and UNITED STATES TRUST
COMPANY OF NEW YORK, party of the second part, has caused this
instrument to be signed in its name and behalf by a Senior Vice
President or a Vice President and its corporate seal to be
hereunto affixed and attested by a Vice President or an Assistant
Vice President, all as of the day and year first above written.
ATTEST: PENNSYLVANIA ELECTRIC COMPANY
______________________________ By:___________________________
(Assistant) Secretary (Vice) President
[CORPORATE SEAL]
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK
______________________________ By:___________________________
(Assistant) Vice President (Senior) Vice President
[CORPORATE SEAL]
40<PAGE>
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this ____ day of November, 1995, before me,
______________________, a Notary Public for the State and County
aforesaid, the undersigned officer, personally appeared
______________________, who acknowledged himself to be a (Vice)
President of Pennsylvania Electric Company, a corporation, and
that he as such (Vice) President, being authorized to do so,
executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as
(Vice) President.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
______________________________
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK :
: ss:
COUNTY OF NEW YORK :
On this ____ day of November, 1995, before me,
_______________________, a Notary Public for the State and County
aforesaid, the undersigned officer, personally appeared
_______________________, who acknowledged herself to be a
(Senior) Vice President of United States Trust Company of New
York, a corporation, and that he as such (Senior) Vice President,
being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of the
corporation by himself as (Senior) Vice President.
I am not a director or officer of said United States
Trust Company of New York.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
______________________________
Notary Public
[NOTARIAL SEAL]
41<PAGE>
CERTIFICATE OF RESIDENCE
United States Trust Company of New York, Mortgagee and
Trustee within named, hereby certifies that its precise residence
is 114 West 47th Street, in the Borough of Manhattan, in the City
of New York, in the State of New York.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:___________________________
(Vice) President
42<PAGE>
SCHEDULE A
CRAWFORD COUNTY
All that certain lot or parcel of land situate in West
Mead Township, Crawford County, Pennsylvania, as and to the
extent conveyed to Pennsylvania Electric Company by Deed dated
June 16, 1993, from Keson, Inc., a Pennsylvania corporation, and
recorded in the Crawford County Recorder of Deeds Office on
June 23, 1993 in Record Book 195, page 204.
ERIE COUNTY
All that certain lot or parcel of land situate in the
First Ward of the City of Corry, Erie County, Pennsylvania, as
and to the extent conveyed to Pennsylvania Electric Company by
Deed dated March 9, 1994, from Dennis E. Roth and Joanne Roth,
husband and wife and Gary H. Munsee and Sylvia J. Munsee, husband
and wife, and recorded in the Erie County Recorder of Deeds
Office on March 9, 1994 in Book 0322, page 1903.
All that certain lot or parcel of land situate in the
Second Ward of the Borough of Union City, Erie County,
Pennsylvania, as and to the extent conveyed to Pennsylvania
Electric Company by Deed dated August 5, 1993, from Leslie E.
Drayer and Betty Lou Drayer, husband and wife, and recorded in
the Erie County Recorder of Deeds Office on August 9, 1993 in
Book 0284, page 1742.
INDIANA COUNTY
All that certain lot or parcel of land situate in the
Township of White, Indiana County, Pennsylvania as and to the
extent conveyed to Pennsylvania Electric Company by Deed dated
April 26, 1994, from David A. Olenik, Executor of the Estate of
Helen Minno, deceased, and recorded in the Indiana Recorder of
Deeds Office on May 6, 1994 in Book 1042, page 811.
A-1<PAGE>
Exhibit 10-A
GPU SYSTEM COMPANIES
DEFERRED COMPENSATION PLAN
(as amended through June 1, 1995)
<PAGE>
TABLE OF CONTENTS
Purpose 1
Definition of Terms 1
Administration 4
Deferral Election 5
Supplemental Savings Plan Benefits 7
Interest 8
Distribution of Deferred Funds 9
Non-Assignment of Deferred Compensation 11
Termination of Participation or Employment 11
Transfer of Employment 11
<PAGE>
1. Purpose
This document sets forth the GPU System Companies Deferred Compensation
Plan, as amended and restated, effective June 1, 1995.
The Plan provides Elected Officers of each Company, as defined herein,
with an opportunity to defer part or all of their Compensation, pursuant
to their elections made in accordance with the provisions hereof. The
Plan also provides Elected Officers and Other Eligible Employees with an
opportunity to be credited with additional deferred amounts that are
intended to approximate the Company Matching Contributions that
otherwise might have been made on their behalf to the General Public
Utilities Corporation and Subsidiary System Companies Employee Savings
Plan for Nonbargaining Employees (the "Savings Plan") but for the
limitation on the amount of compensation that can be taken into account
under the Savings Plan pursuant to section 401(a)(17) of the Internal
Revenue Code of 1986 (the "Compensation Limit").
The Plan is intended to constitute an unfunded plan of deferred
compensation for "a select group of management or highly compensated
employees" within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
Each Company has adopted this Plan as its own Plan. Accordingly, each
Company shall be obligated hereunder only with respect to amounts
distributable from the Accounts it maintains for Participants who are
its own employees; and the right to receive any amount distributable
hereunder with respect to any Participant shall be enforceable only
against the Company with which such Participant is or was last employed.
2. Definition of Terms
2.1 Account - refers, as the context may require, to the Retirement
Account, or the Pre-Retirement Account or Accounts, or to the
Retirement Account and all Pre-Retirement Accounts, established
for a Participant hereunder.
2.2 Board - refers to the Board of Directors of a Company.
2.3 Chairman - refers to the Chairman of the Board or the Chairman, as
appropriate for each Company that has adopted the Plan.
2.4 Committee - refers to the Personnel, Compensation and Nominating
Committee of the Board of Directors of General Public Utilities
Corporation.
2.5 Company - refers, as the context may require, singularly and not
jointly, to any Company, a majority of the outstanding common
stock of which is owned, directly or indirectly, by General Public
Utilities Corporation, that has adopted the Plan. When used in
reference to a Participant, the term "Company" shall mean the
Company with which such Participant is or was last employed unless
the context otherwise requires.
1
<PAGE>
2.6 Compensation - refers to all amounts which, but for an election
hereunder, would be paid in cash during a Plan Year to a
Participant for services performed on behalf of the Company, but
does not include reimbursement for travel or other expenses,
Company contributions to retirement programs or other employee
benefit plans, payments under the Company's Short-Term or Long-
Term Disability Income Plans, any amounts distributed to the
Elected Officer from any Pre-Retirement Account. A Participant's
Compensation for any Plan Year includes any Performance Award that
becomes payable to the Participant during such year, but does not
include any other amounts that are paid or that become payable to
the Participant under the 1990 Stock Plan for Employees of General
Public Utilities Corporation and Subsidiaries (the "Stock Plan").
A Participant's Compensation for any Plan Year beginning on or
after April 1, 1991, shall not include any severance payments made
to the Participant in connection with his or her termination of
employment.
2.7 Disability - refers to entitlement to benefits under the Company's
Long-Term Disability Income Plan or Employee Pension Plan as a
result of a disability which, in the opinion of the Board, is
considered to be a permanent disability.
2.8 Elected Officer - refers to an individual who, pursuant to
election by the Board, is serving as an officer of the Company
other than as an Assistant Controller, an Assistant Secretary, or
an Assistant Treasurer; provided, however, that the Board of any
Company may limit participation in the Plan to such of that
Company's elected officers as the Board may designate, and in such
case, the term "Elected Officer" shall refer only to any elected
officer of such Company so designated by the Board.
2.9 "Excess Compensation" - refers, in the case of any Participant for
any month beginning on or after January 1, 1995, to the amount by
which (i) the aggregate amount of the Participant's Regular
Compensation and Incentive Compensation for such month and for
all prior months within the Plan Year of the Savings Plan ("ESP
Plan Year") that includes such month exceeds the sum of (ii) the
Compensation Limit in effect for such ESP Plan Year and (iii) the
aggregate amount of the Participant's "Excess Compensation" (as
determined under clause (i) and (ii) hereof) for all prior months
within such Plan Year.
2.10 Incentive Compensation - refers to the portion of a Participant's
Compensation for a Plan Year that consists of amounts awarded to
the Participant during such year under the Company's Incentive
Compensation Plan for Elected Officers, Employee Incentive
Compensation Plan, or Annual Performance Award Plan.
2.11 Other Eligible Employee - refers, with respect to any Plan Year,
to any employee of a Company who is not an Elected Officer of such
Company but who is expected to have "Excess Compensation" for any
one or more months during such Plan Year and who has been
designated by the Chairman of such Company as eligible to make a
deferral election for such Plan Year under Section 4.3.
2
<PAGE>
2.12 Participant - refers to any Elected Officer or Other Eligible
Employee who has made a deferral election for any Plan Year under
Section 4.1 or 4.3. For all purposes of the Plan other than for
purposes of continuing entitlement to make deferral elections
under Section 4.1 or 4.3, an Elected Officer who at any time
ceases to be such, or a Participant whose employment is terminated
or whose participation in the Plan is terminated pursuant to
Section 9, shall, notwithstanding such cessation or termination,
continue to be treated as a "Participant" until all amounts
credited to his or her Accounts under the Plan have been
distributed pursuant to Section 7, or transferred pursuant to
Section 10.1.
2.13 Performance Award - refers to the portion of a Participant's
Compensation for a Plan Year that consists of any Performance Cash
Incentive Award that becomes payable to the Elected Officer during
such year under the Stock Plan. For this purpose, a Performance
Award shall be treated as becoming payable to a Participant on the
"Vesting Date" for the restricted shares or restricted units with
respect to which the Performance Award becomes payable; and the
"Vesting Date" shall mean the date on which such restricted shares
or restricted units become vested under the terms of the written
agreement between the Elected Officer and General Public Utilities
Corporation evidencing the award of such shares or units to the
elected Officer.
2.14 Plan - refers to the GPU System Companies Deferred Compensation
Plan as set forth in this document and as it may be amended in the
future.
2.15 Plan Year - refers to each 12-month period from April 1 through
March 31. In the case of any Company that adopts the Plan as of a
date after the start of a Plan Year, as so defined, the initial
"Plan Year," with respect to such Company's Elected Officers and
Other Eligible Employees, shall be the period commencing on the
date as of which the Plan is so adopted and ending on the next
following March 31.
2.16 Pre-Retirement Account - refers to the memorandum account which
shall be established and maintained for a Participant who elects,
pursuant to Section 4.5, to have payment of any portion of his or
her Compensation for any Plan Year deferred to a date which is
expected to occur prior to his or her Retirement or Disability. A
separate Pre-Retirement Account shall be established and
maintained for the Compensation for each Plan Year which the
Participant so elects to defer.
2.17 Regular Compensation - refers to a Participant's Compensation for
a Plan Year, exclusive of any Incentive Compensation awarded to
the Participant during such Plan Year, and exclusive of any
Performance Award that becomes payable to the Participant during
such Plan Year.
3
<PAGE>
2.18 Retirement - refers to termination of service with the Company on
account of retirement under the Company's Employee Pension Plan,
resignation, death or any other reason other than employment by
any other Company. A Participant will not be deemed to have
retired until he or she ceases to be employed with any Company.
2.19 Retirement Account - refers to the memorandum account which shall
be established and maintained for a Participant who elects,
pursuant to Section 4.5, to have payment of any portion of his or
her Compensation for any Plan Year deferred to a date after his or
her Retirement or Disability. The term Retirement Account shall
also refer to the memorandum account that shall be established and
maintained for a Participant pursuant to Section 5.3.
3. Administration
3.1 Subject to the concurrence of the Committee, the Company may
modify the provisions of the Plan from time-to-time, or, may
terminate the entire Plan at any time. Action to amend the Plan
may be taken by the Company either by resolution duly adopted by
the Company's Board, or by an instrument in writing executed by an
officer of the Company to whom authority to adopt or approve
amendments to the Plan has been delegated pursuant to a resolution
duly adopted by the Company's Board. Such modification or
termination shall not adversely affect the rights of any
Participant accrued prior to such modification or termination.
3.2 Responsibility for the ongoing administration of this Plan rests
with the Board.
3.3 The Board may delegate the day-to-day administration of this Plan,
including the maintenance of appropriate records, receiving
notifications, making filings, and maintaining related
documentation, to the officer or other employee of the Company in
charge of the Company's Human Resources division or function, and
to his or her staff.
3.4 The Board shall have exclusive authority to resolve all questions
concerning the Plan, including any dispute over accounting or
administrative procedures or interpretation of the Plan.
Notwithstanding the foregoing, any determination made by the Board
after the occurrence of a "Change in Control", as defined in
Section 7(c) of the Stock Plan, that denies in whole or in part
any claim made by any individual for benefits under the Plan shall
be subject to judicial review, under a "de novo", rather than a
deferential, standard.
3.5 A Participant's election to defer Compensation, selection of a
distribution commencement date and distribution option, or
designation of a beneficiary and contingent beneficiary, made
pursuant to this Plan, shall be made in writing, on a form
furnished to the Participant for such purpose by the officer or
other employee of the Company in charge of the Company's Human
Resources division or function. The form shall be signed by the
4
<PAGE>
Participant and delivered personally or by first class mail to:
Vice President-Human Resources
GPU Service Corporation
100 lnterpace Parkway
Parsippany, New Jersey 07054
Any such election, selection, designation, or any change therein,
shall not become effective unless and until received by the Vice
President-Human Resources.
A change in the selection of a distribution commencement date or
distribution option will not be effective unless made at least
twenty-four (24) months prior to the Participant s Retirement or
Disability.
4. Deferral Election
4.1 For each Plan Year beginning on and after April 1, 1991, an
Elected Officer may elect, separately, to defer (a) any part or
all of his or her Regular Compensation for such year, (b) any part
or all of his or her Incentive Compensation for such year, and/or
(c) any part or all of any Performance Award that becomes payable
to the Elected Officer during such year; subject, however, in each
case to the limitations set forth in Section 4.4.
4.2 An election to defer Regular Compensation for any Plan Year
beginning on and after April 1, 1991, shall be made on or prior to
October 31 of the year preceding such Plan Year. An election to
defer Incentive Compensation for any Plan Year beginning on or
after April 1, 1991, shall be made on or prior to October 31 of
such Plan Year. Notwithstanding the foregoing, (a) Elected
Officers who are initially elected prior to November 1st of any
Plan Year may, within 30 days of such initial election, or, if
later, the date the Elected Officer's Regular Compensation is
fixed by the Board, make a deferral election for his or her
Regular Compensation for the then current Plan Year, and (b)
Elected Officers who are initially elected after November 1st of
any Plan Year may, within 30 days of such initial election, or, if
later, the date the Elected Officer's Regular Compensation is
fixed by the Board, make a deferral election for both his or her
Regular Compensation and Incentive Compensation (if any) for the
then current Plan Year, as well as for his or her Regular
Compensation for the immediately succeeding Plan Year; provided,
however, that any deferral election made pursuant to clause (a) or
(b) hereof shall be effective only with respect to Compensation
earned after such deferral election has become effective. An
election to defer any part of a Performance Award shall be made at
least one year prior to the Vesting Date for the restricted shares
or restricted units with respect to which such Performance Award
is payable. All deferral elections made under Section 4.1 or 4.3
shall be irrevocable.
5
<PAGE>
4.3 For each Plan Year beginning on or after April 1, 1996, any Other
Eligible Employee may elect to defer any part or all of any
"Excess Compensation" that may become payable to such Other
Eligible Employee for any month during such Plan Year, subject to
the limitations set forth in Section 4.4. Such election shall be
made on or prior to October 31 of the year preceding such Plan
Year.
4.4 Deferral elections otherwise permitted to be made under the Plan
for Plan Years beginning on or after April 1, 1995 shall be
subject to the following limitations:
(a) No amount may be deferred pursuant to a Participant's
election under this Plan for a period of 12 months following
the Participant's receipt of a hardship withdrawal under
Section 7.2(e) of the Savings Plan.
(b) No Incentive Compensation for a Plan Year may be deferred
pursuant to a Participant's election hereunder if the
Participant s Retirement or Disability occurs after the date
on which he or she made such election but prior to the first
day of the calendar year next following the date on which
the Participant made the election for such Plan Year.
(c) No portion of a Participant's Compensation for a Plan Year
may be deferred pursuant to the Participant's election
hereunder to the extent such portion is required to be
applied to payment of any tax or other obligation of the
Participant.
4.5 In any election to defer Regular Compensation or Incentive
Compensation for any Plan Year, in any election to defer any
Performance Award that becomes payable during a Plan Year, and in
any election by any Other Eligible Employee to defer any Excess
Compensation for any Plan Year, the Participant shall specify the
amount or portion of such Compensation to be deferred, and shall
indicate whether the Compensation so deferred is to be credited to
a Pre-Retirement Account, or to a Retirement Account. If an
Elected Officer elects to defer Incentive Compensation for any
Plan Year to a Pre-Retirement Account, the Compensation so
deferred shall be credited to the Elected Officer's Pre-Retirement
Account for the Plan Year next following the Plan Year in which
such Incentive Compensation is awarded to the Elected Officer.
4.6 With respect to Compensation deferred hereunder for a Plan Year
which a Participant elects to have credited to his or her Pre-
Retirement Account, he or she shall specify in his or her election
form the date on which distribution of such account shall be made
or commence. The date so selected shall be no earlier than the
first business day of the calendar year following 24 months from
the close of such Plan Year. Notwithstanding the foregoing, a
Participant may elect to have distribution of any Pre-Retirement
Account made or commence on the earlier of any date selected by
the Participant in accordance with the preceding sentence, or the
first business day of the calendar year following the
6
<PAGE>
Participant's Retirement or Disability. In his or her election
form for the Plan Year, the Participant shall also select an
option under Section 7.2 for the distribution of the Pre-
Retirement Account. Except as provided in Section 7.4, the date
so specified, and the option so selected, may not thereafter be
changed by the Participant.
4.7 With respect to any Compensation deferred hereunder which a
Participant elects to have credited to his or her Retirement
Account, he or she shall, at the time he or she first elects to
have an amount credited to such account, also elect a distribution
commencement date and a distribution option under Section 7.2 for
the distribution of such account. A Participant may, subject to
the provisions of Section 3.5, change any election as to the
distribution commencement date and distribution option for the
Retirement Account previously made by him or her. The
distribution commencement date so elected shall be either the
first business day of the calendar year following the
Participant s Retirement or Disability, or the first business day
of any subsequent calendar year.
5. Supplemental Savings Plan Benefits
5.1 Beginning on or after April 1, 1992, for each month for which an
Elected Officer has Excess Compensation, and beginning on or after
April 1, 1996, for each month for which any Other Eligible
Employee has Excess Compensation, there shall be credited to such
Participant's Retirement Account an amount determined by
multiplying the Participant's Excess Compensation for such month
by his or her Matching Percentage for such month.
5.2 For purposes of Section 5.1, the following definitions and rules
shall apply beginning on or after January 1, 1995:
(a) In determining the amount of a Participant's "Excess
Compensation" for any month, only the Participant's Regular
Compensation for those months during which he or she is
eligible to participate in the Savings Plan shall be taken
into account.
(b) A Participant's Regular Compensation for any month shall
include the total amount of Regular Compensation that would
have been paid to the Participant in such month but for any
deferral election made by the Participant hereunder. A
Participant's Incentive Compensation for any month shall
include the total amount of Incentive Compensation awarded
to the Participant during such month whether or not paid to
the Participant in such month.
7
<PAGE>
(c) A Participant's "Matching Percentage" for any month shall
mean the percentage, not in excess of 4%, determined by
dividing the aggregate amount of the Participant's Regular
Compensation and Incentive Compensation for such month, and
for all prior months within the ESP Plan Year that includes
such month, that is deferred pursuant to elections made by
the Participant hereunder, by (ii) the aggregate amount of
the Participant's Excess Compensation for such month and for
all prior months within the ESP Plan Year that includes such
month.
5.3 If, on the first date as of which an amount is to be credited to a
Participant's Retirement Account under Section 5.1, a Retirement
Account had not previously been established for such Participant
pursuant to Section 4.5, a Retirement Account shall be established
for such Participant as of such date. By no later than 30 days
after such date, such Participant shall elect a distribution
commencement date and a distribution option for his Retirement
Account, and may thereafter change any such election, in
accordance with the provisions set forth in Section 4.7.
6. Interest
Interest equivalents will be calculated and credited to Accounts at the
end of each quarter in the calendar year. Such interest equivalents
shall be determined in accordance with the following rules:
(a) The amount of Regular Compensation deferred each month pursuant to
an Elected Officer's election hereunder, the amount of Excess
Compensation for any month that is deferred pursuant to any Other
Eligible Employee's election hereunder, and any amount credited to
a Participant's Retirement Account for any month under Section
5.1, shall be treated as having been credited to the Participant's
Account in two equal installments during such month, one at mid-
month, and the other at month's end; and interest equivalents
thereon shall be compounded monthly on each quarter's beginning
balance with proportionate monthly compounding for any amounts so
deferred or credited during any calendar quarter.
(b) The amount of Incentive Compensation deferred pursuant to an
Elected Officer's election hereunder shall be treated as having
been credited to the Elected Officer's Account as of the 15th day,
or the last day of the month (whichever is earlier), following the
date on which such amount would have been paid to the Elected
Officer in the absence of such election, and interest equivalents
thereon shall be compounded monthly.
(c) Any part of a Performance Award deferred pursuant to an Elected
Officer s election hereunder shall be treated as having been
credited to the Elected Officer's Account as of the 15th day, or
the last day of the month (whichever is earlier), following the
Vesting Date for the restricted shares or restricted units with
respect to which such Performance Award became payable.
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(d) The rate used in calculation of interest equivalents will be the
rate equal to the simple average of Citibank N.A. of New York
Prime Rates for the last business day of each of the three months
in the calendar quarter or, if greater, such other rate as
established from time to time by the Committee.
Interest equivalents will be credited to the balance of each Account
maintained for a Participant hereunder, including the undistributed
balance of any such Account from which payments are being made in
installments. However, if a Participant elects Option (c) under Section
7.2 below, no interest equivalents will be credited to the Participant s
Account for any period after the date on which distribution under such
Option is to commence.
7. Distribution of Deferred Funds
7.1 Subject to Section 7.3(b), a Participant's Pre-Retirement Accounts
shall be distributed to him or her, or distributions from such
Pre-Retirement Accounts shall commence, on the date or dates
specified in the elections made by the Participant with respect to
such accounts. Subject to Section 7.3(b), a Participant's
Retirement Account shall be distributed to him or her, or
distributions from such Retirement Account shall commence, on the
date specified in the Participant's latest effective election.
7.2 The options for distribution are:
(a) A single lump sum payment.
(b) Annual installments over any fixed number of years selected
by the Participant, with a minimum of five annual
installments required for the Retirement Account.
(c) With the prior consent of the Committee and subject to such
terms and conditions as it may require, a lifetime annuity
payable in annual or more frequent installments, the amount
of which shall be determined by reference to mortality
tables and interest and dividend rates applicable under
individual whole life insurance policies being issued at the
time of the Committee's approval by such life insurance
companies as the Committee may designate.
(d) Any other form of distribution, in equal or unequal
payments, as specifically approved by the Committee.
If distribution of any of a Participant's Accounts is to be made
in annual installments under Option (b) of this Section 7.2, the
amount of each installment will equal the total amount in said
Account on the date the installment is payable, divided by the
number of installments remaining to be paid. In addition, if the
distributions are made in installments under Option (b) of this
Section 7.2, the interest equivalent accrued on each Account each
year after the date the first installment is payable will be
distributed on each anniversary of such date.
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7.3 Except as the Board may otherwise determine based on the
circumstances at the time the distribution to the beneficiary is
to commence:
(a) If a Participant should die after distribution of any
Account maintained for him or her hereunder has commenced,
but before the entire balance of such Account has been fully
distributed, distributions will continue to be made from
such Account to the Participant s designated beneficiary or
contingent beneficiary, in accordance with the distribution
option in effect for such Account at the time of the
Participant s death.
(b) If a Participant should die before any distribution from an
Account maintained for him or her hereunder has been made to
him or her, distribution of such Account to the
Participant s designated beneficiary or contingent
beneficiary shall be made, or shall commence, as soon as
practicable after the Participant' death, in accordance with
the distribution option in effect for such Account at the
time of the Participant' death.
Any amounts remaining to be paid to a Participant's designated
beneficiary at the time of the designated beneficiary's death
shall be paid to the Participant's contingent beneficiary or, if
such contingent beneficiary has predeceased the Participant's
designated beneficiary, to the estate of the designated
beneficiary. Any amounts remaining to be paid to a Participant's
contingent beneficiary at the time of such contingent
beneficiary's death shall be paid to the estate of the contingent
beneficiary. If the Participant's designated beneficiary and
contingent beneficiary have both predeceased the Participant, any
amounts remaining to be paid to the Participant at the time of his
or her death shall be paid to the Participant's estate.
7.4 Notwithstanding anything herein to the contrary, any Account
maintained for a Participant hereunder may be distributed, in
whole or in part, to such Participant on any date earlier than the
date on which distribution from such Account is to be made or
commence pursuant to the Participant's election with respect to
such Account, if (a) the Participant requests such early
distribution, and (b) the Board, in its sole discretion,
determines that such early distribution is necessary to help the
Participant meet some severe financial need arising from
circumstances which were beyond the Participant's control and
which were not foreseen by him or her at the time he or she made
his or her election as to the date or dates for distribution from
such Account. A request by a Participant for an early
distribution shall be made in writing, shall set forth sufficient
information as to the Participant's need for such distribution to
enable the Board to take action on his or her request, and shall
be mailed or delivered to the Company's Corporate Secretary.
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7.5 The Company may, but shall not be required to, purchase a life
insurance policy, or policies, to assist in funding any of its
payment obligations under the Plan. If any policy is so
purchased, it shall, at all times, remain the exclusive property
of the Company and subject to the claims of its creditors.
Neither the Participant nor any beneficiary or contingent
beneficiary designated by him or her shall have any interest in,
or rights with respect to, such policy.
7.6 A Participant shall have the status of a mere unsecured creditor
of the Company with respect to his or her right to receive any
payment under the Plan. The Plan shall constitute a mere promise
by the Company to make payments in the future of the benefits
provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes and
for purposes of Title I of ERISA.
8.0 Non-Assignment of Deferred Compensation
A Participant' rights to payments under this Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer (other than
transfer by will or by the laws of descent and distribution, in the
absence of a beneficiary designation), assignment, pledge, encumbrance,
attachment or garnishment by creditors of the Participant or his or her
spouse or other beneficiary.
9. Termination of Participation or Employment
A Participant's participation in the Plan may be terminated by the Board
at any time. No promise or representation, either express or implied,
is made with respect to continued employment, transfer or promotion
because of participation in the Plan, and the employment of a
Participant may be terminated at any time.
10. Transfer of Employment
10.1 If a Participant transfers employment to any other Company that
maintains this Plan for such Company's Elected Officers and Other
Eligible Employees and the Participant is or becomes an Elected
Officer or Other Eligible Employee of such other Company, the
balance to the Participant's credit in each Account maintained for
the Participant under this Plan shall be transferred to the
comparable account established for the Participant under the Plan
maintained by such other Company, effective as of the date on
which the Participant's employment is so transferred or, if later,
the date on which the Participant first becomes an Elected Officer
or Other Eligible Employee of such other Company. Upon the
transfer of the Participant's Account balances, the Company shall
have no further obligation to the Participant or his or her
designated beneficiaries with respect to payment of the Account
balances so transferred.
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10.2 If an Elected Officer or Other Eligible Employee of any other
Company that maintains this Plan for its Elected Officers or Other
Eligible Employee transfers employment to the Company and is or
becomes an Elected Officer or Other Eligible Employee of the
Company, as of the date on which such Elected Officer's or Other
Eligible Employee's employment is so transferred or, if later, the
date on which such Elected Officer or Other Eligible Employee
first becomes an Elected Officer or Other Eligible Employee of the
Company, there shall be established for the Elected Officer or
Other Eligible Employee under this Plan an Account or Accounts
comparable to each account maintained for such Elected Officer or
Other Eligible Employee under such other Company's Plan, and there
shall be transferred to each Account so established an amount
equal to the balance to such Elected Officer's or Other Eligible
Employee's credit in the comparable account maintained for the
Elected Officer or Other Eligible Employee under such other
Company's Plan.
In addition, on and after the date on which an Elected Officer's
or Other Eligible Employee's Account balances are so transferred,
any election to defer Compensation, any election as to the date of
commencement or form of distribution of Account balances, and any
designation of a beneficiary, made by the Participant under such
other Company's Plan shall be treated as having been made under
this Plan.
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Exhibit10-B
GPU SYSTEM COMPANIES
MASTER DIRECTORS' BENEFITS PROTECTION TRUST
As Adopted Effective September 1, 1995
<PAGE>
TABLE OF CONTENTS
Article Title Page No.
ARTICLE 1 Definitions 1
ARTICLE 2 Establishment of the Trusts 3
ARTICLE 3 Contributions and Accounts 4
ARTICLE 4 Payments to Participants and Beneficiaries 6
ARTICLE 5 Legal Defense Fund 10
ARTICLE 6 Insolvency 13
ARTICLE 7 Payments to Company 14
ARTICLE 8 Investment Authority and Disposition of Income 15
ARTICLE 9 General Powers and Duties of Trustee 16
ARTICLE 10 Taxes, Expenses, and Compensation of Trustee 19
ARTICLE 11 Accounting by Trustee 20
ARTICLE 12 Communications 21
ARTICLE 13 Resignation or Removal of Trustee 22
ARTICLE 14 Amendments and Termination 23
ARTICLE 15 Miscellaneous 23
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THIS TRUST AGREEMENT, made as of the 1st day of September, 1995 by
and between GENERAL PUBLIC UTILITIES CORPORATION, a Pennsylvania corporation
(the "Corporation"), JERSEY CENTRAL POWER & LIGHT COMPANY, a New Jersey
corporation, and GPU NUCLEAR CORPORATION, a New Jersey corporation, (each such
corporation is hereinafter referred to individually as a "Company", and all
such corporations are hereinafter referred to collectively as the "Com-
panies"), and UNITED JERSEY BANK, a New Jersey state chartered bank
(hereinafter referred to as the "Trustee").
W I T N E S S E T H :
WHEREAS, each Company has adopted one or more Plans (as
hereinafter defined) under which it has incurred or expects to incur liability
under the terms of such Plans with respect to Benefits (as hereinafter
defined) payable to individuals participating in such Plans; and
WHEREAS, each Company wishes to establish a trust (hereinafter
called the "Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's creditors in the event of the
Company's Insolvency (as hereinafter defined) until paid to Plan participants
and their beneficiaries in such manner and at such times as specified in the
Plans; and
WHEREAS, it is the intention of the parties that each Trust shall
constitute an unfunded arrangement and shall not affect the status of each of
the Plans as unfunded for federal income tax purposes; and
WHEREAS, it is the intention of each Company to make contributions
to its Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under its Plans; and
WHEREAS, the Trustee is not a party to any of the Plans and makes
no representations with respect thereto;
NOW, THEREFORE, each Company and the Trustee agree as follows:
ARTICLE 1
Definitions
1.1 As used herein, the following terms shall have the following
meanings, unless the context clearly indicates a contrary meaning:
(a) "Agreement" shall mean this instrument, as the same may
be amended from time to time as permitted herein.
(b) "Applicable Company" shall mean, with respect to any
Trust established hereunder, or any Plan, the Company that
established such Trust, or that has adopted or maintains such
Plan.
(c) "Beneficiary", with respect to a Participant, shall
mean the person or entity designated by such Participant under a
Plan, or such other person or entity with respect to such
Participant as may be designated under the terms of such Plan, to
receive the Benefits, if any, payable from such Plan following
such Participant's death.
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(d) "Benefits" shall mean those amounts specified in
Exhibit B that are payable under a Plan to (or with respect to) a
Participant, or, upon his death, to his Beneficiary.
(e) "Benefit Valuation Date" shall mean the first day of each
calendar year.
(f) "Change in Control"--For purposes of this Agreement, a
"Change in Control" shall be deemed to occur at the time when
either (i) any entity, person (within the meaning of Section 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (other than any Company, or any
subsidiary of any Company, or any savings, pension or other plan
for the benefit of employees of any Company or its subsidiaries)
which theretofore was beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of less than 20% of the Corporation's then
outstanding Common Stock either (x) acquires shares of Common
Stock of the Corporation in a transaction or series of
transactions that results in such entity, person or group directly
or indirectly owning beneficially 20% or more of the outstanding
Common Stock of the Corporation, or (y) acquires by proxy or
otherwise the right to vote for the election of directors, for any
merger, combination or consolidation of the Corporation or any of
its direct or indirect subsidiaries, or for any other matter or
question more than 20% of the then outstanding voting securities
of the Corporation (except where such acquisition is made by a
person or persons appointed by at least a majority of the Board of
Directors of the Corporation to act as proxy for any purpose); or
(ii) the election or appointment, within a twelve-month period, of
persons to the Corporation's Board of Directors who were not
directors of the Corporation at the beginning of such twelve-month
period, and whose election or appointment was not approved by a
majority of those persons who were directors at the beginning of
such period, where such newly elected or appointed directors
constitute 30% or more of the directors of the Board of Directors
of the Corporation.
Promptly upon learning of the occurrence of a Change in
Control, as defined above, the person who, immediately prior to
the Change in Control, served as either the Chief Executive
Officer or the Senior Vice President and General Counsel of the
Corporation shall furnish the Trustee with written notice that a
Change in Control has occurred. Notwithstanding any provision
herein to the contrary, a Change in Control shall not be treated
as having occurred for purposes of this Agreement, unless and
until the Trustee has received such written notice.
(g) "Code" shall mean the Internal Revenue Code of 1986 as
the same may be amended from time to time.
(h) "Insolvent"--A Company shall be considered "Insolvent"
for purposes of this Agreement if (i) the Company is unable to pay
its debts as they become due, or (ii) the Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy
Code.
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(i) "Participant" shall mean any person who is or may
become entitled to receive Benefits under a Plan and who is
included in the list of persons who are to be treated as
Participants for purposes of this Agreement, as set forth in
Exhibit A hereto.
(j) "Permitted Investments" shall mean direct obligations
of the United States of America or agencies or instrumentalities
thereof or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America ("Obliga-
tions"), and certificates of deposit and bankers' acceptances of a
bank organized and existing under the laws of the United States of
America or any State thereof that has a combined capital and
surplus of at least $100,000,000, all having respective maturities
of not more than one year when purchased. The term "Permitted
Investments" shall also mean any fund or portfolio maintained by
any open-end investment company registered under the Investment
Company Act of 1940, the assets of which are invested exclusively
in Obligations, certificates of deposit and/or bankers'
acceptances of the kind described in the preceding sentence
including, without limitation, any such fund or portfolio for
which the Trustee or any affiliate of the Trustee serves as
investment adviser.
(k) "Present Value" shall mean, with respect to any Benefit, the
single sum actuarial present value of such Benefit, as determined by an
enrolled actuary on the basis of the actuarial assumptions most recently
adopted by the Applicable Company for use in connection with this Agree-
ment. Notwithstanding the foregoing, any determination of the Present
Value of Benefits to be made hereunder at any time after a Change in
Control shall be made on the basis of the actuarial assumptions that
were used in determining the Present Value of such Benefits as of the
most recent Benefit Valuation Date preceding the Change in Control,
unless the Applicable Company has notified the Trustee in writing prior
to the Change in Control of its adoption of different actuarial
assumptions for use hereunder after the Change in Control.
(l) "Plan" or "Plans" shall mean, with respect to any
Company, any (or if the context requires, all) of the plans,
programs or policies maintained by such Company, and agreements
entered into by such Company, that are included in the list set
forth in Exhibit B hereto.
(m) "Valuation Date" shall mean the last business day of
each calendar quarter.
ARTICLE 2
Establishment of the Trusts
2.1 Each Company hereby establishes with the Trustee, and the
Trustee hereby accepts, a Trust consisting of such sums of money and other
property acceptable to the Trustee as such Company shall pay or deliver to the
Trustee from time to time. All such money and other property, all investments
and reinvestments made therewith or proceeds thereof and all earnings and
3
<PAGE>
profits thereon, less all payments therefrom and charges thereto as authorized
herein, are hereinafter referred to as the "Trust Fund" for such Trust. Each
Trust Fund shall be held, administered and disposed of by the Trustee as
provided in this Agreement.
2.2 Prior to a Change in Control, each Trust established
hereunder may be revoked, in whole or in part, by the Applicable Company
giving to the Trustee written notice of such revocation. If a Trust is so
revoked in its entirety, all of the assets of the Trust (after payment of any
unpaid fees and expenses of the Trustee properly chargeable to such Trust)
shall be transferred by the Trustee to the Applicable Company or to such other
person or entity as the Applicable Company may direct in writing. If a Trust
is so revoked in part, the Trustee shall transfer to the Applicable Company
such of the assets of the Trust as the Applicable Company shall have specified
in its written notice to the Trustee of the partial revocation of such Trust.
Upon a Change in Control, each Trust shall become irrevocable.
2.3 Each Trust established hereunder is intended to constitute a
"grantor trust", of which the Company is the grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Code, and shall
be construed accordingly.
2.4 The principal of each Trust, and any earnings thereon, shall
be held separate and apart from other funds of the Applicable Company, and
shall be used exclusively for the uses and purposes of Participants under such
Company's Plans and general creditors of such Company, as herein set forth.
Participants and their Beneficiaries shall have no preferred claim on, or any
beneficial ownership interest in, any assets of any Trust. Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights
of Participants and their Beneficiaries against the Applicable Company. Any
assets held by each Trust will be subject to the claims of the Applicable
Company's general creditors under federal and state law in the event of the
Applicable Company's Insolvency, as defined in Section 1.1(h) herein.
2.5 Each Trust established hereunder shall be maintained by the
Trustee as a separate trust. However, the assets of any Trust may be
commingled with the assets of any other Trust, solely for investment purposes.
ARTICLE 3
Contributions and Accounts
3.1 Prior to a Change in Control, each Company may make
contributions to its Trust in such amounts, and at such times, as such Company
may determine in its sole discretion. Such contributions may be in the form
of cash, or such other property as may be determined by the Company and as may
be acceptable to the Trustee.
3.2 Upon the occurrence of a Change in Control, each Company
shall be required to make contributions to its Trust as follows:
(a) Upon a Change in Control, the Company shall, as soon as
possible but in no event later than 30 days following the Change in Control,
make an irrevocable contribution to its Trust in an amount that, when added to
the value of the Trust Fund for such Trust (exclusive of the value of the
4
<PAGE>
Legal Defense Fund, if any, maintained within such Trust Fund) determined as
of the most recent Valuation Date preceding such contribution, will equal the
sum of (i) the aggregate Present Value of all Benefits accrued for all
Participants under all of such Company's Plans determined as of the most
recent Benefit Valuation Date preceding the date on which the Change in
Control occurred; and (ii) the aggregate Present Value of all other Benefits
for all Participants under all of such Company's Plans that accrue as a result
of the occurrence of the Change in Control, determined as of the first day of
the month coincident with or immediately following the date on which the
Change in Control occurred.
(b) Within 60 days after each Benefit Valuation Date following
the occurrence of a Change in Control, each Company shall make an irrevocable
contribution to its Trust in an amount that, when added to the value of the
Trust Fund for such Trust (exclusive of the value of the Legal Defense Fund,
if any, maintained within such Trust Fund) determined as of the most recent
Valuation Date preceding such contribution, will equal the aggregate Present
Value of all Benefits accrued for all Participants under all of such Company's
Plans determined as of such Benefit Valuation Date.
3.3 Within the Trust Fund for each Trust, the Trustee shall
establish and maintain a separate account (hereinafter referred to as a "Plan
Account") for each of the Applicable Company's Plans. The Trustee also shall
establish within each Plan Account a separate sub-account (hereinafter
referred to as a "Participant Account") for each Participant of such Plan.
The Trustee shall hold all Plan Accounts and Participant Accounts maintained
within the Trust Fund for any Trust as a single consolidated fund.
3.4 At the time each contribution is made to a Trust prior to a
Change in Control, the amount, or property, contributed to such Trust shall be
allocated by the Trustee to the Plan Accounts, and to the Participant
Accounts, maintained within such Trust in such manner as the Applicable
Company directs in written instructions delivered by the Applicable Company to
the Trustee at the time of the contribution.
3.5 As of each Valuation Date, the Trust Fund for each Trust
shall be revalued by the Trustee at its then current fair market value, as
determined by the Trustee. Prior to a Change in Control, the net investment
gains and losses of each Trust Fund for each calendar year shall be allocated
by the Trustee, as of the last Valuation Date occurring in such year, among
the Plan Accounts and Participant Accounts maintained within such Trust, in
such manner as the Applicable Company shall specify in written instructions
furnished by it to the Trustee. As of each Valuation Date following the
occurrence of a Change in Control, the net investment gains and losses of each
Trust Fund shall be allocated by the Trustee proportionately among the Plan
Accounts and Participant Accounts maintained within such Trust, based on the
value of such Accounts as of the immediately preceding Valuation Date. In
making the foregoing allocation, the value of Plan Accounts and Participant
Accounts in existence on the immediately preceding Valuation Date but not in
existence on the current Valuation Date shall be disregarded.
3.6 Notwithstanding the provisions of Sections 3.4 and 3.5, as of
each Benefit Valuation Date occurring prior to a Change in Control, the
Trustee shall, in accordance with such written instructions as it has received
from the Applicable Companies, record adjustments to the balance of each
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<PAGE>
Participant Account maintained within a Plan Account to the extent necessary
for such balance to equal the amount determined by multiplying (a) the balance
of such Plan Account determined as of the most recent Valuation Date preceding
such Benefit Valuation Date, by (b) a fraction the numerator of which is the
Present Value of the Benefits accrued for the applicable Participant under the
Plan in question, determined as of such Benefit Valuation Date, and the
denominator of which is the aggregate Present Value of all of the Benefits
accrued for all Participants under such Plan, determined as of such Benefit
Valuation Date.
3.7 Any contribution made by a Company to its Trust pursuant to
Section 3.2(a) or (b) shall be allocated to the Plan Accounts maintained under
such Trust in proportion to the respective amounts by which the aggregate
Present Value of all Benefits accrued for all Participants under each of the
Plans in question, determined as of the dates specified in Section 3.2(a) or
(b), exceeds the balance of the Plan Account maintained hereunder with respect
to each such Plan, determined as of the Valuation Date immediately preceding
such contribution. The amount so allocated to any Plan Account shall be
further allocated to the Participant Accounts maintained within such Plan
Account in proportion to the respective amounts by which the Present Value of
the Benefits accrued for each Participant under the Plan in question, deter-
mined as of the dates specified in Section 3.2(a) or (b), exceeds the balance
of the Participant Account maintained for such Participant, determined as of
the Valuation Date immediately preceding such contribution.
3.8 The determinations of the Present Value of Benefits required
to be made hereunder as of any Benefit Valuation Date occurring prior to a
Change in Control shall be made by an enrolled actuary selected by the
Applicable Companies. As soon as practicable after each such Benefit
Valuation Date, each Company shall furnish the Trustee with a schedule setting
forth the Present Value so determined of the Benefits accrued for each
Participant under each of the Company's Plans. The determinations of the
Present Value of Benefits required to be made hereunder as of any Benefit
Valuation Date, or other date, occurring after a Change in Control shall be
made by an enrolled actuary selected by the Trustee. In making any allocation
of contributions the Trustee is required to make under Section 3.7, the
Trustee shall be entitled to rely, and shall be fully protected in relying, on
any written determination of the Present Value of any Benefit furnished to it
in accordance with the provisions of this Section 3.8. In making any
allocation of net investment gains and losses pursuant to the second sentence
of Section 3.5, and in recording any adjustments to the balance of any
Participant Account pursuant to Section 3.6, the Trustee shall be entitled to
rely, and shall be fully protected in relying, on any written instructions
furnished to it by the Applicable Companies.
ARTICLE 4
Payments to Participants and Beneficiaries
4.1 Prior to a Change in Control, the Trustee shall make payments
from the Trust Fund for any Trust to such Participants and Beneficiaries, in
such manner, at such times, and in such amounts, as the Applicable Company
shall direct in written instructions delivered to the Trustee.
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4.2. After a Change in Control, the Trustee shall make payments
from the Trust Fund of any Trust to Participants and Beneficiaries in
accordance with the following provisions:
(a) Prior to a Change in Control, each Company shall deliver to
the Trustee a schedule ("Payment Schedule") substantially in the form annexed
hereto as Exhibit C for each Participant of each Plan whose Benefits under
such Plan may be paid from such Company's Trust after a Change in Control.
The Payment Schedule shall
(i) describe the events that must occur in order for the
Participant's Benefits to become payable under the terms of the Plan;
(ii) specify the amount of the Participant's Benefits accrued
under the Plan, as of the date on which the Payment Schedule is
furnished to the Trustee, and provide a formula or such other
instructions as will enable the Trustee to determine the amount of the
Participant's Benefits as of the time they become payable under the
terms of the Plan;
(iii) specify the form in which the Participant's Benefits are to
be paid, as provided for or available under the Plan;
(iv) specify the time of commencement for payment of the
Participant's Benefits under the Plan; and
(v) specify the address and social security number of the
Participant as well as the name, address, social security number and
relation to the Participant of the Participant's Beneficiary.
Prior to a Change in Control, the Applicable Company may from time to time
substitute a new Payment Schedule for, or amend, an existing Payment Schedule
by delivering a new or amended Payment Schedule to the Trustee. Upon receipt
of such new or amended Payment Schedule, the previous Payment Schedule shall
be deemed revoked. Prior to a Change in Control, any Payment Schedule
previously filed with the Trustee may be revoked by the Applicable Company by
filing written notice of such revocation with the Trustee without delivering a
new or amended Payment Schedule to the Trustee. No Payment Schedule may be
revoked after a Change in Control. Notwithstanding any other provision herein
to the contrary, after a Change in Control, no payment shall be made from any
Trust with respect to a Participant's Benefits under any Plan unless a Payment
Schedule for such Participant's Benefits under such Plan (which has not been
revoked) is on file with the Trustee at the time a Change in Control occurs.
Except as otherwise provided herein, the Trustee shall make payments to
Participants and their Beneficiaries in accordance with such Payment Schedule.
(b) Any Participant or Beneficiary seeking to obtain payments
from the Trust Fund for any Trust after a Change in Control shall first file
with the Trustee a written request for payment in substantially the form
annexed hereto as Exhibit D ("Payment Request Form"). In the Payment Request
Form so filed, the Participant or Beneficiary shall
(i) identify the Plan or Plans under which the Participant or
Beneficiary has become entitled to payment of Benefits;
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(ii) describe the events that entitle the Participant or
Beneficiary to receive payment of Benefits under the terms of the Plan
or Plans, and affirm under oath that such events have occurred;
(iii) affirm under oath that no amount of the Benefits with
respect to which payment from the Trust Fund is sought was previously
paid by the Applicable Company; and
(iv) provide such information (including, without limitation,
information as to the Participant's period of service, compensation and
conditions of employment after a Change in Control) as will enable the
Trustee to determine the amount of the Benefits that the Participant or
Beneficiary is entitled to receive in accordance with the Payment
Schedules furnished to the Trustee with respect to the Participant's
Benefits under the Plan or Plans.
In the case of any Beneficiary seeking payments from a Trust Fund, the
Beneficiary shall furnish to the Trustee, along with the Payment Request Form,
a certified copy of the death certificate of the Participant, an inheritance
tax waiver and such other documents as the Trustee may reasonably require,
including, without limitation, certified copies of letters testamentary. For
all purposes under this Agreement, the Trustee may rely, and shall be fully
protected in relying, on the information contained in any Payment Request Form
(and in any documents accompanying such form) filed with it by any Participant
or Beneficiary.
(c) As soon as practicable after a Payment Request Form has been
filed with it by a Participant or Beneficiary, the Trustee, solely out of the
applicable Trust Fund and with no obligation otherwise to make any payments,
shall make payments to such Participant or Beneficiary in such manner, and at
such times, and in such amounts, as the Trustee shall determine to be payable
to such Participant or Beneficiary under the relevant Plan or Plans based on
the most recent Payment Schedules applicable to the Participant or Beneficiary
that were furnished to the Trustee by the Applicable Company prior to a Change
in Control, and on the information contained in the Payment Request Form (and
in any documents accompanying such Form) filed by the Participant or
Beneficiary. The Trustee is authorized to retain an enrolled actuary to
assist it in determining the amount of any Benefits payable to any Participant
or Beneficiary pursuant to any Payment Request Form or Payment Schedules filed
by or for such Participant or Beneficiary. For all purposes under this
Agreement, the Trustee may rely, and shall be fully protected in relying, on
any advice given to it by such actuary as to the amount of Benefits payable
hereunder to any Participant or Beneficiary.
(d) Following the occurrence of a Change in Control, the Trustee
shall make provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect to the payment
of Benefits to be made from any Trust pursuant to the terms of this Agreement,
and shall pay amounts withheld by it to the appropriate taxing authorities or
determine that the amounts required to be withheld with respect to such
payments have been reported, withheld and paid by the Applicable Company.
Prior to a Change in Control, the Trustee shall report and withhold any
federal, state or local taxes that may be required to be withheld with respect
to any payment of Benefits to be made from any Trust pursuant to Section 4.1,
but only to the extent that the Applicable Company has furnished to the
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Trustee, in the written instructions delivered to the Trustee pursuant to
Section 4.1 directing it to make such payment, the amount of the federal,
state or local taxes required to be withheld with respect to such payment.
The Trustee shall be entitled to rely, and shall be fully protected in
relying, upon the information so furnished to it as to the amount of taxes to
be withheld.
4.3. The entitlement of a Participant or Beneficiary to Benefits
under any Plan shall be determined by the Applicable Company or such other
party as may have been designated under the Plan, and any claim for such
Benefits shall be considered and reviewed under the procedures set out in the
Plan. Notwithstanding the foregoing, after a Change in Control, any
Participant or Beneficiary for whom any unrevoked Payment Schedule is on file
with the Trustee at the time of the Change in Control shall be presumed
conclusively, for all purposes of this Agreement, to be entitled to any
Benefit that the Trustee determines to be payable to such Participant or
Beneficiary on the basis of the information contained in such Payment Schedule
and in any Payment Request Form filed by the Participant or Beneficiary; and
in such case, the provisions set forth in the immediately preceding sentence
shall apply only with respect to any claim by the Participant or Beneficiary
for Benefits that are in addition to, or in excess of, the Benefits that the
Trustee has so determined to be payable to the Participant or Beneficiary.
4.4. Each payment made from the Trust Fund for any Trust with
respect to a Participant's Benefits under any Plan shall be payable only from,
and shall be charged against, the Plan Account maintained within such Trust
Fund with respect to such Plan and the Participant Account established within
such Plan Account for the applicable Participant. Notwithstanding any other
provision herein to the contrary, the Trustee shall not make a payment with
respect to a Participant's Benefits under any Plan to the extent that the
amount of the payment otherwise required to be made exceeds the amount then
held in the Plan Account for such Plan or the amount then held in the
Participant Account established within such Plan Account for the applicable
Participant.
If, because of the provisions of this Section 4.4, any amount
otherwise required to be paid by the Trustee to a Participant or Beneficiary
with respect to a Participant's Benefits under any Plan cannot be paid by the
Trustee, such amount shall be paid to the Participant or Beneficiary by the
Applicable Company.
4.5. At such time after a Change in Control as the aggregate
amount of the payments made hereunder from the Participant Account maintained
within any Plan Account for any Participant shall equal the maximum amount
that may be paid from such Participant Account pursuant to the most recent
Payment Schedule filed with respect to such Participant's Benefits under the
Plan in question, the balance then remaining in such Participant Account shall
be allocated and credited, on a pro rata basis, to all other Participant
Accounts maintained within such Plan Account, based on the respective values
of such other Participant Accounts determined as of the most recent Valuation
Date.
At such time after a Change in Control as the aggregate amount of
the payments made from any Plan Account shall equal the maximum amount that
may be paid from such Plan Account pursuant to the most recent Payment
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Schedules filed with respect to Participants' Benefits under the Plan for
which such Plan Account was established, the balance then remaining in such
Plan Account shall be allocated and credited, on a pro rata basis, to all
other Plan Accounts and Participant Accounts maintained within the same Trust
Fund, based on the respective values of such other Plan Accounts and
Participant Accounts determined as of the most recent Valuation Date.
4.6 Notwithstanding any other provision of this Agreement to the
contrary, if at any time any Trust is finally determined by the Internal
Revenue Service (the "IRS") not to be a "grantor trust," with the result that
the income of such Trust is not treated as income of the Applicable Company
pursuant to Sections 671 through 679 of the Code, such Trust shall immediately
terminate and the amounts allocated to each Plan Account and Participant
Account within such Trust shall be paid in a cash lump sum as soon as
practicable by the Trustee to the Participants for whom such Accounts were
maintained. If any Company should receive notice of such final determination
from the IRS, such Company shall promptly furnish written notice of such final
determination to the Trustee.
4.7 Notwithstanding any other provision of this Agreement to the
contrary, if the IRS should finally determine that any amounts held in any
Trust are includible in the gross income of any Participant or Beneficiary
prior to payment of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Participant or Beneficiary from such
Trust. For purposes of this Section 4.7, the Trustee shall be entitled to
rely on an affidavit by a Participant or Beneficiary to the effect that such a
determination has occurred.
4.8 Each Company may make payment of Benefits directly to
Participants or their Beneficiaries as they become due under the terms of the
Applicable Plans. After a Change in Control, a Company that decides to make
payment of Benefits directly shall notify the Trustee in writing of its
decision prior to the time amounts are payable to the Participants or their
Beneficiaries. In addition, each Company shall remain primarily liable to pay
all of the Benefits provided for under its Plans, to the extent such Benefits
are not payable from such Company's Trust pursuant to this Agreement.
Accordingly, if the principal of the Applicable Company's Trust, and any
earnings thereon, are not sufficient to make payments of Benefits in
accordance with the terms of such Company's Plans, the Company shall make the
balance of each such payment as it falls due. The Trustee shall notify the
Applicable Company in writing where principal and earnings of the Company's
Trust are not sufficient.
ARTICLE 5
Legal Defense Fund
5.1 On the written direction of a Company, the Trustee shall
establish within the Trust Fund for such Company's Trust a separate fund,
hereinafter referred to as a "Legal Defense Fund". A Company's Legal Defense
Fund shall consist of such portions of its contributions to its Trust as the
Company shall specify in writing at the time of contribution, together with
all income, gains and losses and proceeds from the investment, reinvestment
and sale thereof, less all payments therefrom and expenses charged thereto in
accordance with the provisions of this Article 5. Subject to Article 6, a
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Company's Legal Defense Fund shall be held and administered by the Trustee
exclusively for the purpose of defraying the costs and expenses incurred by
the Trustee in performing its duties under Sections 5.3 and 5.4.
5.2 A Company's Legal Defense Fund shall be maintained and
administered as a separate segregated account, provided, however, that the
assets of any Legal Defense Fund may be commingled with all other assets of
the same Trust, and with the assets of any other Trust, solely for investment
purposes.
5.3 If, at any time after a Change in Control, a Participant or
Beneficiary notifies the Trustee in writing that a Company has refused to pay
a claim asserted by such Participant or Beneficiary under any of such
Company's Plans, the Trustee shall promptly review such claim and determine
whether it has any basis in law and fact. If the Trustee determines that the
claim has no basis in law and fact, the Trustee shall notify the Participant
or Beneficiary of such determination, and thereafter shall take no further
action with respect to the claim. If the Trustee determines that there is a
basis in law and fact for the Participant's or Beneficiary's claim, the
Trustee shall take the following actions to assist the Participant or
Beneficiary (hereafter referred to as the "Claimant") to recover on such
claim:
(a) The Trustee shall promptly attempt to negotiate with the
Applicable Company to obtain payment, settlement or other disposition of
the claim, subject to the Claimant's consent.
(b) If (i) negotiations fail after 60 days of their commencement
to result in a payment, settlement or other disposition acceptable to
the Claimant, (ii) the Trustee at any time reasonably believes that
further negotiations would not be in the Claimant's best interest or
(iii) any applicable statute of limitations would otherwise expire
within 60 days, the Trustee shall advise the Claimant of such fact.
Thereupon, the Claimant may, by filing with the Trustee a written
authorization in substantially the form attached hereto as Exhibit E,
direct the Trustee to institute and maintain legal proceedings (the
"Litigation") against the Applicable Company to recover on the claim on
behalf of the Claimant.
(c) The Trustee shall direct the course of any Litigation and
shall keep the Claimant informed of the progress thereof at such
intervals as the Trustee deems appropriate, but no less frequently than
quarterly. The Trustee shall have the discretion to determine the form
and nature that any Litigation shall take, and the procedural rules and
laws applicable to such Litigation shall supersede any inconsistent
provision of this Agreement.
(d) If the Claimant directs in writing that the Litigation be
settled or discontinued, the Trustee shall take all appropriate action
to follow such direction, provided that such written direction specifies
the terms and conditions of the settlement or discontinuance and
provided further that the Claimant, if requested to do so by the
Trustee, executes and delivers to the Trustee a document in a form
acceptable to the Trustee releasing the Trustee and holding it harmless
from any liability resulting from its following such direction. If the
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Claimant refuses to consent to a settlement or other disposition of the
Litigation on terms recommended in writing by the Trustee, the Trustee
may proceed, in its sole and absolute discretion, to take such action as
it deems appropriate in the Litigation, including settlement or
discontinuance of the Litigation; provided, however, that the Trustee
shall afford the Claimant at least 14 days' advance notice in writing of
any decision by the Trustee to settle or otherwise discontinue the
Litigation.
(e) A Claimant may at any time revoke the authorization of the
Trustee to continue any Litigation on his behalf by delivering to the
Trustee a written revocation in substantially the form attached as
Exhibit F hereto, and notifying the Trustee in writing that the Claimant
has appointed his own counsel (whose fees and expenses shall not be paid
from any Legal Defense Fund) to represent the Claimant in the Litigation
in lieu of counsel retained by the Trustee. Upon the Trustee's receipt
of such revocation and notice, the Trustee shall have no obligation to
proceed further on behalf of the Claimant in the Litigation, or to pay
any costs or expenses incurred in the Litigation after the date on which
such revocation and notice is delivered to the Trustee.
(f) The Trustee shall be empowered to retain counsel and other
appropriate experts, including actuaries and accountants, to assist it
in making any determination under this Section 5.3, in determining
whether to pursue, settle or discontinue any Litigation, and to
prosecute and maintain any such Litigation on behalf of any Claimant.
Notwithstanding the foregoing, each Company, prior to a Change in
Control, may designate in writing the counsel to be retained by the
Trustee after a Change in Control to assist in enforcing the rights of
Claimants under such Company's Plans in accordance with the provisions
of this Section 5.3. If the counsel so designated declines to provide
representation, or if such counsel's representation would involve a
conflict of interest with the Trustee, or if the Trustee is not
satisfied with the quality of representation provided, the Trustee may
dismiss such counsel and engage another qualified law firm for this
purpose; provided, however, that any law firm so engaged may not be the
same law firm that represents any Company after a Change in Control. No
Company may dismiss or engage such counsel, or cause the Trustee to
engage or dismiss such counsel, after a Change in Control.
(g) All costs and expenses incurred by the Trustee in connection
with the performance of its duties under this Section 5.3, including,
without limitation, the payment of reasonable fees, costs and
disbursements of any counsel, actuaries, accountants or other experts
retained by the Trustee pursuant to Section 5.3(f), shall be charged to
and paid from the Applicable Company's Legal Defense Fund.
(h) Notwithstanding any provision herein to the contrary, the
Trustee shall be required to act under this Section 5.3, including,
without limitation, instituting or continuing any Litigation, only to
the extent there are sufficient amounts available in the Applicable
Company's Legal Defense Fund to defray the costs and expenses the
Trustee reasonably anticipates will be incurred in connection with such
action. If, at any time after a Claimant has filed a written notice
with the Trustee under Section 5.3(a) the Trustee determines that there
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will not be sufficient amounts in the Applicable Company's Legal Defense
Fund to defray such costs and expenses, the Trustee shall promptly
advise the Claimant of such fact. Unless within 30 days after it has
given such notice to the Claimant the Trustee receives from the Claimant
assurances, in such form as may be satisfactory to the Trustee, that any
costs and expenses in excess of amounts available in the Applicable
Company's Legal Defense Fund will be paid by the Claimant, the Trustee
shall have no obligation to take any further action on behalf of the
Claimant pursuant to this Section 5.3; and, if a Litigation on behalf of
the Claimant is then pending, the Trustee may discontinue such
Litigation on such terms and conditions as it deems appropriate in its
sole discretion.
5.4. If, at any time after a Change in Control, legal proceedings
are brought against the Trustee by a Company or other party seeking to
invalidate any of the provisions of this Agreement as they relate to a
Company's Trust, or seeking to enjoin the Trustee from paying any amounts from
any Trust or from taking any other action otherwise required or permitted to
be taken by the Trustee under this Agreement with respect to any Trust, the
Trustee shall take all steps that may be necessary in such proceeding to
uphold the validity and enforceability of the provisions of this Agreement as
they relate to such Trust. All costs and expenses incurred by the Trustee in
connection with any such proceeding (including, without limitation, the
payment of reasonable fees, costs and disbursements of any counsel, actuaries,
accountants or other experts retained by the Trustee in connection with such
proceeding) shall be charged to and paid from the Applicable Company's Legal
Defense Fund. Any costs and expenses so incurred by the Trustee in excess of
amounts available in the Applicable Company's Legal Defense Fund shall be
charged to and paid from the other assets of such Company's Trust. Any such
excess costs and expenses so charged shall be allocated to the Plan Accounts
maintained within such Trust, and to the Participant Accounts maintained
within such Plan Accounts, on a pro rata basis.
5.5 Each Company's Legal Defense Fund shall continue to be held
and administered by the Trustee for the purposes described in Section 5.1
until such time as all Benefits to which all Participants are entitled under
all of such Company's Plans shall have been paid in full to such Participants
or their Beneficiaries. Any balance then remaining in a Company's Legal
Defense Fund shall be distributed to such Company.
ARTICLE 6
Insolvency
6.1 The Trustee shall cease making payment hereunder of Benefits
payable to Participants and their Beneficiaries pursuant to a Company's Plans
if the Company is Insolvent.
6.2 At all times during the continuance of each Trust, as
provided in Section 2.4 hereof, the principal and income of the Trust shall be
subject to claims of general creditors of the Applicable Company under federal
and state law as set forth below:
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(a) The Board of Directors and Chief Executive Officer of each
Company shall have the duty to inform the Trustee in writing of such
Company's Insolvency. If a person claiming to be a creditor of a
Company alleges in writing to the Trustee that such Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall discontinue making
payment from such Company's Trust to Participants and Beneficiaries.
(b) Unless the Trustee has actual knowledge of a Company's
Insolvency, or has received notice from a Company or a person claiming
to be a creditor of such Company alleging that the Company is Insolvent,
the Trustee shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence con-
cerning a Company's solvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
(c) If at any time the Trustee has determined that a Company is
Insolvent, the Trustee shall discontinue making payments from such
Company's Trust to Participants and their Beneficiaries and shall hold
the assets of such Trust for the benefit of the Company's general
creditors. Nothing in this Agreement shall in any way diminish any
rights of Participants or their Beneficiaries to pursue their rights as
general creditors of the Applicable Company with respect to Benefits due
under the Company's Plans or otherwise.
(d) The Trustee shall resume making payment from a Company's
Trust of Benefits to Participants or their Beneficiaries in accordance
with Article 4 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent, or is no longer Insolvent.
6.3 Provided that there are sufficient assets, if the Trustee
discontinues the payment of Benefits from any Trust pursuant to Section 6.2
hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to
Participants or their Beneficiaries under the terms of the Applicable
Company's Plan for the period of such discontinuance, less the aggregate
amount of any payments made to Participants or their Beneficiaries by the
Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
ARTICLE 7
Payments to Company
7.1 Prior to a Change in Control, a Company may, by written
notice to the Trustee, direct the Trustee to pay to such Company, out of the
Trust Fund for such Company's Trust, such amount as is specified in the
notice. Any such notice shall specify the Plan Accounts and the Participant
Accounts, if any, which shall be debited with respect to such payment. If the
amount that would remain in the Trust Fund after any such payment would be
less than the unpaid fees and expenses of the Trustee properly chargeable to
such Trust Fund, the Trustee may deduct such fees and expenses from the
payment that otherwise would be made to the Company.
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7.2 Except as provided in Article 6 hereof, after any Trust has
become irrevocable, the Applicable Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others any of the
Trust assets before all payment of Benefits have been made to Participants and
their Beneficiaries pursuant to the terms of the Company's Plans.
ARTICLE 8
Investment Authority and Disposition of Income
8.1 Except as otherwise provided in Sections 8.2, 8.4, and 8.5,
the Trustee, prior to a Change in Control, shall invest and reinvest the
assets of each Trust, in its sole discretion, in such investments as may be
permitted in accordance with any written investment guidelines that may be
delivered to the Trustee from time to time by the Applicable Company and that
are acceptable to the Trustee or, at any time when no such investment
guidelines are in effect, in Permitted Investments.
8.2 Prior to a Change in Control, the Applicable Company may in
its sole discretion appoint an investment manager to manage the investment of
any part or all of the Trust Fund for any Trust. The Applicable Company shall
promptly inform the Trustee in writing of any such appointment, shall furnish
the Trustee with a copy of the instrument pursuant to which any investment
manager is so appointed, and shall inform the Trustee in writing as to the
specific portions of the Trust Fund for its Trust that will be subject to the
management of such investment manager. During the term of any such
appointment, the investment manager shall have the sole responsibility for the
investment and reinvestment of that portion of any Trust Fund subject to its
investment management, and the Trustee shall have no responsibility for, or
liability with respect to, the investment of such portion of such Trust Fund.
In exercising the powers granted to it hereunder, the Trustee
shall follow the directions of any investment manager with respect to the
portion of any Trust Fund subject to management by such investment manager.
All directions given by an investment manager to the Trustee shall be in
writing, signed by an officer (or a partner) of the investment manager, or by
such other person or persons as may be designated by an officer (or a partner)
of the investment manager. The investment manager may directly place orders
for the purchase or sale of securities, subject to such conditions as may be
approved by the Applicable Company in authorizing the investment manager to
effect transactions directly with respect to the portion of the Trust Fund for
any Trust subject to its management, provided that the Trustee shall
nevertheless retain custody of the assets comprising such portion of the Trust
Fund.
The Applicable Company, by written notice to the Trustee, may at
any time terminate its appointment of any investment manager. In such event,
the Applicable Company shall either appoint a successor investment manager for
the portion of the Trust Fund in question, or direct that such portion of the
Trust Fund thereafter be invested and reinvested by the Trustee in accordance
with the provisions of Section 8.1. Until receipt of such written notice, the
Trustee shall be fully protected in relying upon the most recent prior written
notice of appointment of an investment manager.
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8.3 After a Change in Control, the Trustee shall have exclusive
authority and discretion to manage and control the investment and reinvestment
of the Trust Fund for each Trust; provided, however, that the Trust Fund for
each Trust shall be so invested and reinvested only in Permitted Investments.
8.4 In no event may the assets of any Trust be invested in
securities (including stock or rights to acquire stock) or obligations issued
by any Company, other than a de minimis amount held in common investment
vehicles in which the Trustee invests. All rights associated with assets of
each Trust shall be exercised by the Trustee or an Investment Manager
appointed under Section 8.2, and shall in no event be exercisable by or rest
with Participants.
8.5 During the term of each Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
ARTICLE 9
General Powers and Duties of Trustee
9.1 In addition to the other powers granted to it under this
Agreement, the Trustee shall have the following administrative powers and
authority with respect to the property comprising the Trust Fund for each
Trust:
(a) To sell, exchange or transfer any such property at public or
private sale for cash or on credit and grant options for the purchase or
exchange thereof, including call options for property held in the Trust
Fund and put options for the purchase of such property, including,
without limitation, at any time to sell any asset other than cash held
in the Trust Fund to pay Benefits if there is not sufficient cash in the
Trust Fund to pay Benefits.
(b) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating to any
such property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale or other
action by any corporation or other entity.
(c) To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited.
(d) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to consent
to the reorganization, consolidation, merger or readjustment of the
finances of any corporation, company or association, or to the sale,
mortgage, pledge or lease of the property of any corporation, company or
association of any of the securities of which may at any time be held in
the Trust Fund and to do any act with reference thereto, including the
exercise of options, the making of agreements or subscriptions and the
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payment of expenses, assessments or subscriptions, which may be deemed
necessary or advisable in connection therewith, and to hold and retain
any securities or other property which it may so acquire.
(e) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust.
(f) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
securities or other such property.
(g) To borrow money from any lender in such amounts and upon such
terms and conditions as shall be deemed advisable or proper to carry out
the purposes of the Trust and to pledge any securities or other property
for the repayment of any such loan.
(h) To engage any legal counsel, including (except after the
occurrence of a Change in Control) counsel to any Company, any enrolled
actuary, any accountant or any other suitable agents, to consult with
such counsel, enrolled actuary, accountant or agents with respect to the
construction hereof, the duties of the Trustee hereunder, the trans-
actions contemplated by this Agreement or any act which the Trustee
proposes to take or omit, to rely upon the advice of such counsel,
enrolled actuary, accountant or agents, and to pay its reasonable fees,
expenses and compensation from the Trust Fund.
(i) To register any securities held by it in its own name or in
the name of any custodian of such property or of its nominee, including
the nominee of any system for the central handling of securities, with
or without the addition of words indicating that such securities are
held in a fiduciary capacity, to deposit or arrange for the deposit of
any such securities with such a system and to hold any securities in
bearer form; provided, however, that no such holding shall relieve the
Trustee of its responsibility for the safe custody and disposition of
the Trust Fund in accordance with the provisions of this Agreement, the
Trustee's books and records shall at all times show that such property
is part of the Trust Fund, and the Trustee shall be absolutely liable
for any loss occasioned by the acts of its nominee or nominees with
respect to securities registered in the name of the nominee or nominees.
(j) To make, execute and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgages, conveyances, contracts,
waivers, releases or other instruments in writing necessary or proper
for the accomplishment of any of the powers granted herein.
(k) To transfer assets of the Trust Fund to a successor trustee
as provided in Section 13.4 hereof.
(l) To exercise, generally, any of the powers which an individual
owner might exercise in connection with property either real, personal
or mixed held in the Trust Fund, and to do all other acts that the
Trustee may deem necessary or proper to carry out any of the powers
granted to it hereunder or that otherwise may be in the best interests
of the Trust Fund.
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(m) To hold any portion of the Trust Fund in cash pending
investment, or for the payment of expenses and Benefits, without
liability for interest.
(n) To vote personally or by proxy and to delegate power and
discretion over such proxy on account of securities held in the Trust
Fund.
(o) To hold assets in time or demand deposits (including deposits
with the Trustee in its individual capacity that pay a reasonable rate
of interest).
(p) To invest and reinvest all or any specified portion of any
Trust Fund through the medium of any common, collective, or commingled
trust fund that has been or may hereafter be established and maintained
by the Trustee.
(q) To invest in mutual funds registered with the Securities
Exchange Commission under the Investment Company Act of 1940.
The Trustee also shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein; provided, however, that if an insurance policy is held as an asset of
any Trust, the Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Prior to a Change in Control, the Trustee shall exercise the
powers referred to in Section 9.1(h) only as directed by the Applicable
Company; and, with respect to the portion of any Trust Fund for which an
investment manager has been appointed under Section 8.2, the Trustee shall
exercise any power referred to in this Section 9.1, as it relates to the
investment management of such portion of the Trust Fund, only as directed by
such investment manager. After a Change in Control, the Trustee may exercise
such powers in its sole and absolute discretion, except as otherwise provided
in Article 8.
Notwithstanding any powers granted to the Trustee pursuant to this
Agreement or to applicable law, the Trustee shall not have any power that
could give any Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
9.2 After a Change in Control, the Trustee shall, subject to
Article 6 hereof, discharge its duties under this Agreement solely in the
interest of the beneficiaries of each Trust and (i) for the exclusive purpose
of providing Benefits to such beneficiaries and defraying reasonable expenses
of administering such Trust; (ii) with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and (iii) by diversifying
the investments of the Trust Fund for each Trust so as to minimize the risk of
large losses, unless under the circumstances it is clearly prudent not to do
so.
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9.3 The Trustee shall not be required to give any bond or any
other security for the faithful performance of its duties under this
Agreement, except as required by law.
9.4 Except as otherwise expressly provided herein, the Trustee
shall not be responsible in any respect for administering any Plan; nor shall
the Trustee be responsible for the adequacy of the Trust Fund for any Trust to
meet and discharge all payments and liabilities under any Plan.
9.5 The Trustee shall be under no duties whatsoever, except such
duties as are specifically set forth as such in this Agreement, and no implied
covenant or obligation shall be read into this Agreement against the Trustee.
Except as otherwise provided in Article 5, the Trustee shall not be required
to take any action toward the execution or performance of any Trust created
hereunder or to prosecute or defend any suit or claim in respect thereof,
unless indemnified to its satisfaction against loss, liability, and reasonable
costs and expenses. The Trustee shall be under no liability or obligation to
anyone with respect to any failure on the part of any Company to perform any
of its obligations under any Plan or under this Agreement.
9.6 The Applicable Company shall pay and shall protect, indemnify
and save harmless the Trustee and its officers, directors or trustees,
employees and agents from and against any and all losses, liabilities
(including liabilities for penalties), actions, suits, judgments, demands,
damages, reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) of any nature arising from or
relating to any action or failure to act by the Trustee, its
officers,directors or trustees, employees and agents with respect to any
Trust, or arising from or relating to the transactions contemplated by this
Agreement that pertain to or affect such Trust, except to the extent that any
such loss, liability, action, suit, demand, damage, cost or expense is the
result of the negligence or willful misconduct of the Trustee, its officers,
directors or trustees, employees or agents.
If the Trustee shall become entitled to indemnification by any
Company pursuant to this Section 9.6 and such Company fails to provide such
indemnification to the Trustee within 30 days of the Company's receipt of a
written request from the Trustee for such indemnification, the Trustee may
apply assets of such Company's Trust in full satisfaction of the Company's
obligation to make such indemnification. Promptly after any assets of any
Trust are so applied, the Trustee shall institute legal proceedings on behalf
of the Trust to recover from the Applicable Company an amount equal to the
amount of any Trust assets so applied.
ARTICLE 10
Taxes, Expenses, and Compensation of Trustee
10.1 Each Company shall pay any federal, state, local or other
taxes imposed or levied with respect to the corpus and/or income of its Trust
or any part thereof under existing or future laws and such Company in its
discretion, or the Trustee in its discretion, may contest the validity or
amount of any tax, assessment, claim or demand respecting such Trust or any
part thereof.
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10.2 Each Company shall pay to the Trustee its allocable share of
the compensation that is payable to the Trustee for its services hereunder
pursuant to the schedule of fees annexed hereto as Exhibit G. Each Company
shall also pay its allocable share of the reasonable and necessary expenses
incurred by the Trustee in the performance of its duties under this Agreement,
including reasonable fees of any counsel, actuary, accountant or other agent
engaged by the Trustee pursuant to this Agreement. Any such compensation or
expenses shall be allocated among the Companies as follows: in the case of
any such compensation that is specifically chargeable to, or any such expenses
that were specifically incurred with respect to, a particular Trust, the
amount of such compensation or expenses shall be allocated solely to the
Applicable Company; in the case of any such compensation that is not
specifically chargeable to, or any such expenses that were not specifically
incurred with respect to, a particular Trust, the amount of such compensation
or expenses shall be allocated to the Companies in proportion to the
respective values of the Trust Funds for the Companies' Trusts as of the
Valuation Date immediately preceding the date as of which the Trustee bills
the Companies for such compensation or expenses. Each Company's allocable
share of such compensation and expenses shall be charged against and paid from
the Trust Fund for such Company's Trust, to the extent not paid by such
Company within 45 days after the date on which the Trustee bills the Company
for such compensation and expenses. Any amount so charged against and paid
from the Trust Fund for any Company's Trust shall be further allocated to and
charged against the Plan Accounts and Participant Accounts maintained within
such Trust (a) in such manner as the Applicable Company directs in written
instructions delivered by it to the Trustee, in the case of any amount so
charged and paid prior to a Change in Control; and (b) in proportion to the
respective balances of such Accounts as determined as of the most recent
Valuation Date, in the case of any amount so charged and paid after a Change
in Control.
ARTICLE 11
Accounting by Trustee
11.1 For each Trust, the Trustee shall keep accurate and detailed
accounts of all its investments, receipts, and disbursements under this
Agreement. Such person or persons as the Applicable Company shall designate
shall be allowed to inspect the books of account relating to such Company's
Trust upon request at any reasonable time during the business hours of the
Trustee.
11.2 Within 90 days after the close of each calendar year, the
Trustee shall transmit to each Company, and certify the accuracy of, a written
statement of the assets and liabilities of the Trust Fund for such Company's
Trust at the close of that year, showing the current value of each asset at
that date, and a written account of all the Trustee's transactions relating to
such Trust Fund during the period from the last previous accounting to the
close of that year. For the purposes of this Section 11.2, the date of the
Trustee's resignation or removal as provided in Article 13 hereof shall be
deemed to be the close of a calendar year.
11.3 Unless a Company shall have filed with the Trustee written
exceptions or objections to any such statement and account within 90 days
after receipt thereof, such Company shall be deemed to have approved such
statement and account; and in such case or upon the written approval by such
20
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Company of any such statement and account, the Trustee shall be forever
released and discharged with respect to all matters and things embraced in
such statement and account as though it had been settled by decree of a court
of competent jurisdiction in an action or proceeding to which the Company and
all persons having any beneficial interest in its Trust were parties.
11.4 Nothing contained in this Agreement or in any Plan shall
deprive the Trustee of the right to have a judicial settlement of its accounts
with respect to any Trust. In any proceeding for a judicial settlement of the
Trustee's accounts or for instructions in connection with any Trust, the only
other necessary party thereto in addition to the Trustee shall be the
Applicable Company. If the Trustee so elects, it may bring in as a party or
parties defendant any other person or persons. No person interested in any
Trust, other than the Applicable Company, shall have a right to compel an
accounting, judicial or otherwise, by the Trustee, and each such person shall
be bound by all accounting by the Trustee to such Company, as herein provided,
as if the account had been settled by decree of a court of competent
jurisdiction in an action or proceeding to which such person was a party.
ARTICLE 12
Communications
12.1 With respect to any Trust, the Trustee shall be fully
protected in relying upon any written notice, instruction, direction or other
communication signed by an officer of the Applicable Company. Each Company
from time to time shall furnish the Trustee with the names and specimen
signatures of the officers of the Company authorized to act or give directions
hereunder and shall promptly notify the Trustee of the termination of office
of any such officer of the Company and the appointment of a successor thereto.
Until notified in writing to the contrary, the Trustee shall be fully
protected in relying upon the most recent list of the officers of the Company
furnished to it by the Company.
12.2 Any action required by any provision of this Agreement to be
taken by the Board of Directors of a Company shall be evidenced by a
resolution of such Board of Directors certified to the Trustee by the
Secretary or an Assistant Secretary of the Company under its corporate seal,
and the Trustee shall be fully protected in relying upon any resolution so
certified to it. Unless other evidence with respect thereto has been
specifically prescribed in this Agreement, any other action of a Company under
any provision of this Agreement, including any approval of or exceptions to
the Trustee's accounts, shall be evidenced by a certificate signed by an
officer of the Company, and the Trustee shall be fully protected in relying
upon such certificate. The Trustee may accept a certificate signed by an
authorized officer of a Company as proof of any fact or matter that it deems
necessary or desirable to have established in the administration of such
Company's Trust (unless other evidence of such fact or matter is expressly
prescribed herein) and the Trustee shall be fully protected in relying upon
the statements in the certificate.
12.3 The Trustee shall be entitled conclusively to rely upon any
written notice, instruction, direction, certificate or other communication
21
<PAGE>
believed by it to be genuine and to be signed by the proper person or persons,
and the Trustee shall be under no duty to make investigation or inquiry as to
the truth or accuracy of any statement contained therein.
12.4 Until notice be given to the contrary, communications to the
Trustee shall be sent to it at its office at 210 Main Street, Hackensack, New
Jersey 07601, Attention: Corporate Agency Administration, Investment
Management Division; and communications to any Company shall be sent to it c/o
GPU Service Corporation, 100 Interpace Parkway, Parsippany, New Jersey
07054-1149, Attention: Treasurer.
ARTICLE 13
Resignation or Removal of Trustee
13.1 The Trustee may resign as trustee of any Trust at any time
by written notice to the Applicable Company, which resignation shall be
effective 60 days after the Company's receipt of such notice unless the
Company and the Trustee agree otherwise. The Trustee may be removed as
trustee of any Trust by action of the Applicable Company's Board of Directors,
at any time upon 60 days' written notice to the Trustee, or upon shorter
notice if acceptable to the Trustee. In the event it resigns or is removed,
the Trustee shall have a right to have its accounts settled as provided in
Article 11 hereof.
13.2 Notwithstanding the provisions of Section 13.1, the Trustee
may not be removed as trustee of any Trust after a Change in Control without
the written consent of two-thirds in number of the Participants who are, or
who may become, entitled to receive payments from such Trust. The Applicable
Company shall furnish the Trustee with evidence to establish that such
majority in number of such Participants has granted written consent to such
removal.
13.3 If the Trustee resigns or is removed as trustee of any
Trust, a successor shall be appointed by the Applicable Company, by action of
its Board of Directors, by the effective date of such resignation or removal.
Any successor trustee so appointed shall be a bank as defined under the
Investment Advisers Act of 1940, having a net worth in excess of $100,000,000
or having assets in excess of $2,000,000,000.
After a Change in Control, such appointment of a successor trustee shall be
approved in writing by two-thirds in number of the Participants who are or may
become entitled to receive payments from such Trust. Notwithstanding the
foregoing, if no such appointment of a successor trustee has been made by the
effective date of such resignation or removal, the Trustee may apply to a
court of competent jurisdiction for appointment of a successor trustee or for
instructions. All expenses of the Trustee in connection with such proceeding
shall be allowed as administrative expenses of the Trust and shall be paid by
the Applicable Company.
13.4 Each successor trustee shall have the powers and duties
conferred upon the Trustee in this Agreement, and the term "Trustee" as used
in this Agreement, except where the context otherwise requires, shall be
deemed to include any successor trustee. Upon designation or appointment of a
successor trustee for any Trust, the Trustee shall transfer and deliver the
22
<PAGE>
Trust Fund for such Trust to the successor trustee, reserving such sums as the
Trustee shall deem necessary to defray its expenses in settling its accounts
with respect to such Trust, to pay any of its compensation with respect to
such Trust that is due and unpaid, and to discharge any obligation of such
Trust for which the Trustee may be liable. If the sums so reserved are not
sufficient for these purposes, the Trustee shall be entitled to recover the
amount of any deficiency from either the Applicable Company or the successor
trustee, or both. When the Trust Fund for such Trust shall have been
transferred and delivered to the successor trustee and the accounts of the
Trustee for such Trust have been settled as provided in Article 11 hereof, the
Trustee shall be released and discharged from all further accountability or
liability for the Trust Fund for such Trust and shall not be responsible in
any way for the further disposition of such Trust Fund or any part thereof.
ARTICLE 14
Amendments and Termination
14.1 Subject to Section 14.2, any or all of the provisions of
this Agreement and any Exhibits annexed hereto, as they relate to any
Company's Trust, may be amended at any time, without the consent of any
Participant or Beneficiary, by a written instrument of amendment, duly
executed by the Applicable Company and the Trustee. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Applicable
Company's Plans or shall make the Applicable Company's Trust revocable after
it has become irrevocable in accordance with Section 2.2 hereof.
14.2 After a Change in Control, no amendment may be made to
Exhibit A or Exhibit B; and no other provision of this Agreement may be
amended without the written consent of two-thirds in number of the
Participants who are or may become entitled to payments from each Trust
affected by such amendment. The Trustee may request that the Applicable
Company or Companies furnish evidence to establish that such a majority in
number of such Participants have granted written consent to such an amendment.
14.3 Unless sooner revoked in accordance with Section 2.2 hereof,
each Trust shall terminate on the date on which Participants and their
Beneficiaries are no longer entitled to receive Benefits pursuant to the terms
of the Applicable Company's Plans. Upon termination of any Trust, any assets
remaining in the Trust Fund for such Trust shall be paid by the Trustee to the
Applicable Company.
ARTICLE 15
Miscellaneous
15.1 Any provision of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
15.2 Benefits payable to Participants and their Beneficiaries
under this Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
23
<PAGE>
15.3 This Agreement shall be governed by, and shall be construed
in accordance with, and each Trust hereby created shall be administered in
accordance with, the laws of the State of New Jersey.
15.4 The titles to Articles of this Agreement are placed herein
for convenience of reference only, and this Agreement is not to be construed
by reference thereto.
15.5 This Agreement shall bind and inure to the benefit of the
successors and assigns of each Company and the Trustee, respectively, and all
Participants and Beneficiaries under the Companies' Plans.
15.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one instrument, which may be sufficiently
evidenced by any counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their respective names by their duly authorized officers
under their corporate seals as of the day and year first above written.
GENERAL PUBLIC UTILITIES CORPORATION
By
J. R. Leva, Chairman and
Chief Executive Officer
ATTEST:
JERSEY CENTRAL POWER & LIGHT COMPANY
By
J. R. Leva, Chairman of the Board
and Chief Executive Officer
ATTEST:
GPU NUCLEAR CORPORATION
By
P. R. Clark, President and
Chief Executive Officer
ATTEST:
24
<PAGE>
UNITED JERSEY BANK, as Trustee
By
ATTEST:
25
<PAGE>
EXHIBIT A
List of Participants
Set forth below is a list, for each Company, of the persons who
are to be treated as Participants for purposes of the annexed Agreement.
Company Participants
General Public Utilities Corporation L. J. Appell, Jr.
D. J. Bainton
T. H. Black
J. F. Burditt
D. L. Grove
T. B. Hagen
H. F. Henderson, Jr.
H. R. O'Leary
J. W. Oswald
J. M. Pietruski
C. A. Rein
P. R. Roedel
C. A. Trost
P. K. Woolf
Jersey Central Power & Light Company G. E. Persson
S. C. Van Ness
S. B. Wiley
GPU Nuclear Corporation L. L. Humphreys
R. V. Laney
C.A. Trost
W. A. Wilson
W. F. Witzig
<PAGE>
EXHIBIT B
Covered Plans and Benefits
Set forth below is a list, for each Company, of the plans,
programs, policies or agreements that are to be treated as "Plans", and the
amounts payable under the Plans that are to be treated as "Benefits", for
purposes of the annexed Agreement.
General Public Utilities Corporation
1. All benefit amounts payable under the Deferred Remuneration
Plan for Outside Directors of General Public Utilities Corporation.
2. All benefit amounts payable under the Retirement Plan for
Outside Directors of General Public Utilities Corporation.
Jersey Central Power & Light Company
1. All benefit amounts payable under the Deferred Remuneration
Plan for Outside Directors of Jersey Central Power & Light Company.
GPU Nuclear Corporation
1. All benefit amounts payable under the Deferred Remuneration
Plan for Outside Directors of GPU Nuclear Corporation.
<PAGE>
EXHIBIT C
GPU RABBI TRUST
PARTICIPANT INFORMATION
SOCIAL
NAME ADDRESS SECURITY NUMBER
(INTENTIALLY LEFT BLANK)
<PAGE>
EXHIBIT C-2
GPU SYSTEM COMPANIES MASTER DIRECTORS' BENEFITS PROTECTION TRUST
DEFERRED REMUNERATION PLAN FOR
OUTSIDE DIRECTORS OF
GENERAL PUBLIC UTILITIES CORPORATION
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT:
<PAGE>
EXHIBIT C-3
GPU SYSTEM COMPANIES MASTER DIRECTORS' BENEFITS PROTECTION TRUST
RETIREMENT PLAN FOR OUTSIDE DIRECTORS OF
GENERAL PUBLIC UTILITIES CORPORATION
TERM OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT:
<PAGE>
EXHIBIT C-4
GPU SYSTEM COMPANIES MASTER DIRECTORS' BENEFITS PROTECTION TRUST
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS OF
JERSEY CENTRAL POWER AND LIGHT
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT:
<PAGE>
EXHIBIT C-5
GPU SYSTEM COMPANIES MASTER DIRECTORS' BENEFITS PROTECTION TRUST
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS OF
GPU NUCLEAR CORPORATIONT
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT:
<PAGE>
EXHIBIT C-6
EXHIBIT D
PARTICIPANT'S PAYMENT REQUEST FORM
I, _______________________________________________, a Participant [or
Beneficiary] in the GPU System Companies Master Directors Benefits
Protection Trust (the "Trust"), adopted September 1, 1995, pursuant to
Section 4.3(b) thereof, hereby request that United Jersey Bank, as Trustee
thereunder, make payment to me of the Benefits to which I am entitled as
[Participant or Beneficiary] in accordance with the terms of the Trust
Agreement and the following [Company Name] Plans:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
I hereby attest, certify and affirm that to the best of my knowledge
and belief the following events, upon which entitlement to and payment of
Benefits under said Plans is conditioned, have occurred:
[Insert Description of events that have occurred]
I further attest, certify and affirm that [Name of Company] has not
paid any of the Benefits claimed herein under said plans.
I am [or The Participant was] ____ years of age, having been born on
[Date of Birth]. I have been/was [or the Participant was] employed by [Name of
Company] from [Date] to [Date]. The [Name of Company] records detailing my
[his/her] compensation and the terms and conditions of employment, if any, are
attached hereto and made a part hereof.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT E
REQUEST AND AUTHORIZATION FOR LITIGATION
I, _______________________________________________, a Participant in
the GPU System Companies Master Directors Benefits Protection Trust (the
"Trust"), adopted September 1, 1995, pursuant to Section 5.3 (b) thereof,
hereby request and authorize United Jersey Bank, as Trustee thereunder, to
institute and prosecute legal proceedings (the "Litigation"), on my behalf,
against [Name of GPU System Company] to recover upon my claim against said
company for unpaid benefits under [Name of Plan under which claim is
asserted].
It is understood that, pursuant to Section 5.3(e) of the Trust
Agreement, I may revoke this authorization to prosecute or continue to
prosecute such Litigation, at any time, upon written notification to the
Trustee in the appropriate form.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT F
REVOCATION OF AUTHORITY TO CONTINUE LITIGATION
I, _______________________________________________, a Participant in
the GPU System Companies Master Directors Benefits Protection Trust (the
"Trust"), adopted September 1, 1995, pursuant to Section 5.3 (e) thereof,
hereby revoke the authorization previously granted by me to United Jersey
Bank, as Trustee thereunder, to institute and prosecute legal proceedings (the
"Litigation), on my behalf, against [Name of GPU System Company] for unpaid
Benefits under [Name of Plan under which claim is asserted].
I hereby notify the Trustee that I have appointed and retained [Name
Attorney ] of [Address
] to represent me and my interests
in such Litigation. I understand that the fees and expenses of my attorney in
connection with the Litigation or otherwise shall be my sole responsibility
and that neither me nor my attorney will be entitled to direct payment for any
such fees or expenses out of the Trust fund or any portion thereof.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT G
GPU SYSTEM COMPANIES FEE AGREEMENT
Master Directors' Benefits Protection Trust
(INTENTIALLY LEFT BLANK)
<PAGE>
Exhibit 10-C
GPU SYSTEM COMPANIES
MASTER EXECUTIVES' BENEFITS PROTECTION TRUST
As Adopted Effective September 1, 1995
<PAGE>
TABLE OF CONTENTS
Article Title Page No.
ARTICLE 1 Definitions 1
ARTICLE 2 Establishment of the Trusts 4
ARTICLE 3 Contributions and Accounts 4
ARTICLE 4 Payments to Participants and Beneficiaries 7
ARTICLE 5 Legal Defense Fund 11
ARTICLE 6 Insolvency 14
ARTICLE 7 Payments to Company 15
ARTICLE 8 Investment Authority and Disposition of Income 15
ARTICLE 9 General Powers and Duties of Trustee 16
ARTICLE 10 Taxes, Expenses, and Compensation of Trustee 20
ARTICLE 11 Accounting by Trustee 20
ARTICLE 12 Communications 21
ARTICLE 13 Resignation or Removal of Trustee 22
ARTICLE 14 Amendments and Termination 23
ARTICLE 15 Miscellaneous 24
i
<PAGE>
THIS TRUST AGREEMENT, made as of the 1st day of September, 1995 by
and between GENERAL PUBLIC UTILITIES CORPORATION, a Pennsylvania corporation
(the "Corporation"), JERSEY CENTRAL POWER & LIGHT COMPANY, a New Jersey
corporation, METROPOLITAN EDISON COMPANY, a Pennsylvania corporation,
PENNSYLVANIA ELECTRIC COMPANY, a Pennsylvania corporation, GPU SERVICE COR-
PORATION, a Pennsylvania corporation, GPU NUCLEAR CORPORATION, a New Jersey
corporation, and ENERGY INITIATIVES, INC., a Delaware Corporation (each such
corporation is hereinafter referred to individually as a "Company", and all
such corporations are hereinafter referred to collectively as the "Com-
panies"), and UNITED JERSEY BANK, a New Jersey state chartered bank
(hereinafter referred to as the "Trustee").
W I T N E S S E T H :
WHEREAS, each Company has adopted one or more Plans (as
hereinafter defined) under which it has incurred or expects to incur liability
under the terms of such Plans with respect to Benefits (as hereinafter
defined) payable to individuals participating in such Plans; and
WHEREAS, each Company wishes to establish a trust (hereinafter
called the "Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's creditors in the event of the
Company's Insolvency (as hereinafter defined) until paid to Plan participants
and their beneficiaries in such manner and at such times as specified in the
Plans; and
WHEREAS, it is the intention of the parties that each Trust shall
constitute an unfunded arrangement and shall not affect the status of each of
the Plans as unfunded for purposes of those provisions of Title I of the
Employment Retirement Income Security Act of 1974 that may apply to such Plan;
and
WHEREAS, it is the intention of each Company to make contributions
to its Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under its Plans; and
WHEREAS, the Trustee is not a party to any of the Plans and makes
no representations with respect thereto;
NOW, THEREFORE, each Company and the Trustee agree as follows:
ARTICLE 1
Definitions
1.1 As used herein, the following terms shall have the following
meanings, unless the context clearly indicates a contrary meaning:
(a) "Agreement" shall mean this instrument, as the same may
be amended from time to time as permitted herein.
(b) "Applicable Company" shall mean, with respect to any
Trust established hereunder, or any Plan, the Company that
established such Trust, or that has adopted or maintains such
Plan.
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(c) "Beneficiary", with respect to a Participant, shall
mean the person or entity designated by such Participant under a
Plan, or such other person or entity with respect to such
Participant as may be designated under the terms of such Plan, to
receive the Benefits, if any, payable from such Plan following
such Participant's death.
(d) "Benefits" shall mean those amounts specified in
Exhibit B that are payable under a Plan to (or with respect to) a
Participant, or, upon his death, to his Beneficiary.
(e) "Benefit Valuation Date" shall mean the first day of each
calendar year.
(f) "Change in Control"--For purposes of this Agreement, a
"Change in Control" shall be deemed to occur at the time when
either (i) any entity, person (within the meaning of Section 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (other than any Company, or any
subsidiary of any Company, or any savings, pension or other plan
for the benefit of employees of any Company or its subsidiaries)
which theretofore was beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of less than 20% of the Corporation's then
outstanding Common Stock either (x) acquires shares of Common
Stock of the Corporation in a transaction or series of
transactions that results in such entity, person or group directly
or indirectly owning beneficially 20% or more of the outstanding
Common Stock of the Corporation, or (y) acquires by proxy or
otherwise the right to vote for the election of directors, for any
merger, combination or consolidation of the Corporation or any of
its direct or indirect subsidiaries, or for any other matter or
question more than 20% of the then outstanding voting securities
of the Corporation (except where such acquisition is made by a
person or persons appointed by at least a majority of the Board of
Directors of the Corporation to act as proxy for any purpose); or
(ii) the election or appointment, within a twelve-month period, of
persons to the Corporation's Board of Directors who were not
directors of the Corporation at the beginning of such twelve-month
period, and whose election or appointment was not approved by a
majority of those persons who were directors at the beginning of
such period, where such newly elected or appointed directors
constitute 30% or more of the directors of the Board of Directors
of the Corporation.
Promptly upon learning of the occurrence of a Change in
Control, as defined above, the person who, immediately prior to
the Change in Control, served as either the Chief Executive
Officer or the Senior Vice President and General Counsel of the
Corporation shall furnish the Trustee with written notice that a
Change in Control has occurred. Notwithstanding any provision
herein to the contrary, a Change in Control shall not be treated
as having occurred for purposes of this Agreement, unless and
until the Trustee has received such written notice.
2
<PAGE>
(g) "Code" shall mean the Internal Revenue Code of 1986 as
the same may be amended from time to time.
(h) "Insolvent"--A Company shall be considered "Insolvent"
for purposes of this Agreement if (i) the Company is unable to pay
its debts as they become due, or (ii) the Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy
Code.
(i) "Participant" shall mean any person who is or may
become entitled to receive Benefits under a Plan and who is
included in the list of persons who are to be treated as
Participants for purposes of this Agreement, as set forth in
Exhibit A hereto.
(j) "Permitted Investments" shall mean direct obligations
of the United States of America or agencies or instrumentalities
thereof or obligations unconditionally and fully guaranteed as to
principal and interest by the United States of America ("Obliga-
tions"), and certificates of deposit and bankers' acceptances of a
bank organized and existing under the laws of the United States of
America or any State thereof that has a combined capital and
surplus of at least $100,000,000, all having respective maturities
of not more than one year when purchased. The term "Permitted
Investments" shall also mean any fund or portfolio maintained by
any open-end investment company registered under the Investment
Company Act of 1940, the assets of which are invested exclusively
in Obligations, certificates of deposit and/or bankers'
acceptances of the kind described in the preceding sentence
including, without limitation, any such fund or portfolio for
which the Trustee or any affiliate of the Trustee serves as
investment adviser.
(k) "Present Value" shall mean, with respect to any Benefit, the
single sum actuarial present value of such Benefit, as determined by an
enrolled actuary on the basis of the actuarial assumptions most recently
adopted by the Applicable Company for use in connection with this Agree-
ment. Notwithstanding the foregoing, any determination of the Present
Value of Benefits to be made hereunder at any time after a Change in
Control shall be made on the basis of the actuarial assumptions that
were used in determining the Present Value of such Benefits as of the
most recent Benefit Valuation Date preceding the Change in Control,
unless the Applicable Company has notified the Trustee in writing prior
to the Change in Control of its adoption of different actuarial
assumptions for use hereunder after the Change in Control.
(l) "Plan" or "Plans" shall mean, with respect to any
Company, any (or if the context requires, all) of the plans,
programs or policies maintained by such Company, and agreements
entered into by such Company, that are included in the list set
forth in Exhibit B hereto.
(m) "Valuation Date" shall mean the last business day of
each calendar quarter.
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ARTICLE 2
Establishment of the Trusts
2.1 Each Company hereby establishes with the Trustee, and the
Trustee hereby accepts, a Trust consisting of such sums of money and other
property acceptable to the Trustee as such Company shall pay or deliver to the
Trustee from time to time. All such money and other property, all investments
and reinvestments made therewith or proceeds thereof and all earnings and
profits thereon, less all payments therefrom and charges thereto as authorized
herein, are hereinafter referred to as the "Trust Fund" for such Trust. Each
Trust Fund shall be held, administered and disposed of by the Trustee as
provided in this Agreement.
2.2 Prior to a Change in Control, each Trust established
hereunder may be revoked, in whole or in part, by the Applicable Company
giving to the Trustee written notice of such revocation. If a Trust is so
revoked in its entirety, all of the assets of the Trust (after payment of any
unpaid fees and expenses of the Trustee properly chargeable to such Trust)
shall be transferred by the Trustee to the Applicable Company or to such other
person or entity as the Applicable Company may direct in writing. If a Trust
is so revoked in part, the Trustee shall transfer to the Applicable Company
such of the assets of the Trust as the Applicable Company shall have specified
in its written notice to the Trustee of the partial revocation of such Trust.
Upon a Change in Control, each Trust shall become irrevocable.
2.3 Each Trust established hereunder is intended to constitute a
"grantor trust", of which the Company is the grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Code, and shall
be construed accordingly.
2.4 The principal of each Trust, and any earnings thereon, shall
be held separate and apart from other funds of the Applicable Company, and
shall be used exclusively for the uses and purposes of Participants under such
Company's Plans and general creditors of such Company, as herein set forth.
Participants and their Beneficiaries shall have no preferred claim on, or any
beneficial ownership interest in, any assets of any Trust. Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights
of Participants and their Beneficiaries against the Applicable Company. Any
assets held by each Trust will be subject to the claims of the Applicable
Company's general creditors under federal and state law in the event of the
Applicable Company's Insolvency, as defined in Section 1.1(h) herein.
2.5 Each Trust established hereunder shall be maintained by the
Trustee as a separate trust. However, the assets of any Trust may be
commingled with the assets of any other Trust, solely for investment purposes.
ARTICLE 3
Contributions and Accounts
3.1 Prior to a Change in Control, each Company may make
contributions to its Trust in such amounts, and at such times, as such Company
may determine in its sole discretion. Such contributions may be in the form
of cash, or such other property as may be determined by the Company and as may
be acceptable to the Trustee.
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3.2 Upon the occurrence of a Change in Control, each Company
shall be required to make contributions to its Trust as follows:
(a) Upon a Change in Control, the Company shall, as soon as
possible but in no event later than 30 days following the Change in Control,
make an irrevocable contribution to its Trust in an amount that, when added to
the value of the Trust Fund for such Trust (exclusive of the value of the
Legal Defense Fund, if any, maintained within such Trust Fund) determined as
of the most recent Valuation Date preceding such contribution, will equal the
sum of (i) the aggregate Present Value of all Benefits accrued for all
Participants under all of such Company's Plans determined as of the most
recent Benefit Valuation Date preceding the date on which the Change in
Control occurred; and (ii) the aggregate Present Value of all other Benefits
for all Participants under all of such Company's Plans that accrue as a result
of the occurrence of the Change in Control, determined as of the first day of
the month coincident with or immediately following the date on which the
Change in Control occurred.
(b) Within 60 days after each Benefit Valuation Date following
the occurrence of a Change in Control, each Company shall make an irrevocable
contribution to its Trust in an amount that, when added to the value of the
Trust Fund for such Trust (exclusive of the value of the Legal Defense Fund,
if any, maintained within such Trust Fund) determined as of the most recent
Valuation Date preceding such contribution, will equal the aggregate Present
Value of all Benefits accrued for all Participants under all of such Company's
Plans determined as of such Benefit Valuation Date.
3.3 Within the Trust Fund for each Trust, the Trustee shall
establish and maintain a separate account (hereinafter referred to as a "Plan
Account") for each of the Applicable Company's Plans. The Trustee also shall
establish within each Plan Account a separate sub-account (hereinafter
referred to as a "Participant Account") for each Participant of such Plan.
The Trustee shall hold all Plan Accounts and Participant Accounts maintained
within the Trust Fund for any Trust as a single consolidated fund.
3.4 At the time each contribution is made to a Trust prior to a
Change in Control, the amount, or property, contributed to such Trust shall be
allocated by the Trustee to the Plan Accounts, and to the Participant
Accounts, maintained within such Trust in such manner as the Applicable
Company directs in written instructions delivered by the Applicable Company to
the Trustee at the time of the contribution.
3.5 As of each Valuation Date, the Trust Fund for each Trust
shall be revalued by the Trustee at its then current fair market value, as
determined by the Trustee. Prior to a Change in Control, the net investment
gains and losses of each Trust Fund for each calendar year shall be allocated
by the Trustee, as of the last Valuation Date occurring in such year, among
the Plan Accounts and Participant Accounts maintained within such Trust, in
such manner as the Applicable Company shall specify in written instructions
furnished by it to the Trustee. As of each Valuation Date following the
occurrence of a Change in Control, the net investment gains and losses of each
Trust Fund shall be allocated by the Trustee proportionately among the Plan
Accounts and Participant Accounts maintained within such Trust, based on the
value of such Accounts as of the immediately preceding Valuation Date. In
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making the foregoing allocation, the value of Plan Accounts and Participant
Accounts in existence on the immediately preceding Valuation Date but not in
existence on the current Valuation Date shall be disregarded.
3.6 Notwithstanding the provisions of Sections 3.4 and 3.5, as of
each Benefit Valuation Date occurring prior to a Change in Control, the
Trustee shall, in accordance with such written instructions as it has received
from the Applicable Companies, record adjustments to the balance of each
Participant Account maintained within a Plan Account to the extent necessary
for such balance to equal the amount determined by multiplying (a) the balance
of such Plan Account determined as of the most recent Valuation Date preceding
such Benefit Valuation Date, by (b) a fraction the numerator of which is the
Present Value of the Benefits accrued for the applicable Participant under the
Plan in question, determined as of such Benefit Valuation Date, and the
denominator of which is the aggregate Present Value of all of the Benefits
accrued for all Participants under such Plan, determined as of such Benefit
Valuation Date.
3.7 Any contribution made by a Company to its Trust pursuant to
Section 3.2(a) or (b) shall be allocated to the Plan Accounts maintained under
such Trust in proportion to the respective amounts by which the aggregate
Present Value of all Benefits accrued for all Participants under each of the
Plans in question, determined as of the dates specified in Section 3.2(a) or
(b), exceeds the balance of the Plan Account maintained hereunder with respect
to each such Plan, determined as of the Valuation Date immediately preceding
such contribution. The amount so allocated to any Plan Account shall be
further allocated to the Participant Accounts maintained within such Plan
Account in proportion to the respective amounts by which the Present Value of
the Benefits accrued for each Participant under the Plan in question, deter-
mined as of the dates specified in Section 3.2(a) or (b), exceeds the balance
of the Participant Account maintained for such Participant, determined as of
the Valuation Date immediately preceding such contribution.
3.8 The determinations of the Present Value of Benefits required
to be made hereunder as of any Benefit Valuation Date occurring prior to a
Change in Control shall be made by an enrolled actuary selected by the
Applicable Companies. As soon as practicable after each such Benefit
Valuation Date, each Company shall furnish the Trustee with a schedule setting
forth the Present Value so determined of the Benefits accrued for each
Participant under each of the Company's Plans. The determinations of the
Present Value of Benefits required to be made hereunder as of any Benefit
Valuation Date, or other date, occurring after a Change in Control shall be
made by an enrolled actuary selected by the Trustee. In making any allocation
of contributions the Trustee is required to make under Section 3.7, the
Trustee shall be entitled to rely, and shall be fully protected in relying, on
any written determination of the Present Value of any Benefit furnished to it
in accordance with the provisions of this Section 3.8. In making any
allocation of net investment gains and losses pursuant to the second sentence
of Section 3.5, and in recording any adjustments to the balance of any
Participant Account pursuant to Section 3.6, the Trustee shall be entitled to
rely, and shall be fully protected in relying, on any written instructions
furnished to it by the Applicable Companies.
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ARTICLE 4
Payments to Participants and Beneficiaries
4.1 Prior to a Change in Control, the Trustee shall make payments
from the Trust Fund for any Trust to such Participants and Beneficiaries, in
such manner, at such times, and in such amounts, as the Applicable Company
shall direct in written instructions delivered to the Trustee.
4.2. After a Change in Control, the Trustee shall make payments
from the Trust Fund of any Trust to Participants and Beneficiaries in
accordance with the following provisions:
(a) Prior to a Change in Control, each Company shall deliver to
the Trustee a schedule ("Payment Schedule") substantially in the form annexed
hereto as Exhibit C for each Participant of each Plan whose Benefits under
such Plan may be paid from such Company's Trust after a Change in Control.
The Payment Schedule shall
(i) describe the events that must occur in order for the
Participant's Benefits to become payable under the terms of the Plan;
(ii) specify the amount of the Participant's Benefits accrued
under the Plan, as of the date on which the Payment Schedule is
furnished to the Trustee, and provide a formula or such other
instructions as will enable the Trustee to determine the amount of the
Participant's Benefits as of the time they become payable under the
terms of the Plan;
(iii) specify the form in which the Participant's Benefits are to
be paid, as provided for or available under the Plan;
(iv) specify the time of commencement for payment of the
Participant's Benefits under the Plan; and
(v) specify the address and social security number of the
Participant as well as the name, address, social security number and
relation to the Participant of the Participant's Beneficiary.
Prior to a Change in Control, the Applicable Company may from time to time
substitute a new Payment Schedule for, or amend, an existing Payment Schedule
by delivering a new or amended Payment Schedule to the Trustee. Upon receipt
of such new or amended Payment Schedule, the previous Payment Schedule shall
be deemed revoked. Prior to a Change in Control, any Payment Schedule
previously filed with the Trustee may be revoked by the Applicable Company by
filing written notice of such revocation with the Trustee without delivering a
new or amended Payment Schedule to the Trustee. No Payment Schedule may be
revoked after a Change in Control. Notwithstanding any other provision herein
to the contrary, after a Change in Control, no payment shall be made from any
Trust with respect to a Participant's Benefits under any Plan unless a Payment
Schedule for such Participant's Benefits under such Plan (which has not been
revoked) is on file with the Trustee at the time a Change in Control occurs.
Except as otherwise provided herein, the Trustee shall make payments to
Participants and their Beneficiaries in accordance with such Payment Schedule.
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(b) Any Participant or Beneficiary seeking to obtain payments
from the Trust Fund for any Trust after a Change in Control shall first file
with the Trustee a written request for payment in substantially the form
annexed hereto as Exhibit D ("Payment Request Form"). In the Payment Request
Form so filed, the Participant or Beneficiary shall
(i) identify the Plan or Plans under which the Participant or
Beneficiary has become entitled to payment of Benefits;
(ii) describe the events that entitle the Participant or
Beneficiary to receive payment of Benefits under the terms of the Plan
or Plans, and affirm under oath that such events have occurred;
(iii) affirm under oath that no amount of the Benefits with
respect to which payment from the Trust Fund is sought was previously
paid by the Applicable Company; and
(iv) provide such information (including, without limitation,
information as to the Participant's period of service, compensation and
conditions of employment after a Change in Control) as will enable the
Trustee to determine the amount of the Benefits that the Participant or
Beneficiary is entitled to receive in accordance with the Payment
Schedules furnished to the Trustee with respect to the Participant's
Benefits under the Plan or Plans.
In the case of any Beneficiary seeking payments from a Trust Fund, the
Beneficiary shall furnish to the Trustee, along with the Payment Request Form,
a certified copy of the death certificate of the Participant, an inheritance
tax waiver and such other documents as the Trustee may reasonably require,
including, without limitation, certified copies of letters testamentary. For
all purposes under this Agreement, the Trustee may rely, and shall be fully
protected in relying, on the information contained in any Payment Request Form
(and in any documents accompanying such form) filed with it by any Participant
or Beneficiary.
(c) As soon as practicable after a Payment Request Form has been
filed with it by a Participant or Beneficiary, the Trustee, solely out of the
applicable Trust Fund and with no obligation otherwise to make any payments,
shall make payments to such Participant or Beneficiary in such manner, and at
such times, and in such amounts, as the Trustee shall determine to be payable
to such Participant or Beneficiary under the relevant Plan or Plans based on
the most recent Payment Schedules applicable to the Participant or Beneficiary
that were furnished to the Trustee by the Applicable Company prior to a Change
in Control, and on the information contained in the Payment Request Form (and
in any documents accompanying such Form) filed by the Participant or
Beneficiary. The Trustee is authorized to retain an enrolled actuary to
assist it in determining the amount of any Benefits payable to any Participant
or Beneficiary pursuant to any Payment Request Form or Payment Schedules filed
by or for such Participant or Beneficiary. For all purposes under this
Agreement, the Trustee may rely, and shall be fully protected in relying, on
any advice given to it by such actuary as to the amount of Benefits payable
hereunder to any Participant or Beneficiary.
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(d) Following the occurrence of a Change in Control, the Trustee
shall make provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect to the payment
of Benefits to be made from any Trust pursuant to the terms of this Agreement,
and shall pay amounts withheld by it to the appropriate taxing authorities or
determine that the amounts required to be withheld with respect to such
payments have been reported, withheld and paid by the Applicable Company.
Prior to a Change in Control, the Trustee shall report and withhold any
federal, state or local taxes that may be required to be withheld with respect
to any payment of Benefits to be made from any Trust pursuant to Section 4.1,
but only to the extent that the Applicable Company has furnished to the
Trustee, in the written instructions delivered to the Trustee pursuant to
Section 4.1 directing it to make such payment, the amount of the federal,
state or local taxes required to be withheld with respect to such payment.
The Trustee shall be entitled to rely, and shall be fully protected in
relying, upon the information so furnished to it as to the amount of taxes to
be withheld.
4.3. The entitlement of a Participant or Beneficiary to Benefits
under any Plan shall be determined by the Applicable Company or such other
party as may have been designated under the Plan, and any claim for such
Benefits shall be considered and reviewed under the procedures set out in the
Plan. Notwithstanding the foregoing, after a Change in Control, any
Participant or Beneficiary for whom any unrevoked Payment Schedule is on file
with the Trustee at the time of the Change in Control shall be presumed
conclusively, for all purposes of this Agreement, to be entitled to any
Benefit that the Trustee determines to be payable to such Participant or
Beneficiary on the basis of the information contained in such Payment Schedule
and in any Payment Request Form filed by the Participant or Beneficiary; and
in such case, the provisions set forth in the immediately preceding sentence
shall apply only with respect to any claim by the Participant or Beneficiary
for Benefits that are in addition to, or in excess of, the Benefits that the
Trustee has so determined to be payable to the Participant or Beneficiary.
4.4. Each payment made from the Trust Fund for any Trust with
respect to a Participant's Benefits under any Plan shall be payable only from,
and shall be charged against, the Plan Account maintained within such Trust
Fund with respect to such Plan and the Participant Account established within
such Plan Account for the applicable Participant. Notwithstanding any other
provision herein to the contrary, the Trustee shall not make a payment with
respect to a Participant's Benefits under any Plan to the extent that the
amount of the payment otherwise required to be made exceeds the amount then
held in the Plan Account for such Plan or the amount then held in the
Participant Account established within such Plan Account for the applicable
Participant.
If, because of the provisions of this Section 4.4, any amount
otherwise required to be paid by the Trustee to a Participant or Beneficiary
with respect to a Participant's Benefits under any Plan cannot be paid by the
Trustee, such amount shall be paid to the Participant or Beneficiary by the
Applicable Company.
4.5. At such time after a Change in Control as the aggregate
amount of the payments made hereunder from the Participant Account maintained
within any Plan Account for any Participant shall equal the maximum amount
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that may be paid from such Participant Account pursuant to the most recent
Payment Schedule filed with respect to such Participant's Benefits under the
Plan in question, the balance then remaining in such Participant Account shall
be allocated and credited, on a pro rata basis, to all other Participant
Accounts maintained within such Plan Account, based on the respective values
of such other Participant Accounts determined as of the most recent Valuation
Date.
At such time after a Change in Control as the aggregate amount of
the payments made from any Plan Account shall equal the maximum amount that
may be paid from such Plan Account pursuant to the most recent Payment
Schedules filed with respect to Participants' Benefits under the Plan for
which such Plan Account was established, the balance then remaining in such
Plan Account shall be allocated and credited, on a pro rata basis, to all
other Plan Accounts and Participant Accounts maintained within the same Trust
Fund, based on the respective values of such other Plan Accounts and
Participant Accounts determined as of the most recent Valuation Date.
4.6 Notwithstanding any other provision of this Agreement to the
contrary, if at any time any Trust is finally determined by the Internal
Revenue Service (the "IRS") not to be a "grantor trust," with the result that
the income of such Trust is not treated as income of the Applicable Company
pursuant to Sections 671 through 679 of the Code, such Trust shall immediately
terminate and the amounts allocated to each Plan Account and Participant
Account within such Trust shall be paid in a cash lump sum as soon as
practicable by the Trustee to the Participants for whom such Accounts were
maintained. If any Company should receive notice of such final determination
from the IRS, such Company shall promptly furnish written notice of such final
determination to the Trustee.
4.7 Notwithstanding any other provision of this Agreement to the
contrary, if the IRS should finally determine that any amounts held in any
Trust are includible in the gross income of any Participant or Beneficiary
prior to payment of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Participant or Beneficiary from such
Trust. For purposes of this Section 4.7, the Trustee shall be entitled to
rely on an affidavit by a Participant or Beneficiary to the effect that such a
determination has occurred.
4.8 Each Company may make payment of Benefits directly to
Participants or their Beneficiaries as they become due under the terms of the
Applicable Plans. After a Change in Control, a Company that decides to make
payment of Benefits directly shall notify the Trustee in writing of its
decision prior to the time amounts are payable to the Participants or their
Beneficiaries. In addition, each Company shall remain primarily liable to pay
all of the Benefits provided for under its Plans, to the extent such Benefits
are not payable from such Company's Trust pursuant to this Agreement.
Accordingly, if the principal of the Applicable Company's Trust, and any
earnings thereon, are not sufficient to make payments of Benefits in
accordance with the terms of such Company's Plans, the Company shall make the
balance of each such payment as it falls due. The Trustee shall notify the
Applicable Company in writing where principal and earnings of the Company's
Trust are not sufficient.
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ARTICLE 5
Legal Defense Fund
5.1 On the written direction of a Company, the Trustee shall
establish within the Trust Fund for such Company's Trust a separate fund,
hereinafter referred to as a "Legal Defense Fund". A Company's Legal Defense
Fund shall consist of such portions of its contributions to its Trust as the
Company shall specify in writing at the time of contribution, together with
all income, gains and losses and proceeds from the investment, reinvestment
and sale thereof, less all payments therefrom and expenses charged thereto in
accordance with the provisions of this Article 5. Subject to Article 6, a
Company's Legal Defense Fund shall be held and administered by the Trustee
exclusively for the purpose of defraying the costs and expenses incurred by
the Trustee in performing its duties under Sections 5.3 and 5.4.
5.2 A Company's Legal Defense Fund shall be maintained and
administered as a separate segregated account, provided, however, that the
assets of any Legal Defense Fund may be commingled with all other assets of
the same Trust, and with the assets of any other Trust, solely for investment
purposes.
5.3 If, at any time after a Change in Control, a Participant or
Beneficiary notifies the Trustee in writing that a Company has refused to pay
a claim asserted by such Participant or Beneficiary under any of such
Company's Plans, the Trustee shall promptly review such claim and determine
whether it has any basis in law and fact. If the Trustee determines that the
claim has no basis in law and fact, the Trustee shall notify the Participant
or Beneficiary of such determination, and thereafter shall take no further
action with respect to the claim. If the Trustee determines that there is a
basis in law and fact for the Participant's or Beneficiary's claim, the
Trustee shall take the following actions to assist the Participant or
Beneficiary (hereafter referred to as the "Claimant") to recover on such
claim:
(a) The Trustee shall promptly attempt to negotiate with the
Applicable Company to obtain payment, settlement or other disposition of
the claim, subject to the Claimant's consent.
(b) If (i) negotiations fail after 60 days of their commencement
to result in a payment, settlement or other disposition acceptable to
the Claimant, (ii) the Trustee at any time reasonably believes that
further negotiations would not be in the Claimant's best interest or
(iii) any applicable statute of limitations would otherwise expire
within 60 days, the Trustee shall advise the Claimant of such fact.
Thereupon, the Claimant may, by filing with the Trustee a written
authorization in substantially the form attached hereto as Exhibit E,
direct the Trustee to institute and maintain legal proceedings (the
"Litigation") against the Applicable Company to recover on the claim on
behalf of the Claimant.
(c) The Trustee shall direct the course of any Litigation and
shall keep the Claimant informed of the progress thereof at such
intervals as the Trustee deems appropriate, but no less frequently than
quarterly. The Trustee shall have the discretion to determine the form
and nature that any Litigation shall take, and the procedural rules and
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laws applicable to such Litigation shall supersede any inconsistent
provision of this Agreement.
(d) If the Claimant directs in writing that the Litigation be
settled or discontinued, the Trustee shall take all appropriate action
to follow such direction, provided that such written direction specifies
the terms and conditions of the settlement or discontinuance and
provided further that the Claimant, if requested to do so by the
Trustee, executes and delivers to the Trustee a document in a form
acceptable to the Trustee releasing the Trustee and holding it harmless
from any liability resulting from its following such direction. If the
Claimant refuses to consent to a settlement or other disposition of the
Litigation on terms recommended in writing by the Trustee, the Trustee
may proceed, in its sole and absolute discretion, to take such action as
it deems appropriate in the Litigation, including settlement or
discontinuance of the Litigation; provided, however, that the Trustee
shall afford the Claimant at least 14 days' advance notice in writing of
any decision by the Trustee to settle or otherwise discontinue the
Litigation.
(e) A Claimant may at any time revoke the authorization of the
Trustee to continue any Litigation on his behalf by delivering to the
Trustee a written revocation in substantially the form attached as
Exhibit F hereto, and notifying the Trustee in writing that the Claimant
has appointed his own counsel (whose fees and expenses shall not be paid
from any Legal Defense Fund) to represent the Claimant in the Litigation
in lieu of counsel retained by the Trustee. Upon the Trustee's receipt
of such revocation and notice, the Trustee shall have no obligation to
proceed further on behalf of the Claimant in the Litigation, or to pay
any costs or expenses incurred in the Litigation after the date on which
such revocation and notice is delivered to the Trustee.
(f) The Trustee shall be empowered to retain counsel and other
appropriate experts, including actuaries and accountants, to assist it
in making any determination under this Section 5.3, in determining
whether to pursue, settle or discontinue any Litigation, and to
prosecute and maintain any such Litigation on behalf of any Claimant.
Notwithstanding the foregoing, each Company, prior to a Change in
Control, may designate in writing the counsel to be retained by the
Trustee after a Change in Control to assist in enforcing the rights of
Claimants under such Company's Plans in accordance with the provisions
of this Section 5.3. If the counsel so designated declines to provide
representation, or if such counsel's representation would involve a
conflict of interest with the Trustee, or if the Trustee is not
satisfied with the quality of representation provided, the Trustee may
dismiss such counsel and engage another qualified law firm for this
purpose; provided, however, that any law firm so engaged may not be the
same law firm that represents any Company after a Change in Control. No
Company may dismiss or engage such counsel, or cause the Trustee to
engage or dismiss such counsel, after a Change in Control.
(g) All costs and expenses incurred by the Trustee in connection
with the performance of its duties under this Section 5.3, including,
without limitation, the payment of reasonable fees, costs and
disbursements of any counsel, actuaries, accountants or other experts
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retained by the Trustee pursuant to Section 5.3(f), shall be charged to
and paid from the Applicable Company's Legal Defense Fund.
(h) Notwithstanding any provision herein to the contrary, the
Trustee shall be required to act under this Section 5.3, including,
without limitation, instituting or continuing any Litigation, only to
the extent there are sufficient amounts available in the Applicable
Company's Legal Defense Fund to defray the costs and expenses the
Trustee reasonably anticipates will be incurred in connection with such
action. If, at any time after a Claimant has filed a written notice
with the Trustee under Section 5.3(a) the Trustee determines that there
will not be sufficient amounts in the Applicable Company's Legal Defense
Fund to defray such costs and expenses, the Trustee shall promptly
advise the Claimant of such fact. Unless within 30 days after it has
given such notice to the Claimant the Trustee receives from the Claimant
assurances, in such form as may be satisfactory to the Trustee, that any
costs and expenses in excess of amounts available in the Applicable
Company's Legal Defense Fund will be paid by the Claimant, the Trustee
shall have no obligation to take any further action on behalf of the
Claimant pursuant to this Section 5.3; and, if a Litigation on behalf of
the Claimant is then pending, the Trustee may discontinue such
Litigation on such terms and conditions as it deems appropriate in its
sole discretion.
5.4. If, at any time after a Change in Control, legal proceedings
are brought against the Trustee by a Company or other party seeking to
invalidate any of the provisions of this Agreement as they relate to a
Company's Trust, or seeking to enjoin the Trustee from paying any amounts from
any Trust or from taking any other action otherwise required or permitted to
be taken by the Trustee under this Agreement with respect to any Trust, the
Trustee shall take all steps that may be necessary in such proceeding to
uphold the validity and enforceability of the provisions of this Agreement as
they relate to such Trust. All costs and expenses incurred by the Trustee in
connection with any such proceeding (including, without limitation, the
payment of reasonable fees, costs and disbursements of any counsel, actuaries,
accountants or other experts retained by the Trustee in connection with such
proceeding) shall be charged to and paid from the Applicable Company's Legal
Defense Fund. Any costs and expenses so incurred by the Trustee in excess of
amounts available in the Applicable Company's Legal Defense Fund shall be
charged to and paid from the other assets of such Company's Trust. Any such
excess costs and expenses so charged shall be allocated to the Plan Accounts
maintained within such Trust, and to the Participant Accounts maintained
within such Plan Accounts, on a pro rata basis.
5.5 Each Company's Legal Defense Fund shall continue to be held
and administered by the Trustee for the purposes described in Section 5.1
until such time as all Benefits to which all Participants are entitled under
all of such Company's Plans shall have been paid in full to such Participants
or their Beneficiaries. Any balance then remaining in a Company's Legal
Defense Fund shall be distributed to such Company.
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ARTICLE 6
Insolvency
6.1 The Trustee shall cease making payment hereunder of Benefits
payable to Participants and their Beneficiaries pursuant to a Company's Plans
if the Company is Insolvent.
6.2 At all times during the continuance of each Trust, as
provided in Section 2.4 hereof, the principal and income of the Trust shall be
subject to claims of general creditors of the Applicable Company under federal
and state law as set forth below:
(a) The Board of Directors and Chief Executive Officer of each
Company shall have the duty to inform the Trustee in writing of such
Company's Insolvency. If a person claiming to be a creditor of a
Company alleges in writing to the Trustee that such Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall discontinue making
payment from such Company's Trust to Participants and Beneficiaries.
(b) Unless the Trustee has actual knowledge of a Company's
Insolvency, or has received notice from a Company or a person claiming
to be a creditor of such Company alleging that the Company is Insolvent,
the Trustee shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence con-
cerning a Company's solvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
(c) If at any time the Trustee has determined that a Company is
Insolvent, the Trustee shall discontinue making payments from such
Company's Trust to Participants and their Beneficiaries and shall hold
the assets of such Trust for the benefit of the Company's general
creditors. Nothing in this Agreement shall in any way diminish any
rights of Participants or their Beneficiaries to pursue their rights as
general creditors of the Applicable Company with respect to Benefits due
under the Company's Plans or otherwise.
(d) The Trustee shall resume making payment from a Company's
Trust of Benefits to Participants or their Beneficiaries in accordance
with Article 4 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent, or is no longer Insolvent.
6.3 Provided that there are sufficient assets, if the Trustee
discontinues the payment of Benefits from any Trust pursuant to Section 6.2
hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to
Participants or their Beneficiaries under the terms of the Applicable
Company's Plan for the period of such discontinuance, less the aggregate
amount of any payments made to Participants or their Beneficiaries by the
Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
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ARTICLE 7
Payments to Company
7.1 Prior to a Change in Control, a Company may, by written
notice to the Trustee, direct the Trustee to pay to such Company, out of the
Trust Fund for such Company's Trust, such amount as is specified in the
notice. Any such notice shall specify the Plan Accounts and the Participant
Accounts, if any, which shall be debited with respect to such payment. If the
amount that would remain in the Trust Fund after any such payment would be
less than the unpaid fees and expenses of the Trustee properly chargeable to
such Trust Fund, the Trustee may deduct such fees and expenses from the
payment that otherwise would be made to the Company.
7.2 Except as provided in Article 6 hereof, after any Trust has
become irrevocable, the Applicable Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others any of the
Trust assets before all payment of Benefits have been made to Participants and
their Beneficiaries pursuant to the terms of the Company's Plans.
ARTICLE 8
Investment Authority and Disposition of Income
8.1 Except as otherwise provided in Sections 8.2, 8.4, and 8.5,
the Trustee, prior to a Change in Control, shall invest and reinvest the
assets of each Trust, in its sole discretion, in such investments as may be
permitted in accordance with any written investment guidelines that may be
delivered to the Trustee from time to time by the Applicable Company and that
are acceptable to the Trustee or, at any time when no such investment
guidelines are in effect, in Permitted Investments.
8.2 Prior to a Change in Control, the Applicable Company may in
its sole discretion appoint an investment manager to manage the investment of
any part or all of the Trust Fund for any Trust. The Applicable Company shall
promptly inform the Trustee in writing of any such appointment, shall furnish
the Trustee with a copy of the instrument pursuant to which any investment
manager is so appointed, and shall inform the Trustee in writing as to the
specific portions of the Trust Fund for its Trust that will be subject to the
management of such investment manager. During the term of any such
appointment, the investment manager shall have the sole responsibility for the
investment and reinvestment of that portion of any Trust Fund subject to its
investment management, and the Trustee shall have no responsibility for, or
liability with respect to, the investment of such portion of such Trust Fund.
In exercising the powers granted to it hereunder, the Trustee
shall follow the directions of any investment manager with respect to the
portion of any Trust Fund subject to management by such investment manager.
All directions given by an investment manager to the Trustee shall be in
writing, signed by an officer (or a partner) of the investment manager, or by
such other person or persons as may be designated by an officer (or a partner)
of the investment manager. The investment manager may directly place orders
for the purchase or sale of securities, subject to such conditions as may be
approved by the Applicable Company in authorizing the investment manager to
effect transactions directly with respect to the portion of the Trust Fund for
any Trust subject to its management, provided that the Trustee shall
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nevertheless retain custody of the assets comprising such portion of the Trust
Fund.
The Applicable Company, by written notice to the Trustee, may at
any time terminate its appointment of any investment manager. In such event,
the Applicable Company shall either appoint a successor investment manager for
the portion of the Trust Fund in question, or direct that such portion of the
Trust Fund thereafter be invested and reinvested by the Trustee in accordance
with the provisions of Section 8.1. Until receipt of such written notice, the
Trustee shall be fully protected in relying upon the most recent prior written
notice of appointment of an investment manager.
8.3 After a Change in Control, the Trustee shall have exclusive
authority and discretion to manage and control the investment and reinvestment
of the Trust Fund for each Trust; provided, however, that the Trust Fund for
each Trust shall be so invested and reinvested only in Permitted Investments.
8.4 In no event may the assets of any Trust be invested in
securities (including stock or rights to acquire stock) or obligations issued
by any Company, other than a de minimis amount held in common investment
vehicles in which the Trustee invests. All rights associated with assets of
each Trust shall be exercised by the Trustee or an Investment Manager
appointed under Section 8.2, and shall in no event be exercisable by or rest
with Participants.
8.5 During the term of each Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
ARTICLE 9
General Powers and Duties of Trustee
9.1 In addition to the other powers granted to it under this
Agreement, the Trustee shall have the following administrative powers and
authority with respect to the property comprising the Trust Fund for each
Trust:
(a) To sell, exchange or transfer any such property at public or
private sale for cash or on credit and grant options for the purchase or
exchange thereof, including call options for property held in the Trust
Fund and put options for the purchase of such property, including,
without limitation, at any time to sell any asset other than cash held
in the Trust Fund to pay Benefits if there is not sufficient cash in the
Trust Fund to pay Benefits.
(b) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating to any
such property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale or other
action by any corporation or other entity.
(c) To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited.
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(d) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to consent
to the reorganization, consolidation, merger or readjustment of the
finances of any corporation, company or association, or to the sale,
mortgage, pledge or lease of the property of any corporation, company or
association of any of the securities of which may at any time be held in
the Trust Fund and to do any act with reference thereto, including the
exercise of options, the making of agreements or subscriptions and the
payment of expenses, assessments or subscriptions, which may be deemed
necessary or advisable in connection therewith, and to hold and retain
any securities or other property which it may so acquire.
(e) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust.
(f) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
securities or other such property.
(g) To borrow money from any lender in such amounts and upon such
terms and conditions as shall be deemed advisable or proper to carry out
the purposes of the Trust and to pledge any securities or other property
for the repayment of any such loan.
(h) To engage any legal counsel, including (except after the
occurrence of a Change in Control) counsel to any Company, any enrolled
actuary, any accountant or any other suitable agents, to consult with
such counsel, enrolled actuary, accountant or agents with respect to the
construction hereof, the duties of the Trustee hereunder, the trans-
actions contemplated by this Agreement or any act which the Trustee
proposes to take or omit, to rely upon the advice of such counsel,
enrolled actuary, accountant or agents, and to pay its reasonable fees,
expenses and compensation from the Trust Fund.
(i) To register any securities held by it in its own name or in
the name of any custodian of such property or of its nominee, including
the nominee of any system for the central handling of securities, with
or without the addition of words indicating that such securities are
held in a fiduciary capacity, to deposit or arrange for the deposit of
any such securities with such a system and to hold any securities in
bearer form; provided, however, that no such holding shall relieve the
Trustee of its responsibility for the safe custody and disposition of
the Trust Fund in accordance with the provisions of this Agreement, the
Trustee's books and records shall at all times show that such property
is part of the Trust Fund, and the Trustee shall be absolutely liable
for any loss occasioned by the acts of its nominee or nominees with
respect to securities registered in the name of the nominee or nominees.
(j) To make, execute and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgages, conveyances, contracts,
waivers, releases or other instruments in writing necessary or proper
for the accomplishment of any of the powers granted herein.
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(k) To transfer assets of the Trust Fund to a successor trustee
as provided in Section 13.4 hereof.
(l) To exercise, generally, any of the powers which an individual
owner might exercise in connection with property either real, personal
or mixed held in the Trust Fund, and to do all other acts that the
Trustee may deem necessary or proper to carry out any of the powers
granted to it hereunder or that otherwise may be in the best interests
of the Trust Fund.
(m) To hold any portion of the Trust Fund in cash pending
investment, or for the payment of expenses and Benefits, without
liability for interest.
(n) To vote personally or by proxy and to delegate power and
discretion over such proxy on account of securities held in the Trust
Fund.
(o) To hold assets in time or demand deposits (including deposits
with the Trustee in its individual capacity that pay a reasonable rate
of interest).
(p) To invest and reinvest all or any specified portion of any
Trust Fund through the medium of any common, collective, or commingled
trust fund that has been or may hereafter be established and maintained
by the Trustee.
(q) To invest in mutual funds registered with the Securities
Exchange Commission under the Investment Company Act of 1940.
The Trustee also shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein; provided, however, that if an insurance policy is held as an asset of
any Trust, the Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Prior to a Change in Control, the Trustee shall exercise the
powers referred to in Section 9.1(h) only as directed by the Applicable
Company; and, with respect to the portion of any Trust Fund for which an
investment manager has been appointed under Section 8.2, the Trustee shall
exercise any power referred to in this Section 9.1, as it relates to the
investment management of such portion of the Trust Fund, only as directed by
such investment manager. After a Change in Control, the Trustee may exercise
such powers in its sole and absolute discretion, except as otherwise provided
in Article 8.
Notwithstanding any powers granted to the Trustee pursuant to this
Agreement or to applicable law, the Trustee shall not have any power that
could give any Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
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9.2 After a Change in Control, the Trustee shall, subject to
Article 6 hereof, discharge its duties under this Agreement solely in the
interest of the beneficiaries of each Trust and (i) for the exclusive purpose
of providing Benefits to such beneficiaries and defraying reasonable expenses
of administering such Trust; (ii) with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and (iii) by diversifying
the investments of the Trust Fund for each Trust so as to minimize the risk of
large losses, unless under the circumstances it is clearly prudent not to do
so.
9.3 The Trustee shall not be required to give any bond or any
other security for the faithful performance of its duties under this
Agreement, except as required by law.
9.4 Except as otherwise expressly provided herein, the Trustee
shall not be responsible in any respect for administering any Plan; nor shall
the Trustee be responsible for the adequacy of the Trust Fund for any Trust to
meet and discharge all payments and liabilities under any Plan.
9.5 The Trustee shall be under no duties whatsoever, except such
duties as are specifically set forth as such in this Agreement, and no implied
covenant or obligation shall be read into this Agreement against the Trustee.
Except as otherwise provided in Article 5, the Trustee shall not be required
to take any action toward the execution or performance of any Trust created
hereunder or to prosecute or defend any suit or claim in respect thereof,
unless indemnified to its satisfaction against loss, liability, and reasonable
costs and expenses. The Trustee shall be under no liability or obligation to
anyone with respect to any failure on the part of any Company to perform any
of its obligations under any Plan or under this Agreement.
9.6 The Applicable Company shall pay and shall protect, indemnify
and save harmless the Trustee and its officers, directors or trustees,
employees and agents from and against any and all losses, liabilities
(including liabilities for penalties), actions, suits, judgments, demands,
damages, reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) of any nature arising from or
relating to any action or failure to act by the Trustee, its officers,
directors or trustees, employees and agents with respect to any Trust, or
arising from or relating to the transactions contemplated by this Agreement
that pertain to or affect such Trust, except to the extent that any such loss,
liability, action, suit, demand, damage, cost or expense is the result of the
negligence or willful misconduct of the Trustee, its officers, directors or
trustees, employees or agents.
If the Trustee shall become entitled to indemnification by any
Company pursuant to this Section 9.6 and such Company fails to provide such
indemnification to the Trustee within 30 days of the Company's receipt of a
written request from the Trustee for such indemnification, the Trustee may
apply assets of such Company's Trust in full satisfaction of the Company's
obligation to make such indemnification. Promptly after any assets of any
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Trust are so applied, the Trustee shall institute legal proceedings on behalf
of the Trust to recover from the Applicable Company an amount equal to the
amount of any Trust assets so applied.
ARTICLE 10
Taxes, Expenses, and Compensation of Trustee
10.1 Each Company shall pay any federal, state, local or other
taxes imposed or levied with respect to the corpus and/or income of its Trust
or any part thereof under existing or future laws and such Company in its
discretion, or the Trustee in its discretion, may contest the validity or
amount of any tax, assessment, claim or demand respecting such Trust or any
part thereof.
10.2 Each Company shall pay to the Trustee its allocable share of
the compensation that is payable to the Trustee for its services hereunder
pursuant to the schedule of fees annexed hereto as Exhibit G. Each Company
shall also pay its allocable share of the reasonable and necessary expenses
incurred by the Trustee in the performance of its duties under this Agreement,
including reasonable fees of any counsel, actuary, accountant or other agent
engaged by the Trustee pursuant to this Agreement. Any such compensation or
expenses shall be allocated among the Companies as follows: in the case of
any such compensation that is specifically chargeable to, or any such expenses
that were specifically incurred with respect to, a particular Trust, the
amount of such compensation or expenses shall be allocated solely to the
Applicable Company; in the case of any such compensation that is not
specifically chargeable to, or any such expenses that were not specifically
incurred with respect to, a particular Trust, the amount of such compensation
or expenses shall be allocated to the Companies in proportion to the
respective values of the Trust Funds for the Companies' Trusts as of the
Valuation Date immediately preceding the date as of which the Trustee bills
the Companies for such compensation or expenses. Each Company's allocable
share of such compensation and expenses shall be charged against and paid from
the Trust Fund for such Company's Trust, to the extent not paid by such
Company within 45 days after the date on which the Trustee bills the Company
for such compensation and expenses. Any amount so charged against and paid
from the Trust Fund for any Company's Trust shall be further allocated to and
charged against the Plan Accounts and Participant Accounts maintained within
such Trust (a) in such manner as the Applicable Company directs in written
instructions delivered by it to the Trustee, in the case of any amount so
charged and paid prior to a Change in Control; and (b) in proportion to the
respective balances of such Accounts as determined as of the most recent
Valuation Date, in the case of any amount so charged and paid after a Change
in Control.
ARTICLE 11
Accounting by Trustee
11.1 For each Trust, the Trustee shall keep accurate and detailed
accounts of all its investments, receipts, and disbursements under this
Agreement. Such person or persons as the Applicable Company shall designate
shall be allowed to inspect the books of account relating to such Company's
Trust upon request at any reasonable time during the business hours of the
Trustee.
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11.2 Within 90 days after the close of each calendar year, the
Trustee shall transmit to each Company, and certify the accuracy of, a written
statement of the assets and liabilities of the Trust Fund for such Company's
Trust at the close of that year, showing the current value of each asset at
that date, and a written account of all the Trustee's transactions relating to
such Trust Fund during the period from the last previous accounting to the
close of that year. For the purposes of this Section 11.2, the date of the
Trustee's resignation or removal as provided in Article 13 hereof shall be
deemed to be the close of a calendar year.
11.3 Unless a Company shall have filed with the Trustee written
exceptions or objections to any such statement and account within 90 days
after receipt thereof, such Company shall be deemed to have approved such
statement and account; and in such case or upon the written approval by such
Company of any such statement and account, the Trustee shall be forever
released and discharged with respect to all matters and things embraced in
such statement and account as though it had been settled by decree of a court
of competent jurisdiction in an action or proceeding to which the Company and
all persons having any beneficial interest in its Trust were parties.
11.4 Nothing contained in this Agreement or in any Plan shall
deprive the Trustee of the right to have a judicial settlement of its accounts
with respect to any Trust. In any proceeding for a judicial settlement of the
Trustee's accounts or for instructions in connection with any Trust, the only
other necessary party thereto in addition to the Trustee shall be the
Applicable Company. If the Trustee so elects, it may bring in as a party or
parties defendant any other person or persons. No person interested in any
Trust, other than the Applicable Company, shall have a right to compel an
accounting, judicial or otherwise, by the Trustee, and each such person shall
be bound by all accounting by the Trustee to such Company, as herein provided,
as if the account had been settled by decree of a court of competent
jurisdiction in an action or proceeding to which such person was a party.
ARTICLE 12
Communications
12.1 With respect to any Trust, the Trustee shall be fully
protected in relying upon any written notice, instruction, direction or other
communication signed by an officer of the Applicable Company. Each Company
from time to time shall furnish the Trustee with the names and specimen
signatures of the officers of the Company authorized to act or give directions
hereunder and shall promptly notify the Trustee of the termination of office
of any such officer of the Company and the appointment of a successor thereto.
Until notified in writing to the contrary, the Trustee shall be fully
protected in relying upon the most recent list of the officers of the Company
furnished to it by the Company.
12.2 Any action required by any provision of this Agreement to be
taken by the Board of Directors of a Company shall be evidenced by a
resolution of such Board of Directors certified to the Trustee by the
Secretary or an Assistant Secretary of the Company under its corporate seal,
and the Trustee shall be fully protected in relying upon any resolution so
certified to it. Unless other evidence with respect thereto has been
specifically prescribed in this Agreement, any other action of a Company under
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any provision of this Agreement, including any approval of or exceptions to
the Trustee's accounts, shall be evidenced by a certificate signed by an
officer of the Company, and the Trustee shall be fully protected in relying
upon such certificate. The Trustee may accept a certificate signed by an
authorized officer of a Company as proof of any fact or matter that it deems
necessary or desirable to have established in the administration of such
Company's Trust (unless other evidence of such fact or matter is expressly
prescribed herein) and the Trustee shall be fully protected in relying upon
the statements in the certificate.
12.3 The Trustee shall be entitled conclusively to rely upon any
written notice, instruction, direction, certificate or other communication
believed by it to be genuine and to be signed by the proper person or persons,
and the Trustee shall be under no duty to make investigation or inquiry as to
the truth or accuracy of any statement contained therein.
12.4 Until notice be given to the contrary, communications to the
Trustee shall be sent to it at its office at 210 Main Street, Hackensack, New
Jersey 07601, Attention: Corporate Agency Administration, Investment
Management Division; and communications to any Company shall be sent to it c/o
GPU Service Corporation, 100 Interpace Parkway, Parsippany, New Jersey
07054-1149, Attention: Treasurer.
ARTICLE 13
Resignation or Removal of Trustee
13.1 The Trustee may resign as trustee of any Trust at any time
by written notice to the Applicable Company, which resignation shall be
effective 60 days after the Company's receipt of such notice unless the
Company and the Trustee agree otherwise. The Trustee may be removed as
trustee of any Trust by action of the Applicable Company's Board of Directors,
at any time upon 60 days' written notice to the Trustee, or upon shorter
notice if acceptable to the Trustee. In the event it resigns or is removed,
the Trustee shall have a right to have its accounts settled as provided in
Article 11 hereof.
13.2 Notwithstanding the provisions of Section 13.1, the Trustee
may not be removed as trustee of any Trust after a Change in Control without
the written consent of two-thirds in number of the Participants who are, or
who may become, entitled to receive payments from such Trust. The Applicable
Company shall furnish the Trustee with evidence to establish that such
majority in number of such Participants has granted written consent to such
removal.
13.3 If the Trustee resigns or is removed as trustee of any
Trust, a successor shall be appointed by the Applicable Company, by action of
its Board of Directors, by the effective date of such resignation or removal.
Any successor trustee so appointed shall be a bank as defined under the
Investment Advisers Act of 1940, having a net worth in excess of $100,000,000
or having assets in excess of $2,000,000,000.
After a Change in Control, such appointment of a successor trustee shall be
approved in writing by two-thirds in number of the Participants who are or may
become entitled to receive payments from such Trust. Notwithstanding the
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foregoing, if no such appointment of a successor trustee has been made by the
effective date of such resignation or removal, the Trustee may apply to acourt
of competent jurisdiction for appointment of a successor trustee or for
instructions. All expenses of the Trustee in connection with such proceeding
shall be allowed as administrative expenses of the Trust and shall be paid by
the Applicable Company.
13.4 Each successor trustee shall have the powers and duties
conferred upon the Trustee in this Agreement, and the term "Trustee" as used
in this Agreement, except where the context otherwise requires, shall be
deemed to include any successor trustee. Upon designation or appointment of a
successor trustee for any Trust, the Trustee shall transfer and deliver the
Trust Fund for such Trust to the successor trustee, reserving such sums as the
Trustee shall deem necessary to defray its expenses in settling its accounts
with respect to such Trust, to pay any of its compensation with respect to
such Trust that is due and unpaid, and to discharge any obligation of such
Trust for which the Trustee may be liable. If the sums so reserved are not
sufficient for these purposes, the Trustee shall be entitled to recover the
amount of any deficiency from either the Applicable Company or the successor
trustee, or both. When the Trust Fund for such Trust shall have been
transferred and delivered to the successor trustee and the accounts of the
Trustee for such Trust have been settled as provided in Article 11 hereof, the
Trustee shall be released and discharged from all further accountability or
liability for the Trust Fund for such Trust and shall not be responsible in
any way for the further disposition of such Trust Fund or any part thereof.
ARTICLE 14
Amendments and Termination
14.1 Subject to Section 14.2, any or all of the provisions of
this Agreement and any Exhibits annexed hereto, as they relate to any
Company's Trust, may be amended at any time, without the consent of any
Participant or Beneficiary, by a written instrument of amendment, duly
executed by the Applicable Company and the Trustee. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Applicable
Company's Plans or shall make the Applicable Company's Trust revocable after
it has become irrevocable in accordance with Section 2.2 hereof.
14.2 After a Change in Control, no amendment may be made to
Exhibit A or Exhibit B; and no other provision of this Agreement may be
amended without the written consent of two-thirds in number of the
Participants who are or may become entitled to payments from each Trust
affected by such amendment. The Trustee may request that the Applicable
Company or Companies furnish evidence to establish that such a majority in
number of such Participants have granted written consent to such an amendment.
14.3 Unless sooner revoked in accordance with Section 2.2 hereof,
each Trust shall terminate on the date on which Participants and their
Beneficiaries are no longer entitled to receive Benefits pursuant to the terms
of the Applicable Company's Plans. Upon termination of any Trust, any assets
remaining in the Trust Fund for such Trust shall be paid by the Trustee to the
Applicable Company.
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ARTICLE 15
Miscellaneous
15.1 Any provision of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
15.2 Benefits payable to Participants and their Beneficiaries
under this Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
15.3 This Agreement shall be governed by, and shall be construed
in accordance with, and each Trust hereby created shall be administered in
accordance with, the laws of the State of New Jersey.
15.4 The titles to Articles of this Agreement are placed herein
for convenience of reference only, and this Agreement is not to be construed
by reference thereto.
15.5 This Agreement shall bind and inure to the benefit of the
successors and assigns of each Company and the Trustee, respectively, and all
Participants and Beneficiaries under the Companies' Plans.
15.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one instrument, which may be sufficiently
evidenced by any counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their respective names by their duly authorized officers
under their corporate seals as of the day and year first above written.
GENERAL PUBLIC UTILITIES CORPORATION
GPU SERVICE CORPORATION
By:_________________________________
J. R. Leva, Chairman and
Chief Executive Officer
ATTEST:
__________________________
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:_________________________________
J. R. Leva, Chairman of the Board
and Chief Executive Officer
ATTEST:
__________________________
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GPU NUCLEAR CORPORATION
By:_________________________________
P. R. Clark, President and
Chief Executive Officer
ATTEST:
__________________________
ENERGY INITIATIVES INC.
By:_________________________________
B. L. Levy, President and
Chief Executive Officer
ATTEST:
___________________________
UNITED JERSEY BANK, Trustee
By: _________________________________
ATTEST:
___________________________
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Exhibit A-1
List of Participants
Company Participants
Jersey Central Power
& Light Company Dennis P. Baldassari
Metropolitan Edison Company Fred D. Hafer
Pennsylvania Electric Company Robert L. Wise
GPU Service Corporation Robert C. Arnold
Verner M. Condon (Retired)
Herman Dieckamp (Retired)
F. Allen Donofrio
John G. Graham
Ira H. Jolles
William G. Kuhns (Retired)
James R. Leva
James B. Liberman (Retired)
Philip C. Mezey
Hazel R. O'Leary (Retired)
GPU Nuclear Corporation Philip R. Clark
Thomas G. Broughton
Energy Initiatives, Inc. Bruce L. Levy
<PAGE>
Exhibit B-1
Covered Plans and Benefits
Set forth below is a list, for each Company, of the plans,
programs, policies or agreements that are to be treated as "Plans", and the
amounts payable under the Plans that are to be treated as "Benefits", for
purposes of the annexed Agreement.
Jersey Central Power & Light Company
1. The severance payment benefit provided under Jersey Central
Power & Light Company's Severance Procedure.
2. The excess pension benefit payable to James R. Leva pursuant
to the Agreement dated February 22, 1993, between Jersey Central Power & Light
Company and Mr. Leva.
3. All benefit amounts payable under the Jersey Central Power &
Light Company Supplemental and Excess Benefits Plan.
4. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan.
5. Awards for Performance Period preceding Change in Control
payable under the Incentive Compensation Plan for Elected Officers of Jersey
Central Power & Light Company.
6. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
7. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by Jersey Central Power & Light
Company pursuant to Split Dollar Agreement with Dennis P. Baldassari.
Metropolitan Edison Company
1. The severance payment benefit provided under Metropolitan
Edison Company's Severance Procedure.
2. All benefit amounts payable under the Metropolitan Edison
Company Supplemental and Excess Benefits Plan.
3. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan for Elected Officers.
4. Awards for Performance Period preceding Change in Control
payable under the Incentive Compensation Plan for Elected Officers of
Metropolitan Edison Company.
<PAGE>
EXHIBIT B-2
5. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
6. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by Metropolitan Edison Company
pursuant to Split Dollar Agreement with Fred D. Hafer.
Pennsylvania Electric Company
1. The severance payment benefit provided under Pennsylvania
Electric Company's Severance Procedure.
2. All benefit amounts payable under the Pennsylvania Electric
Company Supplemental and Excess Benefits Plan.
3. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan for Elected Officers.
4. Awards for Performance Period preceding Change in Control
payable under the Incentive Compensation Plan for Elected Officers of
Pennsylvania Electric Company.
5. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
6. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by Pennsylvania Electric Company
pursuant to Split Dollar Agreement with Robert L. Wise.
GPU Service Corporation
1. The severance payment benefit provided under GPU Service
Corporation's Severance Procedure.
2. The additional retirement pension and the supplemental pension
payable to Ira H. Jolles pursuant to Sections 3 and 4 of the Agreement among
General Public Utilities Corporation, GPU Service Corporation and Mr. Jolles.
3. The additional retirement pension payable to Philip C. Mezey
pursuant to the Agreement among General Public Utilities Corporation, GPU
Service Corporation and Mr. Mezey.
4. The pension payable to Hazel R. O'Leary pursuant to the
Agreement among General Public Utilities Corporation, GPU Service Corporation
and Mrs. O'Leary.
<PAGE>
EXHIBIT B-3
5. All benefit amounts payable under the GPU Service Corporation
Supplemental and Excess Benefits Plan.
6. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan.
7. Awards for Performance Period preceding Change in Control
payable under the Incentive Compensation Plan for Elected Officers of GPU
Service Corporation.
8. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
9. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by GPU Service Corporation pursuant
to Split Dollar Agreements with Messrs. Leva, Jolles, Graham, Arnold, Donofrio
and Mezey, and pursuant to Letter Agreements with Messrs. Kuhns and Dieckamp.
10. Supplemental pension payable to William G. Kuhns pursuant to
the Agreement among General Public Utilities Corporation, GPU Service
Corporation and Mr. Kuhns.
11. The retirement annuity payable to James B. Liberman pursuant
to the Agreement between GPU Service Corporation and Mr. Liberman.
12. The supplemental pension payable to Herman Dieckamp pursuant
to the Agreement among General Public Utilities Corporation, GPU Service
Corporation and Mr. Dieckamp.
13. Annuities payable to Messrs. Kuhns, Dieckamp and Condon under
the Deferred Compensation Plan for Senior Officers of GPU Service Corporation.
14. The supplemental pension payable to Messrs. R. C. Arnold, J.
G. Graham and I. H. Jolles pursuant to Agreements between GPU Service
Corporation and Messrs. Arnold, Graham and Jolles.
GPU Nuclear Corporation
1. The severance payment benefit provided under GPU Nuclear
Corporation's Severance Procedure.
2. All benefit amounts payable under the GPU Nuclear Corporation
Supplemental and Excess Benefits Plan.
3. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan.
4. Awards for Performance Period preceding Change in Control
payable under the Incentive Compensation Plan for Elected Officers of GPU
Nuclear Corporation.
<PAGE>
EXHIBIT B-4
5. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
6. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by GPU Nuclear Corporation pursuant
to Split Dollar Agreements with Philip R. Clark and Thomas G. Broughton.
7. The supplemental pension payable to Philip R. Clark pursuant
to the Agreement between GPU Nuclear Corporation and Mr. Clark.
Energy Initiatives, Inc.
1. All benefit amounts payable under the GPU Service Corporation
Supplemental and Excess Benefits Plan, as adopted by Energy Initiatives, Inc.
2. All benefit amounts payable under the GPU System Companies
Deferred Compensation Plan.
3. Awards for Performance Period preceding Change in Control
payable under the Annual Performance Award Plan of Energy Initiatives, Inc.
4. Cash equivalency payments for Restricted Units and Performance
Units Awards, and non-deferred Performance Cash Incentive Awards, payable
under the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries.
5. Premiums on life insurance policies issued under Senior
Executive Life Insurance Program, payable by Energy Initiatives, Inc. pursuant
to Split Dollar Agreement with Bruce L. Levy.
<PAGE>
EXHIBIT C-1
GPU RABBI TRUST
PARTICIPANT INFORMATION
SOCIAL
NAME ADDRESS SECURITY NUMBER
(INTENTIALLY LEFT BLANK)
<PAGE>
EXHIBIT C-2
GPU RABBI TRUST
SEVERENCE PLAN - 1/1/92
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: Lump sum.
<PAGE>
EXHIBIT C-3
GPU RABBI TRUST
INCENTIVE COMPENSATION PLAN
TERM OF PAYMENT:
AMOUNT OF PAYMENT:
Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: Lump sum.
<PAGE>
EXHIBIT C-4
GPU RABBI TRUST
SENIOR EXECUTIVE LIFE INSURANCE PLAN
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: Lump sum payment on or before
of indicated year to the Life Insurance Company of Virginia.
<PAGE>
EXHIBIT C-5
GPU RABBI TRUST
DEFERRED COMPENSATION PLAN
TERMS OF PAYMENT:
PAYMENT SCHEDULE:
Balance
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: Lump sum amount on or before
of indicated year.
<PAGE>
EXHIBIT C-6
GPU RABBI TRUST
EMPLOYEE STOCK PLAN
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Gross-Up
Balance Percentage Payment
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: Lump sum amount on or before
.
<PAGE>
EXHIBIT C-7
GPU RABBI TRUST
DEFERRED COMPENSATION PENSION PLAN
TERMS OF PAYMENT: Each participant listed below is entitled to a monthly
payment for his/her life with continuing payments to his/her beneficiary if
he/she has elected a joint and survivor option.
AMOUNT OF PAYMENT:
AMOUNTS IN PAYMENT STATUS
Monthly Option
Payment Elected Beneficiary
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: On or before of each month
the amount indicated above shall be paid to the participant or his
beneficiary.
<PAGE>
EXHIBIT C-8
GPU RABBI TRUST
SPECIAL PENSION PLAN
TERMS OF PAYMENT: Each participant listed below is entitled to a monthly
payment for his/her life with continuing payments to his/her beneficiary if
he/she has elected a joint and survivor option.
AMOUNT OF PAYMENT:
AMOUNTS IN PAYMENT STATUS
Monthly Option
Payment Elected Beneficiary
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: On or before of each month
the amount indicated above shall be paid to the participant or his
beneficiary.
<PAGE>
EXHIBIT C-9
GPU RABBI TRUST
SUPPLEMENTAL AND EXCESS PENSIONS
TERMS OF PAYMENT: Each participant listed below is entitled to a monthly
payment for his/her life with continuing payments to his/her beneficiary if
he/she has elected a joint and survivor option. The determination of amount
payable is made in accordance with the Company's Excess and Supplemental
Benefits Plan for Elected Officers.
AMOUNT OF PAYMENT:
AMOUNTS IN PAYMENT STATUS
Monthly Option
Payment Elected Beneficiary
(INTENTIALLY LEFT BLANK)
OTHER AMOUNTS
FORM/TIMING OF PAYMENT: On or before of each month
the amount indicated above shall be paid to the participant or his
beneficiary.
<PAGE>
EXHIBIT C-10
GPU RABBI TRUST
SUPPLEMENTAL PENSION AGREEMENT - MEZEY
TERMS OF PAYMENT: Mr. Philip Mezey shall be entitled to a supplemental
pension benefit in accordance with the retirement provisions contained in his
employment agreement with GPU Corporation (attached, dated 1/30/90, signed
2/5/90).
AMOUNT OF PAYMENT:
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: On or before of each
month the amount indicated above shall be paid to the participant or his
beneficiary.
<PAGE>
EXHIBIT C-11
GPU RABBI TRUST
SUPPLEMENTAL PENSION AGREEMENT - JOLLES
TERMS OF PAYMENT: Mr. Ira Jolles shall be entitled to a supplemental pension
benefit in accordance with the retirement provisions contained in his
employment agreement with GPU Corporation and GPU Service Corporation
(attached, dated 3/24/92).
AMOUNT OF PAYMENT:
(INTENTIALLY LEFT BLANK)
FORM/TIMING OF PAYMENT: On or before of each
month the amount indicated above shall be paid to the participant or his
beneficiary.
<PAGE>
EXHIBIT D
PARTICIPANT'S PAYMENT REQUEST FORM
I, _______________________________________________, a Participant [or
Beneficiary] in the GPU System Companies Master Executives Benefits
Protection Trust (the "Trust"), adopted September 1, 1995, pursuant to
Section 4.3(b) thereof, hereby request that United Jersey Bank, as Trustee
thereunder, make payment to me of the Benefits to which I am entitled as
[Participant or Beneficiary] in accordance with the terms of the Trust
Agreement and the following [Company Name] Plans:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
I hereby attest, certify and affirm that to the best of my knowledge
and belief the following events, upon which entitlement to and payment of
Benefits under said Plans is conditioned, have occurred:
[Insert Description of events that have occurred]
I further attest, certify and affirm that [Name of Company] has not
paid any of the Benefits claimed herein under said plans.
I am [or The Participant was] ____ years of age, having been born on
[Date of Birth]. I have been/was [or the Participant was] employed by [Name of
Company] from [Date] to [Date]. The [Name of Company] records detailing my
[his/her] compensation and the terms and conditions of employment, if any, are
attached hereto and made a part hereof.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT E
REQUEST AND AUTHORIZATION FOR LITIGATION
I, _______________________________________________, a Participant in
the GPU System Companies Master Executives Benefits Protection Trust (the
"Trust"), adopted September 1, 1995, pursuant to Section 5.3 (b) thereof,
hereby request and authorize United Jersey Bank, as Trustee thereunder, to
institute and prosecute legal proceedings (the "Litigation"), on my behalf,
against [Name of GPU System Company] to recover upon my claim against said
company for unpaid benefits under [Name of Plan under which claim is
asserted].
It is understood that, pursuant to Section 5.3(e) of the Trust
Agreement, I may revoke this authorization to prosecute or continue to
prosecute such Litigation, at any time, upon written notification to the
Trustee in the appropriate form.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT F
REVOCATION OF AUTHORITY TO CONTINUE LITIGATION
I, _______________________________________________, a Participant in
the GPU System Companies Master Executives Benefits Protection Trust (the
"Trust"), adopted September 1, 1995, pursuant to Section 5.3 (e) thereof,
hereby revoke the authorization previously granted by me to United Jersey
Bank, as Trustee thereunder, to institute and prosecute legal proceedings (the
"Litigation), on my behalf, against [Name of GPU System Company] for unpaid
Benefits under [Name of Plan under which claim is asserted].
I hereby notify the Trustee that I have appointed and retained [Name
Attorney ] of [Address
] to represent me and my interests
in such Litigation. I understand that the fees and expenses of my attorney in
connection with the Litigation or otherwise shall be my sole responsibility
and that neither me nor my attorney will be entitled to direct payment for any
such fees or expenses out of the Trust fund or any portion thereof.
Dated:_________________ ___________________________
[Name of Participant]
___________________________
___________________________
___________________________
[Address & Telephone No.]
<PAGE>
EXHIBIT G
GPU SYSTEM COMPANIES FEE AGREEMENT
Master Executives' Benefits Protection Trust
(INTENTIALLY LEFT BLANK)
<PAGE>
Exhibit 10-D
EMPLOYEE INCENTIVE COMPENSATION PLAN OF
JERSEY CENTRAL POWER & LIGHT COMPANY
(Amending and Restating the former Management Incentive Compensation Plan of
Jersey Central Power & Light Company, last amended and restated March 1, 1990.
This Amendment and Restatement is dated April 1, 1995 and is effective
beginning with the Plan Year)
_____________________________________
1. Purpose
The purpose of the Employee Incentive Compensation Plan of Jersey
Central Power & Light Company (the "Plan") is to attract and retain
highly qualified employees, to obtain from each the best possible
performance, and to underscore the importance to them of achieving
particular business goals.
2. Definitions
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the Plan.
There shall be two classes of Awards -- Class I and Class II.
B. Chairman. The Chairman of the Board of the Company.
C. President. The President of the Company.
D. Company. Jersey Central Power & Light Company.
E. Employee. An individual who is on the active, non-bargaining unit
payroll of the Company at any time during the period for which an
Award is made, and who is not eligible for an Award under the
Incentive Compensation Plan for Elected Officers.
F. Performance Period. The fiscal year (currently calendar) for
which Awards are made.
3. Effective Date
The effective date of the Plan is January 1, 1989.
4. Amounts Available for Awards
A. The aggregate amount available for Awards for any Performance
Period shall be determined by the Chairman and the President.
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
1
<PAGE>
5. Eligibility for Awards
A. The President shall determine the Employees, if any, who are
eligible for Awards for each Performance Period. The President
shall determine which Employees are eligible to receive Class I or
Class II Awards.
B. The President may include among Employees eligible for Awards for
a Performance Period, Employees whose employment terminated
(whether by reason of retirement, death, disability or other
cause) during such Performance Period.
6. Determination of Amounts of Awards
The President shall determine the amounts of Awards either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Management Incentive Compensation Plan Administrative
Manual or its successor, the GPU System Employee Incentive Compensation
Plan Administrative Manual, as in effect for such Performance Period
(the "Manual").
7. Form of Awards
Awards shall be made in cash.
8. Payment of Awards
An Award shall be paid as soon as practicable after it is made.
9. Special Awards and Other Plans
Nothing contained in the Plan shall prohibit the Company from granting
special performance or recognition awards under such conditions, and in
such form and manner as it sees fit, or from establishing other
incentive compensation plans providing for the payment of incentive
compensation to Employees.
10. Amendment and Interpretation of the Plan.
A. Action to amend the Plan from time to time or to terminate it
entirely or to direct the discontinuance of Awards either
temporarily or permanently, may be taken by the Chairman. No
amendment or termination of the Plan shall reduce or otherwise
affect an Award already made hereunder without the consent of the
Employee affected.
B. The decision of the Chairman and the President with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
2
<PAGE>
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the
Plan shall be borne by the Company.
B. All Awards under the Plan are subject to applicable withholding
for federal, state and local taxes.
C. The Participation of any Employee in the Plan may be terminated at
any time. No promise or representation, either express or
implied, is made to any Employee with respect to continued
employment, transfer or promotion because of his or her
participation in the Plan.
3
<PAGE>
Exhibit 10-E
EMPLOYEE INCENTIVE COMPENSATION PLAN OF
METROPOLITAN EDISON COMPANY
(Amending and Restating the former Management Incentive Compensation Plan of
Metropolitan Edison Company, last amended and restated March 1, 1990. This
Amendment and Restatement is dated April 1, 1995, and is effective beginning
with the 1995 Plan Year)
_____________________________________
1. Purpose
The purpose of the Employee Incentive Compensation Plan of Metropolitan
Edison Company (the "Plan") is to attract and retain highly qualified
employees, to obtain from each the best possible performance, and to
underscore the importance to them of achieving particular business
goals.
2. Definitions
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the Plan.
There shall be two classes of Awards -- Class I and Class II.
B. Chairman. The Chairman of the Board of the Company.
C. President. The President of the Company.
D. Company. Metropolitan Edison Company.
E. Employee. An individual who is on the active, non-bargaining unit
payroll of the Company at any time during the period for which an
Award is made, and who is not eligible for an Award under the
Incentive Compensation Plan for Elected Officers.
F. Performance Period. The fiscal year (currently calendar) for
which Awards are made.
3. Effective Date
The effective date of the Plan is January 1, 1989.
4. Amounts Available for Awards
A. The aggregate amount available for Awards for any Performance
Period shall be determined by the Chairman and the President.
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
5. Eligibility for Awards
1
<PAGE>
A. The President shall determine the Employees, if any, who are
eligible for Awards for each Performance Period. The President
shall determine which Employees are eligible to receive Class I or
Class II Awards.
B. The President may include among Employees eligible for Awards for
a Performance Period, Employees whose employment terminated
(whether by reason of retirement, death, disability or other
cause) during such Performance Period.
6. Determination of Amounts of Awards
The President shall determine the amounts of Awards either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Management Incentive Compensation Plan Administrative
Manual or its successor, the GPU System Employee Incentive Compensation
Plan Administrative Manual, as in effect for such Performance Period
(the "Manual").
7. Form of Awards
Awards shall be made in cash.
8. Payment of Awards
An Award shall be paid as soon as practicable after it is made.
9. Special Awards and Other Plans
Nothing contained in the Plan shall prohibit the Company from granting
special performance or recognition awards under such conditions, and in
such form and manner as it sees fit, or from establishing other
incentive compensation plans providing for the payment of incentive
compensation to Employees.
10. Amendment and Interpretation of the Plan.
A. Action to amend the Plan from time to time or to terminate it
entirely or to direct the discontinuance of Awards either
temporarily or permanently, may be taken by the Chairman. No
amendment or termination of the Plan shall reduce or otherwise
affect an Award already made hereunder without the consent of the
Employee affected.
B. The decision of the Chairman and the President with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the
Plan shall be borne by the Company.
B. All Awards under the Plan are subject to applicable withholding
for federal, state and local taxes.
C. The Participation of any Employee in the Plan may be terminated at
any time. No promise or representation, either express or
implied, is made to any Employee with respect to continued
employment, transfer or promotion because of his or her
participation in the Plan.
2
<PAGE>
Exhibit 10-F
EMPLOYEE INCENTIVE COMPENSATION PLAN OF
PENNSYLVANIA ELECTRIC COMPANY
(Amending and Restating the former Management Incentive Compensation Plan of
Pennsylvania Electric Company, last amended and restated March 1, 1990. This
Amendment and Restatement is dated April 1, 1995 and is effective beginning
with the 1995 Plan Year)
_____________________________________
1. Purpose
The purpose of the Employee Incentive Compensation Plan of Pennsylvania
Electric Company (the "Plan") is to attract and retain highly qualified
employees, to obtain from each the best possible performance, and to
underscore the importance to them of achieving particular business
goals.
2. Definitions
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the Plan.
There shall be two classes of Awards -- Class I and Class II.
B. Chairman. The Chairman of the Board of the Company.
C. President. The President of the Company.
D. Company. Pennsylvania Electric Company.
E. Employee. An individual who is on the active, non-bargaining unit
payroll of the Company at any time during the period for which an
Award is made, and who is not eligible for an Award under the
Incentive Compensation Plan for Elected Officers.
F. Performance Period. The fiscal year (currently calendar) for
which Awards are made.
3. Effective Date
The effective date of the Plan is January 1, 1989.
4. Amounts Available for Awards
A. The aggregate amount available for Awards for any Performance
Period shall be determined by the Chairman and the President.
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
5. Eligibility for Awards
A. The President shall determine the Employees, if any, who are
eligible for Awards for each Performance Period. The President
shall determine which Employees are eligible to receive Class I or
Class II Awards.
1
<PAGE>
B. The President may include among Employees eligible for Awards for
a Performance Period, Employees whose employment terminated
(whether by reason of retirement, death, disability or other
cause) during such Performance Period.
6. Determination of Amounts of Awards
The President shall determine the amounts of Awards either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Management Incentive Compensation Plan Administrative
Manual or its successor, the GPU System Employee Incentive Compensation
Plan Administrative Manual, as in effect for such Performance Period
(the "Manual").
7. Form of Awards
Awards shall be made in cash.
8. Payment of Awards
An Award shall be paid as soon as practicable after it is made.
9. Special Awards and Other Plans
Nothing contained in the Plan shall prohibit the Company from granting
special performance or recognition awards under such conditions, and in
such form and manner as it sees fit, or from establishing other
incentive compensation plans providing for the payment of incentive
compensation to Employees.
10. Amendment and Interpretation of the Plan.
A. Action to amend the Plan from time to time or to terminate it
entirely or to direct the discontinuance of Awards either
temporarily or permanently, may be taken by the Chairman. No
amendment or termination of the Plan shall reduce or otherwise
affect an Award already made hereunder without the consent of the
Employee affected.
B. The decision of the Chairman and the President with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the
Plan shall be borne by the Company.
B. All Awards under the Plan are subject to applicable withholding
for federal, state and local taxes.
C. The Participation of any Employee in the Plan may be terminated at
any time. No promise or representation, either express or
implied, is made to any Employee with respect to continued
employment, transfer or promotion because of his or her
participation in the Plan.
2
<PAGE>
Exhibit 10-G
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
JERSEY CENTRAL POWER & LIGHT COMPANY
(As Amended And Restated, Effective January 1, 1995)
1. Purpose.
The purpose of the Incentive Compensation Plan for Elected Officers of
Jersey Central Power & Light Company (the "Plan") is to attract and
retain highly qualified employees, to obtain from each the best possible
performance, and to underscore the importance to them of achieving
particular business objectives established for Jersey Central Power &
Light Company and its affiliates.
2. Definitions.
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the Plan.
B. Board. The Board of Directors of General Public Utilities
Corporation, unless otherwise specified.
C. Committee. The Personnel, Compensation and Nominating Committee of
the Board or any successor thereto.
D. Corporation. Jersey Central Power & Light Company.
E. Employee. An individual who was on the active salaried payroll of
the Corporation or a subsidiary of the Corporation at any time
during the period for which an Award is made.
F. Executive Committee. The Executive Committee of the Board of
Directors of the Corporation.
G. Officer. An Officer of the Corporation who is elected by the
Corporation's Board of Directors and is an Employee of the
Corporation, but not including Assistant Comptrollers, Assistant
Secretaries and Assistant Treasurers.
H. Performance Period. The fiscal year (currently calendar) for which
Awards are made.
3. Effective Date.
The effective date of the Plan is July 1, 1987.
4. Amounts Available for Awards.
A. The aggregate amount available for Awards for any Performance Period
shall be determined by the Board upon the recommendation of the
Committee.
1
<PAGE>
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
5. Eligibility for Awards.
A. The Executive Committee shall determine the Officers, if any, who
are eligible for Awards for each Performance Period, subject, in the
case of the President and of Officers who are also Officers of
General Public Utilities Corporation, to the concurrence of the
Board.
B. The Executive Committee may include, among Officers eligible for
Awards for a Performance Period, Officers whose employment
terminated (whether by reason of retirement, death, disability or
other cause) during such Performance Period.
6. Determination of Amounts of Awards.
The Executive Committee shall determine the amounts of Awards subject,
in the case of Officers who are also Officers of General Public
Utilities Corporation, to the concurrence of the Board, either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Officer Incentive Compensation Administrative Manual as
in effect for such Performance Period (the "Manual").
Notwithstanding the foregoing or any other provision herein or in the
Manual to the contrary, if a Change in Control, as defined in Section
7(c) of the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries, occurs after the close of any Performance
Period but prior to the time Awards for such Performance Period have
been made, the following provisions shall apply:
(i) each objective of the Corporation for such Performance Period
shall be deemed to have been 100% achieved;
(ii) the Corporation's Final Pool for such Performance Period shall be
deemed to be 100%, of the Corporation's Target Pool for such Performance
Period;
(iii) each Officer who, prior to the occurrence of such Change in
Control, was determined to be eligible for an Award for such Performance
Period ("Eligible Officer") shall be entitled to receive an Award for
such Performance Period; and
(iv) the amount of the Award to be made to each Eligible Officer shall
be determined by multiplying the Corporation's Final Pool for the
Performance Period by a fraction the numerator of which is the amount of
the Eligible Officer's Annual Base Salary that was taken into account in
determining the Corporation's Target Pool for the Performance Period,
and the denominator of which is the aggregate amount of the Annual Base
Salaries of all Eligible Officers so taken into account.
2
<PAGE>
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the Corporation's Deferred
Compensation Plan for Elected Officers, an Award shall be paid as soon
as practicable after it is made, but in any event by no later than 60
days after the date on which the Award has been made.
9. Special Awards and Other Plans.
Nothing contained in the Plan shall prohibit the Corporation from
granting special performance or recognition awards under such
conditions, and in such form and manner as it sees fit, or from
establishing other incentive compensation plans providing for the
payment of incentive compensation to Employees; provided, however, that
an Officer who receives an Award under this Plan shall not receive an
award for the same Performance Period under any other annual incentive
plan.
10. Amendment and Interpretation of the Plan.
A. Action to amend or terminate the Plan may be taken by the
Corporation either by resolution duly adopted by the Corporation's
Board of Directors, or by an instrument in writing executed by an
Officer of the Corporation to whom authority to adopt or approve
amendments to the Plan has been delegated pursuant to a resolution
duly adopted by the Corporation's Board of Directors. No amendment
or termination of the Plan shall reduce or otherwise affect an Award
already made hereunder without the consent of the Officer affected.
B. The decision of the Executive Committee with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a "Change in Control" (as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General
Public Utilities Corporation and Subsidiaries) shall be subject to
judicial review, under a "de novo", rather than a deferential
standard.
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the Plan
shall be borne by the Corporation.
B. All Awards under the Plan are subject to applicable withholding for
federal, state and local taxes.
C. The Participation of any Officer in the Plan may be terminated at
any time. No promise or representation, either express or implied,
is made to any Officer with respect to continued employment,
transfer or promotion because of his or her participation in the
Plan.
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<PAGE>
D. Each Officer who is a participant in the Plan shall have the status
of a general unsecured creditor of the Corporation. The Plan shall
constitute a mere promise by the Corporation to make payments in the
future of the Awards provided for herein. It is the intention of
the Corporation that the arrangements reflected in this Plan be
treated as unfunded for tax purposes and, if it should be determined
that Title I of ERISA is applicable to such arrangements, for
purposes of Title I of ERISA.
E. An Officer's rights to payments under the Plan shall not be subject
in any manner to anticipate, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by creditors of the
Officer or the Officer's beneficiary.
4
<PAGE>
Exhibit 10-H
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
METROPOLITAN EDISON COMPANY
(As Amended And Restated, Effective January 1, 1995)
1. Purpose.
The purpose of the Incentive Compensation Plan for Elected Officers of
Metropolitan Edison Company (the "Plan") is to attract and retain highly
qualified employees, to obtain from each the best possible performance,
and to underscore the importance to them of achieving particular
business objectives established for Metropolitan Edison Company and its
affiliates.
2. Definitions.
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the
Plan.
B. Board. The Board of Directors of General Public Utilities
Corporation, unless otherwise specified.
C. Committee. The Personnel, Compensation and Nominating
Committee of the Board or any successor thereto.
D. Corporation. Metropolitan Edison Company.
E. Employee. An individual who was on the active salaried payroll
of the Corporation or a subsidiary of the Corporation at any
time during the period for which an Award is made.
F. Executive Committee. The Executive Committee of the Board of
Directors of the Corporation.
G. Officer. An Officer of the Corporation who is elected by the
Corporation's Board of Directors and is an Employee of the
Corporation, but not including Assistant Comptrollers,
Assistant Secretaries and Assistant Treasurers.
H. Performance Period. The fiscal year (currently calendar) for
which Awards are made.
3. Effective Date.
The effective date of the Plan is July 1, 1987.
4. Amounts Available for Awards.
A. The aggregate amount available for Awards for any Performance Period
shall be determined by the Board upon the recommendation of the
Committee.
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<PAGE>
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
5. Eligibility for Awards.
A. The Executive Committee shall determine the Officers, if any, who
are eligible for Awards for each Performance Period, subject, in the
case of the President and of Officers who are also Officers of
General Public Utilities Corporation, to the concurrence of the
Board.
B. The Executive Committee may include, among Officers eligible for
Awards for a Performance Period, Officers whose employment
terminated (whether by reason of retirement, death, disability or
other cause) during such Performance Period.
6. Determination of Amounts of Awards.
The Executive Committee shall determine the amounts of Awards subject,
in the case of Officers who are also Officers of General Public
Utilities Corporation, to the concurrence of the Board either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Officer Incentive Compensation Administrative Manual as
in effect for such Performance Period (the "Manual").
Notwithstanding the foregoing or any other provision herein or in the
Manual to the contrary, if a Change in Control, as defined in Section
7(c) of the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries, occurs after the close of any Performance
Period but prior to the time Awards for such Performance Period have
been made, the following provisions shall apply:
(i) each objective of the Corporation for such Performance
Period shall be deemed to have been 100% achieved;
(ii) the Corporation's Final Pool for such Performance Period
shall be deemed to be 100%, of the Corporation's Target Pool for such
Performance Period;
(iii) each Officer who, prior to the occurrence of such Change
in Control, was determined to be eligible for an Award for such
Performance Period ("Eligible Officer") shall be entitled to receive an
Award for such Performance Period; and
(iv) the amount of the Award to be made to each Eligible
Officer shall be determined by multiplying the Corporation's Final Pool
for the Performance Period by a fraction the numerator of which is the
amount of the Eligible Officer's Annual Base Salary that was taken into
account in determining the Corporation's Target Pool for the Performance
Period, and the denominator of which is the aggregate amount of the
Annual Base Salaries of all Eligible Officers so taken into account.
2
<PAGE>
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the Corporation's Deferred
Compensation Plan for Elected Officers, an Award shall be paid as soon
as practicable after it is made, but in any event by no later than 60
days after the date on which the Award has been made.
9. Special Awards and Other Plans.
Nothing contained in the Plan shall prohibit the Corporation from
granting special performance or recognition awards under such
conditions, and in such form and manner as it sees fit, or from
establishing other incentive compensation plans providing for the
payment of incentive compensation to Employees; provided, however, that
an Officer who receives an Award under this Plan shall not receive an
award for the same Performance Period under any other annual incentive
plan.
10. Amendment and Interpretation of the Plan.
A. Action to amend or terminate the Plan may be taken by the
Corporation either by resolution duly adopted by the Corporation's
Board of Directors, or by an instrument in writing executed by an
Officer of the Corporation to whom authority to adopt or approve
amendments to the Plan has been delegated pursuant to a resolution
duly adopted by the Corporation's Board of Directors. No amendment
or termination of the Plan shall reduce or otherwise affect an Award
already made hereunder without the consent of the Officer affected.
B. The decision of the Executive Committee with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a "Change in Control" (as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General
Public Utilities Corporation and Subsidiaries) shall be subject to
judicial review, under a "de novo", rather than a deferential
standard.
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the Plan
shall be borne by the Corporation.
B. All Awards under the Plan are subject to applicable withholding for
federal, state and local taxes.
C. The Participation of any Officer in the Plan may be terminated at
any time. No promise or representation, either express or implied,
is made to any Officer with respect to continued employment,
transfer or promotion because of his or her participation in the
Plan.
3
<PAGE>
D. Each Officer who is a participant in the Plan shall have the status
of a general unsecured creditor of the Corporation. The Plan shall
constitute a mere promise by the Corporation to make payments in the
future of the Awards provided for herein. It is the intention of
the Corporation that the arrangements reflected in this Plan be
treated as unfunded for tax purposes and, if it should be determined
that Title I of ERISA is applicable to such arrangements, for
purposes of Title I of ERISA.
E. An Officer's rights to payments under the Plan shall not be subject
in any manner to anticipate, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by creditors of the
Officer or the Officer's beneficiary.
4
<PAGE>
Exhibit 10-I
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
PENNSYLVANIA ELECTRIC COMPANY
(As Amended And Restated, Effective January 1, 1995)
1. Purpose.
The purpose of the Incentive Compensation Plan for Elected Officers of
Pennsylvania Electric Company (the "Plan") is to attract and retain
highly qualified employees, to obtain from each the best possible
performance, and to underscore the importance to them of achieving
particular business objectives established for Pennsylvania Electric
Company and its affiliates.
2. Definitions.
For the purposes of the Plan, the following terms shall have the
following meanings:
A. Awards. Incentive Compensation Awards made pursuant to the Plan.
B. Board. The Board of Directors of General Public Utilities
Corporation, unless otherwise specified.
C. Committee. The Personnel, Compensation and Nominating Committee of
the Board or any successor thereto.
D. Corporation. Pennsylvania Electric Company.
E. Employee. An individual who was on the active salaried payroll of
the Corporation or a subsidiary of the Corporation at any time
during the period for which an Award is made.
F. Executive Committee. The Executive Committee of the Board of
Directors of the Corporation.
G. Officer. An Officer of the Corporation who is elected by the
Corporation's Board of Directors and is an Employee of the
Corporation, but not including Assistant Comptrollers, Assistant
Secretaries and Assistant Treasurers.
H. Performance Period. The fiscal year (currently calendar) for which
Awards are made.
3. Effective Date.
The effective date of the Plan is July 1, 1987.
4. Amounts Available for Awards.
A. The aggregate amount available for Awards for any Performance Period
shall be determined by the Board upon the recommendation of the
Committee.
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<PAGE>
B. No Awards shall be made for a Performance Period if during such
Performance Period no dividends were declared or paid on shares of
Common Stock of General Public Utilities Corporation.
5. Eligibility for Awards.
A. The Executive Committee shall determine the Officers, if any, who
are eligible for Awards for each Performance Period, subject, in the
case of the President and of Officers who are also Officers of
General Public Utilities Corporation, to the concurrence of the
Board.
B. The Executive Committee may include, among Officers eligible for
Awards for a Performance Period, Officers whose employment
terminated (whether by reason of retirement, death, disability or
other cause) during such Performance Period.
6. Determination of Amounts of Awards.
The Executive Committee shall determine the amounts of Awards subject,
in the case of Officers who are also Officers of General Public
Utilities Corporation, to the concurrence of the Board either at or
following the end of the Performance Period to which they relate. The
amount of the Awards to be made for any Performance Period shall be so
determined in accordance with the methods and procedures set forth in
the GPU System Officer Incentive Compensation Administrative Manual as
in effect for such Performance Period (the "Manual").
Notwithstanding the foregoing or any other provision herein or in the
Manual to the contrary, if a Change in Control, as defined in Section
7(c) of the 1990 Stock Plan for Employees of General Public Utilities
Corporation and Subsidiaries, occurs after the close of any Performance
Period but prior to the time Awards for such Performance Period have
been made, the following provisions shall apply:
(i) each objective of the Corporation for such
Performance Period shall be deemed to have been 100% achieved;
(ii) the Corporation's Final Pool for such Performance Period
shall be deemed to be 100%, of the Corporation's Target Pool for such
Performance Period;
(iii) each Officer who, prior to the occurrence of such Change
in Control, was determined to be eligible for an Award for such
Performance Period ("Eligible Officer") shall be entitled to receive an
Award for such Performance Period; and
(iv) the amount of the Award to be made to each Eligible
Officer shall be determined by multiplying the Corporation's Final Pool
for the Performance Period by a fraction the numerator of which is the
amount of the Eligible Officer's Annual Base Salary that was taken into
account in determining the Corporation's Target Pool for the Performance
Period, and the denominator of which is the aggregate amount of the
Annual Base Salaries of all Eligible Officers so taken into account.
2
<PAGE>
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the Corporation's Deferred
Compensation Plan for Elected Officers, an Award shall be paid as soon
as practicable after it is made, but in any event by no later than 60
days after the date on which the Award has been made.
9. Special Awards and Other Plans.
Nothing contained in the Plan shall prohibit the Corporation from
granting special performance or recognition awards under such
conditions, and in such form and manner as it sees fit, or from
establishing other incentive compensation plans providing for the
payment of incentive compensation to Employees; provided, however, that
an Officer who receives an Award under this Plan shall not receive an
award for the same Performance Period under any other annual incentive
plan.
10. Amendment and Interpretation of the Plan.
A. Action to amend or terminate the Plan may be taken by the
Corporation either by resolution duly adopted by the Corporation's
Board of Directors, or by an instrument in writing executed by an
Officer of the Corporation to whom authority to adopt or approve
amendments to the Plan has been delegated pursuant to a resolution
duly adopted by the Corporation's Board of Directors. No amendment
or termination of the Plan shall reduce or otherwise affect an Award
already made hereunder without the consent of the Officer affected.
B. The decision of the Executive Committee with respect to any
questions arising in connection with the administration or
interpretation of the Plan shall be final, conclusive and binding.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a "Change in Control" (as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General
Public Utilities Corporation and Subsidiaries) shall be subject to
judicial review, under a "de novo", rather than a deferential
standard.
11. Miscellaneous.
A. All expenses and costs in connection with the operation of the Plan
shall be borne by the Corporation.
B. All Awards under the Plan are subject to applicable withholding for
federal, state and local taxes.
C. The Participation of any Officer in the Plan may be terminated at
any time. No promise or representation, either express or implied,
is made to any Officer with respect to continued employment,
transfer or promotion because of his or her participation in the
Plan.
3
<PAGE>
D. Each Officer who is a participant in the Plan shall have the status
of a general unsecured creditor of the Corporation. The Plan shall
constitute a mere promise by the Corporation to make payments in the
future of the Awards provided for herein. It is the intention of
the Corporation that the arrangements reflected in this Plan be
treated as unfunded for tax purposes and, if it should be determined
that Title I of ERISA is applicable to such arrangements, for
purposes of Title I of ERISA.
E. An Officer's rights to payments under the Plan shall not be subject
in any manner to anticipate, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by creditors of the
Officer or the Officer's beneficiary.
4
<PAGE>
Exhibit 10-J
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS
OF JERSEY CENTRAL POWER & LIGHT COMPANY
(AS AMENDED AND RESTATED EFFECTIVE SEPTEMBER 1, 1995)
1. Purpose
1.1 The purpose of this document is to set forth the Deferred
Remuneration Plan for Outside Directors, as amended and restated
effective September 1, 1995. The Plan will be implemented by
individual elections by each Director.
2. Plan Summary
2.1 This Plan provides for deferral by Directors of all or a portion of
current Remuneration.
2.2 Funds being deferred will be credited with the equivalent of interest
in accordance with
Section 6.
2.3 Each component of the deferred funds will be distributed as follows:
(a) for a Director who elects deferral until a date or dates
following his or her Retirement, to the Director, in accordance
with his or her latest effective election, and subject to
provisions of Section 4.5;
(b) for a Director who elects deferral until a date or dates
preceding his or her Retirement, to the Director, in accordance
with his or her initial election; or
(c) if a Director dies before the deferred funds have been fully
distributed, to his or her designated beneficiary, in accordance
with the option selected by the Director under Section 7.2 for
each component except as the Board may otherwise determine, based
on the circumstances at the time the distribution is to commence.
3. Definition of Terms
3.1 Board of Directors - refers to the Board of Directors of Jersey
Central Power & Light Company.
3.2 Company - refers to Jersey Central Power & Light Company.
3.3 Director - refers to a member of the Board of Directors who is not
an employee of Jersey Central Power & Light Company or any of its
subsidiaries.
3.4 Plan - refers to this Deferred Remuneration Plan for Outside
Directors as described in this document and as it may be amended in
the future.
<PAGE>
3.5 Remuneration - refers to all cash amounts earned during a calendar
year by a Director for services performed as a Director (including
services performed as a member of a committee of the Board of
Directors), but does not include consulting fees, reimbursement for
travel or other expenses or Company contributions to other benefit
plans.
3.6 Pre-Retirement Account - refers to the memorandum account which shall
be established and maintained for a Director who elects, pursuant to
Section 5.2, to have payment of any portion of his or her
Remuneration for any Plan Year deferred to a date prior to his or her
Retirement. A separate Pre-Retirement Account shall be established
and maintained for the Remuneration for each Plan Year which the
Director so elects to defer.
3.7 Retirement Account - refers to the memorandum account which shall be
established and maintained for a Director who elects, pursuant to
Section 5.2, to have payment of any portion of his or her
Remuneration for any Plan Year deferred to a date after his or her
Retirement. All amounts deferred pursuant to elections made on or
before December 31, 1985 under the Plan by a Director, together with
all interest equivalents earned by such election and credited to such
amounts prior to December 31, 1986, shall be treated, on or after
such date, as part of the Director s Retirement Account.
3.8 Retirement - refers to the retirement from service on the Board of
Directors, on account of resignation, death, or any other reason,
without becoming an employee of Jersey Central Power & Light Company,
GPU or any of its subsidiaries.
3.9 Plan Year - refers to the period October 1, 1986 through December 31,
1986; and each twelve (12) month period from January 1 through
December 1 thereafter.
4. Administration
4.1 The Board of Directors has established this Plan. The Board of
Directors may in its sole discretion modify the provisions of the
Plan from time to time, or may terminate the entire Plan at any time.
Such modification or termination shall not affect the rights of any
participant accrued prior to such modification or termination.
4.2 Responsibility for the ongoing administration of this Plan rests with
the Corporate Secretary's Department.
4.3 All questions concerning the disclosure of information relating to
this Plan, as well as any dispute over accounting or administrative
procedures or interpretation of the Plan, will be resolved at the
sole discretion of the Corporate Secretary.
The Corporate Secretary will not be liable to any person for any
action taken or omitted in connection with the interpretation and the
administration of the Plan unless attributable to willful misconduct
or lack of good faith. Notwithstanding the foregoing, any
determination made by the Corporate Secretary after the occurrence of
a "Change in Control", as defined in Section 7(c) of the 1990 Stock
2
<PAGE>
Plan for Employees of General Public Utilities Corporation and
Subsidiaries, that denies in whole or in part any claim made by any
individual for benefits under the Plan shall be subject to judicial
review, under a "de novo", rather than a deferential, standard.
4.4 All provisions of this Plan, its administration and interpretation,
are intended to be in compliance with appropriate Internal Revenue
Service Rulings regarding the construction and operation of a
deferred compensation program, so that deferred Remuneration and
interest equivalents thereon will not constitute income
constructively received prior to being distributed under the terms of
this Plan.
4.6 A Director's election to voluntarily defer Remuneration, selection of
a distribution commence-ment date and distribution option, and
designation of a beneficiary and contingent beneficiary, made
pursuant to this Plan shall be made in writing, on a form furnished
to the Director by the Company for such purposes, signed and
delivered personally or by first class mail to:
Corporate Secretary
Jersey Central Power & Light Company
300 Madison Avenue
Morristown, New Jersey 07962
Any such election, selection, designation, or change therein, shall
not become effective unless and until received by the Corporate
Secretary. A distribution election or a change in a distribution
election made after May 31, 1987 will not be effective unless made at
least twenty-four (24) months prior to his or her Retirement or
Disability.
5. Deferral Election
5.1 A Director may elect to defer all or any portion of his or her
Remuneration for any Plan Year, providing such portion is three
thousand dollars ($3,000) or more. A separate deferral election shall
be made with respect to a Director's Remuneration for each Plan Year.
An election to defer Remuneration for the 1986 amended Plan Year
shall be made on or prior to September 30. In subsequent years, the
election shall be made on or before December 31 of the year preceding
the Plan Year. Notwithstanding, the foregoing, (a) Directors who are
initially elected prior to December 1st of any Plan Year may, within
30 days of such initial election, make a deferral election for the
then current Plan Year, and (b) Directors who are initially elected
after December 1st of any Plan Year may immediately make a deferral
election for both the then current Plan Year and for the immediately
succeeding Plan Year; provided, however, that any deferral election
made pursuant to clause (a) or (b) hereof shall be effective only
with respect to Remuneration earned after such election has become
effective. All elections under this Section 5.1 shall be irrevocable.
5.2 In his or her election to defer Remuneration for any Plan Year, a
Director shall specify the amount or portion of the Remuneration to
be deferred, and shall indicate whether the Remuneration so deferred
is to be credited to a Pre-Retirement Account, or to a Retirement
Account.
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<PAGE>
5.3 With respect to Remuneration deferred hereunder for a Plan Year which
a Director elects to have credited to his or her Pre-Retirement
Account, the Director shall specify in the election form the date on
which distribution of the Pre-Retirement Account shall be made or
commence. The date so selected shall be no earlier than 24 months
from the close of the Plan Year. In the election form for the Plan
Year, the Director shall also select an option under Section 7.2 for
the distribution of the account. Except as provided in Section 7.4,
the date so specified, and the option so selected, may not thereafter
be changed by the Director.
5.4 With respect to any Remuneration deferred hereunder which a Director
elects to have credited to his or her Retirement Account, the
Director may elect a distribution commencement date and a
distribution option under Section 7.2 for the distribution of the
account, and may change, subject to the provisions of Section 4.5,
any election as to the distribution commencement date and
distribution option for the account previously made by the Director,
at any time prior to his or her Retirement. The distribution
commencement date so elected shall be either the first business day
of the calendar year following the Director's Retirement, or the
first business day of any subsequent calendar year.
5.5 In the case of a Director who, prior to January 1, 1986, made a
deferral election under the Plan with respect to his or her
Remuneration for the calendar year 1986, any deferral election made
by the Director hereunder with respect to the period commencing
October 1, 1986 and ending December 31, 1986 shall be effective, for
that period, only with respect to the excess, if any, of the amount
he or she so elects to defer for said period over the amount of
Remuneration for said period deferred pursuant to the Director's
prior election.
5.6 The amounts which are deferred, including interest equivalents, will
be credited to a Director's Account. Prior to distribution, all
amounts deferred including interest equivalents, will constitute
general assets of the Company for use as it deems necessary, and will
be subject to the claims of the Company's creditors.A Director shall
have the status of a mere unsecured creditor of the Company with
respect to his or her right to receive any payment under the Plan.
The Plan shall constitute a mere promise by the Company to make
payments in the future of the benefits provided for herein. It is
intended that the arrangements reflected in this Plan be treated as
unfunded for tax purposes.
6. Interest
Interest equivalents, compounded monthly on deposits treated as monthly
transactions, will be credited at the end of each quarter in the calendar
year. Such credit will be made to the balance of each account maintained
for a Director hereunder, including the undistributed balance of any such
account from which payments are being made in installments. The rate used
in calculation of interest equivalents will be no less than the rate equal
to the simple average of Citibank N.A. of New York Prime Rates for the last
business day of each of the three months in the calendar quarter or, if
greater, such other rate as established from time to time by the Committee.
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<PAGE>
The Company may, but shall not be required to, purchase a life insurance
policy, or policies, to assist it in funding its payment obligations under
the Plan. If a policy, or policies, is so purchased, it shall, at all
times, remain the exclusive property of the Company and subject to the
claims of its creditors. Neither the Director nor any beneficiary or
contingent beneficiary designated by him or her shall have any interest in,
or rights with respect to such policy.
7. Distribution of Deferred Funds
7.1 A Director's Pre-Retirement Account shall be distributed to the
Director, or distributions from such Pre-Retirement Accounts shall
commence, on the date or dates specified in the elections made by the
Director with respect to such accounts. A Director's Retirement
Account shall be distributed to the Director, or distributions from
such accounts shall commence, on the date specified in the Director's
latest effective election. In such case a distribution election made
after May 31, 1987 will not be effective unless selected at least
twenty-four (24) months prior to his or her Retirement.
7.2 The options for distribution are:
(a) A single lump sum payment.
(b) Annual Installments over any fixed number of years selected by
the Director, with a minimum of five annual installments required
for the Retirement Account.
If distribution of a Director's Account is to be made in annual
installments under Option (b) of Section 7.2, the amount of each
installment will equal the total amount in such account on the date
the installment is payable, divided by the number of installments
remaining to be paid. In addition, if the distributions are made in
installments under Option (b) of Section 7.2, the interest equivalent
accrued on the Director's memorandum account each year after the date
the first installment is payable will be distributed on each
anniversary of such date.
7.3 Except as the Board may otherwise determine based on the
circumstances at the time the distribution to the beneficiary is to
commence:
(a) If a Director should die after distribution of any account
maintained for the Director has commenced, but before the entire
balance of such account has been fully distributed, distributions
will continue to be made from such account to the Director's
designated beneficiary or contingent beneficiary, in accordance
with the distribution option in effect for such Account at the
time of the Director's death.
(b) If a Director should die before any distribution from an account
maintained for the Director hereunder has been made to him or
her, distribution of such account to the Director's designated
beneficiary or contingent beneficiary shall be made, or shall
commence, as soon as practicable after the Director's death, in
accordance with the distribution option in effect for such
account at the time of the Director's death.
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<PAGE>
Amounts remaining to be paid, after the death of the Director, to the
designated beneficiary and the contingent beneficiary, will be paid
in a lump sum to the estate of the last of such persons to die.
7.4 Notwithstanding anything herein to the contrary, any account
maintained for a Director hereunder may be distributed, in whole or
in part, to such Director on any date earlier than the date on which
distribution is to be made, or commence, pursuant to the Director's
election if:
(a) the Director requests early distribution, and
(b) the Board, in its sole discretion, determines that early
distribution is necessary to help the Director meet some severe
financial need arising from circumstances which were beyond the
Director's control and which were not foreseen by the Director at
the time he or she made the election as to the date or dates for
distribution from such account. A request by a Director for an
early distribution shall be made in writing, shall set forth
sufficient information as to the Director's needs for such
distribution to enable the Board to take action on his or her
request, and shall be mailed or delivered to the Company's
Corporate Secretary.
8. Non-Assignment of Deferred Remuneration
8.1 A Director's rights to payments under this Plan shall not be subject
to any manner to anticipation, alienation, sale, transfer (other than
transfer by will or by the laws of descent and distribution, in the
absence of a beneficiary designation), assignment, pledge,
encumbrance, attachment or garnishment by creditors of the Director
or his or her spouse or other beneficiary.
8.2 All amounts paid under the Plan, including the interest equivalents
credited to a Director's memorandum account, are considered to be
Remuneration. The crediting of interest equivalents is intended to
preserve the value of the Remuneration so deferred for the Director.
6
<PAGE>
Exhibit 10-K
JERSEY CENTRAL POWER AND LIGHT COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective January 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
Foreword 1
Section 1 - Definitions 2
Section 2 - Application and Basis of the Plan 4
Section 3 - Payment of Benefits 5
Section 4 - Administration 8
Section 5 - Amendment and Termination 9
i
<PAGE>
JERSEY CENTRAL POWER AND LIGHT COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective January 1, 1995)
Foreword
Effective as of January l, 1988, Jersey Central Power & Light Company
(referred to in this document as the "Company") established a supplemental
pension plan for the benefit of certain of its employees. This Jersey Central
Power & Light Company Supplemental and Excess Benefits Plan (the "Plan") is a
continuation of that plan as adopted effective January 1, 1988.
The Plan, as set forth herein, is applicable to all employees of the Company
who meet the requirements described in this Plan and who are actively employed
by the Company after January 1, 1995. The benefits of any employee who ceased
employment with the Company, by retirement, death, or otherwise, prior to
January 1, 1995 are determined in accordance with the terms of the applicable
predecessor to this Plan as in effect at the time of such cessation of
employment, except that the provisions of section 1.10 are retroactive and
apply to any employee who ceased employment on or after January 1, 1989.
It is intended that the "excess benefits" provided under the Plan be an
"excess benefits plan" as that term is defined in Section 3(36) of the
Employee Retirement Income Security Act of 1974, and that the "supplemental
benefits" provided under the Plan be a deferred compensation plan for "a
select group of management or highly compensated employees" as that term is
used in the Employee Retirement Income Security Act of 1974.
One purpose of the Plan is to provide participants of the Jersey Central Power
& Light Company Employee Pension Plan ("Pension Plan") and the Jersey Central
Power & Light Company Plan For Retirement Annuities ("PRA") and their
surviving spouses with the amount of company-provided benefits that would have
been provided to them under the Pension Plan or the PRA but for the limitation
on benefits imposed under Section 415 of the Internal Revenue Code.
The second purpose of the Plan is to provide elected officers and certain
other highly compensated employees of the Company and their surviving spouses
with the amount of company-provided benefits that would have been provided to
them under the Pension Plan but for the following:
(a) the limitation on Earnings for purposes of the Pension Plan imposed by
Section 401(a)(17) of such Code, and
(b) the exclusion, from Earnings under the Pension Plan, of any compensation
deferred under the Deferred Compensation Plan.
Except to the extent otherwise indicated or inappropriate, the Pension Plan is
incorporated by reference.
1
<PAGE>
SECTION 1
Definitions
1.1 Except to the extent otherwise indicated, the definitions contained in
Section l of the Pension Plan are applicable under the Plan.
1.2 Board of Directors: The term Board of Directors shall mean the Board of
Directors of the Company.
1.3 Company: The word Company shall have the meaning indicated in the
Foreword.
1.4 Deferred Compensation Plan: The term Deferred Compensation Plan shall
mean the GPU System Companies Deferred Compensation Plan, as adopted by
the Company.
1.5 Earnings: The term Earnings shall mean an Employee's "Earnings" as
defined in Section 1.10 of the Pension Plan.
1.6 Excess Benefit: The term Excess Benefit shall mean the excess, if any,
of (i) each pension benefit which would be payable to an Employee or to
the Employee's surviving spouse under the Pension Plan if the
limitations on benefits imposed by Section 18.1 of the Pension Plan were
not applicable over (ii) each pension benefit payable under the Pension
Plan.
1.7 Incentive Compensation Plan: The term Incentive Compensation Plan shall
mean the Company's Employee Incentive Compensation Plan or its Incentive
Compensation Plan for Elected Officers.
1.8 Pension Plan: The term Pension Plan shall have the meaning indicated in
the Foreword.
1.9 Plan: The term Plan shall have the meaning indicated in the Foreword.
1.10 Supplemental Benefit: The term Supplemental Benefit shall mean the
excess, if any, of (i) each pension benefit that would be payable to an
Employee or to an Employee's surviving spouse under the Pension Plan if
all amounts of base compensation or Incentive Compensation Plan awards
deferred under the Deferred Compensation Plan were included in Earnings
(and if the limitations on benefits imposed by Section 18.1 of the
Pension Plan and on Earnings imposed by Section 401(a)(17) of the
Internal Revenue Code were not applicable) over (ii) the sum of (a) each
pension benefit payable under the Pension Plan and (b) any Excess
Benefit payable under this Plan.
2
<PAGE>
For purposes of clause (i) of this Section 1.10, any amount of base
compensation deferred under the Deferred Compensation Plan shall be treated as
Earnings for the period in which such amount would have been paid to the
Employee in cash if the Employee had not elected to defer such amount, and the
amount of any award made to an Employee under the Incentive Compensation Plan
and deferred under the Deferred Compensation Plan shall be treated as Earnings
for the period corresponding to the Performance Period for which such award is
made to the Employee. No amount of base compensation so deferred, and no
amount awarded under the Incentive Compensation Plan, shall be treated as
Earnings for any period other than the period determined under the preceding
sentence.
For purposes of clause (i) of this Section 1.10, the amount of any additional
years of Creditable Service determined in accordance with Section 5.9 of the
Pension Plan will be recalculated by replacing the Employee's annual base
salary rate of Earnings as of April 1, 1989 by (a) for purposes of calculating
projected Basic Pensions, the product of (i) such rate before any reductions
on account of the Deferred Compensation Plan times (ii) 1.0 plus the target
award percentage as described under the Incentive Compensation Plan and (b)
for purposes of calculating the accumulation of contributions of 2.25% or
2.10% of compensation, such rate before any reductions on account of the
Deferred Compensation Plan.
3
<PAGE>
SECTION 2
Application and Basis of the Plan
2.1 The Plan shall be applicable (i) in the case of the Excess Benefit, to
each Employee described in Section 2.1 of the Pension Plan and (ii) in
the case of the Supplemental Benefit, to each Employee described in
clause (i) who is an elected officer of the Company and to each other
Employee described in clause (i) who for any calendar year has Earnings
(plus any Incentive Compensation Plan awards deferred) in excess of the
amount of compensation for such year that can be taken into account for
purposes of the Pension Plan pursuant to Section 401(a)(17) of the Code.
4
<PAGE>
SECTION 3
Payment of Benefits
3.1 The Company shall pay to each Employee to whom this Plan is applicable,
or to the surviving spouse of any such Employee, the Excess Benefit
and/or the Supplemental Benefit determined for such Employee or
surviving spouse under Sections 1.6 and 1.10 hereof.
3.2 (a) The Excess Benefit and/or Supplemental Benefit payable hereunder
to an Employee or the Employee's surviving spouse shall commence
to be paid:
(i) on the first of the month following the Employee's
retirement, if the Employee retires in accordance with
Section 3.1, 3.2, 3.3 or 3.4 of the Pension Plan,
(ii) on Normal Retirement Date, if the Employee becomes entitled
to benefits in accordance with Section 3.5 of the Pension
Plan, or
(iii) in the case of a Benefit which becomes payable hereunder to
an Employee's surviving spouse on account of the Employee's
death before the Employee has received any Benefit payment
hereunder, on the earliest date as of which payment of such
spouse's Basic Pension under the applicable provisions of
Section 9 of the Pension Plan could commence, without regard
to any election by such spouse to defer the commencement of
payment of such Basic Pension.
(b) The Excess and/or Supplemental Benefit payable hereunder to the
Employee shall be paid in the form of a single life annuity,
unless the Employee is married on the date on which payment of
such Benefit is to commence under Section 3.2(a) above, in which
event it shall be paid in accordance with Option 2, as described
in Section 10.1 of the Pension Plan, with the Employee's spouse as
the beneficiary thereunder.
(c) Notwithstanding the preceding provisions of this Section 3.2, an
Employee may elect (i) to delay commencement of his or her Excess
and Supplemental Benefits to a specified date after the date
applicable under Section 3.2(a) but not later than the Employee's
Normal Retirement Date, or (ii) in the case of any Employee who
becomes entitled to benefits in accordance with Section 3.5 of the
Pension Plan, to accelerate commencement of his or her Excess and
Supplemental Benefits to a specified date before the date
applicable under Section 3.2(a) but not earlier than the first day
of the month immediately following his or her 55th birthday,
and/or (iii) to be paid his or her Excess and Supplemental
Benefits in any form permitted (without regard to any requirements
for spousal consent) under the Pension Plan other than the form
applicable under Section 3.2(b).
5
<PAGE>
Any such election shall be made in writing, on a form furnished to
the Employee for such purpose by the Administrative Committee.
The form shall be signed by the Employee and delivered to the
Administrative Committee. An election under this Section 3.2(c)
shall not be effective unless received by the Administrative
Committee at least twenty-four months prior to the Employee's
retirement or other termination of employment.
(d) If payment of Excess and/or Supplemental Benefits commences
earlier or later than payment of Pension Plan benefits, the amount
of the Excess and/or Supplemental Benefits to be paid hereunder
shall be determined as though payment of Pension Plan benefits
commenced on the same date as payment of such Benefits commences,
except that no increase in the dollar limitation of section
415(b)(1)(A) of the Code occurring after payment of Pension Plan
benefits commences shall be taken into account.
(e) If Excess and/or Supplemental Benefits commence to be paid on or
after the date Pension Plan benefits commence to be paid, the
amount of Excess and/or Supplemental Benefits to be paid hereunder
shall be determined in accordance with the following additional
rules:
(i) determine the Employee's Excess and/or Supplemental Benefits
as though such Benefits were payable in the same form, and
with the same beneficiary, if any, as Pension Plan benefits,
and disregarding any change in marital status occurring
subsequent to the date on which payment of Pension Plan
benefits commence,
(ii) if the Employee's Pension Plan benefits are payable in
accordance with Option 1 or 2, as described in Section 10.1
of the Pension Plan, divide the amount determined in (i) by
the complement of the reduction percentage applied to
Pension Plan benefits in accordance with such Section 10.1,
to convert such amount into a benefit payable in the form of
a single life annuity, and
(iii) if payment of the Employee's Excess and/or Supplemental
Benefits is to be made in a form other than as a single life
annuity, reduce the amount determined in (ii) by the
reduction percentage that would be applicable under Section
10.1 of the Pension Plan to an annuity payable thereunder to
the Employee in the same form as the form in which payment
of the Employee's Excess and/or Supplemental Benefits is to
be made hereunder and with the same beneficiary.
6
<PAGE>
If Excess and/or Supplemental Benefits commence to be paid before
Pension Plan benefits commence to be paid, the amount of such
Benefits to be paid hereunder shall be determined as though
Pension Plan benefits were being paid at the same time and in the
same form as Excess and/or Supplemental Benefits, until such time
as Pension Plan benefits commence to be paid, at which time the
amount of Excess and/or Supplemental Benefits thereafter to be
paid hereunder shall be adjusted, in a manner consistent with the
foregoing paragraph, to the extent necessary to reflect any
difference in the form of payment for the Employee's Pension Plan
benefits and the form of payment for his or her Excess and/or
Supplemental Benefits.
(f) In determining the amount of the Excess and/or Supplemental
Benefit payable hereunder to an Employee or the Employee's
surviving spouse, there shall be taken into account any increase
in the amount of the pension benefit that is payable, pursuant to
Section 6 or Section 9 of the Pension Plan, to the Employee or his
or her surviving spouse for the first 12 months during which such
pension benefit is payable.
(g) If, pursuant to Section 3.2(b) or (c) above, an Employee's Excess
and/or Supplemental Benefit is otherwise required to be paid in
the same form as Option 1 or Option 2 as described in Section 10.1
of the Pension Plan, and if the person designated by the Employee
as his or her beneficiary for purposes of such payment form should
die at any time prior to the fifth anniversary of the date on
which the Employee's Benefits hereunder commence to be paid (the
Employee's Benefit Starting Date), the Benefit amounts payable to
the Employee hereunder after the date of such beneficiary's death
shall be equal to the Benefit amounts that would have been payable
to the Employee hereunder after such date if such Benefit amounts
had been payable to the Employee, from his or her Benefit Starting
Date, in the form of a single life annuity.
3.3 Each Employee entitled to benefits under the Plan shall have the status
of a mere unsecured creditor of the Company. The Plan shall constitute
a mere promise by the Company to make payments in the future of the
benefits provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes and for
purposes of Title I of ERISA.
3.4 An Employee's rights to benefit payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors
of the Employee or his or her spouse or other beneficiary.
7
<PAGE>
SECTION 4
Administration
4.1 The Plan shall be administered by an Administrative Committee. The
Administrative Committee shall consist of such persons as the Company
from time to time may appoint to serve thereon. Action to appoint or
remove members of the Committee may be taken by the Company either by
resolution duly adopted by its Board of Directors, or by an instrument
in writing executed by an officer of the Company to whom authority to
appoint or remove members of the Committee has been delegated pursuant
to a resolution duly adopted by the Company's Board of Directors.
4.2 The Administrative Committee shall have the power to interpret the Plan,
to decide all questions that may arise as to the construction or
application of any of its provisions, and make all determinations as to
the rights of Employees or other persons to benefits under the Plan.
Any determination made by the Administrative Committee prior to a
"Change in Control", as defined in Section 7(c) of the 1990 Stock Plan
for Employees of General Public Utilities Corporation and Subsidiaries,
as to the interpretation, construction or application of the Plan, or as
to the rights of any Employee or other persons to benefits under the
Plan, shall be conclusive and binding on all parties. Any such
determination made by the Administrative Committee after the occurrence
of a Change in Control that denies, in whole or in part, any claim made
by any individual for benefits hereunder shall be subject to judicial
review, under a "de novo", rather than a deferential, standard.
4.3 Each member of the Administrative Committee shall be indemnified and
held harmless by the Company for any liability or loss (including legal
fees or other expenses of litigation) arising out of or in connection
with his or her services to the Plan in such capacity, to the extent
that such liability or loss (a) is not insured against under any
applicable policy of insurance (whether or not maintained by the
Company) and (b) is not determined to be due to the gross negligence or
willful misconduct of such member or other person.
8
<PAGE>
SECTION 5
Amendment and Termination
5.1 Subject to Section 5.3, the Company may amend the Plan at any time. Any
such amendment may be made with retroactive effect to the extent not
prohibited by law.
Action to amend the Plan may be taken by the Company either by
resolution duly adopted by the Company's Board of Directors, or by an
instrument in writing executed by an officer of the Company to whom
authority to adopt or approve amendments to the Plan has been delegated
pursuant to a resolution duly adopted by the Company's Board of
Directors.
5.2 Subject to the provisions of Section 5.3, the Plan may be terminated at
any time by the Board of Directors.
5.3 Notwithstanding the provisions of Sections 5.1 and 5.2, (a) no amendment
to or termination of the Plan shall impair any rights to benefits which
have accrued hereunder, and (b) after a "Change in Control", as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General Public
Utilities Corporation and Subsidiaries, no amendment may be made to
Section 4.2 of this Plan without the written consent of two-thirds in
number of the Employees with respect to whom any benefits have accrued
thereunder.
9
<PAGE>
Exhibit 10-L
METROPOLITAN EDISON COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective January 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
Foreword 1
Section 1 - Definitions 2
Section 2 - Application and Basis of the Plan 4
Section 3 - Payment of Benefits 5
Section 4 - Administration 8
Section 5 - Amendment and Termination 9
<PAGE>
METROPOLITAN EDISON COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective January 1, 1995)
Foreword
Effective as of January 1, 1988, Metropolitan Edison Company (referred to in
this document as the "Company") established a supplemental pension plan for
the benefit of certain of its employees. This Metropolitan Edison Company
Supplemental and Excess Benefits Plan (the "Plan") is a continuation of that
plan as adopted effective January 1, 1988.
The Plan, as set forth herein, is applicable to all employees of the Company
who meet the requirements described in this Plan and who are actively employed
by the Company after January 1, 1995. The benefits of any employee who ceased
employment with the Company, by retirement, death, or otherwise, prior to
January 1, 1995 are determined in accordance with the terms of the applicable
predecessor to this Plan as in effect at the time of such cessation of
employment, except that the provisions of section 1.10 are retroactive and
apply to any employee who ceased employment on or after January 1, 1989.
It is intended that the "excess benefits" provided under the Plan be an
"excess benefits plan" as that term is defined in Section 3(36) of the
Employee Retirement Income Security Act of 1974, and that the "supplemental
benefits" provided under the Plan be a deferred compensation plan for "a
select group of management or highly compensated employees" as that term is
used in the Employee Retirement Income Security Act of 1974.
One purpose of the Plan is to provide participants of the Metropolitan Edison
Company Employee Pension Plan ("Pension Plan") and the Metropolitan Edison
Company Plan For Retirement Annuities ("PRA") and their surviving spouses with
the amount of company-provided benefits that would have been provided to them
under the Pension Plan or the PRA but for the limitation on benefits imposed
under Section 415 of the Internal Revenue Code.
The second purpose of the Plan is to provide elected officers and certain
other highly compensated employees of the Company and their surviving spouses
with the amount of company-provided benefits that would have been provided to
them under the Pension Plan but for the following:
(a) the limitation on Earnings for purposes of the Pension Plan imposed by
Section 401(a)(17) of such Code, and
(b) the exclusion, from Earnings under the Pension Plan, of any compensation
deferred under the Deferred Compensation Plan.
Except to the extent otherwise indicated or inappropriate, the Pension Plan is
incorporated by reference.
1
<PAGE>
SECTION 1
Definitions
1.1 Except to the extent otherwise indicated, the definitions contained in
Section l of the Pension Plan are applicable under the Plan.
1.2 Board of Directors: The term Board of Directors shall mean the Board of
Directors of the Company.
1.3 Company: The word Company shall have the meaning indicated in the
Foreword.
1.4 Deferred Compensation Plan: The term Deferred Compensation Plan shall
mean the GPU System Companies Deferred Compensation Plan, as adopted by
the Company.
1.5 Earnings: The term Earnings shall mean an Employee's "Earnings" as
defined in Section 1.10 of the Pension Plan.
1.6 Excess Benefit: The term Excess Benefit shall mean the excess, if any,
of (i) each pension benefit which would be payable to an Employee or to
the Employee's surviving spouse under the Pension Plan if the
limitations on benefits imposed by Section 18.1 of the Pension Plan were
not applicable over (ii) each pension benefit payable under the Pension
Plan.
1.7 Incentive Compensation Plan: The term Incentive Compensation Plan shall
mean the Company's Employee Incentive Compensation Plan or its Incentive
Compensation Plan for Elected Officers.
1.8 Pension Plan: The term Pension Plan shall have the meaning indicated in
the Foreword.
1.9 Plan: The term Plan shall have the meaning indicated in the Foreword.
1.10 Supplemental Benefit: The term Supplemental Benefit shall mean the
excess, if any, of (i) each pension benefit that would be payable to an
Employee or to an Employee's surviving spouse under the Pension Plan if
all amounts of base compensation or Incentive Compensation Plan awards
deferred under the Deferred Compensation Plan were included in Earnings
(and if the limitations on benefits imposed by Section 18.1 of the
Pension Plan and on Earnings imposed by Section 401(a)(17) of the
Internal Revenue Code were not applicable) over (ii) the sum of (a) each
pension benefit payable under the Pension Plan and (b) any Excess
Benefit payable under this Plan.
2
<PAGE>
For purposes of clause (i) of this Section 1.10, any amount of base
compensation deferred under the Deferred Compensation Plan shall be
treated as Earnings for the period in which such amount would have been
paid to the Employee in cash if the Employee had not elected to defer
such amount, and the amount of any award made to an Employee under the
Incentive Compensation Plan and deferred under the Deferred Compensation
Plan shall be treated as Earnings for the period corresponding to the
Performance Period for which such award is made to the Employee. No
amount of base compensation so deferred, and no amount awarded under the
Incentive Compensation Plan, shall be treated as Earnings for any period
other than the period determined under the preceding sentence.
For purposes of clause (i) of this Section 1.10, the amount of any
additional years of Creditable Service determined in accordance with
Section 5.9 of the Pension Plan will be recalculated by replacing the
Employee's annual base salary rate of Earnings as of April 1, 1989 by
(a) for purposes of calculating projected Basic Pensions, the product of
(i) such rate before any reductions on account of the Deferred
Compensation Plan times (ii) 1.0 plus the target award percentage as
described under the Incentive Compensation Plan and (b) for purposes of
calculating the accumulation of contributions of 2.25% or 2.10% of
compensation, such rate before any reductions on account of the Deferred
Compensation Plan.
3
<PAGE>
SECTION 2
Application and Basis of the Plan
2.1 The Plan shall be applicable (i) in the case of the Excess Benefit, to
each Employee described in Section 2.1 of the Pension Plan and (ii) in
the case of the Supplemental Benefit, to each Employee described in
clause (i) who is an elected officer of the Company and to each other
Employee described in clause (i) who for any calendar year has Earnings
(plus any Incentive Compensation Plan awards deferred) in excess of the
amount of compensation for such year that can be taken into account for
purposes of the Pension Plan pursuant to Section 401(a)(17) of the Code.
4
<PAGE>
SECTION 3
Payment of Benefits
3.1 The Company shall pay to each Employee to whom this Plan is applicable,
or to the surviving spouse of any such Employee, the Excess Benefit
and/or the Supplemental Benefit determined for such Employee or
surviving spouse under Sections 1.6 and 1.10 hereof.
3.2 (a) The Excess Benefit and/or Supplemental Benefit payable hereunder
to an Employee or the Employee's surviving spouse shall commence
to be paid:
(i) on the first of the month following the Employee's
retirement, if the Employee retires in accordance with
Section 3.1, 3.2, 3.3 or 3.4 of the Pension Plan,
(ii) on Normal Retirement Date, if the Employee becomes entitled
to benefits in accordance with Section 3.5 of the Pension
Plan, or
(iii) in the case of a Benefit which becomes payable hereunder to
an Employee's surviving spouse on account of the Employee's
death before the Employee has received any Benefit payment
hereunder, on the earliest date as of which payment of such
spouse's Basic Pension under the applicable provisions of
Section 9 of the Pension Plan could commence, without regard
to any election by such spouse to defer the commencement of
payment of such Basic Pension.
(b) The Excess and/or Supplemental Benefit payable hereunder to the
Employee shall be paid in the form of a single life annuity,
unless the Employee is married on the date on which payment of
such Benefit is to commence under Section 3.2(a) above, in which
event it shall be paid in accordance with Option 2, as described
in Section 10.1 of the Pension Plan, with the Employee's spouse as
the beneficiary thereunder.
(c) Notwithstanding the preceding provisions of this Section 3.2, an
Employee may elect (i) to delay commencement of his or her Excess
and Supplemental Benefits to a specified date after the date
applicable under Section 3.2(a) but not later than the Employee's
Normal Retirement Date, or (ii) in the case of any Employee who
becomes entitled to benefits in accordance with Section 3.5 of the
Pension Plan, to accelerate commencement of his or her Excess and
Supplemental Benefits to a specified date before the date
applicable under Section 3.2(a) but not earlier than the first day
of the month immediately following his or her 55th birthday,
and/or (iii) to be paid his or her Excess and Supplemental
5
<PAGE>
Benefits in any form permitted (without regard to any requirements
for spousal consent) under the Pension Plan other than the form
applicable under Section 3.2(b).
Any such election shall be made in writing, on a form furnished to
the Employee for such purpose by the Administrative Committee.
The form shall be signed by the Employee and delivered to the
Administrative Committee. An election under this Section 3.2(c)
shall not be effective unless received by the Administrative
Committee at least twenty-four months prior to the Employee's
retirement or other termination of employment.
(d) If payment of Excess and/or Supplemental Benefits commences
earlier or later than payment of Pension Plan benefits, the amount
of the Excess and/or Supplemental Benefits to be paid hereunder
shall be determined as though payment of Pension Plan benefits
commenced on the same date as payment of such Benefits commences,
except that no increase in the dollar limitation of section
415(b)(1)(A) of the Code occurring after payment of Pension Plan
benefits commences shall be taken into account.
(e) If Excess and/or Supplemental Benefits commence to be paid on or
after the date Pension Plan benefits commence to be paid, the
amount of Excess and/or Supplemental Benefits to be paid hereunder
shall be determined in accordance with the following additional
rules:
(i) determine the Employee's Excess and/or Supplemental Benefits
as though such Benefits were payable in the same form, and
with the same beneficiary, if any, as Pension Plan benefits,
and disregarding any change in marital status occurring
subsequent to the date on which payment of Pension Plan
benefits commence,
(ii) if the Employee's Pension Plan benefits are payable in
accordance with Option 1 or 2, as described in Section 10.1
of the Pension Plan, divide the amount determined in (i) by
the complement of the reduction percentage applied to
Pension Plan benefits in accordance with such Section 10.1,
to convert such amount into a benefit payable in the form of
a single life annuity, and
(iii) if payment of the Employee's Excess and/or Supplemental
Benefits is to be made in a form other than as a single life
annuity, reduce the amount determined in (ii) by the
reduction percentage that would be applicable under Section
10.1 of the Pension Plan to an annuity payable thereunder to
the Employee in the same form as the form in which payment
of the Employee's Excess and/or Supplemental Benefits is to
be made hereunder and with the same beneficiary.
6
<PAGE>
If Excess and/or Supplemental Benefits commence to be paid before
Pension Plan benefits commence to be paid, the amount of such
Benefits to be paid hereunder shall be determined as though
Pension Plan benefits were being paid at the same time and in the
same form as Excess and/or Supplemental Benefits, until such time
as Pension Plan benefits commence to be paid, at which time the
amount of Excess and/or Supplemental Benefits thereafter to be
paid hereunder shall be adjusted, in a manner consistent with the
foregoing paragraph, to the extent necessary to reflect any
difference in the form of payment for the Employee's Pension Plan
benefits and the form of payment for his or her Excess and/or
Supplemental Benefits.
(f) In determining the amount of the Excess and/or Supplemental
Benefit payable hereunder to an Employee or the Employee's
surviving spouse, there shall be taken into account any increase
in the amount of the pension benefit that is payable, pursuant to
Section 6 or Section 9 of the Pension Plan, to the Employee or his
or her surviving spouse for the first 12 months during which such
pension benefit is payable.
(g) If, pursuant to Section 3.2(b) or (c) above, an Employee's Excess
and/or Supplemental Benefit is otherwise required to be paid in
the same form as Option 1 or Option 2 as described in Section 10.1
of the Pension Plan, and if the person designated by the Employee
as his or her beneficiary for purposes of such payment form should
die at any time prior to the fifth anniversary of the date on
which the Employee's Benefits hereunder commence to be paid (the
Employee's Benefit Starting Date"), the Benefit amounts payable to
the Employee hereunder after the date of such beneficiary's death
shall be equal to the Benefit amounts that would have been payable
to the Employee hereunder after such date if such Benefit amounts
had been payable to the Employee, from his or her Benefit Starting
Date, in the form of a single life annuity.
3.3 Each Employee entitled to benefits under the Plan shall have the status
of a mere unsecured creditor of the Company. The Plan shall constitute
a mere promise by the Company to make payments in the future of the
benefits provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes and for
purposes of Title I of ERISA.
3.4 An Employee's rights to benefit payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors
of the Employee or his or her spouse or other beneficiary.
7
<PAGE>
SECTION 4
Administration
4.1 The Plan shall be administered by an Administrative Committee. The
Administrative Committee shall consist of such persons as the Company
from time to time may appoint to serve thereon. Action to appoint or
remove members of the Committee may be taken by the Company either by
resolution duly adopted by its Board of Directors, or by an instrument
in writing executed by an officer of the Company to whom authority to
appoint or remove members of the Committee has been delegated pursuant
to a resolution duly adopted by the Company's Board of Directors.
4.2 The Administrative Committee shall have the power to interpret the Plan,
to decide all questions that may arise as to the construction or
application of any of its provisions, and make all determinations as to
the rights of Employees or other persons to benefits under the Plan.
Any determination made by the Administrative Committee prior to a
"Change in Control", as defined in Section 7(c) of the 1990 Stock Plan
for Employees of General Public Utilities Corporation and Subsidiaries,
as to the interpretation, construction or application of the Plan, or as
to the rights of any Employee or other persons to benefits under the
Plan, shall be conclusive and binding on all parties. Any such
determination made by the Administrative Committee after the occurrence
of a Change in Control that denies, in whole or in part, any claim made
by any individual for benefits hereunder shall be subject to judicial
review, under a "de novo", rather than a deferential, standard.
4.3 Each member of the Administrative Committee shall be indemnified and
held harmless by the Company for any liability or loss (including legal
fees or other expenses of litigation) arising out of or in connection
with his or her services to the Plan in such capacity, to the extent
that such liability or loss (a) is not insured against under any
applicable policy of insurance (whether or not maintained by the
Company) and (b) is not determined to be due to the gross negligence or
willful misconduct of such member or other person.
8
<PAGE>
SECTION 5
Amendment and Termination
5.1 Subject to Section 5.3, the Company may amend the Plan at any time. Any
such amendment may be made with retroactive effect to the extent not
prohibited by law.
Action to amend the Plan may be taken by the Company either by
resolution duly adopted by the Company's Board of Directors, or by an
instrument in writing executed by an officer of the Company to whom
authority to adopt or approve amendments to the Plan has been delegated
pursuant to a resolution duly adopted by the Company's Board of
Directors.
5.2 Subject to the provisions of Section 5.3, the Plan may be terminated at
any time by the Board of Directors.
5.3 Notwithstanding the provisions of Sections 5.1 and 5.2, (a) no amendment
to or termination of the Plan shall impair any rights to benefits which
have accrued hereunder, and (b) after a "Change in Control", as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General Public
Utilities Corporation and Subsidiaries, no amendment may be made to
Section 4.2 of this Plan without the written consent of two-thirds in
number of the Employees with respect to whom any benefits have accrued
thereunder.
9
<PAGE>
Exhibit 10-M
PENNSYLVANIA ELECTRIC COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective January 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
Foreword 1
Section 1 - Definitions 2
Section 2 - Application and Basis of the Plan 4
Section 3 - Payment of Benefits 5
Section 4 - Administration 8
Section 5 - Amendment and Termination 9
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective January 1, 1995)
Foreword
Effective as of January l, 1988, Pennsylvania Electric Company (referred to in
this document as the "Company") established a supplemental pension plan for
the benefit of certain of its employees. This Pennsylvania Electric Company
Supplemental and Excess Benefits Plan (the "Plan") is a continuation of that
plan as adopted effective January 1, 1988.
The Plan, as set forth herein, is applicable to all employees of the Company
who meet the requirements described in this Plan and who are actively employed
by the Company after January 1, 1995. The benefits of any employee who ceased
employment with the Company, by retirement, death, or otherwise, prior to
January 1, 1995 are determined in accordance with the terms of the applicable
predecessor to this Plan as in effect at the time of such cessation of
employment, except that the provisions of section 1.10 are retroactive and
apply to any employee who ceased employment on or after January 1, 1989.
It is intended that the "excess benefits" provided under the Plan be an
"excess benefits plan" as that term is defined in Section 3(36) of the
Employee Retirement Income Security Act of 1974, and that the "supplemental
benefits" provided under the Plan be a deferred compensation plan for "a
select group of management or highly compensated employees" as that term is
used in the Employee Retirement Income Security Act of 1974.
One purpose of the Plan is to provide participants of the Pennsylvania
Electric Company Employee Pension Plan ("Pension Plan") and the Pennsylvania
Electric Company Plan For Retirement Annuities ("PRA") and their surviving
spouses with the amount of company-provided benefits that would have been
provided to them under the Pension Plan or the PRA but for the limitation on
benefits imposed under Section 415 of the Internal Revenue Code.
The second purpose of the Plan is to provide elected officers and certain
other highly compensated employees of the Company and their surviving spouses
with the amount of company-provided benefits that would have been provided to
them under the Pension Plan but for the following:
(a) the limitation on Earnings for purposes of the Pension Plan imposed by
Section 401(a)(17) of such Code, and
(b) the exclusion, from Earnings under the Pension Plan, of any compensation
deferred under the Deferred Compensation Plan.
Except to the extent otherwise indicated or inappropriate, the Pension Plan is
incorporated by reference.
1
<PAGE>
SECTION 1
Definitions
1.1 Except to the extent otherwise indicated, the definitions contained in
Section 1 of the Pension Plan are applicable under the Plan.
1.2 Board of Directors: The term Board of Directors shall mean the Board of
Directors of the Company.
1.3 Company: The word Company shall have the meaning indicated in the
Foreword.
1.4 Deferred Compensation Plan: The term Deferred Compensation Plan shall
mean the GPU System Companies Deferred Compensation Plan, as adopted by
the Company.
1.5 Earnings: The term Earnings shall mean an Employee's "Earnings" as
defined in Section 1.10 of the Pension Plan.
1.6 Excess Benefit: The term Excess Benefit shall mean the excess, if any,
of (i) each pension benefit which would be payable to an Employee or to
the Employee's surviving spouse under the Pension Plan if the
limitations on benefits imposed by Section 18.1 of the Pension Plan were
not applicable over (ii) each pension benefit payable under the Pension
Plan.
1.7 Incentive Compensation Plan: The term Incentive Compensation Plan shall
mean the Company's Employee Incentive Compensation Plan or its Incentive
Compensation Plan for Elected Officers.
1.8 Pension Plan: The term Pension Plan shall have the meaning indicated in
the Foreword.
1.9 Plan: The term Plan shall have the meaning indicated in the Foreword.
1.10 Supplemental Benefit: The term Supplemental Benefit shall mean the
excess, if any, of (i) each pension benefit that would be payable to an
Employee or to an Employee's surviving spouse under the Pension Plan if
all amounts of base compensation or Incentive Compensation Plan awards
deferred under the Deferred Compensation Plan were included in Earnings
(and if the limitations on benefits imposed by Section 18.1 of the
Pension Plan and on Earnings imposed by Section 401(a)(17) of the
Internal Revenue Code were not applicable) over (ii) the sum of (a) each
pension benefit payable under the Pension Plan and (b) any Excess
Benefit payable under this Plan.
2
<PAGE>
For purposes of clause (i) of this Section 1.10, any amount of base
compensation deferred under the Deferred Compensation Plan shall be
treated as Earnings for the period in which such amount would have been
paid to the Employee in cash if the Employee had not elected to defer
such amount, and the amount of any award made to an Employee under the
Incentive Compensation Plan and deferred under the Deferred Compensation
Plan shall be treated as Earnings for the period corresponding to the
Performance Period for which such award is made to the Employee. No
amount of base compensation so deferred, and no amount awarded under the
Incentive Compensation Plan, shall be treated as Earnings for any period
other than the period determined under the preceding sentence.
For purposes of clause (i) of this Section 1.10, the amount of any
additional years of Creditable Service determined in accordance with
Section 5.9 of the Pension Plan will be recalculated by replacing the
Employee's annual base salary rate of Earnings as of April 1, 1989 by
(a) for purposes of calculating projected Basic Pensions, the product of
(i) such rate before any reductions on account of the Deferred
Compensation Plan times (ii) 1.0 plus the target award percentage as
described under the Incentive Compensation Plan and (b) for purposes of
calculating the accumulation of contributions of 2.25% or 2.10% of
compensation, such rate before any reductions on account of the Deferred
Compensation Plan.
3
<PAGE>
SECTION 2
Application and Basis of the Plan
2.1 The Plan shall be applicable (i) in the case of the Excess Benefit, to
each Employee described in Section 2.1 of the Pension Plan and (ii) in
the case of the Supplemental Benefit, to each Employee described in
clause (i) who is an elected officer of the Company and to each other
Employee described in clause (i) who for any calendar year has Earnings
(plus any Incentive Compensation Plan awards deferred) in excess of the
amount of compensation for such year that can be taken into account for
purposes of the Pension Plan pursuant to Section 401(a)(17) of the Code.
4
<PAGE>
SECTION 3
Payment of Benefits
3.1 The Company shall pay to each Employee to whom this Plan is applicable,
or to the surviving spouse of any such Employee, the Excess Benefit
and/or the Supplemental Benefit determined for such Employee or
surviving spouse under Sections 1.6 and 1.10 hereof.
3.2 (a) The Excess Benefit and/or Supplemental Benefit payable hereunder
to an Employee or the Employee's surviving spouse shall commence
to be paid:
(i) on the first of the month following the Employee's
retirement, if the Employee retires in accordance with
Section 3.1, 3.2, 3.3 or 3.4 of the Pension Plan,
(ii) on Normal Retirement Date, if the Employee becomes entitled
to benefits in accordance with Section 3.5 of the Pension
Plan, or
(iii) in the case of a Benefit which becomes payable hereunder to
an Employee's surviving spouse on account of the Employee's
death before the Employee has received any Benefit payment
hereunder, on the earliest date as of which payment of such
spouse's Basic Pension under the applicable provisions of
Section 9 of the Pension Plan could commence, without regard
to any election by such spouse to defer the commencement of
payment of such Basic Pension.
(b) The Excess and/or Supplemental Benefit payable hereunder to the
Employee shall be paid in the form of a single life annuity,
unless the Employee is married on the date on which payment of
such Benefit is to commence under Section 3.2(a) above, in which
event it shall be paid in accordance with Option 2, as described
in Section 10.1 of the Pension Plan, with the Employee's spouse as
the beneficiary thereunder.
(c) Notwithstanding the preceding provisions of this Section 3.2, an
Employee may elect (i) to delay commencement of his or her Excess
and Supplemental Benefits to a specified date after the date
applicable under Section 3.2(a) but not later than the Employee's
Normal Retirement Date, or (ii) in the case of any Employee who
becomes entitled to benefits in accordance with Section 3.5 of the
Pension Plan, to accelerate commencement of his or her Excess and
Supplemental Benefits to a specified date before the date
applicable under Section 3.2(a) but not earlier than the first day
of the month immediately following his or her 55th birthday,
and/or (iii) to be paid his or her Excess and Supplemental
Benefits in any form permitted (without regard to any requirements
for spousal consent) under the Pension Plan other than the form
applicable under Section 3.2(b).
5
<PAGE>
Any such election shall be made in writing, on a form furnished to
the Employee for such purpose by the Administrative Committee.
The form shall be signed by the Employee and delivered to the
Administrative Committee. An election under this Section 3.2(c)
shall not be effective unless received by the Administrative
Committee at least twenty-four months prior to the Employee's
retirement or other termination of employment.
(d) If payment of Excess and/or Supplemental Benefits commences
earlier or later than payment of Pension Plan benefits, the amount
of the Excess and/or Supplemental Benefits to be paid hereunder
shall be determined as though payment of Pension Plan benefits
commenced on the same date as payment of such Benefits commences,
except that no increase in the dollar limitation of section
415(b)(1)(A) of the Code occurring after payment of Pension Plan
benefits commences shall be taken into account.
(e) If Excess and/or Supplemental Benefits commence to be paid on or
after the date Pension Plan benefits commence to be paid, the
amount of Excess and/or Supplemental Benefits to be paid hereunder
shall be determined in accordance with the following additional
rules:
(i) determine the Employee's Excess and/or Supplemental Benefits
as though such Benefits were payable in the same form, and
with the same beneficiary, if any, as Pension Plan benefits,
and disregarding any change in marital status occurring
subsequent to the date on which payment of Pension Plan
benefits commence,
(ii) if the Employee's Pension Plan benefits are payable in
accordance with Option 1 or 2, as described in Section 10.1
of the Pension Plan, divide the amount determined in (i) by
the complement of the reduction percentage applied to
Pension Plan benefits in accordance with such Section 10.1,
to convert such amount into a benefit payable in the form of
a single life annuity, and
(iii) if payment of the Employee's Excess and/or Supplemental
Benefits is to be made in a form other than as a single life
annuity, reduce the amount determined in (ii) by the
reduction percentage that would be applicable under Section
10.1 of the Pension Plan to an annuity payable thereunder to
the Employee in the same form as the form in which payment
of the Employee's Excess and/or Supplemental Benefits is to
be made hereunder and with the same beneficiary.
6
<PAGE>
If Excess and/or Supplemental Benefits commence to be paid before
Pension Plan benefits commence to be paid, the amount of such
Benefits to be paid hereunder shall be determined as though
Pension Plan benefits were being paid at the same time and in the
same form as Excess and/or Supplemental Benefits, until such time
as Pension Plan benefits commence to be paid, at which time the
amount of Excess and/or Supplemental Benefits thereafter to be
paid hereunder shall be adjusted, in a manner consistent with the
foregoing paragraph, to the extent necessary to reflect any
difference in the form of payment for the Employee's Pension Plan
benefits and the form of payment for his or her Excess and/or
Supplemental Benefits.
(f) In determining the amount of the Excess and/or Supplemental
Benefit payable hereunder to an Employee or the Employee's
surviving spouse, there shall be taken into account any increase
in the amount of the pension benefit that is payable, pursuant to
Section 6 or Section 9 of the Pension Plan, to the Employee or his
or her surviving spouse for the first 12 months during which such
pension benefit is payable.
(g) If, pursuant to Section 3.2(b) or (c) above, an Employee's Excess
and/or Supplemental Benefit is otherwise required to be paid in
the same form as Option 1 or Option 2 as described in Section 10.1
of the Pension Plan, and if the person designated by the Employee
as his or her beneficiary for purposes of such payment form should
die at any time prior to the fifth anniversary of the date on
which the Employee's Benefits hereunder commence to be paid (the
Employee's Benefit Starting Date), the Benefit amounts payable to
the Employee hereunder after the date of such beneficiary's death
shall be equal to the Benefit amounts that would have been payable
to the Employee hereunder after such date if such Benefit amounts
had been payable to the Employee, from his or her Benefit Starting
Date, in the form of a single life annuity.
3.3 Each Employee entitled to benefits under the Plan shall have the status
of a mere unsecured creditor of the Company. The Plan shall constitute
a mere promise by the Company to make payments in the future of the
benefits provided for herein. It is intended that the arrangements
reflected in this Plan be treated as unfunded for tax purposes and for
purposes of Title I of ERISA.
3.4 An Employee's rights to benefit payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors
of the Employee or his or her spouse or other beneficiary.
7
<PAGE>
SECTION 4
Administration
4.1 The Plan shall be administered by an Administrative Committee. The
Administrative Committee shall consist of such persons as the Company
from time to time may appoint to serve thereon. Action to appoint or
remove members of the Committee may be taken by the Company either by
resolution duly adopted by its Board of Directors, or by an instrument
in writing executed by an officer of the Company to whom authority to
appoint or remove members of the Committee has been delegated pursuant
to a resolution duly adopted by the Company's Board of Directors.
4.2 The Administrative Committee shall have the power to interpret the Plan,
to decide all questions that may arise as to the construction or
application of any of its provisions, and make all determinations as to
the rights of Employees or other persons to benefits under the Plan.
Any determination made by the Administrative Committee prior to a
"Change in Control", as defined in Section 7(c) of the 1990 Stock Plan
for Employees of General Public Utilities Corporation and Subsidiaries,
as to the interpretation, construction or application of the Plan, or as
to the rights of any Employee or other persons to benefits under the
Plan, shall be conclusive and binding on all parties. Any such
determination made by the Administrative Committee after the occurrence
of a Change in Control that denies, in whole or in part, any claim made
by any individual for benefits hereunder shall be subject to judicial
review, under a "de novo", rather than a deferential, standard.
4.3 Each member of the Administrative Committee shall be indemnified and
held harmless by the Company for any liability or loss (including legal
fees or other expenses of litigation) arising out of or in connection
with his or her services to the Plan in such capacity, to the extent
that such liability or loss (a) is not insured against under any
applicable policy of insurance (whether or not maintained by the
Company) and (b) is not determined to be due to the gross negligence or
willful misconduct of such member or other person.
8
<PAGE>
SECTION 5
Amendment and Termination
5.1 Subject to Section 5.3, the Company may amend the Plan at any time. Any
such amendment may be made with retroactive effect to the extent not
prohibited by law.
Action to amend the Plan may be taken by the Company either by
resolution duly adopted by the Company's Board of Directors, or by an
instrument in writing executed by an officer of the Company to whom
authority to adopt or approve amendments to the Plan has been delegated
pursuant to a resolution duly adopted by the Company's Board of
Directors.
5.2 Subject to the provisions of Section 5.3, the Plan may be terminated at
any time by the Board of Directors.
5.3 Notwithstanding the provisions of Sections 5.1 and 5.2, (a) no amendment
to or termination of the Plan shall impair any rights to benefits which
have accrued hereunder, and (b) after a "Change in Control", as defined
in Section 7(c) of the 1990 Stock Plan for Employees of General Public
Utilities Corporation and Subsidiaries, no amendment may be made to
Section 4.2 of this Plan without the written consent of two-thirds in
number of the Employees with respect to whom any benefits have accrued
thereunder.
9
<PAGE>
Exhibit 10-N
November 22, 1995
Mr. James R. Leva
2 Ryan Court
Chester, New Jersey 07930
Dear Jim:
The purpose of this letter is to set forth the terms and conditions of
the supplemental pension that General Public Utilities Corporation ("GPU") has
agreed to provide to you upon your retirement.
1. Upon your retirement on any date subsequent to the date of this
letter (the date as of which you so retire is referred to herein as your
"Retirement Date") you shall be entitled to receive from GPU a supplemental
pension (your "Supplemental Pension"), which shall be in addition to the
pension amounts payable to you under the GPU Service Corporation Employee
Pension Plan (the "EPP"), the GPU Service Corporation Supplemental and Excess
Benefits Plan (the "SEBP") , and the letter agreement (the "JCP&L Letter
Agreement") between you and Jersey Central Power & Light Company dated
February 22, 1993 (together, the "Retirement Plans").
2. The Supplemental Pension payable to you hereunder, when expressed as
a single life annuity, shall be an annual amount of income equal to (a) 65% of
your Final Average Compensation (as defined in Section 3 hereof), reduced by
(b) the aggregate annual pension amount payable to you under the Retirement
Plans, determined for this purpose without taking into account the 20%
increase in the pension amounts payable to you under the EPP and the SEBP
during the first 12 months following your Retirement Date. If any pension
amount included in the aggregate pension amount referred to in clause (b) of
the preceding sentence is not payable in the form of a single life annuity
commencing on the first day of the month following your Retirement Date, it
shall be converted into a pension amount that would be of equivalent actuarial
value to such pension amount if it were so payable.
3. For purposes of Section 2 hereof, your "Final Average Compensation"
shall mean the quotient resulting from dividing by three the sum of (a) the
aggregate amount of base salary payable to you during the 36-month period
ending on your Retirement Date and (b) the aggregate amount of the awards made
to you under the Incentive Compensation Plan for Elected Officers of GPU
Service Corporation (the "ICP") that are attributable to such 36-month period.
The amounts referred to in clauses (a) and (b) of the preceding
paragraph shall be determined without taking into account any deferral
election made by you under the General Public Utilities Corporation and
Subsidiary System Companies Employee Savings Plan for Non-bargaining Employees
or under the GPU System Companies Deferred Compensation Plan, and without
taking into account any salary reduction election made by you under the GPU
Service Corporation Flexible Benefit Plan.
<PAGE>
Mr. James R. Leva
November 22, 1995
Page 2
For purposes of clause (b) of the first paragraph of this section 3, the
portion of an award made to you under the ICP for any year that is
attributable to each of the calendar months within such year shall be
determined by dividing the total amount of such award by 12 or, in the case of
the year in which you retire, the number of months in the portion of such year
ending on your Retirement Date.
4. The Supplemental Pension shall be paid to you in the form of a
single life annuity unless you are married on your Retirement Date, in which
case it shall be paid in the form described as Option 2 in Section 10.1 of the
EPP, with your spouse as beneficiary.
5. If you should die before you start to receive your Supplemental
Pension, your surviving spouse, if any, shall be entitled to receive from GPU
an annuity (the "Survivor's Annuity") payable to her for her lifetime in an
annual amount equal to 50% of the Supplemental Pension that would have been
payable to you hereunder if you had not died, if you had retired on the last
day of the month in which your death occurs, and if you had not been married
on such last day.
6. Although expressed as annual amounts, the Supplemental Pension and
the Survivor's Annuity shall be paid in equal monthly installments. Payment
of your Supplemental Pension shall commence on the first day of the month
following your Retirement Date and shall end with the installment payable for
the month in which your death occurs or, if the Supplemental Pension is pay-
able in the form described as Option 2 in Section 10.1 of the EPP, the month
in which your death or your spouse's death occurs, whichever is the later.
Payment of the Survivor's Annuity shall commence on the first day of the month
following the date of your death and shall end with the installment payable
for the month in which your surviving spouse's death occurs.
7. With each monthly installment of the Supplemental Pension payable
to you during the first 12 months following your Retirement Date, you shall be
entitled to receive an additional amount equal to 20% of the sum of (a) the
amount of such monthly installment, and (b) the supplemental pension amount
payable to you for such month under the JCP&L Letter Agreement. Such addi-
tional amount shall not be taken into account in determining the amount of the
Survivor's Annuity payable pursuant to Section 5 hereof.
8. You and your surviving spouse shall have the status of a general
unsecured creditor of GPU with respect to your, and her, right to receive any
payment under this Agreement. This Agreement shall constitute a mere promise
by GPU to make payments in the future of the benefits provided for herein. It
is intended that the arrangements reflected in this Agreement be treated as
unfunded for tax purposes, as well as for purposes of Title I of ERISA.
<PAGE>
Mr. James R. Leva
November 22, 1995
Page 3
9. Your rights and your surviving spouse's rights to payments under
this Agreement shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by
your creditors or the creditors of your spouse or any other beneficiary.
If the foregoing correctly reflects your understanding of the agreement
between you and GPU relating to your Supplemental Pension, will you please so
indicate on the enclosed duplicate copy of this letter which will then
constitute a binding agreement between GPU and you.
GENERAL PUBLIC UTILITIES CORPORATION
By:
Ira H. Jolles
Senior Vice President and General Counsel
The foregoing correctly reflects my
understanding and is agreed to by me
as of the date of this letter.
James R. Leva
<PAGE>
Exhibit 10-O
September 18, 1995
Mr. Ira H. Jolles
610 West End Avenue
New York, New York 10024
Dear Ira:
The purpose of this letter is to amend and restate the letter agreement
dated September 8, 1994 between you, General Public Utilities Corporation
(GPU) and GPU Service Corporation (GPUSC). That letter (the "Prior
Agreement") amended and restated a letter agreement dated March 24, 1992
between you, GPU and GPUSC that in turn amended and restated a letter
agreement dated December 13, 1989 between you, GPU and GPUSC that set forth
the terms of your employment, effective January 1, 1990, as Senior Vice
President and General Counsel of GPU and as Executive Vice President and
General Counsel of GPUSC, as well as the agreement between you, GPU and GPUSC
with respect to your pension arrangements.
Upon your agreement to this amendment and restatement as provided on the
last page hereof, this letter agreement (the "Agreement") shall supersede and
replace, in its entirety, the Prior Agreement.
Section 1. Election to Other GPU Offices and Source
of Your Compensation.
You will be a director of GPUSC.
Your compensation and other benefits from the GPU System will be paid to
you by GPUSC. You will not receive separate or additional compensation for
serving as a director or officer of GPU or any GPU System company other than
GPUSC. Payment of your compensation and the other benefits payable to you
pursuant to this Agreement shall be obligations of both GPU and GPUSC. Your
other unfunded employee benefits payable by GPUSC will be guaranteed by GPU to
the extent covered under the latter's guarantee of unfunded benefits for all
GPUSC officers.
Section 2. Effective Date of Employment and Initial Base
Salary.
Your effective date of employment will be January 1, 1990. Your Base
Salary will be determined from time to time by the GPU Board of Directors and
initially will be $284,000.
Section 3. Retirement Provisions.
(a) You will be a participant in the GPUSC Employee Pension Plan and
the GPUSC Supplemental and Excess Benefits Plan (the "Retirement Plans") and,
by reason of the services rendered by you in accordance with this Agreement,
you will accrue benefits, commencing as of January 1, 1990, in accordance with
the terms of such Retirement Plans, as the Retirement Plans may be in effect
from time to time.
<PAGE>
Mr. Ira H. Jolles
September 18, 1995
Page 2
(b) Under the terms of the present Retirement Plans, your Normal
Retirement Date under those plans is the last day of the month in which you
reach your sixty-fifth birthday (December 12, 2003). It is anticipated that
you will retire on your Normal Retirement Date. If you do retire on or after
that date, you will receive an additional retirement pension from GPU System
sources, equal to the additional pension which would have been paid under the
Retirement Plans if, in addition to your actual years of creditable service,
you had an additional 20 years of past creditable service. Payment of the
additional retirement pension will commence on the first day of the month
following the month in which you so retire.
(c) GPUSC has in effect Short-Term and Long-Term Disability Income
Plans that provide coverage, up to your Normal Retirement Date, for employees
meeting the requirements of such Plans. If you are receiving Disability
Income under either such Plan at the time you reach your Normal Retirement
Date, you will thereafter receive an additional retirement pension from GPU
System sources equal to the additional pension which would have been paid
under the Retirement Plans if, in addition to your actual years of creditable
service, you had an additional 20 years of past creditable service.
(d) If your employment within the GPU System shall be terminated (i) as
a result of an "involuntary termination" (as defined below) at any time within
2 years following the occurrence of a "change in control" of GPU, as defined
in paragraph 7(c) of the 1990 Stock Plan for Employees of General Public
Utilities Corporation and Subsidiaries, or (ii) by GPU or GPUSC without cause,
then you will receive from GPU System sources an additional retirement
pension, equal to the additional pension which would have been paid under the
Retirement Plans if, in addition to your actual years of creditable service,
you had an additional 20 years of past creditable service. Payment of the
additional retirement pension will commence on the first day of the month
following the month in which your employment is so terminated.
For purposes of clause (i) above, "involuntary termination" shall mean
(A) the termination of your employment within the GPU System by GPU, or (B)
the termination of your employment within the GPU System by you after any
reduction in your salary, any change in location of your place of employment
to a location other than Parsippany, New Jersey without your consent, a mate-
rial decrease in your responsibilities with respect to the business of the GPU
System, or any other material adverse change in the conditions of your
employment within the GPU System.
(e) If your employment within the GPU System shall terminate for any
reason, other than by death or retirement or termination in accordance with
paragraphs (b), (c) or (d) above, you will receive from GPU System sources an
additional retirement pension equal to the additional pension which would have
been paid under the Retirement Plans if, in addition to your actual years of
creditable service, you had an additional number of years of past creditable
<PAGE>
Mr. Ira H. Jolles
September 18, 1995
Page 3
service determined in accordance with the following table (employing straight-
line interpolation for fractional years of actual GPU employment):
Years of Actual Additional Number of Years
GPU Employment of Past Creditable Service
1 2.0
2 3.5
3 5.0
4 6.0
5 7.0
6 8.0
7 8.5
8 9.0
9 9.5
10 10.0
11 12.5
12 15.0
13 17.5
14 20.0
Payment of the additional retirement pension payable to you under this
paragraph (e) shall commence on the first day of the month following the month
in which your employment so terminates.
(f) For purposes of determining the amount of the additional retirement
pension payable to you under paragraphs (b), (c), (d) or (e) above, it shall
be assumed that the pension payable to you under the Retirement Plans is
payable in the form of a single life annuity, and that payment of such pension
will commence on the same date as payment of your additional retirement
pension hereunder will commence.
The additional retirement pension payable to you hereunder shall be paid
to you in the form of a single life annuity unless you are married on the date
as of which payment of such pension is to commence, in which event it shall be
paid in the form described as Option 2 in Section 10.1 of the GPUSC Employee
Pension Plan, with your spouse as your beneficiary.
(g) If you should die before you start to receive the additional
pension payable to you under paragraph (b), (c), (d) or (e), your surviving
spouse, if any, will receive, for the rest of her life from GPU System
sources, 100% of the pension which would have been payable to you under the
Retirement Plans and 100% of the additional retirement pension which would
have been payable to you in accordance with paragraph (e), had you terminated
employment on the date of your death. Such payments to your surviving spouse
shall commence on the first day of the month following the month of your
death.
<PAGE>
Mr. Ira H. Jolles
September 18, 1995
Page 4
To the extent your surviving spouse does not receive such pension from
the Retirement Plans, she will receive it from GPU System sources.
(h) Retirement or pension benefits from prior employers to which you
are now, or may in the future be, entitled will not be applied against the
pension benefits payable to you pursuant to this Section and you are free to
elect to receive such other pension benefits when, and in such manner as, you
choose.
Section 4. Supplemental Pension
Upon your retirement on any date subsequent to the date of this letter
(the date as of which you so retire is referred to herein as your "Retirement
Date") you shall be entitled to receive from GPU System sources, in addition
to the additional retirement pension payable to you pursuant to Section 3
hereof, a supplemental pension, which shall be payable upon the following
terms and conditions:
(a) The supplemental pension payable to you hereunder, when expressed
as a single life annuity, shall be a monthly amount of income equal to the
amount, if any, by which either (i) $10,825.75 for each month beginning after
your Retirement Date and before the month beginning after your 62nd birthday,
or (ii) $10,325.75 for each month beginning after the later of your Retirement
Date or your 62nd birthday, exceeds (iii) the aggregate pension amount payable
to you for such month under the Retirement Plans and Section 3 hereof,
determined for this purpose without taking into account (x) any Additional
Pension amount payable to you under the GPUSC Employee Pension Plan, and (y)
the 20% increase in the pension amounts payable to you under the Retirement
Plans and Section 3 hereof during the first 12 months following your
retirement. For purposes of the foregoing, if any part of the aggregate
pension amount payable to you under the Retirement Plans or Section 3 hereof
is not payable in the form of a single life annuity commencing on the first
day of the month following your Retirement Date, the pension amount referred
to in (iii) above shall be determined as if such part were so payable.
(b) The supplemental pension shall be paid to you in the same form, and
payments shall commence at the same time, as payment of the additional
retirement pension provided for under Section 3 hereof.
(c) If you should die before you start to receive your supplemental
pension, your surviving spouse, if any, shall be entitled to receive from GPU
System sources an annuity payable to her for her lifetime in a monthly amount
equal to 100% of the supplemental pension that would have been payable to you
hereunder if you had not died, if you had retired on the last day of the month
in which your death occurs, and if you had not been married on such last day.
<PAGE>
Mr. Ira H. Jolles
September 18, 1995
Page 5
(d) With each monthly payment of the supplemental pension payable to
you during the first 12 months following your Retirement Date, you shall be
entitled to receive an additional amount equal to 20% of the amount of such
monthly payment; provided, however, that if clause (i) of paragraph (a) above
applies in calculating the supplemental pension amount payable for such month,
the additional amount payable to you for such month under this paragraph (d)
shall be equal to 20% of the supplemental pension amount that would be payable
to you for such month if clause (ii) instead of clause (i) of paragraph (a)
were applicable in calculating the amount of your supplemental pension payment
for such month.
Section 5. Other Benefits.
To the extent permitted by such plans without requiring prior evidence
of insurability or eligibility, you will participate in all GPU benefit plans
in which senior GPU executives are eligible to participate, as such plans
shall be in effect from time to time. In the case of each such plan that
provides a benefit the amount of which depends, directly or indirectly, on the
number of years of a participant's service within the GPU System, you shall
receive the same benefit amount that would be payable to you under such plan
if you were treated as having, in addition to your actual years of services,
the number of years of service determined under the table in Section 3(e).
The number of additional years of service so determined shall also be taken
into account in determining your eligibility to participate in any GPU benefit
plan in which senior GPU executives are eligible to participate that requires,
as a condition for eligibility, the completion of a specified number of years
of service within the GPU System.
In addition to the Supplemental Pension described above, you will also
receive (i) an extension of coverage in your and your family's health care
benefits under the Supplemental and Excess Medical Plan to the third
anniversary of the date of your retirement, or your attainment of age 62,
whichever is later; and (ii) an amended Split-Dollar Agreement with respect to
your Senior Executive Life Insurance policy to provide for eligibility to
receive full benefits under your policy at age 55 with 10 years of service.
Section 6. Nature of Your Rights
With respect to your right to receive an additional retirement pension
pursuant to Section 3 hereof and the supplemental pension provided for under
Section 4 hereof, you shall have the status of a mere unsecured creditor of
GPUSC and GPU; and this letter agreement shall constitute a mere promise by
GPUSC and GPU to make payments in the future of such pensions in accordance
with the provisions of Sections 3 and 4. It is the intention of the parties
hereto that the arrangements set forth in Sections 3 and 4 of this letter
agreement regarding your additional retirement pension and supplemental
pension shall be treated as unfunded for tax purposes and, if it should be
determined that Title I of ERISA is applicable to such arrangements, for
purposes of Title I of ERISA.
<PAGE>
Mr. Ira H. Jolles
September 18, 1995
Page 6
Section 7. Nonassignability
Your rights to receive payments with respect to the additional
retirement pension and supplemental pension provided for under Sections 3 and
4 of this letter agreement shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by your creditors or creditors of your spouse or any other
beneficiary.
If the foregoing correctly reflects your understanding of the agreement
between you and GPU and GPUSC, will you please so indicate on the enclosed
duplicate copy of this letter which willthen constitute a binding agreement
between GPU and GPUSC, on the one hand, and you, on the other.
GENERAL PUBLIC UTILITIES CORPORATION
By:_______________________________________
James R. Leva, President and
Chief Executive Officer
GPU SERVICE CORPORATION
By:_______________________________________
James R. Leva, President and
Chief Executive Officer
The foregoing correctly reflects my understanding
and is agreed to by me as of the date of this letter.
_______________________________________
Ira. H. Jolles
<PAGE>
Exhibit 10-P
November 22, 1995
Mr. John G. Graham
21 Candace Lane
Chatham Township, New Jersey 07928
Dear John:
The purpose of this letter is to set forth the terms and conditions of
the supplemental pension that GPU Service Corporation ("GPUSC") has agreed to
provide to you upon your retirement.
1. Upon your retirement on any date subsequent to the date of this
letter (the date as of which you so retire is referred to herein as your
"Retirement Date") you shall be entitled to receive from GPUSC a supplemental
pension (your "Supplemental Pension"), which shall be in addition to the
pension payable to you under GPUSC's Employee Pension Plan and GPUSC's
Supplemental and Excess Benefits Plan (together, "GPUSC's Retirement Plans").
2. The Supplemental Pension payable to you hereunder, when expressed as
a single life annuity, shall be a monthly amount of income equal to the
amount, if any, by which either (a) $12,653.50 for each month beginning after
your Retirement Date and before the month beginning after your 62nd birthday,
or (b) $12,153.50 for each month beginning after the later of your Retirement
Date or your 62nd birthday, exceeds (c) the aggregate pension amount payable
to you for such month under GPUSC's Retirement Plans, determined for this
purpose without taking into account (i) any Additional Pension amount payable
to you under GPUSC's Employee Pension Plan, and (ii) the 20% increase in the
pension amounts payable to you under GPUSC's Retirement Plans during the first
12 months following your retirement.
For purposes of the foregoing, if any part of the aggregate pension
amount payable to you under GPUSC's Retirement Plans is not payable in the
form of a single life annuity commencing on the first day of the month
following your Retirement Date, the pension amount referred to in (c) above
shall be determined as if such part were so payable.
3. The Supplemental Pension shall be paid to you in the form of a
single life annuity unless you are married on your Retirement Date, in which
case it shall be paid in the form described as Option 2 in Section 10.1 of
GPUSC's Employee Pension Plan, with your spouse as beneficiary.
4. If you should die before you start to receive your Supplemental
Pension, your surviving spouse, if any, shall be entitled to receive from
GPUSC an annuity (the "Survivor's Annuity") payable to her for her lifetime in
a monthly amount equal to 50% of the Supplemental Pension that would have been
payable to you hereunder if you had not died, if you had retired on the last
day of the month in which your death occurs, and if you had not been married
on such last day.
<PAGE>
Mr. John G. Graham
November 22, 1995
Page 2
5. Payment of your Supplemental Pension shall commence on the first day
of the month following your Retirement Date and shall end with the payment due
for the month in which your death occurs or, if the Supplemental Pension is
payable in the form described as Option 2 in Section 10.1 of GPUSC's Employee
Pension Plan, the month in which your death or your spouse's death occurs
whichever is the later. Payment of the Survivor's Annuity shall commence on
the first day of the month following the date of your death and shall end with
the payment due for the month in which your surviving spouse's death occurs.
6. With each monthly payment of the Supplemental Pension payable to you
during the first 12 months following your Retirement Date, you shall be
entitled to receive an additional amount equal to 20% of the amount of such
monthly payment; provided, however, that if clause (a) of Section 2 hereof
applies in calculating the Supplemental Pension amount payable for such month,
the additional amount payable to you for such month under this Section 6 shall
be equal to 20% of the Supplemental Pension amount that would be payable to
you for such month if clause (b) instead of clause (a) of Section 2 were
applicable in calculating the amount of your Supplemental Pension payment for
such month.
7. In addition to the Supplemental Pension described above, you will
also receive (i) an extension of coverage in your and your family's health
care benefits under the Supplemental and Excess Medical Plan to the third
anniversary of the date of your retirement, or your attainment of age 62,
whichever is later; and (ii) an amended Split-Dollar Agreement with respect to
your Senior Executive Life Insurance policy to provide for eligibility to
receive full benefits under your policy at age 55 with 10 years of service.
8. You and your surviving spouse shall have the status of a mere
unsecured creditor of GPUSC with respect to your, and her, right to receive
any payment under this Agreement. This Agreement shall constitute a mere
promise by GPUSC to make payments in the future of the benefits provided for
herein. It is intended that the arrangements reflected in this Agreement be
treated as unfunded for tax purposes, as well as for purposes of Title I of
ERISA.
9. Your rights and your surviving spouse's rights to payments under
this Agreement shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by
your creditors or the creditors of your spouse or any other beneficiary.
<PAGE>
Mr. John G. Graham
November 22, 1995
Page 2
If the foregoing correctly reflects your understanding of the agreement
between you and GPUSC relating to your Supplemental Pension, will you please
so indicate on the enclosed duplicate copy of this letter which will then
constitute a binding agreement between GPUSC on the one hand, and you, on the
other.
GPU SERVICE CORPORATION
By:_________________________________
J. R. Leva, Chairman &
Chief Executive Officer
The foregoing correctly reflects my understanding
and is agreed to by me as of the date of this
letter.
_________________________________________
John G. Graham
<PAGE>
<TABLE>
Exhibit 12-A
Page 1 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
<CAPTION>
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $1,773,219 $1,774,071 $1,935,909 $1,952,425 $2,035,928
OPERATING EXPENSES 1,519,908 1,536,596 1,600,984 1,622,399 1,653,387
Interest portion
of rentals (A) 13,085 12,414 10,944 10,187 12,354
Net expense 1,506,823 1,524,182 1,590,040 1,612,212 1,641,033
OTHER INCOME:
Allowance for funds
used during
construction 8,683 8,071 4,756 4,143 7,824
Other income, net 20,664 21,519 6,281 21,995 14,889
Total other income 29,347 29,590 11,037 26,138 22,713
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 295,743 $ 279,479 $ 356,906 $ 366,351 $ 417,608
FIXED CHARGES:
Interest on funded
indebtedness $ 85,420 $ 92,942 $ 100,246 $ 93,477 $ 92,602
Other interest 11,540 4,873 6,530 14,726 16,337 (B)
Interest portion
of rentals (A) 13,085 12,414 10,944 10,187 12,354
Total fixed charges $ 110,045 $ 110,229 $ 117,720 $ 118,390 $ 121,293
RATIO OF EARNINGS TO
FIXED CHARGES 2.69 2.54 3.03 3.09 3.44
Preferred stock dividend
requirement 19,440 20,604 16,810 14,795 14,457
Ratio of income before
provision for income
taxes to net income (C) 146.8% 144.2% 151.1% 152.3% 148.8%
Preferred stock dividend
requirement on a pretax
basis 28,538 29,711 25,400 22,529 21,512
Fixed charges, as above 110,045 110,229 117,720 118,390 121,293
Total fixed charges
and preferred
stock dividends $ 138,583 $ 139,940 $ 143,120 $ 140,919 $ 142,805
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS 2.13 2.00 2.49 2.60 2.92<PAGE>
Exhibit 12-A
Page 2 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
NOTES:
(A) The Company has included the equivalent of the interest portion of all
rentals charged to income as fixed charges for this statement and has
excluded such components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $6,628.
(C) Represents income before provision for income taxes divided by income
before cumulative effect of accounting change as follows:
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994 1995
Income before
provisions for
income taxes $185,698 $169,250 $239,187 $247,961 $296,315
Income before
cumulative effect
of accounting
changes 126,460 117,361 158,344 162,841 199,089
</TABLE>
<PAGE>
<TABLE>
Exhibit 12-B
Page 1 of 2
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
<CAPTION>
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $788,462 $821,823 $801,487 $801,303 $854,674
OPERATING EXPENSES 687,439 660,497 624,025 655,805 686,183
Interest portion
of rentals (A) 5,574 5,817 4,932 5,315 5,186
Net expense 681,865 654,680 619,093 650,490 680,997
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 2,330 2,858 2,919 3,847 2,430
Other income
/(expense), net 15,531 3,229 (5,581) (98,953) 129,660
Total other income 17,861 6,087 (2,662) (95,106) 132,090
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $124,458 $173,230 $179,732 $ 55,707 $305,767
FIXED CHARGES:
Interest on funded
indebtedness $ 36,413 $ 38,882 $ 42,887 $ 43,270 $ 45,844
Other interest 9,028 6,039 6,990 15,137(B) 14,147(B)
Interest portion
of rentals (A) 5,574 5,817 4,932 5,315 5,186
Total fixed charges $ 51,015 $ 50,738 $ 54,809 $ 65,722 $ 65,177
RATIO OF EARNINGS TO
FIXED CHARGES 2.44 3.41 3.28 .87 4.69
Preferred stock dividend
requirement $ 10,289 $ 10,289 $ 6,960 $ 2,960 $ 944
Ratio of income before
provision for income
taxes to net income(C) 154.9% 167.6% 160.4% 174.8% 162.0%
Preferred stock dividend
requirement on a pre-
tax basis 15,937 17,244 11,164 5,174 1,529
Fixed charges, as above 51,015 50,738 54,809 63,722 65,177
Total fixed charges
and preferred
stock dividends $ 66,952 $ 67,982 $ 65,973 $ 68,896 $ 66,706
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS 1.86 2.55 2.72 .81 4.58<PAGE>
Exhibit 12-B
Page 2 of 2
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
NOTES:
(A) The Company included the equivalent of the interest portion of all
rentals charged to income as fixed charges for this statement and has
excluded such components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $9,000 and $3,200 for the years 1995 and 1994,
respectively.
(C) Represents income before provisions for income taxes divided by income
before cumulative effect of accounting change as follows:
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994* 1995
Income before
provisions for
income taxes $ 73,443 $122,492 $124,923 $240,590
Income before
cumulative
effect of
accounting
changes 47,400 73,077 77,875 148,540
* For the twelve months ended December 31, 1994, the ratio was based on the composite income
tax rate for 1994.</TABLE>
<PAGE>
<TABLE>
Exhibit 12-C
Page 1 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
<CAPTION>
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $865,552 $896,337 $908,280 $944,744 $981,329
OPERATING EXPENSES 684,709 678,478 688,587 776,215 793,320
Interest portion
of rentals (A) 4,149 3,945 3,406 3,632 4,911
Net expense 680,560 674,533 685,181 772,583 788,409
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 3,396 1,651 2,261 3,837 4,417
Other income
/(expense), net 6,603 (179) (7,021) (71,287) 56 454
Total other income
and deductions 9,999 1,472 (4,760) (67,450) 60,871
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $194,991 $223,276 $218,339 $104,711 $253,791
FIXED CHARGES:
Interest on funded
indebtedness $ 45,289 $ 42,615 $ 44,714 $ 46,439 $ 49,875
Other interest 6,744 6,415 5,255 11,913(B) 17,616(B)
Interest portion
of rentals (A) 4,149 3,945 3,406 3,632 4,911
Total fixed
charges $ 56,182 $ 52,975 $ 53,375 $ 61,984 $ 72,402
RATIO OF EARNINGS
TO FIXED CHARGES 3.47 4.21 4.09 1.69 3.51
Preferred stock
dividend requirement 6,189 5,664 4,987 2,937 1,544
Ratio of income before
provision for
income taxes to
net income (C) 153.6% 170.7% 172.3% 134.4% 163.4%
Preferred stock
dividend requirement
on a pretax basis 9,507 9,671 8,594 3,946 2,523
Fixed charges, as above 56,182 52,975 53,375 61,984 72,402
Total fixed charges
and preferred
stock dividends $65,689 $62,646 $61,969 $65,930 $74,925
RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS 2.97 3.56 3.52 1.59 3.39
<PAGE>
Exhibit 12-C
Page 2 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
Notes:
(A) The Company has included the equivalent of the interest portion of all
rentals charged to income as fixed charges for this statement and has
excluded such components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $9,188 and $4,492 for the years 1995 and 1994,
respectively.
(C) Represents income before provision for income taxes divided by income
before cumulative effect of accounting change as follows:
Twelve Months Ended
December 31, December 31, December 31, December 31, December 31,
1991 1992 1993 1994 1995
Income before
provision for
income taxes $138,809 $170,301 $164,964 $42,727 $181,389
Income before
cumulative effect
of accounting
changes 90,361 99,744 95,728 31,799 111,010
</TABLE>
<PAGE>
Exhibit 21(A)
JERSEY CENTRAL POWER & LIGHT COMPANY
SUBSIDIARIES OF THE REGISTRANT
NAME OF STATE OF
SUBSIDIARIES BUSINESS INCORPORATION
JCP&L PREFERRED SPECIAL-PURPOSE DELAWARE
CAPITAL, INC.
<PAGE>
Exhibit 21(B)
METROPOLITAN EDISON COMPANY
SUBSIDIARIES OF THE REGISTRANT
NAME OF STATE OF
SUBSIDIARIES BUSINESS INCORPORATION
YORK HAVEN POWER COMPANY HYDROELECTRIC GENERATING NEW YORK
STATION
MET-ED PREFERRED SPECIAL-PURPOSE DELAWARE
CAPITAL, INC.
<PAGE>
Exhibit 21(C)
PENNSYLVANIA ELECTRIC COMPANY
SUBSIDIARIES OF THE REGISTRANT
NAME OF STATE OF
SUBSIDIARIES BUSINESS INCORPORATION
NINEVEH WATER WATER SERVICE PENNSYLVANIA
COMPANY
THE WAVERLY ELECTRIC LIGHT ELECTRIC DISTRIBUTION PENNSYLVANIA
AND POWER COMPANY
PENELEC PREFERRED SPECIAL-PURPOSE DELAWARE
CAPITAL INC.
<PAGE>
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of General Public Utilities Corporation on Forms S-8
(File Nos. 33-32325, 33-32326, 33-34661, 33-32327, 33-51037,
33-32328 and 33-51035) and Forms S-3 (File No. 33-30765) of our
report dated January 31, 1996, on our audits of the consolidated
financial statements and financial statement schedule of General
Public Utilities Corporation and Subsidiaries as of December 31,
1995 and 1994, and for each of the three years in the period
ended December 31, 1995, which report is included in this Annual
Report on Form 10-K, for the year ended December 31, 1995.
New York, New York
March 11, 1996<PAGE>
Exhibit 23-B
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Jersey Central Power & Light Company on Form S-3
(File No. 33-49463) of our report dated January 31, 1996, on our
audits of the consolidated financial statements and financial
statement schedule of Jersey Central Power & Light Company as of
December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, which report is included in
this Annual Report on Form 10-K, for the year ended December 31,
1995.
New York, New York
March 11, 1996<PAGE>
Exhibit 23-C
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Metropolitan Edison Company on Form S-3 (File
Nos. 33-51001, 33-53673 and 33-53763-01) of our report dated
January 31, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Metropolitan
Edison Company and Subsidiaries as of December 31, 1995 and 1994,
and for each of the three years in the period ended December 31,
1995, which report is included in this Annual Report on Form
10-K, for the year ended December 31, 1995.
New York, New York
March 11, 1996<PAGE>
Exhibit 23-D
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Pennsylvania Electric Company on Form S-3 (File
Nos. 33-49669, 33-53677 and 33-53677-01) of our report dated
January 31, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Pennsylvania
Electric Company and Subsidiaries as of December 31, 1995 and
1994, and for each of the three years in the period ended
December 31, 1995, which report is included in this Annual Report
on Form 10-K, for the year ended December 31, 1995.
New York, New York
March 11, 1996<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000040779
<NAME> GENERAL PUBLIC UTILITIES CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,369,217
<OTHER-PROPERTY-AND-INVEST> 785,899
<TOTAL-CURRENT-ASSETS> 828,046
<TOTAL-DEFERRED-CHARGES> 1,886,536
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,869,698
<COMMON> 314,458
<CAPITAL-SURPLUS-PAID-IN> 746,449
<RETAINED-EARNINGS> 2,004,072
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,974,634 <F1>
464,000 <F2>
98,116
<LONG-TERM-DEBT-NET> 2,567,898
<SHORT-TERM-NOTES> 123,890
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 121,246
10,000
<CAPITAL-LEASE-OBLIGATIONS> 11,696
<LEASES-CURRENT> 159,565
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,338,653
<TOT-CAPITALIZATION-AND-LIAB> 9,869,698
<GROSS-OPERATING-REVENUE> 3,804,656
<INCOME-TAX-EXPENSE> 173,955
<OTHER-OPERATING-EXPENSES> 3,070,150
<TOTAL-OPERATING-EXPENSES> 3,244,105
<OPERATING-INCOME-LOSS> 560,551
<OTHER-INCOME-NET> 130,472
<INCOME-BEFORE-INTEREST-EXPEN> 691,023
<TOTAL-INTEREST-EXPENSE> 250,888 <F3>
<NET-INCOME> 440,135
0
<EARNINGS-AVAILABLE-FOR-COMM> 440,135
<COMMON-STOCK-DIVIDENDS> 215,413
<TOTAL-INTEREST-ON-BONDS> 188,321
<CASH-FLOW-OPERATIONS> 666,192
<EPS-PRIMARY> 3.79
<EPS-DILUTED> 3.79
<FN>
<F1> INCLUDES REACQUIRED COMMON STOCK OF $90,345.
<F2> INCLUDES SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F2> SECURITIES OF $330,000.
<F3> INCLUDES DIVIDENDS ON SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $24,816 AND PREFERRED STOCK DIVIDENDS OF
<F3> SUBSIDIARIES OF $16,945.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000053456
<NAME> JERSEY CENTRAL POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,910,473
<OTHER-PROPERTY-AND-INVEST> 327,811
<TOTAL-CURRENT-ASSETS> 399,526
<TOTAL-DEFERRED-CHARGES> 827,169
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,464,979
<COMMON> 153,713
<CAPITAL-SURPLUS-PAID-IN> 510,769
<RETAINED-EARNINGS> 816,770
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,481,252
259,000 <F1>
37,741
<LONG-TERM-DEBT-NET> 1,192,945
<SHORT-TERM-NOTES> 800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 25,710
10,000
<CAPITAL-LEASE-OBLIGATIONS> 2,403
<LEASES-CURRENT> 90,329
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,364,799
<TOT-CAPITALIZATION-AND-LIAB> 4,464,979
<GROSS-OPERATING-REVENUE> 2,035,928
<INCOME-TAX-EXPENSE> 91,321
<OTHER-OPERATING-EXPENSES> 1,653,387
<TOTAL-OPERATING-EXPENSES> 1,744,708
<OPERATING-INCOME-LOSS> 291,220
<OTHER-INCOME-NET> 10,787
<INCOME-BEFORE-INTEREST-EXPEN> 302,007
<TOTAL-INTEREST-EXPENSE> 102,918 <F2>
<NET-INCOME> 199,089
14,457
<EARNINGS-AVAILABLE-FOR-COMM> 184,632
<COMMON-STOCK-DIVIDENDS> 140,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 92,602
<CASH-FLOW-OPERATIONS> 342,653
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES OF $125,000.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $6,628.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000065350
<NAME> METROLPOLITAN EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,605,970
<OTHER-PROPERTY-AND-INVEST> 105,216
<TOTAL-CURRENT-ASSETS> 181,036
<TOTAL-DEFERRED-CHARGES> 544,943
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,437,165
<COMMON> 66,273
<CAPITAL-SURPLUS-PAID-IN> 370,200
<RETAINED-EARNINGS> 248,434
<TOTAL-COMMON-STOCKHOLDERS-EQ> 684,907
100,000 <F1>
23,598
<LONG-TERM-DEBT-NET> 603,268
<SHORT-TERM-NOTES> 22,390
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,019
0
<CAPITAL-LEASE-OBLIGATIONS> 1,031
<LEASES-CURRENT> 43,600
<OTHER-ITEMS-CAPITAL-AND-LIAB> 943,352
<TOT-CAPITALIZATION-AND-LIAB> 2,437,165
<GROSS-OPERATING-REVENUE> 854,674
<INCOME-TAX-EXPENSE> 36,686
<OTHER-OPERATING-EXPENSES> 686,183
<TOTAL-OPERATING-EXPENSES> 722,869
<OPERATING-INCOME-LOSS> 131,805
<OTHER-INCOME-NET> 75,600
<INCOME-BEFORE-INTEREST-EXPEN> 207,405
<TOTAL-INTEREST-EXPENSE> 58,865 <F2>
<NET-INCOME> 148,540
944
<EARNINGS-AVAILABLE-FOR-COMM> 147,596
<COMMON-STOCK-DIVIDENDS> 95,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 45,844
<CASH-FLOW-OPERATIONS> 132,596
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $9,000.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000077227
<NAME> PENNSYLVANIA ELECTRIC COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,795,959
<OTHER-PROPERTY-AND-INVEST> 48,985
<TOTAL-CURRENT-ASSETS> 220,210
<TOTAL-DEFERRED-CHARGES> 408,416
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,473,570
<COMMON> 105,812
<CAPITAL-SURPLUS-PAID-IN> 285,486
<RETAINED-EARNINGS> 327,814
<TOTAL-COMMON-STOCKHOLDERS-EQ> 719,112
105,000 <F1>
36,777
<LONG-TERM-DEBT-NET> 642,487
<SHORT-TERM-NOTES> 27,100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 75,009
0
<CAPITAL-LEASE-OBLIGATIONS> 5,277
<LEASES-CURRENT> 22,751
<OTHER-ITEMS-CAPITAL-AND-LIAB> 840,057
<TOT-CAPITALIZATION-AND-LIAB> 2,473,570
<GROSS-OPERATING-REVENUE> 981,329
<INCOME-TAX-EXPENSE> 45,948
<OTHER-OPERATING-EXPENSES> 793,320
<TOTAL-OPERATING-EXPENSES> 839,268
<OPERATING-INCOME-LOSS> 142,061
<OTHER-INCOME-NET> 34,029
<INCOME-BEFORE-INTEREST-EXPEN> 176,090
<TOTAL-INTEREST-EXPENSE> 65,080 <F2>
<NET-INCOME> 111,010
1,544
<EARNINGS-AVAILABLE-FOR-COMM> 109,466
<COMMON-STOCK-DIVIDENDS> 75,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 49,875
<CASH-FLOW-OPERATIONS> 185,264
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $9,188.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
