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, 1996
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 GPU, Inc. 13-5516989
(a Pennsylvania corporation)
(formerly General Public Utilities
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)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
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
GPU, Inc. Common Stock, par value
$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
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Name of each exchange
Registrant Title of each class which registered
Jersey Central Power & First Mortgage Bonds:
Light Company (cont.) 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
Monthly Income Preferred
Securities, 8.56%
Series A, $25 stated
Value (a) New York Stock Exchange
Metropolitan Edison Monthly Income Preferred
Company 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
<PAGE>
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]
The aggregate market value of the registrants' voting stock held by
non-affiliates as of February 3, 1997 was:
Registrant Amount
GPU, Inc. $4,007,836,032
The number of shares outstanding of each of the registrants' classes of
voting stock as of February 3, 1997 was as follows:
Shares
Registrant Title Outstanding
GPU, Inc. Common Stock, $2.50 par value 120,615,517
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 1997 Annual Meeting of Stockholders of GPU, Inc.
(Part III)
_____________________________________________________________________________
This combined Form 10-K is separately filed by GPU, Inc., 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.
<PAGE>
TABLE OF CONTENTS
Page
Number
Part I
Item 1. Business 1
Item 2. Properties 43
Item 3. Legal Proceedings 46
Item 4. Submission of Matters to a Vote of Security Holders 46
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 47
Item 6. Selected Financial Data 47
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 48
Item 8. Financial Statements and Supplementary Data 48
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 48
Part III
Item 10. Directors and Executive Officers of the Registrant 49
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners
and Management 58
Item 13. Certain Relationships and Related Transactions 58
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 59
Signatures 71
<PAGE>
PART I
ITEM 1. BUSINESS.
GPU, Inc., a Pennsylvania corporation, organized in 1946, is a holding
company registered under the Public Utility Holding Company Act of 1935 (1935
Act). GPU, Inc. does not operate any utility properties directly, but owns
all of the outstanding common stock of three domestic 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. In 1996, the customer
service, transmission and distribution operations of these electric utilities
began doing business under the name GPU Energy. JCP&L, Met-Ed and Penelec
considered together are referred to as the "GPU Energy companies." The
generation operations of these three electric utilities are conducted by GPU
Generation, Inc. (Genco) and GPU Nuclear, Inc. (GPUN). GPU, Inc. also owns
all the common stock of GPU International, Inc., GPU Power, Inc. and GPU
Electric, Inc., which primarily develop, own and operate electric generation,
transmission and distribution facilities and supply businesses in the U.S. and
foreign countries. Collectively, these are referred to as the "GPU
International Group." Corporate functions are performed by GPU Service, Inc.
(GPUS). All of these companies considered together are referred to as "GPU."
The GPU registered holding company 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 relating to
the GPU Energy companies are subject to regulation in the state in which each
utility 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 GPU Energy
companies are also subject to wholesale rate and other regulation by the
Federal Energy Regulatory Commission (FERC) under the Federal Power Act. In
addition, certain GPU International Group foreign subsidiaries are subject to
limited rate and other regulation (see Regulation section).
This Form 10-K contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements
made that are not historical facts are forward-looking and, accordingly,
involve risks and uncertainties that could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements.
Although such forward-looking statements have been based on reasonable
assumptions, there is no assurance that the expected results will be achieved.
Some of the factors that could cause actual results to differ materially
include, but are not limited to: the effects of regulatory decisions; changes
in law and other governmental actions and initiatives; the impact of
deregulation and increased competition in the industry; industry
restructuring; expected outcomes of legal proceedings; generating plant
performance; fuel prices and availability; and uncertainties involved with
foreign operations including political risks and foreign currency
fluctuations.
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RECENT DEVELOPMENTS
During the past year, there were a number of major developments which are
expected to significantly affect GPU. They are as follows:
- In 1996, GPU and Cinergy Corp. (Cinergy) formed Avon Energy Partners
Holdings (Holdings), a 50/50 joint venture, to acquire Midlands
Electricity plc (Midlands), an English regional electric company. A
wholly-owned subsidiary of Holdings purchased the outstanding shares of
Midlands through a cash tender offer of 1.7 billion pounds, or
approximately U.S. $2.6 billion. GPU's 50% interest in Holdings is held
by EI UK Holdings, Inc. (EI UK), a wholly-owned subsidiary of GPU
Electric, Inc.
At December 31, 1996, EI UK had borrowed approximately 342 million
pounds, or approximately U.S. $586 million, through a GPU, Inc.
guaranteed five-year bank term loan facility, to fund its investment in
Holdings. At December 31, 1996, Holdings had borrowed approximately
1.1 billion pounds, or approximately U.S. $1.8 billion, through a term
loan and revolving credit facility to provide for the balance of the
acquisition price.
Midlands supplies and distributes electricity to 2.2 million customers in
England in an area with a population of five million. Midlands also owns
a generation business that produces electricity domestically and
internationally and a gas supply company that provides natural gas to
8,000 customers in England. In addition, Midlands owns international
generation projects and is pursuing additional international generation
and transmission projects.
- Pennsylvania adopted comprehensive legislation which provides for the
restructuring of the electric utility industry. The legislation, among
other things, permits one-third of Pennsylvania retail consumers to
choose their electric supplier beginning January 1, 1999, and all retail
consumers by January 1, 2001. The legislation requires the unbundling of
rates for transmission, distribution and generation services. Utilities
would have the opportunity to recover their prudently incurred stranded
costs that result from customers choosing another supplier through a
PaPUC approved competitive transition charge, subject to certain
conditions, including that they attempt to mitigate these costs.
The legislation provides utilities the opportunity to reduce their
stranded costs through the sale of transition bonds by a separate trust
or other similar entity, with maturities of up to 10 years. Principal
and interest payments on the bonds would be paid by all distribution
service customers through a nonbypassable intangible transition charge.
Among other things, the sale proceeds could be used to buy out or buy
down uneconomic nonutility generation (NUG) contracts, to reduce
capitalization, or both. Reduced financing costs associated with the
sale of transition bonds would be used to provide rate reductions for all
customers.
Pennsylvania electric utilities are required to submit restructuring
plans to the PaPUC between April 1, 1997 and September 30, 1997. Met-Ed
and Penelec are scheduled to file their respective plans with the PaPUC
on June 1, 1997. The PaPUC is required to conduct public hearings prior
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to approval of these plans.
Effective January 1, 1997, transmission and distribution rates charged to
Pennsylvania retail customers are generally capped for 4 1/2 years, and
generation rates are generally capped for up to nine years. Transmission
and distribution of electricity will continue as a regulated monopoly and
the PaPUC will ensure that adequate electrical reserves exist to maintain
reliable service. An independent system operator (ISO) will be
responsible for coordinating the generation and transmission of
electricity in an efficient and nondiscriminatory manner.
- The NJBPU released Phase II of the New Jersey Energy Master Plan (NJEMP)
which recommends, among other things, that certain electric retail
customers be permitted to choose their supplier beginning October 1998,
expanding to include all retail customers by April 2001. The NJBPU also
recommends a near-term electric rate reduction of 5% to 10% with the
phase-in of retail competition, and combined with the effects of separate
proposed modifications to the state's energy tax policy, an aggregate
rate reduction of at least 10% to 15% over time.
The NJBPU proposes in this report that utilities have an opportunity to
recover their stranded costs associated with generating capacity
commitments provided that they attempt to mitigate these costs. Also,
NUG contracts which cannot be mitigated would be eligible for stranded
cost recovery. The determination of stranded cost recovery by the NJBPU
would be undertaken on a case-by-case basis, with no guarantee for full
recovery of these costs. A separate market transition charge (MTC) would
be established for each utility to allow utilities to recover stranded
costs over four to eight years. The MTC would be capped to ensure that
customers experience the NJBPU's recommended overall rate reduction of 5%
to 10%. New Jersey is also considering authorizing the sale of
securitized transition bonds as a mechanism to help mitigate stranded
costs.
In addition, the NJBPU is proposing that, beginning October 1998,
utilities unbundle their rates to allow customers to choose their
electric generation supplier. Transmission and distribution of
electricity would continue as a regulated monopoly and utilities would be
responsible for connecting customers to the system and for providing
distribution service. Transmission service would be provided by an ISO,
who would be responsible for maintaining the reliability of the regional
power grid.
The NJBPU intends to issue its final findings and recommendations to the
Governor and the Legislature for their consideration in March 1997. The
NJBPU proposes requiring electric utilities in New Jersey to file for
review, by no later than July 15, 1997, complete restructuring plans,
stranded cost filings and unbundled rate filings, and intends to complete
its review of these filings by October 1998.
- The FERC issued Order 888, which requires utilities to provide open
access to their transmission network, thereby encouraging a fully
competitive wholesale electric power market. It also requires electric
utilities to, among other things: (1) file nondiscriminatory open access
transmission tariffs which would be available to all wholesale sellers
and buyers of electricity; (2) accept service under these new tariffs for
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their own wholesale transactions; and (3) be permitted to recover their
legitimate and verifiable stranded costs incurred when a wholesale
customer purchases power from another supplier using the utility's
transmission system. While it does not require corporate unbundling
(i.e. the disposing of ancillary services or creating separate affiliates
to manage transmission services), Order 888 does call for functional
unbundling of transmission and ancillary services.
The GPU Energy companies filed pro forma tariffs in accordance with Order
888. These tariffs became effective on July 9, 1996.
The GPU Energy companies, along with six other electric utility members
of the Pennsylvania-New Jersey-Maryland (PJM) Power Pool (together, the
supporting PJM companies), filed with the FERC a transmission tariff and
agreements (including, among other things, establishing an ISO to operate
the energy market and transmission system), that would create a new
wholesale energy market to meet the requirements of Order 888, and to
increase competition in the Mid-Atlantic region.
In response to a FERC order, noting deficiencies and objections to their
initial submission, the PJM companies submitted to the FERC a revised
proposal which represents an interim solution and contains several
unresolved issues for which alternate proposals were presented to the
FERC for resolution. On February 28, 1997, the FERC issued an order
directing PJM to adopt all recommendations proposed by the supporting PJM
companies except with regard to congestion pricing, which the FERC
ordered implementation of PECO Energy's proposal on an interim basis.
The FERC has stated that it expects it will order PJM to adopt the
supporting PJM companies' proposal on congestion pricing after certain
issues are resolved concerning implementation of this proposal. PJM has
begun implementation of the FERC's order and plans to have the
restructured PJM Power Pool and pool-wide open access transmission tariff
operational on April 1, 1997. For additional information, see
Competitive Environment, Management's Discussion and Analysis.
- The GPU Energy companies have successfully bought out and/or entered into
restructured power purchase agreements with all major unbuilt NUG
projects with which they had executed power purchase agreements. Since
early 1995, nine NUG contracts representing 950 MW (JCP&L 300 MW; Met-Ed
490 MW; Penelec 160 MW) have been bought out and/or restructured at more
competitive prices. The GPU Energy companies expect these actions will
save their customers approximately $5.4 billion (JCP&L $1.8 billion; Met-
Ed $2.3 billion; Penelec $1.3 billion) over 25 years.
INDUSTRY DEVELOPMENTS
Electric utility customers have traditionally been served by vertically
integrated regulated monopolies. The electric utility industry is moving away
from a traditional rate regulated environment based on cost recovery to some
combination of a competitive marketplace and modified regulation. The
enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA)
facilitated the entry of competitors into the electric generation business.
The Energy Policy Act of 1992 (EPAct) furthered competition among utilities
and NUGs in the wholesale electric generation market, accelerating industry
restructuring. As discussed earlier, Pennsylvania recently adopted
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comprehensive legislation which provides for the restructuring of the electric
utility industry, and New Jersey has proposed similar legislation.
Operating in a competitive environment places 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.
The combination of the current market price of electricity being below
that of utility owned generation and power purchase commitments, as well as
the ability of some customers to choose their energy suppliers, has created
the potential for stranded costs in the electric utility industry. These
stranded costs, while recoverable in a regulated environment, are at risk in a
deregulated competitive environment. The GPU Energy companies estimate that
their total potential above market costs relating to power purchase
commitments, above market generation costs, generating plant decommissioning
costs and regulatory assets at year end 1998, on a present value basis, could
range from $4.5 billion to $8 billion (JCP&L $2.5 billion to $4 billion;
Met-Ed $1 billion to $2 billion; Penelec $1 billion to $2 billion). The
estimate is subject to significant uncertainties including the future market
price of both electricity and other competitive energy sources, as well as the
timing of when these above market costs become stranded due to customers
choosing another supplier. As discussed below, the restructuring legislation
in Pennsylvania and the proposed restructuring plan in New Jersey provide
mechanisms for utilities to recover, subject to regulatory approval, their
above market costs. These regulatory recovery mechanisms in Pennsylvania and
New Jersey will differ, but should allow for the recovery of non-mitigable
above market costs through either distribution charges or separate
nonbypassable charges to customers.
In response to competitive forces and regulatory changes, GPU is
considering various strategies designed to enhance its competitive position
and to increase its ability to adapt to, and anticipate changes in, its
business. GPU expects that its primary strategic focus will be on the
delivery infrastructure, retail supply and customer services segments of the
electric power industry. To this end, GPU is actively reviewing its portfolio
of assets, particularly nuclear and fossil generating facilities, for
consistency with this strategic focus. GPU is aware that a number of
nonaffiliated utilities in the Northeast and in California are in the process
of selling some or all of their generation assets in response to regulatory
and competitive pressures.
GPU's strategies may also 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 its transmission or distribution businesses. No
assurance can be given as to whether or when 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 GPU.
5
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OTHER DEVELOPMENTS AND GPU INITIATIVES
During 1996 and early 1997, there were other state and federal regulatory
developments and GPU initiatives relating to competition within the electric
utility industry which are described below:
- The PaPUC has issued a final order that sets forth the guidelines for
retail access pilot programs in Pennsylvania. These pilot programs will
include residential, commercial and industrial class customers, and
utilities are required to commit about 5% of load to retail access
programs and unbundle their rates to allow customers to choose their
electric generation supplier. In March 1997, Met-Ed and Penelec filed
with the PaPUC their plan for a proposed pilot program that would offer
approximately 51,000 (Met-Ed 23,000; Penelec 28,000) customers choice of
their electric generation supplier. The pilot program, which is subject
to PaPUC approval, is anticipated to begin in the fourth quarter of 1997
and will be in effect for at least one year.
- JCP&L is awaiting NJBPU approval of a plan to establish a one-year pilot
program offering customers in Monroe Township, New Jersey a choice of
their electric energy supplier. At the end of the first year, Monroe
Township will have the option of renewing the pilot. Monroe Township had
been exploring the possibility of establishing its own municipal electric
system.
- In early 1997, two pieces of legislation were introduced in Congress
which provide for a comprehensive restructuring of the electric utility
industry, including retail choice for all utility customers beginning as
early as December 2000, the opportunity for utilities to recover their
prudently incurred stranded costs, and repeal of both PURPA and the 1935
Act. It is expected that other similar proposed legislation will be
introduced in Congress during 1997.
- Federal legislation was enacted which, among other things, permits
registered holding company systems to acquire interests in
telecommunications companies. In addition, the SEC has adopted Rule 58
under the 1935 Act which permits registered holding company systems to
engage in a variety of energy-related services without further SEC
authorization. In February 1997, GPU formed a new, nonregulated
subsidiary, GPU Advanced Resources, Inc. (AR). AR's lines of business
may include telecommunications services, energy services and retail
energy sales.
- GPU reduced its total workforce by 8% in 1996 through voluntary enhanced
retirement programs which were accepted by 493 bargaining and 347
nonbargaining employees.
- Met-Ed and Penelec filed tariff supplements with the PaPUC requesting
approval to, among other things, include their currently effective energy
cost rates (ECR) and state tax adjustment surcharges (STAS) in base
rates, effective for all bills rendered after January 1, 1997. On
February 28, 1997, the PaPUC issued a final order approving this request.
- 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
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established by regulators and charged to customers. If a portion of the
GPU Energy companies' operations continues to be regulated, FAS 71
accounting may only be applied to that portion. Insofar as the GPU
Energy companies are concerned, potentially unrecoverable costs will most
likely be related to generation investment, power purchase contracts, and
regulatory assets, which are deferred accounting transactions whose value
depends on the GPU Energy companies' ability to recover such costs from
their respective customers in the future.
In markets where there is excess capacity (as is currently the case 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.
Also, utilities that are locked into expensive power purchase agreements
may be forced to value the contracts at market prices and recognize
certain losses.
Although the GPU Energy companies continue to be subject to cost-based
ratemaking regulation, in the event that either all or a portion of their
operations are no longer subject to FAS 71 provisions, the related
regulatory assets, net of regulatory liabilities, would have to be
written off and charged to expense. In addition, any above market costs
of power purchase commitments would have to be expensed, and additional
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 experience gained from the
deregulation of the telecommunications industry indicates that
substantial write-offs may result with the discontinuation of FAS 71. At
this time, GPU is unable to determine when and to what extent FAS 71 will
no longer be applicable.
THE GPU ENERGY COMPANIES
The electric generating and transmission facilities of the GPU Energy
companies 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 1996, the GPU Energy
companies' revenues were about equally divided between Pennsylvania customers
and New Jersey customers. During 1996, sales to customers by customer class
were as follows:
% Operating Revenues % KWH Sales
Total JCP&L Met-Ed Penelec Total JCP&L Met-Ed Penelec
Residential 42 45 42 37 36 41 36 30
Commercial 35 39 28 33 33 39 27 30
Industrial 21 16 28 27 28 20 35 34
Other* 2 - 2 3 3 - 2 6
100 100 100 100 100 100 100 100
* Rural electric cooperatives, municipalities, street and highway lighting,
and others.
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The GPU Energy companies also make interchange and spot market sales of
electricity to other utilities. Reference is made to GPU Energy Companies'
Statistics and Company Statistics on pages F-3, F-101, F-111, and F-121, for
additional information concerning GPU'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 14%, respectively, of such
revenues.
The area served by the GPU Energy companies 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, as well as to Allegheny Electric Cooperative, Inc., which serves 13
rural electric cooperatives in Pennsylvania and one in New Jersey. Penelec,
as lessee of the property of the Waverly Electric Light & Power Company, also
serves a population of about 13,700 in Waverly, New York and vicinity.
The GPU Energy companies' transmission facilities are physically
interconnected with neighboring nonaffiliated utilities in Pennsylvania, New
Jersey, Maryland, New York and Ohio. The interconnection facilities are used
for substantial capacity and energy interchange and purchased power
transactions, as well as emergency assistance. The GPU Energy companies are
members of the PJM Power Pool and the Mid-Atlantic Area Council, an
organization providing coordinated review of the planning by utilities in the
PJM area. The PJM Power Pool has submitted a comprehensive restructuring
proposal, which is pending before the FERC. For additional discussion, see
Competitive Environment - Recent Regulatory Actions, Management's Discussion
and Analysis.
GPU INTERNATIONAL GROUP
The GPU International Group has ownership interests in distribution and
supply businesses in England and Australia, ten operating cogeneration plants
in the U.S. totaling 895 MW (of which the GPU International Group's equity
interest represents 261 MW) of capacity, and eleven operating generating
facilities located in foreign countries totaling 2,686 MW (of which the GPU
International Group's equity interest represents 546 MW) of capacity. It has
also made investments in certain advanced technologies related to the electric
power industry.
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The GPU International Group is continuing to investigate investment
opportunities in various other domestic and foreign power projects and foreign
utility systems and has commitments, both domestically and internationally, in
five generating facilities under construction totaling 3,172 MW (of which its
equity interest represents 816 MW) of capacity.
At December 31, 1996, GPU, Inc.'s aggregate investment in the GPU
International Group was $211 million; GPU, Inc. has also guaranteed up to $893
million of GPU International Group obligations. GPU, Inc. has SEC approval to
finance investments in foreign utility companies and exempt wholesale
generators up to an aggregate amount equal to 50% of GPU's average
consolidated retained earnings, or approximately $1 billion. At December 31,
1996, GPU, Inc. had remaining authorization to finance an additional $25
million of such investments. A request to increase this limit to 100% of
GPU's average consolidated retained earnings, or to approximately $2 billion
at December 31, 1996, is pending before the SEC.
Selected financial data for the GPU International Group is as follows:
(In Millions)
1996 1995 1994
Total assets $1,075 $380 $130
Liabilities and capital:
Common equity $ 232 $209 $118
Long-term debt 752 104 -
Notes payable - 2 -
Total capitalization 984 315 118
Minority interest 43 41 -
Other liabilities 48 24 12
Total liabilities and capital $1,075 $380 $130
Purchase of investments $ 574 $165 $ 74
Net income/(loss) $ 24 $ 9 $ (3)
For additional information on the GPU International Group's investments, see
GPU International Group Equity Investments, Note 7 to GPU's Consolidated
Financial Statements.
With the acquisitions of Midlands in 1996 and Solaris Power (Solaris) in
1995, the GPU International Group now has 50% ownership interests in foreign
utility companies having total fixed assets of approximately $1.6 billion.
These foreign utility companies, which annually provide about 20 billion
kilowatt-hours of electricity to 2.2 million customers in England and 240,000
customers in Australia, had operating revenues of $2.5 billion in 1996.
The Labour Party in the United Kingdom has proposed a windfall tax on
privatized utilities and other companies as part of its election campaign
platform. General elections in the United Kingdom are required to be held no
later than May 1997. If the Labour Party wins the general election, and the
tax is enacted as currently proposed, a charge to Midlands' earnings, which is
estimated to range from $110 million to $350 million (GPU's 50% share being
$55 million to $175 million), would be recorded in 1997, perhaps as early as
the second quarter. Due to the fact that (1) the Labour Party may not win the
election; (2) the windfall tax may not be enacted as currently proposed; (3)
the amount of the proposed tax may change; and (4) the Labour Party may change
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its current platform, there is no certainty that this tax, if levied, would be
enacted as currently proposed.
In 1996, GPU Power, through a wholly-owned subsidiary, purchased the
rights to acquire up to a 40% interest in a venture which plans to construct a
300 MW coal generating plant in the Philippines. GPU Power's equity
contribution is expected to be approximately $40 million.
In 1996, GPU International, through a wholly-owned subsidiary, completed
nonrecourse construction financing for its 300 MW Mid-Georgia project. As of
December 31, 1996, GPU International had aggregate borrowings outstanding for
the construction of this project of $62 million, of which $22 million is
guaranteed by GPU, Inc.
In 1996, GPU International and Ballard Power Systems of Canada entered
into an agreement to develop, manufacture and market stationary fuel cell
power plants worldwide. Under the agreement, GPU International will invest
approximately $23 million for up to a 19.3% equity interest in the new
venture, of which $6 million was invested as of December 31, 1996.
Management expects that the GPU International Group will provide a
substantial portion of GPU's future earnings growth and intends on making
additional investments in its business activities. The timing and amounts of
these investments, however, will depend upon the availability of appropriate
opportunities and financing capabilities, including receipt of regulatory
authorization from the SEC.
NUCLEAR FACILITIES
The GPU Energy companies 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. 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, 1996, the GPU
Energy companies' net investment, including nuclear fuel, in TMI-1 was $597
million (JCP&L $154 million; Met-Ed $297 million; Penelec $146 million) and
$766 million for Oyster Creek. The GPU Energy companies' net investment in
TMI-2 at December 31, 1996 was $90 million (JCP&L $81 million; Met-Ed $1
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 related to
their wholesale customers.
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 Energy companies may also incur
costs and experience reduced output at their 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 operating licenses cannot
be assured. Also, not all risks associated with ownership or operation of
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nuclear facilities may be adequately insured or insurable. Consequently, the
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.
TMI-1
The operating license for TMI-1, a 786 MW pressurized water reactor,
expires in 2014. TMI-1 operated at a capacity factor of 102.8% 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, expires in 2009. Oyster Creek operated at a 79.8% capacity
factor for 1996. Oyster Creek completed a 49-day scheduled refueling outage
on October 23, 1996. Subsequently, the station experienced an automatic
reactor shutdown. After the cause of the shutdown was identified, Oyster
Creek was returned to service on November 7, 1996. The station's next
refueling outage is scheduled to begin in September 1998.
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.
A cleanup program was completed in 1990, and after receiving NRC approval,
TMI-2 entered into long-term monitored storage in 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 GPU, Inc. and the GPU Energy
companies. Approximately 2,100 of such claims were filed 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.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the GPU Energy companies 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 financial protection up to an
aggregate of $560 million. Under the secondary level, the GPU Energy
companies 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).
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-
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Anderson Act) to which plaintiffs must resort to get compensatory as well as
punitive damages.
The Court of Appeals also ruled 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 defendants proposed). The Court of
Appeals 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. In 1996, the U.S. Supreme Court denied petitions filed
by GPU, Inc. and the GPU Energy companies to review the Court of Appeals'
rulings.
In June 1996, the District Court granted a motion for summary judgment
filed by GPU, Inc. and the GPU Energy companies, and dismissed all of the
2,100 pending claims. The Court ruled that there was no evidence which
created a genuine issue of material fact warranting submission of plaintiffs'
claims to a jury. The plaintiffs have appealed the District Court's ruling to
the Court of Appeals for the Third Circuit. There can be no assurance as to
the outcome of this litigation.
Based on the above, GPU, Inc. and the GPU Energy companies 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.
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). For further
information regarding nuclear fuel disposal costs, see Summary of Significant
Accounting Policies - Nuclear Fuel Disposal Fee, Note 1 to GPU's Consolidated
Financial Statements.
In 1990, the GPU Energy companies 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 GPU Energy companies 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 was
developed for TMI-2 which took the accident into account. Under the NRC
regulations, the funding targets (in 1996 dollars) are as follows:
(Millions)
Oyster
TMI-1 TMI-2 Creek
JCP&L $ 43 $ 67 $221
Met-Ed 85 135 -
Penelec 42 68 -
Total $170 $270 $221
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The funding targets, while not considered cost estimates, are reference
levels designed to assure that licensees demonstrate adequate financial
responsibility for decommissioning. While the NRC 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.
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 these studies, is in
agreement with them, and believes the results are reasonable. The retirement
cost estimates under the site-specific studies are as follows (in 1996
dollars):
(Millions)
Oyster
GPU TMI-1 TMI-2 Creek
Radiological decommissioning $311 $378 $366
Nonradiological cost of removal 77 36* 35
Total $388 $414 $401
* Net of $6.5 million spent as of December 31, 1996.
(Millions)
Oyster
JCP&L TMI-1 TMI-2 Creek
Radiological decommissioning $78 $ 95 $366
Nonradiological cost of removal 19 9* 35
Total $97 $104 $401
* Net of $1.6 million spent as of December 31, 1996.
(Millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $155 $189
Nonradiological cost of removal 39 18*
Total $194 $207
* Net of $3.3 million spent as of December 31, 1996.
(Millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $78 $ 94
Nonradiological cost of removal 19 9*
Total $97 $103
* Net of $1.6 million spent as of December 31, 1996.
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The ultimate cost of retiring the GPU Energy companies' 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 (for reasons 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.
The GPU Energy companies charge to depreciation expense and accrue
retirement costs based on amounts being collected from customers. Currently,
the GPU Energy companies are collecting retirement costs which are less than
the retirement cost estimates in the 1995 site-specific studies, and they do
not intend to increase these accruals until increased collections from
customers are obtained. Customer collections are contributed to external
trust funds. These deposits, including the related earnings, are classified
as Nuclear Decommissioning Trusts on the Balance Sheets. Accounting for
retirement costs may change based upon the Financial Accounting Standards
Board (FASB) Exposure Draft discussed below.
The FASB has 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 is adopted,
Oyster Creek and TMI-1 future retirement costs would have to be recognized as
a liability immediately, rather than the current industry practice of accruing
these costs in accumulated depreciation over the life of the plants. A
regulatory asset for amounts probable of recovery through rates would also be
established. Any amounts not probable of recovery through rates would have to
be charged to expense. For TMI-2, a liability has already been recognized,
based on the 1995 site-specific study (in 1996 dollars) since the plant is no
longer operating (see TMI-2 under this section). The effective date of this
accounting change could be as early as January 1, 1998.
TMI-1 and Oyster Creek:
The NJBPU has granted JCP&L annual revenues for TMI-1 and Oyster Creek
retirement costs of $2.5 million and $13.5 million, respectively. These
annual revenues are based on both the NRC funding targets for radiological
decommissioning costs and a site-specific study which was performed in 1988
for nonradiological costs of removal. A Stipulation of Final Settlement
pending before the NJBPU would allow for JCP&L's future collection of
retirement costs to increase annually to $5.2 million and $22.5 million for
TMI-1 and Oyster Creek, respectively, beginning in 1998, based on the 1995
site-specific study estimates (see Rate Matters - Final Settlement,
Management's Discussion and Analysis).
The PaPUC has granted Met-Ed annual revenues for TMI-1 retirement costs
of $8.5 million based on both the NRC funding target for radiological
decommissioning costs and the 1988 site-specific study for nonradiological
costs of removal. The PaPUC also granted Penelec annual revenues of $4.2
million for its share of TMI-1 retirement costs, on a basis consistent with
that granted Met-Ed.
The amounts charged to depreciation expense in 1996 and the provisions
for the future expenditure of these funds, which have been made in accumulated
depreciation, are as follows:
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(Millions)
Oyster
TMI-1 Creek
Amount expensed in 1996:
JCP&L $ 2 $ 13
Met-Ed 9 -
Penelec 4 -
Total $ 15 $ 13
Accumulated depreciation
provision at December 31, 1996:
JCP&L $ 30 $174
Met-Ed 50 -
Penelec 21 -
Total $101 $174
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:
The estimated liability for TMI-2 future retirement costs (reflected as
Three Mile Island Unit 2 Future Costs on the Balance Sheet) as of December 31,
1996 is $431 million (JCP&L $108 million; Met-Ed $215 million; Penelec $108
million). The liability is based upon the 1995 site-specific study estimates
(in 1996 dollars) discussed above and an estimate for remaining incremental
monitored storage costs of $17 million (JCP&L $4 million; Met-Ed $8 million;
Penelec $5 million), as a result of TMI-2's entering long-term monitored
storage in 1993. The GPU Energy companies are incurring annual incremental
monitored storage costs of approximately $1 million (JCP&L $250 thousand; Met-
Ed $500 thousand; Penelec $250 thousand).
Offsetting the $431 million liability at December 31, 1996 is $266
million (JCP&L $45 million; Met-Ed $143 million; Penelec $78 million), which
is probable of recovery from customers and included in Three Mile Island Unit
2 Deferred Costs on the Consolidated Balance Sheet, and $181 million (JCP&L
$72 million; Met-Ed $78 million; Penelec $31 million) in trust funds for TMI-2
and included in Nuclear Decommissioning Trusts on the Consolidated Balance
Sheet. Earnings on trust fund deposits are included in amounts shown on the
Consolidated Balance Sheet under Three Mile Island Unit 2 Deferred Costs.
TMI-2 decommissioning costs charged to depreciation expense in 1996 amounted
to $14 million (JCP&L $3 million; Met-Ed $10 million; Penelec $1 million).
The NJBPU and PaPUC have granted JCP&L and Met-Ed, respectively, TMI-2
decommissioning revenues for the NRC funding target and allowances for the
cost of removal of nonradiological structures and materials. In addition,
JCP&L is recovering its share of TMI-2's incremental monitored storage costs.
The Final Settlement pending before the NJBPU would adjust JCP&L's future
revenues for retirement costs based on the 1995 site-specific study estimates,
beginning in 1998. Based on Met-Ed's rate order, Penelec has recorded a
regulatory asset for that portion of such costs which it believes to be
probable of recovery.
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At December 31, 1996, the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $67 million (JCP&L $17 million; Met-
Ed $34 million; Penelec $16 million), which is the difference between the 1995
TMI-1 and TMI-2 site-specific study estimates (in 1996 dollars). 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 GPU Energy companies will not pursue recovery from customers for any of
these amounts contributed in excess of the $67 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.
INSURANCE
GPU 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 GPU 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 GPU.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station and for Oyster Creek total
$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 or to retire capital investment.
The Price-Anderson Act limits GPU'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 Energy companies, could
result in assessments of up to $79 million per incident for each of the GPU
Energy companies' 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 Energy companies are also
subject to retrospective premium assessments of up to $54 million (JCP&L $32
million; Met-Ed $15 million; Penelec $7 million) in any one year under
insurance policies applicable to nuclear operations and facilities.
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The GPU Energy companies have insurance coverage for incremental
replacement power costs resulting from an accident-related outage at their
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% of such
amounts for years two and three.
NONUTILITY AND OTHER POWER PURCHASES
Pursuant to the requirements of PURPA and state regulatory directives,
the GPU Energy companies have entered into power purchase agreements with NUGs
for the purchase of energy and capacity for periods of up to 26 years (JCP&L
25 years; Met-Ed 26 years; Penelec 25 years). The following table shows
actual payments from 1994 through 1996, and estimated payments from 1997
through 2001.
Payments Under NUG Agreements
(in Millions)
Total JCP&L Met-Ed Penelec
* 1994 $528 $304 $101 $123
* 1995 670 381 131 158
* 1996 739 370 177 192
1997 672 336 146 190
1998 691 340 152 199
1999 706 344 152 210
2000 804 347 196 261
2001 873 353 225 295
* Actual. The 1996 amounts are reflected in the rates currently being
charged by the GPU Energy companies.
While a few of these facilities are dispatchable, most are must-run and
generally obligate the GPU Energy companies to purchase, at the contract
price, the output up to the contract limits. As of December 31, 1996,
facilities covered by these agreements having 1,631 MW (JCP&L 891 MW; Met-Ed
340 MW; Penelec 400 MW) of capacity were in service.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the GPU Energy companies' energy supply needs,
which has caused the companies to change their supply strategy to seek
shorter-term agreements offering more flexibility. The cost of near- to
intermediate-term (i.e. one to four 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 lower forecasted fuel
prices. As a result of these developments, the rates under virtually all of
the GPU Energy companies' NUG agreements for facilities currently in operation
are substantially in excess of current and projected prices from alternative
sources.
The GPU Energy companies are seeking to reduce the above market costs of
these NUG agreements by: (1) attempting to convert must-run agreements to
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dispatchable agreements; (2) attempting to renegotiate prices of the
agreements; (3) offering contract buyouts (see The GPU Energy Companies'
Supply Plan - Managing Nonutility Generation, Management's Discussion and
Analysis); and (4) initiating proceedings before federal and state agencies,
and in the courts, where appropriate. In addition, the GPU Energy companies
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 have
resulted and may result in additional claims against GPU for substantial
damages. There can be no assurance as to the extent these efforts will be
successful in whole or in part. Recent NUG actions are as follows:
JCP&L entered into an agreement with the developer of the proposed 110 MW
Freehold gas-fired cogeneration project that terminates JCP&L's long-term
contract to purchase power from the project.
Met-Ed and Penelec entered into restructured power purchase agreements
with AES Power Corporation (AES) relating to the proposed Altoona (80 MW),
Blue Mountain (150 MW) and York County (227 MW) NUG facilities. AES, which
purchased the interests of the original developers, plans to construct a
single, fully dispatchable, gas-fired combined-cycle facility in Southeastern
Pennsylvania. These restructured power purchase agreements, which have
initial eight-year terms, require PaPUC approval.
Penelec entered into a restructured power purchase agreement with the
developer of a proposed 80 MW coal-fired cogeneration facility that was to be
built in western Pennsylvania. The restructured power purchase agreement
provides for a fully dispatchable, gas-fired combined-cycle cogeneration
facility to be built. The new power purchase agreement has an initial eight-
year term, with options for extension, and is subject to PaPUC approval.
From 1997 through 2002, JCP&L has contracts to purchase between 5,100 GWH
and 5,200 GWH of electric generation per year at prices which are estimated to
escalate approximately 1.2% annually on a unit cost (cents/KWH) basis during
this period. From 2003 through 2008, JCP&L has contracts to purchase between
4,700 GWH and 5,100 GWH of electric generation per year at an average annual
cost of $369 million. The prices during this period are estimated to escalate
approximately 1.5% annually. After 2008, when major contracts begin to
expire, purchases steadily decline to approximately 865 GWH in 2014. The
contract unit cost is estimated to escalate approximately 4.0% annually from
2009 through 2014, with a total average annual cost of $193 million during
this period. All of JCP&L's contracts will have expired by the end of 2017.
During this entire period, the NUG fuel mix averages approximately 95% natural
gas.
From 1997 through 1999, Met-Ed has contracts to purchase between 2,000
GWH and 2,100 GWH of electric generation per year at prices which are
estimated to escalate approximately 0.6% annually on a unit cost basis during
this period. From 2000 through 2008, Met-Ed has contracts to purchase between
2,900 GWH and 4,300 GWH of electric generation per year at an average annual
cost of $241 million. The prices during this period are estimated to escalate
approximately 2.5% annually on a unit cost basis. From 2009 through 2012,
Met-Ed is forecast to purchase between 1,500 GWH and 1,900 GWH of electric
generation per year at an average annual cost of $169 million. During this
period, the prices are estimated to escalate approximately 3.4% annually on a
unit cost basis. After 2012, Met-Ed's remaining contracts expire rapidly
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through 2015; thereafter, they remain constant until the expiration of the
last contract in 2020. During this entire period, the NUG fuel mix averages
approximately 50% to 75% coal/waste coal.
From 1997 through 2000, Penelec has contracts to purchase between 3,000
GWH and 4,000 GWH of electric generation per year at prices which are
estimated to escalate approximately 1.4% annually on a unit cost basis during
this period. From 2001 through 2008, Penelec has contracts to purchase
between 3,900 GWH and 5,000 GWH of electric generation per year at an average
annual cost of $297 million. The prices during this period are estimated to
escalate approximately 1.5% annually on a unit cost basis. From 2009 through
2017, purchases decline from approximately 3,000 GWH to approximately 1,500
GWH in 2017. The contract unit cost is estimated to escalate approximately
3.4% annually from 2009 through 2017, with a total average annual cost of $211
million during this period. After 2017, Penelec's remaining contracts expire
rapidly through 2020. During this entire period, the NUG fuel mix averages
approximately 65% to 95% coal/waste coal.
This discussion contains estimates which are based on current knowledge
and expectations of the outcome of future events. The estimates are subject
to significant uncertainties, including changes in fuel prices, improvements
in technology, the changing regulatory environment and the deregulation of the
electric utility industry.
The GPU Energy companies have been granted recovery of their NUG costs
(including certain buyout costs) from customers by the PaPUC and NJBPU and
expect to continue to pursue such recovery. Although the recently enacted
legislation in Pennsylvania and the NJEMP in New Jersey both include
provisions for the recovery of costs under NUG agreements and certain NUG
buyout costs, there can be no assurance that the GPU Energy companies will
continue to be able to recover similar costs which may be incurred in the
future (see Competitive Environment, Management's Discussion and Analysis).
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 745 MW in 1997, declining to 527 MW in 1999 and 345 MW in
2004. Payments pursuant to these agreements are estimated to be $145 million
in 1997, $128 million in 1998, $104 million in 1999, $84 million in 2000, and
$99 million in 2001.
In January 1996, JCP&L issued an all-supply source solicitation for the
supply of energy and capacity to meet its forecasted needs. In October 1996,
four potential suppliers were selected to provide capacity for four years,
beginning in June 1999. Contract negotiations are currently in progress to
provide for firm and optional purchases of capacity and energy from sources in
New Jersey, Pennsylvania and New York.
RATE PROCEEDINGS
Pennsylvania
Pennsylvania adopted comprehensive legislation in 1996 which provides for
the restructuring of the electric utility industry (see Recent Developments
section). Effective January 1, 1997, transmission and distribution rates
charged to Pennsylvania retail customers are generally capped for 4 1/2 years,
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and generation rates are generally capped for up to nine years. Met-Ed and
Penelec filed, in December 1996, tariff supplements with the PaPUC requesting
approval to, among other things, include their currently effective ECR and
STAS in base rates, effective for all bills rendered after January 1, 1997.
On February 28, 1997, the PaPUC issued a final order approving this request.
Since rates that can be charged to customers for generation are capped for up
to nine years, Met-Ed's and Penelec's future earnings will be subject to
market volatility. Increases or decreases in fuel costs will no longer be
subject to deferred accounting and will be reflected in net income as
incurred. Met-Ed and Penelec will continue their efforts to manage fuel costs
and will mitigate, to the extent possible, any excessive risks. As a result
of including their ECRs in base rates and the cessation of deferred energy
accounting, both effective January 1, 1997, Met-Ed and Penelec will experience
step increases in reported revenues totaling approximately $25 million in the
first quarter of 1997.
New Jersey
In 1996, the NJBPU approved a provisional settlement for a combined
levelized energy adjustment clause (LEAC) and Demand-Side Factor (DSF)
increase of $27.9 million annually.
Also in 1996, JCP&L, the staff of the NJBPU and the Division of Ratepayer
Advocate reached an agreement on a variety of pending rate-related issues
(Final Settlement). An Administrative Law Judge (ALJ) issued a decision
recommending approval of the Final Settlement, but the NJBPU ordered
additional evidentiary hearings on the recovery of buyout costs for the
Freehold cogeneration project discussed below (see The GPU Energy Companies'
Supply Plan - Managing Nonutility Generation, Management's Discussion and
Analysis). In December 1996, the ALJ issued a further decision recommending
that recovery of the Freehold buyout costs be approved, subject to possible
revocation or modification, if it is determined that the project was not
viable when it was bought out. On December 31, 1996, an Addendum revising the
Final Settlement was agreed upon by JCP&L, the staff of the NJBPU and the
Division of Ratepayer Advocate. In January 1997, the NJBPU staff recommended
that rate recovery of the Freehold buyout costs be permitted. JCP&L expects
the NJBPU to issue an order in the first quarter of 1997 approving the Final
Settlement as revised. There can be no assurance as to the outcome of this
proceeding.
Provisions of the Final Settlement, as revised by the Addendum, include a
further annual increase of $7 million in the LEAC in addition to those noted
above and an annual reduction of $11 million in base rates. Base rates would
be frozen at that level until the year 2000, and the LEAC rate frozen through
the year 1999. JCP&L could seek a LEAC rate increase if the deferred LEAC
balance is projected to exceed $40 million, or a base rate increase under
certain other conditions, such as a major change in the current regulatory
environment. The Final Settlement provides for recovery in base rates,
beginning in 1998, of all postretirement benefit costs recorded in accordance
with Statement of Financial Accounting Standards No. 106 including amounts
previously deferred and an increase in decommissioning expense to reflect the
radiological decommissioning and nonradiological removal costs estimated in
the 1995 site-specific studies performed for GPUN. Also, included in base
rates would be recovery of the remaining investments in the 58 MW Werner
Unit 4 and 72 MW Gilbert Unit 3 generating plants, which were retired in 1996.
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The Final Settlement also provides for recovery through the LEAC of:
(1) buyout costs up to $130 million, and 50% of any costs from $130 million to
$140 million, over a seven-year period for the termination of the Freehold
power purchase agreement; and (2) $14 million of the $17 million buyout costs,
over a two year period, for the termination of the agreement to purchase power
from the proposed 200 MW Crown/Vista project. JCP&L wrote-off the remaining
$3 million of buyout costs for the Crown/Vista project in the second quarter
of 1996.
In addition, the Final Settlement resolves the NJBPU's generic proceeding
regarding recovery of capacity costs associated with electric power purchases
from NUG projects which the Division of the Ratepayer Advocate claimed to
result in a double recovery. JCP&L would not have to refund any amounts
previously collected. The Final Settlement provides annual allowances for the
recovery of forecasted additions to nuclear plant. The Final Settlement also
provides that if JCP&L's return on equity exceeds 12.2%, excluding demand-side
management and nuclear performance incentives, the excess would be used to
reduce both customer rates and certain regulatory assets.
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.
CAPITAL PROGRAMS
General
During 1996, construction expenditures for the GPU Energy companies
totaled approximately $404 million (JCP&L $200 million; Met-Ed $77 million;
Penelec $115 million; Other $12 million) attributable principally to new
customer connections and maintenance and improvement of existing transmission
and distribution facilities. In addition, the GPU International Group made
investments in 1996 totaling $574 million, primarily to acquire Midlands (see
GPU International Group section). Expenditures for maturing obligations
totaled $131 million (JCP&L $35 million; Met-Ed $15 million; Penelec $75
million; Other $6 million) in 1996. The GPU Energy companies' principal
categories of estimated construction expenditures for 1997 are as follows:
(In Millions)
1997
Total JCP&L Met-Ed Penelec Other
Generation - Nuclear $ 35 $ 16 $13 $ 6 $ -
Non-nuclear 45 10 8 27 -
Total Generation 80 26 21 33 -
Transmission & Distribution 275 141 59 75 -
Other 47 18 10 12 7
Total $402 $185 $90 $120 $ 7
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These construction expenditures are expected to be incurred primarily for
ongoing system development. Construction expenditures for the GPU Energy
companies are estimated to be $391 million in 1998 (JCP&L $168 million; Met-Ed
$98 million; Penelec $118 million; Other $7 million). Expenditures for
maturing obligations will total $179 million for 1997 (JCP&L $110 million;
Met-Ed $40 million; Penelec $26 million; Other $3 million) and $139 million
for 1998 (JCP&L $12 million; Penelec $30 million; Other $97 million). In
addition, during 1997 and 1998, and subject to the receipt of regulatory
approval, GPU, Inc. will make capital contributions and provide credit support
(in amounts which may be substantial) to the GPU International Group as
investment opportunities arise.
GPU and the GPU Energy companies estimate that a substantial portion of
their anticipated total capital needs in 1997 and 1998 will be satisfied
through internally generated funds. The GPU Energy companies expect to
finance the remainder of their capital needs principally through the issuance
of long-term debt, subject to market conditions. In addition, further
significant investments by the GPU International Group, or otherwise, may
require GPU, Inc. to issue additional debt and/or common stock.
The GPU Energy companies' bond indentures and articles of incorporation
include provisions that limit the amount of long-term debt, preferred stock
and short-term debt the companies may issue (see Limitations on Issuing
Additional Securities section).
The GPU Energy companies' 1996 construction expenditures exclude nuclear
fuel additions provided under capital leases that amounted to $35 million
(JCP&L $33 million; Met-Ed $1 million; Penelec $1 million). When consumed,
the presently leased material, which amounted to $139 million (JCP&L $95
million; Met-Ed $29 million; Penelec $15 million) at December 31, 1996, is
expected to be replaced by additional leased material at an average annual
rate (which is based on two full operating cycles, or four years) of between
$35 million and $50 million (JCP&L $20 million - $25 million; Met-Ed $10
million - $15 million; Penelec $5 million - $10 million). In the event the
needed nuclear fuel cannot be leased, the associated capital requirements
would have to be met by other means.
In light of retail access legislation enacted in Pennsylvania and
proposed in New Jersey, the extent to which competition will affect the GPU
Energy companies' supply plan remains uncertain. Over the next five years,
the GPU Energy companies' existing franchise service territories are expected
to experience an average annual growth in sales of about 1.7% (JCP&L 1.7%;
Met-Ed 1.9%; Penelec 1.7%), principally due to continued economic growth and a
slight increase in the number of customers. The GPU Energy companies intend
to provide for these increased energy needs, if necessary, through a mix of
economic supply sources and will continue to evaluate additional economic
purchase opportunities as both demand and supply market conditions evolve.
In response to this competitive climate in which it is likely a major
portion of the GPU Energy companies' existing customer base will be able to
choose their electric generation supplier, and the surplus capacity position
of nearby utilities, the GPU Energy companies' supply plan focuses
increasingly on short- to intermediate-term commitments, reliance on "spot"
market purchases, and avoidance of long-term firm commitments. The GPU Energy
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companies' 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, the GPU Energy companies are continually
evaluating the future financial viability of their nuclear and fossil
generation assets and will retire or otherwise dispose of plants that become
uneconomical. The GPU Energy companies intend to take necessary actions to
avoid adding new capacity which would result in costs that may exceed future
market prices. In addition, the GPU Energy companies intend to continue to
seek regulatory support to renegotiate or buy out contracts with NUGs where
the pricing is in excess of projected market prices.
FINANCING ARRANGEMENTS
GPU, Inc. has received SEC approval to issue and sell up to $300 million
of unsecured debentures through December 31, 2001 and up to seven million
shares of additional common stock through 1998. GPU, Inc. has no current
plans to issue these securities. Any sale of such securities will, among
other things, depend upon future capital requirements and market conditions.
GPU has $527 million of credit facilities, including two Revolving Credit
Agreements, as discussed below.
Under a Credit Agreement between GPU, Inc., the GPU Energy companies and
a consortium of banks, total borrowings are limited to $250 million
outstanding at any time and are subject to various covenants and acceleration
under certain circumstances. The agreement expires May 6, 2001, and a
commitment fee on the unborrowed amount of 1/8 of 1% is payable annually.
Borrowing rates and a facility fee are based on the long-term debt ratings of
the GPU Energy companies.
GPU International, Inc. has a separate Credit Agreement providing for
borrowings (guaranteed by GPU, Inc.) through December 1997 of up to $30
million outstanding at any time, which amount decreases for two years
thereafter. Up to $15 million may be borrowed in the form of letters of
credit. An annual commitment fee of 3/8 of 1% on unborrowed amounts and a
letter of credit fee of 1/2 of 1% are payable by GPU International, Inc.
GPU expects to have short-term debt outstanding from time to time
throughout 1997. The peak in short-term debt outstanding typically occurs in
the spring, coinciding with normal cash requirements for state revenue tax
payments.
As a result of the Pennsylvania restructuring legislation (see
Competitive Environment, Management's Discussion and Analysis), Met-Ed and
Penelec each plan to sell transition bonds through a separate trust or other
similar entity, with maturities of up to 10 years. Met-Ed and Penelec would
use the proceeds from such sale to reduce capitalization and further mitigate
stranded costs resulting from customer choice. The timing and amount of the
sale of transition bonds will depend upon PaPUC approval of restructuring
plans, as well as market conditions.
The GPU Energy companies have regulatory authority to issue and sell
first mortgage bonds (FMBs), including secured medium-term notes, and
preferred stock through various periods into 1997. The GPU Energy companies
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intend to seek regulatory approval to extend such authorizations through June
1999 for both JCP&L and Penelec, and through December 1999 for Met-Ed. Under
existing authorizations, JCP&L, Met-Ed and Penelec may issue these senior
securities in aggregate amounts of $145 million, $190 million and $120
million, respectively, of which up to $100 million for each company may
consist of preferred stock. The GPU Energy companies also have regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
In 1996, the GPU Energy companies issued an aggregate of $120 million
(JCP&L $80 million; Penelec $40 million) principal amount of FMBs. The
proceeds were used to repay short-term debt and for other corporate purposes.
The GPU Energy companies redeemed $115.7 million (JCP&L $25.7 million; Met-Ed
$15 million; Penelec $75 million) principal amount of FMBs with 1996
maturities.
Also in 1996, JCP&L redeemed $20 million stated value of cumulative
preferred stock pursuant to mandatory and optional sinking fund provisions.
In December 1996, Met-Ed and Penelec repurchased an aggregate of $11.4 million
stated value and $20 million stated value, respectively, of cumulative
preferred stock through cash tender offers, at a total cost of approximately
$7.7 million and $14.4 million, respectively.
In January 1997, JCP&L redeemed an aggregate of $54.2 million principal
amount of FMBs, of which $24.2 million were redeemed prior to maturity.
Present plans call for the GPU Energy companies 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, subject to the receipt
of further regulatory authorization, further significant investments by the
GPU International Group, or otherwise, may require GPU, Inc. to issue
additional debt and/or common stock (see GPU International Group section).
In 1996, GPU Electric, through its wholly-owned subsidiary EI UK, entered
into a five-year term loan agreement with a syndicate of banks which provides
for borrowings of up to 350 million pounds, which are guaranteed by GPU, Inc.
As of December 31, 1996, EI UK had aggregate borrowings outstanding under this
facility of 342 million pounds, or approximately U.S. $586 million. The
proceeds from these borrowings were used by EI UK to fund its equity
investment in Midlands.
Also in 1996, GPU International, through a wholly-owned subsidiary,
completed nonrecourse construction financing for its 300 MW Mid-Georgia
project. As of December 31, 1996, aggregate borrowings outstanding for the
construction of this project amounted to $62 million, of which $22 million has
been guaranteed by GPU, Inc.
LIMITATIONS ON ISSUING ADDITIONAL SECURITIES
The GPU Energy companies' FMB indentures and/or charters contain
provisions which limit the total amount of securities evidencing secured
indebtedness and/or unsecured indebtedness which the GPU Energy companies may
issue, the more restrictive of which are discussed below.
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The GPU Energy companies' 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 GPU Energy
companies' 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 GPU
Energy companies to issue additional FMBs against a like principal amount of
previously issued and retired FMBs.
At December 31, 1996, the net earnings requirement under the GPU Energy
companies' FMB indentures, as described above, would have permitted JCP&L,
Met-Ed and Penelec to issue $1.1 billion, $606 million and $556 million,
respectively, principal amount of additional FMBs at an assumed 8% interest
rate. However, the GPU Energy companies had bondable value of property
additions sufficient to permit JCP&L, Met-Ed and Penelec to issue only
approximately $361 million, $377 million and $257 million, respectively,
principal amount of additional FMBs. In addition, the GPU Energy companies'
FMB indentures would have permitted JCP&L, Met-Ed and Penelec to issue
approximately $261 million, $60 million and $142 million, respectively, of
FMBs against retired FMBs.
Among other restrictions, the GPU Energy companies' 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, 1996, these
provisions would have permitted JCP&L, Met-Ed and Penelec to issue $852
million, $419 million and $391 million, respectively, stated value of
cumulative preferred stock at an assumed 7.5% dividend rate.
The GPU Energy companies' charters also provide that, without the consent
of the holders of a majority of the total voting power of the GPU Energy
companies' outstanding preferred stock, the GPU Energy companies may not issue
or assume any securities representing short-term unsecured indebtedness,
except to refund certain outstanding unsecured securities issued or assumed by
the GPU Energy companies 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
three years of maturity for all unsecured indebtedness having original
maturities in excess of 10 years) would exceed 10% of the aggregate of (a) the
total principal amount of all outstanding secured indebtedness issued or
assumed by the GPU Energy companies and (b) the capital and surplus of the GPU
Energy companies. At December 31, 1996, these restrictions would have
permitted JCP&L, Met-Ed and Penelec to have approximately $292 million, $130
million and $145 million, respectively, of unsecured indebtedness outstanding.
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The GPU Energy companies have obtained authorization from the SEC to
incur short-term debt (including indebtedness under the Credit Agreement and
commercial paper) up to the GPU Energy companies' charter limitations.
REGULATION
As a registered holding company, GPU, Inc. is subject to regulation by
the SEC under the 1935 Act. GPU is 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 GPU Energy companies constitute a single integrated
public utility system under the standards of the 1935 Act. The 1935 Act also
limits the extent to which GPU may engage in nonutility businesses (see Other
Developments and GPU Initiatives section). Each of the GPU Energy companies'
retail rates, conditions of service, issuance of securities and other matters
are subject to regulation in the state in which each 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 GPU Energy companies 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 section, for additional information.
Midlands, the GPU International Group's electric distribution subsidiary
in England, is subject to regulation by the Office of Electricity Regulation.
Midlands' network charges are subject to regulatory review every five years,
with the results of the next review scheduled for release on April 1, 2000.
The supply business franchise license currently relates only to customers
having an annual maximum demand of less than 100 KW. Customers with a higher
maximum demand are able to buy their electricity from any electricity
supplier. This option will be extended to cover all customers effective April
1, 1998.
Solaris, the GPU International Group'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., the GPU International Group's electric
generation subsidiary in Bolivia, is subject to regulation under the
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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.
ELECTRIC GENERATION AND THE ENVIRONMENT
Fuel
The GPU Energy companies utilized fuels in the generation of electric
energy during 1996 in approximately the following percentages:
1996 Actuals
Total JCP&L Met-Ed Penelec
Coal 60% 24% 56% 86%
Nuclear 38% 70% 42% 13%
Gas 1% 4% - -
Oil 1% 4% 1% -
Other* - (2)% 1% 1%
* Represents hydro and pumped storage (which is a net user of electricity).
Approximately 40% (JCP&L 58%; Met-Ed 34%; Penelec 29%) of the GPU Energy
companies' total energy requirements in 1996 was supplied by purchases and
interchange from other utilities and NUGs. For 1997, the GPU Energy companies
estimate that their use of fuels in the generation of electric energy will be
in the following percentages:
1997 Estimates
Total JCP&L Met-Ed Penelec
Coal 64% 24% 63% 90%
Nuclear 33% 71% 33% 10%
Gas 3% 10% 2% -
Oil - - - -
Other* - (5)% 2% -
* Represents hydro and pumped storage.
Approximately 40% (JCP&L 59%; Met-Ed 37%; Penelec 26%) of the GPU Energy
companies' 1997 energy requirements are expected to be supplied by purchases
and interchange from other utilities and NUGs.
Fossil: The GPU Energy companies 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 1997 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 GPU Energy companies' share of the cost of
coal purchased under these agreements is expected to aggregate $133 million
(JCP&L $23 million; Met-Ed $29 million; Penelec $81 million) for 1997.
The GPU Energy companies' coal-fired generating stations now in service
are estimated to require an aggregate of 155 million tons (JCP&L 15 million
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tons; Met-Ed 41 million tons; Penelec 99 million tons) of coal over the next
twenty years. Of this total requirement, approximately 8 million tons (JCP&L
3 million tons; Penelec 5 million tons) are expected to be supplied by
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 GPU Energy companies, but this situation could change rapidly
as a result of actions over which they have no control.
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Nuclear: The preparation of nuclear fuel for generating station use
involves various manufacturing stages for which GPU 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.
In accordance with the Nuclear Waste Policy Act of 1982 (NWPA), the GPU
Energy companies have entered into contracts with, and have been paying fees
to, the DOE for the future disposal of spent nuclear fuel in a repository or
interim storage facility. In December 1996, the DOE notified the GPU Energy
companies and other standard contract holders that it will be unable to begin
acceptance of spent nuclear fuel for disposal by 1998, as mandated by the
NWPA. The DOE has requested recommendations for handling the delay. In
January 1997, the GPU Energy companies, along with other electric utilities
and state agencies, petitioned the U.S. Court of Appeals to, among other
things, permit utilities to cease payments into the Federal Nuclear Waste Fund
until the DOE complies with the NWPA. The DOE's inability to accept spent
nuclear fuel by 1998 could have a material impact on GPU's results of
operations, as additional costs may be incurred to build and maintain interim
on-site storage at Oyster Creek. 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.
At Oyster Creek, GPUN completed the construction of an interim spent fuel
dry storage facility in 1996. Currently, however, the dry storage facility at
Oyster Creek is not operational. The NRC has recently raised certain quality
assurance concerns regarding the vendor's quality assurance program and the
manufacture of the storage components under this quality assurance program.
Based on these concerns, the NRC issued a "Demand for Information" letter to
the vendor in late January 1997. This letter requires the vendor to review
and evaluate its program and provide a detailed response within 60 days.
In addition, GPUN had planned to use Oyster Creek's existing overhead
reactor building crane to remove fuel from the spent fuel pool to the interim
storage facility. The NRC has raised a safety concern regarding the use of
this crane while the plant is operating, and has requested GPUN to request a
license amendment addressing its use. GPUN is currently reviewing the
available options for moving spent fuel to the dry storage facility.
If these issues are resolved and the interim spent fuel dry storage
facility becomes operational, Oyster Creek would have sufficient on-site
storage capacity to accommodate, under normal operating conditions, its spent
nuclear fuel through the end of its current licensed life, while maintaining
the ability to remove the entire reactor core.
Environmental Matters
GPU is subject to a broad range of federal, state and local environmental
and employee health and safety legislation and regulations. In addition, the
GPU Energy companies are subject to licensing of hydroelectric projects by the
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FERC and of nuclear power projects by the NRC. Such licensing and other
actions by federal agencies with respect to projects of the GPU Energy
companies 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, ambient air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, GPU may be required to incur substantial additional costs to construct
new equipment, modify or replace existing and proposed equipment, remediate,
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decommission or cleanup waste disposal and other sites currently or formerly
used by it, including formerly owned manufactured gas plant (MGP) sites, coal
mine refuse piles and generation facilities. With regard to electromagnetic
fields, GPU may be required to 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. GPU believes the costs described above should be recoverable, but
recognizes that recovery cannot be assured.
GPU records liabilities (on an undiscounted basis) where it is probable
that a loss has been incurred and the amount of the loss can be reasonably
estimated, and adjusts these liabilities as required to reflect changes in
circumstances. At December 31, 1996, the GPU Energy companies have
liabilities recorded on their balance sheets for environmental matters
totaling $74 million, as follows:
Company Site Description Amount (in millions)
JCP&L MGP sites $45
Penelec Seward station 12
All Ash disposal sites 9*
JCP&L Various non-MGP sites 6
Met-Ed/
Penelec Various other sites 2**
Total $74
* (JCP&L $1; Met-Ed $2; Penelec $6)
** (Met-Ed $1; Penelec $1)
For further discussion of the liabilities recorded for JCP&L's MGP sites,
Penelec's Seward station property and the GPU Energy companies' ash disposal
sites, see the Water, Residual Waste and Hazardous/Toxic Wastes sections,
respectively.
In 1996, the GPU Energy companies made capital expenditures of
approximately $13 million (JCP&L $3 million; Met-Ed $2 million; Penelec $8
million) in response to environmental considerations and have budgeted
approximately $14 million (JCP&L $1 million; Met-Ed $2 million; Penelec $11
million) for this purpose in 1997. The incremental annual operating and
maintenance costs for such equipment is not expected to be material.
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
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 of discharge permits by the EPA, or states
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authorized by the EPA, which specify limitations to be applied. Discharge
permits are required for all of the GPU Energy companies' steam generating
stations. JCP&L has filed an application with the New Jersey Department of
Environmental Protection (NJDEP) for a discharge permit for its Yards Creek
pumped storage facility. Negotiations are proceeding on this with the NJDEP
through a pre-draft review process. In addition, the discharge permits for
JCP&L's Sayreville station and Met-Ed's Portland station have expired, but the
terms of both have been administratively extended pending action by the NJDEP
and Pennsylvania Department of Environmental Protection (PaDEP), respectively.
GPU has obtained all other required permits for its generating facilities
under the Clean Water Act.
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The NJDEP has proposed thermal and other conditions for inclusion in the
discharge permit for JCP&L's Sayreville generating station which, among other
things, could require JCP&L to install cooling towers and/or modify the water
intake/discharge systems at this facility. 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, or alternatively, through negotiation during the
permit renewal process. JCP&L has made filings with the NJDEP that, JCP&L
believes, justify the issuance of a thermal variance 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 this
station, which may result in material capital expenditures.
The discharge permit 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.
Pursuant to federal environmental monitoring requirements, Penelec has
reported to the PaDEP that contaminants from coal mine refuse piles were
identified in storm water run-off at Penelec's Seward station property. The
refuse piles have contributed to acid mine drainage to the Conemaugh River.
Penelec signed a modified Consent Order (Order), which became effective
December 1996, that establishes a schedule for long-term remediation, based on
future operating scenarios, including reboilering the station using fluidized
bed combustion technology. The Order requires Penelec to submit a groundwater
remediation plan by May 31, 1998, and also requires compliance with stormwater
discharge limits contained in the Seward station's discharge permit by
November 1998, if the station is repowered, or by November 1999, if the
station is not repowered. In addition, the Order requires Penelec to perform
an aquatic study on the Conemaugh River in order to receive a thermal
variance.
Penelec currently estimates that the remediation of the Seward station
property will range from $12 million to $25 million and recorded a liability
of $12 million at December 31, 1996. These cost estimates are subject to
uncertainties based on continuing discussions with the PaDEP as to the method
of remediation, the extent of remediation required and available cleanup
technologies. Penelec expects recovery of these remediation costs through its
restructuring plan to be filed with the PaPUC (see Competitive Environment,
Management's Discussion and Analysis), and has recorded a corresponding
regulatory asset of approximately $12 million at December 31, 1996.
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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 April 2000. This
agreement is part of the FERC license. The present estimated installed cost
of the facility is $7 million. Construction is expected to begin in 1998.
The GPU Energy companies 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.
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Nuclear: Reference is made to Nuclear Facilities for information
regarding the TMI-2 accident, its aftermath and the GPU Energy companies'
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, which should commence operation by the end of 2003. Currently, the
N.J. Low-Level Radwaste Disposal Facility Siting Board is looking for a
volunteer community to host the site. GPUN's total share of the cost for
developing, constructing, and licensing the facility is estimated to be $58
million, which will be paid through 2002. Through December 1996, GPUN has
paid $6 million. As a result, at December 31, 1996, a liability of $52
million is reflected on the Consolidated Balance Sheet. JCP&L is recovering
these costs from customers, and a regulatory asset has also been recorded.
Pennsylvania, Delaware, Maryland and West Virginia have established the
Appalachian Compact to construct a facility for the disposal of low-level
radwaste in those states, including low-level radwaste from TMI-1. To date,
pre-construction costs of $33 million, out of an estimated $88 million, have
been paid. Eleven nuclear plants have so far shared equally in the pre-
construction costs; GPUN has contributed $3 million on behalf of TMI-1. All
contributors, including nonutility radwaste producers within the compact that
make voluntary contributions, will receive certain credits against surcharges
to be 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. Delays in
the facility's construction could result in additional funding requirements,
however.
GPUN is currently shipping low-level radwaste to the Barnwell, South
Carolina radwaste disposal site. Operation of the Northeast Compact disposal
facility, initially expected to commence by the mid-1990's, is now expected to
be delayed until at least the end of 2003. The Appalachian Compact disposal
facility, which was scheduled to open in 1999, is now estimated to be
operational by 2002. Continuing delays in the completion of these disposal
facilities will require GPUN to perform an evaluation of its ability to safely
store radwaste beyond these dates.
The GPU Energy companies have provided for future contributions to the
Decontamination and Decommissioning Fund for the cleanup of uranium enrichment
plants operated by the Federal Government. GPU's total liability at December
31, 1996 amounted to $34 million (JCP&L $22 million; Met-Ed $8 million;
Penelec $4 million). The remaining amount recoverable from ratepayers at
December 31, 1996 is $36 million (JCP&L $23 million; Met-Ed $9 million;
Penelec $4 million).
Air: With respect to air quality, the GPU-owned or operated generating
stations are subject to certain state environmental regulations of the NJDEP
and the PaDEP. The stations are also subject to certain federal environmental
regulations of the EPA. One of the major sets of regulations that governs air
quality is the Federal Clean Air Act of 1970 (CAA):
CAA Title I sets National Ambient Air Quality Standards (NAAQS) for
certain criteria pollutants. The criteria pollutants are ozone, sulfur
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dioxide (SO2), nitrogen dioxide, particulate matter, carbon monoxide and lead.
In particular, this Title has established the Ozone Transport Region (OTR),
which includes 12 northeast states and the District of Columbia, to address
the transport of those pollutants leading to non-attainment of the ozone NAAQS
in the Northeast. Ozone control is facilitated by the control of pollutant
precursors, which are nitrogen oxide (NOx) and volatile organic compounds
(VOCs). Fossil fuel-fired electric generating stations are major sources of
NOx emissions. 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
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stationary sources of NOx were required to implement Reasonably Available
Control Technology (RACT) by May 31, 1995. The PaDEP proposed that RACT be
determined on a case-by-case basis and thus could be different for each unit
or facility. RACT proposals were prepared and submitted to the PaDEP in 1994.
GPU has opted for the installation of low NOx burners or other control
technology, and in some cases, limitations on annual operations, in order to
achieve the reductions required by the PaDEP 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. JCP&L is in compliance with NJDEP
RACT regulations.
A Memorandum of Understanding (MOU) has been signed by the members of the
Ozone Transport Commission (OTC). The MOU calls for inner and outer zones,
with seasonal NOx emission reductions from 1990 emission levels of 65% and
55%, respectively, by May 1, 1999. JCP&L, Met-Ed and Penelec will spend an
estimated $1 million, $9 million and $7 million, respectively, to meet the
1999 reductions set by the OTC. The MOU also calls for a 75% reduction from
1990 emission levels by May 2003. The 2003 limits will not be imposed if a
scientific demonstration to be provided by the North American Research
Strategy for Tropospheric Ozone (NARSTO) finds that less restrictive limits
would be necessary to obtain compliance with the ozone NAAQS. However, there
is also the potential that the NARSTO effort may actually recommend more
severe reductions than outlined in the MOU. A market-based NOx trading system
is proposed to allow for the transfer of excess reductions encouraging
alternate compliance strategies.
Under mandatory, routine review of the ozone NAAQS, the EPA proposed new
standards in November 1996 that will significantly increase the areas in the
country which are not in attainment of the NAAQS. The EPA is soliciting
comments on the proposal and must finalize the regulation by June 1997. A
timeline for implementation of the new standards calls for attainment
designations by June 1999; state implementation plans (SIP) by 2000 and 2002
for attainment and non-attainment areas, respectively; and attainment, with
probable extensions, by 2011.
The area around the Warren station has been designated as non-attainment
for the SO2 NAAQS. The EPA and the PaDEP have both approved the use of a non-
guideline air quality model, which is more representative and less
conservative than the EPA guideline model, to evaluate the ambient air quality
impacts of the station. This modeling has demonstrated attainment for the
area, with no required reduction in Warren station emissions. At Shawville
station, the approved use of the same non-guideline model shows attainment of
the SO2 NAAQS within current Pennsylvania default SO2 emission limits.
The vicinity of the Chestnut Ridge Energy Complex, which includes the
Homer City, Conemaugh, Keystone and Seward stations, is officially designated
as being in attainment of the SO2 NAAQS; however, both the EPA and the PaDEP
have questioned the area's attainment of this standard. The EPA and the
PaDEP have both approved the use of the same non-guideline model discussed
above to evaluate the ambient air quality impacts of these generating
stations. This model will also be used in the development of a compliance
strategy for all generating stations in the Chestnut Ridge Energy Complex.
Attainment of the SO2 NAAQS has been taken into account as part of the
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design of the Conemaugh station scrubbers. In addition, Met-Ed has initiated
ambient air quality modeling studies for its Portland and Titus Stations,
which will take several years to complete. While the results are uncertain,
these studies may result in a revised Pennsylvania SIP with source-specific
emission limitations in order to attain NAAQS for SO2. If SO2 emissions need
to be reduced to meet the new SIP, 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 SO2 reductions may be required at one or more of these stations,
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which could result in significant capital and additional operating
expenditures.
Under a court ordered review of the NAAQS for particulate matter, the EPA
released proposed new standards in November 1996, which could significantly
increase the areas in the country that are not in attainment of the standard.
The particulate matter NAAQS impact NOx and SO2 emission sources. It is
possible that once attainment status is defined by the EPA and the reductions
required under other provisions of the CAA are realized, compliance with the
particulate matter NAAQS could require further reductions in NOx and/or SO2
emissions.
Certain other environmental regulations limit the amount of particulate
matter emitted into the environment. GPU has installed equipment at its coal-
fired generating stations and may find it necessary to either upgrade or
install additional equipment at certain of its stations to consistently meet
particulate emission requirements. Also, the proposed revision to the
particulate matter NAAQS could trigger reduction requirements.
Title III of the CAA deals with emissions of hazardous air pollutants
(HAPs). As part of Title III, the EPA is charged with conducting a study to
determine if fossil fuel-fired electric steam generating units pose a serious
threat to public health due to emissions of HAPs. The study will seek to
determine whether regulation of utility sources is appropriate and necessary.
If the study results prove, through risk analysis, that regulation is
required, a Maximum Achievable Control Technology (MACT) standard will be
developed for utility sources. An interim study report was published in
October 1996. In general, the study did not find unacceptable health risks
from utility sources, but recommended further analysis of long-range transport
of HAPs and the impact of mercury emissions. The interim report does not
include the EPA's official recommendation as to the necessity of HAP
regulation for utilities.
Title IV of the CAA requires substantial reductions to meet a national
cap in SO2 emissions beginning in the years 1995 and 2000 (Phases I and II,
respectively). As a result, it will be necessary for the GPU Energy companies
to install and operate emission control equipment, switch to slightly lower
sulfur coal at some of their coal-fired plants, or purchase emission
allowances in order to achieve compliance. Title IV also imposes requirements
for the installation of NOx controls. To comply with Titles I and IV of the
CAA, the GPU Energy companies expect to spend up to $277 million (JCP&L $46
million; Met-Ed $117 million; Penelec $114 million) for air pollution control
equipment by the year 2000, of which approximately $240 million (JCP&L $43
million; Met-Ed $95 million; Penelec $102 million) has been spent as of
December 31, 1996 (these amounts include costs to meet the 1999 reductions set
by the OTC, as discussed on page 33). The capital costs of equipment are for
the installation of flue gas desulfurization systems (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, but recovery is
not assured.
Conemaugh, Portland and Shawville stations are Phase I affected units.
The second of two scrubbers was completed at the Conemaugh station during
1995, as part of GPU's plans to comply with SO2 emission limitations. For the
Portland station, Met-Ed plans to meet its Phase I compliance obligation
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through the use of SO2 emission allowances, including allowances allocated
directly to Portland station by the EPA and excess allowances transferred from
the Conemaugh station that result from operation of the scrubbers. The
Shawville station will require lower sulfur coal and/or the purchase of
emission allowances to meet its Phase I requirements.
GPU's current strategy for Phase II compliance is the use of fuel
switching and the purchase of allowances at the Keystone and the Homer City
Unit 3 stations, with periodic reviews of the cost effectiveness of the
installation of scrubbers. Switching to lower sulfur coal and/or the
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purchasing of allowances is currently planned for the Titus, Seward, Portland,
Shawville and Warren stations as well. Homer City units 1 and 2 will use
existing coal cleaning technology and the purchase of allowances. Additional
control modifications are not expected to be necessary for Phase II compliance
at the Conemaugh and Sayreville Stations.
Title IV of the CAA also requires Phase I and Phase II affected units to
install a continuous emission monitoring system (CEMS) and provide quality
assurance for the data related to SO2, NOx, opacity and volumetric flow. In
addition, Title VIII of the CAA 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, SO2 emission
standards, NOx emissions and a requirement to maintain certified CEMS
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 excess or monitoring failures. With respect to the
operation of Met-Ed and Penelec's generating stations, it is not anticipated
that payments to be made to the Clean Air Fund due to CEM penalties will be
material in amount. The CAA 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.
CAA Title V required that comprehensive permit applications be submitted
by major stationary sources to the permitting authorities in 1995. Title V
may dramatically increase the level of effort required to track compliance and
tabulate emissions of the numerous processes regulated by the new permits once
issued. The states' Title V program also established new emission fee
structures. In 1996, the Pennsylvania stations paid $1.5 million in emissions
fees, and the New Jersey fees totaled approximately $55,000. Emission fees
are based on the level of actual emissions and are assessed on a per ton
basis.
GPU continues to reassess its options for compliance with the CAA,
including those that may result from the continued development of the emission
trading allowance market. GPU'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.
In the fall of 1993, the Clinton Administration announced its Climate
Change Action Plan (Plan), intended to reduce greenhouse gas emissions to 1990
levels by the year 2000. The Plan relies heavily on voluntary action by
industry. GPU has joined approximately 630 other electric utility companies
which have signed accords or are otherwise cooperating with the DOE under the
Climate Challenge Program, which is the electric utility's response to the
Plan. GPU's greenhouse gas management program is expected to reduce,
sequester, or avoid the equivalent of eight million tons of carbon dioxide
emissions between 1995 and 2000.
In 1995, as a result of the United Nations Framework Convention on
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Climate Change, over 160 countries began a negotiating process to produce a
document which would address the reduction of greenhouse gas emissions after
the year 2000. The U.S. State Department supports the negotiations and calls
for all developed nations to commit to emission reductions. The State
Department also supports global emissions credit banking and trading similar
to the domestic SO2 allowance trading program.
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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
findings conflicted with two earlier large-scale studies that found no such
relationship. In 1996, the National Research Council of the National Academy
of Sciences released a report which concluded that, "Based on a comprehensive
evaluation of published studies relating to the effects of power-frequency
electric and magnetic fields on cells, tissues and organisms (including
humans), ... the current body of evidence does not show that exposure to these
fields presents a human-health hazard. Specifically, no conclusive and
consistent evidence shows that exposures to residential electric and magnetic
fields produce cancer, adverse neurobehavioral effects, or reproductive and
developmental effects." Additional studies, which may foster a better
understanding of the subject, are presently underway.
Certain parties have alleged that 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 GPU Energy companies 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 regulations governing ash disposal sites require,
among other things, groundwater assessments of landfills if existing
groundwater monitoring indicates the possibility of degradation. The
assessments could require the installation of additional monitoring wells and
the evaluation of one year's data. If the assessments show degradation of the
groundwater, Penelec and Met-Ed would be required to develop abatement plans,
which may include the lining of currently unlined facilities. To date,
Penelec has not identified any cases requiring abatement. Although Met-Ed's
Titus station ash disposal site was upgraded in 1991 and meets many of the
lined facility requirements, degradation has been identified at the site. In
1996, Met-Ed filed an abatement plan with the PaDEP in conjunction with its
re-permitting application (see discussion below), which states that the
problem will be abated once the station is closed and projected site closure
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procedures have been performed. Approval of the plan by the PaDEP is pending.
Also, Met-Ed's Portland station ash disposal site requires significant
modifications. Various alternatives for upgrading the site are being
evaluated, including beneficial uses of coal ash.
The GPU Energy companies are required to submit applications for re-
permitting seven (JCP&L- one; Met-Ed- three; Penelec- three) operating ash
disposal sites to the PaDEP by July 1997, including projected site closure
procedures and related cost estimates. Applications have been filed with the
PaDEP for five (JCP&L- one; Met-Ed- two; Penelec- two) of these sites. The
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cost estimates for the closure of these five sites range from approximately $9
million to $14 million (JCP&L $1 million; Met-Ed $2 million to $4 million;
Penelec $6 million to $9 million), and a liability of $9 million (JCP&L $1
million; Met-Ed $2 million; Penelec $6 million) is reflected on the
Consolidated Balance Sheet at December 31, 1996. JCP&L's share of these
costs, which results from its 16.67% ownership interest in the Keystone
station, has been deferred based on past rate recovery precedent, and Penelec
and Met-Ed expect recovery through their restructuring plans to be filed with
the PaPUC (see Competitive Environment, Management's Discussion and Analysis).
As a result, a regulatory asset of $9 million (JCP&L $1 million; Met-Ed $2
million; Penelec $6 million) is reflected on the Consolidated Balance Sheet at
December 31, 1996.
Other PaDEP residual waste compliance requirements involve storage
impoundments, which also will eventually require groundwater monitoring
systems and potential 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.
Preliminary groundwater assessment plans have been conducted at Met-Ed's
Portland and Titus stations' industrial waste treatment impoundments. The
Portland station impoundments were upgraded in 1987 and meet the requirements
for lined impoundments. The station's assessment plan is pending with the
PaDEP. Additional data will be collected and evaluated to determine if
abatement will be required. Although new groundwater monitoring wells were
installed at the Titus station, the 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. GPU has met all requirements of the TSCA necessary to allow the
continued use of equipment containing PCBs and has taken substantive voluntary
actions to reduce the amount of PCB-containing electrical equipment.
Prior to 1953, the GPU Energy companies owned and operated MGP sites in
New Jersey and Pennsylvania. Waste contamination associated with the
operation and dismantlement of these MGP sites is, or may be, present both
on-site and off-site. Claims have been asserted against the GPU Energy
companies 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 MGP waste may have been sent. JCP&L has
entered into cost sharing agreements with New Jersey Natural Gas Company and
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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. In
addition, 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 the sites.
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As of December 31, 1996, JCP&L has spent approximately $23 million in
connection with the cleanup of these sites. In addition, JCP&L has recorded
an estimated environmental liability of $45 million relating to expected
future costs of these sites, including the two off-site properties. This
estimated liability is based upon ongoing site investigations and remediation
efforts, which generally involve capping the sites and pumping and treatment
of ground water. Moreover, the cost to clean up these sites could be
materially in excess of $45 million due to significant uncertainties,
including changes in acceptable remediation methods and technologies.
JCP&L defers these remediation expenditures and accrues interest as
previously authorized by the NJBPU, and will continue to defer estimated
future remediation costs. JCP&L has requested the establishment of an
adjustment clause for the recovery of future remediation costs in its
Remediation Adjustment Clause (RAC) filing, which is currently under NJBPU
review. The Final Settlement pending before the NJBPU would allow JCP&L to
continue its accounting treatment for remediation costs and would also provide
for the RAC proceeding to remain open for future review.
JCP&L is pursuing reimbursement from its insurance carriers for
remediation costs already spent and for future estimated costs. In 1994,
JCP&L filed a complaint with the Superior Court of New Jersey against several
of its insurance carriers, relative to these MGP 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 GPU Energy companies'
business, various by-products and substances are produced and/or handled that
are classified as hazardous under one or more of these statutes. GPU
generally provides 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. GPU has been formally notified by the EPA and state environmental
authorities that it is 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 hazardous and/or toxic waste sites in the
following number of instances (in some cases, more than one company is named
for a given site):
JCP&L MET-ED PENELEC GPUN GPU, INC. TOTAL
5 4 2 1 1 10
In addition, certain of the GPU companies 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 formally named as PRPs, although the EPA and state authorities
may nevertheless consider them as PRPs. Certain of the GPU companies have
also been named in lawsuits requesting damages for hazardous and/or toxic
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substances allegedly released into the environment. A discussion of five PRP
sites, where it is probable that a loss has been incurred, follows:
JCP&L, Met-Ed and GPUN are among the more than 800 PRPs under CERCLA who
may be liable to pay for costs 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
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total volume of waste believed shipped to the site, is JCP&L $1.1 million,
Met-Ed $400 thousand and GPUN $150 thousand. A liability is reflected on the
Consolidated Balance Sheet accordingly.
JCP&L has been named as a PRP by the NJDEP for allegedly disposing of
hazardous waste at the Global Landfill, a dump site located in New Jersey.
JCP&L signed a Consent Decree, along with about 50 other PRPs, to investigate
the site and conduct site remediation. The current estimated cost of the
remediation is $33 million. A final allocation of JCP&L's share has not yet
been made. However, JCP&L's interim estimated allocation is $500,000. The
extent of the future liability beyond the $500,000 cannot be estimated at this
time. At December 31, 1996, JCP&L has recorded a liability of $500,000.
Met-Ed received a PRP notice from the PaDEP asserting that it had
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 has made immaterial payments
to the PRP group for the water line installation and the removal of tanks,
drums and other materials at the site. A groundwater study to determine the
extent of ground water contamination was completed in 1996 and has been
submitted to the PaDEP. A feasibility study will be conducted later in 1997
to determine the extent of additional remediation needed. 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 is part of a group of 10 PRPs who have entered into a Consent
Decree with Pennsylvania and a settlement with the EPA to pay for costs
associated with the remediation of a dump site located in Mill Creek Township
near Erie, Pennsylvania. Penelec has paid approximately $114,000 in costs for
the settlement with Pennsylvania and $600,000 in costs for the settlement with
the EPA. Penelec's share of the remaining costs for the site is estimated to
be $500,000 (including costs to cap the site), for which a liability has been
recorded at December 31, 1996.
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 has joined a PRP group, which is exploring a
settlement with the EPA, but cannot predict the ultimate outcome of the
negotiations.
The ultimate cost of remediation of these and other hazardous waste 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 companies involved. GPU and the GPU Energy
companies are unable to estimate the extent of possible remediation and
associated costs of additional environmental matters.
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
49
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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.
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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.
The extent to which competition in the electric utility industry will
affect the territories currently served by the GPU Energy companies and their
rights to provide electric utility service in those territories is uncertain.
Refer to Competitive Environment and The GPU Energy Companies' Supply Plan,
Management's Discussion and Analysis for further discussion.
EMPLOYEE RELATIONS
At February 28, 1997, GPU had 9,061 full-time employees (JCP&L 2,363;
Met-Ed 2,234; Penelec 1,895; all other companies 2,569). The nonsupervisory
production and maintenance employees of the GPU Energy companies 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. Negotiations between Met-Ed and the IBEW
began in March 1997. JCP&L's three-year contract with the IBEW expires on
October 31, 1999.
51
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ITEM 2. PROPERTIES.
Generating Stations
At December 31, 1996, the generating stations of the GPU Energy companies
had an aggregate effective capability of 6,606,000 net kilowatts (KW), as
follows:
Name of GPU Energy Year of Net KW
Station Company 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 Met-Ed 1951-1953 243,000
Seward Penelec 1950-1957 196,000
Warren Penelec 1948-1949 82,000
NUCLEAR:
TMI-1(d) All 1974 786,000
Oyster Creek JCP&L 1969 619,000
GAS/OIL-FIRED:
Sayreville JCP&L 1930-1958 229,000
Combustion
Turbines(e) All 1960-1996 1,299,000
Other(f) All 1968-1977 298,000
Hydroelectric(g) Met-Ed/Penelec 1905-1969 64,000
PUMPED STORAGE:(h)
Yards Creek JCP&L 1965 200,000
Seneca Penelec 1969 87,000
TOTAL 6,606,000
Aggregate Effective Capability of the GPU Energy Companies
Net KW
(Summer) (Winter)
JCP&L 2,718,000 3,139,000
Met-Ed 1,604,000 1,705,000
Penelec 2,284,000 2,365,000
TOTAL 6,606,000 7,209,000
(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.
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(d) Jointly owned by JCP&L, Met-Ed and Penelec in percentages of 25%, 50% and
25%, respectively.
(e) JCP&L - 901,000 KW, Met-Ed - 266,000 KW and Penelec 132,000 KW.
(f) Consists of internal combustion and combined-cycle units (JCP&L - 290,000
KW, Met-Ed - 2,000 KW and Penelec - 6,000 KW).
(g) 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).
(h) Represents the GPU Energy companies' undivided interests in these
stations which are net users rather than net producers of electric
energy. Effective June 10, 1996, the Yards Creek station was rerated
from 195,000 KW.
The GPU Energy companies' 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 GPU Energy companies' 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 GPU Energy companies' properties are subject to
the lien of their respective FMB indentures.
The peak loads of the GPU Energy companies were as follows:
(In KW)
Company Date Peak Load
GPU Energy companies 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
53
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GPU International Group Facilities
At December 31, 1996, the GPU International Group had ownership
interests in 21 operating natural gas-fired cogeneration and other nonutility
power production facilities located both domestically and internationally,
with an aggregate capability of 3,581,000 KW as follows:
Name of Year of Ownership
Facility Location Installation Total KW Interest (KW)
U.S. Facilities
Selkirk NY 1992-94 350,000 66,900
Lake* FL 1993 110,000 54,900
Pasco* FL 1993 109,000 54,400
Onondaga* NY 1993 80,000 40,000
Syracuse* NY 1992 80,000 3,500
Marcal* NJ 1989 65,000 32,500
Camarillo* CA 1988 26,500 300
Chino* CA 1987 26,000 300
FPB CA 1983 26,000 7,800
Berkeley*** CA 1987 22,500 200
Total 895,000 260,800
Non-U.S. Facilities
Teesside** England 1993 1,875,000 249,400
Redditch** England 1991 29,000 14,500
Hereford** England 1980 15,000 7,500
Enersis Group** Portugal 1987-95 50,000 12,500
Micdos** Spain 1975-95 35,000 7,500
Crisa** Spain 1948-58 6,000 2,900
Termobarran-
quilla* Colombia 1972-96 434,000 124,100
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 26,000 19,500
Total 2,686,000 545,900
Total capability 3,581,000 806,700
* The GPU International Group has operating responsibility for these
facilities.
** The GPU International Group's ownership interests in these facilities are
through its investment in Midlands.
*** Sold in January 1997.
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Transmission and Distribution System
At December 31, 1996, GPU owned the following transmission and
distribution facilities:
JCP&L Met-Ed Penelec GPU Total
Transmission and Distribution
Substations 304 281 476 1,061
Aggregate Installed Transformer
Capacity of Substations
(in kilovoltamperes - KVA) 20,868,301 12,056,750 15,897,762 48,822,813
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 1,326 1,919
69 KV, 46 KV and 34.5 KV 1,764 472 364 2,600
Total 2,584 1,407 2,735 6,726
Distribution System:
Line Transformer Capacity (KVA) 9,830,763 5,807,962 6,543,254 22,181,979
Pole Miles of Overhead Lines 15,746 12,613 22,136 50,495
Trench Miles of Underground
Cable 6,829 1,943 1,889 10,661
In addition, Midlands, which provides service to 2.2 million customers in
a 5,000 square mile area in England, owns a total of 39,000 miles of overhead
and underground lines. Solaris, which provides service to more than 240,000
customers in and around a 387 square mile area in Melbourne, Australia, owns a
total of 3,809 miles of overhead and underground lines (see the GPU
International Group section under Item 1).
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 Commitments and Contingencies, Note 14 to GPU's Consolidated Financial
Statements contained in Item 8 for a description of certain pending legal
proceedings involving GPU.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
55
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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, Inc. During 1996, JCP&L, Met-Ed and Penelec paid dividends on their
common stock to GPU, Inc. in the following amounts: JCP&L $135 million, Met-Ed
$60 million and Penelec $40 million.
In accordance with JCP&L, Met-Ed and Penelec's FMB indentures, as
supplemented, the balances of retained earnings at December 31, 1996 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
GPU, Inc. is listed as GPU on the New York Stock Exchange. On February
3, 1997, there were approximately 43,350 registered holders of GPU, Inc.
common stock.
Dividends
GPU, Inc. 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 1996 and 1995 are set forth
below.
Common Stock
Dividends Declared Price Ranges*
1996 1995
1996 1995 Quarter High/Low High/Low
April $.485 $.47 First $35 1/8 31 1/8 $30 5/8 $26 1/4
June .485 .47 Second 35 1/4 30 1/8 31 28 1/4
October .485 .47 Third 35 30 1/2 31 1/4 28 1/8
December .485 .47 Fourth 34 3/8 30 3/4 34 30 5/8
* 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.
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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.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Identification of Directors
Information regarding GPU, Inc.'s directors is incorporated by reference
to pages 2 through 6 of GPU, Inc.'s Proxy Statement for the 1997 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 Elected
Name Age Position JCP&L Met-Ed Penelec
JCP&L/Met-Ed/Penelec:
J. R. Leva (a) 64 Chairman of the Board and 1986 1992 1992
Chief Executive Officer
D. Baldassari (b) 47 President 1982 1996 1996
J. G. Graham (c) 58 Vice President and 1986 1986 1986
Chief Financial Officer
D. W. Myers (d) 52 Vice President - Finance 1994 1996 1996
and Rates, and
Comptroller
F. D. Hafer (e) 55 Director 1996 1978 1994
R. C. Arnold (f) 59 Director 1989 1989 1989
JCP&L only:
G. E. Persson (g) 65 Director 1983
S. C. Van Ness (h) 63 Director 1983
S. B. Wiley (i) 67 Director 1982
(a) Mr. Leva is also Chairman and Chief Executive Officer and a director of
GPUS; Chairman, Chief Executive Officer and a director of Genco; and
Chairman and a director of GPUN, GPU International, Inc. (GPUI), GPU
Power, Inc. (GPU Power), and GPU Electric, Inc. (GPU Electric), all
subsidiaries of GPU, Inc. Mr. Leva also served as President of GPU,
Inc. and GPUS from 1991 to 1996. It is anticipated that Mr. Leva will
retire as Chairman and Chief Executive Officer of GPU, Inc. and other
similar positions with GPU (other than director of GPU, Inc.) in May
1997. Mr. Leva is also Chairman and a director of Avon Energy Partners
Holdings and Midlands Electricity plc, and a director of Utilities
Mutual Insurance Company.
(b) Mr. Baldassari was elected President of JCP&L in 1992, and President of
Met-Ed and Penelec in 1996. Prior to that, Mr. Baldassari served as
Vice President - Materials & Services of JCP&L since 1990. Mr.
Baldassari is also a director of GPUS, GPUN, Genco and First Morris Bank
of Morristown, NJ.
(c) Mr. Graham was elected Senior Vice President of GPU, Inc. in 1989. He
is also Executive Vice President, Chief Financial Officer and a director
of GPUS; Vice President and Chief Financial Officer of GPUN; and a
director of Genco, GPUI, GPU Power and GPU Electric. Mr. Graham is also
a director of Edisto Resources, Inc., Nuclear Electric Insurance
Limited, Nuclear Mutual Limited and Utilities Mutual Insurance Company.
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(d) Mr. Myers was elected Vice President - Finance and Rates, and
Comptroller of Met-Ed and Penelec in 1996, and also serves as Vice
President - Finance and Rates, and Comptroller of JCP&L since 1994.
Prior to that, he served as Vice President and Treasurer of GPU, Inc.,
GPUS, JCP&L, Met-Ed and Penelec since 1993. He served as Vice President
and Comptroller of GPUN from 1986 to 1993.
(e) Mr. Hafer became President, Chief Operating Officer, and a director of
GPU, Inc. and President and Chief Operating Officer of GPUS in 1996.
Prior to that, he was President of Penelec since 1994 and Met-Ed since
1986. It is anticipated that Mr. Hafer will be elected Chairman and
Chief Executive Officer of GPU, Inc. in May 1997 upon Mr. Leva's
retirement. Mr. Hafer is also a director of GPUS, GPUN, Genco, GPUI,
Sovereign Bancorp Inc., Sovereign Bank, and Utilities Mutual Insurance
Company.
(f) Mr. Arnold has been Executive Vice President-Power Supply of GPUS since
1990. He is also a director of GPUS and Genco.
(g) 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.
(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.
The directors of the GPU companies 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 GPU
companies.
Identification of Executive Officers
The current executive officers of GPU, Inc., JCP&L, Met-Ed and Penelec,
their ages, positions held and business experience during the past five years
are as follows:
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Year First
Name Age Position Elected
GPU:
J. R. Leva (a) 64 Chairman, and Chief Executive 1992
Officer
I. H. Jolles (b) 58 Senior Vice President and General 1990
Counsel
J. G. Graham (c) 58 Senior Vice President and Chief 1987
Financial Officer
F. A. Donofrio (d) 54 Vice President, Comptroller and 1985
Chief Accounting Officer
P. C. Mezey (e) 57 Senior Vice President, GPUS 1992
T. G. Howson (f) 48 Vice President and Treasurer 1994
M. A. Nalewako (g) 62 Secretary 1988
T. G. Broughton (h) 51 President, GPUN 1996
R. L. Wise (i) 53 President, Genco 1994
F. D. Hafer (j) 55 President and Chief Operating Officer 1996
D. Baldassari (k) 47 President, JCP&L, Met-Ed, Penelec 1992
B. L. Levy (l) 41 President and Chief Executive 1991
Officer, GPUI, GPU Power and
GPU Electric
R. C. Arnold (m) 59 Executive Vice President, GPUS 1990
Year First Elected
Name Age Position JCP&L Met-Ed Penelec
JCP&L/Met-Ed/Penelec:
J. R. Leva (a) 64 Chairman, and Chief 1992 1992 1992
Executive Officer
D. Baldassari (k) 47 President 1992 1996 1996
I. H. Jolles (b) 58 Vice President and 1996 1996 1996
General Counsel
J. G. Graham (c) 58 Vice President and 1987 1987 1987
Chief Financial Officer
T. G. Howson (f) 48 Vice President 1994 1994 1994
and Treasurer
D. J. Howe (n) 46 Vice President - Sales 1996 1996 1996
and Marketing
D. W. Myers (o) 52 Vice President - 1994 1996 1996
Finance and Rates
and Comptroller
G. R. Repko (p) 51 Vice President - Customer 1996 1994 1986
Services
C. B. Snyder (q) 51 Vice President - 1996 1994 1994
Public Affairs
R. J. Toole (r) 54 Vice President - 1990 1989 1996
Generation
R. S. Zechman (s) 53 Vice President - 1996 1990 1994
Corporate Services
R. S. Cohen (t) 54 Vice President 1996 - -
C. R. Fruehling 61 Vice President 1982 - -
E. J. McCarthy (u) 58 Vice President 1982 - -
D. L. O'Brien (v) 54 Vice President - 1981 1994
J. J. Westervelt(w) 56 Vice President 1982 - -
S. L. Guibord (x) 48 Secretary 1996 1996 1996
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(a) See Note (a) on page 49.
(b) Mr. Jolles is also Executive Vice President, General Counsel and a
director of GPUS, General Counsel of GPUN and Genco, and a director of
GPUI, GPU Power, GPU Electric and Genco.
(c) See Note (c) on page 49.
(d) Mr. Donofrio was elected Vice President of GPU, Inc. in 1989. He is also
Senior Vice President - Financial Controls of GPUS and a director of
GPUS.
(e) Mr. Mezey was elected Senior Vice President - System Services of GPUS in
1992 and is a director of GPUI, GPU Power and GPU Electric. He
previously served as Vice President of GPUS from January 1991 through
March 1992 and President of GPUI from February 1990 through December
1991.
(f) Mr. Howson is also Vice President and Treasurer of GPUS, 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 GPUS since 1989.
(g) Mrs. Nalewako is also Secretary of GPUS and Genco and Assistant Secretary
of GPUN, JCP&L, Met-Ed and Penelec.
(h) Mr. Broughton previously served as Executive Vice President of GPUN since
September 1995. Prior to that, he served as Vice President-TMI of GPUN
since 1991. Mr. Broughton is also a director of GPUS and Genco.
(i) Mr. Wise is also a director of GPUS, GPUN, Genco, GPUI, GPU Power and GPU
Electric. He previously served as President, Fossil Generation-GPUS
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 (e) on page 50.
(k) See Note (b) on page 49.
(l) Mr. Levy is also a director of GPUI, GPU Power, GPU Electric and Genco.
He has served as President, Chief Executive Officer and director of GPUI
since 1991. Prior to that, Mr. Levy served as Vice President - Business
Development of GPUI since 1985.
(m) See Note (f) on page 50.
(n) Mr. Howe previously served as Director of Marketing and Pricing of JCP&L
since 1994. Prior to that, he was Director of Competitive Strategies and
Initiatives of JCP&L since 1993 and served as Manager - Cogeneration of
JCP&L from 1991-1993.
(o) See Note (d) on page 50.
(p) Mr. Repko was elected Vice President - Customer Services of JCP&L in
1996, and also serves as Vice President - Customer Services of Met-Ed and
Penelec since 1994. Prior to that, he served as Vice President -
Division Operations of Penelec from 1986 to 1993.
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(q) Mrs. Snyder was elected Vice President - Public Affairs of JCP&L in 1996
and also serves as Vice President - Public Affairs of Met-Ed and Penelec
since 1994. Prior to that she was Regional Director of Met-Ed from 1991
to 1994, and Divisional Director of Met-Ed since 1990.
(r) Mr. Toole was also elected a Vice President and a director of Genco in
1996.
(s) Mr. Zechman was elected Vice President - Corporate Services of JCP&L in
1996 and also serves as Vice President - Corporate Services of Met-Ed and
Penelec since 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.
(t) Mr. Cohen previously served as Secretary and Corporate Counsel for JCP&L
since 1986.
(u) Mr. McCarthy served as Vice President - Customer Operations and Sales of
JCP&L from 1994 to 1996. Prior to that, he served as Vice President -
Customer Services of JCP&L since 1982.
(v) Mr. O'Brien previously served as Comptroller for Met-Ed and Penelec since
1994. Prior to that, he served as Comptroller of Met-Ed since 1981.
(w) Mr. Westervelt served as Vice President - Human Resources and Corporate
Services of JCP&L from 1994 to 1996. Prior to that, he served as Vice
President - Human Resources of JCP&L since 1982.
(x) Mr. Guibord was elected Secretary of JCP&L, Met-Ed, and Penelec in 1996.
He had served as Corporate Compliance Auditing Director of GPUS since
1994. Prior to that, he was a General Attorney at JCP&L. Mr. Guibord
also serves as Secretary of GPUN.
The executive officers of the GPU 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.
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ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item with respect to GPU, Inc. is
incorporated by reference to pages 8 through 18 of GPU, Inc.'s Proxy Statement
for the 1997 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, 1996.
The managements of JCP&L, Met-Ed and Penelec were combined in a 1996
reorganization. Accordingly, the amounts shown below represent the aggregate
remuneration paid to such executive officers by JCP&L, Met-Ed and Penelec
during 1996.
<TABLE>
Remuneration of Executive Officers
SUMMARY COMPENSATION TABLE
<CAPTION>
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/Met-Ed/Penelec:
D. Baldassari
President (5) (5) (5) (5) (5) (5) (5)
G. R. Repko 1996 154,625 44,000 615 - 20,085 12,562 (6)
Vice President - 1995 147,100 48,000 337 - 9,930 11,491
Customer Services 1994 142,225 32,000 - 14,630 - 9,778
D. W. Myers 1996 153,333 44,000 590 - 19,265 12,505 (7)
Vice President - 1995 144,000 34,000 362 - 10,665 10,687
Finance and Rates 1994 142,125 29,300 - 13,716 - 9,853
R. S. Zechman 1996 152,827 44,000 596 - 19,470 14,051 (8)
Vice President - 1995 142,500 46,000 453 - 8,318 11,087
Corporate Services 1994 132,500 31,000 - 13,324 - 9,104
(1) Consists of earnings on "Long-Term Incentive Plan" ("LTIP")
Compensation paid in the year the award vested.
(2) The restricted units issued in 1995 and 1996 under the 1990 Stock Plan
are performance based. The 1996 awards are shown in "Long-Term
Incentive Plans - Awards in Last Fiscal Year" table (the LTIP table ).
Dividends are paid or accrued on the aggregate restricted stock/units
awarded under the 1990 Stock Plan and reinvested.
The aggregate number and value (based on the stock price per share at
63
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December 31, 1996) of unvested stock-equivalent restricted units
(including reinvested dividends) includes the amounts shown on the LTIP
table, and at the end of 1996 were:
64
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Aggregate Units Aggregate Value
J. R. Leva (4) (4)
D. Baldassari (5) (5)
G. R. Repko 3,946 $132,684
D. W. Myers 3,964 133,290
R. S. Zechman 3,744 125,892
(3) Consists of Performance Cash Incentive Awards paid on the 1990 and 1991
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.
(4) As noted above, Mr. Leva is Chairman and Chief Executive Officer of GPU,
Inc. and its Subsidiaries. Mr. Leva is compensated by GPUS for his
overall service on behalf of GPU 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, Inc.'s 1997 Proxy Statement, which is incorporated
herein by reference.
(5) Information with respect to Mr. Baldassari's compensation is included on
pages 11 through 13 in GPU, Inc.'s 1997 Proxy Statement, which is
incorporated herein by reference.
(6) Consists of GPU's matching contributions under the Savings Plan
($6,000), above-market interest accrued on the retirement portion of
deferred compensation ($92), and earnings on LTIP compensation not paid
in the current year ($6,470).
(7) Consists of GPU's matching contributions under the Savings Plan ($6,000)
and earnings on LTIP compensation not paid in the current year ($6,505).
(8) Consists of GPU's matching contributions under the Savings Plan
($6,000), matching contributions under the non-qualified deferred
compensation plan ($1,948), above-market interest accrued on the
retirement portion of deferred compensation ($9), and earnings on LTIP
compensation not paid in the current year ($6,094).
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 companies.
65
<PAGE>
</TABLE>
<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 (#) (#) (#)
<S> <C> <C> <C> <C> <C>
JCP&L/Met-Ed/Penelec:
G. R. Repko 970 5 year vesting 0 970 1,940
D. W. Myers 970 5 year vesting 0 970 1,940
R. S. Zechman 970 5 year vesting 0 970 1,940
(1) The restricted units awarded in 1996 under the 1990 Stock Plan provide
for a performance adjustment to the aggregate number of units vesting for
the recipient, including the accumulated reinvested dividends, 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. Under the
1990 Stock Plan, regular quarterly dividends are reinvested in additional
units that are subject to the vesting restrictions of the award. Actual
payouts under the Plan would be based on the aggregate number of units
awarded and the units accumulated through dividend reinvestment at the
time the restrictions lapse. Information with respect to Mr. Leva's and
Mr. Baldassari's long-term incentive plans is included on pages 13 and 14
in GPU, Inc.'s 1997 Proxy Statement, which is incorporated herein by
reference.
</TABLE>
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, Inc. Board of Directors.
Retirement Plans
The GPU pension plans provide for pension benefits, payable for life
after retirement, based upon years of creditable service with GPU 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 plans are subject to certain maximum
amounts. The GPU 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 1997 (computed on a single life annuity basis) to persons in
specified salary and years of service classifications:
66
<PAGE>
<TABLE>
ESTIMATED ANNUAL RETIREMENT BENEFITS (2) (3) (4)
BASED UPON CAREER AVERAGE COMPENSATION
(1997 Retirement)
<CAPTION>
Career
Average
Compen- 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
sation(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 $ 9,338 $ 14,007 $ 18,676 $ 23,345 $ 28,014 $ 32,684 $ 37,085 $ 41,085
100,000 19,338 29,007 38,676 48,345 58,014 67,684 76,685 84,685
150,000 29,338 44,007 58,676 73,345 88,014 102,684 116,285 128,285
200,000 39,338 59,007 78,676 98,345 118,014 137,684 155,885 171,885
250,000 49,338 74,007 98,676 123,345 148,014 172,684 195,485 215,485
300,000 59,338 89,007 118,676 148,345 178,014 207,684 235,085 259,085
350,000 69,338 104,007 138,676 173,345 208,014 242,684 274,685 302,685
400,000 79,338 119,007 158,676 198,345 238,014 277,684 314,285 346,285
450,000 89,338 134,007 178,676 223,345 268,014 312,684 353,885 389,885
500,000 99,338 149,007 198,676 248,345 298,014 347,684 393,485 433,485
550,000 109,338 164,007 218,676 273,345 328,014 382,684 433,085 477,085
600,000 119,338 179,007 238,676 298,345 358,014 417,684 472,685 520,685
650,000 129,338 194,007 258,676 323,345 388,014 452,684 512,285 564,285
700,000 139,338 209,007 278,676 348,345 418,014 487,684 551,885 607,885
750,000 149,338 224,007 298,676 373,345 448,014 522,684 591,485 651,485
800,000 159,338 239,007 318,676 398,345 478,014 557,684 631,085 695,085
(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: Messrs. Leva - $453,214; Baldassari - $191,741; Repko -
$132,857; Myers - $150,696; and Zechman - $117,028.
(2) Years of Creditable Service at December 31, 1996: Messrs. Leva - 45
years; Baldassari - 27 years; Repko - 30 years; Myers - 16 years; and
Zechman - 27 years.
(3) Based on an assumed retirement at age 65 in 1997. 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 36
calendar months.
</TABLE>
Remuneration of JCP&L Directors
Nonemployee directors receive an annual retainer of $15,000, a fee of
$1,000 for each Board meeting attended, and a fee of $1,000 for each Committee
meeting attended.
67
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item for GPU, Inc. is incorporated by
reference to page 7 of GPU, Inc.'s Proxy Statement for the 1997 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 their
parent, GPU, Inc., 100 Interpace Parkway, Parsippany, NJ 07054.
The following table sets forth, as of February 1, 1997, 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 Energy
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.
<TABLE>
Amount and Nature of Beneficial Ownership
<CAPTION>
Shares(1) Stock-Equivalent
Name Title of Security Direct Indirect Restricted Units(2)
<S> <C> <C> <C> <C>
JCP&L/Met-Ed/Penelec:
J. R. Leva GPU Common Stock 4,450 100 44,905
F. D. Hafer GPU Common Stock 5,035 131 11,378
J. G. Graham GPU Common Stock 4,377 1,180 11,721
R. C. Arnold GPU Common Stock - 5,370 10,003
D. Baldassari GPU Common Stock 1,081 - 10,839
D. W. Myers GPU Common Stock - - 3,964
G. R. Repko GPU Common Stock 8,099 - 3,946
R. S. Zechman GPU Common Stock 964 - 3,744
JCP&L Only:
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
Executive Officers
as a Group GPU Common Stock 38,039 7,219 142,860
(1) The number of shares owned and the nature of such ownership, not being
within the knowledge of GPU, have been furnished by each individual.
(2) Restricted units, which do not have voting rights, represent rights
(subject to vesting) to receive shares of Common Stock under the 1990
Stock Plan for Employees of GPU and Subsidiaries (the 1990 Stock Plan ).
See Summary Compensation Table above.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
68
<PAGE>
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-A-2 Articles of Incorporation of GPU, Inc. as amended August 1,
1996.
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 -
Incorporated by reference to Exhibit 3-F, 1995 Annual Report
on Form 10-K, SEC File No. 1-446.
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 -
Incorporated by reference to Exhibit 3-H, 1995 Annual Report
on Form 10-K, SEC File No. 1-3522.
69
<PAGE>
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.
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.
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<PAGE>
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.
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.
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<PAGE>
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.
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.
72
<PAGE>
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-A-43 Fifty-first Supplemental Indenture of JCP&L, dated August
15, 1996.
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 May 1, 1960 - 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 December 1, 1962 -
Incorporated by reference to Exhibit 2-E(1), Registration
No. 2-59678.
4-B-2 Supplemental Indenture of Met-Ed, dated March 20, 1964 -
Incorporated by reference to Exhibit 2-E(2), Registration
No. 2-59678.
4-B-3 Supplemental Indenture of Met-Ed, dated July 1, 1965 -
Incorporated by reference to Exhibit 2-E(3), Registration
No. 2-59678.
4-B-4 Supplemental Indenture of Met-Ed, dated June 1, 1966 -
Incorporated by reference to Exhibit 2-B-4, Registration No.
2-24883.
4-B-5 Supplemental Indenture of Met-Ed, dated March 22, 1968 -
Incorporated by reference to Exhibit 4-C-5, Registration No.
2-29644.
4-B-6 Supplemental Indenture of Met-Ed, dated September 1, 1968 -
Incorporated by reference to Exhibit 2-E(6), Registration
No. 2-59678.
4-B-7 Supplemental Indenture of Met-Ed, dated August 1, 1969 -
Incorporated by reference to Exhibit 2-E(7), Registration
No. 2-59678.
4-B-8 Supplemental Indenture of Met-Ed, dated November 1, 1971 -
Incorporated by reference to Exhibit 2-E(8), Registration
No. 2-59678.
4-B-9 Supplemental Indenture of Met-Ed, dated May 1, 1972 -
Incorporated by reference to Exhibit 2-E(9), Registration
No. 2-59678.
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<PAGE>
4-B-10 Supplemental Indenture of Met-Ed, dated December 1, 1973 -
Incorporated by reference to Exhibit 2-E(10), Registration
No. 2-59678.
4-B-11 Supplemental Indenture of Met-Ed, dated October 30, 1974 -
Incorporated by reference to Exhibit 2-E(11), Registration
No. 2-59678.
4-B-12 Supplemental Indenture of Met-Ed, dated October 31, 1974 -
Incorporated by reference to Exhibit 2-E(12), Registration
No. 2-59678.
4-B-13 Supplemental Indenture of Met-Ed, dated March 20, 1975 -
Incorporated by reference to Exhibit 2-E(13), Registration
No. 2-59678.
4-B-14 Supplemental Indenture of Met-Ed, dated September 25, 1975 -
Incorporated by reference to Exhibit 2-E(15), Registration
No. 2-59678.
4-B-15 Supplemental Indenture of Met-Ed, dated January 12, 1976 -
Incorporated by reference to Exhibit 2-E(16), Registration
No. 2-59678.
4-B-16 Supplemental Indenture of Met-Ed, dated March 1, 1976 -
Incorporated by reference to Exhibit 2-E(17), Registration
No. 2-59678.
4-B-17 Supplemental Indenture of Met-Ed, dated September 28, 1977 -
Incorporated by reference to Exhibit 2-E(18), Registration
No. 2-62212.
4-B-18 Supplemental Indenture of Met-Ed, dated January 1, 1978 -
Incorporated by reference to Exhibit 2-E(19), Registration
No. 2-62212.
4-B-19 Supplemental Indenture of Met-Ed, dated September 1, 1978 -
Incorporated by reference to Exhibit 4-A(19), Registration
No. 33-48937.
4-B-20 Supplemental Indenture of Met-Ed, dated June 1, 1979 -
Incorporated by reference to Exhibit 4-A(20), Registration
No. 33-48937.
4-B-21 Supplemental Indenture of Met-Ed, dated January 1, 1980 -
Incorporated by reference to Exhibit 4-A(21), Registration
No. 33-48937.
4-B-22 Supplemental Indenture of Met-Ed, dated September 1, 1981 -
Incorporated by reference to Exhibit 4-A(22), Registration
No. 33-48937.
4-B-23 Supplemental Indenture of Met-Ed, dated September 10, 1981 -
Incorporated by reference to Exhibit 4-A(23), Registration
No. 33-48937.
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<PAGE>
4-B-24 Supplemental Indenture of Met-Ed, dated December 1, 1982 -
Incorporated by reference to Exhibit 4-A(24), Registration
No. 33-48937.
4-B-25 Supplemental Indenture of Met-Ed, dated September 1, 1983 -
Incorporated by reference to Exhibit 4-A(25), Registration
No. 33-48937.
4-B-26 Supplemental Indenture of Met-Ed, dated September 1, 1984 -
Incorporated by reference to Exhibit 4-A(26), Registration
No. 33-48937.
4-B-27 Supplemental Indenture of Met-Ed, dated March 1, 1985 -
Incorporated by reference to Exhibit 4-A(27), Registration
No. 33-48937.
4-B-28 Supplemental Indenture of Met-Ed, dated September 1, 1985 -
Incorporated by reference to Exhibit 4-A(28), Registration
No. 33-48937.
4-B-29 Supplemental Indenture of Met-Ed, dated June 1, 1988 -
Incorporated by reference to Exhibit 4-A(29), Registration
No. 33-48937.
4-B-30 Supplemental Indenture of Met-Ed, dated April 1, 1990 -
Incorporated by reference to Exhibit 4-A(30), Registration
No. 33-48937.
4-B-31 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-32 Supplemental Indenture of Met-Ed, dated September 1, 1992 -
Incorporated by reference to Exhibit 4-A(32)(a),
Registration No. 33-48937.
4-B-33 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-34 Supplemental Indenture of Met-Ed dated July 15, 1995 -
Incorporated by reference to Exhibit 4-B-35, 1995 Annual
Report on Form 10-K, SEC File No. 1-446.
4-B-35 Supplemental Indenture of Met-Ed dated August 15, 1996.
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
Annual Report of GPU on Form U5S, SEC File Nos. 30-126 and
1-3292.
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<PAGE>
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 -
Incorporated by reference to Exhibit 4-C-11, 1995 Annual
Report on Form 10-K, SEC File No. 1-3522.
4-C-12 Supplemental Indenture of Penelec dated August 15, 1996.
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.
76
<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 August
1, 1996.
10-B GPU System Companies Master Directors' Benefits Protection
Trust dated November 7, 1996.
10-C GPU System Companies Master Executives' Benefits Protection
Trust dated August 1, 1996.
77
<PAGE>
10-D Employee Incentive Compensation Plan of JCP&L dated April 1,
1995 - Incorporated by reference to Exhibit 10-D, 1995
Annual Report on Form 10-K, SEC File No. 1-3141.
10-E Employee Incentive Compensation Plan of Met-Ed dated April
1, 1995 - Incorporated by reference to Exhibit 10-E, 1995
Annual Report on Form 10-K, SEC File No. 1-446.
10-F Employee Incentive Compensation Plan of Penelec dated April
1, 1995 - Incorporated by reference to Exhibit 10-F, 1995
Annual Report on Form 10-K, SEC File No. 1-3522.
10-G Incentive Compensation Plan for Elected Officers of JCP&L
dated August 1, 1996.
10-H Incentive Compensation Plan for Elected Officers of Met-Ed
dated August 1, 1996.
10-I Incentive Compensation Plan for Elected Officers of Penelec
dated August 1, 1996.
10-J Deferred Remuneration Plan for Outside Directors of JCP&L
dated November 7, 1996.
10-K JCP&L Supplemental and Excess Benefits Plan dated August 1,
1996.
10-L Met-Ed Supplemental and Excess Benefits Plan dated August 1,
1996.
10-M Penelec Supplemental and Excess Benefits Plan dated August
1, 1996.
10-N Letter agreements dated November 1, 1996 relating to
supplemental pension benefits for J.R. Leva.
10-O Letter agreement dated November 1, 1996 relating to terms of
employment and pension benefits for I.H. Jolles.
10-P Letter agreement dated November 1, 1996 relating to
supplemental pension benefits for J.G. Graham.
10-Q GPU, Inc. Restricted Stock Plan for Outside Directors dated
November 7, 1996.
10-R Retirement Plan for Outside Directors of GPU, Inc. dated
November 7, 1996.
10-S Deferred Remuneration Plan for Outside Directors of GPU,
Inc. dated November 7, 1996.
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.
78
<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.
10-CC GPU, Inc. 1990 Stock Plan for Employees of GPU, Inc. and
Subsidiaries as amended and restated to reflect amendments
through August 1, 1996.
12 Statements Showing Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
A - GPU
B - JCP&L
C - Met-Ed
D - Penelec
79
<PAGE>
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
(b) Reports on Form 8-K:
A - GPU, Inc.
Dated October 21, 1996, under Item 5 (Other Events).
Dated December 2, 1996, under Item 5 (Other Events).
B - JCP&L
Dated October 21, 1996, under Item 5 (Other Events).
C - Met-Ed
Dated November 20, 1996, under Item 5 (Other Events).
Dated December 2, 1996, under Item 5 (Other Events).
D - Penelec
Dated November 20, 1996, under Item 5 (Other Events).
Dated December 2, 1996, under Item 5 (Other Events).
80
<PAGE>
GPU, INC.
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.
GPU, INC.
Dated: March 10, 1997 BY: /s/ J. R. Leva
J. R. Leva, Chairman
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 10, 1997
J. R. Leva, Chairman (Chief Executive
Officer) and President
/s/ F. D. Hafer March 10, 1997
F. D. Hafer, President (Chief
Operating Officer) and Director
/s/ J. G. Graham March 10, 1997
J. G. Graham, Senior Vice President
(Chief Financial Officer)
/s/ F. A. Donofrio March 10, 1997
F. A. Donofrio, Vice President and
Comptroller (Chief Accounting Officer)
/s/ T. H. Black March 10, 1997
T. H. Black, Director
/s/ T. B. Hagen March 10, 1997
T. B. Hagen, Director
/s/ H. F. Henderson March 10, 1997
H. F. Henderson, Jr., Director
/s/ J. M. Pietruski March 10, 1997
J. M. Pietruski, Director
/s/ C. A. Rein March 10, 1997
C. A. Rein, Director
/s/ P. R. Roedel March 10, 1997
P. R. Roedel, Director
/s/ B. S. Townsend March 10, 1997
B. S. Townsend, Director
/s/ C. A. H. Trost March 10, 1997
C. A. H. Trost, Director
/s/ P. K. Woolf March 10, 1997
P. K. Woolf, Director
81
<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 10, 1997 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 10, 1997
J. R. Leva, Chairman
(Principal Executive Officer) and Director
/s/ D. Baldassari March 10, 1997
D. Baldassari, President
(Principal Operating Officer) and Director
/s/ J. G. Graham March 10, 1997
J. G. Graham, Vice President
(Principal Financial Officer) and Director
/s/ D. W. Myers March 10, 1997
D. W. Myers, Vice President-Comptroller
(Principal Accounting Officer) and Director
/s/ R. C. Arnold March 10, 1997
R. C. Arnold, Director
/s/ F. D. Hafer March 10, 1997
F. D. Hafer, Director
/s/ G. E. Persson March 10, 1997
G. E. Persson, Director
/s/ S. C. Van Ness March 10, 1997
S. C. Van Ness, Director
/s/ S. B. Wiley March 10, 1997
S. B. Wiley, Director
82
<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 10, 1997 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 10, 1997
J. R. Leva, Chairman (Principal Executive
Officer) and Director
/s/ D. Baldassari March 10, 1997
D. Baldassari, President (Principal
Operating Officer) and Director
/s/ J. G. Graham March 10, 1997
J. G. Graham, Vice President (Principal
Financial Officer) and Director
/s/ D. W. Myers March 10, 1997
D. W. Myers, Vice President-Comptroller
(Principal Accounting Officer) and Director
/s/ R. C. Arnold March 10, 1997
R. C. Arnold, Director
/s/ F. D. Hafer March 10, 1997
F. D. Hafer, Director
83
<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 10, 1997 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 10, 1997
J. R. Leva, Chairman (Principal Executive
Officer) and Director
/s/ D. Baldassari March 10, 1997
D. Baldassari, President (Principal
Operating Officer) and Director
/s/ J. G. Graham March 10, 1997
J. G. Graham, Vice President (Principal
Financial Officer) and Director
/s/ D. W. Myers March 10, 1997
D. W. Myers, Vice President-Comptroller
(Principal Accounting Officer) and Director
/s/ R. C. Arnold March 10, 1997
R. C. Arnold, Director
/s/ F. D. Hafer March 10, 1997
F. D. Hafer, Director
84
<PAGE>
<TABLE>
Exhibit 12-A
Page 1 of 2
GPU, INC. AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $3,918,089 $3,804,656 $3,649,516 $3,596,090 $3,434,153
OPERATING EXPENSES 3,243,238 3,070,150 3,008,944 2,868,135 2,821,710
Interest portion
of rentals (A) 26,093 27,362 24,655 25,536 28,374
Fixed charges of
service company
subsidiaries (B) 3,695 3,666 3,637 4,204 4,366
Net expense 3,213,450 3,039,122 2,980,652 2,838,395 2,788,970
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 10,672 14,671 11,827 9,936 12,580
Other income /
(expense), net 28,151 216,110 (152,236) (7,579) 30,503
Fixed charges of
the GPU International
Group (C) 29,683 1,717 15 4 9
Total other income
and deductions 68,506 232,498 (140,394) 2,361 43,092
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 773,145 $ 998,032 $ 528,470 $ 760,056 $ 688,275
FIXED CHARGES:
Interest on funded
indebtedness $ 216,352 $ 192,488 $ 186,259 $ 191,142 $ 178,176
Other interest (D) 59,398 56,396 47,498 21,525 19,604
Preferred stock dividends
of subsidiaries on a
pretax basis (F) 24,008 26,756 30,314 46,270 58,637
Interest portion
of rentals (A) 26,093 27,362 24,655 25,536 28,374
Total fixed
charges $ 325,851 $ 303,002 $ 288,726 $ 284,473 $ 284,791
RATIO OF EARNINGS
TO FIXED CHARGES 2.37 3.29 1.83 2.67 2.42
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS (E) 2.37 3.29 1.83 2.67 2.42<PAGE>
Exhibit 12-A
Page 2 of 2
GPU, INC. AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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) Represents fixed charges of GPU Service, Inc. and GPU Nuclear, Inc. which are accounted
for as operating expenses in the Company's consolidated income statement. The Company
has removed the fixed charges from operating expenses and included such amounts in fixed
charges as interest on funded indebtedness and other interest for this statement.
(C) Represents fixed charges of the GPU International Group which are accounted for as other
income and deductions in the Company's consolidated income statement. The Company
has removed the fixed charges from other income and deductions and included such amounts
in fixed charges as interest on funded indebtedness and other interest for this
statement.
(D) Includes dividends on subsidiary-obligated mandatorily redeemable preferred securities of
$28,888, $24,816 and $7,692 for the years 1996, 1995 and 1994, respectively.
(E) GPU Inc., the parent holding company, does not have any preferred stock outstanding,
therefore, the ratio of earnings to combined fixed charges and preferred stock dividends
is the same as the ratio of earnings to fixed charges.
(F) Calculation of preferred stock dividends of subsidiaries on a pretax basis is as follows:
<CAPTION>
Twelve Months Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income before provision
for income taxes and
preferred stock dividends
of subsidiaries and
gain on preferred
stock reacquisition $471,302 $721,786 $270,058 $521,853 $462,121
Income before preferred
stock dividends of
subsidiaries and gain
on preferred stock
reacquisition 304,583 457,080 184,380 324,430 288,193
Pretax earnings ratio 154.7% 157.9% 146.5% 160.9% 160.4%
Preferred stock dividends
of subsidiaries 15,519 16,945 20,692 28,757 36,557
Preferred stock dividends
of subsidiaries on
a pretax basis 24,008 26,756 30,314 46,270 58,637<PAGE>
Exhibit 12-B
Page 1 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $2,057,918 $2,035,928 $1,952,425 $1,935,909 $1,774,071
OPERATING EXPENSES 1,729,532 1,653,387 1,622,399 1,600,984 1,536,596
Interest portion
of rentals (A) 10,666 12,354 10,187 10,944 12,414
Net expense 1,718,866 1,641,033 1,612,212 1,590,040 1,524,182
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 6,647 7,824 4,143 4,756 8,071
Other income/
(expense), net 7,202 14,889 21,995 6,281 21,519
Total other income
and deductions 13,849 22,713 26,138 11,037 29,590
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 352,901 $ 417,608 $ 366,351 $ 356,906 $ 279,479
FIXED CHARGES:
Interest on funded
indebtedness $ 89,648 $ 92,602 $ 93,477 $ 100,246 $ 92,942
Other interest (B) 21,847 16,337 14,726 6,530 4,873
Interest portion
of rentals (A) 10,666 12,354 10,187 10,944 12,414
Total fixed
charges $ 122,161 $ 121,293 $ 118,390 $ 117,720 $ 110,229
RATIO OF EARNINGS
TO FIXED CHARGES 2.89 3.44 3.09 3.03 2.54
Preferred stock
dividend requirement 13,072 14,457 14,795 16,810 20,604
Ratio of income before
provision for
income taxes to
net income (C) 147.6% 148.8% 152.3% 151.1% 144.2%
Preferred stock
dividend requirement
on a pretax basis 19,294 21,512 22,529 25,400 29,711
Fixed charges, as above 122,161 121,293 118,390 117,720 110,229
Total fixed charges
and preferred stock dividends $ 141,455 $ 142,805 $ 140,919 $ 143,120 $ 139,940
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 2.50 2.92 2.60 2.49 2.00<PAGE>
Exhibit 12-B
Page 2 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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
$10,700 and $6,628 for the years 1996 and 1995, respectively.
(C) Represents income before provision for income taxes divided by net income as follows:
<CAPTION>
Twelve Months Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income before provision
for income taxes $230,740 $296,315 $247,961 $239,187 $169,250
Net Income 156,303 199,089 162,841 158,344 117,361<PAGE>
Exhibit 12-C
Page 1 of 2
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $910,408 $854,674 $801,303 $801,487 $821,823
OPERATING EXPENSES 733,664 686,183 655,805 624,025 660,497
Interest portion
of rentals (A) 5,367 5,186 5,315 4,932 5,817
Net expense 728,297 680,997 650,490 619,093 654,680
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 1,245 2,430 3,847 2,919 2,858
Other income/
(expense), net 1,220 129,660 (98,953) (5,581) 3 229
Total other income
and deductions 2,465 132,090 (95,106) (2,662) 6,087
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $184,576 $305,767 $ 55,707 $179,732 $173,230
FIXED CHARGES:
Interest on funded
indebtedness $ 45,373 $ 45,844 $ 43,270 $ 42,887 $ 38,882
Other interest (B) 14,436 14,147 15,137 6,990 6,039
Interest portion
of rentals (A) 5,367 5,186 5,315 4,932 5,817
Total fixed
charges $ 65,176 $ 65,177 $ 63,722 $ 54,809 $ 50,738
RATIO OF EARNINGS
TO FIXED CHARGES 2.83 4.69 0.87 3.28 3.41
Preferred stock
dividend requirement 944 944 2,960 6,960 10,289
Ratio of income before
provision for
income taxes to
net income (C) 172.9% 162.0% 174.8% 160.4% 167.6%
Preferred stock
dividend requirement
on a pretax basis 1,632 1,529 5,174 11,164 17,244
Fixed charges, as above 65,176 65,177 63,722 54,809 50,738
Total fixed charges
and preferred
stock dividends $ 66,808 $ 66,706 $ 68,896 $ 65,973 $ 67,982
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 2.76 4.58 0.81 2.72 2.55<PAGE>
Exhibit 12-C
Page 2 of 2
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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
$9,000, $9,000 and $3,200 for the years 1996, 1995 and 1994, respectively.
(C) Represents income before provision for income taxes divided by net income as follows:
<CAPTION>
Twelve Months Ended December 31,
1996 1995 1994* 1993 1992
<S> <C> <C> <C> <C> <C>
Income before provision
for income taxes $119,400 $240,590 $ - $124,923 $122,492
Net Income 69,067 148,540 - 77,875 73,077
* For the twelve months ended December 31, 1994, the ratio was based on the composite income
tax rate for 1994.<PAGE>
Exhibit 12-D
Page 1 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $1,019,645 $981,329 $944,744 $908,280 $896,337
OPERATING EXPENSES 840,288 793,320 776,215 688,587 678,478
Interest portion
of rentals (A) 4,490 4,911 3,632 3,406 3,945
Net expense 835,798 788,409 772,583 685,181 674,533
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 2,780 4,417 3,837 2,261 1,651
Other income/
(expense), net (825) 56,454 (71,287) (7,021) (179)
Total other income
and deductions 1,955 60,871 (67,450) (4,760) 1,472
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $185,802 $253,791 $104,711 $218,339 $223,276
FIXED CHARGES:
Interest on funded
indebtedness $ 49,654 $ 49,875 $ 46,439 $ 44,714 $ 42,615
Other interest (B) 16,300 17,616 11,913 5,255 6,415
Interest portion
of rentals (A) 4,490 4,911 3,632 3,406 3,945
Total fixed
charges $ 70,444 $ 72,402 $ 61,984 $ 53,375 $ 52,975
RATIO OF EARNINGS
TO FIXED CHARGES 2.64 3.51 1.69 4.09 4.21
Preferred stock
dividend requirement 1,503 1,544 2,937 4,987 5,664
Ratio of income before
provision for
income taxes to
net income (C) 165.2% 163.4% 134.4% 172.3% 170.7%
Preferred stock
dividend requirement
on a pretax basis 2,483 2,523 3,946 8,594 9,671
Fixed charges, as above 70,444 72,402 61,984 53,375 52,975
Total fixed charges
and preferred
stock dividends $ 72,927 $ 74,925 $ 65,930 $ 61,969 $ 62,646
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 2.55 3.39 1.59 3.52 3.56<PAGE>
Exhibit 12-D
Page 2 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND 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, $9,188 and $4,492 for the years 1996, 1995 and 1994, respectively.
(C) Represents income before provision for income taxes divided by net income as follows:
<CAPTION>
Twelve Months Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income before provision
for income taxes $115,358 $181,389 $42,727 $164,964 $170,301
Net Income 69,809 111,010 31,799 95,728 99,744
</TABLE>
<PAGE>
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
GPU, INC. Page
Supplementary Data
GPU Energy Companies' Statistics F-3
Selected Financial Data F-4
Quarterly Financial Data F-5
Combined Management's Discussion and Analysis of
Financial Condition and Results of Operations F-6
Financial Statements
Report of Independent Accountants F-39
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-40
Balance Sheets as of December 31, 1996 and 1995 F-41
Statements of Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994 F-43
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-44
Combined Notes to Consolidated Financial Statements F-45
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1994-1996 F-100
JERSEY CENTRAL POWER & LIGHT COMPANY
Supplementary Data
Company Statistics F-101
Selected Financial Data F-102
Quarterly Financial Data F-103
Financial Statements
Report of Independent Accountants F-104
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-105
Balance Sheets as of December 31, 1996 and 1995 F-106
Statements of Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994 F-108
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-109
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1994-1996 F-110
F-1
<PAGE>
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
METROPOLITAN EDISON COMPANY
Supplementary Data
Company Statistics F-111
Selected Financial Data F-112
Quarterly Financial Data F-113
Financial Statements
Report of Independent Accountants F-114
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-115
Balance Sheets as of December 31, 1996 and 1995 F-116
Statements of Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994 F-118
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-119
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1994-1996 F-120
PENNSYLVANIA ELECTRIC COMPANY
Supplementary Data
Company Statistics F-121
Selected Financial Data F-122
Quarterly Financial Data F-123
Financial Statements
Report of Independent Accountants F-124
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-125
Balance Sheets as of December 31, 1996 and 1995 F-126
Statements of Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994 F-128
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-129
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1994-1996 F-130
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>
GPU, Inc. and Subsidiary Companies
GPU ENERGY COMPANIES' STATISTICS
<CAPTION>
For The Years Ended December 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Capacity at System Peak (in MW):
Company owned 6,680 6,637 6,655 6,735 6,718 6,737
Contracted 3,536 3,604 3,416 3,236 3,360 3,045
Total capacity (a) 10,216 10,241 10,071 9,971 10,078 9,782
Hourly Peak Load (in MW):
Summer peak 8,497 9,101 8,521 8,533 8,067 8,271
Winter peak 7,756 7,861 7,683 7,167 7,173 7,119
Reserve at system peak (%) 20.2 12.5 18.2 16.9 24.9 18.3
Load factor (%) (b) 64.2 57.5 61.7 60.9 62.3 61.1
Sources of Energy (in thousands of MWH):
Coal 18,133 17,500 16,548 16,969 18,123 17,942
Nuclear 11,439 11,582 10,216 10,614 11,449 8,598
Gas, hydro & oil 812 1,019 1,071 575 409 1,187
Net generation 30,384 30,101 27,835 28,158 29,981 27,727
Utility purchases and interchange 8,795 10,297 10,326 11,984 11,931 14,255
Nonutility purchases 11,046 10,712 8,810 8,383 8,070 5,934
Total sources of energy 50,225 51,110 46,971 48,525 49,982 47,916
Company use, line loss, etc (5,777) (5,357) (4,313) (5,166) (4,843) (4,775)
Total electric energy sales 44,448 45,753 42,658 43,359 45,139 43,141
Fuel Expense (in millions):
Coal $263 $251 $260 $266 $266 $285
Nuclear 70 74 65 66 69 60
Gas & oil 38 38 39 32 21 44
Total $371 $363 $364 $364 $356 $389
Power Purchased and Interchanged (in millions):
Utility purchases and interchange $ 267 $ 351 $367 $406 $430 $508
Nonutility purchases 739 671 528 491 471 343
Total $1,006 $1,022 $895 $897 $901 $851
Electric Energy Sales (in thousands of MWH):
Residential 15,298 14,802 14,788 14,498 13,725 13,852
Commercial 14,017 13,544 13,301 12,919 12,333 12,336
Industrial 12,093 11,982 11,983 11,699 11,901 12,035
Other 1,105 1,143 1,245 1,221 1,303 1,369
Sales to customers 42,513 41,471 41,317 40,337 39,262 39,592
Sales to other utilities 1,935 4,282 1,341 3,022 5,877 3,549
Total 44,448 45,753 42,658 43,359 45,139 43,141
Operating Revenues (in millions):
Residential $1,599 $1,542 $1,503 $1,465 $1,339 $1,341
Commercial 1,324 1,258 1,215 1,169 1,079 1,060
Industrial 803 780 774 755 752 753
Other 71 73 78 89 89 93
Sales to customers 3,797 3,653 3,570 3,478 3,259 3,247
Sales to other utilities 57 101 24 67 127 84
Total electric energy sales 3,854 3,754 3,594 3,545 3,386 3,331
Other revenues 64 51 56 51 48 41
Total $3,918 $3,805 $3,650 $3,596 $ 3,434 $3,372
Price per KWH (in cents):
Residential 10.51 10.35 10.18 10.07 9.73 9.67
Commercial 9.47 9.25 9.12 9.04 8.72 8.59
Industrial 6.65 6.51 6.46 6.47 6.32 6.25
Total sales to customers 8.96 8.77 8.64 8.61 8.28 8.20
Total electric energy sales 8.70 8.17 8.43 8.17 7.49 7.72
Kilowatt-hour Sales per Residential Customer 8,741 8,539 8,646 8,575 8,215 8,374
Customers at Year-End (in thousands) 1,997 1,976 1,949 1,925 1,901 1,879
(a) Summer ratings at December 31, 1996 of owned and contracted capacity were 6,606 MW and 3,901 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-3
<PAGE>
GPU, Inc. and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION>
For The Years Ended December 31, 1996* 1995** 1994*** 1993 1992 1991****
<S> <C> <C> <C> <C> <C> <C>
Common Stock Data
Earnings per average common share $ 2.47 $ 3.79 $ 1.42 $ 2.65 $ 2.27 $ 2.49
Cash dividends paid per share $ 1.925 $ 1.86 $ 1.775 $ 1.65 $ 1.575 $ 1.45
Book value per share $ 25.21 $ 24.66 $ 22.31 $ 22.69 $ 21.46 $ 20.81
Closing market price per share $ 33 5/8 $ 34 $ 26 1/4 $ 30 7/8 $ 27 5/8 $ 27 1/4
Common shares outstanding (In Thousands):
Average 120,743 116,214 115,160 111,779 110,840 110,798
At year-end 120,870 120,619 115,315 115,041 110,857 110,815
Market price to book value at year-end 133% 138% 118% 136% 129% 131%
Price/earnings ratio 13.6 9.0 18.5 11.7 12.2 10.9
Return on average common equity 9.8% 16.0% 6.3% 11.9% 10.7% 12.0%
Financial Data (In Thousands)
Operating revenues $3,918,089 $3,804,656 $3,649,516 $3,596,090 $3,434,153 $3,371,599
Other operation and maintenance expense 1,090,888 963,609 1,076,925 909,786 856,773 891,314
Net income 298,352 440,135 163,688 295,673 251,636 275,882
Net utility plant in service 5,942,354 5,862,390 5,730,962 5,512,057 5,244,039 5,064,254
Total assets 10,941,219 9,849,516 9,209,777 8,829,255 7,730,738 7,408,834
Long-term debt 3,177,016 2,567,898 2,345,417 2,320,384 2,221,617 1,992,499
Long-term obligations under
capital leases 6,623 11,696 16,982 23,320 24,094 27,210
Subsidiary-obligated mandatorily
redeemable preferred securities 330,000 330,000 205,000 - - -
Cumulative preferred stock with
mandatory redemption 114,000 134,000 150,000 150,000 150,000 100,000
Capital expenditures:
GPU Energy companies 403,880 461,860 585,916 495,517 460,073 467,050
GPU International Group 573,587 164,831 73,835 16,426 747 5,338
Number of employees 9,345 10,286 10,555 11,963 11,969 12,018
* Results for 1996 reflect a decrease in earnings of $74.5 million (after-tax), or $0.62 per share, for costs related to
voluntary enhanced retirement programs.
** 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.
F-4
<PAGE>
GPU, Inc. and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
First Quarter Second Quarter
In Thousands Except
Per Share Data 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues $1,022,934 $913,972 $912,254 $864,648
Operating income 161,206 133,660 134,753 126,318
Net income 108,253 75,497 73,625 60,980
Earnings per share .90 .65 .61 .53
Third Quarter Fourth Quarter
In Thousands Except
Per Share Data 1996* 1995** 1996 1995
Operating revenues $1,058,223 $1,095,082 $924,678 $930,954
Operating income 93,166 184,581 119,154 115,992
Net income 35,821 234,278 80,653 69,380
Earnings per share .29 2.02 .67 .59
* Results for the third quarter of 1996 reflect charges of $74.5 million (after-tax),
or $0.62 per share, for costs related to voluntary enhanced retirement programs.
** 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.
F-5
</TABLE>
<PAGE>
GPU, Inc. and Subsidiary Companies
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GPU, Inc. (formerly General Public Utilities Corporation) owns all the
outstanding common stock of three domestic electric utilities -- Jersey
Central Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed)
and Pennsylvania Electric Company (Penelec). In 1996, the customer service,
transmission and distribution operations of these electric utilities began
doing business under the name GPU Energy. JCP&L, Met-Ed and Penelec
considered together are referred to as the "GPU Energy companies." The
generation operations of these three electric utilities are conducted by GPU
Generation, Inc. (Genco) and GPU Nuclear, Inc. (GPUN). GPU, Inc. also owns
all the common stock of GPU International, Inc. (formerly Energy Initiatives,
Inc.), GPU Power, Inc. (formerly EI Power, Inc.) and GPU Electric, Inc.
(formerly EI Energy, Inc.). Collectively, these are referred to as the "GPU
International Group." Corporate functions are performed by GPU Service, Inc.
(GPUS). All of these companies considered together are referred to as "GPU."
GPU RESULTS OF OPERATIONS
GPU's 1996 earnings were $298.4 million, or $2.47 per share, compared to
1995 earnings of $440.1 million, or $3.79 per share. GPU's return on average
common equity was 9.8% in 1996 compared to 16.0% in 1995.
Earnings for 1996 would have been $372.9 million, or $3.09 per share,
compared to earnings of $343.6 million, or $2.95 per share for 1995, if
nonrecurring items are excluded. Excluding these nonrecurring items, return
on average common equity for 1996 and 1995 would have been 12.1% and 12.7%,
respectively. The earnings increase, on this basis, was due primarily to
higher GPU International Group income, mainly resulting from the earnings
inclusion of Midlands Electricity plc (Midlands), in which a 50% interest was
acquired in 1996. Also affecting the 1996 earnings were lower reserve
capacity expense and gains associated with the reacquisition of preferred
stock through cash tender offers, which were primarily offset by higher
depreciation and other operation and maintenance (O&M) expenses.
The 1996 nonrecurring item consisted of a $74.5 million after-tax charge
to income, or $0.62 per share, for costs related to voluntary enhanced
retirement programs, which were accepted by 840 bargaining and nonbargaining
employees, representing about 8% of GPU's total workforce.
The 1995 nonrecurring items consisted of the reversal of a $104.9 million
after-tax expense, or $0.91 per share, for certain future Three Mile Island
Unit 2 (TMI-2) retirement costs written off by Met-Ed and Penelec in 1994.
This reversal of expense resulted from a 1995 Pennsylvania Supreme Court
decision restoring a 1993 Pennsylvania Public Utility Commission (PaPUC) order
allowing Met-Ed to recover such costs from customers. Partially offsetting
the effect of this 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.
F-6
<PAGE>
GPU, Inc. and Subsidiary Companies
GPU RESULTS OF OPERATIONS (continued)
Earnings in 1995 were $440.1 million, or $3.79 per share, compared to
1994 earnings of $163.7 million, or $1.42 per share. The increase in earnings
was due primarily to the effect of 1995 (discussed above) and 1994
nonrecurring items. Excluding these nonrecurring items, earnings for 1995
would have been $343.6 million, or $2.95 per share, compared to 1994 earnings
of $328.4 million, or $2.85 per share. Contributing to this increase were
higher new customer sales, partially offset by higher depreciation and
financing expenses.
The 1994 nonrecurring items included the write-off of $104.9 million
after-tax, or $0.91 per share (discussed above), of certain future TMI-2
retirement costs. Also in 1994, there was a charge to income of $76.1 million
after-tax, or $0.66 per share, for costs related to voluntary enhanced
retirement programs; 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.
OPERATING REVENUES:
Total revenues increased 3% to $3.9 billion in 1996, after increasing
4.3% to $3.8 billion in 1995. The components of these changes are as follows:
(In Millions)
1996 1995
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 24.9 $ 14.7
Energy revenues 67.8 141.6
Other revenues 20.7 (1.2)
Increase in revenues $113.4 $155.1
Kilowatt-hour revenues
1996 and 1995
The 1996 and 1995 increases in KWH revenues were due primarily to
increased new commercial and residential customer sales, partially offset by
lower weather-related sales to residential customers.
1996 KWH Customer Sales by Service Class
Residential 36%
Commercial 33%
Industrial/Other 31%
F-7
<PAGE>
GPU, Inc. and Subsidiary Companies
GPU RESULTS OF OPERATIONS (continued)
Energy revenues
1996 and 1995
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The 1996 increase was due primarily to higher energy cost rates in
effect and increased commercial and residential customer sales, partially
offset by lower sales to other utilities. Energy revenues in 1995 increased
primarily from additional sales to other utilities and higher energy cost
rates.
Other revenues
1996 and 1995
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. However, increased transmission revenues contributed to earnings in
1996.
OPERATING EXPENSES:
Power purchased and interchanged (PP&I)
1996 and 1995
Generally, changes in the energy component of PP&I expense do not
significantly affect earnings since these cost increases are substantially
recovered through the GPU Energy companies' energy adjustment clauses.
However, lower reserve capacity expense, which is a component of PP&I,
contributed to earnings in 1996.
Fuel and Deferral of energy costs, net
1996 and 1995
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues. However, earnings for 1996 benefitted from a $6.3 million pre-tax
performance award earned by JCP&L for the efficient operation of its nuclear
generating stations.
Other operation and maintenance
1996
The 1996 increase in other O&M expenses was due primarily to a $122.7
million pre-tax charge related to the early retirement programs. Partially
offsetting the effect of these was a 1995 write-off of $14.7 million pre-tax,
for TMI-2 monitored storage costs deemed not probable of recovery through
ratemaking. Greater storm damage and emergency repairs in 1996 also
contributed to the increase.
F-8
<PAGE>
GPU, Inc. and Subsidiary Companies
GPU RESULTS OF OPERATIONS (continued)
1995
The 1995 decrease in other O&M expenses was due to a $127 million pre-tax
charge in 1994 related to early retirement programs. Partially offsetting the
effect of these was the 1995 write-off of $14.7 million for TMI-2 monitored
storage costs.
Depreciation and amortization
1996
The 1996 increase in depreciation and amortization expense was due
primarily to additions to plant in service and higher depreciation rates for
Met-Ed and Penelec.
1995
The 1995 increase in depreciation and amortization expense was due
primarily to additions to plant in service.
Taxes, other than income taxes
1996 and 1995
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
1996
The 1996 decrease in other income/(expense) was due primarily to the
reversal in 1995, of $183.9 million pre-tax, of certain future TMI-2
retirement costs written off in 1994 by Met-Ed and Penelec. This reversal of
expense resulted from a 1995 Pennsylvania Supreme Court decision restoring a
1993 PaPUC order allowing Met-Ed to recover such costs from customers. This
was partially offset by higher GPU International Group income, due primarily
to the inclusion of Midlands' income (see Note 6 to GPU's Consolidated
Financial Statements).
1995
The 1995 increase in other income/(expense) was due largely to the
reversal of TMI-2 retirement costs written off in 1994. Also, 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 the collection of such costs by a nonaffiliated
utility, and $4 million was charged to expense for OPEB costs related to
employees who participated in the 1994 early retirement programs. Increased
GPU International Group income in 1995, due primarily to gains on the sale of
investment securities totaling $11.8 million pre-tax, also contributed to the
increase. Partially offsetting these was interest income in 1994 of $59.4
million pre-tax resulting from refunds of previously paid federal income taxes
related to the tax retirement of TMI-2.
F-9
<PAGE>
GPU, Inc. and Subsidiary Companies
GPU RESULTS OF OPERATIONS (continued)
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
1995
The 1995 decrease in other interest was due primarily to the GPU Energy
companies recognizing in 1994 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
1996 and 1995
The 1996 increase was due to JCP&L issuing in May 1995, through a
special-purpose finance subsidiary, $125 million stated value of mandatorily
redeemable preferred securities. The 1995 increase was due to Met-Ed and
Penelec issuing in 1994, through special-purpose finance subsidiaries, $100
million and $105 million, respectively, of these securities.
Gain on preferred stock reacquisition
1996
The 1996 increase was due to gains associated with Met-Ed and Penelec
reacquiring, through cash tender offers, portions of their preferred stock.
JCP&L RESULTS OF OPERATIONS
JCP&L's 1996 earnings were $143.2 million, compared to 1995 earnings of
$184.6 million. The decrease in earnings was due primarily to a $39.4 million
after-tax charge in 1996 for voluntary enhanced retirement programs (includes
JCP&L's share of costs allocated from Genco, GPUN and GPUS), which were
accepted by 341 bargaining and non-bargaining employees of JCP&L, or about
11.5% of its workforce. JCP&L's return on average common equity was 9.5% in
1996 compared to 13.1% in 1995. Excluding this nonrecurring item, 1996
earnings would have been $182.6 million and return on average common equity,
on this basis, would have been 12%.
Earnings in 1995 were $184.6 million, compared to 1994 earnings of $148
million. Contributing to this earnings increase were a $30.4 million after-
tax charge in 1994 for early retirement programs, lower other O&M expenses,
and higher new customer sales, partially offset by lower weather-related
sales. Also, in 1994 JCP&L 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 TMI-2.
F-10
<PAGE>
GPU, Inc. and Subsidiary Companies
JCP&L RESULTS OF OPERATIONS (continued)
OPERATING REVENUES:
Total revenues increased 1.1% to $2.06 billion in 1996, after increasing
4.3% to $2.04 billion in 1995. The components of these changes are as
follows:
(In Millions)
1996 1995
Kilowatt-hour revenues
(excluding energy portion) $ (7.2) $ 11.4
Energy revenues 22.1 72.3
Other revenues 7.1 (0.2)
Increase in revenues $ 22.0 $ 83.5
Kilowatt-hour revenues
1996
The 1996 decrease in KWH revenues was due to lower weather-related sales
to residential customers, partially offset by new residential and commercial
customer sales.
1996 KWH Customer Sales by Service Class
Residential 41%
Commercial 39%
Industrial/Other 20%
1995
The 1995 increase in KWH revenues was due to increases in new residential
and commercial customer sales, partially offset by lower weather-related
sales.
Energy revenues
1996 and 1995
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The 1996 increase in energy revenues was due primarily to higher
energy cost rates in effect and increased commercial customer sales, partially
offset by lower sales to other utilities. The 1995 increase was primarily due
to additional sales to other utilities and higher energy cost rates.
Other revenues
1996 and 1995
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-11
<PAGE>
GPU, Inc. and Subsidiary Companies
JCP&L RESULTS OF OPERATIONS (continued)
OPERATING EXPENSES:
Power purchased and interchanged
1996
Generally, changes in the energy component of PP&I expense do not
significantly affect earnings since these cost increases are substantially
recovered through the energy adjustment clause. However, lower reserve
capacity expense resulting primarily from reduced purchases from Pennsylvania
Power & Light Company contributed to the 1996 earnings.
1995
Earnings in 1995 were negatively affected by higher reserve capacity
expense resulting primarily from a Pennsylvania-New Jersey-Maryland
Interconnection (PJM Power Pool) prior year adjustment and one-time net
charges of $3.6 million pre-tax from another utility.
Fuel and Deferral of energy and capacity costs, net
1996 and 1995
Generally, changes in fuel expense and deferral of energy and capacity
costs do not affect earnings as they are offset by corresponding changes in
energy revenues. However, earnings for 1996 benefitted from a $6.3 million
pre-tax performance award earned by JCP&L for the efficient operation of its
nuclear generating stations.
Other operation and maintenance
1996
The 1996 increase in other O&M expenses was due in part to a $62.9
million pre-tax charge related to the early retirement programs. Payments
associated with the use of others' transmission facilities (primarily
associated companies) and greater storm damage and emergency repairs also
contributed to the increase.
1995
The 1995 decrease in other O&M expenses was due primarily to the effect
of a $46.9 million pre-tax charge in 1994 related to early retirement programs
and lower 1995 storm damage and emergency repairs.
Depreciation and amortization
1996
The 1996 increase in depreciation and amortization expense was due
primarily to additions to plant in service, partially offset by lower
depreciation rates; and higher regulatory asset amortizations.
1995
The 1995 increase in depreciation and amortization expense was due
primarily to additions to plant in service, partially offset by lower
regulatory asset amortizations.
F-12
<PAGE>
GPU, Inc. and Subsidiary Companies
JCP&L RESULTS OF OPERATIONS (continued)
Taxes, other than income taxes
1996 and 1995
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
1996
The 1996 decrease in other income was due largely to the write-off of $3
million pre-tax of nonutility generation (NUG) buyout costs related to the
Crown/Vista project (see Rate Matters section) and the write-off of obsolete
inventory in connection with the retirements of the Werner and Gilbert
generating stations.
1995
The 1995 decrease was due to the recognition in 1994 of 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. Partially offsetting the
effect of this was a 1994 write-off of $4.2 million pre-tax for a cancelled
project.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES:
Interest on long-term debt
1996
The decrease in interest on long-term debt was due to lower interest
rates on long-term debt.
Dividends on company-obligated mandatorily redeemable preferred securities
1996 and 1995
The 1996 increase was due to JCP&L issuing in May 1995, through a
special-purpose finance subsidiary, $125 million stated value of mandatorily
redeemable preferred securities.
MET-ED RESULTS OF OPERATIONS
Met-Ed's 1996 earnings were $71.8 million, compared to 1995 earnings of
$147.6 million. The decrease in earnings was due primarily to the effect of
1996 and 1995 nonrecurring items. Met-Ed's return on average common equity
was 10.3% in 1996 compared to 23.5% in 1995.
F-13
<PAGE>
GPU, Inc. and Subsidiary Companies
MET-ED RESULTS OF OPERATIONS (continued)
Excluding these nonrecurring items, earnings would have been $87.2
million, compared to earnings of $80.5 million for 1995. Return on average
common equity for 1996 and 1995, on this basis, would have been 12.4% and
13.4%, respectively. The earnings increase, on this basis, was due to
primarily higher customer sales, lower reserve capacity expense and gains
associated with the reacquisition of preferred stock.
The 1996 nonrecurring item consisted of a charge to income of $15.4
million after-tax for voluntary enhanced retirement programs (includes Met-
Ed's share of costs allocated from Genco, GPUN and GPUS), which were accepted
by 163 bargaining and non-bargaining employees of Met-Ed, or about 7.5% of its
workforce.
The 1995 nonrecurring items consisted of the reversal of a $72.8 million
after-tax expense, for certain future TMI-2 retirement costs written off in
1994. This reversal of expense resulted from a 1995 Pennsylvania Supreme
Court decision restoring a 1993 PaPUC order allowing Met-Ed to recover such
costs from customers. Partially offsetting the effect of this was a charge to
income of $5.7 million after-tax for TMI-2 monitored storage costs deemed not
probable of recovery through ratemaking.
Earnings in 1995 were $147.6 million, compared to a net loss of $2.2
million for 1994. The increase in earnings was due primarily to the net
effect of 1995 (discussed above) and 1994 nonrecurring items. Excluding these
nonrecurring items, earnings for 1995 would have been $80.5 million, compared
to 1994 earnings of $77.7 million. Contributing to this increase were higher
customer sales and lower other O&M expenses, partially offset by higher
depreciation and financing expenses.
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 costs related to voluntary enhanced retirement
programs; 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.
OPERATING REVENUES:
Total revenues increased 6.5% to $910.4 million in 1996, after increasing
6.7% to $854.7 million in 1995. The components of these changes are as
follows:
(In Millions)
1996 1995
Kilowatt-hour revenues
(excluding energy portion) $ 21.5 $ 4.8
Energy revenues 30.1 46.4
Other revenues 4.1 2.2
Increase in revenues $ 55.7 $ 53.4
F-14
<PAGE>
GPU, Inc. and Subsidiary Companies
MET-ED RESULTS OF OPERATIONS (continued)
Kilowatt-hour revenues
1996
The 1996 increase in KWH revenues was due to increased customer usage,
higher weather-related sales to residential customers and an increase in new
commercial and residential customer sales.
1996 KWH Customer Sales by Service Class
Residential 36%
Commercial 27%
Industrial/Other 37%
1995
The 1995 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.
Energy revenues
1996 and 1995
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The 1996 increase in energy revenues was due primarily to higher
energy cost rates in effect and increased commercial and residential customer
sales, partially offset by lower sales to other utilities. The 1995 increase
was due to higher energy cost rates and additional sales to other utilities.
Other revenues
1996 and 1995
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
1996 and 1995
Generally, changes in the energy component of PP&I expense do not
significantly affect earnings since these cost increases are substantially
recovered through the energy adjustment clause. However, lower reserve
capacity expense contributed to the 1996 and 1995 earnings.
Fuel and Deferral of energy costs, net
1996 and 1995
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-15
<PAGE>
GPU, Inc. and Subsidiary Companies
MET-ED RESULTS OF OPERATIONS (continued)
Other operation and maintenance
1996
The 1996 increase in other O&M expenses was due primarily to a $26.2
million pre-tax charge related to the early retirement programs and greater
storm damage and emergency repairs. Partially offsetting the effect of these
was a 1995 write-off of $10 million pre-tax, for TMI-2 monitored storage costs
deemed not probable of recovery through ratemaking.
1995
The 1995 decrease in other O&M expenses was due primarily to a $35.2
million pre-tax charge in 1994 related to early retirement programs.
Partially offsetting the effect of this was a 1995 write-off of $10 million
pre-tax for TMI-2 monitored storage costs.
Depreciation and amortization
1996
The 1996 decrease in depreciation and amortization was due to adjustments
in 1995 related to TMI-2 decommissioning. These adjustments more than offset
1996 increases in depreciation expense resulting from additions to plant in
service and higher depreciation rates.
1995
The 1995 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
1996 and 1995
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
1996
The 1996 decrease in other income/(expense) was due primarily to the
reversal in 1995, of $127.6 million pre-tax, of certain future TMI-2
retirement costs written off in 1994. This reversal of expense resulted from
a 1995 Pennsylvania Supreme Court decision restoring a 1993 PaPUC order
allowing Met-Ed to recover such costs from customers.
1995
The 1995 increase in other income/(expense) was due largely to the
reversal of TMI-2 retirement costs written off in 1994. Partially offsetting
F-16
<PAGE>
GPU, Inc. and Subsidiary Companies
MET-ED RESULTS OF OPERATIONS (continued)
the effect of this was interest income in 1994 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 DIVIDENDS ON PREFERRED SECURITIES:
Dividends on company-obligated mandatorily redeemable preferred securities
1995
The 1995 increase was due to Met-Ed issuing in August 1994, through a
special-purpose finance subsidiary, $100 million stated value of mandatorily
redeemable preferred securities.
Gain on preferred stock reacquisition
1996
The 1996 increase was due to gains associated with Met-Ed reacquiring,
through cash tender offers, portions of its preferred stock.
PENELEC RESULTS OF OPERATIONS
Penelec's 1996 earnings were $73.9 million, compared to 1995 earnings of
$109.5 million. The decrease in earnings was due primarily to the effect of
1996 and 1995 nonrecurring items. Penelec's return on average common equity
was 10% in 1996 compared to 15.8% in 1995.
Excluding these nonrecurring items, earnings would have been $93.6
million compared to earnings of $80.1 million for 1995. Return on average
common equity for 1996 and 1995, on this basis, would have been 12.6% and
11.8%, respectively. The earnings increase, on this basis, was due primarily
to higher customer sales and gains associated with the reacquisition of
preferred stock, which were partially offset by higher depreciation expense.
The 1996 nonrecurring item consisted of a charge to income of $19.7
million after-tax for voluntary enhanced retirement programs (includes
Penelec's share of costs allocated from Genco, GPUN and GPUS), which were
accepted by 165 bargaining and non-bargaining employees of Penelec or about
7.5% of its workforce.
The 1995 nonrecurring items consisted of the reversal of a $32.1 million
after-tax expense, for certain future TMI-2 retirement costs written off in
1994. This reversal of expense resulted from a 1995 Pennsylvania Supreme
Court decision restoring a 1993 PaPUC order allowing an affiliate (Met-Ed) to
recover such costs from customers. Partially offsetting the effect of this
was a charge to income of $2.7 million after-tax for TMI-2 monitored storage
costs deemed not probable of recovery through ratemaking.
F-17
<PAGE>
GPU, Inc. and Subsidiary Companies
PENELEC RESULTS OF OPERATIONS (continued)
Earnings in 1995 were $109.5 million, compared to 1994 earnings of $28.9
million. The increase in earnings was due primarily to the net effect of 1995
(discussed above) and 1994 nonrecurring items. Excluding these nonrecurring
items, earnings for 1995 would have been $80.1 million, compared to 1994
earnings of $90.7 million. Contributing to this earnings decrease were higher
other O&M expenses and increased financing expenses.
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 costs related to voluntary enhanced retirement
programs; a write-off of $10.6 million after-tax for certain 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.
OPERATING REVENUES:
Total revenues increased 3.9% to $1 billion in 1996, after increasing
3.9% to $981.3 million in 1995. The components of these changes are as
follows:
(In Millions)
1996 1995
Kilowatt-hour revenues
(excluding energy portion) $ 7.5 $ 1.7
Energy revenues 14.7 32.3
Other revenues 16.1 2.6
Increase in revenues $ 38.3 $ 36.6
Kilowatt-hour revenues
1996 and 1995
The 1996 and 1995 increases in KWH revenues were due primarily to
increased new commercial and residential customer sales. Higher weather-
related sales to residential customers also contributed to the 1996 increase.
1996 KWH Customer Sales by Service Class
Residential 29%
Commercial 31%
Industrial 34%
Other 6%
Energy revenues
1996 and 1995
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The 1996 increase in energy revenues was due primarily to higher
energy cost rates in effect and increased commercial and residential customer
F-18
<PAGE>
GPU, Inc. and Subsidiary Companies
PENELEC RESULTS OF OPERATIONS (continued)
sales, partially offset by lower sales to other utilities. The 1995 increase
was due primarily to additional sales to other utilities and higher energy
cost rates.
Other revenues
1996 and 1995
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. However, increased transmission revenues contributed to earnings in
1996.
OPERATING EXPENSES:
Power purchased and interchanged
1996 and 1995
Generally, changes in the energy component of PP&I expense do not
significantly affect earnings since these cost increases are substantially
recovered through the energy adjustment clause.
Fuel and Deferral of energy costs, net
1996 and 1995
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
1996
The 1996 increase in other O&M expenses was due to a $33.6 million
pre-tax charge related to the early retirement programs. Partially offsetting
the effect of this was a 1995 write-off of $4.7 million pre-tax, for TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
1995
The 1995 decrease in other O&M expenses was due to a $44.9 million
pre-tax charge in 1994 related to early retirement programs. Partially
offsetting the effect of this were a 1995 write-off of $4.7 million pre-tax
for TMI-2 monitored storage costs, and employee severance payments associated
with the management combination with Met-Ed in 1995.
Depreciation and amortization
1996 and 1995
The 1996 increase in depreciation and amortization expense was due to
additions to plant in service and higher depreciation rates. The 1995
increase was due primarily to additions to plant in service.
F-19
<PAGE>
GPU, Inc. and Subsidiary Companies
PENELEC RESULTS OF OPERATIONS (continued)
Taxes, other than income taxes
1996 and 1995
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
1996
The 1996 decrease in other income/(expense) was due primarily to the
reversal in 1995, of $56.3 million pre-tax, of certain future TMI-2 retirement
costs written off in 1994. This reversal of expense resulted from a 1995
Pennsylvania Supreme Court decision restoring a 1993 PaPUC order allowing an
affiliate to recover such costs from customers. Partially offsetting this was
a write-off in 1995 of $2.5 million of deferred OPEB costs related to
wholesale customers which were deemed not recoverable through ratemaking.
1995
The 1995 increase in other income/(expense) was due largely to the
reversal of TMI-2 retirement costs of $56.3 million pre-tax written off in
1994. 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,
Penelec 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 DIVIDENDS ON PREFERRED SECURITIES:
Dividends on company-obligated mandatorily redeemable preferred securities
1995
The 1995 increase was due to Penelec issuing in July 1994, through a
special-purpose finance subsidiary, $105 million stated value of mandatorily
redeemable preferred securities.
Gain on preferred stock reacquisition
1996
The 1996 increase was due to gains associated with Penelec reacquiring,
through cash tender offers, portions of its preferred stock.
F-20
<PAGE>
GPU, Inc. and Subsidiary Companies
The following sections of Management's Discussion and Analysis of
Financial Condition and Results of Operations contain certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements made that are not historical facts are forward-looking
and, accordingly, involve risks and uncertainties that could cause actual
results or outcomes to differ materially from those expressed in the
forward-looking statements. Although such forward-looking statements have
been based on reasonable assumptions, there is no assurance that the expected
results will be achieved. Some of the factors that could cause actual results
to differ materially include, but are not limited to: the effects of
regulatory decisions; changes in law and other governmental actions and
initiatives; the impact of deregulation and increased competition in the
industry; industry restructuring; expected outcomes of legal proceedings;
generating plant performance; fuel prices and availability; and uncertainties
involved with foreign operations including political risks and foreign
currency fluctuations.
GPU INTERNATIONAL GROUP
The GPU International Group develops, owns and operates electric
generation, transmission and distribution facilities and supply businesses in
the U.S. and foreign countries. It has also made investments in certain
advanced technologies related to the electric power industry. The GPU
International Group has ownership interests in distribution and supply
businesses in England and Australia, ten operating cogeneration plants in the
U.S. totaling 895 MW (of which the GPU International Group's equity interest
represents 261 MW) of capacity, and eleven operating generating facilities
located in foreign countries totaling 2,686 MW (of which the GPU International
Group's equity interest represents 546 MW) of capacity.
The GPU International Group is continuing to pursue investment
opportunities and has commitments, both domestically and internationally, in
five generating facilities under construction totaling 3,172 MW (of which the
GPU International Group's equity interest represents 816 MW) of capacity.
At December 31, 1996, GPU, Inc.'s aggregate investment in the GPU
International Group was $211 million; GPU, Inc. has also guaranteed up to an
additional $893 million of GPU International Group obligations. GPU, Inc. has
Securities and Exchange Commission (SEC) approval to finance investments in
foreign utility companies and exempt wholesale generators up to an aggregate
amount equal to 50% of GPU's average consolidated retained earnings, or
approximately $1 billion. At December 31, 1996, GPU, Inc. had remaining
authorization to finance an additional $25 million of such investments. A
request to increase this limit to 100% of GPU's average consolidated retained
earnings, or to approximately $2 billion at December 31, 1996, is pending.
Selected financial data for the GPU International Group is as follows:
F-21
<PAGE>
GPU, Inc. and Subsidiary Companies
(In Millions)
1996 1995 1994
Total assets $1,075 $380 $130
Liabilities and capital:
Common equity $ 232 $209 $118
Long-term debt 752 104 -
Notes payable - 2 -
Total capitalization 984 315 118
Minority interest 43 41 -
Other liabilities 48 24 12
Total liabilities and capital $1,075 $380 $130
Purchase of investments $ 574 $165 $ 74
Net income/(loss) $ 24 $ 9 $ (3)
For additional information on the GPU International Group's investments, see
Note 7 to GPU's Consolidated Financial Statements.
In 1996, GPU and Cinergy Corp. (Cinergy) formed Avon Energy Partners
Holdings (Holdings), a 50/50 joint venture, to acquire Midlands (see Note 6 to
GPU's Consolidated Financial Statements), an English regional electric
company. A wholly-owned subsidiary of Holdings purchased the outstanding
shares of Midlands through a cash tender offer of 1.7 billion pounds, or
approximately U.S. $2.6 billion. GPU's 50% interest in Holdings is held by EI
UK Holdings, Inc. (EI UK), a wholly-owned subsidiary of GPU Electric.
The Labour Party in the United Kingdom has proposed a windfall tax on
privatized utilities and other companies as part of its election campaign
platform. General elections in the United Kingdom are required to be held no
later than May 1997. If the Labour Party wins the general election, and the
tax is enacted as currently proposed, a charge to Midlands' earnings, which is
estimated to range from $110 million to $350 million (GPU's 50% share being
$55 million to $175 million), would be recorded in 1997, perhaps as early as
the second quarter. Due to the fact that (1) the Labour Party may not win the
election; (2) the windfall tax may not be enacted as currently proposed; (3)
the amount of the proposed tax may change; and (4) the Labour Party may change
its current platform, there is no certainty that this tax, if levied, would be
enacted as currently proposed.
With the acquisitions of Midlands in 1996 and Solaris Power in 1995, the
GPU International Group now has 50% ownership interests in foreign utility
companies having total fixed assets of approximately $1.6 billion. These
foreign utility companies annually provide about 20 billion kilowatt-hours of
electricity to 2.2 million customers in England and 240,000 customers in
Australia, with operating revenues of $2.5 billion in 1996.
In 1996, GPU Power, through a wholly-owned subsidiary, purchased the
rights to acquire up to a 40% interest in a venture which plans to construct a
300 MW coal generating plant in the Philippines. GPU Power's equity
contribution is expected to be approximately $40 million.
F-22
<PAGE>
GPU, Inc. and Subsidiary Companies
In 1996, GPU International and Ballard Power Systems of Canada agreed to
a business venture to develop, manufacture and market stationary fuel cell
power plants worldwide. Under the agreement, GPU International will invest
approximately $23 million for up to a 19.3% equity interest in the new
venture, of which $6 million was invested as of December 31, 1996.
Management expects that the GPU International Group will provide a
substantial portion of GPU's future earnings growth and intends on making
additional investments in its business activities. The timing and amounts of
these investments, however, will depend upon the availability of appropriate
opportunities and financing capabilities.
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs
The GPU Energy companies' capital needs were $535 million (JCP&L $235
million; Met-Ed $92 million; Penelec $190 million; Other $18 million) in 1996,
consisting of cash construction expenditures of $404 million (JCP&L $200
million; Met-Ed $77 million; Penelec $115 million; Other $12 million) and
amounts for maturing obligations of $131 million (JCP&L $35 million; Met-Ed
$15 million; Penelec $75 million; Other $6 million). In addition, the GPU
International Group made investments in 1996 totaling $574 million, due
primarily to the acquisition of Midlands (see Note 6 to GPU's Consolidated
Financial Statements).
During 1996, construction expenditures were used primarily for new
customer connections and to maintain and improve existing transmission and
distribution facilities. In 1997, construction expenditures for the GPU
Energy companies are estimated to be $402 million (JCP&L $185 million; Met-Ed
$90 million; Penelec $120 million; Other $7 million), consisting primarily of
$391 million (JCP&L $179 million; Met-Ed $88 million; Penelec $117 million;
Other $7 million) for ongoing system development. Expenditures for maturing
obligations will total $179 million (JCP&L $110 million; Met-Ed $40 million;
Penelec $26 million; Other $3 million) in 1997, and $139 million (JCP&L $12
million; Penelec $30 million; Other $97 million) in 1998. Management
estimates that a substantial portion of GPU's and the GPU Energy companies'
1997 capital needs will be satisfied through internally generated funds.
Cash Construction Expenditures
(In millions of dollars)
1992 1993 1994 1995 1996 1997*
GPU $460 $496 $586 $462 $404 $402
JCP&L $219 $197 $244 $218 $200 $185
Met-Ed 131 142 160 113 77 90
Penelec 110 150 174 131 115 120
Other - 7 8 - 12 7
* Estimate
The GPU Energy companies' capital leases are primarily for nuclear fuel.
F-23
<PAGE>
GPU, Inc. and Subsidiary Companies
Nuclear fuel capital leases at December 31, 1996 totaled $139 million (JCP&L
$95 million; Met-Ed $29 million; Penelec $15 million). When consumed,
portions of the presently leased material will be replaced by additional
leased material at an average annual rate (which is based on two full
operating cycles, or four years) of between $35 million and $50 million (JCP&L
$20 million - $25 million; Met-Ed $10 million - $15 million; Penelec $5
million - $10 million). In the event the needed nuclear fuel cannot be
leased, the associated capital requirements would have to be met by other
means.
Financing
GPU, Inc. has received SEC approval to issue and sell up to $300 million
of unsecured debentures through December 31, 2001 and up to seven million
shares of additional common stock through 1998. GPU, Inc. has no current
plans to issue these securities. Any sale of such securities will, among
other things, depend upon future capital requirements and market conditions.
As a result of Pennsylvania legislation (see Competitive Environment
section), Met-Ed and Penelec each plan to sell securitized transition bonds
through a separate trust or other similar entity, and would use the proceeds
to reduce capitalization and further mitigate stranded costs resulting from
customer choice. The timing and amount of any sale will depend upon PaPUC
approval of restructuring plans, as well as market conditions.
The GPU Energy companies have regulatory authority to issue and sell
first mortgage bonds (FMBs), including secured medium-term notes, and
preferred stock through various periods into 1997. JCP&L and Penelec intend
to seek regulatory approval to extend such authorizations through June 1999.
Under existing authorizations, JCP&L, Met-Ed and Penelec may issue these
senior securities in aggregate amounts of $145 million, $190 million and $120
million, respectively, of which up to $100 million for each company may
consist of preferred stock. The GPU Energy companies also have regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
In 1996, the GPU Energy companies issued an aggregate of $120 million
(JCP&L $80 million; Penelec $40 million) principal amount of FMBs. The
proceeds from these issuances were used to repay short-term debt and for other
corporate purposes. The GPU Energy companies redeemed $115.7 million (JCP&L
$25.7 million; Met-Ed $15 million; Penelec $75 million) principal amount of
FMBs with 1996 maturities.
Also in 1996, JCP&L redeemed $20 million stated value of cumulative
preferred stock pursuant to mandatory and optional sinking fund provisions.
In December 1996, Met-Ed and Penelec repurchased an aggregate of $11.4 million
stated value and $20 million stated value, respectively, of cumulative
preferred stock, through cash tender offers, at a total cost of approximately
$7.7 million and $14.4 million, respectively.
In January 1997, JCP&L redeemed an aggregate of $54.2 million principal
amount of FMBs, of which $24.2 million were redeemed prior to maturity.
F-24
<PAGE>
GPU, Inc. and Subsidiary Companies
The GPU Energy companies' bond indentures and articles of incorporation
include provisions that limit the amount of long-term debt, preferred stock
and short-term debt the companies may issue. The GPU Energy companies'
interest and preferred dividend coverage ratios are currently in excess of
indenture and charter restrictions. The amount of FMBs that the GPU Energy
companies could issue based on the bondable value of property additions is in
excess of amounts currently authorized.
GPU's cost of capital and ability to obtain external financing are
affected by its security ratings, which are periodically reviewed by the
credit rating agencies. The GPU Energy companies' FMBs are currently rated at
an equivalent of "BBB+" or higher by the major credit rating agencies, while
the preferred stock and mandatorily redeemable preferred securities have been
assigned an equivalent of "BBB" or higher. In addition, the GPU Energy
companies' commercial paper is rated as having good to high credit quality.
The Standard & Poor's (S&P) rating outlook is used to assess the
potential direction of an issuer's long-term debt rating over the intermediate
to longer-term. The rating outlook for the GPU Energy companies remained
constant in 1996. Met-Ed's "positive" rating outlook reflects expectations of
steady financial improvement based on economic growth, the successful buyout
of expensive NUG contracts, and continued strong nuclear operations. JCP&L's
and Penelec's "stable" rating outlooks reflect manageable construction
programs, minimal rate relief requirements and expectations of modest
strengthening in the service area economies. The S&P 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 business position currently
assigned to the GPU Energy companies is "low average" to "average"; in 1996,
the business position for Met-Ed was raised to "average."
Present plans call for the GPU Energy companies 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, further significant
investments by the GPU International Group, or otherwise, may require GPU,
Inc. to issue additional debt and/or common stock (see GPU International Group
section for a discussion of GPU, Inc.'s remaining investment authorization).
In 1996, GPU Electric, through its wholly-owned subsidiary EI UK, entered
into a five-year term loan agreement with a syndicate of banks which provides
for borrowings of up to 350 million pounds. As of December 31, 1996, EI UK
had aggregate borrowings outstanding under the GPU, Inc. guaranteed term loan
of 342 million pounds, or approximately U.S. $586 million. The proceeds from
these borrowings were used by EI UK to fund the acquisition of Midlands.
Also in 1996, GPU International, through a wholly-owned subsidiary,
completed nonrecourse construction financing for its 300 MW Mid-Georgia
project. As of December 31, 1996, GPU International had aggregate borrowings
outstanding for the construction of this project of $62 million, of which $22
million is guaranteed by GPU, Inc.
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GPU, Inc. and Subsidiary Companies
Capitalization
GPU'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:
GPU Target Range 1996 1995 1994
Common equity 45-48% 43% 47% 44%
Preferred equity 7-9 7 9 8
Notes payable and
long-term debt 48-43 50 44 48
100% 100% 100% 100%
JCP&L Target Range 1996 1995 1994
Common equity 48-51% 48% 49% 47%
Preferred equity 8-10 9 10 7
Notes payable and
long-term debt 44-39 43 41 46
100% 100% 100% 100%
Met-Ed Target Range 1996 1995 1994
Common equity 47-50% 48% 47% 46%
Preferred equity 8-10 8 9 10
Notes payable and
long-term debt 45-40 44 44 44
100% 100% 100% 100%
Penelec Target Range 1996 1995 1994
Common equity 45-48% 45% 45% 43%
Preferred equity 8-10 7 9 9
Notes payable and
long-term debt 47-42 48 46 48
100% 100% 100% 100%
In 1996, the quarterly dividend on GPU, Inc.'s common stock was increased
by 3.2% to an annualized rate of $1.94 per share. GPU, Inc.'s payout rate in
1996 was 62% of earnings (excluding the nonrecurring items). Management will
continue to review GPU, Inc.'s dividend policy to determine how to best serve
the long-term interests of shareholders.
COMPETITIVE ENVIRONMENT
The GPU Energy companies estimate that their total potential above market
costs relating to power purchase commitments, above market generation costs,
generating plant decommissioning costs and regulatory assets at year end 1998,
on a present value basis, could range from $4.5 billion to $8 billion (JCP&L
$2.5 billion to $4 billion; Met-Ed $1 billion to $2 billion; Penelec $1
billion to $2 billion). The estimate is subject to significant uncertainties
including the future market price of both electricity and other competitive
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GPU, Inc. and Subsidiary Companies
energy sources, as well as the timing of when these above market costs become
stranded due to customers choosing another supplier. As discussed below, both
the restructuring legislation in Pennsylvania and the proposed restructuring
plan in New Jersey provide mechanisms for utilities to recover, subject to
regulatory approval, their above market costs. These regulatory recovery
mechanisms in Pennsylvania and New Jersey will differ, but should allow for
the recovery of non-mitigable above market costs through either distribution
charges or separate nonbypassable charges to customers.
Recent Regulatory Actions
Since the enactment of the federal Public Utility Regulatory Policies Act
of 1978 (PURPA), market forces combined with state and federal actions have
led to increased competition in the electric utility industry. During 1996,
state and federal actions continued to move the electric utility industry in
this direction.
In 1996, Pennsylvania adopted comprehensive legislation which provides
for the restructuring of the electric utility industry. The legislation,
among other things, permits one-third of Pennsylvania retail consumers to
choose their electric supplier beginning January 1, 1999, and all retail
consumers by January 1, 2001. The legislation requires the unbundling of
rates for transmission, distribution and generation services. Utilities would
have the opportunity to recover up to 100% of their prudently incurred
stranded costs that result from customers choosing another supplier through a
PaPUC approved competitive transition charge, subject to certain conditions,
including that they attempt to mitigate these costs. For a discussion of
stranded costs, see the Competition and the Changing Regulatory Environment
section of Note 14 to GPU's Consolidated Financial Statements.
The legislation provides utilities the opportunity to reduce their
stranded costs through the issuance of transition bonds with maturities of up
to 10 years. The sale proceeds could be used to buy out or buy down
uneconomic NUG contracts, to reduce capitalization, or both. Principal and
interest payments on the bonds would be paid by all distribution service
customers through a nonbypassable intangible transition charge. Reduced
financing costs associated with the sale of transition bonds would be used to
provide rate reductions for all customers.
Pennsylvania electric utilities are required to submit restructuring
plans to the PaPUC between April 1, 1997 and September 30, 1997. Met-Ed and
Penelec are scheduled to file their respective plans with the PaPUC on June 1,
1997. The PaPUC is required to conduct public hearings prior to its approval
of these plans.
Effective January 1, 1997, transmission and distribution rates charged to
Pennsylvania retail customers are generally capped for 4 1/2 years, and
generation rates are generally capped for up to nine years. Transmission and
distribution of electricity will continue as a regulated monopoly and the
PaPUC will ensure that adequate electrical reserves exist to maintain reliable
service. An independent system operator (ISO) will be responsible for
coordinating the generation and transmission of electricity in an efficient
and nondiscriminatory manner.
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GPU, Inc. and Subsidiary Companies
As part of this restructuring, Met-Ed and Penelec filed, in December
1996, tariff supplements with the PaPUC requesting approval to, among other
things, include their currently effective energy cost rates (ECR) and state
tax adjustment surcharges (STAS) in base rates, effective for all bills
rendered after January 1, 1997. The PaPUC has issued a tentative order
approving this request. Since rates that can be charged to customers for
generation are capped for up to nine years, Met-Ed's and Penelec's future
earnings will be subject to market volatility. Increases or decreases in fuel
costs will no longer be subject to deferred accounting and will be reflected
in net income as incurred. Met-Ed and Penelec will continue their efforts to
manage fuel costs and will mitigate, to the extent possible, any excessive
risks. As a result of including their ECRs in base rates and the cessation of
deferred energy accounting, both effective January 1, 1997, Met-Ed and Penelec
will experience step increases in reported revenues totaling approximately $25
million (Met-Ed $10 million; Penelec $15 million) in the first quarter of
1997.
The PaPUC has also issued a final order that sets forth the guidelines
for retail access pilot programs in Pennsylvania. These pilot programs shall
include residential, commercial and industrial class customers, and utilities
are required to commit about 5% of load to retail access programs and unbundle
their rates to allow customers to choose their electric generation supplier.
Met-Ed and Penelec expect to file with the PaPUC in the first quarter of 1997
their plan for a proposed pilot program that would offer certain customers
choice of their electric generation supplier.
In January 1997, the New Jersey Board of Public Utilities (NJBPU)
released Phase II of the New Jersey Energy Master Plan which recommends, among
other things, that certain electric retail customers be permitted to choose
their supplier beginning October 1998, expanding to include all retail
customers by April 2001. The NJBPU also recommends a near-term electric rate
reduction of 5% to 10% with the phase in of retail competition, and combined
with the effects of separate proposed modifications to the state's energy tax
policy, an aggregate rate reduction of at least 10% to 15% over time.
The NJBPU proposes in this report that utilities have an opportunity to
recover their stranded costs associated with generating capacity commitments
provided that they attempt to mitigate these costs. Also, NUG contracts which
cannot be mitigated will be eligible for stranded cost recovery. The
determination of stranded cost recovery by the NJBPU would be undertaken on a
case-by-case basis, with no guarantee for full recovery of these costs. A
separate market transition charge (MTC) would be established for each utility
to allow utilities to recover stranded costs over 4 to 8 years. The MTC would
be capped to ensure that customers experience the NJBPU's recommended overall
rate reduction of 5% to 10%. New Jersey is also considering securitization as
a mechanism to help mitigate stranded costs.
In addition, the NJBPU is proposing that beginning October 1998,
utilities unbundle their rates to allow customers to choose their electric
generation supplier. Transmission and distribution of electricity would
continue as a regulated monopoly and utilities would be responsible for
connecting customers to the system and for providing distribution service.
Transmission service would be provided by an ISO, who would be responsible for
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GPU, Inc. and Subsidiary Companies
maintaining the reliability of the regional power grid and would be regulated
by the Federal Energy Regulatory Commission (FERC).
The NJBPU intends to issue its final findings and recommendations to the
Governor and the Legislature for their consideration in March 1997. The NJBPU
proposes requiring electric utilities in New Jersey to file for review, by no
later than July 15, 1997, complete restructuring plans, stranded cost filings
and unbundled rate filings. The NJBPU intends to complete its review of these
filings by October 1998.
JCP&L is awaiting NJBPU approval of a plan to establish a one-year pilot
program offering customers in Monroe Township, New Jersey a choice of their
electric energy supplier. At the end of the first year, Monroe Township will
have the option of renewing the pilot. Monroe Township had been exploring the
possibility of establishing its own municipal electric system.
In 1996, FERC issued Order 888, which requires utilities to provide open
access to their transmission network, thereby encouraging a fully competitive
wholesale electric power market. It also requires electric utilities to,
among other things: (1) file nondiscriminatory open access transmission
tariffs which would be available to all wholesale sellers and buyers of
electricity; (2) accept service under these new tariffs for their own
wholesale transactions; and (3) be permitted to recover their legitimate and
verifiable stranded costs incurred when a wholesale customer purchases power
from another supplier using the utility's transmission system. While it does
not require corporate unbundling, which the FERC defines as the disposing of
ancillary services or creating separate affiliates to manage transmission
services, Order 888 does call for functional unbundling of transmission and
ancillary services.
In July 1996, the GPU Energy companies filed pro forma tariffs in
accordance with Order 888. These tariffs became effective on July 9, 1996.
In 1996, the GPU Energy companies, along with six other electric utility
members of the PJM Power Pool (together, the supporting PJM companies), filed
with the FERC a transmission tariff and agreements that would create a new
wholesale energy market to meet the requirements of Order 888, and to increase
competition in the Mid-Atlantic region. The Mid-Atlantic energy agreements
include: (1) the requirements and standards under which an ISO will operate
the energy market and transmission system; (2) a transmission owners agreement
and tariff that provides pool-wide transmission service with ten zones, each
reflecting an existing PJM company's transmission costs, and an average
transmission rate for service across or out of the power pool; (3)
establishment of a Mid-Atlantic spot energy market; and (4) requiring the
ownership of, or contracting for, sufficient transmission and generation
capacity, including the sharing of generating capacity reserves, to meet
reliability requirements. The proposed PJM tariff and agreements would
supersede the tariffs filed by the GPU Energy companies in July 1996. PECO
Energy Company (PECO), which opposes the supporting PJM companies' proposed
restructuring plan, has filed its own plan with the FERC.
A number of parties, including PECO, have intervened in this proceeding.
Among other things, the interveners contend that the proposal would leave
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GPU, Inc. and Subsidiary Companies
excessive control of the transmission system to the PJM member utilities and
that the plan's ten zone transmission pricing is anticompetitive and preserves
utility market power.
In a November 1996 order the FERC directed the PJM companies to develop a
new ISO proposal. According to the FERC, the proposals failed to satisfy
Order 888, particularly the requirement that ISOs be independent. Among other
things, the FERC noted that all stakeholders should participate in the
formation of an ISO, no party should exercise undue influence on its board of
directors, and no administrative oversight committee should control the
actions of the ISO, which should be able to develop its own operating
procedures. In December 1996, the PJM companies, including PECO, submitted to
the FERC a joint filing they believe is in compliance with Order 888. The
joint filing represents an interim solution and contains several unresolved
issues for which alternate proposals were presented to the FERC for
resolution. The joint filing includes a pool-wide pro forma tariff and
amendments to the PJM Interconnection Agreement to modify membership and
governance provisions.
As part of the joint compliance filing, the supporting PJM companies and
PECO filed separate briefs supporting their positions on a number of other
unresolved issues involving PJM restructuring, principally concerning
transmission tariff design and congestion pricing. The PJM companies hope to
reach consensus among themselves and with other stakeholders on all the issues
and file a new pro forma tariff and other agreements by no later than May 31,
1997.
In January 1997, legislation was introduced in Congress which provides
for a comprehensive restructuring of the electric utility industry, including,
retail choice for all utility customers beginning December 2003, the
opportunity for utilities to recover their prudently incurred stranded costs,
and repeal of both PURPA and the Public Utility Holding Company Act. It is
expected that other similar proposed legislation will be introduced in
Congress during 1997.
Managing the Transition
As competition in the electric utility industry increases, the price of
electricity and quality of customer services will be critical. GPU has been
active both on the federal and state levels in helping to shape electric
industry restructuring while protecting the interests of its shareholders and
customers, and is attempting to assess the impact that these competitive
pressures and other changes will have on its financial condition and results
of operations.
GPU has identified the following strategic objectives to guide it over
the next several years: (1) strengthen and expand 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; and (4) seek earnings growth from new core-
related business initiatives, including making investments in the GPU
International Group.
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GPU, Inc. and Subsidiary Companies
As part of its strategic planning, GPU is continuing to investigate
investment opportunities in various domestic and foreign power projects and
foreign utility systems, and intends on making additional investments which
would be financed with new debt or equity (see GPU International Group section
for a discussion of GPU, Inc.'s remaining investment authorization). GPU
believes it can achieve earnings growth by making these kinds of investments
and also gain operating experience in businesses that are already operating in
a competitive environment.
While GPU recognizes that there are risks inherent in making these
investments and that investment risk cannot be mitigated entirely, GPU
believes the best long-term approach to managing these risks is through
portfolio diversification. GPU's diversification policy is to reduce its
overall investment risk by: (1) investing in diverse electric businesses; (2)
achieving a balance between new development and construction of electric
facilities, and acquisitions of assets already in operation (thereby producing
near-term earnings without significant development or construction risk); and
(3) investing in diverse geographic regions.
In 1996, 493 bargaining employees (JCP&L 265; Met-Ed 90; Penelec 133;
Other 5) and 347 nonbargaining employees (JCP&L 76; Met-Ed 73; Penelec 32;
Other 166) accepted voluntary enhanced retirement programs, resulting in an 8%
reduction in GPU's total workforce and a third quarter pre-tax charge to
earnings of $122.7 million (JCP&L $62.9 million; Met-Ed $26.2 million; Penelec
$33.6 million). GPU funded the cost of these retirement programs in 1996.
In response to competitive forces and regulatory changes, GPU 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. GPU is aware
that a number of nonaffiliated utilities in the Northeast and in California
are in the process of selling some or all of their generation assets in
response to regulatory and competitive pressures.
The GPU Energy companies are continually evaluating the future financial
viability of their nuclear and fossil generation assets and will retire or
otherwise attempt to dispose of plants that become uneconomical. In 1996,
JCP&L retired its 58 MW Werner Unit 4 and 72 MW Gilbert Unit 3 generating
plants because of high operating costs. See the Rate Matters section
regarding the recovery of JCP&L's remaining investment in these plants.
GPU's 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. As a result of federal and state
actions noted above, the GPU Energy companies will be required to implement
rate unbundling for generation, transmission and distribution services. 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 GPU.
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GPU, Inc. and Subsidiary Companies
Nonutility Generation Agreements
Pursuant to the requirements of PURPA and state regulatory directives,
the GPU Energy companies have entered into power purchase agreements with NUGs
for the purchase of energy and capacity for periods of up to 26 years (JCP&L
25 years; Met-Ed 26 years; Penelec 25 years). Although a few of these
facilities are dispatchable, most are must-run and generally obligate the GPU
Energy companies to purchase, at the contract price, the output up to the
contract limits. While the GPU Energy companies thus far have been granted
recovery of their NUG costs from customers by the PaPUC and NJBPU, there can
be no assurance that they will continue to be able to recover these costs
throughout the terms of the related agreements. As of December 31, 1996,
facilities covered by these agreements having 1,631 MW (JCP&L 891 MW; Met-Ed
340 MW; Penelec 400 MW) of capacity were in service.
Due to the current availability of excess capacity in the marketplace,
the cost of near- to intermediate-term (i.e., one to four 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 lower
forecasted fuel prices.
The GPU Energy companies 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 continue to support legislative
efforts to repeal PURPA. They are also attempting to renegotiate, and in some
cases buy out, existing high cost long-term NUG agreements (see Managing
Nonutility Generation section).
RATE MATTERS
Pennsylvania adopted comprehensive legislation in 1996 which provides for
the restructuring of the electric utility industry. For additional
information and related rate matters, see the Competitive Environment section.
In 1996, the NJBPU approved a provisional settlement for a combined
levelized energy adjustment clause (LEAC) and Demand-Side Factor (DSF)
increase of $27.9 million annually. The DSF is applied to customer rates so
electric utilities can recover their demand-side management program costs,
which include activities designed to improve efficiency in customer
electricity use and load-management programs that reduce peak demand.
Also in 1996, JCP&L, the staff of the NJBPU and the Division of Ratepayer
Advocate reached an agreement on a variety of pending rate-related issues
(Final Settlement). An Administrative Law Judge (ALJ) issued a decision
recommending approval of the Final Settlement, but the NJBPU ordered
additional evidentiary hearings on the recovery of buyout costs for the
Freehold cogeneration project discussed below (see Managing Nonutility
Generation section). In December 1996, the ALJ issued a further decision
recommending that recovery of the Freehold buyout costs be approved, subject
to possible revocation or modification, if it is determined that the project
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GPU, Inc. and Subsidiary Companies
was not viable when it was bought out. On December 31, 1996, an Addendum
revising the Final Settlement was agreed upon by JCP&L, the staff of the NJBPU
and the Division of Ratepayer Advocate. In January 1997, the NJBPU staff
recommended that rate recovery of the Freehold buyout costs be permitted.
JCP&L expects the NJBPU to issue an order in the first quarter of 1997
approving the Final Settlement as revised. There can be no assurance as to
the outcome of this proceeding.
Provisions of the Final Settlement, as revised by the Addendum, include a
further annual increase of $7 million in the LEAC in addition to those noted
above and an annual reduction of $11 million in base rates. Base rates would
be frozen at that level until the year 2000, and the LEAC rate frozen through
the year 1999. JCP&L could seek a LEAC rate increase if the deferred LEAC
balance is projected to exceed $40 million, or a base rate increase under
certain other conditions, such as a major change in the current regulatory
environment. The Final Settlement provides for recovery in base rates,
beginning in 1998, of all OPEB costs recorded in accordance with Statement of
Financial Accounting Standards No. 106 including amounts previously deferred
and an increase in decommissioning expense to reflect the radiological
decommissioning and nonradiological removal costs estimated in the 1995 site-
specific studies performed for GPUN (see Nuclear Plant Retirement Costs
section of Note 14 to GPU's Consolidated Financial Statements). Also,
included in base rates would be recovery of the remaining investments in the
58 MW Werner Unit 4 and 72 MW Gilbert Unit 3 generating plants, which were
retired in 1996.
The Final Settlement also provides for recovery through the LEAC of:
(1) buyout costs up to $130 million, and 50% of any costs from $130 million to
$140 million, over a seven-year period for the termination of the Freehold
power purchase agreement; and (2) $14 million of the $17 million buyout costs,
over a two year period, for the termination of the agreement to purchase power
from the proposed 200 MW Crown/Vista project. JCP&L wrote-off the remaining
$3 million of buyout costs for the Crown/Vista project in the second quarter
of 1996.
In addition, the Final Settlement resolves the NJBPU's generic proceeding
regarding recovery of capacity costs associated with electric power purchases
from NUG projects which the Division of the Ratepayer Advocate claimed to
result in a double recovery. JCP&L would not have to refund any amounts
previously collected. The Final Settlement provides annual allowances for the
recovery of forecasted additions to nuclear plant. The Final Settlement also
provides that if JCP&L's return on equity exceeds 12.2%, excluding demand-side
management and nuclear performance incentives, the excess would be used to
reduce both customer rates and certain regulatory assets.
THE GPU ENERGY COMPANIES' SUPPLY PLAN
Under traditional retail regulation, supply planning in the electric
utility industry is directly related to projected growth in a utility's
franchise service territory. In light of retail access legislation enacted in
Pennsylvania and proposed in New Jersey, the extent to which competition will
affect the GPU Energy companies' supply plan remains uncertain (see
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GPU, Inc. and Subsidiary Companies
Competitive Environment section). As the GPU Energy companies prepare to
operate in a competitive environment, its supply planning strategy is being
modified. One planning effort is focused on providing for the needs of
existing retail customers who continue to receive energy supplied by the GPU
Energy companies and to whom the GPU Energy companies will continue to have an
obligation to serve. The second planning effort will focus on those new
customers who may choose the GPU Energy companies as their alternative
supplier.
Over the next five years, the GPU Energy companies' existing franchise
service territories are expected to experience an average annual growth in
sales of about 1.7% (JCP&L 1.7%; Met-Ed 1.9%; Penelec 1.7%), principally due
to continued economic growth and a slight increase in the number of
customer. To be able to meet this growth, if necessary, actual and projected
capacity and sources of energy are as follows:
Capacity
1996 2001
MW % MW %
Coal 3,024 29 2,746 25
Nuclear 1,405 13 1,405 13
Gas, hydro & oil 2,177 21 2,082 19
Contracted purchases 3,901 37 3,763 34
Uncommitted sources - - 1,021 9
Total 10,507 100 11,017 100
Sources of Energy
1996 2001
GWH % GWH %
Coal 18,133 36 18,581 36
Nuclear 11,439 23 10,338 20
Gas, hydro & oil 812 2 855 2
Contracted purchases 16,365 32 18,226 36
Spot market &
interchange purchases 3,476 7 3,279 6
Total 50,225 100 51,279 100
In response to this competitive climate in which it is likely a major
portion of the GPU Energy companies' existing customer base will be able to
choose their electric generation supplier, and the surplus capacity position
of nearby utilities, the GPU Energy companies' supply plan focuses
increasingly on short- to intermediate-term commitments, reliance on "spot"
market purchases, and avoidance of long-term firm commitments. The GPU Energy
companies' 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, the GPU Energy companies are continually
evaluating the future financial viability of their nuclear and fossil
generation assets and will retire or otherwise dispose of plants that become
uneconomical. The GPU Energy companies intend to take necessary actions to
avoid adding new capacity which would result in costs that may exceed future
market prices. In addition, the GPU Energy companies intend to continue to
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GPU, Inc. and Subsidiary Companies
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 Energy companies' supply plan includes contracted capacity from
NUGs, the replacement of expiring utility purchase contracts, the construction
of new peaking units, and the continued promotion of economic
energy-conservation and load-management programs. The supply plan also
includes the addition of approximately 1,021 MW (JCP&L 816 MW; Met-Ed 78 MW;
Penelec 127 MW) of currently uncommitted capacity.
JCP&L has constructed a 141 MW gas-fired combustion turbine at its
Gilbert generating station at a cost of approximately $50 million. The
facility was placed in service in July 1996.
In January 1996, JCP&L issued an all-supply source solicitation for the
supply of energy and capacity to meet its forecasted needs. In October 1996,
four potential suppliers were selected to provide capacity for four years,
beginning in June 1999. Contract negotiations are currently in progress to
provide for firm and optional purchases of capacity and energy from sources in
New Jersey, Pennsylvania and New York.
The GPU Energy companies will continue to evaluate additional economic
purchase opportunities as both demand and supply market conditions evolve. If
warranted, the GPU Energy companies will conduct further solicitations to fill
a part of their uncommitted supply needs.
Managing Nonutility Generation
The GPU Energy companies 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; and (4) initiating proceedings
before federal and state agencies, and in the courts, where appropriate. In
addition, the GPU Energy companies 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 GPU for
substantial damages. There can, however, be no assurance as to what extent
these efforts will be successful in whole or in part.
In 1996, JCP&L entered into an agreement with Freehold Cogeneration
Associates (Freehold), the developer of a proposed 110 MW gas-fired
cogeneration project, that terminates JCP&L's long-term obligation to purchase
power from the project. JCP&L expects that the buyout will save customers
$1.1 billion over the term of the power purchase contract based on the
projected cost of alternative sources of energy. JCP&L has agreed to pay
Freehold $125 million, of which $65 million was paid in 1996 and the remainder
to be paid over a three-year period. Associated with this buyout are certain
payments to third parties, which could be material in amount. As part of the
Final Settlement (see Rate Matters section), JCP&L would recover buyout costs
of up to $130 million, and 50% of any costs from $130 million to $140 million,
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GPU, Inc. and Subsidiary Companies
over a seven-year period.
In October 1996, JCP&L was named as a defendant in a breach of contract
lawsuit against Freehold brought by Nestle Beverage Company (Nestle) in New
Jersey Superior Court. Nestle is seeking damages of at least $75 million for
Freehold's alleged breach of the steam sales agreement and approximately
$412 million in damages against JCP&L for alleged unlawful interference with
that agreement. Nestle has also requested punitive damages in an unspecified
amount. JCP&L believes the claims against it are without merit (see Other
Commitments and Contingencies section of Note 14 to GPU's Consolidated
Financial Statements).
In February 1997, Met-Ed and Penelec entered into restructured power
purchase agreements with AES Power Corporation (AES) for 377 MW and 80 MW,
respectively, relating to a gas-fired combined-cycle facility that AES plans
to construct in Southeastern Pennsylvania. In 1996, AES purchased the
interests of the developers of the proposed Altoona, Blue Mountain and York
County NUG facilities and plans to construct a single fully dispatchable NUG
facility. The restructured power purchase agreements, which are subject to
PaPUC approval, are for an initial eight-year term, with options for
extensions. Met-Ed has paid $63.5 million to terminate the power purchase
agreements it had for the Blue Mountain and York County facilities. If the
restructured power purchase agreements with AES are not approved by the PaPUC,
Met-Ed and Penelec have agreed to pay AES up to an additional $28 million and
$8.3 million, respectively. Met-Ed has received approval to recover up to $35
million in buyout costs for the proposed York County project through its ECR
over three years, beginning in 1997 and intends to seek recovery of buyout
costs for the Blue Mountain project.
Penelec also entered into an agreement in 1996 with the developer of a
proposed 80 MW coal-fired cogeneration facility that was to be built in
western Pennsylvania. Under the agreement, Penelec paid the developer $11.7
million to cancel the project and both parties agreed to attempt to negotiate
a new, competitively priced power purchase agreement. In November 1996, the
power purchase agreement was amended to provide for a fully dispatchable
gas-fired combined-cycle cogeneration facility. The agreement, which is
subject to PaPUC approval, is for an initial eight-year term, with options for
extension. Penelec intends to seek recovery of the $11.7 million in buyout
costs.
In December 1996, Met-Ed and Penelec requested PaPUC approval to, among
other things, include their currently effective ECR in base rates including
NUG buyout costs already in the ECR, effective January 1, 1997, and defer for
possible future rate recovery NUG buyout costs not yet reflected in rates. In
January 1997, the PaPUC issued a tentative order approving this request. For
additional information, see the Competitive Environment section.
ENVIRONMENTAL MATTERS
The federal Clean Air Act Amendments of 1990 (Clean Air Act) require
substantial reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx)
emissions by the year 2000. The GPU Energy companies plan to install and
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GPU, Inc. and Subsidiary Companies
operate emission control equipment at some coal-fired facilities and switch to
lower sulfur coal in conjunction with the purchase of SO2 and NOx allowances
at other coal-fired facilities.
To comply with the Clean Air Act, the GPU Energy companies expect to
spend up to $277 million (JCP&L $46 million; Met-Ed $117 million; Penelec $114
million) for air pollution control equipment by the year 2000, of which
approximately $240 million (JCP&L $43 million; Met-Ed $95 million; Penelec
$102 million) has already been spent.
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 GPU Energy companies 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 $17 million (JCP&L $1 million; Met-Ed $9 million; Penelec $7
million) (included in the Clean Air Act total), beginning in 1997, to meet the
1999 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 (NAAQS) for ozone.
However, the specific requirements that will have to be met at that time have
not been finalized. In addition, the EPA has recently proposed changes to the
NAAQS for ozone, particulate matter and regional haze. The GPU Energy
companies are unable to determine what additional costs, if any, will be
incurred.
In developing their least-cost plan to comply with the Clean Air Act, the
GPU Energy companies will continue to evaluate major capital investments
compared to participation in the SO2 and NOx emission allowance market and the
use of low-sulfur fuel or retirement of facilities. These and other
compliance alternatives may result in the substitution of increased operating
expenses for capital costs.
For more information, see the Environmental Matters section of Note 14 to
GPU's Consolidated Financial Statements.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS
In 1996, a U.S. District Court granted a motion for summary judgment
filed by GPU, Inc. and the GPU Energy companies, dismissing all of the 2,100
pending claims for alleged personal injury and punitive damages filed as a
result of the TMI-2 accident in March 1979. The plaintiffs have appealed the
District Court's ruling to the Court of Appeals for the Third Circuit. There
can be no assurance as to the outcome of this litigation. For more
information, see the Nuclear Facilities section of Note 14 to GPU's
Consolidated Financial Statements.
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GPU, Inc. and Subsidiary Companies
EFFECTS OF INFLATION
As competition and deregulation accelerate, there can be no assurance as
to the future recovery of increased operating expenses or utility plant
investments through traditional ratemaking. As a result, the GPU Energy
companies are focusing less on the ratemaking process, and are actively trying
to find new ways to increase revenues, improve performance and reduce
operating costs to facilitate the competitive pricing of their products and
services.
ACCOUNTING MATTERS
In June 1996, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 125 (FAS 125), "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," which is effective
for transactions occurring after December 31, 1996. The accounting for the
GPU Energy companies' securitization of stranded costs is expected to be
covered by this statement. In February 1997, the staff of the SEC Chief
Accountant's Office concluded that in applying FAS 125 with respect to several
California utilities' securitization plans, the enforceable right of these
utilities to recover the cost of their "stranded assets" was not a contractual
right and therefore not a financial asset as defined by FAS 125. Under this
basis, a utility would not be able to remove the related "stranded assets"
from its balance sheet. The accounting for securitizations by other utilities
will be based on specific facts and circumstances of the individual utility,
including the legislation enacted in its state and the particular
securitization structure.
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GPU, Inc. and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
GPU, Inc.
Parsippany, New Jersey
We have audited the consolidated financial statements and financial statement
schedule of GPU, Inc. 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 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. Those 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 GPU, Inc. and
Subsidiary Companies as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 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
February 5, 1997
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<TABLE>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Revenues $3,918,089 $3,804,656 $3,649,516
Operating Expenses:
Fuel 371,396 363,211 363,834
Power purchased and interchanged 1,005,630 1,022,361 894,560
Deferral of energy costs, net 19,788 (5,902) (29,025)
Other operation and maintenance 1,090,888 963,609 1,076,925
Depreciation and amortization 400,253 377,650 353,705
Taxes, other than income taxes 355,283 349,221 348,945
Total operating expenses 3,243,238 3,070,150 3,008,944
Operating Income Before Income Taxes 674,851 734,506 640,572
Income taxes 166,572 173,955 152,047
Operating Income 508,279 560,551 488,525
Other Income and Deductions:
Allowance for other funds used during construction 2,249 5,113 4,712
Other income/(expense), net 28,151 216,110 (152,236)
Income taxes (147) (90,751) 66,369
Total other income and deductions 30,253 130,472 (81,155)
Income Before Interest Charges and
Preferred Dividends 538,532 691,023 407,370
Interest Charges and Preferred Dividends:
Interest on long-term debt 184,675 188,321 183,186
Other interest 28,809 30,364 39,227
Allowance for borrowed funds used during
construction (8,423) (9,558) (7,115)
Dividends on subsidiary-obligated mandatorily
redeemable preferred securities 28,888 24,816 7,692
Preferred stock dividends of subsidiaries 15,519 16,945 20,692
Gain on preferred stock reacquisition (9,288) - -
Total interest charges and preferred dividends 240,180 250,888 243,682
Net Income $ 298,352 $ 440,135 $ 163,688
Earnings Per Average Common Share $ 2.47 $ 3.79 $ 1.42
Average Common Shares Outstanding (In Thousands) 120,743 116,214 115,160
Cash Dividends Paid Per Share $ 1.925 $ 1.86 $ 1.775
The accompanying notes are an integral part of the consolidated financial statements.
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<PAGE>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $ 9,646,380 $9,295,630
Less, accumulated depreciation 3,704,026 3,433,240
Net utility plant in service 5,942,354 5,862,390
Construction work in progress 277,440 313,471
Other, net 168,029 193,356
Net utility plant 6,387,823 6,369,217
Other Property and Investments:
GPU International Group investments, net 924,397 288,044
Nuclear decommissioning trusts, at market 464,011 362,957
Nuclear fuel disposal trust, at market 101,661 95,393
Other, net 51,122 39,505
Total other property and investments 1,541,191 785,899
Current Assets:
Cash and temporary cash investments 31,604 18,422
Special deposits 47,545 14,877
Accounts receivable:
Customers, net 270,844 278,643
Other 91,637 69,773
Unbilled revenues 114,891 128,749
Materials and supplies, at average cost or less:
Construction and maintenance 187,130 194,769
Fuel 40,207 39,795
Deferred income taxes 32,148 20,090
Prepayments 81,168 42,746
Total current assets 897,174 807,864
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 356,517 368,712
Income taxes recoverable through future rates 527,385 527,584
Nonutility generation contract buyout costs 242,481 84,132
Unamortized property losses 100,310 105,729
Other 426,579 353,551
Total regulatory assets 1,653,272 1,439,708
Deferred income taxes 332,828 330,186
Other 128,931 116,642
Total deferred debits and other assets 2,115,031 1,886,536
Total Assets $10,941,219 $9,849,516
The accompanying notes are an integral part of the consolidated financial statements.
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<PAGE>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 314,458 $ 314,458
Capital surplus 750,569 746,449
Retained earnings 2,068,976 2,004,072
Total 3,134,003 3,064,979
Less, reacquired common stock, at cost 86,416 90,345
Total common stockholders' equity 3,047,587 2,974,634
Cumulative preferred stock:
With mandatory redemption 114,000 134,000
Without mandatory redemption 66,478 98,116
Subsidiary-obligated mandatorily redeemable
preferred securities 330,000 330,000
Long-term debt 3,177,016 2,567,898
Total capitalization 6,735,081 6,104,648
Current Liabilities:
Securities due within one year 178,583 131,246
Notes payable 265,547 123,890
Obligations under capital leases 143,818 159,565
Accounts payable 354,819 318,394
Taxes accrued 25,717 46,613
Deferred energy 15,559 (13,208)
Interest accrued 70,370 69,456
Other 282,193 252,306
Total current liabilities 1,336,606 1,088,262
Deferred Credits and Other Liabilities:
Deferred income taxes 1,562,979 1,466,060
Unamortized investment tax credits 133,572 145,375
Three Mile Island Unit 2 future costs 430,508 413,031
Regulatory liabilities 89,815 97,999
Other 652,658 534,141
Total deferred credits and other liabilities 2,869,532 2,656,606
Commitments and Contingencies (Note 14)
Total Liabilities and Capital $10,941,219 $9,849,516
The accompanying notes are an integral part of the consolidated financial statements.
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GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $2,004,072 $1,775,759 $1,813,490
Net income 298,352 440,135 163,688
Cash dividends declared on common stock (235,731) (218,288) (207,215)
Net unrealized gain on investments 704 5,731 6,549
Net foreign currency translation gain 3,054 959 -
Other adjustments, net (1,475) (224) (753)
Balance at end of year $2,068,976 $2,004,072 $1,775,759
The accompanying notes are an integral part of the consolidated financial statements.
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GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 298,352 $ 440,135 $ 163,688
Adjustments to reconcile income to cash provided:
Depreciation and amortization 422,506 381,618 363,099
Amortization of property under capital leases 55,642 57,324 56,793
Equity in undistributed (earnings)/losses
of affiliates (33,981) 3,597 1,014
Three Mile Island Unit 2 costs - (170,005) 183,944
Voluntary enhanced retirement programs 122,739 - 126,964
Nuclear outage maintenance costs, net (6,078) 7,407 (7,425)
Deferred income taxes and investment tax
credits, net 57,144 115,278 (80,139)
Deferred energy costs, net 19,719 (6,061) (28,463)
Accretion income (11,610) (12,520) (14,855)
Allowance for other funds used during
construction (2,249) (5,113) (4,713)
Changes in working capital:
Receivables 2,893 (54,993) 6,799
Materials and supplies 6,604 9,323 316
Special deposits and prepayments (36,294) 14,401 25,696
Payables and accrued liabilities (103,221) (18,651) (59,798)
Nonutility generation contract buyout costs (120,018) (38,499) -
Other, net (29,479) (58,008) (4,325)
Net cash provided by operating activities 642,669 665,233 728,595
Investing Activities:
Cash construction expenditures (403,880) (461,860) (585,916)
Contributions to decommissioning trusts (40,324) (37,541) (33,575)
GPU International Group investments (573,587) (164,831) (73,835)
Other, net (16,251) (3,834) (17,429)
Net cash used for investing activities (1,034,042) (668,066) (710,755)
Financing Activities:
Issuance of long-term debt 743,596 403,656 178,787
Increase/(Decrease) in notes payable, net 141,657 (223,962) 131,574
Retirement of long-term debt (150,763) (192,664) (197,232)
Capital lease principal payments (56,217) (50,611) (61,002)
Issuance of common stock - 157,545 -
Issuance of subsidiary-obligated mandatorily
redeemable preferred securities - 121,063 197,917
Redemption of preferred stock of subsidiaries (42,347) (6,049) (62,763)
Dividends paid on common stock (231,956) (215,413) (204,233)
Net cash provided/(required) by
financing activities 403,970 (6,435) (16,952)
Effect of exchange rate changes on cash 585 959 -
Net increase/(decrease) in cash and temporary cash
investments from above activities 13,182 (8,309) 888
Cash and temporary cash investments, beginning of year 18,422 26,731 25,843
Cash and temporary cash investments, end of year $ 31,604 $ 18,422 $ 26,731
Supplemental Disclosure:
Interest and preferred dividends paid $ 281,057 $ 254,906 $ 271,303
Income taxes paid $ 153,599 $ 187,361 $ 124,274
New capital lease obligations incurred $ 34,826 $ 54,478 $ 43,246
Common stock dividends declared but not paid $ 58,493 $ 54,718 $ 51,843
The accompanying notes are an integral part of the consolidated financial statements.
F-44
</TABLE>
<PAGE>
GPU, Inc. and Subsidiary Companies
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GPU, Inc. (formerly General Public Utilities Corporation), a Pennsylvania
corporation, is a holding company registered under the Public Utility Holding
Company Act of 1935. GPU, Inc. does not directly operate any utility
properties, but owns all the outstanding common stock of three domestic
electric utilities serving customers in New Jersey -- Jersey Central Power &
Light Company (JCP&L) -- and Pennsylvania -- Metropolitan Edison Company
(Met-Ed) and Pennsylvania Electric Company (Penelec). In 1996, the customer
service, transmission and distribution operations of these electric utilities
began doing business under the name GPU Energy. JCP&L, Met-Ed and Penelec
considered together are referred to as the "GPU Energy companies." The
fossil-fuel and hydroelectric generating facilities owned by these utilities
are operated and maintained by GPU Generation, Inc. (Genco), and the nuclear
generating units are operated and maintained by GPU Nuclear, Inc. (GPUN).
GPU, Inc. also owns all of the common stock of GPU International, Inc., GPU
Power, Inc. and GPU Electric, Inc. These three companies (collectively, the
GPU International Group) develop, own and operate generation, transmission and
distribution facilities and supply businesses in the United States and in
foreign countries. GPU Service, Inc. (GPUS), a service company, is also a
wholly-owned subsidiary of GPU, Inc. All of these companies considered
together are referred to as "GPU."
The Notes to Consolidated Financial Statements are presented below on a
combined basis for all of GPU, Inc., JCP&L, Met-Ed and Penelec.
1. 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 GPU Energy companies' accounting records
are maintained in accordance with the Uniform System of Accounts prescribed by
the Federal Energy Regulatory Commission (FERC) and adopted by the
Pennsylvania Public Utility Commission (PaPUC) and the New Jersey Board of
Public Utilities (NJBPU), and also comply with the Securities and Exchange
Commission's rules and regulations.
CONSOLIDATION
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany transactions and accounts are
eliminated in consolidation. GPU consolidates the accounts of its wholly-
owned subsidiaries and any affiliates in which it has a controlling financial
F-45
<PAGE>
GPU, Inc. and Subsidiary Companies
interest (generally evidenced by a greater than 50% ownership interest). GPU
also uses the equity method of accounting for investments in affiliates in
which it has the ability to exercise significant influence. (For further
information, see Note 7, GPU International Group Equity Investments.)
REGULATORY ACCOUNTING
In accordance with Statement of Financial Accounting Standards No. 71
(FAS 71), "Accounting for the Effects of Certain Types of Regulation," the
consolidated financial statements reflect assets and costs in accordance with
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
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.
In accordance with the provisions of FAS 71, the GPU Energy companies have
deferred certain costs pursuant to actions of the NJBPU, PaPUC and 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 Sheets, and regulatory liabilities
are reflected in the Deferred Credits and Other Liabilities section of the
Consolidated Balance Sheets. (For further information about regulatory assets
and liabilities, see Note 14, Commitments and Contingencies.)
CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52 (FAS
52), "Foreign Currency Translation," balance sheet accounts of the GPU
International Group'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 relevant period. The resulting translation adjustments
are not material and are included in Retained Earnings. Gains and losses
resulting from foreign currency transactions are included in Net Income.
REVENUES
The GPU Energy companies recognize electric operating revenues for
services rendered (including an estimate of unbilled revenues) to the end of
the relevant accounting period.
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GPU, Inc. and Subsidiary Companies
DEFERRED ENERGY COSTS
Energy costs are recognized in the period in which the related energy
clause revenues are billed. Through December 31, 1996, Met-Ed and Penelec
recovered energy costs through the Energy Cost Rate (ECR) mechanism and
deferred any differences between actual energy costs and amounts recovered.
Comprehensive legislation adopted in Pennsylvania in 1996, which provides for
the restructuring of the electric utility industry in the state, capped rates
that can be charged to customers for generation for up to nine years. In
December 1996, Met-Ed and Penelec filed a request with the PaPUC and received
a tentative order, effective for all bills rendered after January 1, 1997,
which allows their currently effective ECRs to be included in base rates. As
a result, effective January 1, 1997, Met-Ed and Penelec will no longer defer
energy costs. (For further information, see Competitive Environment,
Management's Discussion and Analysis.) JCP&L continues to recover energy-
related costs through the Levelized Energy Adjustment Clause (LEAC).
UTILITY PLANT
It is the policy of the GPU Energy companies 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
GPU 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. These rates,
on an aggregate composite basis, were as follows:
GPU JCP&L Met-Ed Penelec
1996 3.31% 3.58% 3.27% 2.82%
1995 3.22% 3.64% 3.07% 2.61%
1994 3.16% 3.62% 3.04% 2.49%
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. These rates, on an aggregate composite basis, were as
follows:
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GPU, Inc. and Subsidiary Companies
GPU JCP&L Met-Ed Penelec
1996 6.79% 6.88% 8.11% 6.15%
1995 8.05% 8.04% 8.62% 7.78%
1994 6.45% 5.35% 7.31% 7.19%
AMORTIZATION POLICIES
Accounting for TMI-2 and Forked River Investments:
JCP&L is collecting annual revenues for the amortization of Three Mile
Island Unit 2 (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 TMI-2 investment attributable to retail customers.
At December 31, 1996, $81 million is included in Unamortized property losses
on the Consolidated Balance Sheets 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 GPU Energy companies 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 in accordance with Statement of Financial Accounting
Standards No. 90, "Regulated Enterprises- Accounting for Abandonments and
Disallowances of Plant Costs."
Nuclear Fuel:
Nuclear fuel is amortized on a unit-of-production basis. Rates are
determined and periodically revised to amortize the cost of the fuel over its
useful life.
At December 31, 1996, the liability of the GPU Energy companies for future
contributions to the Federal Decontamination and Decommissioning Fund for the
cleanup of uranium enrichment plants operated by the Federal Government
amounted to $34 million (JCP&L $22 million; Met-Ed $8 million; Penelec $4
million), and was primarily reflected in Deferred Credits and Other
Liabilities-Other. Annual contributions, which began in 1993, are being made
over a 15-year period and are being recovered from customers. At
December 31, 1996, $36 million (JCP&L $23 million; Met-Ed $9 million; Penelec
$4 million) was recorded on the Consolidated Balance Sheets in Regulatory
assets-Other.
Intangibles:
The GPU International Group records goodwill for any amount paid over the
fair value of net assets it acquires, and other intangible assets for the
right to perform management services. As of December 31, 1996 and 1995, the
GPU International Group had goodwill and other intangibles, net of accumulated
amortization, of approximately $24 million and $32 million, respectively.
Goodwill and other intangibles are amortized on a straight-line basis over a
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GPU, Inc. and Subsidiary Companies
period of 40 years. Amortization expense, in the aggregate, amounted to $0.8
million and $0.9 million for the years ended December 31, 1996 and 1995,
respectively. The GPU International Group periodically reviews projections of
future cash flows from operations to assess any potential intangible
impairment. An impairment, if identified, would be recorded based upon
discounted projected cash flows.
Goodwill related to the GPU International Group's purchase of Midlands
Electricity plc and the other investments accounted for under the equity
method is discussed in Note 6, Acquisition of Midlands Electricity plc and
Note 7, GPU International Group Equity Investments.
NUCLEAR OUTAGE MAINTENANCE COSTS
The GPU Energy companies accrue incremental nuclear outage maintenance
costs anticipated to be incurred during scheduled nuclear plant refueling
outages to provide a proper matching of revenues to expenses.
NUCLEAR FUEL DISPOSAL FEE
The GPU Energy companies are providing for estimated future disposal costs
for spent nuclear fuel at Oyster Creek and Three Mile Island Unit 1
(TMI-1) in accordance with the Nuclear Waste Policy Act of 1982. The GPU
Energy companies entered into contracts in 1983 with the U.S. Department of
Energy (DOE) for the disposal of spent nuclear fuel. The total liability
under these contracts, including interest, at December 31, 1996, all of which
relates to spent nuclear fuel from nuclear generation through April 1983,
amounted to $171 million (JCP&L $128 million; Met-Ed $29 million; Penelec $14
million), 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 GPU Energy companies have reflected such excess of
$21.6 million (JCP&L $23.3 million; Met-Ed $(1.2) million; Penelec $(0.5)
million) at December 31, 1996 in Regulatory assets - Other. The rates
presently charged to customers provide for the collection of these costs, plus
interest, over remaining periods of 10 years for JCP&L and Met-Ed and one year
for Penelec.
The GPU Energy companies 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. (See Note 14, Commitments and Contingencies, for a discussion of the
DOE's current inability to begin acceptance of spent nuclear fuel from the GPU
Energy companies and other standard contract holders.)
INCOME TAXES
GPU files 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.
Deferred income taxes, which result primarily from liberalized
depreciation methods, deferred energy costs, decommissioning funds and
discounted Forked River and TMI-2 investments, reflect the impact of temporary
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GPU, Inc. and Subsidiary Companies
differences between the amounts of assets and liabilities recognized for
financial reporting purposes and the amounts recognized for tax purposes.
Investment tax credits (ITC) are amortized over the estimated service lives of
the related facilities.
CARRYING AMOUNTS OF FINANCIAL INSTRUMENTS
The carrying amounts of Temporary cash investments, Special deposits,
Securities due within one year and Notes payable on the Consolidated Balance
Sheets approximate fair value due to the short period to maturity. The
carrying amounts of the Nuclear decommissioning trusts and Nuclear fuel
disposal trust, whose assets are invested in cash equivalents and debt and
equity securities, also approximate fair value. At December 31, 1996, the
Consolidated Balance Sheets included $47 million in restricted cash, related
to the GPU International Group's 50% ownership interest in Empresa Guaracachi,
S.A.
ENVIRONMENTAL LIABILITIES
GPU may be subject to loss contingencies resulting from environmental laws
and regulations, which include obligations to mitigate the effects on the
environment of the disposal or release of certain hazardous wastes and
substances at various sites. GPU records liabilities (on an undiscounted
basis) for hazardous waste sites where it is probable that a loss has been
incurred and the amount of the loss can be reasonably estimated and adjusts
these liabilities as required to reflect changes in circumstances.
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.
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<TABLE>
GPU, Inc. and Subsidiary Companies
2. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1996 and 1995, GPU had short-term notes outstanding as
follows:
<CAPTION>
1996 1995
Balance Weighted Balance Weighted
Company Facility Outstanding Avg. Rate Outstanding Avg. Rate
(in millions) (in millions)
<S> <C> <C> <C> <C> <C>
GPU, Inc. Bank Lines of Credit $ 75 5.7% $ 72 6.0%
JCP&L Bank Lines of Credit 32 6.5 1 6.0
Met-Ed Bank Lines of Credit 51 5.9 22 5.6
Penelec Bank Lines of Credit 99 6.1 27 5.9
Commercial Paper 9 5.8 - -
GPU International Bank Lines of Credit - - 2 6.3
Total $266 6.0% $124 5.9%
</TABLE>
GPU has $527 million of credit facilities, including two Revolving Credit
Agreements, as discussed below:
Under the Credit Agreement between GPU, Inc., the GPU Energy companies and
a consortium of banks, total borrowings are limited to $250 million
outstanding at any time and are subject to various covenants and acceleration
under certain circumstances. The agreement expires May 6, 2001, and a
commitment fee on the unborrowed amount of 1/8 of 1% is payable annually.
Borrowing rates and a facility fee are based on the long-term debt ratings of
the GPU Energy companies.
GPU International, Inc. has a separate Credit Agreement providing for
borrowings (guaranteed by GPU, Inc.) through December 1997 of up to $30
million outstanding at any time, which decreases for two years thereafter. Up
to $15 million may be borrowed in the form of letters of credit. An annual
commitment fee of 3/8 of 1% on unborrowed amounts and a letter of credit fee
of 1/2 of 1% are payable by GPU International, Inc.
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GPU, Inc. and Subsidiary Companies
3. LONG-TERM DEBT
At December 31, 1996 and 1995, long-term debt outstanding was as follows:
<TABLE>
(in thousands)
JCP&L
First Mortgage Bonds - Series as noted (a):
<CAPTION>
1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
6 1/8% due 1996 $ - $25,701 6.85% due 2006 $ 40,000 $ -
6.90% due 1997 30,000 30,000 7.90% due 2007 40,000 40,000
6 5/8% due 1997 25,874 25,874 7 1/8% due 2009 6,300 6,300
6.70% due 1997 20,000 20,000 7.10% due 2015 12,200 12,200
7 1/4% due 1998 24,191 24,191 9.20% due 2021 50,000 50,000
6.04% due 2000 40,000 40,000 8.55% due 2022 30,000 30,000
6.45% due 2001 40,000 - 8.82% due 2022 12,000 12,000
9% due 2002 50,000 50,000 8.85% due 2022 38,000 38,000
6 3/8% due 2003 150,000 150,000 8.32% due 2022 40,000 40,000
7 1/8% due 2004 160,000 160,000 7.98% due 2023 40,000 40,000
6.78% due 2005 50,000 50,000 7 1/2% due 2023 125,000 125,000
8 1/4% due 2006 50,000 50,000 8.45% due 2025 50,000 50,000
6 3/4% due 2025 150,000 150,000
Subtotal $1,273,565 $1,219,266
Amount due within one year (100,065) (25,701)
Total $1,173,500 $1,193,565
Other long-term debt (excludes amounts due within one year
of $10 for 1996 and $9 for 1995) 3,048 3,058
Unamortized net discount on long-term debt (3,457) (3,678)
Total long-term debt $1,173,091 $1,192,945
Met-Ed
First Mortgage Bonds - Series as noted (a):
1996 1995 1996 1995
5 3/4% due 1996 $ - $15,000 6.77% due 2005 $ 30,000 $ 30,000
7.47% due 1997 20,000 20,000 7.35% due 2005 20,000 20,000
9.2% due 1997 20,000 20,000 6.36% due 2006 17,000 17,000
7.05% due 1999 30,000 30,000 6.40% due 2006 33,000 33,000
<PAGE>
6.2% due 2000 30,000 30,000 6% due 2008 8,700 8,700
9.48% due 2000 20,000 20,000 6.1% due 2021 28,500 28,500
8.05% due 2002 30,000 30,000 8.6% due 2022 30,000 30,000
6.6% due 2003 20,000 20,000 8.8% due 2022 30,000 30,000
7.22% due 2003 40,000 40,000 6.97% due 2023 30,000 30,000
9.1% due 2003 30,000 30,000 7.65% due 2023 30,000 30,000
6.34% due 2004 40,000 40,000 8.15% due 2023 60,000 60,000
Subtotal $ 597,200 $ 612,200
Amount due within one year (40,000) (15,000)
Total 557,200 597,200
Other long-term debt (excludes amounts due within one year
of $20 for 1996 and $19 for 1995) 6,095 6,115
Unamortized net discount on long-term debt (43) (47)
Total long-term debt $ 563,252 $ 603,268
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<PAGE>
GPU, Inc. and Subsidiary Companies
(in thousands)
Penelec
First Mortgage Bonds-Series as noted (a):
1996 1995 1996 1995
6 1/4% due 1996 $ - $25,000 6.10% due 2004 $ 30,000 $ 30,000
6.80% due 1996 - 20,000 6.7% due 2005 30,000 30,000
7.45% due 1996 - 30,000 6.35% due 2006 40,000 40,000
6.1/4% due 1997 26,000 26,000 8.05% due 2006 10,000 10,000
7 7/8% due 1998 30,000 30,000 6 1/8% due 2007 4,110 4,110
6.15% due 2000 30,000 30,000 6.55% due 2009 50,000 50,000
6.8% due 2001 20,000 - 5.35% due 2010 12,310 12,310
8.70% due 2001 30,000 30,000 5.35% due 2010 12,000 12,000
7.40% due 2002 10,000 10,000 5.80% due 2020 20,000 20,000
7.43% due 2002 30,000 30,000 8.33% due 2022 20,000 20,000
7.92% due 2002 10,000 10,000 7.49% due 2023 30,000 30,000
7.40% due 2003 10,000 10,000 8.38% due 2024 40,000 40,000
6.60% due 2003 30,000 30,000 8.61% due 2025 30,000 30,000
7.02% due 2003 20,000 - 7.53% due 2025 40,000 40,000
7.48% due 2004 40,000 40,000 6.05% due 2025 25,000 25,000
Subtotal $ 679,420 $ 714,420
Amounts due within one year (26,000) (75,000)
Total $ 653,420 $ 639,420
Other long-term debt (excludes amounts due within one year
of $10 for 1996 and $9 for 1995) 3,048 3,058
Unamortized net (discount)/premium on long-term debt (9) 9
Total long-term debt $ 656,459 $ 642,487
(a) Substantially all of the utility plant owned by the GPU Energy companies is subject to the lien of
their respective mortgages.
GPU International Group
Other long-term debt (excludes amounts due within one year
of $2,478 for 1996 and $2,308 for 1995) $ 749,214 $ 101,698
GPUS
Other long-term debt (excludes amounts due within one year
of $3,200 for 1995) $ 35,000 $ 27,500
Total - GPU, Inc. and Subsidiary Companies
First Mortgage Bonds $2,550,185 $2,545,886
Amounts due within one year (166,065) (115,701)
Total $2,384,120 $2,430,185
Other long-term debt $ 798,922 $ 146,974
Amounts due within one year (2,518) (5,545)
Total $ 796,404 $ 141,429
Unamortized net discount (3,508) (3,716)
Total long-term debt $3,177,016 $2,567,898
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</TABLE>
<PAGE>
GPU, Inc. and Subsidiary Companies
At December 31, 1996, the GPU International Group had long-term debt
outstanding of approximately $752 million (included in the table above under
"Other long-term debt"). Of this amount, approximately $680 million was
guaranteed by GPU, Inc. The guaranteed amount consisted of the following: 342
million pounds (approximately U.S. $586 million at December 31, 1996) under a
bank term loan facility used to fund EI UK Holdings, Inc.'s investment in Avon
Energy Partners Holdings (see Note 6); A$90 million (approximately U.S. $72
million at December 31, 1996 and U.S. $68 million at December 31, 1995)
through a bank term loan facility used to fund a GPU Electric, Inc.
subsidiary's purchase of its interest in Solaris Power; and approximately $22
million through a bank term loan facility used to fund a GPU International,
Inc. subsidiary's investment in Mid-Georgia Cogen, L.P.
For the years 1997, 1998, 1999, 2000 and 2001, GPU has long-term debt
maturities for first mortgage bonds and other long-term debt as follows:
(in millions)
Company 1997 1998 1999 2000 2001
JCP&L $100 $ - $ - $ 40 $ 40
Met-Ed 40 - 30 50 -
Penelec 26 30 - 30 50
GPU International Group 3 97 3 589 3
GPUS - - - - 35
Total $169 $127 $ 33 $709 $128
The estimated fair value of GPU's long-term debt, as of December 31, 1996
and 1995 was as follows:
(in thousands)
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
JCP&L $1,173,091 $1,177,544 $1,192,945 $1,260,502
Met-Ed 563,252 567,075 603,268 644,838
Penelec 656,459 640,274 642,487 677,564
GPU International Group 749,214 742,126 101,698 101,698
GPUS 35,000 35,000 27,500 27,500
Total $3,177,016 $3,162,019 $2,567,898 $2,712,102
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 GPU
for debt of the same remaining maturities and credit qualities.
4. 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. In 1995, JCP&L Capital,
L.P. issued $125 million of mandatorily redeemable preferred securities
(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 were then lent to JCP&L, Met-Ed and Penelec,
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GPU, Inc. and Subsidiary Companies
respectively, which, in turn, issued their deferrable interest subordinated
debentures to the partnerships. The following issues of Preferred Securities
were outstanding at December 31, 1996 and 1995:
Issue Securities Total
Company Series Price Outstanding (in thousands)
JCP&L Capital, L.P. 8.56% $25 5,000,000 $125,000
Met-Ed Capital, L.P. 9.00% $25 4,000,000 100,000
Penelec Capital, L.P. 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, 1996 and 1995 was $337 million (JCP&L $127 million;
Met-Ed $103 million; Penelec $107 million) and $347 million (JCP&L
$131 million; Met-Ed $106 million; Penelec $110 million), respectively.
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. Their
respective 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% of their principal amount, or earlier under certain limited
circumstances, including the loss of the tax deduction for interest paid on
the subordinated debentures. JCP&L, Met-Ed and Penelec have 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 their respective 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 on, or redeem or acquire, any of
their preferred or common stock until deferred payments on their respective
subordinated debentures are paid in full.
5. CAPITAL STOCK
At December 31, 1996 and 1995, GPU had the following issues of capital
stock outstanding:
GPU, Inc.
Common stock, par value $2.50 a share; 350,000,000 shares authorized in both
1996 and 1995; 125,783,338 shares issued in both 1996 and 1995; and
120,611,137 and 120,423,341 shares outstanding in 1996 and 1995,
respectively (a), (b), (c)
(in thousands)
1996 1995
Common Stock $314,458 $314,458
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<PAGE>
GPU, Inc. and Subsidiary Companies
JCP&L
Cumulative preferred stock, without par value, 15,600,000 shares authorized,
1,615,000 and 1,815,000 shares issued and outstanding in 1996 and 1995,
respectively (f):
(in thousands)
1996 1995
Cumulative preferred stock -
without mandatory redemption (g):
4% Series, 125,000 shares,
callable at $106.50 a share $ 12,500 $ 12,500
7.88% Series E, 250,000 shares,
callable at $103.65 a share 25,000 25,000
Subtotal 37,500 37,500
Premium on cumulative preferred stock 241 241
Total cumulative preferred stock -
without mandatory redemption $ 37,741 $ 37,741
Cumulative preferred stock -
with mandatory redemption (d), (e), (h):
8.48% Series I, 300,000 shares in 1996
and 500,000 shares in 1995 $ 30,000 $ 50,000
8.65% Series J, 500,000 shares 50,000 50,000
7.52% Series K, 440,000 shares 44,000 44,000
Subtotal 124,000 144,000
Amount due in one year (h) (10,000) (10,000)
Total cumulative preferred stock -
with mandatory redemption $114,000 $134,000
Common stock, par value $10 a share,
16,000,000 shares authorized, 15,371,270
shares issued and outstanding $153,713 $153,713
Met-Ed
Cumulative preferred stock, without par value, 10,000,000 shares authorized,
119,475 and 233,912 shares issued and outstanding in 1996 and 1995, without
mandatory redemption (f), (g), (i):
(in thousands)
1996 1995
3.90% Series, 64,384 shares in 1996 and
117,729 shares in 1995, callable at
$105.625 a share $ 6,439 $ 11,773
4.35% Series, 22,517 shares in 1996 and
33,429 shares in 1995, callable at
$104.25 a share 2,252 3,325
3.85% Series, 9,252 shares in 1996 and
29,175 shares in 1995, callable at
$104.00 a share 925 2,917
3.80% Series, 7,982 shares in 1996 and
18,122 shares in 1995, callable at
$104.70 a share 798 1,812
4.45% Series, 15,340 shares in 1996 and
35,637 shares in 1995, callable at
$104.25 a share 1,534 3,564
Subtotal 11,948 23,391
Premium on cumulative preferred stock 108 207
Total cumulative preferred stock $ 12,056 $ 23,598
Common stock, no par value, 900,000 shares
authorized, 859,500 shares issued
and outstanding $ 66,273 $ 66,273
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<PAGE>
GPU, Inc. and Subsidiary Companies
Penelec
Cumulative preferred stock, without par value, 11,435,000 shares authorized,
167,485 and 365,000 shares issued and outstanding in 1996 and 1995, no
mandatory redemption (f), (g), (i):
(in thousands)
1996 1995
4.40% Series B, 29,678 shares in 1996 and
56,810 shares in 1995, callable at
$108.25 per share $ 2,968 $ 5,681
3.70% Series C, 49,568 shares in 1996 and
97,054 shares in 1995, callable at
$105.00 per share 4,957 9,705
4.05% Series D, 28,219 shares in 1996 and
63,696 shares in 1995, callable at
$104.53 per share 2,822 6,370
4.70% Series E, 14,103 shares in 1996 and
28,739 shares in 1995, callable at
$105.25 per share 1,410 2,874
4.50% Series F, 17,081 shares in 1996 and
42,969 shares in 1995, callable at
$104.27 per share 1,708 4,297
4.60% Series G, 26,836 shares in 1996 and
75,732 shares in 1995, callable at
$104.25 per share 2,684 7,573
Subtotal 16,549 36,500
Premium on cumulative preferred stock 132 277
Total cumulative preferred stock $ 16,681 $ 36,777
Common stock, par value $20 per share,
5,400,000 shares authorized, 5,290,596
shares issued and outstanding $105,812 $105,812
Total - GPU. Inc. and Subsidiary Companies
(in thousands)
1996 1995
Cumulative preferred stock:
With mandatory redemption $114,000 $134,000
Without mandatory redemption 66,478 $ 98,116
Total cumulative preferred stock $180,478 $232,116
(a) In 1995, GPU, Inc. sold five million additional shares of common
stock, for net proceeds of $157.5 million. The issuance resulted in
a credit to capital surplus totaling $71.9 million. No shares of
common stock were reacquired in 1996, 1995 or 1994. In 1996, 1995
and 1994, under GPU Inc.'s Dividend Reinvestment Plan, capital
surplus was credited $3.0 million, $2.7 million and $2.3 million,
respectively, for shares sold. There were 5,172,201 and 5,359,997
reacquired shares outstanding at December 31, 1996 and 1995,
respectively.
(b) In 1996, 1995 and 1994, pursuant to the 1990 Restricted Stock Plan,
GPU, Inc. issued restricted units to officers representing rights to
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GPU, Inc. and Subsidiary Companies
receive shares of common stock, on a one-for-one basis, at the end of
the vesting or restriction period. Beginning with awards in 1995,
the number of shares eventually issued will vary from the number of
units awarded according to the degree that GPU, Inc.'s performance
goals have been met for the restriction period. The shares issuable
at the end of the period could range from 0% to 200% of the
originally awarded units. The units are considered common stock
equivalents and therefore are reflected in the computation of
earnings per share shown on the income statement. The units accrue
dividend equivalents on a quarterly basis, which are invested in
additional equivalent units. In 1996, 1995 and 1994, GPU, Inc.
awarded to plan participants 63,206, 83,600 and 34,595 restricted
units, respectively. In 1996, 1995 and 1994, GPU, Inc. issued a
total of 37,253, 30,558 and 6,275 shares, respectively, from
previously reacquired shares. There were 258,705 and 195,499
restricted units outstanding at December 31, 1996 and 1995,
respectively.
(c) In 1996, GPU adopted Statement of Financial Accounting Standards No. 123
(FAS 123), "Accounting for Stock-Based Compensation," which establishes a
fair value-based method of accounting for employee stock-based
compensation. Under this method, compensation cost is measured at the
grant date, based on the market price of the stock at that date, and is
recognized as expense over the restricted period. FAS 123 permits
companies to continue to follow the accounting prescribed by Accounting
Principles Board Opinion No. 25 (APB No. 25), provided that pro forma
disclosures of net income are made as if the fair value-based method of
accounting had been applied. GPU has elected to continue accounting for
stock-based compensation in accordance with APB No. 25, which contains
provisions for subsequent adjustments to compensation cost based on
market price fluctuations of the stock after the grant date. The pro
forma effects on net income resulting from the application of the fair
value-based method of accounting defined in FAS 123 are immaterial.
(d) 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 a five-
year period which began in 1996.
(e) During 1996, JCP&L redeemed $20 million stated value of 8.48% cumulative
preferred stock pursuant to mandatory and optional sinking fund
provisions. JCP&L's total redemption cost was $20 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 redemption cost was $6.1 million, which
resulted in a $0.1 million charge to Retained Earnings.
(f) At December 31, 1996 and 1995, the GPU Energy companies were authorized
to issue 37,035,000 shares of cumulative preferred stock. If dividends
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GPU, Inc. and Subsidiary Companies
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 of that company until all dividends in
arrears have been paid. A GPU Energy company may not redeem preferred
stock unless dividends on all of its preferred stock for all past
quarterly dividend periods have been paid or declared and set aside for
payment.
(g) The outstanding shares of preferred stock without mandatory redemption
are callable at various prices above their stated values. At December
31, 1996, the aggregate amount at which these shares could be called by
the GPU Energy companies was $69 million (JCP&L $39 million; Met-Ed $13
million; Penelec $17 million).
(h) The outstanding shares with mandatory redemption have the following
redemption requirements over the next five years: $10.0 million in 1997;
$12.5 million in 1998 and 1999; and $10.8 million in 2000 and 2001. The
fair value of the preferred stock with mandatory redemption, based on
market price quotations at December 31, 1996 and 1995, was $123.4 million
and $146.6 million, respectively.
(i) During 1996, Met-Ed and Penelec reacquired, pursuant to cash tender
offers, preferred shares for a total cost of $7.7 million and
$14.4 million, respectively. A reacquisition gain of $3.7 million and
$5.6 million was recorded for Met-Ed and Penelec, respectively, which
resulted in an increase in GPU, Inc.'s earnings per share of $0.08.
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 redemption cost
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.
6. ACQUISITION OF MIDLANDS ELECTRICITY PLC
In 1996, GPU, Inc. and Cinergy Corp. (Cinergy) formed Avon Energy
Partners Holdings (Holdings), a 50/50 joint venture, to acquire Midlands
Electricity plc (Midlands), an English regional electric company. A wholly-
owned subsidiary of Holdings, Avon, purchased the outstanding shares of
Midlands through a cash tender offer of 1.7 billion pounds, or approximately
U.S. $2.6 billion. GPU's 50% interest in Holdings is held by EI UK Holdings,
Inc. (EI UK), a wholly-owned subsidiary of GPU Electric, Inc.
At December 31, 1996, EI UK has borrowed approximately 342 million pounds,
or approximately U.S. $586 million, through a GPU, Inc. guaranteed five-year
bank term loan facility, to fund its investment in Holdings. At December 31,
1996, Holdings has borrowed approximately 1.1 billion pounds, or approximately
U.S. $1.8 billion, through a term loan and revolving credit facility to
provide for the balance of the acquisition price.
Midlands supplies and distributes electricity to 2.2 million customers in
England in an area with a population of five million. Midlands also owns a
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GPU, Inc. and Subsidiary Companies
generation business that produces electricity domestically and internationally
and a gas supply company that provides natural gas to 8,000 customers in
England. In addition, Midlands owns international generation projects and is
pursuing additional international generation and transmission projects.
EI UK accounts for its 50% investment in Holdings using the equity method
of accounting (see Note 7, GPU International Group Equity Investments).
Accordingly, EI UK's investment is reported on the Consolidated Balance Sheets
in GPU International Group investments, net, and its proportionate share of
earnings from Holdings is reflected on the Consolidated Income Statements in
Other Income and Deductions. EI UK has recorded its proportionate share of
Holdings' income (from the Midlands' acquisition date), which is reflected in
GPU's results of operations.
The acquisition of Midlands by Avon is accounted for under the purchase
method of accounting. The total acquisition cost exceeds the preliminary
estimated value of net assets by 1.4 billion pounds, or approximately U.S.
$2.1 billion. This excess amount is considered goodwill and is amortized to
expense on a straight-line basis over 40 years.
7. GPU INTERNATIONAL GROUP EQUITY INVESTMENTS
The GPU International Group has investments in joint ventures and
affiliates involved in power production, transmission and distribution in the
United States and foreign countries. The GPU International Group uses the
equity method of accounting for its investments in which it has the ability to
exercise significant influence. Brooklyn Energy, L.P. is being accounted for
under the equity method of accounting in anticipation of a reduction of the
percentage to 27%. Investments accounted for under the equity method follow:
Ownership
Investment Location of Operations Percentage
Brooklyn Energy, L.P. Canada 75%
Avon Energy Partners
Holdings (owns Midlands) United Kingdom 50%
Solaris Power Australia 50%
Prime Energy, L.P. United States 50%
Onondaga Cogen, L.P. United States 50%
Pasco Cogen, Ltd. United States 50%
Lake Cogen, Ltd. United States 50%
FPB Cogeneration Partners, L.P. United States 30%
Termobarranquilla S.A. Colombia 29%
Polsky Energy Corporation United States & Canada 25%
Selkirk Cogeneration Partners, L.P. United States 19%
EnviroTech Investment Fund United States 10%
Ballard Generation Systems, Inc. Canada 6%
Project Orange Associates, L.P. United States 4%
OLS Power, L.P. United States 1%
Summarized financial information for the GPU International Group's equity
investments (which are not consolidated in the financial statements),
including both the GPU International Group's ownership interests and the non-
ownership interests, is as follows:
F-60
<PAGE>
GPU, Inc. and Subsidiary Companies
December 31, December 31,
Balance Sheet Data (in thousands) 1996 1995
Current Assets $ 1,016,730 $ 248,012
Noncurrent Assets 5,761,593 1,962,238
Current Liabilities (1,207,038) (220,796)
Noncurrent Liabilities (4,080,475) (1,693,669)
Net Assets $ 1,490,810 $ 295,785
GPU International Group's
Equity in Net Assets $ 735,763 $ 25,341
For the Year Ended December 31,
Earnings Data (in thousands) 1996 1995
Revenues $ 1,869,038 $ 680,617
Operating Income $ 299,161 $ 102,817
Net Income/(Loss) $ 70,346 $ (140)
GPU International Group's
Equity in Net Income/(Loss) $ 33,981 $ (3,597)
As of December 31, 1996 and 1995, the amount of investments accounted for
under the equity method included goodwill, net of accumulated amortization, of
approximately $23 million and $29 million, respectively, which is amortized to
expense over periods not exceeding 40 years. Amortization expense amounted to
$0.8 million for each of the years ended December 31, 1996 and 1995. In 1996,
the GPU International Group recorded a net reduction of $5 million in goodwill
attributed primarily to the sale of a partnership interest.
In addition, the GPU International Group's 50% ownership interest in
Empresa Guaracachi, S.A., a Bolivian electric generating company, is accounted
for as a consolidated entity in GPU's financial statements. The GPU
International Group also has a 100% ownership interest in Mid-Georgia Cogen,
L.P., a cogeneration facility under construction, which is currently accounted
for as a consolidated entity in GPU's financial statements.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The GPU International Group uses interest rate swap agreements as hedges
to manage the risk of increases in interest rates. These swap agreements
effectively convert variable-rate debt into fixed-rate debt. At December 31,
1996, these agreements covered approximately $329 million of debt and were
scheduled to expire at various dates through 1998. Amounts paid and received
under these agreements are recorded as adjustments to the interest expense of
the underlying debt. During 1996, fixed interest expense exceeded variable-
rate interest by approximately $0.6 million.
F-61
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GPU, Inc. and Subsidiary Companies
9. INCOME TAXES
As of December 31, 1996 and 1995, the Consolidated Balance Sheets
reflected income taxes recoverable through future rates (primarily related to
liberalized depreciation), and a regulatory liability for income taxes
refundable through future rates (related to unamortized ITC), substantially
due to the recognition of amounts not previously recorded with the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" in 1993, as follows:
(in millions)
1996 1995
Income Taxes Recoverable Through Future Rates:
JCP&L $143 $135
Met-Ed 174 179
Penelec 210 214
Total $527 $528
Income Taxes Refundable Through Future Rates:
JCP&L $ 33 $ 36
Met-Ed 23 25
Penelec 32 34
Total $ 88 $ 95
Summaries of the components of deferred taxes as of December 31, 1996
and 1995 are as follows:
GPU, Inc. and Subsidiary Companies:
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
1996 1995 1996 1995
Current: Current:
Unbilled revenue $ 23 $ 23 Revenue taxes $ 12 $ 16
Other 9 (3)
Total $ 32 $ 20
Noncurrent: Noncurrent:
Unamortized ITC $ 88 $ 95 Liberalized
Decommissioning 75 62 depreciation:
Contributions in aid previously flowed
of construction 24 23 through $ 292 $ 301
Other 146 150 future revenue
Total $333 $330 requirements 203 209
Subtotal 495 510
Liberalized
depreciation 859 817
Other 209 139
Total $1,563 $1,466
F-62
<PAGE>
GPU, Inc. and Subsidiary Companies
JCP&L:
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
1996 1995 1996 1995
Current: Current:
Unbilled revenue $ 18 $ 12 Revenue taxes $ 12 $ 16
Deferred energy 5 (3)
Total $ 23 $ 9
Noncurrent: Noncurrent:
Unamortized ITC $ 33 $ 36 Liberalized
Decommissioning 32 26 depreciation:
Contributions in aid previously flowed
of construction 19 19 through $ 76 $ 77
Other 55 41 future revenue
Total $139 $122 requirements 42 42
Subtotal 118 119
Liberalized
depreciation 412 393
Forked River 9 11
Other 125 84
Total $664 $607
Met-Ed:
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
1996 1995 1996 1995
Noncurrent:
Current: Liberalized
Unbilled revenue $ 5 $ 6 depreciation:
Other 2 2 previously flowed
Total $ 7 $ 8 through $ 95 $100
future revenue
Noncurrent: requirements 73 76
Unamortized ITC $ 24 $ 25
Decommissioning 28 23 Subtotal 168 176
Contributions in aid Liberalized
of construction 2 2 depreciation 185 182
Other 31 41 Other 48 22
Total $ 85 $ 91 Total $401 $380
F-63
<PAGE>
GPU, Inc. and Subsidiary Companies
Penelec:
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
1996 1995 1996 1995
Current: Current:
Unbilled revenue $ - $ 5 Deferred energy $ - $ 4
Noncurrent: Noncurrent:
Unamortized ITC $ 32 $ 34 Liberalized
Decommissioning 15 13 depreciation:
Contributions in aid previously flowed
of construction 3 3 through $119 $121
Other 17 29 future revenue
Total $ 67 $ 79 requirements 89 91
Subtotal 208 212
Liberalized
depreciation 239 229
Other 26 21
Total $473 $462
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:
GPU, Inc. and Subsidiary Companies:
(in millions)
1996 1995 1994
Net income $298 $440 $164
Preferred stock dividends 16 17 21
Gain on preferred stock reacquisition (9) - -
Income tax expense 184 265 86
Book income subject to tax $489* $722 $271
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 3 4 -
Other - (2) (3)
Effective income tax rate 38% 37% 32%
* Includes pre-tax foreign operations income of $58 million, of which $54
million relates to equity method investments, which is reflected in Other
income, net in the Consolidated Statement of Income.
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<PAGE>
GPU, Inc. and Subsidiary Companies
Federal and state income tax expense is comprised of the following:
(in millions)
1996 1995 1994
Provisions for taxes currently payable:
Domestic $108 $154 $162
Foreign 11 - -
Total provision for taxes $119 $154 $162
Deferred income taxes:
Liberalized depreciation 27 31 31
New Jersey revenue tax (3) (2) 32
Deferral of energy costs (8) 1 12
Foreign deferred taxes 7 - -
Accretion income 5 5 11
Decommissioning (9) 71 (76)
Voluntary Enhanced Retirement
Programs (VERP) 15 24 (51)
Nonutility generation contract buyout costs 41 15 -
Other 2 (23) (21)
Deferred income taxes, net 77 122 (62)
Amortization of ITC, net (12) (11) (14)
Income tax expense $184 $265 $ 86
The foreign taxes in the above table for 1996, which primarily relate to
equity method investees, total $17 million ($10 million- Current; $7 million-
Deferred), and are included in Other income, net in the Consolidated
Statements of Income.
JCP&L:
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)
1996 1995 1994
Net income $156 $199 $163
Income tax expense 74 97 85
Book income subject to tax $230 $296 $248
Federal statutory rate 35% 35% 35%
Other (3) (2) (1)
Effective income tax rate 32% 33% 34%
F-65
<PAGE>
GPU, Inc. and Subsidiary Companies
Federal and state income tax expense is comprised of the following:
(in millions)
1996 1995 1994
Provisions for taxes currently payable $ 70 $100 $ 50
Deferred income taxes:
Liberalized depreciation 1 8 13
Nonutility generation contract buyout costs 22 6 -
Gain/Loss on reacquired debt - - 6
New Jersey revenue tax (3) (2) 32
Deferral of energy costs (8) 1 9
Abandonment loss - Forked River (4) (4) (5)
Nuclear outage maintenance costs 5 (6) 6
Accretion income 5 5 6
Unbilled revenue (5) (2) 2
Pension expense/VERP 4 3 (15)
Other (6) (6) (12)
Deferred income taxes, net 11 3 42
Amortization of ITC, net ( 7) ( 6) ( 7)
Income tax expense $ 74 $ 97 $ 85
Met-Ed:
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)
1996 1995 1994
Net income $ 69 $149 $ 1
Income tax expense 50 92 (9)
Book income subject to tax $119 $241 $ (8)
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 5 6 32
Amortization of ITC (2) (1) 22
Other 4 (2) 20
Effective income tax rate 42% 38% 109%
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<PAGE>
GPU, Inc. and Subsidiary Companies
Federal and state income tax expense is comprised of the following:
(in millions)
1996 1995 1994
Provisions for taxes currently payable $ 25 $ 23 $ 45
Deferred income taxes:
Liberalized depreciation 10 10 6
Deferral of energy costs 5 - 6
Decommissioning (3) 46 (52)
Pension expense/VERP 5 8 (15)
Unbilled revenue - (4) 2
Nonutility generation contract buyout costs 14 8 -
Other (4) 3 2
Deferred income taxes, net 27 71 (51)
Amortization of ITC, net (2) (2) (3)
Income tax expense $ 50 $ 92 $ (9)
Penelec:
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)
1996 1995 1994
Net income $ 70 $111 $32
Income tax expense 45 70 11
Book income subject to tax $115 $181 $43
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 6 6 1
Other ( 2) ( 2) (10)
Effective income tax rate 39% 39% 26%
Federal and state income tax expense is comprised of the following:
(in millions)
1996 1995 1994
Provisions for taxes currently payable $ 26 $ 28 $ 61
Deferred income taxes:
Liberalized depreciation 8 12 12
Deferral of energy costs - - (3)
Accretion income - - 5
Decommissioning (1) 21 (24)
Pension expense/VERP 7 13 (21)
Unbilled revenue 5 (2) -
Nonutility generation contract buyout costs 5 - -
Other (2) 1 (15)
Deferred income taxes, net 22 45 (46)
Amortization of ITC, net (3) (3) (4)
Income tax expense $ 45 $ 70 $ 11
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<PAGE>
GPU, Inc. and Subsidiary Companies
In 1994, GPU and the Internal Revenue Service (IRS) reached an agreement to
settle GPU's claim for 1986 that TMI-2 has been retired for tax purposes. The
GPU Energy companies received net refunds totaling $17 million (JCP&L $4
million; Met-Ed $9 million; Penelec $4 million), which have been credited to
their customers. Also in 1994, GPU received net interest from the IRS
totaling $46 million (JCP&L $11.5 million; Met-Ed $23 million; Penelec $11.5
million), before income taxes, associated with the refund settlement, which
was credited to income. The IRS has completed its examinations of GPU's
federal income tax returns through 1992. The years 1993 through 1995 are
currently being audited.
10. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses consisted
of the following:
(in millions)
1996 1995 1994
Maintenance:
JCP&L $120 $128 $132
Met-Ed 50 54 59
Penelec 65 71 80
Total Maintenance $235 $253 $271
Other Taxes:
New Jersey Unit Tax (JCP&L) $208 $209 $204
Pennsylvania State Gross Receipts:
Met-Ed $ 38 $ 35 $ 32
Penelec 40 39 38
Total $ 78 $ 74 $ 70
Real Estate and Personal Property:
JCP&L $ 8 $ 8 $ 7
Met-Ed 8 7 6
Penelec 9 8 8
Total $ 25 $ 23 $ 21
Other:
JCP&L $ 13 $ 10 $ 20
Met-Ed 15 13 14
Penelec 16 20 20
Total $ 44 $ 43 $ 54
Total Other Taxes $355 $349 $349
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<PAGE>
GPU, Inc. and Subsidiary Companies
The cost of services rendered to the GPU Energy companies by their
affiliates is as follows:
(in millions)
1996 1995 1994
JCP&L:
Cost of services rendered by GPUN $221 $186 $268
Cost of services rendered by GPUS 44 43 48
Cost of services rendered by Genco 85 - -
Total $350 $229 $316
Amount Charged to Income $293 $183 $242
Met-Ed:
Cost of services rendered by GPUN $ 67 $ 81 $ 77
Cost of services Rendered by GPUS 29 27 27
Cost of services rendered by Genco 85 - -
Total $181 $108 $104
Amount Charged to Income $153 $ 92 $ 87
Penelec:
Cost of services rendered by GPUN $ 34 $ 41 $ 40
Cost of services rendered by GPUS 31 38 40
Cost of services rendered by Genco 159 - -
Total $224 $ 79 $ 80
Amount Charged to Income $181 $ 67 $ 64
For the years 1996, 1995 and 1994, JCP&L purchased $21 million, $23 million
and $22 million, respectively, in energy from a cogeneration project in which
an affiliate has a 50% partnership interest.
11. EMPLOYEE BENEFITS
Pension Plans
GPU maintains defined benefit pension plans covering substantially all
employees. GPU's policy is to currently fund net pension costs within the
deduction limits permitted by the Internal Revenue Code.
Summaries of the components of net periodic pension cost follow:
(in millions)
GPU, Inc. and Subsidiary Companies 1996 1995 1994
Service cost-benefits earned during the period $ 36.1 $ 30.0 $ 34.8
Interest cost on projected benefit obligation 112.1 109.8 95.4
Less: Expected return on plan assets (123.2) (112.9) (104.4)
Amortization (1.1) (1.4) (1.4)
Net periodic pension cost $ 23.9 $ 25.5 $ 24.4
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<PAGE>
GPU, Inc. and Subsidiary Companies
(in millions)
JCP&L 1996 1995 1994
Service cost-benefits earned during the period $ 8.0 $ 7.3 $ 8.8
Interest cost on projected benefit obligation 32.1 32.9 29.0
Less: Expected return on plan assets (36.3) (35.2) (33.3)
Amortization (0.3) (0.3) (0.5)
Net periodic pension cost $ 3.5 $ 4.7 $ 4.0
(in millions)
Met-Ed 1996 1995 1994
Service cost-benefits earned during the period $ 4.5 $ 4.4 $ 4.7
Interest cost on projected benefit obligation 19.6 20.2 17.7
Less: Expected return on plan assets (21.3) (20.3) (19.1)
Amortization - (0.1) (0.3)
Net periodic pension cost $ 2.8 $ 4.2 $ 3.0
(in millions)
Penelec 1996 1995 1994
Service cost-benefits earned during the period $ 6.0 $ 8.9 $ 10.2
Interest cost on projected benefit obligation 29.3 34.9 30.6
Less: Expected return on plan assets (32.3) (35.6) (32.4)
Amortization 0.3 0.3 0.5
Net periodic pension cost $ 3.3 $ 8.5 $ 8.9
The above amounts for 1996 and 1994 do not include pre-tax charges to
earnings of $71 million (JCP&L $37 million; Met-Ed $17 million; Penelec $17
million) and $97 million (JCP&L $38 million; Met-Ed $26 million; Penelec $33
million), respectively, resulting from early retirement programs in both of
those years. At December 31, 1996, GPU has funded the entire cost of its
retirement programs.
The actual return on the plans' assets for the years 1996, 1995 and 1994
resulted in gains as follows:
(in millions)
Company 1996 1995 1994
JCP&L $ 66.0 $101.3 $ 4.4
Met-Ed 39.6 59.4 2.5
Penelec 53.5 100.3 4.2
Other 69.9 61.0 2.7
Total $229.0 $322.0 $ 13.8
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<PAGE>
GPU, Inc. and Subsidiary Companies
The funded status of the plans and related assumptions at December 31,
1996 and 1995 were as follows:
(in millions)
GPU, Inc. and Subsidiary Companies 1996 1995
Accumulated benefit obligation (ABO):
Vested benefits $ 1,338.5 $ 1,172.8
Nonvested benefits 137.8 133.7
Total ABO 1,476.3 1,306.5
Effect of future compensation levels 215.1 237.7
Projected benefit obligation (PBO) $ 1,691.4 $ 1,544.2
Plan assets at fair value $ 1,801.8 $ 1,596.1
PBO (1,691.4) (1,544.2)
Plan assets in excess of PBO 110.4 51.9
Less: Unrecognized net gain (143.8) (64.9)
Unrecognized prior service cost 5.7 5.2
Unrecognized net transition asset (3.0) (5.8)
Adjustment required to recognize
minimum liability (3.8) (0.2)
Accrued pension liability $ (34.5) $ (13.8)
(in millions)
JCP&L 1996 1995
ABO:
Vested benefits $ 391.9 $ 359.8
Nonvested benefits 27.8 30.4
Total ABO 419.7 390.2
Effect of future compensation levels 53.8 69.9
PBO $ 473.5 $ 460.1
Plan assets at fair value $ 514.5 $ 494.4
PBO (473.5) (460.1)
Plan assets in excess of PBO 41.0 34.3
Less: Unrecognized net gain (45.7) (32.2)
Unrecognized prior service cost 2.2 2.4
Unrecognized net transition asset (1.5) (2.1)
(Accrued) prepaid pension cost $ (4.0) $ 2.4
F-71
<PAGE>
GPU, Inc. and Subsidiary Companies
(in millions)
Met-Ed 1996 1995
ABO:
Vested benefits $ 240.7 $ 220.9
Nonvested benefits 24.4 24.0
Total ABO 265.1 244.9
Effect of future compensation levels 37.4 42.4
PBO $ 302.5 $ 287.3
Plan assets at fair value $ 309.9 $ 293.1
PBO (302.5) (287.3)
Plan assets in excess of PBO 7.4 5.8
Less: Unrecognized net gain (7.1) (7.6)
Unrecognized prior service cost 2.8 3.5
Unrecognized net transition asset (0.6) (1.3)
Adjustment required to recognize
minimum liability (0.4) -
Prepaid pension cost $ 2.1 $ 0.4
(in millions)
Penelec 1996 1995
ABO:
Vested benefits $ 303.6 $ 364.4
Nonvested benefits 24.3 44.1
Total ABO 327.9 408.5
Effect of future compensation levels 39.1 73.3
PBO $ 367.0 $ 481.8
Plan assets at fair value $ 411.8 $ 496.8
PBO (367.0) (481.8)
Plan assets in excess of PBO 44.8 15.0
Less: Unrecognized net gain (35.2) (18.8)
Unrecognized prior service cost 3.4 3.8
Unrecognized net transition obligation 2.1 3.0
Prepaid pension cost $ 15.1 $ 3.0
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 7.5
Annual increase in compensation levels 5.5 5.5
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<PAGE>
GPU, Inc. and Subsidiary Companies
In 1996, the PBO increased by $92 million (JCP&L $28 million; Met-Ed $16
million; Penelec $14 million; Other $34 million) as a result of the VERP. 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
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/obligation
arising out of the adoption of Statement of Financial Accounting Standards No.
87 (FAS 87), "Employers' Accounting for Pensions," are being amortized to
pension cost over the average remaining service periods for covered employees.
At December 31, 1996, 1995 and 1994, GPU had accumulated pension
obligations in excess of amounts accrued; as a result, additional minimum
liabilities in the amounts of $2.2 million (Met-Ed $0.3 million; GPUS $1.8
million; Genco $0.1 million), $0.1 million (GPUS) and $0.7 million (GPUS),
respectively, net of deferred income taxes of $1.6 million (Met-Ed $0.2
million; GPUS $1.3 million; Genco $0.1 million), $0.1 million (GPUS) and $0.5
million (GPUS), respectively, are reflected as reductions in Retained Earnings
in accordance with FAS 87.
Savings Plans
GPU also maintains savings plans for substantially all employees. These
plans provide for employee contributions up to specified limits. GPU's
savings plans provide for various levels of matching contributions. The
matching contributions for GPU were as follows:
(in millions)
Company 1996 1995 1994
JCP&L $ 2.8 $ 3.2 $ 2.4
Met-Ed 3.2 2.7 2.2
Penelec 1.4 2.5 3.0
Other 6.7 5.0 5.1
Total $ 14.1 $ 13.4 $ 12.7
Postretirement Benefits Other Than Pensions
GPU provides certain retiree health care and life insurance benefits for
substantially all employees who reach retirement age while working for GPU.
Health care benefits are administered by various organizations. A portion of
the costs are borne by the participants. Effective January 1, 1993, GPU
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. GPU 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-73
<PAGE>
GPU, Inc. and Subsidiary Companies
Summaries of the components of the net periodic postretirement benefit
cost for 1996, 1995 and 1994 follows:
(in millions)
GPU, Inc. and Subsidiary Companies 1996 1995 1994
Service cost-benefits attributed to service
during the period $ 14.3 $ 13.4 $ 14.6
Interest cost on the accumulated postretirement
benefit obligation 45.7 43.4 37.0
Expected return on plan assets (13.8) (11.0) (7.0)
Amortization of transition obligation 17.4 17.4 18.1
Other amortization, net 2.9 1.3 2.1
Net periodic postretirement benefit cost 66.5 64.5 64.8
Less, deferred for future recovery (18.2) (15.0) (15.8)
Postretirement benefit cost, net of deferrals $ 48.3 $ 49.5 $ 49.0
The above amounts for 1996 and 1994 do not include pre-tax charges to
earnings of $52 million and $30 million, respectively, relating to early
retirement programs in both of those years. At December 31, 1996, GPU has
funded the entire cost of its retirement programs.
(in millions)
JCP&L 1996 1995 1994
Service cost-benefits attributed to service
during the period $ 2.8 $ 3.0 $ 3.3
Interest cost on the accumulated postretirement
benefit obligation 11.4 11.2 9.4
Expected return on plan assets (2.8) (2.3) (1.7)
Amortization of transition obligation 4.8 5.0 5.2
Other amortization, net 0.7 0.5 0.4
Net periodic postretirement benefit cost 16.9 17.4 16.6
Less, deferred for future recovery (4.4) (4.0) ( 7.8)
Postretirement benefit cost, net of deferrals $ 12.5 $ 13.4 $ 8.8
The above amounts for 1996 and 1994 do not include pre-tax charges to
earnings of $26 million and $9 million, respectively, relating to early
retirement programs in both of those years. The amount deferred for future
recovery does not include $7.2 million of allocated postretirement benefit
costs from affiliates for 1996.
F-74
<PAGE>
GPU, Inc. and Subsidiary Companies
(in millions)
Met-Ed 1996 1995 1994
Service cost-benefits attributed to service
during the period $ 1.9 $ 2.0 $ 2.3
Interest cost on the accumulated postretirement
benefit obligation 8.6 8.3 7.1
Expected return on plan assets (1.6) (1.4) (1.2)
Amortization of transition obligation 3.2 3.4 3.4
Other amortization, net 0.7 0.3 0.5
Net periodic postretirement benefit cost 12.8 12.6 12.1
Less, deferred for future recovery (4.1) (5.6) (8.3)
Postretirement benefit cost, net of deferrals $ 8.7 $ 7.0 $ 3.8
The above amounts for 1996 and 1994 do not include a pre-tax charge to
earnings of $13 million and $9 million, respectively, relating to early
retirement programs in both of those years. The amount deferred for future
recovery does not include $2.5 million of allocated postretirement benefit
costs from affiliates for 1996.
(in millions)
Penelec 1996 1995 1994
Service cost-benefits attributed to service
during the period $ 2.7 $ 4.3 $ 4.6
Interest cost on the accumulated postretirement
benefit obligation 14.1 15.6 13.4
Expected return on plan assets (4.6) (4.3) (2.3)
Amortization of transition obligation 5.4 6.2 6.5
Other amortization, net 0.9 0.5 0.8
Net periodic postretirement benefit cost 18.5 22.3 23.0
Net write-off - 1.3 9.0
Postretirement benefit cost $ 18.5 $ 23.6 $ 32.0
The above amounts for 1996 and 1994 do not include a pre-tax charge to
earnings of $13 million and $12 million, respectively, relating to early
retirement programs in both of those years.
The actual return on the plans' assets for the years 1996, 1995 and 1994
resulted in gains as follows:
(in millions)
Company 1996 1995 1994
JCP&L $ 8.0 $ 5.7 $ 0.6
Met-Ed 3.6 3.3 0.4
Penelec 14.7 11.1 0.8
Other 12.3 7.8 0.5
Total $ 38.6 $ 27.9 $ 2.3
F-75
<PAGE>
GPU, Inc. and Subsidiary Companies
The funded status of the plans at December 31, 1996 and 1995, was as
follows:
(in millions)
GPU, Inc. and Subsidiary Companies 1996 1995
Accumulated Postretirement Benefit Obligation:
Retirees $ 452.7 $ 361.6
Fully eligible active plan participants 17.1 32.4
Other active plan participants 236.2 232.4
Total accumulated postretirement
benefit obligation (APBO) $ 706.0 $ 626.4
APBO $(706.0) $(626.4)
Plan assets at fair value 303.6 191.3
APBO in excess of plan assets (402.4) (435.1)
Less: Unrecognized net loss 56.6 65.0
Unrecognized prior service cost 1.9 2.3
Unrecognized transition obligation 268.6 295.9
Accrued postretirement benefit liability $ (75.3) $ (71.9)
(in millions)
JCP&L 1996 1995
APBO:
Retirees $ 120.2 $ 89.2
Fully eligible active plan participants 7.7 18.9
Other active plan participants 52.0 53.4
Total APBO $ 179.9 $ 161.5
APBO $(179.9) $(161.5)
Plan assets at fair value 70.7 39.7
APBO in excess of plan assets (109.2) (121.8)
Less: Unrecognized net loss 14.1 12.9
Unrecognized transition obligation 74.4 85.3
Accrued postretirement benefit liability $ (20.7) $ (23.6)
(in millions)
Met-Ed 1996 1995
APBO:
Retirees $ 84.7 $ 80.2
Fully eligible active plan participants 2.1 3.5
Other active plan participants 37.4 39.2
Total APBO $ 124.2 $ 122.9
APBO $(124.2) $(122.9)
Plan assets at fair value 34.7 21.9
APBO in excess of plan assets (89.5) (101.0)
Less: Unrecognized net loss 19.6 17.7
Unrecognized transition obligation 44.7 57.4
Accrued postretirement benefit liability $ (25.2) $ (25.9)
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(in millions)
Penelec 1996 1995
APBO:
Retirees $ 145.5 $ 139.7
Fully eligible active plan participants 3.7 6.0
Other active plan participants 54.8 79.6
Total APBO $ 204.0 $ 225.3
APBO $(204.0) $(225.3)
Plan assets at fair value 95.6 75.3
APBO in excess of plan assets (108.4) (150.0)
Less: Unrecognized net loss 13.2 25.0
Unrecognized prior service cost 1.6 2.3
Unrecognized transition obligation 83.2 106.1
Accrued postretirement benefit liability $ (10.4) $ (16.6)
Principal actuarial assumptions (%):
Annual long-term rate of return on plan assets 8.5 8.5
Discount rate 7.5 7.5
GPU 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 1996, the APBO increased by $45 million (JCP&L $15 million; Met-Ed $8
million; Penelec $8 million; Other $14 million) as a result of the VERP. The
APBO 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 11% for those not eligible for Medicare and 8% 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 APBO by approximately
$60 million (JCP&L $14 million; Met-Ed $10 million; Penelec $16 million; Other
$20 million) as of December 31, 1996 and the aggregate of the service and
interest cost components of net periodic postretirement health-care cost by
approximately $5 million (JCP&L $1 million; Met-Ed $1 million; Penelec $2
million; Other $1 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. A Stipulation of Final Settlement (Final Settlement),
pending before the NJBPU, would allow JCP&L to recover and amortize the
deferred balance at December 31, 1997 over a fifteen-year period. In
addition, the Final Settlement would allow JCP&L to recover current amounts
accrued pursuant to FAS 106, including amortization of the transition
obligation. (See discussion of the Final Settlement in Rate Matters,
Management's Discussion and Analysis.) In January 1997, the NJBPU issued a
generic order providing certain options for recovery of postretirement costs.
This generic order would affect JCP&L only if the Final Settlement is not
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approved. 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 1996 and 1995, Penelec recorded charges to income of approximately $12
million and $9 million, respectively, which represent continued amortization
of the transition obligation along with current accruals of FAS 106 expense
for active employees.
12. 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 GPU Energy companies participated with nonaffiliated
utilities in the following jointly owned stations at December 31, 1996:
Balance (in millions)
% Accumulated
Station Owner Ownership Investment Depreciation
Homer City Penelec 50 $453.7 $157.3
Conemaugh Met-Ed 16.45 146.1 40.7
Keystone JCP&L 16.67 90.3 22.5
Yards Creek JCP&L 50 29.9 6.5
Seneca Penelec 20 16.0 5.1
13. LEASES
GPU's capital leases consist primarily of leases for nuclear fuel.
Nuclear fuel capital leases at December 31, 1996 totaled $139 million (JCP&L
$95 million; Met-Ed $29 million; Penelec $15 million), net of amortization of
$208 million (JCP&L $124 million; Met-Ed $56 million; Penelec $28 million).
Nuclear fuel capital leases at December 31, 1995 totaled $152 million (JCP&L
$88 million; Met-Ed $43 million; Penelec $21 million), net of amortization of
$160 million (JCP&L $98 million; Met-Ed $41 million; Penelec $21 million).
The recording of capital leases has no effect on net income because all
leases, for ratemaking purposes, are considered operating leases.
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The GPU Energy companies have nuclear fuel lease agreements with
nonaffiliated fuel trusts. In 1995, the GPU Energy companies 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 GPU Energy companies 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 GPU Energy companies
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, 1996, 1995 and 1994,
these amounts were as follows:
(in millions)
Company 1996 1995 1994
JCP&L $ 32 $ 35 $ 28
Met-Ed 16 15 15
Penelec 8 7 7
Total $ 56 $ 57 $ 50
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 36 years, average approximately $3 million annually for each company.
14. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The GPU Energy companies have made investments in three major nuclear
projects--TMI-1 and Oyster Creek, both of which are operating generation
facilities, and 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, 1996 and December 31, 1995, the GPU Energy companies' net investment in
TMI-1 and Oyster Creek, including nuclear fuel, was as follows:
Net Investment (in millions)
TMI-1 Oyster Creek
1996
JCP&L $154 $766
Met-Ed 297 -
Penelec 146 -
Total $597 $766
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Net Investment (in millions)
TMI-1 Oyster Creek
1995
JCP&L $166 $782
Met-Ed 318 -
Penelec 156 -
Total $640 $782
The GPU Energy companies' net investment in TMI-2 at December 31, 1996
and 1995 was $90 million and $95 million, respectively (JCP&L $81 million and
$85 million, respectively; Met-Ed $1 million and $2 million, respectively;
Penelec $8 million in both years). 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 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 Energy companies may also incur
costs and experience reduced output at their 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 operating licenses cannot
be assured. Also, not all risks associated with the ownership or operation of
nuclear facilities may be adequately insured or insurable. Consequently, the
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 the Competition and the Changing
Regulatory Environment section.)
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.
A cleanup program was completed in 1990, and after receiving Nuclear
Regulatory Commission (NRC) approval, TMI-2 entered into long-term monitored
storage in 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 GPU, Inc. and the GPU Energy
companies. Approximately 2,100 of such claims were filed 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.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the GPU Energy companies had (a) primary financial protection in the form
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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 financial protection up to an
aggregate of $560 million. Under the secondary level, the GPU Energy
companies 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).
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 Court of Appeals also ruled 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 defendants proposed). The Court of
Appeals 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. In 1996, the U.S. Supreme Court denied petitions filed
by GPU, Inc. and the GPU Energy companies to review the Court of Appeals'
rulings.
In June 1996, the District Court granted a motion for summary judgment
filed by GPU, Inc. and the GPU Energy companies, and dismissed all of the
2,100 pending claims. The Court ruled that there was no evidence which
created a genuine issue of material fact warranting submission of plaintiffs'
claims to a jury. The plaintiffs have appealed the District Court's ruling to
the Court of Appeals for the Third Circuit. There can be no assurance as to
the outcome of this litigation.
Based on the above, GPU, Inc. and the GPU Energy companies 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.
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 1, the disposal of spent nuclear fuel is covered separately by
contracts with the DOE.
In 1990, the GPU Energy companies submitted a report, in compliance with
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NRC regulations, setting forth a funding plan (employing the external sinking
fund method) for the decommissioning of their nuclear reactors. Under this
plan, the GPU Energy companies 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 was
developed for TMI-2 which took the accident into account. Under the NRC
regulations, the funding targets (in 1996 dollars) are as follows:
(in millions)
Oyster
TMI-1 TMI-2 Creek
JCP&L $ 43 $ 67 $221
Met-Ed 85 135 -
Penelec 42 68 -
$170 $270 $221
The funding targets, while not considered cost estimates, are reference levels
designed to assure that licensees demonstrate adequate financial
responsibility for decommissioning. While the NRC 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.
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 these studies, is in
agreement with them, and believes the results are reasonable. The retirement
cost estimates under the site-specific studies are as follows (in 1996
dollars):
(in millions)
Oyster
GPU TMI-1 TMI-2 Creek
Radiological decommissioning $311 $378 $366
Nonradiological cost of removal 77 36 * 35
Total $388 $414 $401
* Net of $6.5 million spent as of December 31, 1996.
(in millions)
Oyster
JCP&L TMI-1 TMI-2 Creek
Radiological decommissioning $ 78 $ 95 $366
Nonradiological cost of removal 19 9 * 35
Total $ 97 $104 $401
* Net of $1.6 million spent as of December 31, 1996.
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(in millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $155 $189
Nonradiological cost of removal 39 18 *
Total $194 $207
* Net of $3.3 million spent as of December 31, 1996.
(in millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $ 78 $ 94
Nonradiological cost of removal 19 9 *
Total $ 97 $103
* Net of $1.6 million spent as of December 31, 1996.
The ultimate cost of retiring the GPU Energy companies' 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 (for reasons 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.
The GPU Energy companies charge to depreciation expense and accrue
retirement costs based on amounts being collected from customers. Currently,
the GPU Energy companies are collecting retirement costs which are less than
the retirement cost estimates in the 1995 site-specific studies, and they do
not intend to increase these accruals until increased collections from
customers are obtained. Customer collections are contributed to external
trust funds. These deposits, including the related earnings, are classified
as Nuclear Decommissioning Trusts on the Balance Sheets. Accounting for
retirement costs may change based upon the Financial Accounting Standards
Board (FASB) Exposure Draft discussed below.
The FASB has 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 is adopted,
Oyster Creek and TMI-1 future retirement costs would have to be recognized as
a liability immediately, rather than the current industry practice of accruing
these costs in accumulated depreciation over the life of the plants. A
regulatory asset for amounts probable of recovery through rates would also be
established. Any amounts not probable of recovery through rates would have to
be charged to expense. For TMI-2, a liability has already been recognized,
based on the 1995 site-specific study (in 1996 dollars) since the plant is no
longer operating (see TMI-2). The effective date of this accounting change
could be as early as January 1, 1998.
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TMI-1 and Oyster Creek:
The NJBPU has granted JCP&L annual revenues for TMI-1 and Oyster Creek
retirement costs of $2.5 million and $13.5 million, respectively. These
annual revenues are based on both the NRC funding targets for radiological
decommissioning costs and a site-specific study which was performed in 1988
for nonradiological costs of removal. The Final Settlement pending before the
NJBPU would allow for JCP&L's future collection of retirement costs to
increase annually to $5.2 million and $22.5 million for TMI-1 and Oyster
Creek, respectively, beginning in 1998, based on the 1995 site-specific study
estimates. (See discussion of Final Settlement in Rate Matters, Management's
Discussion and Analysis.)
The PaPUC has granted Met-Ed annual revenues for TMI-1 retirement costs
of $8.5 million based on both the NRC funding target for radiological
decommissioning costs and the 1988 site-specific study for nonradiological
costs of removal. The PaPUC also granted Penelec annual revenues of $4.2
million for its share of TMI-1 retirement costs, on a basis consistent with
that granted Met-Ed.
The amounts charged to depreciation expense in 1996 and the provisions
for the future expenditure of these funds, which have been made in accumulated
depreciation, are as follows:
(in millions)
Oyster
TMI-1 Creek
Amount expensed in 1996:
JCP&L $ 2 $ 13
Met-Ed 9 -
Penelec 4 -
$ 15 $ 13
(in millions)
Oyster
TMI-1 Creek
Accumulated depreciation
provision at December 31, 1996:
JCP&L $ 30 $174
Met-Ed 50 -
Penelec 21 -
$101 $174
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:
The estimated liabilities for TMI-2 future retirement costs (reflected as
Three Mile Island Unit 2 future costs on the Consolidated Balance Sheets) as
of December 31, are as follows:
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GPU, Inc. and Subsidiary Companies
(in millions)
GPU JCP&L Met-Ed Penelec
1996 $431 $108 $215 $108
1995 $413 $103 $207 $103
These amounts are based upon the 1995 site-specific study estimates (in 1996
and 1995 dollars, respectively) discussed above and an estimate for remaining
incremental monitored storage costs of $17 million (JCP&L $4 million; Met-Ed
$8 million; Penelec $5 million) for 1996 and $18 million (JCP&L $4 million;
Met-Ed $9 million; Penelec $5 million) for 1995, as a result of TMI-2's
entering long-term monitored storage in 1993. The GPU Energy companies are
incurring annual incremental monitored storage costs of approximately $1
million (JCP&L $250 thousand; Met-Ed $500 thousand; Penelec $250 thousand).
Offsetting the $431 million liability at December 31, 1996 is $266 million
(JCP&L $45 million; Met-Ed $143 million; Penelec $78 million) which is
probable of recovery from customers and included in Three Mile Island Unit 2
deferred costs on the Consolidated Balance Sheets, and $181 million (JCP&L $72
million; Met-Ed $78 million; Penelec $31 million) in trust funds for TMI-2 and
included in Nuclear decommissioning trusts on the Consolidated Balance Sheets.
Earnings on trust fund deposits are included in amounts shown on the
Consolidated Balance Sheets under Three Mile Island Unit 2 deferred costs.
TMI-2 decommissioning costs charged to depreciation expense in 1996 amounted
to $14 million (JCP&L $3 million; Met-Ed $10 million; Penelec $1 million).
The NJBPU and PaPUC have granted JCP&L and Met-Ed, respectively, TMI-2
decommissioning revenues for the NRC funding target and allowances for the
cost of removal of nonradiological structures and materials. In addition,
JCP&L is recovering its share of TMI-2's incremental monitored storage costs.
The Final Settlement pending before the NJBPU would adjust JCP&L's future
revenues for retirement costs based on the 1995 site-specific study estimates,
beginning in 1998. Based on Met-Ed's rate order, Penelec has recorded a
regulatory asset for that portion of such costs which it believes to be
probable of recovery.
At December 31, 1996 the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $67 million (JCP&L $17 million, Met-
Ed $34 million; Penelec $16 million), which is the difference between the 1995
TMI-1 and TMI-2 site-specific study estimates (in 1996 dollars). 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 GPU Energy companies will not pursue recovery from customers for any of
these amounts contributed in excess of the $67 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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INSURANCE
GPU 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 GPU 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 GPU.
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 GPU'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 Energy companies, could
result in assessments of up to $79 million per incident for each of the GPU
Energy companies' 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 Energy companies are also
subject to retrospective premium assessments of up to $54 million (JCP&L $32
million; Met-Ed $15 million; Penelec $7 million) in any one year under
insurance policies applicable to nuclear operations and facilities.
The GPU Energy companies have insurance coverage for incremental
replacement power costs resulting from an accident-related outage at their
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% of such
amounts for years two and three.
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
The Emerging Competitive Market and Stranded Costs:
The combination of the current market price of electricity being below that
of utility-owned generation and purchase power commitments, as well as the
ability of some customers to choose their energy suppliers has created the
potential for stranded costs in the electric utility industry. These stranded
costs, while recoverable in a regulated environment, are at risk in a
deregulated and competitive environment. The GPU Energy companies estimate
that their total potential above market costs relating to power purchase
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commitments, above market generation costs, generating plant decommissioning
costs and regulatory assets at year end 1998, on a present value basis, could
range from $4.5 billion to $8 billion (JCP&L $2.5 billion to $4 billion; Met-
Ed $1 billion to $2 billion; Penelec $1 billion to $2 billion). The estimate
is subject to significant uncertainties including the future market price of
both electricity and other competitive energy sources, as well as the timing
of when these above market costs become stranded due to customers choosing
another supplier. The restructuring legislation in Pennsylvania and the
proposed restructuring plan in New Jersey provide mechanisms for utilities to
recover, subject to regulatory approval, their above market costs. These
regulatory recovery mechanisms in Pennsylvania and New Jersey will differ, but
should allow for the recovery of non-mitigable above market costs through
either distribution charges or separate nonbypassable charges to customers.
In 1996, FERC issued Order 888, which permits electric utilities to recover
their legitimate and verifiable stranded costs incurred when a wholesale
customer purchases power from another supplier using the utility's
transmission system. In addition, Pennsylvania adopted comprehensive
legislation in 1996 which provides for the restructuring of the electric
utility industry and will permit utilities the opportunity to recover their
prudently incurred stranded costs through a PaPUC-approved competitive
transition charge, subject to certain conditions, including that utilities
attempt to mitigate these costs. In 1997, the NJBPU released Phase II of the
New Jersey Energy Master Plan (NJEMP), which proposes that New Jersey electric
utilities should have an opportunity to recover their stranded costs
associated with generating capacity commitments and caused by electric retail
competition, provided that they attempt to mitigate these costs. There can be
no assurance as to the extent that stranded costs will be recoverable. The
inability of the GPU Energy companies to recover their stranded costs in whole
or in part could result in the recording of liabilities for above market
nonutility generation (NUG) costs and writedowns of uneconomic generation
plant and regulatory assets recorded in accordance with FAS 71.
Decommissioning costs, for which a liability and corresponding regulatory
asset is recorded for amounts recoverable from customers, could also be
subject to writedowns. The inability to recover these stranded costs would
have a material adverse effect on GPU's results of operations. (See
additional discussion of stranded costs in Competitive Environment,
Management's Discussion and Analysis).
Nonutility Generation Agreements:
Pursuant to the requirements of the federal Public Utility Regulatory
Policies Act (PURPA) and state regulatory directives, the GPU Energy companies
have entered into power purchase agreements with NUGs for the purchase of
energy and capacity for periods of up to 26 years (JCP&L 25 years; Met-Ed 26
years; Penelec 25 years). The following table shows actual payments from 1994
through 1996, and estimated payments from 1997 through 2001.
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Payments Under NUG Agreements
(in Millions)
Total JCP&L Met-Ed Penelec
* 1994 $528 $304 $101 $123
* 1995 670 381 131 158
* 1996 739 370 177 192
1997 672 336 146 190
1998 691 340 152 199
1999 706 344 152 210
2000 804 347 196 261
2001 873 353 225 295
* Actual. The 1996 amounts are reflected in the rates currently being
charged by the GPU Energy companies.
While a few of these facilities are dispatchable, most are must-run and
generally obligate the GPU Energy companies to purchase, at the contract
price, the output up to the contract limits. As of December 31, 1996,
facilities covered by these agreements having 1,631 MW (JCP&L 891 MW; Met-Ed
340 MW; Penelec 400 MW) of capacity were in service.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the companies' energy supply needs, which has
caused the GPU Energy companies to change their supply strategy to seek
shorter-term agreements offering more flexibility. The cost of near- to
intermediate-term (i.e., one to four 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 lower forecasted fuel
prices. As a result of these developments, the rates under virtually all of
the GPU Energy companies' NUG agreements for facilities currently in operation
are substantially in excess of current and projected prices from alternative
sources.
The GPU Energy companies 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 (see Managing Nonutility Generation,
Management's Discussion and Analysis); and (4) initiating proceedings before
federal and state agencies, and in the courts, where appropriate. In addition,
the GPU Energy companies 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 GPU for substantial
damages. There can be no assurance as to the extent these efforts will be
successful in whole or in part.
From 1997 through 2002, JCP&L has contracts to purchase between 5,100 GWH
and 5,200 GWH of electric generation per year at prices which are estimated to
escalate approximately 1.2% annually on a unit cost (cents/KWH) basis during
this period. From 2003 through 2008, JCP&L has contracts to purchase between
4,700 GWH and 5,100 GWH of electric generation per year at an average annual
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cost of $369 million. The prices during this period are estimated to escalate
approximately 1.5% annually. After 2008, when major contracts begin to
expire, purchases steadily decline to approximately 865 GWH in 2014. The
contract unit cost is estimated to escalate approximately 4.0% annually from
2009 through 2014, with a total average annual cost of $193 million during
this period. All of JCP&L's contracts will have expired by the end of 2017.
During this entire period, the NUG fuel mix averages approximately 95% natural
gas.
From 1997 through 1999, Met-Ed has contracts to purchase between 2,000
GWH and 2,100 GWH of electric generation per year at prices which are
estimated to escalate approximately 0.6% annually on a unit cost basis during
this period. From 2000 through 2008, Met-Ed has contracts to purchase between
2,900 GWH and 4,300 GWH of electric generation per year at an average annual
cost of $241 million. The prices during this period are estimated to escalate
approximately 2.5% annually on a unit cost basis. From 2009 through 2012,
Met-Ed is forecast to purchase between 1,500 GWH and 1,900 GWH of electric
generation per year at an average annual cost of $169 million. During this
period, the prices are estimated to escalate approximately 3.4% annually on a
unit cost basis. After 2012, Met-Ed's remaining contracts expire rapidly
through 2015; thereafter, they remain constant until the expiration of the
last contract in 2020. During this entire period, the NUG fuel mix averages
approximately 50% to 75% coal/waste coal.
From 1997 through 2000, Penelec has contracts to purchase between 3,000
GWH and 4,000 GWH of electric generation per year at prices which are
estimated to escalate approximately 1.4% annually on a unit cost basis during
this period. From 2001 through 2008, Penelec has contracts to purchase
between 3,900 GWH and 5,000 GWH of electric generation per year at an average
annual cost of $297 million. The prices during this period are estimated to
escalate approximately 1.5% annually on a unit cost basis. From 2009 through
2017, purchases decline from approximately 3,000 GWH to approximately 1,500
GWH in 2017. The contract unit cost is estimated to escalate approximately
3.4% annually from 2009 through 2017, with a total average annual cost of
$211 million during this period. After 2017, Penelec's remaining contracts
expire rapidly through 2020. During this entire period, the NUG fuel mix
averages approximately 65% to 95% coal/waste coal.
This discussion of "Nonutility Generation Agreements" contains estimates
which are based on current knowledge and expectations of the outcome of future
events. The estimates are subject to significant uncertainties, including
changes in fuel prices, improvements in technology, the changing regulatory
environment and the deregulation of the electric utility industry.
The GPU Energy companies have been granted recovery of their NUG costs
(including certain buyout costs) from customers by the PaPUC and NJBPU and
expect to continue to pursue such recovery. Although the recently enacted
legislation in Pennsylvania and the NJEMP in New Jersey both include
provisions for the recovery of costs under NUG agreements and certain NUG
buyout costs, there can be no assurance that the GPU Energy companies will
continue to be able to recover similar costs which may be incurred in the
future. (See Competitive Environment, Management's Discussion and Analysis
for additional discussion.)
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Regulatory Assets and Liabilities:
Regulatory assets and liabilities, as reflected in the December 31, 1996
and 1995 Consolidated Balance Sheets in accordance with the provisions of FAS
71, were as follows:
GPU Assets (in thousands)
December 31, December 31,
1996 1995
Income taxes recoverable through
future rates $ 527,385 $ 527,584
TMI-2 deferred costs 356,517 368,712
Nonutility generation contract buyout costs 242,481 84,132
Unamortized property losses 100,310 105,729
Other postretirement benefits 76,569 58,362
Manufactured gas plant (MGP) remediation 49,596 29,608
N.J. unit tax 45,877 51,518
Unamortized loss on reacquired debt 45,378 50,198
Load and demand-side management programs 40,770 48,071
N.J. low-level radwaste disposal 37,525 21,778
DOE enrichment facility decommissioning 36,352 38,519
Nuclear fuel disposal fee 21,552 21,946
Environmental remediation (non-MGP sites) 20,864 -
Storm damage 20,226 18,294
Other 31,870 15,257
Total $1,653,272 $1,439,708
Liabilities (in thousands)
December 31, December 31,
1996 1995
Income taxes refundable through
future rates $ 87,735 $ 94,931
Other 2,080 3,068
Total $ 89,815 $ 97,999
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JCP&L Assets (in thousands)
December 31, December 31,
1996 1995
Income taxes recoverable through
future rates $ 142,726 $ 134,787
TMI-2 deferred costs 126,448 138,472
Nonutility generation contract buyout costs 139,000 17,482
Unamortized property losses 94,767 100,176
Other postretirement benefits 44,024 32,390
Manufactured gas plant (MGP) remediation 49,596 29,608
N.J. unit tax 45,877 51,518
Unamortized loss on reacquired debt 31,469 34,285
Load and demand-side management programs 40,770 48,071
N.J. low-level radwaste disposal 37,525 21,778
DOE enrichment facility decommissioning 23,150 24,503
Nuclear fuel disposal fee 23,319 23,165
Environmental remediation (non-MGP sites) 698 -
Storm damage 20,226 18,294
Other 9,966 10,199
Total $ 829,561 $ 684,728
Liabilities (in thousands)
December 31, December 31,
1996 1995
Income taxes refundable through
future rates $ 32,567 $ 36,343
Other 683 1,254
Total $ 33,250 $ 37,597
Met-Ed Assets (in thousands)
December 31, December 31,
1996 1995
Income taxes recoverable through
future rates $ 174,636 $ 178,513
TMI-2 deferred costs 144,782 149,004
Nonutility generation contract buyout costs 86,781 66,650
Unamortized property losses 3,113 3,273
Other postretirement benefits 32,545 25,972
Unamortized loss on reacquired debt 6,336 6,945
DOE enrichment facility decommissioning 8,801 9,344
Nuclear fuel disposal fee (1,282) (1,025)
Environmental remediation (non-MGP sites) 2,575 -
Other 4,096 1,299
Total $ 462,383 $ 439,975
Liabilities (in thousands)
December 31, December 31,
1996 1995
Income taxes refundable through
future rates $ 23,486 $ 24,765
Other 2,495 1,696
Total $ 25,981 $ 26,461
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Penelec Assets (in thousands)
December 31, December 31,
1996 1995
Income taxes recoverable through
future rates $ 210,023 $ 214,284
TMI-2 deferred costs 85,287 81,236
Nonutility generation contract buyout costs 16,700 -
Unamortized property losses 2,430 2,280
Other postretirement benefits - -
Unamortized loss on reacquired debt 7,686 8,968
DOE enrichment facility decommissioning 4,401 4,672
Nuclear fuel disposal fee (485) (194)
Environmental remediation (non-MGP sites) 17,591 -
Other 18,805 3,759
Total $ 362,438 $ 315,005
Liabilities (in thousands)
December 31, December 31,
1996 1995
Income taxes refundable through
future rates $ 31,682 $ 33,823
Other 12 118
Total $ 31,694 $ 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.
TMI-2 deferred costs: Represents costs that are recoverable through rates for
the GPU Energy companies' 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 (in
1996 dollars) and JCP&L's share of long-term monitored storage costs. For
additional information, see TMI-2 Future Costs.
Nonutility generation contract buyout costs: Represents amounts 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).
Unamortized property losses: Consists mainly of costs associated with JCP&L's
Forked River project, which are included in rates.
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."
Manufactured gas plant remediation: Consists of costs which are probable of
recovery, with interest, associated with the investigation and remediation of
several gas manufacturing plants. For additional information, see the
Environmental Matters section.
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N.J. unit tax: Represents certain state taxes, with interest, for which JCP&L
received NJBPU approval in 1993 to recover over a ten-year period.
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 and other DSM program expenditures that are currently being recovered,
with interest, through JCP&L's retail base rates. Also includes provisions
for lost revenues between base rate cases and performance incentives.
N.J. low-level radwaste disposal: Represents 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.
DOE enrichment facility decommissioning: Represents payments to the DOE over
a 15-year period beginning in 1994. For additional information, see Note 1,
Summary of Significant Accounting Policies.
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.
Environmental remediation: Represents amounts related to the remediation of
Penelec's Seward station property and various ash disposal sites for all three
GPU Energy companies (see the Environmental Matters section).
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 amortization amount is included in JCP&L's retail base
rates and is charged to expense.
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 the Nuclear Plant Retirement Costs section.
Accounting Matters:
Statement of Financial Accounting Standards No. 101, "Regulated
Enterprises- Accounting for the Discontinuation of Application of FASB
Statement No. 71", applies when a utility fails to continue to meet the
provisions of FAS 71. (See Regulatory Accounting under Note 1 and Regulatory
Assets and Liabilities above.) Although the GPU Energy companies continue to
be subject to cost-based ratemaking regulation, in the event that either all
or a portion of their operations are no longer subject to FAS 71 provisions,
the related regulatory assets, net of regulatory liabilities, would have to be
written off and charged to expense. In addition, any above market costs of
power purchase commitments would have to be expensed, and additional
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 experience gained from the deregulation of the
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telecommunications industry indicates that substantial write-offs may result
with the discontinuation of FAS 71. At this time, GPU is unable to determine
when and to what extent FAS 71 will no longer be applicable.
In 1995, the FASB issued Statement of Financial Accounting Standards No.
121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets," which
requires that regulatory assets meet the recovery criteria of FAS 71 on an
ongoing basis in order to avoid a writedown. In addition, 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. FAS
121 also requires the recognition of impairment losses when the carrying
amounts of those assets are greater than the estimated cash flows expected to
be generated from the use and eventual disposition of the assets. The effects
of FAS 121 have not been material to GPU's results of operations. However, as
GPU enters a more competitive environment, some assets could be subject to
impairment, thereby necessitating writedowns, which could have a material
adverse effect on GPU's results of operations and financial condition.
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, ambient air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, GPU may be required to incur substantial additional costs to construct
new equipment, modify or replace existing and proposed equipment, remediate,
decommission or cleanup waste disposal and other sites currently or formerly
used by it, including formerly owned manufactured gas plants, coal mine refuse
piles and generation facilities. With regard to electromagnetic fields, GPU
may be required to 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 GPU Energy companies expect to spend up to $277 million for air
pollution control equipment by the year 2000 (JCP&L $46 million; Met-Ed $117
million; Penelec $114 million), of which approximately $240 million has
already been spent (JCP&L $43 million; Met-Ed $95 million; Penelec $102
million). In developing their least-cost plan to comply with the Clean Air
Act, the GPU Energy companies will continue to evaluate major capital
investments compared to participation in the sulfur dioxide (SO2) emission
allowance market, the expected nitrogen oxide (NOx) emissions trading 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 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 GPU Energy companies 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 $17
million (included in the Clean Air Act total), beginning in 1997, to meet the
1999 seasonal reductions agreed upon by the OTC (JCP&L $1 million; Met-Ed $9
million; Penelec $7 million). The OTC has stated that it anticipates that
additional NOx reductions will be necessary to meet the Clean Air Act's 2005
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National Ambient Air Quality Standard (NAAQS) for ozone. However, the
specific requirements that will have to be met at that time have not been
finalized. In addition, the EPA has recently proposed changes to the NAAQS
for ozone, particulate matter and regional haze. The GPU Energy companies are
unable to determine what additional costs, if any, will be incurred.
GPU has been formally notified by the EPA and state environmental
authorities that it is 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 hazardous and/or toxic waste sites in the
following number of instances (in some cases, more than one company is named
for a given site):
JCP&L MET-ED PENELEC GPUN GPU INC. TOTAL
5 4 2 1 1 10
In addition, certain of the GPU companies have been requested to
participate in the remediation or supply information to the EPA and state
environmental authorities on several other sites for which they have not been
formally named as PRPs, although the EPA and state authorities may
nevertheless consider them as PRPs. Certain of the GPU companies 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 companies involved.
Pursuant to federal environmental monitoring requirements, Penelec has
reported to the Pennsylvania Department of Environmental Protection (PaDEP)
that contaminants from coal mine refuse piles were identified in storm water
run-off at Penelec's Seward station property. Penelec signed a modified
Consent Order, which became effective December 1996, that establishes a
schedule for long-term remediation, based on future operating scenarios,
including reboilering the station using fluidized bed combustion technology.
Penelec currently estimates that the remediation of the Seward station
property will range from $12 to $25 million and has recorded a liability of
$12 million at December 31, 1996. These cost estimates are subject to
uncertainties based on continuing discussions with the PaDEP as to the method
of remediation, the extent of remediation required and available cleanup
technologies. Penelec will seek, and expects, recovery of these remediation
costs in its restructuring plan to be filed with the PaPUC (see Competitive
Environment, Management's Discussion and Analysis), and has recorded a
corresponding regulatory asset of approximately $12 million at December 31,
1996.
The GPU Energy companies are required to submit applications for re-
permitting seven operating ash disposal sites to the PaDEP by July 1997,
including projected site closure procedures and related cost estimates.
Applications have been filed with the PaDEP for five of these sites. The cost
estimates for the closure of these five sites range from approximately $9
million to $14 million, and a liability of $9 million (JCP&L $1 million; Met-
Ed $2 million; Penelec $6 million) is reflected in the Consolidated Balance
Sheet at December 31, 1996. JCP&L's share of these costs is deferred based on
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past rate recovery precedent, and Penelec and Met-Ed expect recovery through
their restructuring plans to be filed with the PaPUC (see Competitive
Environment, Management's Discussion and Analysis). As a result, a regulatory
asset of $9 million is reflected in the Consolidated Balance Sheet at December
31, 1996.
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 (MGP) sites. JCP&L has also entered
into various cost-sharing agreements with other utilities for most of the
sites. As of December 31, 1996, JCP&L has spent approximately $23 million in
connection with the cleanup of these sites. In addition, JCP&L has recorded an
estimated environmental liability of $45 million relating to expected future
costs of these sites (as well as two other properties). This estimated
liability is based upon ongoing site investigations and remediation efforts,
which generally involve capping the sites and pumping and treatment of ground
water. Moreover, the cost to clean up these sites could be materially in
excess of $45 million due to significant uncertainties, including changes in
acceptable remediation methods and technologies.
In 1994, the NJBPU approved a mechanism similar to JCP&L's LEAC for the
recovery of future MGP remediation costs. However, the NJBPU has also
directed that recovery of MGP remediation costs cease until such expenditures
equaled the funds already collected from customers. At December 31, 1996,
JCP&L had recorded on its Balance Sheet a regulatory asset of $49.6 million,
which included approximately $45 million related to expected future costs
discussed above and approximately $4 million for remediation expenditures in
excess of collections from customers (including interest) (see Regulatory
Assets and Liabilities). JCP&L is continuing to defer these remediation
expenditures and accrue interest as previously authorized by the NJBPU, and is
continuing to defer estimated future remediation costs. JCP&L has requested
the establishment of an adjustment clause for the recovery of future
remediation costs in its Remediation Adjustment Clause (RAC) filing, which is
currently under NJBPU review. The Final Settlement pending before the NJBPU
would allow JCP&L to continue its accounting treatment for remediation costs
and would also provide for the RAC proceeding to remain open for future
review.
JCP&L is pursuing reimbursement from its insurance carriers for
remediation costs already spent and for future estimated costs. In 1994,
JCP&L filed a complaint with the Superior Court of New Jersey against several
of its insurance carriers, relative to these MGP sites. Pretrial discovery
has begun in this case.
OTHER COMMITMENTS AND CONTINGENCIES
GPU International Group:
At December 31, 1996, the GPU International Group had investments
totaling approximately $787 million in facilities located in foreign
countries. Although management attempts to mitigate the risk of investing in
certain foreign countries by securing political risk insurance, the GPU
International Group faces additional risks inherent to operating in such
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locations, including foreign currency fluctuations (see GPU International
Group in Management's Discussion and Analysis).
At December 31, 1996, GPU, Inc.'s aggregate investment in the GPU
International Group was $211 million; GPU, Inc. has also guaranteed up to an
additional $893 million of GPU International Group obligations. Of this
amount, $680 million is included in Long-term debt in the Consolidated Balance
Sheet at December 31, 1996 (see Note 3, Long-Term Debt); $30 million relates
to a GPU International, Inc. revolving credit agreement (see Note 2, Short-
Term Borrowing Arrangements); and $183 million relates to various other
obligations of the GPU International Group.
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. GPU International, Inc. has ownership interests, with an aggregate book
value of approximately $36 million, in three NUG projects which have long-term
power purchase agreements with NIMO. In August 1996, NIMO proposed to buy out
or restructure 44 of its NUG power purchase agreements, including those for
the three GPU International, Inc. projects. GPU International, Inc., in
conjunction with the other NUG developers, is discussing the proposal with
NIMO. There can be no assurance as to the outcome of this matter.
NIMO has also initiated an action in federal court seeking to invalidate
numerous NUG contracts, including those for the GPU International, Inc.
projects. GPU International, Inc. has filed motions to dismiss the complaint.
There can be no assurance as to the outcome of these proceedings.
The Labour Party in the United Kingdom has proposed a windfall tax on
privatized utilities and other companies as part of its election campaign
platform. General elections in the United Kingdom are required to be held no
later than May 1997. If the Labour Party wins the general election, and the
tax is enacted as currently proposed, a charge to Midlands' earnings, which is
estimated to range from $110 million to $350 million (GPU's 50% share being
$55 million to $175 million), would be recorded in 1997, perhaps as early as
the second quarter. Due to the fact that (1) the Labour Party may not win the
election; (2) the windfall tax may not be enacted as currently proposed;
(3) the amount of the proposed tax may change; and (4) the Labour Party may
change its current platform, there is no certainty that this tax, if levied,
would be enacted as currently proposed.
Other:
In 1996, 493 bargaining employees (JCP&L 265; Met-Ed 90; Penelec 133;
Other 5) and 347 nonbargaining employees (JCP&L 76; Met-Ed 73; Penelec 32;
Other 166) accepted voluntary enhanced retirement programs, resulting in an 8%
reduction in GPU's total workforce and a third quarter pre-tax charge to
earnings of $122.7 million (JCP&L $62.9 million; Met-Ed $26.2 million; Penelec
$33.6 million). The charges for these programs are included in Other
Operation and Maintenance on the Income Statement.
GPU's construction programs, for which substantial commitments have been
incurred and which extend over several years, contemplate expenditures of $402
million during 1997 (JCP&L $185 million; Met-Ed $90 million; Penelec $120
million; Other $7 million). As a consequence of reliability, licensing,
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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.
The GPU Energy companies 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 1997 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 GPU Energy companies'
share of the cost of coal purchased under these agreements is expected to
aggregate $133 million for 1997 (JCP&L $23 million; Met-Ed $29 million;
Penelec $81 million).
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 745 MW in 1997, declining to 527 MW in 1999 and 345 MW in
2004. Payments pursuant to these agreements are estimated to be $145 million
in 1997, $128 million in 1998, $104 million in 1999, $84 million in 2000 and
$99 million in 2001.
In October 1996, JCP&L was named as a defendant in a breach of contract
lawsuit against Freehold Cogeneration Associates (Freehold) brought by Nestle
Beverage Company (Nestle) in the New Jersey Superior Court. The lawsuit
relates to the April 1996 agreement under which JCP&L agreed to buy out the
power purchase agreement for the proposed 110 MW Freehold cogeneration
project. Nestle is seeking damages of at least $75 million for Freehold's
alleged breach of its steam sales agreement with Nestle and approximately
$412 million in damages against JCP&L for alleged unlawful interference with
that agreement. Nestle has also requested punitive damages in an unspecified
amount. JCP&L believes the claims against it are without merit. There can be
no assurance as to the outcome of this matter.
In 1993, the NJBPU instituted a generic proceeding to respond to
contentions of the Division of the Ratepayer Advocate that by permitting
utilities to recover NUG capacity 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 LEAC periods after March 1991 were open for further investigation. JCP&L
estimates that the potential refund liability through February 1997, the end
of the most recent LEAC period, is $45 million. The Final Settlement which is
now pending before the NJBPU would resolve all remaining issues in this
proceeding. (See Rate Matters in Management's Discussion and Analysis).
In accordance with the Nuclear Waste Policy Act of 1982 (NWPA), the GPU
Energy companies have entered into contracts with, and have been paying fees
to, the DOE for the future disposal of spent nuclear fuel in a repository or
interim storage facility. In December 1996, the DOE notified the GPU Energy
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companies and other standard contract holders that it will be unable to begin
acceptance of spent nuclear fuel for disposal by 1998, as mandated by the
NWPA. The DOE has requested recommendations for handling the delay. In
January 1997, the GPU Energy companies, along with other electric utilities
and state agencies, petitioned the U.S. Court of Appeals to, among other
things, permit utilities to cease payments into the Federal Nuclear Waste Fund
until the DOE complies with the NWPA. The DOE's inability to accept spent
nuclear fuel by 1998 could have a material impact on GPU's results of
operations, as additional costs may be incurred to build and maintain interim
on-site storage at Oyster Creek. TMI-1 has sufficient on-site storage
capacity to accommodate spent nuclear fuel through the end of its licensed
life. There can be no assurance as to the outcome of this matter.
New Jersey and Connecticut have established the Northeast Compact, to
construct a low-level radioactive waste disposal facility in New Jersey, which
should commence operation by the end of 2003. GPUN's total share of the cost
for developing, constructing, and licensing the facility is estimated to be
$58 million, which will be paid through 2002. Through December 1996, $6
million has been paid. As a result, at December 31, 1996, a liability of $52
million is reflected on the Consolidated Balance Sheet. JCP&L is recovering
these costs from customers, and a regulatory asset has also been recorded.
(See the Regulatory Assets and Liabilities section.)
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 $11.7 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.
Many of GPU's computer systems must be modified due to certain
programming limitations in recognizing dates beyond 1999. GPU currently
estimates that it will cost approximately $20 million to $35 million to modify
these systems. These costs will be expensed as incurred.
As of December 31, 1996, approximately 52% of GPU's workforce was
represented by unions for collective bargaining purposes. In 1996, JCP&L
entered into a new collective bargaining agreement, which expires in 1999.
Met-Ed and Penelec's collective bargaining agreements expire in 1997 and 1998,
respectively.
During the normal course of the operation of its businesses, in addition
to the matters described above, GPU is from time to time involved in disputes,
claims and, in some cases, as a defendant 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's financial
position or results of operations, there can be no assurance that this will
continue to be the case.
F-99
<PAGE>
GPU, Inc. and Subsidiary Companies
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
(In Thousands)
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, 1996
Allowance for doubtful
accounts $8,182 $17,501 $5,304(a) $22,327(b) $8,660
Allowance for inventory
obsolescence 3,373 650 2,207(e) 3,974(c) 2,256
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(c) 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(d) 1,572(c) 4,923
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Sale of inventory previously written off by Met-Ed ($466) and reestablishment of zero
value inventory by JCP&L ($348).
(e) Sale of inventory previously written off by Met-Ed ($4) and JCP&L ($4) and
reestablishment of zero value inventory by JCP&L ($2,199).
F-100
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
COMPANY STATISTICS
<CAPTION>
For The Years Ended December 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Capacity at Company Peak (in MW):
Company owned 2,850 2,749 2,765 2,839 2,826 2,836
Contracted 2,497 2,462 2,403 2,033 2,364 1,995
Total capacity (a) 5,347 5,211 5,168 4,872 5,190 4,831
Hourly Peak Load (in MW):
Summer peak 4,130 4,554 4,292 4,564 4,149 4,376
Winter peak 3,173 3,260 3,242 3,129 3,135 3,222
Reserve at company peak (%) 29.5 14.4 20.4 6.7 25.1 10.4
Load factor (%) (b) 53.9 47.1 50.8 49.1 51.7 49.3
Sources of Energy (in thousands of MWH):
Coal 2,105 1,929 1,738 1,983 1,985 1,926
Nuclear 6,114 6,791 5,275 6,151 6,259 4,362
Gas, hydro & oil 535 861 757 460 270 1,066
Net generation 8,754 9,581 7,770 8,594 8,514 7,354
Utility purchases and interchange 6,608 6,304 6,966 7,253 7,173 9,498
Nonutility purchases 5,439 5,850 4,920 4,820 5,274 3,579
Total sources of energy 20,801 21,735 19,656 20,667 20,961 20,431
Company use, line loss, etc (2,127) (1,749) (1,405) (2,026) (2,075) (1,799)
Total electric energy sales 18,674 19,986 18,251 18,641 18,886 18,632
Fuel Expense (in millions):
Coal $ 30 $ 26 $26 $28 $26 $ 28
Nuclear 40 44 35 42 41 32
Gas & oil 31 31 34 29 18 41
Total $101 $101 $95 $99 $85 $101
Power Purchased and Interchanged (in millions):
Utility purchases and interchange $246 $279 $295 $310 $325 $390
Nonutility purchases 370 382 304 292 316 216
Total $616 $661 $599 $602 $641 $606
Electric Energy Sales (in thousands of MWH):
Residential 7,266 7,112 7,094 6,983 6,568 6,757
Commercial 6,829 6,611 6,586 6,474 6,207 6,243
Industrial 3,497 3,562 3,673 3,689 3,723 3,816
Other 78 77 76 369 389 383
Sales to customers 17,670 17,362 17,429 17,515 16,887 17,199
Sales to other utilities 1,004 2,624 822 1,126 1,999 1,433
Total 18,674 19,986 18,251 18,641 18,886 18,632
Operating Revenues (in millions):
Residential $ 895 $ 881 $ 855 $ 835 $ 735 $ 750
Commercial 775 742 721 699 630 620
Industrial 311 315 322 321 306 309
Other 21 21 21 40 40 39
Sales to customers 2,002 1,959 1,919 1,895 1,711 1,718
Sales to other utilities 35 62 19 31 53 45
Total electric energy sales 2,037 2,021 1,938 1,926 1,764 1,763
Other revenues 21 15 15 10 10 10
Total $2,058 $2,036 $1,953 $1,936 $1,774 $1,773
Price per KWH (in cents):
Residential 12.40 12.31 12.06 11.90 11.15 11.11
Commercial 11.38 11.20 10.92 10.78 10.08 9.93
Industrial 8.92 8.45 8.78 8.70 8.20 8.08
Total sales to customers 11.38 11.24 11.00 10.80 10.09 9.99
Total electric energy sales 10.96 10.08 10.61 10.31 9.30 9.47
Kilowatt-hour Sales per Residential Customer 8,637 8,559 8,690 8,669 8,264 8,585
Customers at Year-End (in thousands) 954 940 924 911 897 887
(a) Summer ratings at December 31, 1996 of owned and contracted capacity were 2,718 MW and 2,226 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-101
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
SELECTED FINANCIAL DATA
<CAPTION> (In Thousands)
For the Years Ended December 31, 1996* 1995 1994** 1993 1992 1991***
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $2,057,918 $2,035,928 $1,952,425 $1,935,909 $1,774,071 $1,773,219
Other operation and
maintenance expense 556,086 475,448 526,623 460,128 424,285 433,562
Net income 156,303 199,089 162,841 158,344 117,361 153,523
Earnings available
for common stock 143,231 184,632 148,046 141,534 96,757 134,083
Net utility plant
in service 2,717,056 2,641,565 2,620,212 2,558,160 2,429,756 2,365,987
Total assets 4,709,919 4,456,389 4,336,640 4,269,155 3,886,904 3,695,645
Long-term debt 1,173,091 1,192,945 1,168,444 1,215,674 1,116,930 1,022,903
Long-term obligations
under capital leases 933 2,402 4,362 6,966 4,645 5,471
Company-obligated mandatorily
redeemable preferred securities 125,000 125,000 - - - -
Cumulative preferred stock
with mandatory redemption 114,000 134,000 150,000 150,000 150,000 100,000
Capital expenditures 199,823 217,805 243,878 197,059 218,874 241,774
Return on average
common equity 9.5% 13.1% 11.2% 11.1% 8.0% 11.9%
Number of employees 2,538 3,111 3,077 3,447 3,434 3,466
* Results for 1996 reflect a decrease in earnings of $39.4 million (after-tax) for costs related to voluntary enhanced
retirement programs.
** 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.
F-102
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
First Quarter Second Quarter
In Thousands 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues $529,274 $468,034 $475,884 $453,081
Operating income 77,361 57,227 67,750 61,834
Net income 54,496 36,211 40,381 36,796
Earnings available for common stock 50,910 32,512 37,219 33,210
Third Quarter Fourth Quarter
In Thousands 1996* 1995 1996 1995
Operating revenues $578,274 $625,479 $474,486 $489,334
Operating income 53,452 119,457 58,743 52,702
Net income 27,519 95,447 33,907 30,635
Earnings available for common stock 24,357 91,861 30,745 27,049
* Results for the third quarter of 1996 reflect charges of $39.4 million (after-tax)
for costs related to voluntary enhanced retirement programs.
F-103
</TABLE>
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Jersey Central Power & Light Company
Reading, Pennsylvania
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. Those 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, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996 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
February 5, 1997
F-104
<PAGE>
<TABLE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Revenues $2,057,918 $2,035,928 $1,952,425
Operating Expenses:
Fuel 101,357 101,110 94,503
Power purchased and interchanged:
Affiliates 27,058 17,950 18,661
Others 589,396 642,858 579,948
Deferral of energy and capacity costs, net 19,441 (5,949) (19,448)
Other operation and maintenance 556,086 475,448 526,623
Depreciation and amortization 207,309 194,976 191,042
Taxes, other than income taxes 228,885 226,994 231,070
Total operating expenses 1,729,532 1,653,387 1,622,399
Operating Income Before Income Taxes 328,386 382,541 330,026
Income taxes 71,080 91,321 75,748
Operating Income 257,306 291,220 254,278
Other Income and Deductions:
Allowance for other funds used during construction 1,536 1,803 893
Other income/(expense), net 7,202 14,889 21,995
Income taxes (3,357) (5,905) (9,372)
Total other income and deductions 5,381 10,787 13,516
Income Before Interest Charges and
Dividends on Preferred Securities 262,687 302,007 267,794
Interest Charges and Dividends
on Preferred Securities:
Interest on long-term debt 89,648 92,602 93,477
Other interest 11,147 9,709 14,726
Allowance for borrowed funds used during
construction (5,111) (6,021) (3,250)
Dividends on company-obligated mandatorily
redeemable preferred securities 10,700 6,628 -
Total interest charges and dividends
on preferred securities 106,384 102,918 104,953
Net Income 156,303 199,089 162,841
Preferred stock dividends 13,072 14,457 14,795
Earnings Available for Common Stock $ 143,231 $ 184,632 $ 148,046
The accompanying notes are an integral part of the consolidated financial statements.
F-105
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $4,528,676 $4,311,458
Less, accumulated depreciation 1,811,620 1,669,893
Net utility plant in service 2,717,056 2,641,565
Construction work in progress 106,512 157,885
Other, net 111,116 111,023
Net utility plant 2,934,684 2,910,473
Other Property and Investments:
Nuclear decommissioning trusts, at market 278,342 225,200
Nuclear fuel disposal trust, at market 101,661 95,393
Other, net 8,305 7,218
Total other property and investments 388,308 327,811
Current Assets:
Cash and temporary cash investments 1,321 922
Special deposits 6,939 7,358
Accounts receivable:
Customers, net 135,655 150,002
Other 33,228 21,912
Unbilled revenues 56,522 66,389
Materials and supplies, at average cost or less:
Construction and maintenance 92,761 95,949
Fuel 19,257 18,693
Deferred income taxes 22,509 8,842
Prepayments 21,150 20,869
Total current assets 389,342 390,936
Deferred Debits and Other Assets:
Regulatory assets:
Income taxes recoverable through future rates 142,726 134,787
Nonutility generation contract buyout costs 139,000 17,482
Three Mile Island Unit 2 deferred costs 126,448 138,472
Unamortized property losses 94,767 100,176
Other 326,620 293,811
Total regulatory assets 829,561 684,728
Deferred income taxes 138,903 122,082
Other 29,121 20,359
Total deferred debits and other assets 997,585 827,169
Total Assets $4,709,919 $4,456,389
The accompanying notes are an integral part of the consolidated financial statements.
F-106
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153,713 $ 153,713
Capital surplus 510,769 510,769
Retained earnings 825,001 816,770
Total common stockholder's equity 1,489,483 1,481,252
Cumulative preferred stock:
With mandatory redemption 114,000 134,000
Without mandatory redemption 37,741 37,741
Company-obligated mandatorily redeemable
preferred securities 125,000 125,000
Long-term debt 1,173,091 1,192,945
Total capitalization 2,939,315 2,970,938
Current Liabilities:
Securities due within one year 110,075 35,710
Notes payable 31,800 800
Obligations under capital leases 96,150 90,329
Accounts payable:
Affiliates 71,761 31,885
Other 94,258 111,225
Taxes accrued 2,063 10,516
Deferred energy credits/(costs) 15,559 (5,290)
Interest accrued 28,350 28,718
Other 80,195 71,769
Total current liabilities 530,211 375,662
Deferred Credits and Other Liabilities:
Deferred income taxes 664,440 607,188
Unamortized investment tax credits 59,893 66,874
Three Mile Island Unit 2 future costs 107,652 103,271
Nuclear fuel disposal fee 127,543 121,121
Regulatory liabilities 33,250 37,597
Other 247,615 173,738
Total deferred credits and other liabilities 1,240,393 1,109,789
Commitments and Contingencies (Note 14)
Total Liabilities and Capital $4,709,919 $4,456,389
The accompanying notes are an integral part of the consolidated financial statements.
F-107
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 816,770 $ 772,240 $ 724,194
Net income 156,303 199,089 162,841
Total 973,073 971,329 887,035
Cash dividends on capital stock:
Cumulative preferred stock
(at the annual rates
indicated below):
4% Series ($4.00 a share) (500) (500) (500)
7.88% Series E ($7.88 a share) (1,970) (1,970) (1,970)
8.48% Series I ($8.48 a share) (2,968) (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) (3,309) (3,422) (3,760)
Common stock (not declared on a
per share basis) (135,000) (140,000) (100,000)
Total (148,072) (154,457) (114,795)
Other adjustments, net - (102) -
Balance at end of year $ 825,001 $ 816,770 $ 772,240
The accompanying notes are an integral part of the consolidated financial statements.
F-108
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 156,303 $ 199,089 $ 162,841
Adjustments to reconcile income to cash provided:
Depreciation and amortization 217,225 212,609 209,823
Amortization of property under capital leases 28,339 31,963 27,876
Voluntary enhanced retirement programs 62,909 - 46,862
Nuclear outage maintenance costs, net (15,392) 16,239 (16,182)
Deferred income taxes and investment tax
credits, net 4,056 (3,264) 35,426
Deferred energy and capacity costs, net 19,436 (6,511) (19,166)
Accretion income (11,610) (12,520) (13,541)
Allowance for other funds used during
construction (1,536) (1,803) (893)
Changes in working capital:
Receivables 12,897 (35,318) 24,579
Materials and supplies 2,624 (2,642) 1,221
Special deposits and prepayments 138 22,261 20,282
Payables and accrued liabilities (62,157) (47,634) (103,485)
Nonutility generation contract buyout costs (65,000) (17,000) -
Other, net (6,334) (12,816) (19,537)
Net cash provided by operating activities 341,898 342,653 356,106
Investing Activities:
Cash construction expenditures (199,823) (217,805) (243,878)
Contributions to decommissioning trusts (18,004) (18,793) (17,237)
Other, net (10,253) (7,114) (15,417)
Net cash used for investing activities (228,080) (243,712) (276,532)
Financing Activities:
Issuance of long-term debt 79,550 49,625 -
Increase/(Decrease) in notes payable, net 31,000 (109,700) 110,500
Retirement of long-term debt (25,710) (47,439) (60,008)
Capital lease principal payments (29,763) (26,991) (31,531)
Issuance of company-obligated mandatorily
redeemable preferred securities - 121,063 -
Redemption of preferred stock (20,000) (6,049) -
Dividends paid on preferred stock (13,496) (14,569) (14,795)
Dividends paid on common stock (135,000) (140,000) (100,000)
Contribution from parent corporation - 75,000 -
Net cash required by
financing activities (113,419) (99,060) (95,834)
Net increase/(decrease) in cash and temporary cash
investments from above activities 399 (119) (16,260)
Cash and temporary cash investments, beginning of year 922 1,041 17,301
Cash and temporary cash investments, end of year $ 1,321 $ 922 $ 1,041
Supplemental Disclosure:
Interest paid $ 106,264 $ 106,673 $ 109,094
Income taxes paid $ 90,960 $ 93,662 $ 44,619
New capital lease obligations incurred $ 32,694 $ 18,264 $ 37,699
The accompanying notes are an integral part of the consolidated financial statements.
F-109
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
(In Thousands)
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, 1996
Allowance for doubtful
accounts $1,958 $5,080 $1,680(a) $7,048(b) $1,670
Allowance for inventory
obsolescence 197 - 4(e) 2,194(c) 206
2,199(d)
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(c) 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(d) - 348
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Reestablishment of zero value inventory.
(e) Sale of inventory previously written off.
F-110
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
COMPANY STATISTICS
<caption
For The Years Ended December 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Capacity at Company Peak (in MW):
Company owned 1,705 1,604 1,602 1,602 1,602 1,613
Contracted 853 492 499 676 609 677
Total capacity (a) 2,558 2,096 2,101 2,278 2,211 2,290
Hourly Peak Load (in MW):
Summer peak 2,017 2,186 2,000 1,944 1,845 1,978
Winter peak 2,114 2,012 1,954 1,940 1,834 1,842
Reserve at company peak (%) 21.0 (4.1) 5.1 17.2 19.8 15.8
Load factor (%) (b) 66.3 61.4 66.6 67.2 67.6 63.2
Sources of Energy (in thousands of MWH):
Coal 4,760 4,334 4,547 4,283 4,809 4,829
Nuclear 3,550 3,194 3,294 2,975 3,460 2,824
Gas, hydro & oil 182 253 194 42 64 85
Net generation 8,492 7,781 8,035 7,300 8,333 7,738
Utility purchases and interchange 2,021 3,087 2,295 3,398 3,319 3,477
Nonutility purchases 2,406 2,066 1,654 1,623 1,333 1,135
Total sources of energy 12,919 12,934 11,984 12,321 12,985 12,350
Company use, line loss, etc (718) (856) (660) (884) (479) (982)
Total electric energy sales 12,201 12,078 11,324 11,437 12,506 11,368
Fuel Expense (in millions):
Coal $69 $61 $71 $64 $72 $ 88
Nuclear 20 20 20 16 19 19
Gas & oil 5 6 3 2 2 2
Total $94 $87 $94 $82 $93 $109
Power Purchased and Interchanged (in millions):
Utility purchases and interchange $ 54 $ 84 $ 80 $108 $105 $122
Nonutility purchases 177 131 101 95 78 66
Total $231 $215 $181 $203 $183 $188
Electric Energy Sales (in thousands of MWH):
Residential 4,135 3,925 3,921 3,800 3,567 3,542
Commercial 3,144 3,011 2,921 2,794 2,638 2,618
Industrial 4,033 3,957 3,861 3,664 3,589 3,502
Other 213 209 211 284 329 320
Sales to customers 11,525 11,102 10,914 10,542 10,123 9,982
Sales to other utilities 676 976 410 895 2,383 1,386
Total 12,201 12,078 11,324 11,437 12,506 11,368
Operating Revenues (in millions):
Residential $365 $339 $327 $322 $306 $301
Commercial 247 229 215 209 201 197
Industrial 243 228 215 207 213 209
Other 14 13 12 18 22 21
Sales to customers 869 809 769 756 742 728
Sales to other utilities 20 26 12 27 63 45
Total electric energy sales 889 835 781 783 805 773
Other revenues 21 20 20 18 17 15
Total $910 $855 $801 $801 $822 $788
Price per KWH (in cents):
Residential 8.90 8.54 8.39 8.42 8.60 8.45
Commercial 7.88 7.54 7.38 7.46 7.63 7.51
Industrial 6.04 5.74 5.55 5.68 5.95 5.96
Total sales to customers 7.58 7.23 7.07 7.16 7.34 7.27
Total electric energy sales 7.33 6.86 6.92 6.83 6.45 6.78
Kilowatt-hour Sales per Residential Customer 10,012 9,609 9,741 9,573 9,139 9,203
Customers at Year-End (in thousands) 470 465 458 451 445 437
(a) Winter ratings at December 31, 1996 of owned and contracted capacity were 1,705 MW and 823 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-111
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1996* 1995** 1994*** 1993 1992 1991****
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 910,408 $ 854,674 $ 801,303 $ 801,487 $ 821,823 $ 788,462
Other operation and
maintenance expense 249,993 229,559 258,656 210,822 208,756 224,315
Net income 69,067 148,540 731 77,875 73,077 62,341
Earnings available
for common stock 71,845 147,596 (2,229) 70,915 62,788 52,052
Net utility plant
in service 1,455,702 1,477,030 1,437,250 1,361,409 1,290,628 1,226,436
Total assets 2,472,978 2,437,165 2,236,279 2,172,543 1,811,689 1,726,388
Long-term debt 563,252 603,268 529,783 546,319 496,440 386,404
Long-term obligations
under capital leases 380 1,032 2,174 3,557 2,643 2,555
Company-obligated mandatorily
redeemable preferred securities 100,000 100,000 100,000 - - -
Capital expenditures 76,660 112,554 159,717 142,380 130,641 121,840
Return on average
common equity 10.3% 23.5% (0.4%) 12.2% 11.8% 9.4%
Number of employees 2,093 2,166 2,000 2,322 2,328 2,322
* Results for 1996 reflect a decrease in earnings of $15.4 million (after tax) for costs related to voluntary enhanced retirement
programs.
** 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.
F-112
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
First Quarter Second Quarter
In Thousands 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues $237,688 $205,749 $207,058 $190,342
Operating income 38,392 31,155 31,129 28,335
Net income 24,037 16,384 16,806 12,617
Earnings available for common stock 23,801 16,148 16,570 12,381
Third Quarter Fourth Quarter
In Thousands 1996* 1995** 1996 1995
Operating revenues $243,077 $241,664 $222,585 $216,919
Operating income 23,575 35,121 33,804 37,194
Net income 8,382 97,391 19,842 22,148
Earnings available for common stock 8,146 97,155 23,328 21,912
* Results for the third quarter of 1996 reflect charges of $15.4 million (after-tax)
for costs related to voluntary enhanced 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-113
</TABLE>
<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-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. Those 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, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 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
February 5, 1997
F-114
<PAGE>
<TABLE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Revenues $910,408 $854,674 $801,303
Operating Expenses:
Fuel 93,881 87,477 94,260
Power purchased and interchanged:
Affiliates 20,724 31,411 17,834
Others 209,831 184,319 162,693
Deferral of energy costs, net (448) (1,041) (15,518)
Other operation and maintenance 249,993 229,559 258,656
Depreciation and amortization 98,364 99,588 86,063
Taxes, other than income taxes 61,319 54,870 51,817
Total operating expenses 733,664 686,183 655,805
Operating Income Before Income Taxes 176,744 168,491 145,498
Income taxes 49,844 36,686 34,002
Operating Income 126,900 131,805 111,496
Other Income and Deductions:
Allowance for other funds used during
construction 540 1,304 1,978
Other income/(expense), net 1,220 129,660 (98,953)
Income taxes (489) (55,364) 42,748
Total other income and deductions 1,271 75,600 (54,227)
Income Before Interest Charges and
Dividends on Preferred Securities 128,171 207,405 57,269
Interest Charges and Dividends on Preferred Securities:
Interest on long-term debt 45,373 45,844 43,270
Other interest 5,436 5,147 11,937
Allowance for borrowed funds used during
construction (705) (1,126) (1,869)
Dividends on company-obligated mandatorily
redeemable preferred securities 9,000 9,000 3,200
Total interest charges and dividends
on preferred securities 59,104 58,865 56,538
Net Income 69,067 148,540 731
Preferred stock dividends 944 944 2,960
Gain on preferred stock reacquisition 3,722 - -
Earnings/(Loss) Available for Common Stock $ 71,845 $147,596 $ (2,229)
The accompanying notes are an integral part of the consolidated financial statements.
F-115
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2,297,100 $2,240,951
Less, accumulated depreciation 841,398 763,921
Net utility plant in service 1,455,702 1,477,030
Construction work in progress 98,171 83,353
Other, net 31,000 45,587
Net utility plant 1,584,873 1,605,970
Other Property and Investments:
Nuclear decommissioning trusts, at market 131,475 95,317
Other, net 11,261 9,899
Total other property and investments 142,736 105,216
Current Assets:
Cash and temporary cash investments 1,901 1,810
Special deposits 1,052 1,256
Accounts receivable:
Customers, net 61,522 60,739
Other 17,368 22,151
Unbilled revenues 27,019 31,509
Materials and supplies, at average cost or less:
Construction and maintenance 39,739 39,337
Fuel 11,026 9,817
Deferred income taxes 7,073 7,868
Prepayments 17,254 6,549
Total current assets 183,954 181,036
Deferred Debits and Other Assets:
Regulatory assets:
Income taxes recoverable through future rates 174,636 178,513
Three Mile Island Unit 2 deferred costs 144,782 149,004
Nonutility generation contract buyout costs 86,781 66,650
Other 56,184 45,808
Total regulatory assets 462,383 439,975
Deferred income taxes 85,169 91,356
Other 13,863 13,612
Total deferred debits and other assets 561,415 544,943
Total Assets $2,472,978 $2,437,165
The accompanying notes are an integral part of the consolidated financial statements.
F-116
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66,273 $ 66,273
Capital surplus 370,200 370,200
Retained earnings 264,044 248,434
Total common stockholder's equity 700,517 684,907
Cumulative preferred stock 12,056 23,598
Company-obligated mandatorily redeemable
preferred securities 100,000 100,000
Long-term debt 563,252 603,268
Total capitalization 1,375,825 1,411,773
Current Liabilities:
Securities due within one year 40,020 15,019
Notes payable 50,667 22,390
Obligations under capital leases 29,964 43,600
Accounts payable:
Affiliates 27,556 10,559
Other 89,857 91,538
Taxes accrued 11,222 19,615
Deferred energy credits - 1,417
Interest accrued 18,279 19,359
Other 45,825 40,635
Total current liabilities 313,390 264,132
Deferred Credits and Other Liabilities:
Deferred income taxes 401,104 380,135
Three Mile Island Unit 2 future costs 215,204 206,489
Unamortized investment tax credits 31,584 33,387
Nuclear fuel disposal fee 28,811 27,360
Regulatory liabilities 25,981 26,461
Other 81,079 87,428
Total deferred credits and other liabilities 783,763 761,260
Commitments and Contingencies (Note 14)
Total Liabilities and Capital $2,472,978 $2,437,165
The accompanying notes are an integral part of the consolidated financial statements.
F-117
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 248,434 $ 190,742 $ 229,677
Net income 69,067 148,540 731
Total 317,501 339,282 230,408
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)
7.68% Series G ($7.68 a share) - - (2,016)
Common stock (not declared on a
per share basis) (60,000) (95,000) (35,000)
Total (60,944) (95,944) (37,960)
Net unrealized gain/(loss) on investments 4,027 5,119 (489)
Gain on preferred stock reacquisition 3,722 - -
Other adjustments, net (262) (23) (1,217)
Balance at end of year $ 264,044 $ 248,434 $ 190,742
The accompanying notes are an integral part of the consolidated financial statements.
F-118
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 69,067 $ 148,540 $ 731
Adjustments to reconcile income to cash provided:
Depreciation and amortization 104,820 84,848 80,501
Amortization of property under capital leases 15,704 13,667 14,795
Three Mile Island Unit 2 costs - (118,209) 127,640
Voluntary enhanced retirement programs 26,204 - 35,246
Nuclear outage maintenance costs, net 6,215 (5,931) 5,895
Deferred income taxes and investment tax
credits, net 25,168 68,827 (53,993)
Deferred energy costs, net (448) (1,041) (15,518)
Accretion income - - (1,114)
Allowance for other funds used during
construction (540) (1,304) (1,978)
Changes in working capital:
Receivables 8,490 (19,130) 5,498
Materials and supplies (1,611) 7,053 944
Special deposits and prepayments (10,501) 1,615 (4,593)
Payables and accrued liabilities (17,714) 11,478 28,364
Nonutility generation contract buyout costs (43,318) (21,499) -
Other, net (15,964) (36,318) 7,753
Net cash provided by operating activities 165,572 132,596 230,171
Investing Activities:
Cash construction expenditures (76,660) (112,554) (159,717)
Contributions to decommissioning trusts (17,057) (13,485) (10,633)
Other, net (1,087) (300) 79
Net cash used for investing activities (94,804) (126,339) (170,271)
Financing Activities:
Issuance of long-term debt - 87,911 49,687
Increase/(Decrease) in notes payable, net 28,277 22,390 (81,600)
Retirement of long-term debt (15,019) (40,519) (26,016)
Capital lease principal payments (15,171) (12,531) (15,168)
Issuance of company-obligated mandatorily
redeemable preferred securities - - 96,732
Redemption of preferred stock (7,820) - (36,595)
Dividends paid on preferred stock (944) (944) (3,632)
Dividends paid on common stock (60,000) (95,000) (35,000)
Contribution from parent corporation - 25,000 -
Net cash required by
financing activities (70,677) (13,693) (51,592)
Net increase/(decrease) in cash and temporary cash
investments from above activities 91 (7,436) 8,308
Cash and temporary cash investments, beginning of year 1,810 9,246 938
Cash and temporary cash investments, end of year $ 1,901 $ 1,810 $ 9,246
Supplemental Disclosure:
Interest paid $ 59,697 $ 57,606 $ 77,636
Income taxes paid $ 39,278 $ 47,343 $ 15,179
New capital lease obligations incurred $ 1,417 $ 22,316 $ 3,126
The accompanying notes are an integral part of the consolidated financial statements.
F-119
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
(In Thousands)
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, 1996
Allowance for doubtful
accounts $3,072 $6,460 $1,651(a) $8,011(b) $3,172
Allowance for inventory
obsolescence 3,176 - 4(c) 1,316(d) 1,864
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
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Sale of inventory previously written off.
(d) Inventory written off.
F-120
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
COMPANY STATISTICS
<CAPTION>
For The Years Ended December 31, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Capacity at Company Peak (in MW):
Company owned 2,365 2,365 2,369 2,369 2,371 2,512
Contracted 782 868 778 636 418 224
Total capacity (a) 3,147 3,233 3,147 3,005 2,789 2,736
Hourly Peak Load (in MW):
Summer peak 2,410 2,495 2,309 2,208 2,140 2,153
Winter peak 2,574 2,589 2,514 2,342 2,355 2,325
Reserve at company peak (%) 22.3 24.9 25.2 28.3 18.4 17.7
Load factor (%) (b) 71.1 67.6 69.4 70.5 69.3 70.6
Sources of Energy (in thousands of MWH):
Coal 11,268 11,237 10,263 10,703 11,329 11,187
Nuclear 1,775 1,597 1,647 1,488 1,730 1,412
Gas, hydro & oil 95 (95) 120 73 75 36
Net generation 13,138 12,739 12,030 12,264 13,134 12,635
Utility purchases and interchange 2,268 3,071 2,468 2,219 2,723 2,197
Nonutility purchases 3,201 2,796 2,236 1,940 1,463 1,220
Total sources of energy 18,607 18,606 16,734 16,423 17,320 16,052
Company use, line loss, etc (2,932) (2,751) (2,248) (2,256) (2,289) (1,992)
Total electric energy sales 15,675 15,855 14,486 14,167 15,031 14,060
Fuel Expense (in millions):
Coal $164 $164 $163 $174 $168 $169
Nuclear 10 10 10 8 9 9
Gas & oil 2 1 2 1 1 1
Total $176 $175 $175 $183 $178 $179
Power Purchased and Interchanged (in millions):
Utility purchases and interchange $ 18 $ 43 $ 35 $ 31 $ 51 $ 45
Nonutility purchases 192 158 123 104 77 61
Total $210 $201 $158 $135 $128 $106
Electric Energy Sales (in thousands of MWH):
Residential 3,897 3,765 3,773 3,715 3,590 3,553
Commercial 4,044 3,922 3,794 3,651 3,488 3,475
Industrial 4,563 4,463 4,449 4,346 4,589 4,718
Other 814 857 958 568 585 666
Sales to customers 13,318 13,007 12,974 12,280 12,252 12,412
Sales to other utilities 2,357 2,848 1,512 1,887 2,779 1,648
Total 15,675 15,855 14,486 14,167 15,031 14,060
Operating Revenues (in millions):
Residential $ 339 $322 $321 $308 $298 $290
Commercial 302 287 279 261 248 244
Industrial 249 237 237 227 233 236
Other 36 39 45 31 27 32
Sales to customers 926 885 882 827 806 802
Sales to other utilities 53 68 36 52 62 43
Total electric energy sales 979 953 918 879 868 845
Other revenues 41 28 27 29 28 21
Total $1,020 $981 $945 $908 $896 $866
Price per KWH (in cents):
Residential 8.70 8.52 8.51 8.30 8.27 8.16
Commercial 7.48 7.29 7.34 7.17 7.11 7.01
Industrial 5.44 5.33 5.32 5.24 5.08 4.99
Total sales to customers 6.95 6.79 6.80 6.74 6.58 6.46
Total electric energy sales 6.24 6.00 6.34 6.21 5.77 6.00
Kilowatt-hour Sales per Residential Customer 7,857 7,620 7,678 7,607 7,393 7,369
Customers at Year-End (in thousands) 573 571 567 563 559 555
(a) Winter ratings at December 31, 1996 of owned and contracted capacity were 2,365 MW and 866 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
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
SELECTED FINANCIAL DATA
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1996* 1995** 1994*** 1993 1992 1991****
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $1,019,645 $ 981,329 $ 944,744 $ 908,280 $ 896,337 $ 865,552
Other operation and
maintenance expense 293,868 266,347 294,316 241,252 226,179 234,648
Net income 69,809 111,010 31,799 95,728 99,744 106,595
Earnings available
for common stock 73,872 109,466 28,862 90,741 94,080 100,406
Net utility plant
in service 1,715,670 1,692,850 1,621,818 1,542,276 1,473,293 1,419,726
Total assets 2,535,065 2,473,570 2,381,054 2,301,340 1,892,715 1,862,249
Long-term debt 656,459 642,487 616,490 524,491 582,647 542,392
Long-term obligations
under capital leases 4,129 5,277 6,741 7,745 7,691 8,260
Company-obligated mandatorily
redeemable preferred securities 105,000 105,000 105,000 - - -
Capital expenditures 114,672 130,512 174,464 150,252 110,629 101,328
Return on average
common equity 10.0% 15.8% 4.2% 13.5% 14.5% 15.1%
Number of employees 2,071 2,665 3,031 3,539 3,551 3,537
* Results for 1996 reflect a decrease in earnings of $19.7 million (after-tax) due to charges related to voluntary
enhanced retirement programs ($33.6 million).
** Results for 1995 reflect a the reversal of $32.1 million (after-tax) of certain 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 probable 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.
F-122
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
First Quarter Second Quarter
In Thousands 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues $269,329 $253,412 $246,788 $238,451
Operating income 46,660 46,110 37,508 37,218
Net income 30,515 30,566 21,609 20,276
Earnings available for common stock 30,129 30,180 21,223 19,890
Third Quarter Fourth Quarter
In Thousands 1996* 1995** 1996 1995
Operating revenues $256,143 $249,234 $247,385 $240,232
Operating income 19,230 30,911 30,311 27,822
Net income 2,865 50,015 14,820 10,153
Earnings available for common stock 2,479 49,629 20,041 9,767
* Results for the third quarter of 1996 reflect charges of $19.7 million (after-tax)
for costs related to voluntary enhanced retirement programs.
** 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-123
</TABLE>
<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-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. Those 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, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996 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
February 5, 1997
F-124
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Revenues $1,019,645 $981,329 $944,744
Operating Expenses:
Fuel 176,158 174,624 175,071
Power purchased and interchanged:
Affiliates 3,529 5,927 6,310
Others 206,403 195,184 151,919
Deferral of energy costs, net 795 1,088 5,941
Other operation and maintenance 293,868 266,347 294,316
Depreciation and amortization 94,580 83,086 76,600
Taxes, other than income taxes 64,955 67,064 66,058
Total operating expenses 840,288 793,320 776,215
Operating Income Before Income Taxes 179,357 188,009 168,529
Income taxes 45,648 45,948 42,297
Operating Income 133,709 142,061 126,232
Other Income and Deductions:
Allowance for other funds used during construction 173 2,006 1,841
Other income/(expense), net (825) 56,454 (71,287)
Income taxes 99 (24,431) 31,369
Total other income and deductions (553) 34,029 (38,077)
Income Before Interest Charges and
Dividends on Preferred Securities 133,156 176,090 88,155
Interest Charges and Dividends
on Preferred Securities
Interest on long-term debt 49,654 49,875 46,439
Other interest 7,112 8,428 7,421
Allowance for borrowed funds used during
construction (2,607) (2,411) (1,996)
Dividends on company-obligated mandatorily
redeemable preferred securities 9,188 9,188 4,492
Total interest charges and dividends
on preferred securities 63,347 65,080 56,356
Net Income 69,809 111,010 31,799
Preferred stock dividends 1,503 1,544 2,937
Gain on preferred stock reacquisition 5,566 - -
Earnings Available for Common Stock $ 73,872 $109,466 $ 28,862
The accompanying notes are an integral part of the consolidated financial statements.
F-125
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2,738,223 $2,667,842
Less, accumulated depreciation 1,022,553 974,992
Net utility plant in service 1,715,670 1,692,850
Construction work in progress 72,757 72,233
Other, net 22,910 30,876
Net utility plant 1,811,337 1,795,959
Other Property and Investments:
Nuclear decommissioning trusts, at market 54,194 42,440
Other, net 7,271 6,545
Total other property and investments 61,465 48,985
Current Assets:
Cash and temporary cash investments - 1,367
Special deposits 2,348 2,718
Accounts receivable:
Customers, net 73,190 67,454
Other 15,151 29,033
Unbilled revenues 31,350 30,851
Materials and supplies, at average cost or less:
Construction and maintenance 49,007 53,237
Fuel 9,924 11,285
Deferred energy costs - 9,335
Deferred income taxes - 4,602
Prepayments 36,930 10,328
Total current assets 217,900 220,210
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 85,287 81,236
Income taxes recoverable through future rates 210,023 214,284
Other 67,128 19,485
Total regulatory assets 362,438 315,005
Deferred income taxes 67,099 78,754
Other 14,826 14,657
Total deferred debits and other assets 444,363 408,416
Total Assets $2,535,065 $2,473,570
The accompanying notes are an integral part of the consolidated financial statements.
F-126
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
December 31, 1996 1995
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105,812 $ 105,812
Capital surplus 285,486 285,486
Retained earnings 363,702 327,814
Total common stockholder's equity 755,000 719,112
Cumulative preferred stock 16,681 36,777
Company-obligated mandatorily redeemable
preferred securities 105,000 105,000
Long-term debt 656,459 642,487
Total capitalization 1,533,140 1,503,376
Current Liabilities:
Securities due within one year 26,010 75,009
Notes payable 107,680 27,100
Obligations under capital leases 15,881 22,751
Accounts payable:
Affiliates 20,432 13,806
Other 53,424 66,687
Taxes accrued 11,223 16,019
Interest accrued 19,192 19,567
Vacations accrued 5,172 9,976
Other 12,052 19,448
Total current liabilities 271,066 270,363
Deferred Credits and Other Liabilities:
Deferred income taxes 473,268 462,354
Unamortized investment tax credits 42,095 45,114
Three Mile Island Unit 2 future costs 107,652 103,271
Nuclear fuel disposal fee 14,406 13,680
Regulatory liabilities 31,694 33,941
Other 61,744 41,471
Total deferred credits and other liabilities 730,859 699,831
Commitments and Contingencies (Note 14)
Total Liabilities and Capital $2,535,065 $2,473,570
The accompanying notes are an integral part of the consolidated financial statements.
F-127
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
(In Thousands)
For the Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 327,814 $ 290,786 $ 328,290
Net income 69,809 111,010 31,799
Total 397,623 401,796 360,089
Cash dividends on capital stock:
Cumulative preferred stock
(at the annual rates
indicated below):
4.40% Series B ($4.40 a share) (244) (250) (250)
3.70% Series C ($3.70 a share) (351) (359) (359)
4.05% Series D ($4.05 a share) (251) (258) (258)
4.70% Series E ($4.70 a share) (132) (135) (135)
4.50% Series F ($4.50 a share) (188) (193) (193)
4.60% Series G ($4.60 a share) (337) (349) (349)
8.36% Series H ($8.36 a share) - - (1,393)
Common stock (not declared on a
per share basis) (40,000) (75,000) (65,000)
Total (41,503) (76,544) (67,937)
Gain on preferred stock reacquisition 5,566 - -
Net unrealized gain / (loss) on investments 2,014 2,593 (278)
Other adjustments, net 2 (31) (1,088)
Balance at end of year $ 363,702 $ 327,814 $ 290,786
The accompanying notes are an integral part of the consolidated financial statements.
F-128
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands)
For The Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 69,809 $ 111,010 $ 31,799
Adjustments to reconcile income to cash provided:
Depreciation and amortization 89,021 77,635 69,615
Amortization of property under capital leases 8,733 7,777 8,553
Three Mile Island Unit 2 costs - (51,796) 56,304
Voluntary enhanced retirement programs 33,626 - 44,856
Nuclear outage maintenance costs, net 3,099 (2,901) 2,862
Deferred income taxes and investment tax
credits, net 19,208 42,514 (50,451)
Deferred energy costs, net 731 1,491 6,221
Accretion income - - (200)
Allowance for other funds used during
construction (173) (2,006) (1,842)
Changes in working capital:
Receivables 7,648 (7,713) (15,945)
Materials and supplies 5,591 4,912 (1,849)
Special deposits and prepayments (26,232) (5,078) 1,644
Payables and accrued liabilities (52,958) 8,241 (12,804)
Nonutility generation contract buyout costs (11,700) - -
Other, net (7,746) 1,178 12,803
Net cash provided by operating activities 138,657 185,264 151,566
Investing Activities:
Cash construction expenditures (114,672) (130,512) (174,464)
Contributions to decommissioning trusts (5,263) (5,263) (5,705)
Other, net (684) (323) 134
Net cash used for investing activities (120,619) (136,098) (180,035)
Financing Activities:
Issuance of long-term debt 39,513 197,997 129,100
Increase/(Decrease) in notes payable, net 80,580 (83,952) 8,774
Retirement of long-term debt (75,009) (99,319) (108,008)
Capital lease principal payments (8,418) (7,172) (8,734)
Issuance of company-obligated mandatorily
redeemable preferred securities - - 101,185
Redemption of preferred stock (14,527) - (26,168)
Dividends paid on preferred stock (1,544) (1,544) (3,111)
Dividends paid on common stock (40,000) (75,000) (65,000)
Contribution from parent corporation - 20,000 -
Net cash required by
financing activities (19,405) (48,990) 28,038
Net decrease in cash and temporary cash
investments from above activities (1,367) 176 (431)
Cash and temporary cash investments, beginning of year 1,367 1,191 1,622
Cash and temporary cash investments, end of year $ - $ 1,367 $ 1,191
Supplemental Disclosure:
Interest paid $ 63,162 $ 60,524 $ 55,221
Income taxes paid $ 43,098 $ 43,685 $ 59,881
New capital lease obligations incurred $ 715 $ 11,160 $ 2,400
The accompanying notes are an integral part of the consolidated financial statements.
F-129
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
(In Thousands)
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, 1996
Allowance for doubtful
accounts $3,152 $5,961 $1,973(a) $7,268(b) $3,818
Allowance for inventory
obsolescence - 650 - 464(c) 186
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 - - - - -
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
F-130
</TABLE>
<PAGE>
Page 1 of 2
Exhibits to be filed with 1996 10-K
3-A-2 Articles of Incorporation of GPU, Inc. as amended
August 1, 1996.
4-A-43 Fifty-first Supplemental Indenture of JCP&L, dated
August 15, 1996.
4-B-35 Supplemental Indenture of Met-Ed dated August 15, 1996.
4-C-12 Supplemental Indenture of Penelec dated August 15,
1996.
10-A GPU System Companies Deferred Compensation Plan dated
August 1, 1996.
10-B GPU System Companies Master Directors' Benefits
Protection Trust dated November 7, 1996.
10-C GPU System Companies Master Executives' Benefits
Protection Trust dated August 1, 1996.
10-G Incentive Compensation Plan for Elected Officers of
JCP&L dated August 1, 1996.
10-H Incentive Compensation Plan for Elected Officers of
Met-Ed dated August 1, 1996.
10-I Incentive Compensation Plan for Elected Officers of
Penelec dated August 1, 1996.
10-J Deferred Remuneration Plan for Outside Directors of
JCP&L dated November 7, 1996.
10-K JCP&L Supplemental and Excess Benefits Plan dated
August 1, 1996.
10-L Met-Ed Supplemental and Excess Benefits Plan dated
August 1, 1996.
10-M Penelec Supplemental and Excess Benefits Plan dated
August 1, 1996.
10-N Letter agreements dated November 1, 1996 relating to
supplemental pension benefits for J.R. Leva.
10-O Letter agreement dated November 1, 1996 relating to
terms of employment and pension benefits for I.H.
Jolles.
10-P Letter agreement dated November 1, 1996 relating to
supplemental pension benefits for J.G. Graham.<PAGE>
Page 2 of 2
Exhibits to be filed with 1996 10-K
10-Q GPU, Inc. Restricted Stock Plan for Outside Directors
dated November 7, 1996.
10-R Retirement Plan for Outside Directors of GPU, Inc.
dated November 7, 1996.
10-S Deferred Remuneration Plan for Outside Directors of
GPU, Inc. dated November 7, 1996.
10-CC GPU, Inc. 1990 Stock Plan for Employees of GPU, Inc.
and Subsidiaries as amended and restated to reflect
amendments through August 1, 1996.
21 Subsidiaries of the Registrant
A - JCP&L
B - Met-Ed
C - Penelec
23 Consent of Independent Accountants
A - GPU, Inc.
B - JCP&L
C - Met-Ed
D - Penelec
<PAGE>
Exhibit 3-A-2
Articles of Incorporation
of
GPU, Inc.
Pursuant to Article VIII of the Business Corporation Law,
Act 1933, May 5 P. L. 364, As Amended
(As Amended August 1, 1996)<PAGE>
Articles of Incorporation
1. The name of the Corporation is GPU, Inc.
2. The location and post office address of the
Corporation's initial registered office in this Commonwealth
is 2800 Pottsville Pike, Muhlenberg Township, Berks County,
Pennsylvania 19605.
3. The purposes of the Corporation are:
(a) To purchase, hold, acquire and dispose of the
stock, bonds and other evidences of indebtedness of any
corporation or association, domestic or foreign, and to pay for
the same in cash or in stock, bonds, notes or other obligations
of the Corporation, or otherwise, and while the owner of such
stock, bonds, or other evidences of indebtedness, to possess and
exercise in respect thereof all the rights, powers and privileges
of individual owners or holders thereof and to exercise any and
all voting power thereon.
(b) To aid in any manner permitted by law any
corporation or association in whose shares of stock, certificates
of interest, bonds, debentures, notes or other obligations or
securities the Corporation may be interested, and to do any other
act or thing permitted by law for the preservation, protection,
improvement or enhancement of the value of such shares of stock
or other certificates of interest, bonds, debentures, notes, or
other obligations or securities, or the property represented
thereby or securing the same or owned, held or possessed by such
other corporation or association.
(c) To borrow or raise moneys for any of the purposes
of the Corporation and from time to time, without limit as to
amount, to draw, make, accept, endorse, execute and issue bonds,
debentures, notes, drafts, bills of exchange, warrants and other
negotiable or non-negotiable instruments and evidences of
indebtedness; and to secure the payment thereof and of the
interest thereon by mortgage upon or pledge of, or by conveyance,
or assignment in trust of, the whole of any part of the property
and franchises of the Corporation, real, personal and mixed,
tangible or intangible, and wheresoever situate, whether at the
time owned or thereafter acquired; and to issue, sell, negotiate,
pledge or otherwise dispose of such bonds or other obligations of
the Corporation for its corporate purposes. Nothing herein,
however, shall be deemed to empower the Corporation to transact
business which under the laws of the Commonwealth of Pennsylvania
may not be transacted by a corporation organized under the
Business Corporation Law of Pennsylvania.
(d) To make any guarantee respecting dividends,
stocks, bonds, contracts, or other obligations so far as the same
may be permitted by corporations organized under the Business
Corporation Law of Pennsylvania.
1<PAGE>
(e) To acquire all or any part of the goodwill,
rights, property, and business of any person, firm, association,
or corporation heretofore, now or hereafter engaged in any
business similar to or the same as any business which the
Corporation has or may have the power to conduct; to pay for the
same in cash or in stock, bonds, notes or other obligations of
the Corporation, or otherwise; to hold, utilize and in any manner
dispose of the whole or any part of the goodwill, right, property
and business so acquired; to assume in connection therewith the
whole or any part of the liabilities and obligations of any such
person, firm, association or corporation; and to conduct in any
lawful manner the whole or any part of the business acquired.
(f) To loan money secured by mortgages on personal
property or real estate, to buy, sell and deal in bonds, notes
and loans secured by mortgages, or other liens on personal
property or real estate, to purchase, hold, improve, sell or
exchange real estate, and to purchase, sell and deal in notes,
bonds, stocks, securities and investments of any kind, with full
power to borrow such moneys as may be required for the purpose of
its business.
(g) To buy, hold, cancel, sell, reissue, transfer and
otherwise acquire and dispose of, shares of its stock and its
bonds, debentures, notes and other obligations and securities,
from time to time, to such extent, in such manner and upon such
terms, as its Board of Directors may determine, subject to such
restrictions as may be imposed by the laws of the Commonwealth of
Pennsylvania.
(h) To enter into, make and perform any lawful
contracts of every kind and description with any person, firm,
association, corporation, municipality, body politic, county,
State or government, necessary or proper for, or incidental to,
the business which the Corporation is authorized to transact, or
the carrying out of its purpose or objects, or the exercise of
its corporate powers, or which may be made, entered into and
performed by a corporation organized under the Business
Corporation Law of Pennsylvania.
(i) To have one or more offices within the
Commonwealth of Pennsylvania and one or more offices outside of
the Commonwealth of Pennsylvania and to conduct its business in
all its branches in the Commonwealth of Pennsylvania and in other
States and in territories and dependencies of the United States
and foreign countries.
(j) To purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the
power to indemnify him against such liability.
2<PAGE>
(k) To have unlimited power to engage in and to do any
lawful act concerning any and all lawful business for which
corporations may be incorporated under the Business Corporation
Law of Pennsylvania under the provisions of which the Corporation
is incorporated.
The foregoing classes shall be construed as both
purposes and powers and it is hereby expressly provided that the
foregoing enumeration of specific power shall in no way limit or
restrict in any manner the powers of the Corporation as the same
may now or hereafter be conferred by law.
4. The duration of the Corporation is perpetual.
5. The amount of the capital stock of the Corporation
is to be $875,000,000 consisting of 350,000,000 shares
of common stock of the par value of $2.50 each.
6. The private property of the stockholders shall not
be subject to the payment of corporate debts.
7. The name and address of the incorporator and the
number of the class of shares subscribed by him are:
W.G. Kuhns 100 shares of common stock
100 Essex Dr. ($2.50 par value)
Tenafly, New Jersey
8. Except as otherwise provided by law, the Board of
Directors of the Corporation shall have the power and authority
to make, amend and repeal the By-Laws of the Corporation, subject
to the power of the shareholders to change such action.
9. No holder of common stock of the Corporation
shall have, as such holder, any preemptive right to purchase any
common stock or other shares or securities of the Corporation.
10. (a) At each annual meeting of stockholders,
directors of the Corporation shall be elected to hold office
until the expiration of the term for which they are elected, and
until their successors have been elected and qualified; except
that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in
accordance with the Pennsylvania Business Corporation Law. The
directors of the Corporation shall be divided into three classes
as nearly equal in size as is practicable, hereby designated
Class I, Class II, and Class III. The term of office of the
initial Class I directors shall expire at the next succeeding
annual meeting of stockholders, the term of office of the initial
Class II directors shall expire at the second succeeding annual
meeting of stockholders and the term of office of the initial
Class III directors shall expire at the next succeeding annual
meeting of the stockholders. For the purposes hereof, the
initial Class I, Class II and Class III directors shall be those
directors elected at the May 2, 1988 annual meeting and
3<PAGE>
designated as members of such Class. At each annual meeting after
the May 2, 1988 annual meeting, directors to replace those of a
Class whose terms expire at such annual meeting shall be elected
to hold office until the third succeeding annual meeting and
until their respective successors shall have been elected and
shall qualify. If the number of directors is hereafter changed,
any newly created directorships or decrease in directorships
shall be so apportioned among the classes as to make all classes
as nearly equal in number as is practicable. When the number of
directors is increased by the Board and any newly created
directorships are filled by the Board, there shall be no
classification of the additional directors until the next annual
meeting of stockholders.
(b) The number of directors constituting the
entire Board of Directors shall be not less than five nor more
than sixteen as may be fixed from time to time by resolution
adopted by a majority of the entire Board of Directors; provided,
however, that no decrease in the number of directors constituting
the entire Board of Directors shall shorten the term of any
incumbent director. In the event the number of directors elected
at an annual meeting of stockholders is less than sixteen, a
majority of the entire Board of Directors may at any time
increase the number of directors to not more than sixteen and, by
vote of a majority of the Board of Directors, elect a new
director or directors to fill any such newly created
directorship. Any such new director shall hold office until the
next annual meeting of stockholders and until his successor shall
have been duly elected and qualified. Each director shall be at
least 21 years of age and shall be a stockholder of the
Corporation.
(c) Vacancies occurring on the Board of Directors
for any reason may be filled by vote of a majority of the
remaining members of the Board of Directors, although less than a
quorum, at any meeting of the Board of Directors. A person so
elected by the Board of Directors to fill a vacancy shall be
elected to hold office until the next succeeding annual meeting
of stockholders of the Corporation and until his or her successor
shall have been duly elected and qualified.
(d) Notwithstanding anything contained in these
Articles of Incorporation or specified by law to the contrary,
the vote of the holders of not less than two-thirds of the then
outstanding shares of common stock of the Corporation entitled to
vote thereon shall be required to alter, amend, or repeal this
Article 10 or to adopt any provision inconsistent herewith.
11. At all elections of directors each holder of
record of shares of common stock then entitled to vote, shall be
entitled to cast as many votes as shall equal the number of votes
which (except for this provision) he would be entitled to cast
for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected, and he may
cast all such votes for a single director or may distribute them
4<PAGE>
among the number to be voted for, or any two or more of them, as
he may see fit. Except as otherwise provided by law or by these
Articles, each holder of record of shares of common stock
entitled to vote at any meeting of stockholders shall be entitled
to one vote for every share of common stock standing in his name
on the books of the Corporation. All elections shall be
determined by a plurality vote, and, except as otherwise provided
by law or by these Articles, all other matters shall be
determined by a vote of the holders of a majority of these shares
of common stock present or represented at a meeting and voting on
such questions. Except as otherwise provided by law the holders
of a majority of the shares of common stock issued and
outstanding and entitled to vote, present in person or by proxy,
shall be requisite for and shall constitute a quorum at any
meeting of the stockholders.
12. Unless the By-Laws of the Corporation shall at the
time otherwise expressly provide, the Board of Directors
shall have power:
(a) To designate five or more of their number to
constitute an Executive Committee which Committee, to such extent
as may be provided by the By-Laws of the Corporation, shall have,
and may exercise, any or all of the powers of the Board of
Directors in the management of the business and affairs of the
Corporation.
(b) To issue, without the vote or consent of the
stockholders, common stock, now or hereafter authorized, for cash
or in payment for property or services, or for other assets or
securities, including cash, necessary or desirable to be
purchased or acquired from time to time for the lawful purposes
of the Corporation, or to the extent permitted by law, as a
dividend upon the common stock of the Corporation.
13. The Corporation shall not issue nonvoting stock.
14. The Corporation shall, not less than once
annually, make periodic reports to holders of its stock and
securities which shall include profit and loss statement and
balance sheets prepared in accordance with sound business and
accounting practice, and audited by independent public
accountants.
15. Unless otherwise provided by law, any contract,
transaction or act of the Corporation or of the Board of
Directors, which shall be ratified by a majority of a quorum of
the stockholders entitled to vote at any annual meeting or at any
special meeting called for that purpose, shall be as valid and
binding as though ratified by every stockholder of the
Corporation; provided, however, that any failure of the
stockholders to approve or ratify such contract, transaction or
act, when and if submitted, shall not be deemed in any way to
invalidate the same or to deprive the Corporation, its directors
or officers of their right to proceed with such contract,
transaction or action.
5<PAGE>
16. The Corporation reserves the right to amend,
alter, change, or repeal any provision contained in these
Articles in the manner now or hereafter prescribed by statute,
and all rights hereby conferred upon the stockholders are granted
subject to this reservation.
6<PAGE>
Exhibit 4-A-43
_________________________________________________________
_________________________________________________________
JERSEY CENTRAL POWER & LIGHT COMPANY
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
__________
SUPPLEMENTAL INDENTURE
__________
Dated as of August 15, 1996
_________________________________________________________
_________________________________________________________
<PAGE>
MORTGAGE
FIFTY-FIRST SUPPLEMENTAL INDENTURE, dated as of the 15th
day of August, 1996, made and entered into by and between JERSEY
CENTRAL POWER & LIGHT COMPANY, a corporation organized and
existing under the laws of the State of New Jersey (hereinafter
called the "Company"), party of the first part, and UNITED STATES
TRUST COMPANY OF NEW YORK, a bank and trust company organized
under the State of New York bank law, with its principal
corporate trust office at 114 West 47th Street, New York, New
York, 10036-1532, as Successor Trustee under the Original
Indenture hereinafter mentioned (the Successor Trustee being
hereinafter sometimes called "Trustee"), party of the second
part.
WHEREAS, the Company has heretofore executed and delivered
to City Bank Farmers Trust Company an Indenture dated as of March
1, 1946 (hereinafter called the "Original Indenture"), to secure
the principal of and the interest and premium (if any) on all
bonds at any time issued and outstanding thereunder, to declare
the terms and conditions upon which bonds are to be issued
thereunder and to subject to the lien thereof certain property
therein described; and
WHEREAS, United States Trust Company of New York is now
acting as Successor Trustee under the Original Indenture and the
indentures supplemental thereto hereinafter enumerated; and
WHEREAS, the Original Indenture has heretofore been
supplemented by a First Supplemental Indenture dated as of
December 1, 1948, a Second Supplemental Indenture dated as of
April 1, 1953, a Third Supplemental Indenture dated as of June 1,
1954, a Fourth Supplemental Indenture dated as of May 1, 1955, a
Fifth Supplemental Indenture dated as of August 1, 1956, a Sixth
Supplemental Indenture dated as of July 1, 1957, a Seventh
Supplemental Indenture dated as of July 1, 1959, an Eighth
Supplemental Indenture dated as of June 1, 1960, a Ninth
Supplemental Indenture dated as of November 1, 1962, a Tenth
Supplemental Indenture dated as of October 1, 1963, an Eleventh
Supplemental Indenture dated as of October 1, 1964, a Twelfth
Supplemental Indenture dated as of November 1, 1965, a Thirteenth
Supplemental Indenture dated as of August 1, 1966, a Fourteenth
Supplemental Indenture dated as of September 1, 1967, a Fifteenth
Supplemental Indenture dated as of October 1, 1968, a Sixteenth
Supplemental Indenture dated as of October 1, 1969, a Seventeenth
Supplemental Indenture dated as of June 1, 1970, an Eighteenth
Supplemental Indenture dated as of December 1, 1970, a Nineteenth
Supplemental Indenture dated as of February 1, 1971, a Twentieth
Supplemental Indenture dated as of November 1, 1971, a
Twenty-first Supplemental Indenture dated as of August 1, 1972, a
Twenty-second Supplemental Indenture dated as of August 1, 1973,
a Twenty-third Supplemental Indenture dated as of October 1,
1973, a Twenty-fourth Supplemental Indenture dated as of December
1, 1973, a Twenty-fifth Supplemental Indenture dated as of
November 1, 1974, a Twenty-sixth Supplemental Indenture dated as
of March 1, 1975, a Twenty-seventh Supplemental Indenture dated <PAGE>
- 3 -
as of July 1, 1975, a Twenty-eighth Supplemental Indenture dated
as of October 1, 1975, a Twenty-ninth Supplemental Indenture
dated as of February 1, 1976, a Supplemental Indenture No. 29A
dated as of May 31, 1976, a Thirtieth Supplemental Indenture
dated as of June 1, 1976, a Thirty-first Supplemental Indenture
dated as of May 1, 1977, a Thirty-second Supplemental Indenture
dated as of January 20, 1978, a Thirty-third Supplemental
Indenture dated as of January 1, 1979, a Thirty-fourth
Supplemental Indenture dated as of June 1, 1979, a Thirty-fifth
Supplemental Indenture dated as of June 15, 1979, a Thirty-sixth
Supplemental Indenture dated as of October 1, 1979, a
Thirty-seventh Supplemental Indenture dated as of September 1,
1984, a Thirty-eighth Supplemental Indenture dated as of July 1,
1985, a Thirty-ninth Supplemental Indenture dated as of April 1,
1988, a Fortieth Supplemental Indenture dated as of June 14,
1988, a Forty-first Supplemental Indenture dated as of April 1,
1989, a Forty-second Supplemental Indenture dated as of July 1,
1989, a Forty-third Supplemental Indenture dated as of March 1,
1991, a Forty-fourth Supplemental Indenture dated as of March 1,
1992, a Forty-fifth Supplemental Indenture dated as of October 1,
1992, a Forty-sixth Supplemental Indenture dated as of April 1,
1993, a Forty-seventh Supplemental Indenture dated as of April
10, 1993, a Forty-eighth Supplemental Indenture dated as of April
15, 1993, a Forty-ninth Supplemental Indenture dated as of
October 1, 1993, and a Fiftieth Supplemental Indenture dated as
of August 1, 1994 (hereinafter respectively called "First
Supplemental Indenture," "Second Supplemental Indenture," "Third
Supplemental Indenture," "Fourth Supplemental Indenture," "Fifth
Supplemental Indenture," "Sixth Supplemental Indenture," "Seventh
Supplemental Indenture," "Eighth Supplemental Indenture," "Ninth
Supplemental Indenture," "Tenth Supplemental Indenture,"
"Eleventh Supplemental Indenture," "Twelfth Supplemental
Indenture," "Thirteenth Supplemental Indenture," "Fourteenth
Supplemental Indenture," "Fifteenth Supplemental Indenture,"
"Sixteenth Supplemental Indenture," "Seventeenth Supplemental
Indenture," "Eighteenth Supplemental Indenture," "Nineteenth
Supplemental Indenture," "Twentieth Supplemental Indenture,"
"Twenty-first Supplemental Indenture," "Twenty-second
Supplemental Indenture," "Twenty-third Supplemental Indenture,"
"Twenty-fourth Supplemental Indenture," "Twenty-fifth
Supplemental Indenture," "Twenty-sixth Supplemental Indenture,"
"Twenty-seventh Supplemental Indenture," "Twenty-eighth
Supplemental Indenture," "Twenty-ninth Supplemental Indenture,"
"Supplemental Indenture No. 29A," "Thirtieth Supplemental
Indenture," "Thirty-first Supplemental Indenture,"
"Thirty-second Supplemental Indenture," "Thirty-third
Supplemental Indenture," "Thirty-fourth Supplemental Indenture,"
"Thirty-fifth Supplemental Indenture," "Thirty-sixth
Supplemental Indenture," "Thirty-seventh Supplemental Indenture,"
"Thirty-eighth Supplemental Indenture," "Thirty-ninth
Supplemental Indenture," "Fortieth Supplemental Indenture,"
"Forty-first Supplemental Indenture," "Forty-second Supplemental <PAGE>
- 4 -
Indenture," "Forty-third Supplemental Indenture," "Forty-fourth
Supplemental Indenture," "Forty-fifth Supplemental Indenture,"
"Forty-sixth Supplemental Indenture," "Forty-seventh Supplemental
Indenture," "Forty-eighth Supplemental Indenture", "Forty-ninth
Supplemental Indenture", and "Fiftieth Supplemental Indenture",
collectively called "the Supplemental Indentures"), for the
purposes therein expressed; and
WHEREAS, the Original Indenture has been recorded in the
proper recording offices of the following counties in the State
of New Jersey and the Commonwealth of Pennsylvania in Books of
Mortgages at the pages respectively stated as follows:
NEW JERSEY
Mortgage
County Book Page
Burlington 360 1 &c
Camden 2423 37 &c
Essex I-103 155 &c
Hunterdon 439 284 &c
Mercer 732 280 &c
Middlesex 871 101 &c
Monmouth 1365 1 &c
Morris Z-16 1 &c
Ocean 385 33 &c
Passaic B-24 1 &c
Somerset 386 1 &c
Sussex 394 148 &c
Union 1474 1 &c
Warren 279 191 &c
PENNSYLVANIA
Armstrong 213 421 &c
Bucks 2133 151 &c
Dauphin N52 1 &c
Indiana 200 371 &c
Montgomery 7537 1287 &c
Northampton 1159 1 &c
; and
WHEREAS, the Supplemental Indentures have been recorded in
the proper recording offices of the appropriate counties in the
State of New Jersey and the Commonwealth of Pennsylvania; and<PAGE>
- 5 -
WHEREAS, the Original Indenture, as the same may be amended
or supplemented from time to time by indentures supplemental
thereto, is hereinafter referred to as "the Indenture"; and
WHEREAS, the Original Indenture authorizes the Company and
the Trustee to enter into supplemental indentures for the
purpose, among others, of (i) conveying, transferring and
assigning to the Trustee, and subjecting to the lien thereof,
additional properties thereafter acquired by the Company, and
(ii) curing an ambiguity or correcting or supplementing any
provision contained in the Original Indenture; and
WHEREAS, the Company desires to subject specifically to the
lien of the Indenture certain property acquired by the Company
and more particularly described in Schedule A; and
WHEREAS, the provisions of Article XVII, Section 17.01(f) of
the Original Indenture provide that indentures supplemental to
the Original Indenture may be executed and delivered for any
purpose not inconsistent with the terms of the Original Indenture
or to cure any ambiguity or to correct or supplement any
provision contained in the Original Indenture or in any
supplemental indenture which may be defective or inconsistent
with any other provision contained in the Original Indenture or
in any supplemental indenture, or to make such other provisions
in regard to matters or questions arising under the Original
Indenture which shall not be inconsistent with the provisions of
the Original Indenture and which shall not adversely affect the
interests of the holders of the bonds; and
WHEREAS, the Company desires to cure an ambiguity in Article
I, Section 1.05(B)(2) of the Original Indenture relating to the
identification and inclusion of property additions in officers'
certificates of bondable value of property additions; and
WHEREAS, the Company, in the exercise of the powers and
authority conferred upon and reserved to it under the provisions
of the Original Indenture and pursuant to appropriate action of
its Board of Directors, has fully resolved and determined to
make, execute and deliver to the Trustee a Fifty-first
Supplemental Indenture in the form hereof for the purposes herein
provided; and
WHEREAS, the Company represents that all conditions and
requirements necessary to make this Fifty-first Supplemental
Indenture, in the form and upon the terms hereof, 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
upon the terms hereof, have been in all respects duly authorized.<PAGE>
- 6 -
NOW THEREFORE, THIS FIFTY-FIRST SUPPLEMENTAL INDENTURE
WITNESSETH: That Jersey Central Power & Light Company, in
consideration of the premises, and the execution and delivery by
the Trustee of this Fifty-first Supplemental Indenture and for
other good and valuable considerations, receipt of which is
hereby acknowledged, has granted, bargained, sold, aliened,
enfeoffed, released, conveyed, mortgaged, assigned, transferred,
pledged, set over and confirmed, and by these presents does
grant, bargain, sell, alien, enfeoff, release, convey, mortgage,
assign, transfer, pledge, set over and confirm unto United States
Trust Company of New York, as Successor Trustee as aforesaid, and
to its successors in the trust created by the Original Indenture
and to its and their successors and assigns forever, all the
following properties of the Company, that is to say:
FIRST
All property additions, as defined in and by Section 1.03 of
the Original Indenture, acquired by the Company on or after
August 1, 1994, and prior to August 15, 1996, and now owned by
the Company.
SECOND
Also all property of the character and nature specified in
the "Second," "Third," "Fourth," "Fifth," and "Sixth"
subdivisions of the granting clauses of the Original Indenture.
THIRD
All those certain lots, tracts or parcels of real estate and
interest more particularly and specifically described in Schedule
A attached hereto and hereby made a part hereof.
EXPRESSLY EXCEPTING AND EXCLUDING, HOWEVER, from this Fifty-
first Supplemental Indenture and from the lien and operation of
the Indenture, all property which, prior to the date of this
Fifty-first Supplemental Indenture, shall have been released from
the lien of, or disposed of by the Company in accordance with the
provisions of the Indenture; and all the tracts or parcels of
land and premises and all property of every kind and type
excepted and excluded from, and not heretofore or hereby
expressly subjected to, the lien of the Original Indenture by the
terms thereof whether such property was owned by the Company at
the date thereof or has been acquired since that date.
SUBJECT, HOWEVER, except as otherwise expressly provided in
this Fifty-first Supplemental Indenture, to the exceptions,
reservations and matters recited in the Indenture, to the
reservations, exceptions, limitations and restrictions contained
in the several deeds, grants, franchises and contracts or other
instruments through which the Company acquired or claims title to<PAGE>
- 7 -
the aforesaid property; and subject also to existing leases, to
liens on easements or rights-of-way for transmission or
distribution line purposes, to taxes and assessments not in
default, to easements for alleys, streets, highways, rights-of-
way and railroads that may run across or encroach upon said
lands, to joint pole and similar agreements, to undetermined
liens and charges, if any, incidental to the construction and
other permissible encumbrances, as defined in the Original
Indenture, and subject also to the provisions of Section 13.03 of
the Original Indenture.
In trust, nevertheless, upon the terms and trusts set forth
in the Indenture.
AND THIS FIFTY-FIRST SUPPLEMENTAL INDENTURE FURTHER
WITNESSETH: That the Company, for the considerations aforesaid,
hereby covenants and agrees to and with the Trustee and its
successors in the trust under the Indenture, as follows:
ARTICLE I.
CONCERNING THE TRUSTEE.
SECTION 1.01. The Trustee hereby accepts the properties
hereby mortgaged and conveyed to it upon the trusts hereinbefore
referred to and agrees to perform the same upon the terms and
conditions set forth in the Indenture.
SECTION 1.02. The Trustee shall not be responsible in any
manner for or with respect to the validity or sufficiency of this
Fifty-first Supplemental Indenture, or the due execution hereof
by the Company, or for or with respect to the recitals and
statements contained herein, all of which recitals and statements
are made solely by the Company.
ARTICLE II
CURING AN AMBIGUITY IN ARTICLE I, SECTION 1.05
OF THE ORIGINAL INDENTURE
SECTION 2.01. Pursuant to Article XVII, Section 17.01(f) of
the Original Indenture, for the purpose of curing an ambiguity in
Article I, Section 1.05 relating to the identification and
inclusion of property additions in officers' certificates of
bondable value of property additions, Section 1.05(B)(2) of the
Original Indenture is hereby revised and restated in its entirety
as follows:
"(2) a brief identification, including the location, of the
property additions then being certified to the Trustee; if any
property included in such property additions is located on any<PAGE>
- 8 -
leasehold, other than those of the nature described in paragraph
d) of the definition of property additions,stating that such
leasehold extends beyond the date of maturity of all bonds then
outstanding under this Indenture and all additional bonds applied
for at the particular time, and that the amount then and
theretofore included in property additions on account of
leasehold estates or improvements, extensions or additions
thereto, other than those of the nature described in paragraph
(d) of the definition of property additions, does not in the
aggregate exceed five per centum (5%) of the aggregate principal
amount of all bonds then outstanding and all bonds which might
then be authenticated and delivered hereunder pursuant to the
provisions of Sections 4.03, 4.04 and 4.05 hereof; if any
property included in such property additions is subject to a
prior lien securing prior lien bonds which have not been
described in accordance with clause (10) of this paragraph B in a
preceding certificate delivered to the Trustee pursuant to this
paragraph B, stating (i) the principal amount of prior lien bonds
secured by such prior lien and then to become refundable prior
lien bonds, and (ii) the aggregate principal amount of prior lien
bonds then outstanding which became, at any previous time,
refundable prior lien bonds, and (iii) stating that the inclusion
of said property in the certificate does not result in a
violation of the covenants contained in the first paragraph of
Section 5.15 hereof; (i) no annual officers' certificate of
bondable value of property additions shall include property
additions made, constructed or acquired by the Company during the
period prior to the date of the last preceding annual officers'
certificate of bondable value of property additions delivered to
the Trustee pursuant to this paragraph B, and (ii) each officers'
certificate other than an annual officers' certificate of
bondable value of property additions may include property
additions made, constructed or acquired by the Company during the
period subsequent to the date of the last preceding annual
officers' certificate of bondable value of property additions
delivered to the Trustee pursuant to this paragraph B, if such
property additions have not been included in a previous
certificate, except, in either case, (a) that such certificate
may include property additions made, constructed or acquired by
the Company prior to said dates if such property additions are
subject to a prior lien and have not been included in a previous
certificate, and (b) that any property additions acquired by the
Company within 15 days preceding, or to be so acquired
concurrently with the granting of any application in connection
with which such officers' certificate is delivered to the
Trustee, may, unless such property additions are to be acquired
in exchange or substitution for bondable property, be certified
to the Trustee as property additions in such officers'
certificate and in such event shall be treated for all purposes
of this Indenture has having been acquired on or before the date
of such officers' certificate." <PAGE>
- 9 -
ARTICLE III.
MISCELLANEOUS.
SECTION 3.01. For all purposes hereof, except as the
context may otherwise require, (a) all terms contained herein
shall have the meanings given such terms in, and (b) all
references herein to sections of the Original Indenture shall be
deemed to be to such sections of, the Original Indenture as the
same heretofore has been or hereafter may be amended by an
indenture or indentures supplemental thereto.
SECTION 3.02. As amended and supplemented by the aforesaid
indentures supplemental thereto and by this Fifty-first
Supplemental Indenture, the Original Indenture is in all respects
ratified and confirmed and the Original Indenture and the
aforesaid indentures supplemental thereto and this Fifty-first
Supplemental Indenture shall be read, taken and construed as one
and the same instrument.
SECTION 3.03. This Fifty-first 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.
IN WITNESS WHEREOF, JERSEY CENTRAL POWER & LIGHT 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, as Successor Trustee as aforesaid, the 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 Authorized Officer and its corporate seal
to be hereunto affixed and attested by an Authorized Officer, all
as of the day and year first above written.
JERSEY CENTRAL POWER & LIGHT COMPANY
By
T. G. Howson
Vice President
ATTEST:
M. A. Nalewako
Assistant Secretary
Signed, sealed and delivered by
JERSEY CENTRAL POWER & LIGHT
COMPANY in the presence of:
<PAGE>
- 10 -
UNITED STATES TRUST COMPANY
OF NEW YORK
As Successor Trustee as aforesaid
By
Vice President
ATTEST:
Assistant Secretary
Signed, sealed and delivered by
UNITED STATES TRUST COMPANY
OF NEW YORK
in the presence of:
<PAGE>
- 11 -
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this _____ day of August, 1996, before me, B. E.
Jost, a Notary Public for the State and County aforesaid, the
undersigned officer, personally appeared T. G. Howson, who, to my
satisfaction, acknowledged himself to be a Vice President of
Jersey Central Power & Light Company, a corporation, and that he
as such Vice President, being authorized to do so, executed the
foregoing instrument for the purposes therein contained as the
act of the corporation by signing his name as Vice President of
the corporation.
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 August, 1996, before me,
_______________________,
a Notary Public for the State and County aforesaid, the
undersigned officer, personally appeared L. P. Young, who, to my
satisfaction, acknowledged himself to be a Vice President of
United States Trust Company of New York, a corporation, and that
he as such Vice President, being authorized to do so, executed
the foregoing instrument for the purposes therein contained as
the act of the corporation by signing his name as Vice President
of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
_________________________________
Notary Public
[NOTARIAL SEAL]<PAGE>
- 12 -
CERTIFICATE OF RESIDENCE
United States Trust Company of New York, Successor 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<PAGE>
- 13 -
COMMONWEALTH OF PENNSYLVANIA
MONTGOMERY COUNTY
PENNSYLVANIA - NEW JERSEY - MARYLAND INTERCONNECTION CONTROL
CENTER:
An undivided 7.50% interest of the Company in and to the
following described real property:
All that certain tract or parcel of ground with the
buildings and improvements thereon, situate in the Township of
Lower Providence, County of Montgomery, Commonwealth of
Pennsylvania bounded and described in accordance with a survey
and plan thereof made by George C. Beebe, Registered Professional
Engineer, for Robert E. Lamb, Inc., Valley Forge, Pennsylvania,
dated May 16, 1968, as follows:
Beginning at a point at the intersection of the title line
within the bed of Van Buren Avenue and the title line within the
bed of Jefferson Avenue and extending thence from said point S.
42 degrees 00' W. 440 feet 0 inches to a point; thence N. 48
degrees 00' W. 440 feet 0 inches to a point; thence N. 42 degrees
00' E 75 feet 0 inches to a point; thence N. 48 degrees 00' W. 30
feet 0 inches to a point; thence N. 42 degrees 00' E. 365 feet 0
inches to a point on the title line within the bed of Van Buren
Avenue and thence along the title line within the bed of Van
Buren Avenue, S. 48 degrees 00' E. 470 feet 0 inches to the first
mentioned point and place of beginning.
Containing 4.696 acres, more or less.
Subject to easements, rights, covenants, conditions and
restrictions of record, if any, or otherwise visible.
Being the same undivided 7.50% interest in the above
described premises which was conveyed to the Company by PECO
Energy Company, a Pennsylvania corporation, as Agent for members
of the Pennsylvania-New Jersey-Maryland Interconnection, by deed
dated July 13, 1995 and recorded in the Montgomery County
Commissioners Registry on October 26, 1995 in Deed Book 5129,
Page 1538 &c.
Montgomery County Tax Parcel No. 43-00-15406-00-4.
<PAGE>
Exhibit 4-B-35
_________________________________________________________
_________________________________________________________
METROPOLITAN EDISON COMPANY
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
__________
SUPPLEMENTAL INDENTURE
__________
Dated as of August 15, 1996
_________________________________________________________
_________________________________________________________<PAGE>
MORTGAGE
THIS SUPPLEMENTAL INDENTURE, dated as of the 15th day of
August, 1996, made and entered into by and between METROPOLITAN
EDISON COMPANY, a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania (hereinafter called the
"Company"), party of the first part, and UNITED STATES TRUST
COMPANY OF NEW YORK, a bank and trust company organized under the
State of New York bank law, with its principal corporate trust
office at 114 West 47th Street, New York, New York, 10036-1532,
as Successor Trustee under the Original Indenture hereinafter
mentioned (the Successor Trustee being hereinafter sometimes
called "Trustee"), party of the second part.
WHEREAS, the Company has heretofore executed and delivered
to Guaranty Trust Company of New York an Indenture dated November
1, 1944 (hereinafter called the "Original Indenture"), to secure
the principal of and the interest and premium (if any) on all
bonds at any time issued and outstanding thereunder, to declare
the terms and conditions upon which bonds are to be issued
thereunder and to subject to the lien thereof certain property
therein described; and
WHEREAS, United States Trust Company of New York is now
acting as Successor Trustee under the Original Indenture and the
indentures supplemental thereto; and
WHEREAS, the Original Indenture and the Supplemental
Indentures have been recorded in the proper recording offices of
the appropriate counties in the State of New Jersey and the
Commonwealth of Pennsylvania; and<PAGE>
WHEREAS, the Original Indenture, as the same may be amended
or supplemented from time to time by indentures supplemental
thereto, is hereinafter referred to as "the Indenture"; and
WHEREAS, the Original Indenture authorizes the Company and
the Trustee to enter into supplemental indentures for the
purpose, among others, of (i) conveying, transferring and
assigning to the Trustee, and subjecting to the lien thereof,
additional properties thereafter acquired by the Company, and
(ii) curing an ambiguity or correcting or supplementing any
provision contained in the Original Indenture; and
WHEREAS, the Company desires to subject specifically to the
lien of the Indenture certain property acquired by the Company
and more particularly described in Schedule A; and
WHEREAS, the provisions of Article XVII, Section 17.01(f) of
the Original Indenture provide that indentures supplemental to
the Original Indenture may be executed and delivered for any
purpose not inconsistent with the terms of the Original Indenture
or to cure any ambiguity or to correct or supplement any
provision contained in the Original Indenture or in any
supplemental indenture which may be defective or inconsistent
with any other provision contained in the Original Indenture or
in any supplemental indenture, or to make such other provisions
in regard to matters or questions arising under the Original
Indenture which shall not be inconsistent with the provisions of
the Original Indenture and which shall not adversely affect the
interests of the holders of the bonds; and
- 3 -<PAGE>
WHEREAS, the Company desires to cure an ambiguity in Article
I, Section 1.05(B)(2) of the Original Indenture relating to the
identification and inclusion of property additions in officers'
certificates of bondable value of property additions; and
WHEREAS, the Company, in the exercise of the powers and
authority conferred upon and reserved to it under the provisions
of the Original Indenture and pursuant to appropriate action of
its Board of Directors, has fully resolved and determined to
make, execute and deliver to the Trustee a Supplemental Indenture
in the form hereof for the purposes herein provided; and
WHEREAS, the Company represents that all conditions and
requirements necessary to make this Supplemental Indenture, in
the form and upon the terms hereof, 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 upon the terms
hereof, have been in all respects duly authorized.
NOW THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
That Metropolitan Edison Company, in consideration of the
premises, and the execution and delivery by the Trustee of this
Supplemental Indenture and for other good and valuable
considerations, receipt of which is hereby acknowledged, has
granted, bargained, sold, aliened, enfeoffed, released, conveyed,
mortgaged, assigned, transferred, pledged, set over and
confirmed, and by these presents does grant, bargain, sell,
alien, enfeoff, release, convey, mortgage, assign, transfer,
pledge, set over and confirm unto United States Trust Company of
New York, as Successor Trustee as aforesaid, and to its
- 4 -<PAGE>
successors in the trust created by the Original Indenture and to
its and their successors and assigns forever, all the following
properties of the Company, that is to say:
FIRST
All property additions, as defined in and by Section 1.03 of
the Original Indenture, acquired by the Company on or after July
15, 1995, and prior to August 15, 1996, and now owned by the
Company.
SECOND
Also all property of the character and nature specified in
the "Second," "Third," "Fourth," and "Fifth" subdivisions of the
granting clauses of the Original Indenture.
THIRD
All those certain lots, tracts or parcels of real estate and
interest more particularly and specifically described in Schedule
A attached hereto and hereby made a part hereof.
EXPRESSLY EXCEPTING AND EXCLUDING, HOWEVER, from this
Supplemental Indenture and from the lien and operation of the
Indenture, all property which, prior to the date of this
Supplemental Indenture, shall have been released from the lien
of, or disposed of by the Company in accordance with the
provisions of the Indenture; and all the tracts or parcels of
land and premises and all property of every kind and type
excepted and excluded from, and not heretofore or hereby
expressly subjected to, the lien of the Original Indenture by the
terms thereof whether such property was owned by the Company at
the date thereof or has been acquired since that date.
- 5 -<PAGE>
SUBJECT, HOWEVER, except as otherwise expressly provided in
this Supplemental Indenture, to the exceptions, reservations and
matters recited in the Indenture, to the reservations,
exceptions, limitations and restrictions contained in the several
deeds, grants, franchises and contracts or other instruments
through which the Company acquired or claims title to the
aforesaid property; and subject also to existing leases, to liens
on easements or rights-of-way for transmission or distribution
line purposes, to taxes and assessments not in default, to
easements for alleys, streets, highways, rights-of-way and
railroads that may run across or encroach upon said lands, to
joint pole and similar agreements, to undetermined liens and
charges, if any, incidental to the construction and other
permissible encumbrances, as defined in the Original Indenture,
and subject also to the provisions of Section 13.03 of the
Original Indenture.
In trust, nevertheless, upon the terms and trusts set forth
in the Indenture.
AND THIS SUPPLEMENTAL INDENTURE FURTHER WITNESSETH: That
the Company, for the considerations aforesaid, hereby covenants
and agrees to and with the Trustee and its successors in the
trust under the Indenture, as follows:
ARTICLE I.
CONCERNING THE TRUSTEE.
SECTION 1.01. The Trustee hereby accepts the properties
hereby mortgaged and conveyed to it upon the trusts hereinbefore
- 6 -<PAGE>
referred to and agrees to perform the same upon the terms and
conditions set forth in the Indenture.
SECTION 1.02. The Trustee shall not be responsible in any
manner for or with respect to the validity or sufficiency of this
Supplemental Indenture, or the due execution hereof by the
Company, or for or with respect to the recitals and statements
contained herein, all of which recitals and statements are made
solely by the Company.
ARTICLE II
CURING AN AMBIGUITY IN ARTICLE I, SECTION 1.05
OF THE ORIGINAL INDENTURE
SECTION 2.01. Pursuant to Article XVII, Section 17.01(f) of
the Original Indenture, for the purpose of curing an ambiguity in
Article I, Section 1.05 relating to the identification and
inclusion of property additions in officers' certificates of
bondable value of property additions, Section 1.05(B)(2) of the
Original Indenture is hereby revised and restated in its entirety
as follows:
"(2) a brief identification, including the location, of the
property additions then being certified to the Trustee; if any
property included in such property additions is located on any
leasehold, other than those of the nature described in paragraph
(d) of the definition of property additions, stating that such
leasehold extends beyond the date of maturity of all bonds then
outstanding under this Indenture and all additional bonds applied
for at the particular time, and that the amount then and
- 7 -<PAGE>
theretofore included in property additions on account of
leasehold estates or improvements, extensions or additions
thereto, other than those of the nature described in paragraph
(d) of the definition of property additions, does not in the
aggregate exceed five per centum (5%) of the aggregate principal
amount of all bonds then outstanding and all bonds which might
then be authenticated and delivered hereunder pursuant to the
provisions of Sections 4.03, 4.04 and 4.05 hereof; if any
property included in such property additions is subject to a
prior lien securing prior lien bonds which have not been
described in accordance with clause (10) of this paragraph B in a
preceding certificate delivered to the Trustee pursuant to this
paragraph B, stating (i) the principal amount of prior lien bonds
secured by such prior lien and then to become refundable prior
lien bonds, and (ii) the aggregate principal amount of prior lien
bonds then outstanding which became, at any previous time,
refundable prior lien bonds, and (iii) stating that the inclusion
of said property in the certificate does not result in a
violation of the covenants contained in the first paragraph of
Section 5.15 hereof; (i) no annual officers' certificate of
bondable value of property additions shall include property
additions made, constructed or acquired by the Company during the
period prior to the date of the last preceding annual officers'
certificate of bondable value of property additions delivered to
the Trustee pursuant to this paragraph B, and (ii) each officers'
certificate other than an annual officers' certificate of
bondable value of property additions may include property
- 8 -<PAGE>
additions made, constructed or acquired by the Company during the
period subsequent to the date of the last preceding annual
officers' certificate of bondable value of property additions
delivered to the Trustee pursuant to this paragraph B, if such
property additions have not been included in a previous
certificate, except, in either case, (a) that such certificate
may include property additions made, constructed or acquired by
the Company prior to said dates if such property additions are
subject to a prior lien and have not been included in a previous
certificate, and (b) that any property additions acquired by the
Company within 15 days preceding, or to be so acquired
concurrently with the granting of any application in connection
with which such officers' certificate is delivered to the
Trustee, may, unless such property additions are to be acquired
in exchange or substitution for bondable property, be certified
to the Trustee as property additions in such officers'
certificate and in such event shall be treated for all purposes
of this Indenture has having been acquired on or before the date
of such officers' certificate."
ARTICLE III.
MISCELLANEOUS.
SECTION 3.01. For all purposes hereof, except as the
context may otherwise require, (a) all terms contained herein
shall have the meanings given such terms in, and (b) all
references herein to sections of the Original Indenture shall be
deemed to be to such sections of, the Original Indenture as the
- 9 -<PAGE>
same heretofore has been or hereafter may be amended by an
indenture or indentures supplemental thereto.
SECTION 3.02. 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 3.03. 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.
IN WITNESS WHEREOF, METROPOLITAN EDISON 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, as Successor Trustee as aforesaid, the 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 Authorized Officer and its corporate seal
to be hereunto affixed and attested by an Authorized Officer, all
as of the day and year first above written.
- 10 -<PAGE>
METROPOLITAN EDISON COMPANY
By
T. G. Howson
Vice President
ATTEST:
S. L. Guibord
Secretary
Signed, sealed and delivered by
METROPOLITAN EDISON COMPANY
in the presence of:
UNITED STATES TRUST COMPANY
OF NEW YORK
As Successor Trustee as aforesaid
By
Vice President
ATTEST:
Assistant Vice President
Signed, sealed and delivered by
UNITED STATES TRUST COMPANY
OF NEW YORK
in the presence of:
- 11 -<PAGE>
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this _____ day of August, 1996, before me, B. E.
Jost, a Notary Public for the State and County aforesaid, the
undersigned officer, personally appeared T. G. Howson, who
acknowledged himself to be a Vice President of Metropolitan
Edison 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 August, 1996, before me,
_______________________,
a Notary Public for the State and County aforesaid, the
undersigned officer, personally appeared L. P. Young, who
acknowledged himself to be a Vice President of United States
Trust Company of New York, 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]
- 12 -<PAGE>
CERTIFICATE OF RESIDENCE
United States Trust Company of New York, Successor 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
- 13 -<PAGE>
SCHEDULE A
COMMONWEALTH OF PENNSYLVANIA
MONTGOMERY COUNTY
PENNSYLVANIA-NEW JERSEY-MARYLAND INTERCONNECTION CONTROL CENTER:
An undivided 3.40% interest of the Company in and to the
following described real property:
All that certain tract or parcel of ground with the
buildings and improvements thereon, situate in the Township of
Lower Providence, County of Montgomery, Commonwealth of
Pennsylvania bounded and described in accordance with a survey
and plan thereof made by George C. Beebe, Registered Professional
Engineer, for Robert E. Lamb, Inc., Valley Forge, Pennsylvania,
dated May 16, 1968, as follows:
Beginning at a point at the intersection of the title line
within the bed of Van Buren Avenue and the title line within the
bed of Jefferson Avenue and extending thence from said point S.
42 degrees 00' W. 440 feet 0 inches to a point; thence N.
48 degrees 00' W. 440 feet 0 inches to a point; thence N. 42
degrees 00' E 75 feet 0 inches to a point; thence N. 48 degrees
00' W. 30 feet 0 inches to a point; thence N. 42 degrees 00' E.
365 feet 0 inches to a point on the title line within the bed of
Van Buren Avenue and thence along the title line within the bed
of Van Buren Avenue, S. 48 degrees 00' E. 470 feet 0 inches to
the first mentioned point and place of beginning.
Containing 4.696 acres, more or less.
Subject to easements, rights, covenants, conditions and
restrictions of record, if any, or otherwise visible.
Being the same undivided 3.40% interest in the above
described premises which was conveyed to the Company by PECO
Energy Company, a Pennsylvania corporation, as Agent for members
of the Pennsylvania-New Jersey-Maryland Interconnection, by deed
dated July 13, 1995 and recorded in the Montgomery County
Commissioners Registry on October 26, 1995 in Deed Book 5129,
Page 1538 &c.
Montgomery County Tax Parcel No. 43-00-15406-00-4.
PORTLAND STATION ASH DISPOSAL SITE
ALL THAT CERTAIN tract of land situate in the Borough of
Bangor, County of Northampton and Commonwealth of Pennsylvania,
being the same premises granted and conveyed unto Metropolitan
Edison Company by John W. Wallace and Shirley Wallace, his wife,
by Deed dated July 14, 1995, and recorded July 19, 1995 in Vol.
1995-1, Page 063646, Northampton County Records.<PAGE>
PORTLAND STATION ASH DISPOSAL SITE
ALL THAT CERTAIN tract of land situate partly in the Borough
of Bangor and Township of Washington, County of Northampton and
Commonwealth of Pennsylvania, being the same premises granted and
conveyed unto Metropolitan Edison Company by Myrtle M. Linaberry,
widow, and Executrix of the Last Will and Testament of John P.
Linaberry, a/k/a John F. Linaberry, deceased, by Deed dated July
14, 1995, and recorded July 19, 1995 in Vol. 1995-1, Page 063652,
Northampton County Records.<PAGE>
Exhibit 4-C-12
_________________________________________________________
_________________________________________________________
PENNSYLVANIA ELECTRIC COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
__________
SUPPLEMENTAL INDENTURE
__________
Dated as of August 15, 1996
_________________________________________________________
_________________________________________________________<PAGE>
SUPPLEMENTAL INDENTURE, dated as of August 15, 1996,
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 corporation
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 Indenture of Mortgage and Deed of Trust (hereinafter called
the "Original Indenture"), dated as of the first day of January,
1942, to Bankers Trust Company 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, 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 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, as of
June 1, 1993 and as of November 1, 1995, 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, certain of said
Supplemental Indentures, an Instrument of Resignation,
Appointment and Acceptance dated as of October 27, 1995 among the
Company, Bankers Trust Company and United States Trust Company of
New York 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 is
to be recorded, and in the mortgage records of Garrett County,
Maryland; and<PAGE>
WHEREAS, provision is made in Section 17.01(e) of the
Original Indenture for the execution by the Company and the
Trustee, without the consent of the holders of the bonds at the
time outstanding, of an indenture or indentures supplemental to
the Original Indenture for the purpose of curing any ambiguity or
correcting or supplementing any provision contained herein or in
any supplemental indenture which may be defective or inconsistent
with any other provision contained herein or in any supplemental
indenture, or making such other provisions in regard to matters
or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture and which
shall not adversely affect the interest of the holders of the
bonds; and
WHEREAS, the Company desires to cure an ambiguity in
Section 1.05(B)(2) of the Original Indenture relating to the
identification and inclusion of property additions in officers'
certificates of bondable value of property additions; and
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, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
That 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 ensealing
and delivery hereof, and for other valuable considerations, the
receipt whereof is hereby acknowledged, and intending to be
legally bound hereby, the Company hereby covenants and agrees to
and with the Trustee and its successors in the trusts under the
Mortgage, as follows:
ARTICLE I.
Amendment of Original Indenture
Section 1.01. The references in this Article I to
Articles, Sections or parts thereof and to page numbers are to
Articles, Sections or part thereof and page numbers of the
Original Indenture.
Section 1.02. Pursuant to Section 17.01(f) of the
Original Indenture, for the purpose of curing an ambiguity in
Article I, Section 1.05 relating to the identification and
inclusion of property additions in officers' certificates of
bondable value of property additions, Section 1.05(B)(2) of the
Original Indenture is hereby revised and restated in its entirety
as follows:
2<PAGE>
"(2) a brief identification of the property
additions then being certified to the Trustee (and, if
any property included in such property additions is
located on any leasehold, stating that the property
located on such leasehold constitutes movable physical
property used or useful in connection with bondable
property), provided, however that (i) no annual
officers' certificate of bondable value of property
additions shall include property additions made,
constructed or acquired by the Company during the
period prior to the date of the last preceding annual
officers' certificate of bondable value of property
additions delivered to the Trustee pursuant to this
paragraph B, and (ii) each officers' certificate other
than an annual officers' certificate of bondable value
of property additions may include property additions
made, constructed or acquired by the Company during the
period subsequent to the date of the last preceding
annual officers' certificate of bondable value of
property additions delivered to the Trustee pursuant to
this paragraph B, if such property additions have not
been included in a previous certificate; and further
provided, however, that any property additions to be
acquired by the Company concurrently with the granting
of any application in connection with which such
officers' certificate is delivered to the Trustee, may,
unless such property additions are to be acquired in
exchange or substitution for bondable property, be
certified to the Trustee as property additions in such
officers' certificate and in such event shall be
treated for all purposes of this Indenture as having
been acquired on or before the date of such officers'
certificate."
ARTICLE II
Miscellaneous
Section 2.01. The Trustee hereby accepts the
modifications of the Original Indenture provided for herein, and
agrees that the same shall have the same effect provided for in
the Mortgage. The recitals contained herein shall be taken as
the statements of the Company alone, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee
makes no representations as to the validity or sufficiency of
this Supplemental Indenture.
Section 2.02. 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.
3<PAGE>
Section 2.03. 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.
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________________________________
S. L. Guibord T. G. Howson
Secretary Vice President
[CORPORATE SEAL]
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK
____________________________ By________________________________
Assistant Vice President Vice President
[CORPORATE SEAL]
4<PAGE>
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this _____ day of August, 1996, before me, B. E.
Jost, a Notary Public for the State and County aforesaid, the
undersigned officer, personally appeared T. G. Howson, 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 August, 1996, before me,
_____________________, a Notary Public for the State and County
aforesaid, the undersigned officer, personally appeared L. P.
Young, who acknowledged himself to be a Vice President of United
States Trust Company of New York, 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]
5<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________________________________
Name
Vice President
6<PAGE>
Exhibit 10-A
GPU SYSTEM COMPANIES
DEFERRED COMPENSATION PLAN
(as amended through August 1, 1996)<PAGE>
TABLE OF CONTENTS
Purpose 1
Definition of Terms 1
Administration 7
Deferral Election 8
Supplemental Savings Plan Benefits 11
Interest 12
Distribution of Deferred Funds 13
Non-Assignment of Deferred Compensation 17
Termination of Participation or Employment 17
Transfer of Employment 18<PAGE>
1. Purpose
This document sets forth the GPU System Companies Deferred
Compensation Plan, as amended and restated, effective
August 1, 1996.
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 GPU, Inc. 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, as amended (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 Change in Control - A "Change in Control" shall mean the
occurrence during the term of the Plan of:
1<PAGE>
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation") of any common stock of the
Corporation ("Common Stock") or other voting securities
of the Corporation entitled to vote generally for the
election of directors (the "Voting Securities") by any
"Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), immediately
after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the
then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting
equity securities or equity interest is owned, directly
or indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the board of directors of the Corporation
(the "Incumbent Board"), cease for any reason to
constitute at least seventy percent (70%) of the members
of the board of directors of the Corporation; provided,
however, that if the election, or nomination for
election by the Corporation's shareholders, of any new
director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no
individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a
result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the board of directors of the
Corporation (a "Proxy Contest") including by reason of
any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(3) The consummation of:
2<PAGE>
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger,
consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the
Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization,
at least sixty percent (60%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution
of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
corporation, directly or indirectly, beneficially owning
a majority of the Voting Securities of the Surviving
Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or
reorganization, was maintained by the Corporation or any
Subsidiary, or (z) any Person who, immediately prior to
such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of
the then outstanding Voting Securities or common stock
of the Corporation, has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its common stock.
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to
any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more
than the permitted amount of the then outstanding Common
Stock or Voting Securities as a result of the
3<PAGE>
acquisition of Common Stock or Voting Securities by the
Corporation which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding,
increases the proportional number of shares Beneficially
Owned by the Subject Persons, provided that if a Change
in Control would occur (but for the operation of this
sentence) as a result of the acquisition of shares of
Common Stock or Voting Securities by the Corporation,
and after such share acquisition by the Corporation, the
Subject Person becomes the Beneficial Owner of any
additional shares of Common Stock or Voting Securities
which increases the percentage of the then outstanding
shares of Common Stock or Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control
shall occur.
2.5 Committee - refers to the Personnel, Compensation and
Nominating Committee of the Board of Directors of GPU,
Inc.
2.6 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 GPU, Inc., 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.
2.7 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 GPU, Inc. 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.
2.8 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.
4<PAGE>
2.9 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.
2.10 "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.
2.11 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.
2.12 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.
2.13 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.
2.14 Performance Award - refers to the portion of a
Participant's Compensation for a Plan Year that consists
5<PAGE>
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 GPU, Inc.
evidencing the award of such shares or units to the
Elected Officer.
2.15 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.
2.16 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.
2.17 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.
2.18 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.
2.19 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.
2.20 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
6<PAGE>
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; provided,
however, that Section 2.4, this Section 3.1, Section
3.4, Paragraph (d) of Section 6 and the last paragraph
of Section 7.2 may not be amended or modified, and the
Plan may not be terminated, (i) at the request of a
third party who has indicated an intention or taken
steps to effect a Change in Control and who effectuates
a Change in Control, (ii) within six (6) months prior
to, or otherwise in connection with, or in anticipation
of, a Change in Control which has been threatened or
proposed and which actually occurs, or (iii) following a
Change in Control, if the amendment, modification or
termination adversely affects the rights of any
Participant under the Plan. 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. No modification or termination of
the Plan shall adversely affect the rights of any
Participant with respect to any amounts standing to the
Participant's credit in any Account immediately prior to
the date of the adoption of such modification or
termination, including without limitation any rights
with respect to the time and method of payment of, or
the crediting of interest equivalents with respect to,
any such amounts.
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.
7<PAGE>
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
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 Participant and delivered personally or by
first class mail to:
Vice President-Human Resources
GPU Service, Inc.
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.
Except as provided in Section 7.2 or Section 7.4, a
change in the selection of a distribution commencement
date or distribution option shall 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.
8<PAGE>
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.
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
9<PAGE>
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 January 15
of the third calendar year beginning after the close of
such Plan Year, and may be the January 15 of any
subsequent calendar 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 January 15 of
the calendar year following the 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 7.2 or 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
10<PAGE>
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 January 15
of the calendar year following the Participant's
Retirement or Disability, or January 15 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.
(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.
11<PAGE>
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.
(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,
12<PAGE>
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 7.4, 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 7.4, 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
13<PAGE>
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.
Notwithstanding any other provision of the Plan to the
contrary or any other optional form of distribution
otherwise elected, each Participant shall be permitted
to make a special distribution election to have the
entire balance of each of his or her Accounts
distributed in the form of a single lump sum payment in
the event of the Participant's termination of employment
(1) by the Company (A) within six (6) months prior to a
Change in Control or (B) prior to a Change in Control
but which the Participant reasonably demonstrates (i)
was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect
a Change in Control or (ii) otherwise arose in
connection with, or in anticipation of, a Change in
Control which has been threatened or proposed and which
actually occurs, or (2) for any reason within the two
(2) year period following a Change in Control; provided,
however, that such election shall be effective only if
it is made either (x) at least twenty-four (24) months
prior to such termination of Participant's employment,
or (y) if such termination of employment constitutes an
"Involuntary Termination" as defined below, at least one
year prior to such Change in Control. Any special
election made hereunder may be revoked, and a new
special election may be made at any time; provided,
however, that any such revocation or new election shall
be effective only if it is made within the election
period specified in clause (x) or (y) of the preceding
sentence. Any special election, or revocation of a
special election, that may be made hereunder shall be
made in the manner set forth in Section 3.5
For purposes of this Section 7.2, an "Involuntary
Termination" shall mean the termination of a
Participant's employment (A) as a result of the
Participant's death, (B) by the Company, for any reason,
or (C) by the Participant for "Good Reason" as defined
below.
For purposes of this Section 7.2, "Good Reason" shall
mean the occurrence after a Change in Control of any of
the following events or conditions:
(A) a change in the Participant's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Participant's
reasonable judgment, represents an adverse change
from his or her status, title, position or
responsibilities as in effect immediately prior
14<PAGE>
thereto; the assignment to the Participant of any
duties or responsibilities which, in the
Participant's reasonable judgment, are inconsistent
with his or her status, title, position or
responsibilities; or any removal of the Participant
from or failure to reappoint or reelect him or her
to any of such offices or positions, other than in
connection with the termination of his or her
employment for disability, for cause, or by the
Participant other than for Good Reason;
(B) a reduction in the Participant's annual base
salary below the rate of the Participant's annual
base salary in effect as of the date of the Change
in Control or, if greater, at any time thereafter,
determined without regard to any salary reduction
or deferred compensation elections made by the
Participant;
(C) the relocation of the offices of the Company
at which the Participant is principally employed to
a location more than twenty-five (25) miles from
the location of such offices immediately prior to
the Change in Control, or the Company's requiring
the Participant to be based anywhere other than
such offices, except to the extent the Participant
was not previously assigned to a principal location
and except for required travel on the Company's
business to an extent substantially consistent with
the Participant's business travel obligations at
the time of the Change in Control;
(D) the failure by the Company to pay to the
Participant any amount of the Participant's current
compensation, or any amount payable under this
Plan, within seven (7) days of the date on which
payment of such amount is due; or
(E) the failure by the Company to (1) continue in
effect (without reduction in benefit level, and/or
reward opportunities) any material compensation or
employee benefit plan in which the Participant was
participating immediately prior to the Change in
Control unless a substitute or replacement plan has
been implemented which provides substantially
identical compensation or benefits to the
Participant or (2) provide the Participant with
compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under
all other compensation or employee benefit plans,
programs and practices in which the Participant was
participating immediately prior to the Change in
Control.
15<PAGE>
Any event or condition described in subparagraph (A)
through (E) above which occurs (1) within six (6) months
prior to a Change in Control or (2) prior to a Change in
Control but which (x) was at the request of a third
party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and
who effectuates a Change in Control, or (y) otherwise
arose in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed
and which actually occurs, shall constitute Good Reason
for purposes of this Section 7.2 notwithstanding that it
occurred prior to a Change in Control.
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's death, in
accordance with the distribution option in effect
for such Account at the time of the Participant's
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.
16<PAGE>
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.
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. Non-Assignment of Deferred Compensation
A Participant's 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
17<PAGE>
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 making the transfer shall have no further
obligation to the Participant or his or her designated
beneficiaries with respect to payment of the Account
balances so transferred.
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.
18<PAGE>
Exhibit 10-B
GPU SYSTEM COMPANIES
MASTER DIRECTORS' BENEFITS PROTECTION TRUST
As Amended and Restated Effective November 7, 1996<PAGE>
TABLE OF CONTENTS
Article Title Page No.
ARTICLE 1 Definitions 2
ARTICLE 2 Establishment of the Trusts 7
ARTICLE 3 Contributions and Accounts 9
ARTICLE 4 Payments to Participants and Beneficiaries 16
ARTICLE 5 Legal Defense Fund 25
ARTICLE 6 Insolvency 29
ARTICLE 7 Payments to Company 31
ARTICLE 8 Investment Authority and
Disposition of Income 32
ARTICLE 9 General Powers and Duties of Trustee 34
ARTICLE 10 Taxes, Expenses, and Compensation of Trustee 40
ARTICLE 11 Accounting by Trustee 41
ARTICLE 12 Communications 43
ARTICLE 13 Resignation or Removal of Trustee 45
ARTICLE 14 Amendments and Termination 47
ARTICLE 15 Miscellaneous 48<PAGE>
THIS TRUST AGREEMENT, Amended and Restated as of November 7,
1996, by and between GPU, INC., a Pennsylvania corporation (the
"Corporation"), JERSEY CENTRAL POWER & LIGHT COMPANY, a New
Jersey corporation, and GPU NUCLEAR, INC., 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 "Companies"), and
SUMMIT BANK (formerly 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, pursuant to a Trust Agreement dated as of September
1, 1995 between the Companies and the Trustee (the "Prior
Agreement"), each of the Companies has established a trust
(hereinafter called the "Trust") and has contributed 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<PAGE>
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; and
WHEREAS, the parties hereto wish to amend and restate the
Prior Agreement to make certain changes thereto; and
NOW, THEREFORE, the Prior Agreement is hereby amended and
restated to read in its entirety 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.
(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) "Board" shall mean the board of directors of the
Corporation.
2<PAGE>
(g) "Change in Control" shall mean the occurrence of
any of the following:
(1) An acquisition (other than directly from the
Corporation) of any common stock of the Corporation ("Common
Stock") or other voting securities of the Corporation
entitled to vote generally for the election of directors
(the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of
the then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding Voting
Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (A) an employee benefit plan
(or a trust forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person of which
a majority of its voting power or its voting equity
securities or equity interest is owned, directly or
indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996,
are members of the Board (the "Incumbent Board"), cease for
any reason to constitute at least seventy percent (70%) of
the members of the Board; provided, however, that if the
election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of
at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Trust, be considered as
a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office
as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving the Corporation, unless such
merger, consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a
3<PAGE>
merger, consolidation or reorganization of the Corporation
where:
(i) the stockholders of the
Corporation, immediately before such merger, consolidation
or reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization constitute at least seventy
percent (70%) of the members of the board of directors of
the Surviving Corporation, or a corporation, directly or
indirectly, beneficially owning a majority of the Voting
Securities of the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its common stock;
(B) A complete liquidation or dissolution of
the Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common
Stock or Voting Securities by the Corporation which, by
reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person,
provided that if a Change in Control would occur (but for
4<PAGE>
the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities
by the Corporation, and after such share acquisition by the
Corporation, the Subject Person becomes the Beneficial Owner
of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
(h) "Code" shall mean the Internal Revenue Code of
1986 as the same may be amended from time to time.
(i) "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.
(j) "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.
(k) "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 ("Obligations"), 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.
(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) "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
5<PAGE>
Applicable Company for use in connection with this
Agreement. Notwithstanding the foregoing, any determination
of the Present Value of Benefits to be made hereunder at any
time after a Change in Control or during a Threatened Change
in Control Period 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 or Threatened
Change in Control Period, unless the Applicable Company has
notified the Trustee in writing prior to the Change in
Control or the Threatened Change in Control Period of its
adoption of different actuarial assumptions for use
hereunder after the Change in Control or during the
Threatened Change in Control Period; provided, however, that
if any Plan specifies (either expressly or by reference) the
actuarial assumptions that are to be used to calculate the
Benefits provided under such Plan, the actuarial assumptions
so specified shall be used to determine the Present Value of
Benefits under that Plan for purposes of this Agreement.
(n) "Threatened Change in Control" shall mean the
occurrence of any of the following events (but no event
other than the following events), except as otherwise
provided below: Any Person
(1) becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation representing
fifteen percent (15%) or more of the then-outstanding Common
Stock or of the combined voting power of the Corporation's
then-outstanding voting securities, or
(2) initiates a tender offer or exchange offer to
acquire securities of the Corporation representing twenty
percent (20%) or more of the then-outstanding Common Stock
or of the combined voting power of the Corporation's then-
outstanding voting securities, or
(3) solicits proxies for the election within any
single twelve (12)-month period of three or more directors,
whose election or nomination is not approved by a majority
of the Incumbent Board then serving as members of the Board,
to serve on the Board.
Notwithstanding the foregoing, a Threatened Change in
Control shall not be deemed to occur pursuant to this
Section 1.1(n) solely because of an acquisition or tender
offer made or effected in connection with a Non-Control
Acquisition.
(o) "Threatened Change in Control Period" shall mean
the period commencing on the date on which a Threatened
Change in Control has occurred and ending (i) on the date on
which a Change in Control has occurred, or (ii), if earlier,
on whichever of the following dates is applicable:
6<PAGE>
(1) in the case of a Threatened Change in Control
described in Section 1.1(n)(1), the date as of which any
Person described in Section 1.l(n)(1) ceases to be the
Beneficial Owner, directly or indirectly, of securities of
the Corporation representing fifteen percent (15%) or more
of the Common Stock or of the combined voting power of the
Corporation's then-outstanding voting securities, or
(2) in the case of a Threatened Change in Control
described in Section 1.l(n)(2), the date as of which the
tender offer or exchange offer described in Section
1.1(n)(2) is terminated without any securities described
therein of the Corporation being purchased thereunder, or
(3) in the case of a Threatened Change in Control
described in Section 1.l(n)(3), the date as of which any
Person described in Section 1.1(n)(3) fails to effect the
election within any single twelve (12)-month period of three
or more directors, whose election or nomination is not
approved by a majority of the Incumbent Board then serving
as members of the Board, to serve on the Board.
(p) "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 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.
7<PAGE>
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; provided, however, that no Trust established
hereunder may be revoked (i) at the request of a third party who
has indicated an intention or taken steps to effect a Change in
Control and who effectuates a Change in Control, (ii) in
connection with, or in anticipation of, a Change in Control which
has been threatened or proposed and which actually occurs or
(iii) during a Threatened Change in Control Period, any such
attempted revocation being null and void. 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.
8<PAGE>
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.
9<PAGE>
3.2 Required Contributions.
3.2.1 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
10<PAGE>
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.
3.2.2 Upon the occurrence of a Threatened Change
in Control, each Company shall be required to make contributions
to its Trust as follows:
(a) Upon a Threatened Change in Control, the
Company shall, as soon as practicable but in no event later than
30 days following the Threatened Change in Control, make a
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 Threatened
Change in Control occurred; and (ii) the aggregate Present Value,
determined as of the first day of the month coincident with or
immediately following the date on which the Threatened Change in
Control occurred, of all other Benefits for all Participants
under all of such Company's Plans that would have accrued as a
result of a Change in Control if such Change in Control had
occurred on the date on which the Threatened Change in Control
occurs.
11<PAGE>
(b) Within 60 days after each Benefit
Valuation Date during a Threatened Change in Control Period, each
Company shall make a 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 such Benefit Valuation Date and (ii) the
aggregate Present Value, determined as of such Benefit Valuation
Date, of all other Benefits for all Participants under all of
such Company's Plans that would have accrued as a result of a
Change in Control, if such Change in Control had occurred on 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 With respect to each contribution that is made to
a Trust prior to a Change in Control but not during any
Threatened Change in Control Period, the amount, or property, so
12<PAGE>
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. The net investment
gains and losses of each Trust Fund for each calendar year that
ends prior to a Change in Control but not during a Threatened
Change in Control 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,
or that falls within a Threatened Change in Control Period, the
net investment gains and losses of each Trust Fund for the
calendar year ending on such Valuation Date 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.
13<PAGE>
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, but not during any Threatened Change in
Control Period, 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 Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or 3.2.2(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 (or, in the case
of contributions made under clause (ii) of Section 3.2.2(a) or
3.2.2(b), deemed to have accrued) for all Participants under each
of the Plans in question, determined as of the dates specified in
Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or 3.2.2(b), exceeds the
balance of the Plan Account maintained hereunder with respect to
each such Plan, determined as of the Valuation Date immediately
14<PAGE>
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 (or, in the case of contributions made under clause (ii)
of Section 3.2.2(a) or 3.2.2(b), deemed to have accrued) for each
Participant under the Plan in question, determined as of the
dates specified in Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or
3.2.2(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, or other 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
determination has been made, each Company shall furnish the
Trustee with a schedule setting forth the Present Value so
determined of the Benefits accrued (or, if applicable, deemed to
have 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
15<PAGE>
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.
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;
16<PAGE>
(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. Notwithstanding the foregoing,
no Payment Schedule may be amended or revoked after a Change in
Control or during a Threatened Change in Control Period;
provided, however, that during a Threatened Change in Control
Period, a Payment Schedule with respect to a Participant's
Benefits under any Plan may be amended so as to reflect any
amendment to the Plan made during such Threatened Change in
Control Period that has the effect of increasing the amount of
17<PAGE>
the Benefits payable under the Plan with respect to the
Participant, or that permits payment of such Benefits to be made
in a form, or to commence at a time, more favorable to the
Participant or his or her Beneficiary than as provided under the
Plan prior to such amendment. Except as otherwise provided
herein, after a Change in Control the Trustee shall make payments
with respect to a Participant's Benefits under any Plan only in
accordance with the Payment Schedule with respect to such
Participant's Benefits under such Plan that is on file with the
Trustee, and that has not been revoked, at the time such payments
are to be made.
(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.
18<PAGE>
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
19<PAGE>
Schedules filed by or for such Participant or Beneficiary and, in
any case in which a Participant or Beneficiary has filed a
Payment Request Form with respect to Benefits under any Plan for
which an unrevoked Payment Schedule is not on file with the
Trustee, to assist it in determining such Participant's or
Beneficiary's entitlement to Benefits under such Plan. 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 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
20<PAGE>
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
21<PAGE>
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.
22<PAGE>
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
23<PAGE>
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.
24<PAGE>
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
25<PAGE>
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 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
26<PAGE>
discretion, to take such action as it deems appropriate in
the Litigation, including settlement or discontinuance of
the Litigation; provided, however, that the Trustee
shallafford 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.
27<PAGE>
(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 or
during a Threatened Change in Control Period, 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,
28<PAGE>
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:
29<PAGE>
(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
concerning 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
30<PAGE>
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 (but not during a
Threatened Change in Control Period), 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, during
such time as the Trust is 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.
31<PAGE>
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
32<PAGE>
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.
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.
33<PAGE>
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
34<PAGE>
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
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 transactions 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
35<PAGE>
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.
(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
36<PAGE>
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
37<PAGE>
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
38<PAGE>
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.
39<PAGE>
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
40<PAGE>
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.
41<PAGE>
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
shallbe 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
42<PAGE>
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
43<PAGE>
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 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
44<PAGE>
Service, Inc., 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 board of directors of the Applicable Company, 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 or during a Threatened Change in Control Period
without the written consent of at least 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
45<PAGE>
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 or during a Threatened Change in Control
Period, such appointment of a successor trustee shall be approved
in writing by at least 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 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
46<PAGE>
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 No amendment may be made to delete a Participant
from Exhibit A or to delete a Plan from Exhibit B and no other
provision of this Agreement may be amended (i) during a
Threatened Change in Control Period, (ii) after a Change in
Control, (iii) at the request of a third party who has indicated
an intention or taken steps to effect a Change in Control and who
47<PAGE>
effectuates a Change in Control or (iv) otherwise in connection
with, or in anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs unless in any
such case the written consent of at least two-thirds in number of
the Participants who are or may become entitled to payments from
each Trust affected by such amendment is obtained, in which case
such amendment may be made. The Trustee may request that the
Applicable Company or Companies furnish evidence to establish
that at least two-thirds of the 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,
48<PAGE>
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.
49<PAGE>
GPU INC.
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, INC.
By:__________________________________
T.G. Broughton, President and
Chief Executive Officer
ATTEST:
____________________________
SUMMIT BANK, Trustee
By:__________________________________
ATTEST:
___________________________
50<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
GPU Inc. 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,
Inc. L. L. Humphreys
R. V. Laney
J. D. Townsend
C. A. Trost
W. A. Wilson
W. F. Witzig
51<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.
GPU, Inc.
1. All benefit amounts payable under the Deferred
Remuneration Plan for Outside Directors of GPU, Inc.
2. All benefit amounts payable under the Retirement Plan
for Outside Directors of GPU Inc.
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, Inc.
1. All benefit amounts payable under the Deferred
Remuneration Plan for Outside Directors of GPU Nuclear, Inc.
EXHIBIT C
Payment Schedule
[Material To Be Added.]
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 and amended November 7, 1996, pursuant to
Section 4.3 thereof, hereby request that [Name of 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:
_______________________________
_______________________________
_______________________________
52<PAGE>
_______________________________
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.]
EXHIBIT E
AUTHORIZATION TO TRUSTEE
TO COMMENCE LITIGATION
I, _______________________________________________, a
Participant in the GPU System Companies Master Directors'
Benefits Protection Trust (the "Trust"), adopted September 1,
1995 and amended November 7, 1996, pursuant to Section 5.3(b)
thereof, hereby request and authorize [Name of 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].
53<PAGE>
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.]
54<PAGE>
EXHIBIT F
REVOCATION OF TRUSTEE'S AUTHORITY
TO MAINTAIN LITIGATION
I, _______________________________________________, a
Participant in the GPU System Companies Master Directors'
Benefits Protection Trust (the "Trust"), adopted September 1,
1995 and amended November 7, 1996, pursuant to Section 5.3(e)
thereof, hereby revoke the authorization previously granted by me
to [Name of 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.]
55<PAGE>
EXHIBIT G
Trustee's Fee Schedule
[Material to be added, including provision for automatic
annual COLA adjustments after a Change in Control.]
GPU RABBI TRUST
PARTICIPANT INFORMATION
NAME ADDRESS SOCIAL SECURITY NUMBER
Appell, L. J., 1700 Power Mill Road ###-##-####
Jr. York, PA 17403
Bainton, D. J. 39 West Brother Drive ###-##-####
Greenwich, CT 06830
Black, T. H. 543 Carter Street ###-##-####
New Canaan, CT 06840
Burditt, J. F. P. O. Box 1327 ###-##-####
Manchester Center, VT 05255
Grove, D. L. 5 The Knoll ###-##-####
Armonk, NY 10504
Hagen, T. B. 5727 Grubb Road ###-##-####
Erie, PA 16505
Henderson, 315 Rifle Camp Road ###-##-####
H. F., Jr. West Paterson, NJ 07424
Humphreys, 217 Lasiandra Court ###-##-####
L. L. Richland, WA 99352
Laney, R. V. 24 Trout Farm Road ###-##-####
Duxburn, MD 02332
O'Leary, H. R. 5610 Wisconsin Avenue PH20C ###-##-####
O'Leary, J. Chevy Chase, MD 20815
(deceased)
Oswald, R. O. 600 E. Cathedral Road ###-##-####
Oswald, J. W. Apt. J-304
(deceased) Philadelphia, PA 19128
Persson, G. E. 27 Greenfields Drive ###-##-####
Lakewood, NJ 08701
Pietruski, 27 Paddock Lane ###-##-####
J. M. Colts Neck, NJ 07722
56<PAGE>
GPU RABBI TRUST
PARTICIPANT INFORMATION
NAME ADDRESS SOCIAL SECURITY NUMBER
Rein, C. A. 21 East 22nd St. ###-##-####
Apt. 8-B
New York, NY 10010
Roedel, P. R. 416 Wheatland Ave. ###-##-####
Shillington, PA 19607
Townsend, J. D. 190 Red Rock Cove Dr. ###-##-####
Sedona, AZ 86351
Trost, C. A. H. 10405 Windsor View Dr. ###-##-####
Potomac, MD 20854
Van Ness, S. C. 503 South Street ###-##-####
Brielle, NJ 08730
Wiley, S. B. Canfield Road ###-##-####
Covenant Sta., NJ 07961
Wilson, W. A. 115 Wilton Woods Ln ###-##-####
Media, PA 19063
Witzig, W. F. 1330 Park Hills Avenue ###-##-####
East
State College, PA 16801
Woolf, P. K. 506 Quaker Road ###-##-####
Princeton, NJ 08540
57<PAGE>
Exhibit 10-C
GPU SYSTEM COMPANIES
MASTER EXECUTIVES' BENEFITS PROTECTION TRUST
As Amended and Restated Effective August 1, 1996<PAGE>
TABLE OF CONTENTS
Article Title Page No.
ARTICLE 1 Definitions 3
ARTICLE 2 Establishment of the Trusts 9
ARTICLE 3 Contributions and Accounts 11
ARTICLE 4 Payments to Participants and Beneficiaries 18
ARTICLE 5 Legal Defense Fund 27
ARTICLE 6 Insolvency 31
ARTICLE 7 Payments to Company 32
ARTICLE 8 Investment Authority and Disposition
of Income 33
ARTICLE 9 General Powers and Duties of Trustee 36
ARTICLE 10 Taxes, Expenses, and Compensation of
Trustee 41
ARTICLE 11 Accounting by Trustee 43
ARTICLE 12 Communications 45
ARTICLE 13 Resignation or Removal of Trustee 46
ARTICLE 14 Amendments and Termination 48
ARTICLE 15 Miscellaneous 50
THIS TRUST AGREEMENT, Amended and Restated as of August ___,
1996, by and between GPU, INC., 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, INC., a Pennsylvania corporation, GPU
1<PAGE>
NUCLEAR, INC., a New Jersey corporation, GPU GENERATION, INC., a
Pennsylvania corporation ("Genco"), and GPU INTERNATIONAL, INC.,
a Delaware Corporation (each such corporation is hereinafter
referred to individually as a "Company", and all such corpora-
tions are hereinafter referred to collectively as the "Com-
panies"), and SUMMIT BANK (formerly 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, pursuant to a Trust Agreement dated as of
September 1, 1995 between the Corporation, each of the Companies
other than Genco, and the Trustee (the "Prior Agreement"), each
of such Companies has established a trust (hereinafter called the
"Trust") and has contributed 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, Genco wishes to establish a Trust hereunder
and to become a party to this Agreement and agrees to be bound by
all of its terms and provisions; and
2<PAGE>
WHEREAS, it is the intention of the parties that each
Trust established hereunder or under the Prior Agreement 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; and
WHEREAS, the parties hereto wish to amend and restate
the Prior Agreement to permit Genco to become a party hereto and
to make certain other changes in the Prior Agreement;
NOW, THEREFORE, the Prior Agreement is hereby amended
and restated to read in its entirety as follows:
ARTICLE 1
Definitions
1.1 As used herein, the following terms shall have the
following meanings, unless the context clearly indicates a con-
trary 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.
3<PAGE>
(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) "Board" shall mean the board of directors of
the Corporation.
(g) "Change in Control" shall mean the occurrence
of any of the following:
(1) An acquisition (other than directly from
the Corporation) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election
of directors (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the
then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting
equity securities or equity interest is owned, directly
or indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
4<PAGE>
(2) The individuals who, as of August 1,
1996, are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least seventy
percent (70%) of the members of the Board; provided,
however, that if the election, or nomination for
election by the Corporation's shareholders, of any new
director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for
purposes of this Trust, be considered as a member of
the Incumbent Board; provided further, however, that no
individual shall be considered a member of the
Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy
Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving the Corporation, unless such
merger, consolidation or reorganization is a "Non-
Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
the Corporation where:
(i) the stockholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
5<PAGE>
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Corporation or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial
Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities or its common stock.
(B) A complete liquidation or
dissolution of the Corporation; or
(C) The sale or other disposition of
all or substantially all of the assets of the
Corporation to any Person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person
(the "Subject Person") acquired Beneficial Ownership of
more than the permitted amount of the then outstanding
Common Stock or Voting Securities as a result of the
acquisition of Common Stock or Voting Securities by the
Corporation which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding,
increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided
that if a Change in Control would occur (but for the
operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting
Securities by the Corporation, and after such share
acquisition by the Corporation, the Subject Person
becomes the Beneficial Owner of any additional shares
of Common Stock or Voting Securities which increases
the percentage of the then outstanding shares of Common
Stock or Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
(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.
6<PAGE>
(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 Agree-
ment, 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 uncondition-
ally and fully guaranteed as to principal and interest
by the United States of America ("Obligations"), 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 regis-
tered 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 Agreement. Notwithstanding the foregoing,
any determination of the Present Value of Benefits to
be made hereunder at any time after a Change in Control
or during a Threatened Change in Control Period 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 or Threatened Change in
Control Period, unless the Applicable Company has
notified the Trustee in writing prior to the Change in
Control or the Threatened Change in Control Period of
its adoption of different actuarial assumptions for use
hereunder after the Change in Control or during the
Threatened Change in Control Period; provided, however,
that if any Plan specifies (either expressly or by
reference) the actuarial assumptions that are to be
used to calculate the Benefits provided under such
Plan, the actuarial assumptions so specified shall be
used to determine the Present Value of Benefits under
that Plan for purposes of this Agreement.
7<PAGE>
(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 Com-
pany, and agreements entered into by such Company, that
are included in the list set forth in Exhibit B hereto.
(m) "Threatened Change in Control" shall mean the
occurrence of any of the following events (but no event
other than the following events), except as otherwise
provided below: Any Person
(1) becomes the Beneficial Owner, directly
or indirectly, of securities of the Corporation
representing fifteen percent (15%) or more of the then-
outstanding Common Stock or of the combined voting
power of the Corporation's then-outstanding voting
securities, or
(2) initiates a tender offer or exchange
offer to acquire securities of the Corporation
representing twenty percent (20%) or more of the then-
outstanding Common Stock or of the combined voting
power of the Corporation's then-outstanding voting
securities, or
(3) solicits proxies for the election within
any single twelve (12)-month period of three or more
directors, whose election or nomination is not approved
by a majority of the Incumbent Board then serving as
members of the Board, to serve on the Board.
Notwithstanding the foregoing, a Threatened
Change in Control shall not be deemed to occur pursuant
to this Section 1.1(m) solely because of an acquisition
or tender offer made or effected in connection with a
Non-Control Acquisition.
(n) "Threatened Change in Control Period" shall
mean the period commencing on the date on which a
Threatened Change in Control has occurred and ending
(i) on the date on which a Change in Control has
occurred, or (ii), if earlier, on whichever of the
following dates is applicable:
(1) in the case of a Threatened Change in
Control described in Section 1.1(m)(1), the date as of
which any Person described in Section 1.l(m)(1) ceases
to be the Beneficial Owner, directly or indirectly, of
securities of the Corporation representing fifteen
percent (15%) or more of the Common Stock or of the
combined voting power of the Corporation's
then-outstanding voting securities, or
8<PAGE>
(2) in the case of a Threatened Change in
Control described in Section 1.l(m)(2), the date as of
which the tender offer or exchange offer described in
Section 1.1(m)(2) is terminated without any securities
described therein of the Corporation being purchased
thereunder, or
(3) in the case of a Threatened Change in
Control described in Section 1.l(m)(3), the date as of
which any Person described in Section 1.1(m)(3) fails
to effect the election within any single twelve
(12)-month period of three or more directors, whose
election or nomination is not approved by a majority of
the Incumbent Board then serving as members of the
Board, to serve on the Board.
(o) "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 reinvest-
ments 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, adminis-
tered and disposed of by the Trustee as provided in this
Agreement.
2.2 Prior to a Change in Control, each Trust estab-
lished hereunder may be revoked, in whole or in part, by the
9<PAGE>
Applicable Company giving to the Trustee written notice of such
revocation; provided, however, that no Trust established
hereunder may be revoked (i) at the request of a third party who
has indicated an intention or taken steps to effect a Change in
Control and who effectuates a Change in Control, (ii) in
connection with, or in anticipation of, a Change in Control which
has been threatened or proposed and which actually occurs or
(iii) during a Threatened Change in Control Period, any such
attempted revocation being null and void. 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 accord-
ingly.
2.4 The principal of each Trust, and any earnings
thereon, shall be held separate and apart from other funds of the
10<PAGE>
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. Partici-
pants 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 main-
tained 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.
11<PAGE>
3.2 Required Contributions.
3.2.1 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
12<PAGE>
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.
3.2.2 Upon the occurrence of a Threatened Change in
Control, each Company shall be required to make contributions to
its Trust as follows:
(a) Upon a Threatened Change in Control, the
Company shall, as soon as practicable but in no event later than
30 days following the Threatened Change in Control, make a
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 Threatened
Change in Control occurred; and (ii) the aggregate Present Value,
determined as of the first day of the month coincident with or
immediately following the date on which the Threatened Change in
Control occurred, of all other Benefits for all Participants
under all of such Company's Plans that would have accrued as a
result of a Change in Control if such Change in Control had
occurred on the date on which the Threatened Change in Control
occurs.
13<PAGE>
(b) Within 60 days after each Benefit
Valuation Date during a Threatened Change in Control Period, each
Company shall make a 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 such Benefit Valuation Date and (ii) the
aggregate Present Value, determined as of such Benefit Valuation
Date, of all other Benefits for all Participants under all of
such Company's Plans that would have accrued as a result of a
Change in Control, if such Change in Control had occurred on 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 With respect to each contribution that is
made to a Trust prior to a Change in Control but not during any
14<PAGE>
Threatened Change in Control Period, the amount, or property, so
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. The net
investment gains and losses of each Trust Fund for each calendar
year that ends prior to a Change in Control but not during a
Threatened Change in Control 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,
or that falls within a Threatened Change in Control Period, the
net investment gains and losses of each Trust Fund for the
calendar year ending on such Valuation Date shall be allocated by
the Trustee proportionately among the Plan Accounts and Par-
ticipant 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.
15<PAGE>
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, but not during any Threatened Change in
Control Period, 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 Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or
3.2.2(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 (or, in the case
of contributions made under clause (ii) of Section 3.2.2(a) or
3.2.2(b), deemed to have accrued) for all Participants under each
of the Plans in question, determined as of the dates specified in
Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or 3.2.2(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
16<PAGE>
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 (or, in the case of contributions made under clause (ii)
of Section 3.2.2(a) or 3.2.2(b), deemed to have accrued) for each
Participant under the Plan in question, determined as of the
dates specified in Sections 3.2.1(a), 3.2.1(b), 3.2.2(a) or
3.2.2(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, or other 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
determination has been made, each Company shall furnish the
Trustee with a schedule setting forth the Present Value so
determined of the Benefits accrued (or, if applicable, deemed to
have 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
17<PAGE>
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 Par-
ticipants 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") substan-
tially in the form annexed hereto as Exhibit C for each Par-
ticipant 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;
18<PAGE>
(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 secu-
rity 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. Notwithstanding the foregoing,
no Payment Schedule may be amended or revoked after a Change in
Control or during a Threatened Change in Control Period;
provided, however, that during a Threatened Change in Control, a
Payment Schedule with respect to a Participant's Benefits under
any Plan may be amended so as to reflect any amendment to the
Plan made during such Threatened Change in Control period that
has the effect of increasing the amount of the Benefits payable
19<PAGE>
under the Plan with respect to the Participant, or that permits
payment of such Benefits to be made in a form, or to commence at
a time, more favorable to the Participant or his or her
Beneficiary than as provided under the Plan prior to such
amendment. Except as otherwise provided herein, after a Change
in Control, the Trustee shall make payments with respect to a
Participant's Benefits under any Plan only in accordance with the
Payment Schedule with respect to such Participant's Benefits
under such Plan that is on file with the Trustee, and that has
not been revoked, at the time such payments are to be made.
(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 Par-
ticipant 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 Bene-
ficiary 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.
20<PAGE>
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 certifi-
cate of the Participant, an inheritance tax waiver and such other
documents as the Trustee may reasonably require, including, with-
out 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 and, in any case in which a
21<PAGE>
Participant or Beneficiary has filed a Payment Request Form with
respect to Benefits under any Plan for which an unrevoked Payment
Schedule is not on file with the Trustee, to assist it in
determining such Participant's or Beneficiaries' entitlement to
Benefits under such Plan. 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 with-
holding 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 fur-
nished 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,
22<PAGE>
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. Notwith-
standing 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 deter-
mines 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
23<PAGE>
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 Par-
ticipant 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 Partici-
pant 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.
24<PAGE>
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 immedi-
ately 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 Partici-
pants 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.
25<PAGE>
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 prac-
ticable, 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.
26<PAGE>
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
27<PAGE>
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 (here-
after 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 Litiga-
tion 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 Liti-
gation 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.
28<PAGE>
(e) A Claimant may at any time revoke the authoriza-
tion 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 con-
trary, 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
29<PAGE>
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 or
during a Threatened Change in Control Period, 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 pro-
ceeding to uphold the validity and enforceability of the provi-
sions 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 reason-
able fees, costs and disbursements of any counsel, actuaries,
accountants or other experts retained by the Trustee in connec-
tion 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
30<PAGE>
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 pur-
suant 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
31<PAGE>
inquire whether the Company is Insolvent. The Trustee may in all
events rely on such evidence concerning 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 pur-
suant to Section 6.2 hereof and subsequently resumes such pay-
ments, 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 (but not during a
Threatened Change in Control Period), a Company may, by written
notice to the Trustee, direct the Trustee to pay to such Company,
32<PAGE>
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, during
such time as the Trust is 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
33<PAGE>
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 manage-
ment 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 transac-
tions 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.
34<PAGE>
The Applicable Company, by written notice to the
Trustee, may at any time terminate its appointment of any invest-
ment 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.
35<PAGE>
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 admin-
istrative powers and authority with respect to the property com-
prising 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 subscrip-
tion 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.
36<PAGE>
(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 transactions 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.
37<PAGE>
(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 (includ-
ing deposits with the Trustee in its individual capacity that pay
a reasonable rate of interest).
(p) To invest and reinvest all or any specified por-
tion 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 exer-
cise 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 manage-
ment of such portion of the Trust Fund, only as directed by such
38<PAGE>
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 pur-
suant 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.
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
39<PAGE>
any Plan; nor shall the Trustee be responsible for the adequacy
of the Trust Fund for any Trust to meet and discharge all pay-
ments 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 pro-
tect, 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 penal-
ties), 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,
40<PAGE>
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 obli-
gation 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.
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
41<PAGE>
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, actu-
ary, accountant or other agent engaged by the Trustee pursuant to
this Agreement. Any such compensation or expenses shall be allo-
cated 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 par-
ticular 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
42<PAGE>
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.
43<PAGE>
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 pro-
ceeding to which the Company and all persons having any benefi-
cial 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 pro-
vided, 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.
44<PAGE>
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 offi-
cers of the Company authorized to act or give directions here-
under 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 Secre-
tary of the Company under its corporate seal, and the Trustee
shall be fully protected in relying upon any resolution so certi-
fied 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
45<PAGE>
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, communica-
tions 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 commu-
nications 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 board of directors of the Applicable Company, at
any time upon 60 days' written notice to the Trustee, or upon
46<PAGE>
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 or during a Threatened Change in Control Period
without the written consent of at least 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 or during a Threatened Change in Control
Period, such appointment of a successor trustee shall be approved
in writing by at least 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
47<PAGE>
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 provi-
sions of this Agreement and any Exhibits annexed hereto, as they
48<PAGE>
relate to any Company's Trust, may be amended at any time, with-
out 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 amend-
ment 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 No amendment may be made to delete a Participant
from Exhibit A or to delete a Plan from Exhibit B and no other
provision of this Agreement may be amended (i) during a
Threatened Change in Control Period, (ii) after a Change in
Control, (iii) at the request of a third party who has indicated
an intention or taken steps to effect a Change in Control and who
effectuates a Change in Control or (iv) otherwise in connection
with, or in anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs unless in any
such case the written consent of at least two-thirds in number of
the Participants who are or may become entitled to payments from
each Trust affected by such amendment is obtained, in which case
such amendment may be made. The Trustee may request that the
Applicable Company or Companies furnish evidence to establish
that at least two-thirds of the 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
49<PAGE>
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, with-
out 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, encum-
bered 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 Agree-
ment is not to be construed by reference thereto.
15.5 This Agreement shall bind and inure to the bene-
fit 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.
50<PAGE>
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.
GPU, INC.
GPU SERVICE, INC.
GPU GENERATION, INC.
ENERGY INITIATIVES, INC.
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:
_________________________
GPU NUCLEAR, INC.
By:_________________________________
T.G. Broughton, President and
Chief Executive Officer
ATTEST:
__________________________
51<PAGE>
GPU INTERNATIONAL, INC.
By:_________________________________
B. L. Levy, President and
Chief Executive Officer
ATTEST:
___________________________
Summit Bank, Trustee
By: _________________________________
ATTEST:
__________________________
52<PAGE>
Exhibit A
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, Inc. 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, Inc. Philip R. Clark
Thomas G. Broughton
GPU International, Inc. Bruce L. Levy
53<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.
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 amended Agreement dated August 1, 1996, 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 Periods preceding and
including 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 GPU, Inc. 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.
8. The severance payment benefit payable to Dennis P.
Baldassari provided under the Severance Agreement, dated August
1, 1996, between Mr. Baldassari, Jersey Central Power & Light
Company and GPU, Inc.
Metropolitan Edison Company
1. The severance payment benefit provided under
Metropolitan Edison Company's Severance Procedure.
54<PAGE>
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 Periods preceding and
including Change in Control payable under the Incentive
Compensation Plan for Elected Officers of Metropolitan Edison
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 GPU, Inc. 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 GPU, Inc. 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.
7. The severance payment benefit payable to Robert L.
Wise provided under the Severance Agreement, dated August 1,
1996, between Mr. Wise, GPU Generation, Inc. and GPU, Inc.
55<PAGE>
GPU Service, Inc.
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 GPU, Inc., GPU Service,
Inc. and Mr. Jolles.
3. The additional retirement pension payable to Philip
C. Mezey pursuant to the Agreement among GPU, Inc., GPU Service,
Inc. and Mr. Mezey.
4. The pension payable to Hazel R. O'Leary pursuant to
the Agreement among GPU, Inc., GPU Service, Inc. and
Mrs. O'Leary.
5. All benefit amounts payable under the GPU Service,
Inc. Supplemental and Excess Benefits Plan.
6. All benefit amounts payable under the GPU System
Companies Deferred Compensation Plan.
7. Awards for Performance Periods preceding and
including Change in Control payable under the Incentive
Compensation Plan for Elected Officers of GPU Service, Inc.
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 GPU, Inc. and Subsidiaries.
9. Premiums on life insurance policies issued under
Senior Executive Life Insurance Program, payable by GPU Service,
Inc. 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 GPU, Inc., GPU Service, Inc. and
Mr. Kuhns.
11. The retirement annuity payable to James B. Liberman
pursuant to the Agreement between GPU Service, Inc. and Mr.
Liberman.
12. The supplemental pension payable to Herman Dieckamp
pursuant to the Agreement among GPU, Inc., GPU Service, Inc. and
Mr. Dieckamp.
13. Annuities payable to Messrs. Kuhns, Dieckamp and
Condon under the Deferred Compensation Plan for Senior Officers
of GPU Service, Inc.
56<PAGE>
14. The supplemental pension payable to Messrs. R. C.
Arnold, J. G. Graham and I. H. Jolles pursuant to Agreements
between GPU Service, Inc. and Messrs. Arnold, Graham and Jolles.
15. The severance payment benefit payable to Messrs.
James R. Leva, R. C. Arnold, J. G. Graham and I. H. Jolles
provided under the Severance Agreements, dated August 1, 1996,
between GPU, Inc., GPU Service, Inc. and each of Messrs. Leva,
Arnold, Graham and Jolles.
16. The severance payment benefit payable to Fred D.
Hafer provided under the Severance Agreement, dated August 1,
1996, between Mr. Hafer, GPU Service, Inc. and GPU, Inc.
GPU Nuclear, Inc.
1. The severance payment benefit provided under GPU
Nuclear Inc.'s Severance Procedure.
2. All benefit amounts payable under the GPU Nuclear
Inc. Supplemental and Excess Benefits Plan.
3. All benefit amounts payable under the GPU System
Companies Deferred Compensation Plan.
4. Awards for Performance Periods preceding and
including Change in Control payable under the Incentive
Compensation Plan for Elected Officers of GPU Nuclear Inc.
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 GPU, Inc. and Subsidiaries.
6. Premiums on life insurance policies issued under
Senior Executive Life Insurance Program, payable by GPU Nuclear
Inc. 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 Inc. and Mr. Clark.
8. The severance payment benefit payable to Thomas G.
Broughton provided under the Severance Agreement, dated August
1, 1996, between Mr. Broughton, GPU Nuclear Inc. and GPU, Inc.
57<PAGE>
GPU International, Inc.
1. All benefit amounts payable under the GPU Service,
Inc. Supplemental and Excess Benefits Plan, as adopted by GPU
International, Inc.
2. All benefit amounts payable under the GPU System
Companies Deferred Compensation Plan.
3. Awards for Performance Periods preceding and
including Change in Control payable under the Annual Performance
Award Plan of GPU International, 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 GPU, Inc. and Subsidiaries.
5. Premiums on life insurance policies issued under
Senior Executive Life Insurance Program, payable by GPU
International, Inc. pursuant to Split Dollar Agreement with Bruce
L. Levy.
6. The severance payment benefit payable to Bruce L.
Levy provided under the Severance Agreement, dated August 1,
1996, between Mr. Levy, GPU International, Inc. and GPU, Inc.
58<PAGE>
EXHIBIT C-1
GPU RABBI TRUST
PARTICIPANT INFORMATION
SOCIAL
NAME ADDRESS SECURITY No.
Arnold 7 Fernwood Trail, PO Box 151 ###-##-####
Mountain Lakes, New Jersey 07046
Baldassari 9 Willow Spring Drive ###-##-####
Morristown, New Jersey 07960
Broughton 7 Knoll Top Court ###-##-####
Denville, New Jersey 07834
Clark 297 Morris Avenue ###-##-####
Mountain Lakes, New Jersey 07046
Condon Box 116 Young's Road ###-##-####
Basking Ridge, New Jersey 07920
Dieckamp 29 Crystal Road ###-##-####
Mountain Lakes, New Jersey 07046
Donofrio 40 Longview Avenue ###-##-####
Randolph, New Jersey 07869
Graham 21 Candace Lane ###-##-####
Chatham Township, New Jersey 07928
Hafer 1730 Meadowlark Road ###-##-####
Wyomissing, Pennsylvania 19610
Jolles 610 West End Avenue ###-##-####
New York, New York 10024
Kuhns 49 Creston Avenue ###-##-####
Tenafly, New Jersey 07670
Leva 2 Ryan Court ###-##-####
Chester, New Jersey 07930
Levy 5 Oak Ridge Court ###-##-####
Pomona, New York 10970
Liberman 205 East 69th Street ###-##-####
New York, New York 10021
Mezey 46 Gatehouse Road ###-##-####
Bedminster, New Jersey 07921
O'Leary 5610 Wisconsin Avenue PH20C ###-##-####
Chevy Chase, Maryland 20815
Wise 701 Tioga Street ###-##-####
Johnstown, Pennsylvania 15905
59<PAGE>
EXHIBIT C-2
GPU RABBI TRUST
SEVERANCE PLAN - 8/1/96
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Weeks Base Pay Payment
FORM/TIMING OF PAYMENT: Lump sum.
60<PAGE>
EXHIBIT C-3
GPU RABBI TRUST
INCENTIVE COMPENSATION PLAN
TERM OF PAYMENT:
AMOUNT OF PAYMENT:
Payment
FORM/TIMING OF PAYMENT: Lump sum.
61<PAGE>
EXHIBIT C-4
GPU RABBI TRUST
SENIOR EXECUTIVE LIFE INSURANCE PLAN
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
FORM/TIMING OF PAYMENT: Lump sum payment on or before
of indicated year to the Life Insurance Company of
Virginia.
62<PAGE>
EXHIBIT C-5
GPU RABBI TRUST
DEFERRED COMPENSATION PLAN
TERMS OF PAYMENT:
PAYMENT SCHEDULE:
Balance
FORM/TIMING OF PAYMENT: Lump sum amount on or before
of indicated year.
63<PAGE>
EXHIBIT C-6
GPU RABBI TRUST
EMPLOYEE STOCK PLAN
TERMS OF PAYMENT:
AMOUNT OF PAYMENT:
Gross-Up
Balance Percentage Payment
FORM/TIMING OF PAYMENT: Lump sum amount on or before_________
______________________.
64<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
FORM/TIMING OF PAYMENT: On or before
of each month the amount indicated above shall be paid to the
participant or his beneficiary.
65<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
FORM/TIMING OF PAYMENT: On or before
of each month the amount indicated above shall be paid to the
participant or his beneficiary.
66<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
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.
67<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, Inc.
(attached, amended 8/1/96, signed _______).
AMOUNT OF PAYMENT:
FORM/TIMING OF PAYMENT: On or before
of each month the amount indicated above shall be paid to the
participant or his beneficiary.
68<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, Inc.
and GPU Service, Inc. (attached, amended 8/1/96).
AMOUNT OF PAYMENT:
FORM/TIMING OF PAYMENT: On or before
of each month the amount indicated above shall be paid to the
participant or his beneficiary.
69<PAGE>
EXHIBIT C-12
GPU RABBI TRUST
Severance Agreement Payment
TERMS OF PAYMENT: Mr. [Name of Officer] shall be entitled to a
severance payment benefit in accordance with the provisions
contained in his severance agreement with [Company Name] and GPU,
Inc. (attached, dated 8/1/96).
AMOUNT OF PAYMENT:
FORM/TIMING OF PAYMENT: On or before
the amount indicated above shall be paid to the participant or
his beneficiary.
70<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 and amended August 1, 1996, pursuant to
Section 4.3(b) thereof, hereby request that [Name of 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.]
71<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 and amended August 1, 1996, pursuant to Section 5.3 (b)
thereof, hereby request and authorize [Name of 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.]
72<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 and amended August 1, 1996, pursuant to Section 5.3 (e)
thereof, hereby revoke the authorization previously granted by me
to [Name of 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.]
73<PAGE>
Exhibit 10-G
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
JERSEY CENTRAL POWER & LIGHT COMPANY
(AS AMENDED AND RESTATED AUGUST 1, 1996)
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 GPU, Inc.
unless otherwise specified.
C. Change in Control. A "Change in Control"
shall mean the occurrence of:
(1) An acquisition (other than directly from
the Corporation) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election
of directors (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the
then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person of
1<PAGE>
which a majority of its voting power or its voting
equity securities or equity interest is owned, directly
or indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1,
1996, are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least seventy
percent (70%) of the members of the Board; provided,
however, that if the election, or nomination for
election by the Corporation's shareholders, of any new
director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no
individual shall be considered a member of the
Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy
Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving the Corporation, unless such
merger, consolidation or reorganization is a "Non-
Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
the Corporation where:
(i) the shareholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
2<PAGE>
directors of the Surviving Corporation, or a
corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w)
the Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Corporation or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial
Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities or its common stock.
(B) A complete liquidation or
dissolution of the Corporation; or
(C) The sale or other disposition of
all or substantially all of the assets of the
Corporation to any Person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change
in Control shall not be deemed to occur solely because
any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then
outstanding Common Stock or Voting Securities as a
result of the acquisition of Common Stock or Voting
Securities by the Corporation which, by reducing the
number of shares of Common Stock or Voting Securities
then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting
Securities by the Corporation, and after such share
acquisition by the Corporation, the Subject Person
becomes the Beneficial Owner of any additional shares
of Common Stock or Voting Securities which increases
the percentage of the then outstanding shares of Common
Stock or Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
D. Committee. The Personnel,
Compensation and Nominating Committee of the Board or
any successor thereto.
E. Company. Jersey Central Power &
Light Company
3<PAGE>
F. Corporation. GPU, Inc.
G. Employee. An individual who was on
the active salaried payroll of the Company or a
subsidiary of the Company at any time during the period
for which an Award is made.
H. Executive Committee. The Executive
Committee of the Board of Directors of the Company.
I. Officer. An Officer of the Company
who is elected by the Company's Board of Directors and
is an Employee of the Company, but not including
Assistant Comptrollers, Assistant Secretaries and
Assistant Treasurers.
J. Performance Period. The fiscal
year (currently the calendar year) 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.
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.
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 the 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.
4<PAGE>
6. Determination of Amounts of Awards.
A. The Executive Committee shall determine the
amounts of Awards subject, in the case of Officers who are also
Officers of the 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 Plan Administrative Manual as in effect
for such Performance Period (the "Manual").
B. Notwithstanding the foregoing or any other
provision herein or in the Manual to the contrary, if a Change in
Control occurs, then in respect of the Performance Period in
which the Change in Control occurs (and in respect of the
previous Performance Period if the Change in Control occurs prior
to the time Awards for such Performance Period have been made),
the following provisions shall apply:
(i) each objective of the Company's for each
such Performance Period shall be deemed to have been 100%
achieved;
(ii) the Company's Final Pool for each such
Performance Period shall be deemed to be 100% of the Company's
Target Pool for each such Performance Period (or if, as of the
date of the Change in Control, the Target Pool has not been
determined for the Performance Period, the Target Pool for the
immediately preceding Performance Period);
(iii) each Officer who, prior to the
occurrence of such Change in Control, was determined to be
eligible for an Award for each such Performance Period ("Eligible
Officer") shall be entitled to receive an Award for each such
Performance Period;
(iv) the amount of the Award to be made to
each Eligible Officer shall be determined by multiplying the
Company's Final Pool for each such 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 Company's Target Pool for each such Performance
Period, and the denominator of which is the aggregate amount of
the Annual Base Salaries of all Eligible Officers so taken into
account; provided, however, that in the event an Eligible Officer
is terminated by the Company without "Cause" (as defined below)
during the Performance Period in which a Change in Control
occurs, the amount of the Award to be made to such Eligible
Officer in respect of that Performance Period shall be the amount
determined above multiplied by a fraction, the numerator of which
is the number of days that have elapsed since the end of the
immediately preceding Performance Period through the date of
termination and the denominator of which is 365.
5<PAGE>
A termination is for Cause if the Eligible Officer is convicted
of a felony or where the Eligible Officer (1) intentionally and
continually failed substantially to perform his or her reasonably
assigned duties with the Company (other than a failure resulting
from the Eligible Officer's incapacity due to physical or mental
illness) which failure continued for a period of at least thirty
(30) days after a written notice of demand for substantial
performance, signed by a duly authorized officer, has been
delivered to the Eligible Officer specifying the manner in which
he or she has failed substantially to perform, or (2)
intentionally engaged in conduct which is demonstrably and
materially injurious to the Corporation or the Company. No act,
nor failure to act, on the Eligible Officer's part, shall be
considered "intentional" unless he or she has acted, or failed to
act, with a lack of good faith and with a lack of reasonable
belief that the Eligible Officer's action or failure to act was
in the best interest of the Corporation and the Company.
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the GPU System
Companies Deferred Compensation Plan, 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; provided, however, that if an Eligible Officer is entitled
to a pro-rated Award pursuant to the proviso in Section 6.B(iv),
such pro-rated Award shall be paid within twenty (20) days after
the Eligible Officer's date of termination.
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;
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, modify, suspend or terminate 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
6<PAGE>
delegated pursuant to a resolution duly adopted by the Company's
Board of Directors; provided, however, that any amendment to
Section 4, Section 6 or this Section 10.A shall be subject to the
concurrence of the Board; provided further, however, that Section
2.C, Section 6 and this Section 10 may not be amended or
modified, and the Plan may not be suspended or terminated, (i) at
the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control
and who effectuates a Change in Control, (ii) within six (6)
months prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been threatened or
proposed and which actually occurs, or (iii) following a Change
in Control, if the amendment, modification, suspension or
termination adversely affects the rights of any Eligible Officer
under the Plan. No amendment or termination of the Plan shall
reduce or otherwise adversely affect an Award already made
hereunder without the consent of the Officer affected.
B. The Executive Committee is authorized to determine
in its discretion all questions that may arise as to the
construction or interpretation of the Plan, and to resolve any
claims that may arise with respect to any Officer's rights or
entitlement to any payment under the Plan. The decision of the
Executive Committee with respect to any such questions or claims
shall be final, conclusive and binding on all parties.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a Change in Control 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 Company.
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 con-
tinued employment, transfer or promotion because of his or her
participation in the Plan.
D. Each Officer who is a participant in the Plan
shall have the status of a general unsecured creditor of the
Company with respect to any amounts payable to the Officer
hereunder. The Plan shall constitute a mere promise by the
Company to make payments in the future of the Awards provided for
herein. It is the intention of the Company 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.
7<PAGE>
E. An Officer's rights to payments under the Plan
shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Officer or the Officer's
beneficiary.
8<PAGE>
Exhibit 10-H
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
METROPOLITAN EDISON COMPANY
(AS AMENDED AND RESTATED AUGUST 1, 1996)
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 GPU, Inc.
unless otherwise specified.
C. Change in Control. A "Change in Control"
shall mean the occurrence of:
(1) An acquisition (other than directly from
the Corporation) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election
of directors (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the
then outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting
1<PAGE>
equity securities or equity interest is owned, directly
or indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1,
1996, are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least seventy
percent (70%) of the members of the Board; provided,
however, that if the election, or nomination for
election by the Corporation's shareholders, of any new
director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no
individual shall be considered a member of the
Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy
Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving the Corporation, unless such
merger, consolidation or reorganization is a "Non-
Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
the Corporation where:
(i) the shareholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
2<PAGE>
corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w)
the Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Corporation or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial
Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities or its common stock.
(B) A complete liquidation or
dissolution of the Corporation; or
(C) The sale or other disposition of
all or substantially all of the assets of the
Corporation to any Person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change
in Control shall not be deemed to occur solely because
any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then
outstanding Common Stock or Voting Securities as a
result of the acquisition of Common Stock or Voting
Securities by the Corporation which, by reducing the
number of shares of Common Stock or Voting Securities
then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting
Securities by the Corporation, and after such share
acquisition by the Corporation, the Subject Person
becomes the Beneficial Owner of any additional shares
of Common Stock or Voting Securities which increases
the percentage of the then outstanding shares of Common
Stock or Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
D. Committee. The Personnel,
Compensation and Nominating Committee of the Board or
any successor thereto.
E. Company. Metropolitan Edison
Company
F. Corporation. GPU, Inc.
3<PAGE>
G. Employee. An individual who was on
the active salaried payroll of the Company or a
subsidiary of the Company at any time during the period
for which an Award is made.
H. Executive Committee. The Executive
Committee of the Board of Directors of the Company.
I. Officer. An Officer of the Company
who is elected by the Company's Board of Directors and
is an Employee of the Company, but not including
Assistant Comptrollers, Assistant Secretaries and
Assistant Treasurers.
J. Performance Period. The fiscal
year (currently the calendar year) 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.
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.
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 the 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.
A. The Executive Committee shall determine the
amounts of Awards subject, in the case of Officers who are also
Officers of the Corporation, to the concurrence of the Board,
either at or following the end of the Performance Period to which
4<PAGE>
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 Plan Administrative Manual as in effect
for such Performance Period (the "Manual").
B. Notwithstanding the foregoing or any other
provision herein or in the Manual to the contrary, if a Change in
Control occurs, then in respect of the Performance Period in
which the Change in Control occurs (and in respect of the
previous Performance Period if the Change in Control occurs prior
to the time Awards for such Performance Period have been made),
the following provisions shall apply:
(i) each objective of the Company's for each
such Performance Period shall be deemed to have been 100%
achieved;
(ii) the Company's Final Pool for each such
Performance Period shall be deemed to be 100% of the Company's
Target Pool for each such Performance Period (or if, as of the
date of the Change in Control, the Target Pool has not been
determined for the Performance Period, the Target Pool for the
immediately preceding Performance Period);
(iii) each Officer who, prior to the
occurrence of such Change in Control, was determined to be
eligible for an Award for each such Performance Period ("Eligible
Officer") shall be entitled to receive an Award for each such
Performance Period;
(iv) the amount of the Award to be made to
each Eligible Officer shall be determined by multiplying the
Company's Final Pool for each such 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 Company's Target Pool for each such Performance
Period, and the denominator of which is the aggregate amount of
the Annual Base Salaries of all Eligible Officers so taken into
account; provided, however, that in the event an Eligible Officer
is terminated by the Company without "Cause" (as defined below)
during the Performance Period in which a Change in Control
occurs, the amount of the Award to be made to such Eligible
Officer in respect of that Performance Period shall be the amount
determined above multiplied by a fraction, the numerator of which
is the number of days that have elapsed since the end of the
immediately preceding Performance Period through the date of
termination and the denominator of which is 365.
A termination is for Cause if the Eligible Officer is convicted
of a felony or where the Eligible Officer (1) intentionally and
continually failed substantially to perform his or her reasonably
assigned duties with the Company (other than a failure resulting
from the Eligible Officer's incapacity due to physical or mental
illness) which failure continued for a period of at least thirty
5<PAGE>
(30) days after a written notice of demand for substantial
performance, signed by a duly authorized officer, has been
delivered to the Eligible Officer specifying the manner in which
he or she has failed substantially to perform, or (2)
intentionally engaged in conduct which is demonstrably and
materially injurious to the Corporation or the Company. No act,
nor failure to act, on the Eligible Officer's part, shall be
considered "intentional" unless he or she has acted, or failed to
act, with a lack of good faith and with a lack of reasonable
belief that the Eligible Officer's action or failure to act was
in the best interest of the Corporation and the Company.
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the GPU System
Companies Deferred Compensation Plan, 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; provided, however, that if an Eligible Officer is entitled
to a pro-rated Award pursuant to the proviso in Section 6.B(iv),
such pro-rated Award shall be paid within twenty (20) days after
the Eligible Officer's date of termination.
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;
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, modify, suspend or terminate 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; provided, however, that any amendment to
Section 4, Section 6 or this Section 10.A shall be subject to the
concurrence of the Board; provided further, however, that Section
2.C, Section 6 and this Section 10 may not be amended or
modified, and the Plan may not be suspended or terminated, (i) at
6<PAGE>
the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control
and who effectuates a Change in Control, (ii) within six (6)
months prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been threatened or
proposed and which actually occurs, or (iii) following a Change
in Control, if the amendment, modification, suspension or
termination adversely affects the rights of any Eligible Officer
under the Plan. No amendment or termination of the Plan shall
reduce or otherwise adversely affect an Award already made
hereunder without the consent of the Officer affected.
B. The Executive Committee is authorized to determine
in its discretion all questions that may arise as to the
construction or interpretation of the Plan, and to resolve any
claims that may arise with respect to any Officer's rights or
entitlement to any payment under the Plan. The decision of the
Executive Committee with respect to any such questions or claims
shall be final, conclusive and binding on all parties.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a Change in Control 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 Company.
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.
D. Each Officer who is a participant in the Plan
shall have the status of a general unsecured creditor of the
Company with respect to any amounts payable to the Officer
hereunder. The Plan shall constitute a mere promise by the
Company to make payments in the future of the Awards provided for
herein. It is the intention of the Company 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 anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Officer or the Officer's
beneficiary.
7<PAGE>
Exhibit 10-I
INCENTIVE COMPENSATION PLAN FOR ELECTED OFFICERS OF
PENNSYLVANIA ELECTRIC COMPANY
(AS AMENDED AND RESTATED AUGUST 1, 1996)
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 GPU, Inc.
unless otherwise specified.
C. Change in Control. A "Change in Control"
shall mean the occurrence of:
(1) An acquisition (other than directly from
the Corporation) of any common stock of the
Corporation ("Common Stock") or other voting
securities of the Corporation entitled to vote
generally for the election of directors (the "Voting
Securities") by any "Person" (as the term person is
1<PAGE>
used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such
Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of the then
outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change
in Control. A "Non-Control Acquisition" shall mean
an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (i) the
Corporation or (ii) any corporation or other Person
of which a majority of its voting power or its
voting equity securities or equity interest is
owned, directly or indirectly, by the Corporation
(for purposes of this definition, a "Subsidiary"),
(B) the Corporation or its Subsidiaries, or (C) any
Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1,
1996, are members of the Board (the "Incumbent
2<PAGE>
Board"), cease for any reason to constitute at least
seventy percent (70%) of the members of the Board;
provided, however, that if the election, or
nomination for election by the Corporation's
shareholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Plan,
be considered as a member of the Incumbent Board;
provided further, however, that no individual shall
be considered a member of the Incumbent Board if
such individual initially assumed office as a result
of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf
of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy
Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving the Corporation, unless
such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or
reorganization of the Corporation where:
3<PAGE>
(i) the shareholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty
percent (60%) of the combined voting power of the
outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership
of the Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately prior to
the execution of the agreement providing for such
merger, consolidation or reorganization constitute
at least seventy percent (70%) of the members of the
board of directors of the Surviving Corporation, or
a corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger,
consolidation or reorganization, was maintained by
4<PAGE>
the Corporation or any Subsidiary, or (z) any Person
who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities or common stock of the Corporation, has
Beneficial Ownership of twenty percent (20%) or more
of the combined voting power of the Surviving
Corporation's then outstanding voting securities or
its common stock.
(B) A complete liquidation or
dissolution of the Corporation; or
(C) The sale or other disposition of
all or substantially all of the assets of the
Corporation to any Person (other than a transfer to
a Subsidiary).
Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur solely because
any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of
Common Stock or Voting Securities by the Corporation
which, by reducing the number of shares of Common
Stock or Voting Securities then outstanding,
increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided
that if a Change in Control would occur
5<PAGE>
(but for the operation of this sentence) as a result
of the acquisition of shares of Common Stock or
Voting Securities by the Corporation, and after such
share acquisition by the Corporation, the Subject
Person becomes the Beneficial Owner of any
additional shares of Common Stock or Voting
Securities which increases the percentage of the
then outstanding shares of Common Stock or Voting
Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
D. Committee. The Personnel, Compensation and
Nominating Committee of the Board or any successor
thereto.
E. Company. Pennsylvania Electric Company.
F. Corporation. GPU, Inc.
G. Employee. An individual who was on the
active salaried payroll of the Company or a
subsidiary of the Company at any time during the
period for which an Award is made.
H. Executive Committee. The Executive Committee
of the Board of Directors of the Company.
I. Officer. An Officer of the Company who is
elected by the Company's Board of Directors and is
an Employee of the Company, but not including
Assistant Comptrollers, Assistant Secretaries and
Assistant Treasurers.
6<PAGE>
J. Performance Period. The fiscal year
(currently the calendar year) 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.
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.
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 the 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.
7<PAGE>
6. Determination of Amounts of Awards.
A. The Executive Committee shall determine the amounts
of Awards subject, in the case of Officers who are also Officers
of the 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 Plan Administrative Manual as in effect for such
Performance Period (the "Manual").
B. Notwithstanding the foregoing or any other provision
herein or in the Manual to the contrary, if a Change in Control
occurs, then in respect of the Performance Period in which the
Change in Control occurs (and in respect of the previous
Performance Period if the Change in Control occurs prior to the
time Awards for such Performance Period have been made), the
following provisions shall apply:
(i) each objective of the Company's for each such
Performance Period shall be deemed to have been 100% achieved;
(ii) the Company's Final Pool for each such
Performance Period shall be deemed to be 100% of the Company's
Target Pool for each such Performance Period (or if, as of the
date of the Change in Control, the Target Pool has not been
determined for the Performance Period, the Target Pool for the
immediately preceding Performance Period);
(iii) each Officer who, prior to the occurrence of
such Change in Control, was determined to be eligible for an
8<PAGE>
Award for each such Performance Period ("Eligible Officer") shall
be entitled to receive an Award for each such Performance Period;
(iv) the amount of the Award to be made to each
Eligible Officer shall be determined by multiplying the Company's
Final Pool for each such 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
Company's Target Pool for each such Performance Period, and the
denominator of which is the aggregate amount of the Annual Base
Salaries of all Eligible Officers so taken into account;
provided, however, that in the event an Eligible Officer is
terminated by the Company without "Cause" (as defined below)
during the Performance Period in which a Change in Control
occurs, the amount of the Award to be made to such Eligible
Officer in respect of that Performance Period shall be the amount
determined above multiplied by a fraction, the numerator of which
is the number of days that have elapsed since the end of the
immediately preceding Performance Period through the date of
termination and the denominator of which is 365.
A termination is for Cause if the Eligible Officer is convicted
of a felony or where the Eligible Officer (1) intentionally and
continually failed substantially to perform his or her reasonably
assigned duties with the Company (other than a failure resulting
from the Eligible Officer's incapacity due to
9<PAGE>
physical or mental illness) which failure continued for a period
of at least thirty (30) days after a written notice of demand for
substantial performance, signed by a duly authorized officer, has
been delivered to the Eligible Officer specifying the manner in
which he or she has failed substantially to perform, or
(2) intentionally engaged in conduct which is demonstrably and
materially injurious to the Corporation or the Company. No act,
nor failure to act, on the Eligible Officer's part, shall be
considered "intentional" unless he or she has acted, or failed to
act, with a lack of good faith and with a lack of reasonable
belief that the Eligible Officer's action or failure to act was
in the best interest of the Corporation and the Company.
7. Form of Awards.
Awards shall be made in cash.
8. Payment of Awards.
Unless it has been deferred pursuant to the GPU System
Companies Deferred Compensation Plan, 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; provided, however, that if an Eligible Officer is entitled
to a pro-rated Award pursuant to the proviso in Section 6.B(iv),
such pro-rated Award shall be paid within twenty (20) days after
the Eligible Officer's date of termination.
10<PAGE>
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; 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, modify, suspend or terminate 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; provided, however, that any amendment to
Section 4, Section 6 or this Section 10.A shall be subject to the
concurrence of the Board; provided further, however, that Section
2.C, Section 6 and this Section 10 may not be amended or
modified, and the Plan may not be suspended or terminated, (i) at
the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control
and who effectuates a Change in Control, (ii) within six (6)
months prior to, or otherwise in connection with, or in
anticipation of, a Change in Control
11<PAGE>
which has been threatened or proposed and which actually occurs,
or (iii) following a Change in Control, if the amendment,
modification, suspension or termination adversely affects the
rights of any Eligible Officer under the Plan. No amendment or
termination of the Plan shall reduce or otherwise adversely
affect an Award already made hereunder without the consent of the
Officer affected.
B. The Executive Committee is authorized to determine
in its discretion all questions that may arise as to the
construction or interpretation of the Plan, and to resolve any
claims that may arise with respect to any Officer's rights or
entitlement to any payment under the Plan. The decision of the
Executive Committee with respect to any such questions or claims
shall be final, conclusive and binding on all parties.
Notwithstanding the foregoing, any decision made by the Executive
Committee after the occurrence of a Change in Control 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 Company.
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 con-
12<PAGE>
tinued employment, transfer or promotion because of his or her
participation in the Plan.
D. Each Officer who is a participant in the Plan shall
have the status of a general unsecured creditor of the Company
with respect to any amounts payable to the Officer hereunder.
The Plan shall constitute a mere promise by the Company to make
payments in the future of the Awards provided for herein. It is
the intention of the Company 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 anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Officer or the Officer's
beneficiary.
13<PAGE>
Exhibit 10-J
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS OF JERSEY
CENTRAL POWER & LIGHT COMPANY
(AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 7, 1996)
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 November 7, 1996. 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 Change in Control - A "Change in Control" shall
mean the occurrence during the term of the Plan of:<PAGE>
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation")) of any common stock of the
Corporation ("Common Stock") or other voting securities
of the Corporation entitled to vote generally for the
election of directors of the Corporation (the "Voting
Securities") by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of the then outstanding shares of
Common Stock or the combined voting power of the
Corporation's then outstanding Voting Securities;
provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an
employee benefit plan (or a trust forming a part
thereof) maintained by (i) the Corporation or (ii) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the
Corporation (for purposes of this definition, a
"Subsidiary"), (B) the Corporation or its Subsidiaries,
or (C) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the board of directors of the Corporation
(the "Incumbent Board"), cease for any reason to
constitute at least seventy percent (70%) of the
members of the board of directors of the Corporation;
provided, however, that if the election, or nomination
for election by the Corporation's shareholders, of any
new director was approved by a vote of at least two-
thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of
the Incumbent Board; provided further, however, that no
individual shall be considered a member of the
Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the board of directors of
the Corporation (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
2<PAGE>
involving the Corporation, unless such merger,
consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the
Corporation where:
(i) the shareholders of the
Corporation, immediately before such merger,
consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution
of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Corporation or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial
Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities or its common stock;
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to
any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person
(the "Subject Person") acquired Beneficial Ownership of
more than the permitted amount of the then outstanding
Common Stock or Voting Securities as a result of the
3<PAGE>
acquisition of Common Stock or Voting Securities by the
Corporation which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding,
increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that
if a Change in Control would occur (but for the
operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting
Securities by the Corporation, and after such share
acquisition by the Corporation, the Subject Person
becomes the Beneficial Owner of any additional shares
of Common Stock or Voting Securities which increases
the percentage of the then outstanding shares of Common
Stock or Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
3.3 Company - refers to Jersey Central Power & Light
Company.
3.4 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.
3.5 Plan - refers to this Deferred Remuneration Plan
for Outside Directors as described in this document and
as it may be amended in the future.
3.6 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.
3.7 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.
3.8 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
4<PAGE>
date, as part of the Director's Retirement Account.
3.9 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, the
Corporation or any of its subsidiaries.
3.10 Plan Year - refers to the period October 1, 1986
through December 31, 1986; and each twelve (12) month
period from January 1 through December 31 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;
provided, however, that Section 3.2, this Section 4.1,
Section 4.3, the last sentence of the first paragraph
of Section 6 and the last paragraph of Section 7.2 may
not be amended or modified, and the Plan may not be
terminated, (i) at the request of a third party who has
indicated an intention or taken steps to effect a
Change in Control and who effectuates a Change in
Control, (ii) within six (6) months prior to, or
otherwise in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed
and which actually occurs, or (iii) following a Change
in Control, if the amendment, modification or
termination adversely affects the rights of any
Director under the Plan. No modification or
termination of the Plan shall adversely affect the
rights of any Director with respect to any amounts
standing to the Director's credit in any Account
immediately prior to the date of the adoption of such
modification or termination, including without
limitation any rights with respect to the time and
method of payment of, or the crediting of interest
equivalents with respect to, any such amounts.
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
5<PAGE>
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" 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.
4.5 A Director's election to voluntarily defer
Remuneration, selection of a distribution commencement
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
6<PAGE>
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.
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 January 15
of the calendar year following the Director's
Retirement, or January 15 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
7<PAGE>
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.
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
8<PAGE>
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.
Notwithstanding any other provision of the Plan to the
contrary or any other optional form of distribution
otherwise elected, each Outside Director shall be
permitted to make a special distribution election to
have the entire balance of his or her Accounts
distributed in the form of a single lump sum payment in
the event of the Outside Director's Retirement
following a Change in Control; provided, however, that
such election shall be effective only if it is made at
least twelve (12) months prior to such Change in
Control. Any special election made hereunder may be
revoked, and a new special election may be made at any
time; provided, however, that any such revocation or
new election shall be effective only if it is made at
least twelve (12) months prior to a Change in Control.
Any special election, or revocation of a special
election, that may be made hereunder shall be made in
the manner set forth in Section 4.5.
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
9<PAGE>
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.
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.
10<PAGE>
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.
11<PAGE>
Exhibit 10-K
JERSEY CENTRAL POWER AND LIGHT COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective August 1, 1996<PAGE>
TABLE OF CONTENTS
Page
Foreword 3
Section 1 - Definitions 3
Section 2 - Application and Basis of the Plan 7
Section 3 - Payment of Benefits 8
Section 4 - Administration 14
Section 5 - Amendment and Termination 15<PAGE>
JERSEY CENTRAL POWER AND LIGHT COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective August 1, 1996)
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 August 1, 1996.
The benefits of any employee who ceased employment with the
Company, by retirement, death, or otherwise, prior to August 1,
1996 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 1.11 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, as
amended ("ERISA"), 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 ERISA.
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, as amended.
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, as amended, and <PAGE>
(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.
2<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 Change in Control: The term Change in Control shall mean
the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation")) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%)
or more of the then outstanding shares of Common Stock or
the combined voting power of the Corporation's then
outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained
by (i) the Corporation or (ii) any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the board of directors of the Corporation (the
"Incumbent Board"), cease for any reason to constitute at
least seventy percent (70%) of the members of the board of
directors of the Corporation; provided, however, that if the
election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of
at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as
a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office
3<PAGE>
as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the board of directors of the Corporation (a "Proxy
Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger, consolidation
or reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation or
reorganization of the Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution of
the agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of
the members of the board of directors of the Surviving
Corporation, or a corporation, directly or indirectly,
beneficially owning a majority of the Voting Securities of
the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its common stock.
(B) A complete liquidation or dissolution of the
Corporation; or
4<PAGE>
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common
Stock or Voting Securities by the Corporation which, by
reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities
by the Corporation, and after such share acquisition by the
Corporation, the Subject Person becomes the Beneficial Owner
of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
1.4 Company: The word Company shall have the meaning indicated
in the Foreword.
1.5 Deferred Compensation Plan: The term Deferred Compensation
Plan shall mean the GPU System Companies Deferred
Compensation Plan, as adopted by the Company.
1.6 Earnings: The term Earnings shall mean an Employee's
"Earnings" as defined in the Pension Plan.
1.7 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.
1.8 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 or Annual Performance Award Plan.
1.9 Pension Plan: The term Pension Plan shall have the meaning
indicated in the Foreword.
1.10 Plan: The term Plan shall have the meaning indicated in the
Foreword.
5<PAGE>
1.11 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.
For purposes of clause (i) of this Section 1.11, 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 1.11, 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.
6<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.
7<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 1.7 and 1.11 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 the
same form as 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
8<PAGE>
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).
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
9<PAGE>
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.
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.
(h) Notwithstanding any other provision of the Plan to
the contrary or any other optional form of distribution
otherwise elected, each Employee shall be permitted to make
a special distribution election to have his or her Excess
and/or Supplemental Benefit distributed in the form of a
single lump sum payment in the event of the Employee's
termination of employment (1) by the Company (A) within six
(6) months prior to a Change in Control or (B) prior to a
Change in Control but which the Employee reasonably
demonstrates (i) was at the request of a third party who has
10<PAGE>
indicated an intention or taken steps reasonably calculated
to effect a Change in Control or (ii) otherwise arose in
connection with, or in anticipation of a Change in Control
which has been threatened or proposed and which actually
occurs, or (2) for any reason within the two (2) year period
following a Change in Control; provided, however, that such
election shall be effective only if it is made either (I) at
least twenty-four (24) months prior to such termination of
the Employee's employment, or (II) if such termination of
employment constitutes an "Involuntary Termination" as
defined below, at least one year prior to such Change in
Control. Any special election made hereunder may be
revoked, and a new special election may be made at any time;
provided, however, that any such revocation or new election
shall be effective only if it is made within the election
period specified in clause (I) or (II) of the preceding
sentence. Any special election, or revocation of a special
election, that may be made hereunder shall be made in
writing, on a form furnished to the Employee for such
purpose by the Administrative Committee. The lump sum
payment to be made hereunder to an Employee shall be in an
amount that is Actuarially Equivalent (as defined in the
Pension Plan and determined as of the date of the Employee's
termination of employment) to the Excess and/or Supplemental
Benefit that otherwise would be payable hereunder to the
Employee if (x) payment of the Employee's Excess and/or
Supplemental Benefit and the benefits payable to the
Employee under the Pension Plan were to commence on the
Employee's Normal Retirement Date (as defined in the Pension
Plan) or, if earlier, on the earliest date as of which the
Employee could elect to have payment of his or her benefits
under the Pension Plan commence, (y) the Employee's Excess
and/or Supplemental Benefit were payable in the form of a
single life annuity, and (z) the Employee's benefits under
the Pension Plan were payable either (1) in the same form as
Option 2 as described in Section 10.1 of the Pension Plan
with the Employee's spouse as the beneficiary thereunder, if
the Employee is married on the date of his or her
termination of employment, or (2) in the form of a single
life annuity, if the Employee is not married on such date.
The lump sum payment to be made hereunder to the surviving
spouse of an Employee shall be in an amount that is
Actuarially Equivalent (as defined in the Pension Plan and
determined as of the date of the Employee's death) to the
Excess and/or Supplemental Benefit that otherwise would be
payable hereunder to such spouse by reason of the Employee's
death. The lump sum payment to be made hereunder with
respect to any Employee shall be made by no later than
30 days following the date of the Employee's termination of
employment.
11<PAGE>
For purposes of this Section 3.2(h), an
"Involuntary Termination" shall mean the termination of an
Employee's employment (A) as a result of the Employee's
death, (B) by the Company, for any reason, or (C) by the
Employee, for "Good Reason" as defined below.
For purposes of the paragraph above, "Good Reason"
shall mean the occurrence after a Change in Control of any
of the following events or conditions:
(A) a change in the Employee's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Employee's reasonable
judgement, represents an adverse change from his or her
status, title, position or responsibilities as in
effect immediately prior thereto; the assignment to the
Employee of any duties or responsibilities which, in
the Employee's reasonable judgement, are inconsistent
with his or her status, title, position or
responsibilities; or any removal of the Employee from
or failure to reappoint or reelect him or her to any of
such offices or positions, other than in connection
with the termination of his or her employment for
disability, for cause, or by the Employee other than
for Good Reason;
(B) a reduction in the Employee's annual base
salary below the rate of the Employee's annual base
salary in effect as of the date of the Change in
Control or, if greater, at any time thereafter,
determined without regard to any salary reduction or
deferred compensation elections made by the Employee;
(C) the relocation of the offices of the Company
at which the Employee is principally employed to a
location more than twenty-five (25) miles from the
location of such offices immediately prior to the
Change in Control, or the Company's requiring the
Employee to be based anywhere other than such offices,
except to the extent the Employee was not previously
assigned to a principal location and except for
required travel on the Company's business to an extent
substantially consistent with the Employee's business
travel obligations at the time of the Change in
Control;
(D) the failure by the Company to pay to the
Employee any amount of the Employee's current
compensation, or any amount payable under any deferred
compensation program of the Company in which the
Employee participated, within seven (7) days of the
date on which payment of such amount is due; or
12<PAGE>
(E) the failure by the Company to (1) continue in
effect (without reduction in benefit level, and/or
reward opportunities) any material compensation or
employee benefit plan in which the Employee was
participating immediately prior to the Change in
Control unless a substitute or replacement plan has
been implemented which provides substantially identical
compensation or benefits to the Employee or (2) provide
the Employee with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for
under all other compensation or employee benefit plans,
programs and practices in which the Employee was
participating immediately prior to the Change in
Control.
Any event or condition described in subparagraph
(A) through (E) above which occurs (1) within six (6) months
prior to a Change in Control or (2) prior to a Change in
Control but which (x) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates
a Change in Control, or (y) otherwise arose in connection
with, or in anticipation of, a Change in Control which has
been threatened or proposed and which actually occurs, shall
constitute Good Reason for purposes of this Section 3.2(h)
notwithstanding that it occurred prior to a Change in
Control.
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.
13<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 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.
14<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) no
amendment to Section 3.2(h), Section 4.2 or to this Section
5.3, nor any termination of the Plan, effectuated (i) at the
request of a third party who has indicated an intention or
taken steps to effect a Change in Control and who
effectuates a Change in Control, (ii) within six (6) months
prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs, or (iii)
following a Change in Control, shall be effective if the
amendment or termination adversely affects the rights of any
Employee under the Plan.
15<PAGE>
Exhibit 10-L
METROPOLITAN EDISON COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective August 1, 1996<PAGE>
TABLE OF CONTENTS
Page
Foreword 3
Section 1 - Definitions 3
Section 2 - Application and Basis of the Plan 7
Section 3 - Payment of Benefits 8
Section 4 - Administration 14
Section 5 - Amendment and Termination 15<PAGE>
METROPOLITAN EDISON COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective August 1, 1996)
Foreword
Effective as of January l, 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 August 1, 1996.
The benefits of any employee who ceased employment with the
Company, by retirement, death, or otherwise, prior to August 1,
1996 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 1.11 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, as
amended ("ERISA"), 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 ERISA.
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,
as amended.
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, as amended, and <PAGE>
(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.
2<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 Change in Control: The term Change in Control shall mean
the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation")) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%)
or more of the then outstanding shares of Common Stock or
the combined voting power of the Corporation's then
outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained
by (i) the Corporation or (ii) any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the board of directors of the Corporation (the
"Incumbent Board"), cease for any reason to constitute at
least seventy percent (70%) of the members of the board of
directors of the Corporation; provided, however, that if the
election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of
at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as
a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the
3<PAGE>
Incumbent Board if such individual initially assumed office
as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the board of directors of the Corporation (a "Proxy
Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger, consolidation
or reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation or
reorganization of the Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of
the members of the board of directors of the Surviving
Corporation, or a corporation, directly or indirectly,
beneficially owning a majority of the Voting Securities of
the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its common stock.
4<PAGE>
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common
Stock or Voting Securities by the Corporation which, by
reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities
by the Corporation, and after such share acquisition by the
Corporation, the Subject Person becomes the Beneficial Owner
of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
1.4 Company: The word Company shall have the meaning indicated
in the Foreword.
1.5 Deferred Compensation Plan: The term Deferred Compensation
Plan shall mean the GPU System Companies Deferred
Compensation Plan, as adopted by the Company.
1.6 Earnings: The term Earnings shall mean an Employee's
"Earnings" as defined in the Pension Plan.
1.7 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.
1.8 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 or Annual Performance Award Plan.
1.9 Pension Plan: The term Pension Plan shall have the meaning
indicated in the Foreword.
5<PAGE>
1.10 Plan: The term Plan shall have the meaning indicated in the
Foreword.
1.11 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.
For purposes of clause (i) of this Section 1.11, 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 1.11, 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.
6<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.
7<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 1.7 and 1.11 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 the
same form as 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
8<PAGE>
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).
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
9<PAGE>
which payment of the Employee's Excess and/or Supplemental
Benefits is to be made hereunder and with the same
beneficiary.
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.
(h) Notwithstanding any other provision of the Plan to
the contrary or any other optional form of distribution
otherwise elected, each Employee shall be permitted to make
a special distribution election to have his or her Excess
and/or Supplemental Benefit distributed in the form of a
single lump sum payment in the event of the Employee's
termination of employment (1) by the Company (A) within six
(6) months prior to a Change in Control or (B) prior to a
Change in Control but which the Employee reasonably
demonstrates (i) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated
10<PAGE>
to effect a Change in Control or (ii) otherwise arose in
connection with, or in anticipation of a Change in Control
which has been threatened or proposed and which actually
occurs, or (2) for any reason within the two (2) year period
following a Change in Control; provided, however, that such
election shall be effective only if it is made either (I) at
least twenty-four (24) months prior to such termination of
the Employee's employment, or (II) if such termination of
employment constitutes an "Involuntary Termination" as
defined below, at least one year prior to such Change in
Control. Any special election made hereunder may be
revoked, and a new special election may be made at any time;
provided, however, that any such revocation or new election
shall be effective only if it is made within the election
period specified in clause (I) or (II) of the preceding
sentence. Any special election, or revocation of a special
election, that may be made hereunder shall be made in
writing, on a form furnished to the Employee for such
purpose by the Administrative Committee. The lump sum
payment to be made hereunder to an Employee shall be in an
amount that is Actuarially Equivalent (as defined in the
Pension Plan and determined as of the date of the Employee's
termination of employment) to the Excess and/or Supplemental
Benefit that otherwise would be payable hereunder to the
Employee if (x) payment of the Employee's Excess and/or
Supplemental Benefit and the benefits payable to the
Employee under the Pension Plan were to commence on the
Employee's Normal Retirement Date (as defined in the Pension
Plan) or, if earlier, on the earliest date as of which the
Employee could elect to have payment of his or her benefits
under the Pension Plan commence, (y) the Employee's Excess
and/or Supplemental Benefit were payable in the form of a
single life annuity, and (z) the Employee's benefits under
the Pension Plan were payable either (1) in the same form as
Option 2 as described in Section 10.1 of the Pension Plan
with the Employee's spouse as the beneficiary thereunder, if
the Employee is married on the date of his or her
termination of employment, or (2) in the form of a single
life annuity, if the Employee is not married on such date.
The lump sum payment to be made hereunder to the surviving
spouse of an Employee shall be in an amount that is
Actuarially Equivalent (as defined in the Pension Plan and
determined as of the date of the Employee's death) to the
Excess and/or Supplemental Benefit that otherwise would be
payable hereunder to such spouse by reason of the Employee's
death. The lump sum payment to be made hereunder with
respect to any Employee shall be made by no later than
30 days following the date of the Employee's termination of
employment.
11<PAGE>
For purposes of this Section 3.2(h), an "Involuntary
Termination" shall mean the termination of an Employee's
employment (A) as a result of the Employee's death, (B) by
the Company, for any reason, or (C) by the Employee, for
"Good Reason" as defined below.
For purposes of the paragraph above, "Good Reason"
shall mean the occurrence after a Change in Control of any
of the following events or conditions:
(A) a change in the Employee's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Employee's reasonable
judgement, represents an adverse change from his or her
status, title, position or responsibilities as in
effect immediately prior thereto; the assignment to the
Employee of any duties or responsibilities which, in
the Employee's reasonable judgement, are inconsistent
with his or her status, title, position or
responsibilities; or any removal of the Employee from
or failure to reappoint or reelect him or her to any of
such offices or positions, other than in connection
with the termination of his or her employment for
disability, for cause, or by the Employee other than
for Good Reason;
(B) a reduction in the Employee's annual base
salary below the rate of the Employee's annual base
salary in effect as of the date of the Change in
Control or, if greater, at any time thereafter,
determined without regard to any salary reduction or
deferred compensation elections made by the Employee;
(C) the relocation of the offices of the Company
at which the Employee is principally employed to a
location more than twenty-five (25) miles from the
location of such offices immediately prior to the
Change in Control, or the Company's requiring the
Employee to be based anywhere other than such offices,
except to the extent the Employee was not previously
assigned to a principal location and except for
required travel on the Company's business to an extent
substantially consistent with the Employee's business
travel obligations at the time of the Change in
Control;
(D) the failure by the Company to pay to the
Employee any amount of the Employee's current
compensation, or any amount payable under any deferred
compensation program of the Company in which the
Employee participated, within seven (7) days of the
date on which payment of such amount is due; or
12<PAGE>
(E) the failure by the Company to (1) continue in
effect (without reduction in benefit level, and/or
reward opportunities) any material compensation or
employee benefit plan in which the Employee was
participating immediately prior to the Change in
Control unless a substitute or replacement plan has
been implemented which provides substantially identical
compensation or benefits to the Employee or (2) provide
the Employee with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for
under all other compensation or employee benefit plans,
programs and practices in which the Employee was
participating immediately prior to the Change in
Control.
Any event or condition described in subparagraph
(A) through (E) above which occurs (1) within six (6) months
prior to a Change in Control or (2) prior to a Change in
Control but which (x) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates
a Change in Control, or (y) otherwise arose in connection
with, or in anticipation of, a Change in Control which has
been threatened or proposed and which actually occurs, shall
constitute Good Reason for purposes of this Section 3.2(h)
notwithstanding that it occurred prior to a Change in
Control.
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.
13<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 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.
14<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) no
amendment to Section 3.2(h), Section 4.2 or to this Section
5.3, nor any termination of the Plan, effectuated (i) at the
request of a third party who has indicated an intention or
taken steps to effect a Change in Control and who
effectuates a Change in Control, (ii) within six (6) months
prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs, or (iii)
following a Change in Control, shall be effective if the
amendment or termination adversely affects the rights of any
Employee under the Plan.
15<PAGE>
Exhibit 10-M
PENNSYLVANIA ELECTRIC COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
As Amended, Effective August 1, 1996<PAGE>
TABLE OF CONTENTS
Page
Foreword 3
Section 1 - Definitions 4
Section 2 - Application and Basis of the Plan 7
Section 3 - Payment of Benefits 8
Section 4 - Administration 14
Section 5 - Amendment and Termination 14<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
SUPPLEMENTAL AND EXCESS BENEFITS PLAN
(As amended effective August 1, 1996)
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 August 1, 1996.
The benefits of any employee who ceased employment with the
Company, by retirement, death, or otherwise, prior to August 1,
1996 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 1.11 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, as
amended ("ERISA"), 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 ERISA.
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,
as amended.
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, as amended, 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.<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 Change in Control: The term Change in Control shall mean
the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation")) of any common stock of the Corporation
("Common Stock") or other voting securities of the
Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%)
or more of the then outstanding shares of Common Stock or
the combined voting power of the Corporation's then
outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained
by (i) the Corporation or (ii) any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary"), (B) the Corporation or its
Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the board of directors of the Corporation (the
"Incumbent Board"), cease for any reason to constitute at
least seventy percent (70%) of the members of the board of
directors of the Corporation; provided, however, that if the
election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of
at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as
a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office
as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the <PAGE>
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the board of directors of the Corporation (a "Proxy
Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger, consolidation
or reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation or
reorganization of the Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of
the members of the board of directors of the Surviving
Corporation, or a corporation, directly or indirectly,
beneficially owning a majority of the Voting Securities of
the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) that, immediately
prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities or its common stock.
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Subsidiary).<PAGE>
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than
the permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common
Stock or Voting Securities by the Corporation which, by
reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities
by the Corporation, and after such share acquisition by the
Corporation, the Subject Person becomes the Beneficial Owner
of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
1.4 Company: The word Company shall have the meaning indicated
in the Foreword.
1.5 Deferred Compensation Plan: The term Deferred Compensation
Plan shall mean the GPU System Companies Deferred
Compensation Plan, as adopted by the Company.
1.6 Earnings: The term Earnings shall mean an Employee's
"Earnings" as defined in the Pension Plan.
1.7 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.
1.8 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 or Annual Performance Award Plan.
1.9 Pension Plan: The term Pension Plan shall have the meaning
indicated in the Foreword.
1.10 Plan: The term Plan shall have the meaning indicated in the
Foreword.
1.11 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 <PAGE>
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.
For purposes of clause (i) of this Section 1.11, 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 1.11, 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.
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.<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 1.7 and 1.11 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 the same form as 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<PAGE>
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).
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 <PAGE>
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.
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.
(h) Notwithstanding any other provision of the
Plan to the contrary or any other optional form of
distribution otherwise elected, each Employee shall be
permitted to make a special distribution election to
have his or her Excess and/or Supplemental Benefit <PAGE>
distributed in the form of a single lump sum payment in
the event of the Employee's termination of employment
(1) by the Company (A) within six (6) months prior to a
Change in Control or (B) prior to a Change in Control
but which the Employee reasonably demonstrates (i) was
at the request of a third party who has indicated an
intention or taken steps reasonably calculated to
effect a Change in Control or (ii) otherwise arose in
connection with, or in anticipation of a Change in
Control which has been threatened or proposed and which
actually occurs, or (2) for any reason within the two
(2) year period following a Change in Control;
provided, however, that such election shall be
effective only if it is made either (I) at least
twenty-four (24) months prior to such termination of
the Employee's employment, or (II) if such termination
of employment constitutes an "Involuntary Termination"
as defined below, at least one year prior to such
Change in Control. Any special election made hereunder
may be revoked, and a new special election may be made
at any time; provided, however, that any such
revocation or new election shall be effective only if
it is made within the election period specified in
clause (I) or (II) of the preceding sentence. Any
special election, or revocation of a special election,
that may be made hereunder shall be made in writing, on
a form furnished to the Employee for such purpose by
the Administrative Committee. The lump sum payment to
be made hereunder to an Employee shall be in an amount
that is Actuarially Equivalent (as defined in the
Pension Plan and determined as of the date of the
Employee's termination of employment) to the Excess
and/or Supplemental Benefit that otherwise would be
payable hereunder to the Employee if (x) payment of the
Employee's Excess and/or Supplemental Benefit and the
benefits payable to the Employee under the Pension Plan
were to commence on the Employee's Normal Retirement
Date (as defined in the Pension Plan) or, if earlier,
on the earliest date as of which the Employee could
elect to have payment of his or her benefits under the
Pension Plan commence, (y) the Employee's Excess and/or
Supplemental Benefit were payable in the form of a
single life annuity, and (z) the Employee's benefits
under the Pension Plan were payable either (1) in the
same form as Option 2 as described in Section 10.1 of
the Pension Plan with the Employee's spouse as the
beneficiary thereunder, if the Employee is married on
the date of his or her termination of employment, or
(2) in the form of a single life annuity, if the
Employee is not married on such date. The lump sum
payment to be made hereunder to the surviving spouse of
an Employee shall be in an amount that is Actuarially
Equivalent (as defined in the Pension Plan and
determined as of the date of the Employee's death) to
the Excess and/or Supplemental Benefit that otherwise
would be payable hereunder to such spouse by reason of <PAGE>
the Employee's death. The lump sum payment to be made
hereunder with respect to any Employee shall be made by
no later than 30 days following the date of the
Employee's termination of employment.
For purposes of this Section 3.2(h), an
"Involuntary Termination" shall mean the termination of
an Employee's employment (A) as a result of the
Employee's death, (B) by the Company, for any reason,
or (C) by the Employee, for "Good Reason" as defined
below.
For purposes of the paragraph above, "Good Reason"
shall mean the occurrence after a Change in Control of
any of the following events or conditions:
(A) a change in the Employee's status,
title, position or responsibilities (including
reporting responsibilities) which, in the
Employee's reasonable judgement, represents an
adverse change from his or her status, title,
position or responsibilities as in effect
immediately prior thereto; the assignment to the
Employee of any duties or responsibilities which,
in the Employee's reasonable judgement, are
inconsistent with his or her status, title,
position or responsibilities; or any removal of
the Employee from or failure to reappoint or
reelect him or her to any of such offices or
positions, other than in connection with the
termination of his or her employment for
disability, for cause, or by the Employee other
than for Good Reason;
(B) a reduction in the Employee's annual
base salary below the rate of the Employee's
annual base salary in effect as of the date of the
Change in Control or, if greater, at any time
thereafter, determined without regard to any
salary reduction or deferred compensation
elections made by the Employee;
(C) the relocation of the offices of the
Company at which the Employee is principally
employed to a location more than twenty-five (25)
miles from the location of such offices
immediately prior to the Change in Control, or the
Company's requiring the Employee to be based
anywhere other than such offices, except to the
extent the Employee was not previously assigned to
a principal location and except for required
travel on the Company's business to an extent
substantially consistent with the Employee's
business travel obligations at the time of the
Change in Control;<PAGE>
(D) the failure by the Company to pay to the
Employee any amount of the Employee's current
compensation, or any amount payable under any
deferred compensation program of the Company in
which the Employee participated, within seven (7)
days of the date on which payment of such amount
is due; or
(E) the failure by the Company to (1)
continue in effect (without reduction in benefit
level, and/or reward opportunities) any material
compensation or employee benefit plan in which the
Employee was participating immediately prior to
the Change in Control unless a substitute or
replacement plan has been implemented which
provides substantially identical compensation or
benefits to the Employee or (2) provide the
Employee with compensation and benefits, in the
aggregate, at least equal (in terms of benefit
levels and/or reward opportunities) to those
provided for under all other compensation or
employee benefit plans, programs and practices in
which the Employee was participating immediately
prior to the Change in Control.
Any event or condition described in
subparagraph (A) through (E) above which occurs (1) within
six (6) months prior to a Change in Control or (2) prior to
a Change in Control but which (x) was at the request of a
third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control, or (y) otherwise arose in
connection with, or in anticipation of, a Change in Control
which has been threatened or proposed and which actually
occurs, shall constitute Good Reason for purposes of this
Section 3.2(h) notwithstanding that it occurred prior to a
Change in Control.
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.<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 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.
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 <PAGE>
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) no
amendment to Section 3.2(h), Section 4.2 or to this Section
5.3, nor any termination of the Plan, effectuated (i) at the
request of a third party who has indicated an intention or
taken steps to effect a Change in Control and who
effectuates a Change in Control, (ii) within six (6) months
prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been
threatened or proposed and which actually occurs, or (iii)
following a Change in Control, shall be effective if the
amendment or termination adversely affects the rights of any
Employee under the Plan.<PAGE>
Exhibit 10-N
Mr. J. R. Leva
Page 1
November 1, 1996
November 1, 1996
CONFIDENTIAL
Mr. J.R. Leva
2 Ryan Court
Chester, New Jersey 07930
Dear Jim:
The purpose of this letter is to amend and restate the
letter agreement dated February 22, 1993 between you and Jersey
Central Power & Light Company ("Jersey Central") (the "Prior
Agreement") which set forth the terms of the supplemental pension
arrangement authorized by Jersey Central's Board of Directors on
October 23, 1989. Upon your agreement to this amendment and
restatement as provided on the last page of this letter agreement
(the "Agreement"), the Prior Agreement shall be superseded and
replaced in its entirety by the terms and conditions set forth
below.
1. Upon your retirement from the GPU System, you will
receive a supplemental pension from Jersey Central, in the amount
of $345 per month, commencing on the first day of the month
following the month in which you so retire, subject to applicable
tax and benefit deductions consistent with the then existing
pension formula. The supplemental 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 supplemental pension is to commence, in which event it shall
be paid in the form described as Option 2 in Section 10.1 of the
GPU Service, Inc. Employee Pension Plan, with your spouse as your
beneficiary. This supplemental pension benefit is in addition to
the benefits otherwise payable to you under applicable GPU System
Companies' retirement plans ("GPUS's Retirement Plans").
2. If you should die before you start to receive the
supplemental pension payable to you hereunder, your surviving
spouse, if any, will receive, for the rest of her life, 100% of
the supplemental pension which would have been payable to you in
accordance with this letter agreement, had you retired 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. J. R. Leva
Page 2
November 1, 1996
3. Notwithstanding any other provision of this Agreement or
GPUS's Retirement Plans to the contrary, or any other form of
distribution provided for or optional form of distribution
otherwise elected under this Agreement or GPUS's Retirement
Plans, you shall be permitted to make a special distribution
election to have the supplemental pension payable to you
hereunder, or the survivors annuity payable hereunder to your
surviving spouse, distributed in the form of a single lump sum
payment in the event of your termination of employment within the
GPU System (a) by any GPU System Company (1) within six (6)
months prior to a Change in Control (as defined in Appendix A
hereto) or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of, a Change in Control
which has been threatened or proposed and which actually occurs,
or (b) for any reason within the two (2) year period following
the occurrence of a Change in Control; provided, however, that
such election shall be effective only if it is made either (y) at
least twenty-four (24) months prior to such termination of your
employment, or (z) if such termination of your employment is the
result of an "Involuntary Termination" (as defined in Appendix A
hereto) at least one year prior to such Change in Control. Any
special election made hereunder may be revoked, and a new special
election may be made, at any time; provided, however, that any
such revocation or new election shall be effective only if it is
made within the election period specified in clause (y) or (z) of
the preceding sentence. Any special election, or revocation of a
special election, that may be made hereunder shall be made in
writing, on a form furnished to you for such purpose by the
Administrative Committee of the GPU Service, Inc. Employee
Pension Plan. The lump sum payment to be made to you hereunder
shall be in an amount that is "Actuarially Equivalent" (as
defined below) to the supplemental pension that otherwise would
be payable to you hereunder if payment of your supplemental
pension and the pension payable to you under GPUS's Retirement
Plans (i) were to commence on your retirement date, and (ii) were
to be made in the form of a single life annuity. The lump sum
payment to be made hereunder to your surviving spouse shall be in
an amount that is Actuarially Equivalent (as defined below) to
the survivor's annuity that otherwise would be payable to such
spouse pursuant to Section 2 hereof. The lump sum payment to be
made hereunder to you or your surviving spouse shall be made by
no later than 30 days following the date of your termination of
employment. <PAGE>
Mr. J. R. Leva
Page 3
November 1, 1996
For purposes of this Section 3, "Actuarially Equivalent"
shall mean, with respect to any distribution or payment, an
actuarially equivalent amount, calculated by using the annual
interest rate on 30-year Treasury securities for the second month
preceding the calendar year in which such distribution is made or
commences, and the mortality table prescribed for purposes of
section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code of 1986,
as amended (the "Code"). Such annual interest rate and mortality
table shall be as specified or prescribed by the Commissioner of
the Internal Revenue Service for purposes of Section
417(e)(3)(A)(ii) of the Code in revenue rulings, notices or other
guidance.
4. With respect to your right to receive the supplemental
pension amount set forth above, you shall have the status of a
mere unsecured creditor of Jersey Central, and this letter
agreement shall constitute a mere promise by Jersey Central to
make payments of such supplemental pension payment amount in the
future in accordance with the terms hereof.
5. It is the intention of the parties hereto that the
arrangements set forth in this letter regarding the above pension
amount shall be treated as unfunded for tax purposes and, if it
should be determined that Title I of ERISA is applicable to such
arrangement, for purposes of Title I of ERISA.
6. Your rights to receive the payment promised hereunder
shall not be subject in any manner to anticipation, alienation 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 Jersey Central, will you please so
indicate on the enclosed duplicate copies of this letter which
will then constitute a binding agreement between Jersey Central
and you.
JERSEY CENTRAL POWER & LIGHT COMPANY
By: _____________________________
D. Baldassari, President
The foregoing correctly reflects
my understanding and is agreed to
by me.
_____________________________
J.R. Leva<PAGE>
Mr. J. R. Leva
Page 1
November 1, 1996
APPENDIX A
"Change in Control" shall mean:
(1) An acquisition (other than directly from GPU, Inc.
("GPU")) of any common stock of GPU ("Common Stock") or other
voting securities of GPU entitled to vote generally for the
election of directors (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or
more of the then outstanding shares of common stock or the
combined voting power of GPU's then outstanding Voting
Securities; provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control.
A "Non-Control Acquisition" shall mean an acquisition by (A) an
employee benefit plan (or a trust forming a part thereof)
maintained by (i) GPU or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly,
by GPU (for purposes of this definition, a "Subsidiary"), (B) GPU
or its Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board of Directors of GPU (the "Incumbent Board"),
cease for any reason to constitute at least seventy percent (70%)
of the members of the Board of Directors of GPU (the "Board");
provided, however, that if the election, or nomination for
election by GPU's shareholders, of any new director was approved
by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either
an actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving GPU, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation
or reorganization of GPU where:<PAGE>
Mr. J. R. Leva
Page 2
November 1,1 996
(i) the shareholders of GPU, immediately
before such merger, consolidation or reorganization,
own directly or indirectly immediately following
such merger, consolidation or reorganization, at
least sixty percent (60%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion
as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution
of the agreement providing for such merger,
consolidation or reorganization constitute at least
seventy percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
corporation, directly or indirectly, beneficially
owning a majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w) GPU, (x) any
Subsidiary, (y) any employee benefit plan (or any
trust forming a part thereof) that, immediately
prior to such merger, consolidation or
reorganization, was maintained by GPU or any
Subsidiary, or (z) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more
of the then outstanding Voting Securities or common
stock of GPU, has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power
of the Surviving Corporation's then outstanding
voting securities or its common stock.
(B) A complete liquidation or dissolution of GPU;
or
(C) The sale or other disposition of all or
substantially all of the assets of GPU to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting <PAGE>
Mr. J. R. Leva
Page 3
November 1,1996
Securities by GPU which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by
GPU, and after such share acquisition by GPU, the Subject Person
becomes the Beneficial Owner of any additional shares of Common
Stock or Voting Securities which increases the percentage of the
then outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
"Involuntary Termination" shall mean the termination of
your employment within the GPU System (A) as a result of your
death, (B) by GPU or GPU Service, Inc., for any reason, or (C) by
you, for "Good Reason."
"Good Reason" shall mean the occurrence after a Change in
Control of any of the following events or conditions:
(1) a change in your status, title, position or
responsibilities (including reporting responsibilities) which, in
your reasonable judgment, represents an adverse change from your
status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are
inconsistent with your status, title, position or
responsibilities; or any removal of you from or failure to
reappoint or reelect you to any of such offices or positions,
except in connection with the termination of your employment for
disability, cause, as a result of your death or by you other than
for Good Reason;
(2) a reduction in your annual base salary;
(3) any change in location of your place of employment
to a location other than Parsippany, New Jersey without your
consent,
(4) the failure by GPU to pay to you any portion of your
current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of GPU in which you participated, within
seven (7) days of the date such compensation is due;
(5) the failure by GPU to (A) continue in effect
(without reduction in benefit level, and/or reward opportunities)
any material compensation or employee benefit plan in which you <PAGE>
Mr. J. R. Leva
Page 4
November 1, 1996
were participating immediately prior to the Change in Control,
unless a substitute or replacement plan has been implemented
which provides substantially identical compensation or benefits
to you or (B) provide you with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other
compensation or employee benefit plan, program and practice in
which you were participating immediately prior to the Change in
Control;
(6) the failure of GPU to obtain a satisfactory
agreement from any successors or assigns to assume and agree to
honor and perform GPU's obligations under this Agreement; or
Any event or condition described in clauses (1) through
(6) which occurs (1) within six (6) months prior to a Change in
Control or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of a Change in Control
which has been threatened or proposed, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred prior to a Change in Control.<PAGE>
Mr. James R. Leva
Page 1
November 1, 1996
November 1, 1996
Mr. James R. Leva
2 Ryan Court
Chester, New Jersey 07930
Dear Jim:
The purpose of this letter is to amend and restate the letter
agreement dated November 22, 1995 between you and GPU, Inc.
("GPU") (the "Prior Agreement") which set forth the terms and
conditions of the supplemental pension that GPU has agreed to
provide to you upon your retirement. Upon your agreement to this
amendment and restatement as provided on the last page of this
letter agreement (the "Agreement"), the Prior Agreement shall be
superseded and replaced in its entirety by the terms and
conditions set forth below.
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 amended and restated
letter agreement (the "JCP&L Letter Agreement") between you and
Jersey Central Power & Light Company dated August 1, 1996
(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,
Inc. (the "ICP") that are attributable to such 36-month period.<PAGE>
Mr. James R. Leva
Page 2
November 1, 1996
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 GPU, Inc. 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, Inc.
Flexible Benefit Plan.
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 twelve (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
payable 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
additional amount shall not be taken into account in determining
the amount of the Survivor's Annuity payable pursuant to Section
5 hereof.<PAGE>
Mr. James R. Leva
Page 3
November 1, 1996
8. Notwithstanding any other provision of this Agreement or
the Retirement Plans to the contrary, or any other form of
distribution provided for or optional form of distribution
otherwise elected under this Agreement or the Retirement Plans,
you shall be permitted to make a special distribution election to
have the Supplemental Pension payable to you hereunder, or the
Survivors Annuity payable hereunder to your surviving spouse,
distributed in the form of a single lump sum payment in the event
of your termination of employment within the GPU System (a) by
any GPU System Company (1) within six (6) months prior to a
Change in Control (as defined in Appendix A hereto) or (2) prior
to a Change in Control but which you reasonably demonstrate (A)
was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect a Change
in Control or (B) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or
proposed and which actually occurs, or (b) for any reason within
the two (2) year period following the occurrence of a Change in
Control; provided, however, that such election shall be effective
only if it is made either (y) at least twenty-four (24) months
prior to such termination of your employment, or (z) if such
termination of your employment is the result of an "Involuntary
Termination" (as defined in Appendix A hereto) at least one year
prior to such Change in Control. Any special election made
hereunder may be revoked, and a new special election may be made,
at any time; provided, however, that any such revocation or new
election shall be effective only if it is made within the
election period specified in clause (y) or (z) of the preceding
sentence. Any special election, or revocation of a special
election, that may be made hereunder shall be made in writing, on
a form furnished to you for such purpose by the Administrative
Committee of the EPP. The lump sum payment to be made to you
hereunder shall be in an amount that is "Actuarially Equivalent"
(as defined below) to the Supplemental Pension that otherwise
would be payable to you hereunder if payment of your Supplemental
Pension and the pension payable to you under the Retirement Plans
(i) were to commence on your Retirement Date, and (ii) were to be
made in the form of a single life annuity. The lump sum payment
to be made hereunder to your surviving spouse shall be in an
amount that is Actuarially Equivalent (as defined below) to the
Survivor's Annuity that otherwise would be payable to such spouse
pursuant to Section 4 hereof. The lump sum payment to be made
hereunder to you or your surviving spouse shall be made by no
later than 30 days following the date of your termination of
employment.
For purposes of this Section 8, "Actuarially Equivalent" shall
mean, with respect to any distribution or payment, an actuarially
equivalent amount, calculated by using the annual interest rate
on 30-year Treasury securities for the second month preceding the
calendar year in which such distribution is made or commences,
and the mortality table prescribed for purposes of section
417(e)(3)(A)(ii)(I) of the Internal Revenue Code of 1986, as
amended (the "Code"). Such annual interest rate and mortality <PAGE>
Mr. James R. Leva
Page 4
November 1, 1996
table shall be as specified or prescribed by the Commissioner of
the Internal Revenue Service for purposes of Section
417(e)(3)(A)(ii) of the Code in revenue rulings, notices or other
guidance.
9. 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.
10. 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.
GPU, INC.
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>
Mr. James R. Leva
Page 1
November 1, 1996
APPENDIX A
"Change in Control" shall mean:
(1) An acquisition (other than directly from GPU) of any
common stock of GPU ("Common Stock") or other voting securities
of GPU entitled to vote generally for the election of directors
(the "Voting Securities") by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of the then outstanding
shares of common stock or the combined voting power of GPU's then
outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting Securities which
are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a
part thereof) maintained by (i) GPU or (ii) any corporation or
other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or
indirectly, by GPU (for purposes of this definition, a
"Subsidiary"), (B) GPU or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board of Directors of GPU (the "Incumbent Board"),
cease for any reason to constitute at least seventy percent (70%)
of the members of the Board of Directors of GPU (the "Board");
provided, however, that if the election, or nomination for
election by GPU's shareholders, of any new director was approved
by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided further, however, that
no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either
an actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving GPU, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-
Control Transaction" shall mean a merger, consolidation
or reorganization of GPU where:<PAGE>
Mr. J. R. Leva
Page 2
November 1, 1996
(i) the shareholders of GPU,
immediately before such merger, consolidation
or reorganization, own directly or indirectly
immediately following such merger,
consolidation or reorganization, at least sixty
percent (60%) of the combined voting power of
the outstanding voting securities of the
corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members
of the Incumbent Board immediately prior to the
execution of the agreement providing for such
merger, consolidation or reorganization
constitute at least seventy percent (70%) of
the members of the board of directors of the
Surviving Corporation, or a corporation,
directly or indirectly, beneficially owning a
majority of the Voting Securities of the
Surviving Corporation, and
(iii) no Person other than (w) GPU,
(x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof)
that, immediately prior to such merger,
consolidation or reorganization, was maintained
by GPU or any Subsidiary, or (z) any Person
who, immediately prior to such merger,
consolidation or reorganization had Beneficial
Ownership of twenty percent (20%) or more of
the then outstanding Voting Securities or
common stock of GPU, has Beneficial Ownership
of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's
then outstanding voting securities or its
common stock.
(B) A complete liquidation or dissolution of
GPU; or
(C) The sale or other disposition of all or
substantially all of the assets of GPU to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by GPU which, by reducing the number of shares of <PAGE>
Mr. J. R. Leva
Page 3
November 1, 1996
Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by
GPU, and after such share acquisition by GPU, the Subject Person
becomes the Beneficial Owner of any additional shares of Common
Stock or Voting Securities which increases the percentage of the
then outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
"Involuntary Termination" shall mean the termination of your
employment within the GPU System (A) as a result of your death,
(B) by GPU or GPU Service, Inc., for any reason, or (C) by you,
for "Good Reason."
"Good Reason" shall mean the occurrence after a Change in
Control of any of the following events or conditions:
(1) a change in your status, title, position or
responsibilities (including reporting responsibilities) which, in
your reasonable judgment, represents an adverse change from your
status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are
inconsistent with your status, title, position or
responsibilities; or any removal of you from or failure to
reappoint or reelect you to any of such offices or positions,
except in connection with the termination of your employment for
disability, cause, as a result of your death or by you other than
for Good Reason;
(2) a reduction in your annual base salary;
(3) any change in location of your place of employment
to a location other than Parsippany, New Jersey without your
consent,
(4) the failure by GPU to pay to you any portion of your
current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of GPU in which you participated, within
seven (7) days of the date such compensation is due;
(5) the failure by GPU to (A) continue in effect
(without reduction in benefit level, and/or reward opportunities)
any material compensation or employee benefit plan in which you
were participating immediately prior to the Change in Control,
unless a substitute or replacement plan has been implemented
which provides substantially identical compensation or benefits
to you or (B) provide you with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other <PAGE>
Mr. J. R. Leva
Page 4
November 1, 1996
compensation or employee benefit plan, program and practice in
which you were participating immediately prior to the Change in
Control;
(6) the failure of GPU to obtain a satisfactory
agreement from any successors or assigns to assume and agree to
honor and perform GPU's obligations under this Agreement; or
Any event or condition described in clauses (1) through (6)
which occurs (1) within six (6) months prior to a Change in
Control or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of a Change in Control
which has been threatened or proposed, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred prior to a Change in Control.<PAGE>
Exhibit 10-O
Mr. Ira H. Jolles
November 1, 1996
Page 1
November 1, 1996
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 18, 1995 between you, GPU, Inc.
(GPU) and GPU Service, Inc. (GPUS). That letter (the "Prior
Agreement") amended and restated a letter agreement dated
September 8, 1994 between you, GPU and GPUS that in turn amended
and restated a letter agreement dated March 24, 1992 between you,
GPU and GPUS that in turn amended and restated a letter agreement
dated December 13, 1989 between you, GPU and GPUS 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 GPUS, as well as the
agreement between you, GPU and GPUS 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 GPUS.
Your compensation and other benefits from the GPU System
will be paid to you by GPUS. You will not receive separate or
additional compensation for serving as a director or officer of
GPU or any GPU System company other than GPUS. Payment of your
compensation and the other benefits payable to you pursuant to
this Agreement shall be obligations of both GPU and GPUS. Your
other unfunded employee benefits payable by GPUS will be
guaranteed by GPU to the extent covered under the latter's
guarantee of unfunded benefits for all GPUS 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.<PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 2
Section 3. Retirement Provisions.
(a) You will be a participant in the GPUS Employee Pension
Plan and the GPUS 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.
(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) GPUS 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 two (2) years following the
occurrence of a "Change in Control" (as defined in Appendix A
hereto), or (ii) by GPU or GPUS without "Cause" (as defined in
Appendix A hereto), 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 twenty (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) a termination by you (x) for "Good Reason" <PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 3
(as defined in Appendix A hereto) or (y) as the result of any
other material adverse change in the conditions of your
employment within the GPU System. If the termination of your
employment by GPU is (1) within six (6) months prior to a Change
in Control or (2) prior to the date of a Change in Control but
you reasonably demonstrate that the termination (A) was at the
request of a third party who has indicated an intention or taken
steps reasonably calculated to effect a Change in Control or (B)
otherwise arose in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed and which
actually occurs, such termination shall be deemed to have
occurred after a Change in Control.
(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 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 <PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 4
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 GPUS 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.
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 <PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 5
Retirement Plans and Section 3 hereof, determined for this
purpose without taking into account (x) any Additional Pension
amount payable to you under the GPUS 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.
(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. Special Distribution of Benefits.
Notwithstanding any other provision of this Agreement or the
Retirement Plans to the contrary, or any other form of
distribution provided for or optional form of distribution
otherwise elected under this Agreement or the Retirement Plans,
you shall be permitted to make a special distribution election to
have the additional retirement pension payable pursuant to
Section 3 hereof and the supplemental pension payable pursuant to
Section 4 hereof distributed in the form of a single lump sum
payment in the event of your termination of employment within the<PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 6
GPU System (a) by any GPU System company (1) within six (6)
months prior to a Change in Control or (2) prior to a Change in
Control but which you reasonably demonstrate (A) was at the
request of a third party who has indicated an intention or taken
steps reasonably calculated to effect a Change in Control or (B)
otherwise arose in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed and which
actually occurs, or (b) for any reason within the two (2) year
period following the occurrence of a Change in Control; provided,
however, that such election shall be effective only if it is made
either (y) at least twenty-four (24) months prior to such
termination of your employment, or (z) if such termination of
your employment is due to your death or is the result of an
Involuntary Termination as defined in Section 3(d) hereof, at
least one year prior to such Change in Control. Any special
election made hereunder may be revoked, and a new special
election may be made, at any time; provided, however, that any
such revocation or new election shall be effective only if it is
made within the election period specified in clause (y) or (z) of
the preceding sentence. Any special election, or revocation of a
special election, that may be made hereunder shall be made in
writing, on a form furnished to you for such purposes by the
Administrative Committee of the GPUS Employee Pension Plan. The
lump sum payment to be made to you hereunder shall be in an
amount that is "Actuarially Equivalent" (as defined below) to the
additional retirement pension and supplemental pension that
otherwise would be payable to you hereunder if payment of your
additional retirement pension and supplemental pension and the
pension payable to you under the Retirement Plans (i) were to
commence on your Normal Retirement Date or, if earlier, on the
earliest date as of which you could elect to have payment of your
pension under the Retirement Plans commence and (ii) were to be
made in the form of a single life annuity. The lump sum payment
to be made hereunder to your surviving spouse shall be in an
amount that is "Actuarially Equivalent" (as defined below) to the
pension and the annuity that otherwise would be payable to such
spouse pursuant to Section 3(g) and Section 4(c) hereof. The
lump sum payment to be made hereunder to you or your surviving
spouse shall be made by no later than 30 days following the date
of your termination of employment.
For purposes of this Section 5, "Actuarially Equivalent"
shall mean, with respect to any distribution or payment, an
actuarially equivalent amount, calculated by using the annual
interest rate on 30-year Treasury securities for the second month
preceding the calendar year in which such distribution is made or
commences, and the mortality table prescribed for purposes of
section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code of 1986,
as amended (the "Code"). Such annual interest rate and mortality<PAGE>
Mr. Ira H. Jolles
November 1, 1996
Page 7
table shall be as specified or prescribed by the Commissioner of
the Internal Revenue Service for purposes of Section
417(e)(3)(A)(ii) of the Code in revenue rulings, notices or other
guidance.
Section 6. 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 7. 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 GPUS and
GPU; and this letter agreement shall constitute a mere promise by
GPUS and GPU to make payments in the future of such pensions in
accordance with the provisions of Sections 3, 4 and 5. It is the
intention of the parties hereto that the arrangements set forth
in Sections 3, 4 and 5 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
November 1, 1996
Page 8
Section 8. 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 GPUS, will you please so
indicate on the enclosed duplicate copy of this letter which will
then constitute a binding agreement between GPU and GPUS, on the
one hand, and you, on the other.
GPU, INC.
By: _____________________________
James R. Leva, Chairman and
Chief Executive Officer
GPU SERVICE, INC.
By: ____________________________
James R. Leva, Chairman and
Chief Executive Officer
The foregoing is agreed to by me as
of the date of this letter.
_________________________________
Ira H. Jolles<PAGE>
APPENDIX A
Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if you have been convicted of a felony
or the termination is evidenced by a resolution adopted in good
faith by two-thirds of the GPU Board of Directors (the "Board")
that you:
(a) intentionally and continually failed substantially to
perform your reasonably assigned duties with GPU or GPUS (other
than a failure resulting from your incapacity due to physical or
mental illness or from your assignment of duties that would
constitute "Good Reason" as hereinafter defined) which failure
continued for a period of at least thirty (30) days after a
written notice of demand for substantial performance, signed by a
duly authorized officer of GPU, has been delivered to you
specifying the manner in which you have failed substantially to
perform, or
(b) intentionally engaged in conduct which is demonstrably
and materially injurious to GPU; provided, however, that no
termination of your employment shall be for Cause as set forth in
this clause (b) until (1) there shall have been delivered to you
a copy of a written notice, signed by a duly authorized officer
of GPU, setting forth that you were guilty of the conduct set
forth in this clause (b) and specifying the particulars thereof
in detail, and (2) you shall have been provided an opportunity to
be heard in person by the Board (with the assistance of your
counsel if you so desire).
No act, nor failure to act, on your part, shall be
considered "intentional" unless you have acted, or failed to act,
with a lack of good faith and with a lack of reasonable belief
that your action or failure to act was in the best interest of
GPU. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by you after a written notice of
termination is given by you shall constitute Cause for purposes
of this Agreement.
Change in Control. "Change in Control" shall mean:
(1) An acquisition (other than directly from GPU) of
any common stock of GPU ("Common Stock") or other voting
securities of GPU entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of the then
outstanding shares of Common Stock or the combined voting power
of GPU's then outstanding Voting Securities; provided, however,
in determining whether a Change in Control has occurred, Voting
1<PAGE>
Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (i) GPU or (ii) any
corporation or other Person of which a majority of its voting
power or its voting equity securities or equity interest is
owned, directly or indirectly, by GPU (for purposes of this
definition, a "Subsidiary"), (B) GPU or its Subsidiaries, or (C)
any Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least seventy percent (70%) of the
members of the Board; provided, however, that if the election, or
nomination for election by GPU's shareholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered
a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving GPU, unless
such merger, consolidation or
reorganization is a "Non-Control
Transaction." A "Non-Control
Transaction" shall mean a merger,
consolidation or reorganization of GPU
where:
(i) the shareholders of
GPU, immediately before such
merger, consolidation or
reorganization, own directly
or indirectly immediately
following such merger,
consolidation or
reorganization, at least sixty
percent (60%) of the combined
voting power of the
outstanding voting securities
2<PAGE>
of the corporation resulting
from such merger or
consolidation or
reorganization (the "Surviving
Corporation") in substantially
the same proportion as their
ownership of the Voting
Securities immediately before
such merger, consolidation or
reorganization,
(ii) the individuals who were
members of the Incumbent Board
immediately prior to the
execution of the agreement
providing for such merger,
consolidation or
reorganization constitute at
least seventy percent (70%) of
the members of the board of
directors of the Surviving
Corporation, or a corporation,
directly or indirectly,
beneficially owning a majority
of the Voting Securities of
the Surviving Corporation, and
(iii) no Person other than (w)
GPU, (x) any Subsidiary, (y)
any employee benefit plan (or
any trust forming a part
thereof) that, immediately
prior to such merger,
consolidation or
reorganization, was maintained
by GPU or any Subsidiary, or
(z) any Person who,
immediately prior to such
merger, consolidation or
reorganization had Beneficial
Ownership of twenty percent
(20%) or more of the then
outstanding Voting Securities
or common stock of GPU, has
Beneficial Ownership of twenty
percent (20%) or more of the
combined voting power of the
Surviving Corporation's then
outstanding voting securities
or its common stock.
(B) A complete liquidation or
dissolution of GPU; or
3<PAGE>
(C) The sale or other disposition of
all or substantially all of the assets
of GPU to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or
Voting Securities by GPU which, by reducing the number of shares
of Common Stock or Voting Securities then outstanding, increases
the proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would occur
(but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by
GPU, and after such share acquisition by GPU, the Subject Person
becomes the Beneficial Owner of any additional shares of Common
Stock or Voting Securities which increases the percentage of the
then outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
Good Reason. (a) For purposes of this Agreement, "Good
Reason" shall mean the occurrence after a Change in Control of
any of the following events or conditions:
(1) a change in your status, title, position or
responsibilities (including reporting responsibilities) which, in
your reasonable judgment, represents an adverse change from your
status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are
inconsistent with your status, title, position or
responsibilities; or any removal of you from or failure to
reappoint or reelect you to any of such offices or positions,
except in connection with the termination of your employment for
disability, Cause, as a result of your death or by you other than
for Good Reason;
(2) a reduction in your annual base salary;
(3) any change in location of your place of employment
to a location other than Parsippany, New Jersey without your
consent,
(4) the failure by GPU to pay to you any portion of
your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of GPU in which you participated, within
seven (7) days of the date such compensation is due;
(5) the failure by GPU to (A) continue in effect
(without reduction in benefit level, and/or reward opportunities)
any material compensation or employee benefit plan in which you
4<PAGE>
were participating immediately prior to the Change in Control,
unless a substitute or replacement plan has been implemented
which provides substantially identical compensation or benefits
to you or (B) provide you with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other
compensation or employee benefit plan, program and practice in
which you were participating immediately prior to the Change in
Control;
(6) the failure of GPU to obtain a satisfactory
agreement from any successors or assigns to assume and agree to
honor and perform GPU's obligations under this Agreement; or
(b) Any event or condition described in clauses (1) through
(6) which occurs (1) within six (6) months prior to a Change in
Control or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control (a "Third Party") or (B)
otherwise arose in connection with, or in anticipation of a
Change in Control which has been threatened or proposed, shall
constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred prior to a Change in Control.
5<PAGE>
Exhibit 10-P
John G. Graham
November 1, 1996
Page 1
November 1, 1996
John G. Graham
21 Candace Lane
Chatham Township, New Jersey 07928
Dear John:
The purpose of this letter is to amend and restate the
letter agreement dated November 22, 1995 between you and GPU
Service, Inc. ("GPUS") (the "Prior Agreement") which set forth
the terms and conditions of the supplemental pension that GPUS
has agreed to provide to you upon your retirement. Upon your
agreement to this amendment and restatement as provided on the
last page of this letter agreement (the "Agreement"), the Prior
Agreement shall be superseded and replaced in its entirety by the
terms and conditions set forth below.
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 GPUS a supplemental pension (your "Supplemental
Pension"), which shall be in addition to the pension payable to
you under GPUS's Employee Pension Plan and GPUS's Supplemental
and Excess Benefits Plan (together, "GPUS'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 GPUS's
Retirement Plans, determined for this purpose without taking into
account (i) any Additional Pension amount payable to you under
GPUS's Employee Pension Plan and (ii) the 20% increase in the
pension amounts payable to you under GPUS'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 GPUS'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.<PAGE>
John G. Graham
November 1, 1996
Page 2
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 GPUS'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 GPUS 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.
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 GPUS'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. Notwithstanding any other provision of this Agreement
or GPUS's Retirement Plans to the contrary, or any other form of
distribution provided for or optional form of distribution <PAGE>
John G. Graham
November 1, 1996
Page 3
otherwise elected under this Agreement or GPUS's Retirement
Plans, you shall be permitted to make a special distribution
election to have the Supplemental Pension payable to you
hereunder, or the Survivors Annuity payable hereunder to your
surviving spouse, distributed in the form of a single lump sum
payment in the event of your termination of employment within the
GPU System (a) by any GPU System Company (1) within six (6)
months prior to a Change in Control (as defined in Appendix A
hereto) or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of, a Change in Control
which has been threatened or proposed and which actually occurs,
or (b) for any reason within the two (2) year period following
the occurrence of a Change in Control; provided, however, that
such election shall be effective only if it is made either (y) at
least twenty-four (24) months prior to such termination of your
employment, or (z) if such termination of your employment is the
result of an "Involuntary Termination" (as defined in Appendix A
hereto) at least one year prior to such Change in Control. Any
special election made hereunder may be revoked, and a new special
election may be made, at any time; provided, however, that any
such revocation or new election shall be effective only if it is
made within the election period specified in clause (y) or (z) of
the preceding sentence. Any special election, or revocation of a
special election, that may be made hereunder shall be made in
writing, on a form furnished to you for such purpose by the
Administrative Committee of GPUS's Employee Pension Plan. The
lump sum payment to be made to you hereunder shall be in an
amount that is "Actuarially Equivalent" (as defined below) to the
Supplemental Pension that otherwise would be payable to you
hereunder if payment of your Supplemental Pension and the pension
payable to you under GPUS's Retirement Plans (i) were to commence
on your Retirement Date, and (ii) were to be made in the form of
a single life annuity. The lump sum payment to be made hereunder
to your surviving spouse shall be in an amount that is
Actuarially Equivalent (as defined below) to the Survivor's
Annuity that otherwise would be payable to such spouse pursuant
to Section 4 hereof. The lump sum payment to be made hereunder
to you or your surviving spouse shall be made by no later than
30 days following the date of your termination of employment.
For purposes of this Section 8, "Actuarially Equivalent"
shall mean, with respect to any distribution or payment, an
actuarially equivalent amount, calculated by using the annual
interest rate on 30-year Treasury securities for the second month
preceding the calendar year in which such distribution is made or
commences, and the mortality table prescribed for purposes of
section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code of 1986,
as amended (the "Code"). Such annual interest rate and mortality<PAGE>
John G. Graham
November 1, 1996
Page 4
table shall be as specified or prescribed by the Commissioner of
the Internal Revenue Service for purposes of Section
417(e)(3)(A)(ii) of the Code in revenue rulings, notices or other
guidance.
9. You and your surviving spouse shall have the status of
a mere unsecured creditor of GPUS with respect to your, and her,
right to receive any payment under this Agreement. This
Agreement shall constitute a mere promise by GPUS 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.
10. 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 GPUS 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 GPUS on the one hand, and you, on the other.
GPU SERVICE , INC.
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>
John G. Graham
November 1, 1996
Page 1
APPENDIX A
"Change in Control" shall mean:
(1) An acquisition (other than directly from GPU,
Inc. ("GPU")) of any common stock of GPU ("Common Stock") or
other voting securities of GPU entitled to vote generally for the
election of directors (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or
more of the then outstanding shares of common stock or the
combined voting power of GPU's then outstanding Voting
Securities; provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control.
A "Non-Control Acquisition" shall mean an acquisition by (A) an
employee benefit plan (or a trust forming a part thereof)
maintained by (i) GPU or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly,
by GPU (for purposes of this definition, a "Subsidiary"), (B) GPU
or its Subsidiaries, or (C) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996,
are members of the Board of Directors of GPU (the "Incumbent
Board"), cease for any reason to constitute at least seventy
percent (70%) of the members of the Board of Directors of GPU
(the "Board"); provided, however, that if the election, or
nomination for election by GPU's shareholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered
a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest; or <PAGE>
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving GPU, unless such merger,
consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization of
GPU where:
(i) the shareholders of GPU,
immediately before such merger, consolidation
or reorganization, own directly or indirectly
immediately following such merger,
consolidation or reorganization, at least
sixty percent (60%) of the combined voting
power of the outstanding voting securities of
the corporation resulting from such merger or
consolidation or reorganization (the
"Surviving Corporation") in substantially the
same proportion as their ownership of the
Voting Securities immediately before such
merger, consolidation or reorganization,
(ii) the individuals who were
members of the Incumbent Board immediately
prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least seventy
percent (70%) of the members of the board of
directors of the Surviving Corporation, or a
corporation, directly or indirectly,
beneficially owning a majority of the Voting
Securities of the Surviving Corporation, and
(iii) no Person other than (w) GPU,
(x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof)
that, immediately prior to such merger,
consolidation or reorganization, was
maintained by GPU or any Subsidiary, or (z)
any Person who, immediately prior to such
merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%)
or more of the then outstanding Voting
Securities or common stock of GPU, has
Beneficial Ownership of twenty percent (20%)
or more of the combined voting power of the
Surviving Corporation's then outstanding
voting securities or its common stock.
(B) A complete liquidation or dissolution of
GPU; or
2<PAGE>
(C) The sale or other disposition of all or
substantially all of the assets of GPU to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by GPU which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by
GPU, and after such share acquisition by GPU, the Subject Person
becomes the Beneficial Owner of any additional shares of Common
Stock or Voting Securities which increases the percentage of the
then outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
"Involuntary Termination" shall mean the termination of your
employment within the GPU System (A) as a result of your death,
(B) by GPU or GPUS, for any reason, or (C) by you, for "Good
Reason."
"Good Reason" shall mean the occurrence after a Change in
Control of any of the following events or conditions:
(1) a change in your status, title, position or
responsibilities (including reporting responsibilities) which, in
your reasonable judgment, represents an adverse change from your
status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are
inconsistent with your status, title, position or
responsibilities; or any removal of you from or failure to
reappoint or reelect you to any of such offices or positions,
except in connection with the termination of your employment for
disability, Cause, as a result of your death or by you other than
for Good Reason;
(2) a reduction in your annual base salary;
(3) any change in location of your place of
employment to a location other than Parsippany, New Jersey
without your consent,
(4) the failure by GPU to pay to you any portion
of your current compensation or to pay to you any portion of an
installment of deferred compensation under any deferred
compensation program of GPU in which you participated, within
seven (7) days of the date such compensation is due;
3<PAGE>
(5) the failure by GPU to (A) continue in effect
(without reduction in benefit level, and/or reward opportunities)
any material compensation or employee benefit plan in which you
were participating immediately prior to the Change in Control,
unless a substitute or replacement plan has been implemented
which provides substantially identical compensation or benefits
to you or (B) provide you with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other
compensation or employee benefit plan, program and practice in
which you were participating immediately prior to the Change in
Control;
(6) the failure of GPU to obtain a satisfactory
agreement from any successors or assigns to assume and agree to
honor and perform GPU's obligations under this Agreement; or
Any event or condition described in clauses (1) through (6)
which occurs (1) within six (6) months prior to a Change in
Control or (2) prior to a Change in Control but which you
reasonably demonstrate (A) was at the request of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control or (B) otherwise arose
in connection with, or in anticipation of a Change in Control
which has been threatened or proposed, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred prior to a Change in Control.
4<PAGE>
Exhibit 10-Q
GPU, INC.RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
AS AMENDED AND RESTATED AS OF NOVEMBER 1, 1996<PAGE>
GPU, INC.
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
1. Purpose. The purpose of this restricted Stock Plan for
Outside Directors (the "Plan") is to enable GPU, Inc. ("GPU") to
attract and retain persons of outstanding competence to serve on
its Board of Directors by paying such persons a portion of their
compensation in GPU Common Stock ("Common Stock") pursuant to the
terms hereof.
2. Definitions.
(a) The term "Board of Directors" shall mean the board
of directors of GPU.
(b) The term "Change in Control" shall mean the
occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU)
of any Common Stock or other voting securities of GPU entitled to
vote generally for the election of directors (the "Voting
Securities") by any "Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), immediately after
which such Person has "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of the then outstanding shares of Common
Stock or the combined voting power of GPU's then outstanding
Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (A) an employee benefit plan (or a trust forming a part
thereof) maintained by (i) GPU or (ii) any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by GPU (for purposes of this definition, a
"Subsidiary"), (B) GPU or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
(2) The individuals who, as of August 1, 1996,
are members of the Board of Directors (the "Incumbent Board"),
cease for any reason to constitute at least seventy percent (70%)
of the members of the Board of Directors; provided, however, that
if the election, or nomination for election by GPU's
shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or <PAGE>
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or
reorganization involving GPU, unless such merger, consolidation
or reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or reorganization
of GPU where:
(i) the shareholders of GPU,
immediately before such merger, consolidation or reorganization,
own directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent (60%) of
the combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of the
members of the board of directors of the Surviving Corporation,
or a corporation, directly or indirectly, beneficially owning a
majority of the Voting Securities of the Surviving Corporation,
and
(iii) no Person other than (w) GPU, (x)
any Subsidiary, (y) any employee benefit plan (or any trust
forming a part thereof) that, immediately prior to such merger,
consolidation or reorganization, was maintained by GPU or any
Subsidiary, or (z) any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership
of twenty percent (20%) or more of the then outstanding Voting
Securities or Common Stock, has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities or its
common stock;
(B) A complete liquidation or dissolution of
GPU; or
(C) The sale or other disposition of all or
substantially all of the assets of GPU to any Person (other than
a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
2<PAGE>
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by GPU which, by reducing the number of shares of
Common Stock or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of
shares of Common Stock or Voting Securities by GPU, and after
such share acquisition by GPU, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or
Voting Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
(c) The term "Outside Director" or "Participant" means a
member of the Board of Directors who is not an employee (within
the meaning of the Employee Retirement Income Security Act of
1974) of GPU or any of its Subsidiaries. A director of GPU who
is also an employee of GPU or any of its Subsidiaries shall
become eligible to participate in this Plan and shall be entitled
to receive an award of restricted stock upon the termination of
such employment.
(d) The term "Subsidiary" means, for purposes other than
Section 2(b), any corporation 50% or more of the outstanding
Common Stock of which is owned, directly or indirectly, by GPU.
(e) The term "Service" shall mean service as an Outside
Director.
3. Eligibility. All Outside Directors of GPU shall receive
stock awards hereunder.
4. Stock Awards.
(a) A total of 33,000(1) shares of GPU Common Stock shall
be available for awards under the Plan. Such shares shall be
either previously unissued shares or reacquired shares. Any
restricted shares awarded under this Plan with respect to which
the restrictions do not lapse and which are forfeited as provided
herein shall again be available for other awards under the plan.
___________________________
(1) Initially, 20,000 shares were authorized to be issued under
the Plan. On May 29, 1991, GPU effected a two-for-one stock
split by way of a stock dividend, leaving 33,000 shares
available for issuance under the Plan on and after July 1,
1991 after giving effect to shares previously awarded.
3<PAGE>
(b) Each Outside Director shall receive an annual award of
300 shares of GPU Common Stock with respect to each calendar year
or portion thereof, during which he or she serves as an Outside
Director, beginning with the calendar year 1993. Awards shall
be made in January of each year. However, for the calendar year
in which an Outside Director commences Service, the award of
shares to such Outside Director for such year shall be made in
the month in which his or her Service commences, if his or her
Service commences after January 31 of such year. All awards of
shares made hereunder shall be subject to the restrictions set
forth in Section 5.
(c) Subject to the provisions of Section 5, certificates
representing shares of GPU Common Stock awarded hereunder shall
be issued in the name of the respective Participants. During the
period of time such shares are subject to the restrictions set
forth in Section 5, such certificates shall be endorsed with a
legend to that effect, and shall be held by GPU or an agent
therefor. The Participant shall, nevertheless, have all the
other rights of a shareholder, including the right to vote and
the right to receive all cash dividends paid with respect to such
shares.
Subject to the requirements of applicable law, certificates
representing such shares shall be delivered to the Participant
within 30 days after the lapse of the restrictions to which they
are subject.
(d) If as a result of a stock dividend, stock split,
recapitalization (or other adjustment in the stated capital of
GPU), or as the result of a merger, consolidation, or other
reorganization, the common shares of GPU are increased, reduced,
or otherwise changed, the number of shares available and to be
awarded hereunder shall be appropriately adjusted, and if by
virtue thereof a Participant shall be entitled to new or
additional or different shares, such shares to which the
Participant shall be entitled shall be subject to the terms,
conditions, and restrictions herein contained relating to the
original shares. In the event that warrants or rights are
awarded with respect to shares awarded hereunder, and the
recipient exercises such rights or warrants, the shares or
securities issuable upon such exercise shall be likewise subject
to the terms, conditions, and restrictions herein contained
relating to the original shares.
5. Restrictions.
(a) Shares are awarded to a Participant on the condition
that he or she serves or has served as an Outside Director until:
(i) the Participant's death or disability, or
4<PAGE>
(ii) the Participant's failure to stand for re-election
at the end of the term during which the Participant reaches age
70; or
(iii) the Participant's resignation or failure to stand
for re-election prior to the end of the term during which the
Participant reaches age 70 with the consent of the Board, i.e.,
approval thereof by a least 80% of the directors voting thereon,
with the affected director abstaining; or
(iv) the Participant's failure to be re-elected after
being duly nominated.
Termination of Service of a Participant for any other reason,
including, without limitation, any involuntary termination
effected by Board action, shall result in forfeiture of all
shares awarded. Notwithstanding the foregoing, upon the
occurrence of a Change in Control, the restrictions set forth in
Section 5(b) hereof to which any shares awarded to a Participant
are then still subject shall lapse, and the termination of the
Participant's Service for any reason at any time after the
occurrence of such Change in Control shall not result in the
forfeiture of any such shares.
(b) Shares awarded hereunder may not be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of
(herein, "Transferred") other than to GPU pursuant to Section
5(a) during the period commencing on the date of the award of
such shares and ending on the date of termination of the Outside
Director's Service; provided, however, that in no event may any
shares awarded hereunder be Transferred for a period of six
months following the date of the award thereof, except in the
case of the recipient's death or disability, other than to GPU
pursuant to Section 5(a) hereof.
(c) Each Participant shall represent and warrant to and
agree with GPU that he or she (i) takes any shares awarded under
the Plan for investment only and not for purposes of sale or
other disposition and will also take for investment only and not
for purposes of sale or other disposition any rights, warrants,
shares, or securities which may be issued on account of ownership
of such shares, and (ii) will not sell or transfer any shares
awarded or any shares received upon exercise of any such rights
or warrants except in accordance with (A) an opinion of counsel
for GPU (or other counsel acceptable to GPU) that such shares,
rights, warrants, or other securities may be disposed of without
registration under the Securities Act of 1933, or (B) an
applicable "no action" letter issued by the Staff of the
Commission.
6. Administrative Committee. An Administrative Committee (the
"Committee") shall have full power and authority to construe and
administer the Plan. Any action taken under the provisions of
the Plan by the Committee arising out of or in connection with
5<PAGE>
the administration, construction, or effect of the Plan or any
rules adopted thereunder shall, in each case, lie within the
discretion of the Committee and shall be conclusive and binding
under GPU and upon all Participants, and all persons claiming
under or through any of them. Notwithstanding the foregoing, any
determination made by the Committee after the occurrence of a
Change in Control 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. The Committee shall have as members the Chief
Executive Officer of GPU and two officers of GPU or its
Subsidiaries designated by the Chief Executive Officer; in the
absence of such designation, the other members of the Committee
shall be the Chief Financial Officer and the Secretary of GPU.
7. Approval: Effective Date. The Plan is subject to the
approval of a majority of the holders of GPU's Common Stock
present and entitled to vote at a meeting of shareholders, and of
the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935. The Plan shall be effective January
1, 1989.
8. Termination and Amendment. The Board of Directors of GPU
may suspend, terminate, modify or amend the Plan, provided that
if any such amendment requires shareholder approval to meet the
requirement of the then applicable rules under Section 16(b) of
the Exchange Act, such amendment shall be subject to the approval
of GPU's shareholders; and provided further that no amendment or
modification to Section 2(b), to the penultimate sentence of
Section 6, to the last sentence of Section 5(a), or to this
Section 8, nor any suspension or termination of the Plan,
effectuated (i) at the request of a third party who has indicated
an intention or taken steps to effect a Change in Control and who
effectuates a Change in Control, (ii) within six (6) months prior
to, or otherwise in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed and which
actually occurs, or (iii) following a Change in Control, shall be
effective if the amendment, modification, suspension or
termination adversely affects the rights of any Participant under
the Plan. If the Plan is terminated, the terms of the Plan
shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. In addition, no
amendment, modification, suspension or termination of the Plan
shall adversely affect the rights of any Participant with respect
to any award (including without limitation any right with respect
to the timing and method of payment of any award) granted to the
Participant prior to the date of the adoption of such amendment,
modification, suspension or termination without such
Participant's written consent.
6<PAGE>
Exhibit 10-R
RETIREMENT PLAN FOR OUTSIDE DIRECTORSOF GPU, INC.
AS AMENDED AND RESTATED AS OFNOVEMBER 7, 1996<PAGE>
RETIREMENT PLAN FOR OUTSIDE DIRECTORSOF GPU, INC.
1. Purpose
The Retirement Plan for Outside Directors of GPU, Inc. (the
"Plan") is designed to enhance the ability of GPU, Inc. (the
"Corporation") to attract and retain competent and experienced
Outside Directors by providing retirement benefits and death
benefits for Eligible Outside Directors who retire or die after
the Plan's Effective Date.
2. Definitions
Except as otherwise specified or as the context may otherwise
require, the following terms have the meanings indicated below
for all purposes of this Plan:
Board of Directors means the board of directors of the
Corporation.
Outside Director means a member of the Board of Directors who,
during the period involved, is not or was not an Officer or an
employee of the Corporation or a subsidiary thereof.
Board Service means service as an Outside Director of the
Corporation both before and after the Effective Date.
Change in Control means the occurrence during the term of the
Plan of:
(1) An acquisition (other than directly from the
Corporation) of any Common Stock or other voting securities of
the Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of the then
outstanding shares of Common Stock or the combined voting power
of the Corporation's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-
Control Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by
(i) the Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly,
by the Corporation (for purposes of this definition, a <PAGE>
"Subsidiary"), (B) the Corporation or its Subsidiaries, or (C)
any Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board of Directors (the "Incumbent Board"), cease
for any reason to constitute at least seventy percent (70%) of
the members of the Board of Directors; provided, however, that if
the election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or reorganization
of the Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or reorganization,
own directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent (60%) of
the combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of the
members of the board of directors of the Surviving Corporation,
or a corporation, directly or indirectly, beneficially owning a
majority of the Voting Securities of the Surviving Corporation,
and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit plan
(or any trust forming a part thereof) that, immediately prior to
2<PAGE>
such merger, consolidation or reorganization, was maintained by
the Corporation or any Subsidiary, or (z) any Person who,
immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities or Common Stock, has
Beneficial Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities or its common stock.
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by the Corporation which, by reducing the number of
shares of Common Stock or Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by
the Subject Person, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the
Corporation, and after such share acquisition by the Corporation,
the Subject Person becomes the Beneficial Owner of any additional
shares of Common Stock or Voting Securities which increases the
percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then
a Change in Control shall occur.
Compensation means the sum of: (a) the monthly retainer paid
in cash to an Outside Director as compensation for services as a
Director of the Corporation, excluding any fees paid for
attendance at meetings of the Board of Directors or any committee
of the Board of Directors, and also excluding any additional
retainer paid for service as a Committee Chairman, and (b)
one-twelfth of the cash value of all shares awarded to, the
Outside Director pursuant to the Restricted Stock Plan for
Outside Directors as the annual award thereunder for the year
preceding his or her Retirement, and not subsequently forfeited.
The cash value of a share shall be its closing price as
reported for New York Stock Exchange-Composite Transactions on
the date of award.
Effective Date means the date of initial adoption of this
Plan by the Board of Directors.
3<PAGE>
Retirement or Retires means the cessation of service as an
Outside Director for any reason other than (i) acceptance of
employment as an officer or employee of the Corporation or a
subsidiary thereof or (ii) death.
3. Eligibility
An Outside Director who has completed at least fifty-four (54)
months of Board Service and who Retires from the Board of
Directors or dies before Retirement on or after the Effective
Date shall be eligible for benefits as provided herein. After
the occurrence of a Change in Control, any person who was an
Outside Director immediately prior to such Change in Control
shall be eligible for benefits as provided herein upon Retirement
or death before Retirement, whether or not such Outside Director
has completed at least fifty-four (54) months of Board Service.
4. Pension Benefits of Eligible Retired Outside Directors
Before Death
The accumulated amount of pension benefits payable to an Outside
Director eligible to receive benefits hereunder shall be equal to
the product of (a) the number of months of such Outside
Director's Board Service under this Plan times (b) the monthly
compensation of such Outside Director at the date of such Outside
Director's Retirement under the Plan. Such pension benefits
shall be paid in monthly installments equal to the monthly
compensation of each Outside Director at the date of such Outside
Director's Retirement. Such pension benefits shall commence on
the first day of the month following the Director's 60th birthday
or the Director's Retirement under the Plan, whichever is later,
and shall continue during the Retired Outside Director's life
until the date when the total payments to the Retired Outside
Director shall be equal to the Outside Director's accumulated
pension benefits at the date of such Director's Retirement.
Notwithstanding any other provision of the Plan to the
contrary, each Outside Director shall be permitted to make a
special distribution election to have his or her pension benefits
distributed in the form of a single lump sum payment in the event
of the Outside Director's Retirement following a Change in
Control; provided, however, that such election shall be effective
only if it is made at least twelve (12) months prior to such
Change in Control. Any special election made hereunder may be
revoked, and a new special election may be made at any time;
provided, however, that any such revocation or new election shall
be effective only if it is made at least twelve (12) months prior
to a Change in Control. Any special election, or revocation of a
special election, that may be made hereunder shall be made in
writing, on a form furnished to the Outside Director for such
purpose by the Personnel, Compensation and Nominating Committee.
The lump sum payment to be made hereunder to an Outside Director
4<PAGE>
shall be in an amount that is Actuarially Equivalent (as defined
in the GPU Service Corporation Employee Pension Plan or any
successor thereto and determined as of the date of the Outside
Director's Retirement) to the pension benefits that otherwise
would be payable hereunder if such pension benefits were to
commence upon the Outside Director's Retirement or 60th birthday,
whichever is later. The lump sum payment to be made hereunder
with respect to any Outside Director shall be made by no later
than 30 days following the date of the Outside Director's
Retirement.
5. Benefits Payable by Reason of Death of Eligible Outside
Director
In the event that an Outside Director who is eligible to receive
benefits hereunder should die prior to receiving payment of the
full amount of his or her accumulated pension benefits, the
remaining portion of such Outside Director's accumulated pension
benefits shall be paid as follows:
(a) If the Outside Director dies after Retirement, the
monthly payments previously made to the Outside Director shall
continue to be made to the Outside Director's surviving spouse
(or, if applicable, designated beneficiary) until the aggregate
of the payments to the Outside Director and such surviving spouse
or beneficiary shall be equal to the Outside Director's
accumulated pension benefits at the date of such Director's
Retirement.
(b) If the Outside Director dies prior to Retirement, there
shall be paid to the Outside Director's surviving spouse (or, if
applicable, designated beneficiary) monthly installments equal to
the monthly compensation of such Outside Director at the date of
such Outside Director's death until the aggregate of the payments
to such surviving spouse (or, if applicable, designated
beneficiary) shall be equal to the Outside Director's accumulated
amount of pension benefits at the date of the Outside Director's
death. Payment of such monthly installments shall begin on the
first day of the month next following the Outside Director's
death or, if later, the first day of the month in which the
Outside Director's 60th birthday would have occurred if the
outside Director had survived.
6. Designated Beneficiary of Eligible Outside Director
If an Eligible Outside Director shall die without leaving a
surviving spouse or if the Outside Director's surviving spouse
shall die prior to payment in full of the outside Director's
accumulated pension benefits, the payments which would otherwise
have been made to the Outside Director's surviving spouse shall
be made to the Outside Director's designated beneficiary (or
5<PAGE>
beneficiaries). Such designations shall be made in writing on
forms provided by the Corporation to the Outside Director. Any
such designation by an Outside Director may be revoked by the
Outside Director at any time before or after Retirement. Any
such revocation shall be made in writing on a form provided by
the Corporation to the Outside Director.
7. Provision for Benefits
All benefits payable hereunder shall be provided from the
general assets of the Corporation. No Outside Director shall
acquire any interest in any specific assets of the Corporation by
reason of this Plan. An Outside Director shall have the status
of a mere unsecured creditor of the Corporation with respect to
his or her right to receive any payment under the Plan. The Plan
shall constitute a mere promise by the Corporation 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.
8. Amendment and Termination
The Board of Directors reserves the right to terminate this Plan
or amend this Plan prospectively in any respect at any time, but
no such amendment may reduce (a) the benefits of any Outside
Director who has previously Retired hereunder, or (b) the
benefits accrued hereunder by any Outside Director prior to the
effective date of such termination or amendment. In addition,
the definition of Change in Control in Section 2, the last
sentence in Section 3, the last paragraph in Section 4, this
Section 8, and the last sentence of Section 9 may not be amended
or modified, and the Plan may not be terminated, (i) at the
request of a third party who has indicated an intention or taken
steps to effect a Change in Control and who effectuates a Change
in Control, (ii) within six (6) months prior to, or otherwise in
connection with, or in anticipation of, a Change in Control which
has been threatened or proposed and which actually occurs, or
(iii) following a Change in Control, if the amendment,
modification or termination adversely affects the rights of any
Outside Director under the Plan.
9. Administration
This Plan shall be administered by the Personnel, Compensation,
and Nominating Committee of the Board of Directors. Such
Committee's final decision, in making any determination or
construction under this Plan and in exercising any discretionary
power, shall in all instances be final and binding on all persons
having or claiming any rights under this Plan. Notwithstanding
the foregoing, any determination made by the Committee after the
occurrence of a Change in Control 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.
6<PAGE>
10. Miscellaneous
Nothing herein contained shall be deemed to give any Outside
Director the right to be retained as a director of the
Corporation, nor shall it interfere with the Outside Director's
right to terminate such directorship at any time. An Outside
Director's 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 Outside Director or his or her spouse or other
beneficiary.
7<PAGE>
Exhibit 10-S
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORSOF GPU, INC.
(AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 7, 1996)
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 November 7, 1996. 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.
(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 in effect
for 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 Account - refers to both Pre-Retirement and Retirement
Accounts established for Directors unless specifically
designated one or the other in the text of this Plan.
3.2 Board of Directors - refers to the Board of Directors
of GPU, Inc.
3.3 Change in Control - A "Change in Control" shall mean
the occurrence during the term of the Plan of:<PAGE>
(1) An acquisition (other than directly from GPU, Inc.
(the "Corporation")) of any common stock of the
Corporation ("Common Stock") or other voting securities
of the Corporation entitled to vote generally for the
election of directors of the Corporation (the "Voting
Securities") by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of the then outstanding shares of
Common Stock or the combined voting power of the
Corporation's then outstanding Voting Securities;
provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an
employee benefit plan (or a trust forming a part
thereof) maintained by (i) the Corporation or (ii) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the
Corporation (for purposes of this definition, a
"Subsidiary"), (B) the Corporation or its Subsidiaries,
or (C) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board of Directors (the "Incumbent
Board"), cease for any reason to constitute at least
seventy percent (70%) of the members of the Board of
Directors; provided, however, that if the election, or
nomination for election by the Corporation's
shareholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided
further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange
Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other
than the board of directors of the Corporation (a
"Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or
Proxy Contest; or
(3) The consummation of:
2<PAGE>
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger,
consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the
Corporation where:
(i) the shareholders of the Corporation,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization,
at least sixty percent (60%) of the combined voting
power of the outstanding voting securities of the
corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for such merger, consolidation
or reorganization constitute at least seventy percent
(70%) of the members of the board of directors of the
Surviving Corporation, or a corporation, directly or
indirectly, beneficially owning a majority of the
Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee
benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation
or reorganization, was maintained by the Corporation or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Voting Securities or
common stock of the Corporation, has Beneficial
Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's
then outstanding voting securities or its common stock;
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common
Stock or Voting Securities by the Corporation which, by
3<PAGE>
reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person,
provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities
by the Corporation, and after such share acquisition by the
Corporation, the Subject Person becomes the Beneficial Owner
of any additional shares of Common Stock or Voting
Securities which increases the percentage of the then
outstanding shares of Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
3.4 Committee - refers to the Personnel, Compensation and
Nominating Committee of the Corporation.
3.5 Director - refers to a member of the Board of Directors
who is not an employee of the Corporation or any of its
subsidiaries.
3.6 Plan - refers to this Deferred Remuneration Plan for
Outside Directors as described in this document and as it
may be amended in the future.
3.7 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 Corporation contributions to other benefit plans.
3.8 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.
3.9 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.
4<PAGE>
3.10 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 the
Corporation or any of its subsidiaries.
3.11 Plan Year - refers to the period October 1, 1986
through December 31, 1986; and each twelve (12) month period
from January 1 through December 31 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; provided, however, that Section
3.3, this Section 4.1, Section 4.4, the last sentence in the
first paragraph of Section 6 and the last paragraph in
Section 7.2 may not be amended or modified, and the Plan may
not be terminated, (i) at the request of a third party who
has indicated an intention or taken steps to effect a Change
in Control and who effectuates a Change in Control, (ii)
within six (6) months prior to, or otherwise in connection
with, or in anticipation of, a Change in Control which has
been threatened or proposed and which actually occurs, or
(iii) following a Change in Control, if the amendment,
modification or termination adversely affects the rights of
any Director under the Plan. No modification or termination
of the Plan shall adversely affect the rights of any
Director with respect to any amounts standing to the
Director's credit in any Account immediately prior to the
date of the adoption of such modification or termination,
including without limitation any rights with respect to the
time and method of payment of, or the crediting of interest
equivalents with respect to, any such amounts.
4.2 Responsibility for the ongoing administration of this
Plan rests with the Committee.
4.3 The Committee may delegate the daily administration of
this Plan, including the maintenance of appropriate records,
receiving notifications, making filings, and maintaining
related documentation, to the Vice President - Human
Resources of GPU Service Corporation and to the Vice
President's staff.
4.4 All questions concerning the 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 Committee, except that no member of the
Committee shall vote on any matter which affects that member
but not all other members of the Committee. Notwithstanding
the foregoing, any determination made by the Committee after
the occurrence of a "Change in Control" that denies in whole
or in part any claim made by any individual for benefits
5<PAGE>
under the Plan shall be subject to judicial review, under a
"de novo", rather than a deferential, standard.
4.5 All provisions of this Plan, its administration and
interpretation, are intended to be in compliance with
appropriate Internal Revenue Service Rulings and judicial
decisions 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 commencement 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 Corporation for such purposes, signed and delivered
personally or by first class mail to:
Corporate Secretary
GPU Service Corporation
100 Interpace Parkway
Parsippany, New Jersey 07054
Any such election, selection, designation, or change
therein, shall not become effective unless and until
received by the Corporate Secretary. A change in a
distribution election made after April 30, 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.
6<PAGE>
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.
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 Pre-Retirement Account.
Except as provided in Section 7.2 or 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 shall, at the time he or
she first elects to have an amount credited to that account,
also elect a distribution commencement date and a
distribution option under Section 7.2 for the distribution
of the Retirement Account. A Director may, subject to the
provisions of Section 4.6, change any election as to the
distribution commencement date and distribution option for
the Retirement Account previously made by the Director. The
distribution commencement date so elected shall be either
January 15 of the calendar year following the Director's
Retirement, or January 15 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
Corporation for use as it deems necessary, and will be
subject to the claims of the Corporation's creditors. A
Director shall have the status of a mere unsecured creditor
of the Corporation with respect to his or her right to
receive any payment under the Plan. The Plan shall
constitute a mere promise by the Corporation to make
payments in the future of the benefits provided for herein.
7<PAGE>
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.
The Corporation 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 Corporation 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
Retirement Account shall commence, on the date specified in
the Director'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 Director, with a minimum of five annual
installments required for the Retirement Account.
(c) Other
option, in equal or unequal payments, as specifically
approved by the Committee.
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 said Account on the date the installment is
8<PAGE>
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 each
Account each year after the date the first installment
is payable will be distributed on each anniversary of
such date.
Notwithstanding any other provision of the Plan to the
contrary or any other optional form of distribution
otherwise elected, each Outside Director shall be
permitted to make a special distribution election to
have the entire balance of his or her Accounts
distributed in the form of a single lump sum payment in
the event of the Outside Director's Retirement
following a Change in Control; provided, however, that
such election shall be effective only if it is made at
least twelve (12) months prior to such Change in
Control. Any special election made hereunder may be
revoked, and a new special election may be made at any
time; provided, however, that any such revocation or
new election shall be effective only if it is made
twelve (12) months prior to a Change in Control. Any
special election, or revocation of a special election,
that may be made hereunder shall be made in the manner
set forth in Section 4.6.
7.3 Except as the Committee 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
his/her Account maintained for the Director has
commenced, but before the entire balance has been fully
distributed, distributions will continue to be made 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 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.
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.
9<PAGE>
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 Committee, 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. 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 Committee to take
action on his or her request, and shall be mailed or
delivered to the Corporation'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 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.
10<PAGE>
Exhibit 10-CC
GPU, INC.
1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC. AND SUBSIDIARIES
AS AMENDED AND RESTATED
TO REFLECT AMENDMENTS
THROUGH AUGUST 1, 1996<PAGE>
1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC. AND SUBSIDIARIES
1. Purpose
GPU, Inc. (the "Corporation") desires to attract and retain
employees of outstanding talent. The 1990 Stock Plan for
Employees of GPU, Inc. and Subsidiaries (the "Plan") affords
eligible employees the opportunity to acquire proprietary
interests in the Corporation and thereby encourages their highest
levels of performance.
2. Scope and Duration
(a) Awards under the Plan may be granted in the following
forms:
(i) incentive stock options ("incentive stock
options") as provided in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and non-qualified
stock options ("non-qualified options") (the term "options"
includes incentive stock options and non-qualified options);
(ii) shares of Common Stock of the Corporation
(the "Common Stock") which are restricted as provided in
paragraph 10 ("restricted shares"); or
(iii) rights to acquire shares of Common Stock
which are restricted as provided in paragraph 10 ("units" or
"restricted units").
Options may be accompanied by stock appreciation rights
("rights").
(b) The maximum aggregate number of shares of Common Stock
as to which awards of options, restricted shares, units or rights
may be made from time to time under the Plan is 1,974,190 shares.
(1) Shares issued pursuant to this Plan may be in whole or in
part, as the Board of Directors of the Corporation (the "Board of
Directors") shall from time to time determine, authorized but
unissued shares or issued shares reacquired by the Corporation.
If for any reason any shares as to which an option has been
granted cease to be subject to purchase thereunder or any
restricted shares or restricted units are forfeited to the
Corporation, or to the extent that any awards under the Plan
denominated in shares or units are paid or settled in cash or are
surrendered upon the exercise of an option,
________________________________
(1) Initially, 1,000,000 shares were authorized to be issued
under the Plan. On May 29, 1991, the Corporation effected a
two-for-one stock split by way of a stock dividend, leaving
1,974,190 shares available for issuance under the Plan on
and after that date, after giving effect to shares
previously awarded.<PAGE>
then (unless the Plan shall have been terminated) such shares or
units, and any shares surrendered to the Corporation upon such
exercise, shall become available for subsequent awards under the
Plan unless such shares or units, if so made available for
subsequent awards under the Plan, would not be exempt from
Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") pursuant to Rule 16b-3, as amended, thereunder;
provided, however, that shares surrendered to the Corporation
upon the exercise of an incentive stock option and shares subject
to an incentive stock option surrendered upon the exercise of a
right shall not be available for subsequent award of additional
stock options under the Plan.
(c) No incentive stock option shall be granted hereunder
after November 30, 1999.
3. Administration
(a) The Plan shall be administered by those members of the
Personnel, Compensation and Nominating Committee, or any
successor thereto, of the Board of Directors who are
"disinterested persons" within the meaning of Rule 16b-3, as
amended, under Section 16(b) of the Exchange Act or by such other
committee consisting of not less than two persons each of whom
shall qualify as "disinterested persons," as may be determined by
the Board of Directors ("the Committee").
(b) The Committee shall have plenary authority in its sole
discretion, subject to and not inconsistent with the express
provisions of this Plan: (i) to grant options, to determine the
purchase price of the Common Stock covered by each option, the
term of each option, the employees to whom, and the time or times
at which, options shall be granted and the number of shares to be
covered by each option; (ii) to designate options as incentive
stock options or non-qualified options and to determine which
options shall be accompanied by rights; (iii) to grant rights and
to determine the purchase price of the Common Stock covered by
each right or related option, the term of each right or related
option, the employees to whom, and the time or times at which,
rights or related options shall be granted and the number of
shares to be covered by each right or related option; (iv) to
grant restricted shares and restricted units and to determine the
term of the Restricted Period (as defined in paragraph 10) and
other conditions applicable to such shares or units, the
employees to whom, and the time or times at which, restricted
shares or restricted units shall be granted and the number of
shares or units to be covered by each grant; (v) to interpret the
Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions
of the option and rights agreements (which need not be identical)
and the restricted share and restricted unit agreements (which
need not be identical) entered into in connection with awards
under the Plan, including any provisions of such agreements that
may permit a recipient of an award of restricted units to elect,
2<PAGE>
prior to the vesting of such units, to defer the payment of cash
and/or the delivery of shares of Common Stock otherwise to be
made upon the vesting of such restricted units, and/or to defer
the payment of any cash compensation awarded to the recipient
with respect to such restricted units, or with respect to any
restricted stock awarded to the recipient, either under this Plan
or the GPU System Companies Deferred Compensation Plan (a
"Deferral"); and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
Without limiting the foregoing, the Committee shall have plenary
authority in its sole discretion, subject to and not inconsistent
with the express provisions of the Plan, (1) to select GPU
Officers (as defined below) for participation in the Plan, (2) to
determine the timing, price and amount of any grant or award
under the Plan to any GPU Officer, (3) either (A) to determine
the form in which payment of any right granted or awarded under
the Plan will be made (i.e., cash, securities or any combination
thereof) or (B) to approve the election of the employee to
receive cash in whole or in part in settlement of any right
granted or awarded under the Plan. As used herein, the term "GPU
Officer" shall mean an officer (other than an assistant officer)
of the Corporation, any member of the Corporation's Corporate
Executive Council (as it may be constituted from time to time),
and any person who may from time to time be designated an
executive officer of the Corporation by its Board of Directors.
The exercise by the Committee of the powers granted in clauses
(i), (ii), (iii), (iv), and (vii) hereof shall be subject to the
approval of a committee of the Board of Directors comprised only
of "disinterested persons" within the meaning of Rule 16b-3, as
amended, under Section 16(b) of the Exchange Act with respect to
a recipient of an award hereunder who is an officer (other than
assistant officer) of the Corporation or the Chairman or
President of any subsidiary (as defined in paragraph 4(a) hereof)
of the Corporation (the "Board Committee"). (The Committee and
the Board Committee are sometimes hereinafter referred to as the
"Committees.")
(c) The Committees may delegate to one or more of their
members or to one or more agents such administrative duties as
they may deem advisable, and the Committees or any person to whom
they have delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the
Committees or such person may have under the Plan; provided, that
the Committees may not delegate any duties to a member of the
Board of Directors who would not qualify as a "disinterested
person" to administer the Plan as contemplated by Rule 16b-3, as
amended, or other applicable rules under the Exchange Act. The
Committees may employ attorneys, consultants, accountants or
other persons and the Committees, the Corporation and its
officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Committees
in good faith shall be final and binding upon all employees who
have received awards, the Corporation and all other interested
3<PAGE>
persons. Notwithstanding the foregoing, any action taken or any
interpretation or determination made by the Committees after the
occurrence of a "Change in Control" (as defined in paragraph 7(c)
hereof) which adversely affects the rights of any employee with
respect to any award made to the employee hereunder shall be
subject to judicial review under a "de novo" rather than a
deferential standard. No member or agent of the Committees shall
be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan or
awards made thereunder, and all members and agents of the
Committees shall be fully protected by the Corporation in respect
of any such action, determination or interpretation.
4. Eligibility; Factors to be Considered in Making Awards
(a) Only employees of the Corporation or its subsidiaries
may receive awards under the Plan. The term "subsidiary" means
any corporation one hundred (100%) percent of the common stock of
which is owned, directly or indirectly, by the Corporation. A
director of the Corporation or of a subsidiary who is not also an
employee will not be eligible to receive an award.
(b) In determining the employees to whom awards shall be
granted and the number of shares or units to be covered by each
award, the Committee shall take into account the nature of the
employee's duties, his or her present and potential contributions
to the success of the Corporation and such other factors as it
shall deem relevant in connection with accomplishing the purposes
of the Plan.
(c) Awards may be granted singly, in combination or in
tandem and may be made in combination or in tandem with or in
replacement of, or as alternatives to, awards or grants under any
other employee plan maintained by the Corporation or its
subsidiaries. An award made in the form of an option, a unit or
a right may provide, in the discretion of the committee, for (i)
the crediting to the account of, or the current payment to, each
employee who has such an award of an amount equal to the cash
dividends and stock dividends paid by the Corporation upon one
share of Common Stock for each restricted unit, or share of
Common Stock subject to an option or right, included in such
award, and for each restricted unit which is the subject of a
Deferral ("Dividend Equivalents"), or (ii) the deemed
reinvestment of such Dividend Equivalents and stock dividends in
shares of Common Stock or the deemed reinvestment of units in
additional units , which deemed reinvestment in each case shall
be deemed to be made in accordance with the provisions of
paragraph 10 and credited to the Employee's account ("Additional
Deemed Shares"). Such Additional Deemed Shares shall be subject
to the same restrictions (including but not limited to provisions
regarding forfeitures) applicable with respect to the option,
unit or right with respect to which such credit is made.
Dividend Equivalents not deemed reinvested as stock dividends
shall not be subject to forfeiture, and may bear amounts
4<PAGE>
equivalent to interest or cash dividends as the Committee may
determine. An employee who has been granted incentive stock
options under the Plan may be granted an additional award or
awards, subject to such limitations as may be imposed by the Code
with respect to incentive stock options.
(d) The Committee, in its sole discretion, may grant to an
employee who has been granted an award under the Plan or any
other employee plan maintained by the Corporation, any of its
subsidiaries, or any successor thereto, in exchange for the
surrender and cancellation of such award, a new award in the same
or a different form and containing such terms, including without
limitation a price which is different (either higher or lower)
than any price provided in the award so surrendered and
cancelled, as the Committee may deem appropriate.
5. Option Price
(a) The purchase price of the Common Stock covered by each
option shall be determined by the Committee; provided, however,
that in the case of incentive stock options, the purchase price
shall not be less than 100% of the fair market value of the
Common Stock on the date the option is granted. Fair market
value shall mean the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Tape for the
date on which the option is granted, or if there are no sales on
such date, on the next preceding day on which there were sales.
Such price shall be subject to adjustment as provided in
paragraph 13. The price so determined shall also be applicable
in connection with the exercise of any related right.
(b) The purchase price of the shares as to which an option
is exercised shall be paid in full at the time of exercise;
payment may be made in cash, which may be paid by check or other
instrument acceptable to the Corporation, in shares of the Common
Stock, valued at the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Tape for the
date of exercise, or if there were no sales on such date, on the
next preceding day on which there were sales, or (if permitted by
the Committee and subject to such terms and conditions as it may
determine) by surrender of outstanding awards under the Plan. In
addition, the employee shall pay any amount necessary to satisfy
applicable federal, state or local tax requirements promptly upon
notification of the amount due. The Committee may permit such
amount to be paid in shares of Common Stock previously owned by
the employee, or a portion of the shares of Common Stock that
otherwise would be distributed to such employee upon exercise of
the option, or a combination of cash and shares of such Common
Stock.
5<PAGE>
6. Term of Options
The term of each incentive stock option granted under the
Plan shall be such period of time as the Committee shall
determine, but not more than ten years from the date of grant,
subject to earlier termination as provided in paragraphs 11 and
12. The term of each non-qualified stock option granted under
the Plan shall be such period of time as the Committee shall
determine, subject to earlier termination as provided in
paragraphs 11 and 12.
7. Exercise of Options
(a) Each option shall become exercisable in whole or in
part, as the Committee shall determine provided, however, that
the Committee may also, in its discretion, accelerate the
exercisability of any option in whole or in part at any time.
(b) Subject to the provisions of the Plan and unless
otherwise provided in the option agreement, an option granted
under the Plan shall become exercisable in full at the earliest
of the employee's death, Eligible Retirement (as defined below),
or Total Disability (as defined in paragraph 12). For purposes
of this Plan, the term "Eligible Retirement" shall mean the date
upon which an employee, having attained an age of not less than
fifty-five, terminates his or employment with the Corporation and
all of its subsidiaries, provided that such employee is
immediately eligible to receive a pension (whether or not he or
she otherwise elects to defer such receipt) under Section 3.1 or
3.3 of the "Employee Pension Plan" maintained by any subsidiary
or subsidiaries of the Corporation for salaried employees, or any
successor plan thereto.
(c) Notwithstanding the foregoing, an option shall become
immediately exercisable as to all shares of Common Stock
remaining subject to the option on or following a "Change in
Control" of the Corporation (the date upon which such event
occurs shall be referred to for purposes of this Plan as an
"Acceleration Date"). A "Change in Control" shall mean the
occurrence during the term of the Plan of:
(1) An acquisition (other than directly from the
Corporation) of any Common Stock or other voting securities of
the Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of the then
outstanding shares of Common Stock or the combined voting power
of the Corporation's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred,
6<PAGE>
Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-
Control Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by
(i) the Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly,
by the Corporation (for purposes of this definition, a
"Subsidiary"), (B) the Corporation or its Subsidiaries, or (C)
any Person in connection with a "Non-Control Transaction" (as
hereinafter defined);
(2) The individuals who, as of August 1, 1996, are
members of the Board of Directors (the "Incumbent Board"), cease
for any reason to constitute at least seventy percent (70%) of
the members of the Board of Directors; provided, however, that if
the election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization
involving the Corporation, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or reorganization
of the Corporation where:
(i) the shareholders of the
Corporation, immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately following
such merger, consolidation or reorganization, at least sixty
percent (60%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such merger
or consolidation or reorganization (the "Surviving Corporation")
in substantially the same proportion as their ownership of the
Voting Securities immediately before such merger, consolidation
or reorganization,
(ii) the individuals who were members of
the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least seventy percent (70%) of the
members of the board of directors of the Surviving Corporation,
7<PAGE>
or a corporation, directly or indirectly, beneficially owning a
majority of the Voting Securities of the Surviving Corporation,
and
(iii) no Person other than (w) the
Corporation, (x) any Subsidiary, (y) any employee benefit plan
(or any trust forming a part thereof) that, immediately prior to
such merger, consolidation or reorganization, was maintained by
the Corporation or any Subsidiary, or (z) any Person who,
immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty percent (20%) or more of the
then outstanding Voting Securities or Common Stock, has
Beneficial Ownership of twenty percent (20%) or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities or its common stock.
(B) A complete liquidation or dissolution of the
Corporation; or
(C) The sale or other disposition of all or
substantially all of the assets of the Corporation to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock or Voting Securities
as a result of the acquisition of Common Stock or Voting
Securities by the Corporation which, by reducing the number of
shares of Common Stock or Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the
Corporation, and after such share acquisition by the Corporation,
the Subject Person becomes the Beneficial Owner of any additional
shares of Common Stock or Voting Securities which increases the
percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then
a Change in Control shall occur.
(d) An option may be exercised, at any time or from time to
time (subject, in the case of an incentive stock option, to such
restrictions as may be imposed by the Code), as to any or all
full shares as to which the option has become exercisable,
provided, however, that an option may not be exercised at any one
time as to less than 100 shares (or less than the number of
shares as to which the option is then exercisable, if that number
is less than 100 shares).
(e) Subject to the provisions of paragraphs 11 and 12, in
the case of incentive stock options, no option may be exercised
at any time unless the holder thereof is then an employee of the
8<PAGE>
Corporation or any of its subsidiaries. For purposes of this
subparagraph 7(e), subsidiary shall include, as under Treasury
Regulations Section 1.421-7(h)(3) and (4), example (3), any
corporation which is a subsidiary of the Corporation during the
entire portion of the requisite period of employment during which
it is the employer of the holder.
(f) Upon the exercise of an option or portion thereof in
accordance with the Plan, the option agreement and such rules and
regulations as may be established by the Committee, the holder
thereof shall have the rights of a shareholder with respect to
the shares issued as a result of such exercise.
8. Award and Exercise of Rights
(a) A right may be awarded by the Committee in connection
with any option granted under the Plan, either at the time the
option is granted or thereafter at any time prior to the
exercise, termination or expiration of the option ("tandem
right"), or separately ("freestanding right"). Each tandem right
shall be subject to the same terms and conditions as the related
option and shall be exercisable only to the extent the option is
exercisable. No right shall be exercisable for cash by a GPU
Officer within six months from the date the right is awarded (and
then, as to a tandem right, only to the extent the related option
is exercisable) or, if the exercise price of the right is not
fixed on the date of the award, within six months from the date
when the exercise price is so fixed, and in any case only when
the GPU Officer's election to receive cash in full or partial
satisfaction of the right, as well as the GPU Officer's exercise
of the right for cash, is made during a Quarterly Window Period
(as defined below); provided, that a right may be exercised by a
GPU Officer for cash outside a Quarterly Window Period if the
date of exercise is automatic or has been fixed in advance under
the Plan and is outside the GPU Officer's control. The term
"Quarterly Window Period" shall mean the period beginning on the
third business day following the date of release of each of the
Corporation's quarterly and annual summary statements of sales
and earnings and ending on the twelfth business day following
such release; and the date of any such release shall be deemed to
be the date it either (A) appears on a wire service, (B) appears
on a financial news service, (C) appears in a newspaper of
general circulation, or (D) is otherwise made publicly available,
for example, by press releases to a wire service, financial news
service, or newspapers or general circulation. Subject to the
foregoing, a right shall be exercisable (as to a tandem right,
only to the extent the related option is exercisable) on or after
an Acceleration Date.
(b) A right shall entitle the employee upon exercise in
accordance with its terms (subject, in the case of a tandem
right, to the surrender unexercised of the related option or any
9<PAGE>
portion or portions thereof which the employee from time to time
determines to surrender for this purpose) to receive, subject to
the provisions of the Plan and such rules and regulations as from
time to time may be established by the Committee, a payment
having an aggregate value equal to the product of (A) the excess
of (i) the fair market value on the exercise date of one share of
Common Stock over (ii) the exercise price per share, in the case
of a tandem right, or the price per share specified in the terms
of the right, in the case of a freestanding right, multiplied by
(B) the number of shares with respect to which the right shall
have been exercised. The payment may be made in the form of all
cash, all shares of Common Stock, or a combination thereof, as
elected by the employee, subject (where the employee is a GPU
Officer) to paragraph 8(a) hereof.
(c) The exercise price per share specified in a right shall
be as determined by the Committee, provided that, in the case of
a tandem right accompanying an incentive stock option, the
exercise price shall be not less than fair market value of the
Common Stock subject to such option on the date of grant.
(d) If upon the exercise of a right the employee is to
receive a portion of the payment in shares of Common Stock, the
number of shares shall be determined by dividing such portion by
the fair market value of a share on the exercise date. The
number of shares received may not exceed the number of shares
covered by any option or portion thereof surrendered. Cash will
be paid in lieu of any fractional share.
(e) No payment will be required from an employee upon
exercise of a right, except that any amount necessary to satisfy
applicable federal, state or local tax requirements shall be
withheld or paid promptly by the employee upon notification of
the amount due and prior to or concurrently with delivery of cash
or a certificate representing shares. The Committee may permit
such amount to be paid in shares of Common Stock previously owned
by the employee, or a portion of the shares of Common Stock that
otherwise would be distributed to such employee upon exercise of
the right, or a combination of cash and shares of such Common
Stock.
(f) The fair market value of a share shall mean the closing
price of the Common Stock as reported on the New York Stock
Exchange Composite Tape for the date of exercise, or if there are
no sales on such date, on the next preceding day on which there
were sales; provided, however, that in the case of rights that
relate to an incentive stock option, the Committee may prescribe,
by rules of general application, such other measure of fair
market value as the Committee may in its discretion determine but
not in excess of the maximum amount that would be permissible
under Section 422 of the Code without disqualifying such option
under Section 422.
10<PAGE>
(g) Upon exercise of a tandem right, the number of shares
subject to exercise under the related option shall automatically
be reduced by the number of shares represented by the option or
portion thereof surrendered.
(h) A right related to an incentive stock option may only
be exercised if the fair market value of a share of Common Stock
on the exercise date exceeds the option price.
9. Non-Transferability of Options, Rights and Units;
Holding Periods for GPU Officers
(a) Options, rights, and units granted under the Plan shall
not be transferable by the grantee thereof otherwise than by will
or the laws of descent and distribution; provided, that the
designation of a beneficiary by an employee shall not constitute
a transfer; and options and rights may be exercised during the
lifetime of the employee only by the employee or, unless such
exercise would disqualify an option as an incentive stock option,
by the employee's guardian or legal representative.
(b) Notwithstanding anything contained in this Plan to the
contrary, (i) any shares of Common Stock awarded hereunder to a
GPU Officer may not be transferred or disposed of for at least
six months from the date of award thereof, (ii) any option, right
or unit awarded hereunder to a GPU Officer, or the shares of
Common Stock into which any such option, right or unit is
exercised or converted, may not be transferred or disposed of for
at least six months following the date of acquisition by the GPU
Officer of such option, right or unit, and (iii) the Committee
shall take no action whose effect would cause a GPU Officer to be
in violation of clause (i) or (ii) above.
10. Award and Delivery of Restricted
Shares or Restricted Units
(a) At the time an award of restricted shares or restricted
units is made, the Committee shall establish a period of time
(the "Restricted Period") applicable to such award. Each award
of restricted shares or restricted units may have a different
Restricted Period. The Committee may, in its sole discretion, at
the time an award is made, prescribe conditions for the
incremental lapse of restrictions during the Restricted Period
and for the lapse or termination of restrictions upon the
satisfaction of other conditions in addition to or other than the
expiration of the Restricted Period with respect to all or any
portion of the restricted shares or restricted units. Subject to
Section 9 hereof, the Committee may also, in its sole discretion,
shorten or terminate the Restricted Period, or waive any
conditions for the lapse or termination of restrictions with
respect to all or any portion of the restricted shares or
11<PAGE>
restricted units. Notwithstanding the foregoing but subject to
Section 9 hereof, all restrictions shall lapse, and the
Restricted Period shall terminate, with respect to all restricted
shares or restricted units upon the earliest to occur of an
employee's Eligible Retirement, death, Total Disability or the
occurrence of an Acceleration Date.
(b) (1) Unless such shares are issued as uncertificated
shares pursuant to subparagraph (3) below, a stock certificate
representing the number of restricted shares granted to an
employee shall be registered in the employee's name but shall be
held in custody by the Corporation or an agent therefor for the
employee's account. The employee shall generally have the rights
and privileges of a shareholder as to such restricted shares,
including the right to vote such restricted shares, except that,
subject to the provisions of paragraph 11, the following
restrictions shall apply: (i) the employee shall not be entitled
to delivery of the certificate until the expiration or
termination of the Restricted Period and the satisfaction of any
other conditions prescribed by the Committee; (ii) none of the
restricted shares may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period
and until the satisfaction of any other conditions prescribed by
the Committee at the time of award; and (iii) all of the
restricted shares shall be forfeited and all rights of the
employee to such restricted shares shall terminate without
further obligation on the part of the Corporation unless the
employee has remained an employee of the Corporation or any of
its subsidiaries until the expiration or termination of the
Restricted Period and the satisfaction of any other conditions
prescribed by the Committee at the time of award applicable to
such restricted shares. At the discretion of the Committee, (i)
cash and stock dividends with respect to the restricted shares
may be either currently paid or withheld by the Corporation for
the employee's account, and interest may be paid on the amount of
cash dividends withheld at a rate and subject to such terms as
determined by the Committee or (ii) the Committee may require
that all cash dividends be applied to the purchase of additional
shares of Common Stock, and such purchased shares, together with
any stock dividends related to such restricted shares (such
purchased shares and stock dividends are hereafter referred to as
"Additional Restricted Shares") shall be treated as Additional
Shares, subject to forfeiture on the same terms and conditions as
the original grant of the restricted shares to the employee.
(2) The purchase of any such Additional Restricted Shares
shall be made either (x) through the Corporation's Dividend
Reinvestment and Stock Purchase Plan, in which event the price of
such shares so purchased through the reinvestment of dividends
shall be as determined in accordance with the provisions of that
plan and no stock certificate representing such Additional
Restricted Shares shall be registered in the employee's name or
(y) in accordance with such alternative procedure as is
12<PAGE>
determined by the Committee in which event the price of such
purchased shares shall be the closing price of the Common Stock
as reported on the New York Stock Exchange Composite Tape for the
date on which such purchase is made, or if there were no sales on
such date, the next preceding day on which there were sales. In
the event that the Committee shall not require reinvestment, cash
or stock dividends so withheld by the Committee shall not be
subject to forfeiture. Upon the forfeiture of any restricted
shares (including any Additional Restricted Shares), such
forfeited shares shall be transferred to the Corporation without
further action by the employee. The employee shall have the same
rights and privileges, and be subject to the same restrictions,
with respect to any shares received pursuant to paragraph 13.
(3) Not-withstanding anything herein to the contrary,
shares representing Restricted Shares or Additional Restricted
Shares may be issued as uncertificated shares.
(c) Upon the expiration or termination of the Restricted
Period and the satisfaction of any other conditions prescribed by
the Committee at the time of award, or at such earlier time as
provided for in paragraph 11, the restrictions applicable to the
restricted shares (including Additional Restricted Shares) shall
lapse and a stock certificate for the number of restricted shares
(including any Additional Restricted Shares) with respect to
which the restrictions have lapsed shall be delivered, free of
all such restrictions, except any that may be imposed by law, to
the employee or the employee's beneficiary or estate, as the case
may be. The Corporation shall not be required to deliver any
fractional share of Common Stock but will pay, in lieu thereof,
the fair market value (determined as of the date the restrictions
lapse) of such fractional share to the employee or the employee's
beneficiary or estate, as the case may be.
No payment will be required from the employee upon the
issuance or delivery of any restricted shares, except that any
amount necessary to satisfy applicable federal, state or local
tax requirements shall be withheld or paid promptly upon
notification of the amount due and prior to or concurrently with
the issuance or delivery of a certificate representing such
shares. The Committee may permit such amount to be paid in shares
of Common Stock previously owned by the employee, or a portion of
the shares of Common Stock that otherwise would be distributed to
such employee upon the lapse of the restrictions applicable to
the restricted shares, or a combination of cash and shares of
such Common Stock.
(d) In the case of an award of restricted units, no shares
of Common Stock shall be issued at the time the award is made,
and the Corporation shall not be required to set aside a fund for
the payment of any such award.
13<PAGE>
(e) Subject to subparagraph (g) below:
(i) Upon the expiration or termination of the
Restricted Period or the occurrence of an Acceleration Date
and the satisfaction of any other conditions prescribed by
the Committee or at such earlier time as provided for in
paragraph 11, the Corporation shall deliver to the employee
or the employee's beneficiary or estate, as the case may be,
one share of Common Stock for each restricted unit with
respect to which the restrictions have lapsed ("vested
unit").
(ii) In addition, if the Committee has not
required the deemed reinvestment of such Dividend
Equivalents pursuant to paragraph 4, at such time the
Corporation shall deliver to the employee cash equal to any
Dividend Equivalents or stock dividends credited with
respect to each such vested unit and, to the extent
determined by the Committee, the interest thereupon.
However, if the Committee has required such deemed
reinvestment in connection with such restricted unit, in
addition to the stock represented by such vested unit, the
Corporation shall deliver the number of Additional Deemed
Shares credited to the employee with respect to such vested
unit.
(iii) Notwithstanding the foregoing, the Committee
may, in its sole discretion, elect to pay cash or part cash
and part Common Stock in lieu of delivering only Common
Stock for the vested units and related Additional Deemed
Shares. If a cash payment is made in lieu of delivering
Common Stock, the amount of such cash payment shall be equal
to the closing price of the Common Stock as reported on the
New York Stock Exchange Composite Tape for the date on which
the Restricted Period lapsed with respect to such vested
unit and related Additional Deemed Shares, or if there are
no sales on such date, on the next preceding day on which
there were sales.
(f) Upon the occurrence of an Acceleration Date, all
outstanding vested units (including restricted units whose
restrictions have lapsed as a result of the occurrence of such
acceleration date) and credited Dividend Equivalents or related
Additional Deemed Shares shall be payable as soon as practicable
but in no event later than 90 days after such Acceleration Date
in cash, in shares of Common Stock, or part in cash and part in
Common Stock, as the Committee, in its sole discretion, shall
determine.
(i) Subject to subparagraph (g) below, to the extent
that an employee receives cash in payment for his or her
vested units and Additional Deemed Shares, such employees
shall receive an amount equal to the product of (x) the
number of vested units and Additional Deemed Shares credited
to such employee's account for which such employee is
receiving payment in cash multiplied by (y) the highest
14<PAGE>
closing price per share of Common Stock occurring during the
ninety (90) day period preceding and the ninety (90) day
period following the Acceleration Date (the "Multiplication
Factor").
(ii) Subject to subparagraph (g) below, to the extent
that an employee receives Common Stock in payment for his or
her vested units and Additional Deemed Shares, such employee
shall receive the number of shares of Common Stock
determined by dividing (x) the product of (I) the number of
vested units and Additional Deemed Shares credited to such
employee's account for which such employee is receiving
payment in Common Stock multiplied by (II) the
Multiplication Factor, by (y) the fair market value per
share of the Common Stock for the day preceding the payment
date, or if there are no sales on such date, on the next
preceding day on which there were sales.
(g) No payment will be required from the employee upon the
award of any restricted units, the crediting or payment of any
Dividend Equivalents or Additional Deemed Shares, or the delivery
of Common Stock or the payment of cash in respect of vested
units, except that any amount necessary to satisfy applicable
federal, state or local tax requirements shall be withheld or
paid promptly upon notification of the amount due. The Committee
may permit such amount to be paid in shares of Common Stock
previously owned by the employee, or a portion of the shares of
Common Stock that otherwise would be distributed to such employee
in respect of vested units and Additional Deemed Shares, or a
combination of cash and shares of such Common Stock.
(h) In addition, the Committee shall have the right, in its
absolute discretion, upon or prior to the vesting of any
restricted shares (including Additional Restricted Shares) and
restricted units (including Additional Deemed Shares) to award
cash compensation to the employee for the purpose of aiding the
employee in the payment of any and all federal, state and local
income taxes payable as a result of such vesting, if the
performance of the Corporation during the Restricted Period meets
such criteria as the Committee shall have prescribed.
(i) Notwithstanding any other provision in this paragraph
10 to the contrary, any payment of cash and/or delivery of any
shares of Common Stock otherwise required to be made hereunder on
any date with respect to any restricted units awarded to an
employee, or with respect to any cash compensation awarded to an
employee pursuant to subparagraph (h) above, may be deferred, at
the employee's election, either under this Plan or under the GPU
System Companies Deferred Compensation Plan for Elected Officers,
to the extent such deferral is permitted under, and upon such
terms and conditions as may be set forth in, the written
agreement between the employee and the Corporation (whether as
initially entered into, or as subsequently amended) evidencing
the award of such units, or cash compensation, to the employee.
15<PAGE>
11. Termination of Employment
In the event that the employment of an employee to whom an
option or right has been granted under the Plan shall be
terminated for any reason other than as set forth in paragraph
12, such option or right may, subject to the provisions of the
Plan, be exercised (but only to the extent that the employee was
entitled to do so at the termination of his or her employment) at
any time within three (3) months after such termination, but in
no case later than the date on which the option or right
terminates.
Unless otherwise determined by the Committee, if an employee
to whom restricted shares or restricted units have been granted
ceases to be an employee of the Corporation or of any subsidiary
prior to the end of the Restricted Period and the satisfaction of
any other conditions prescribed by the Committee at the time of
grant for any reason other than as set forth in paragraph 12, the
employee shall immediately forfeit all restricted shares and
restricted units, including all Additional Restricted Shares or
Additional Deemed Shares related thereto.
Any option, right, restricted share or restricted unit
agreement, or any rules and regulations relating to the Plan, may
contain such provisions as the Committee shall approve with
reference to the determination of the date employment terminates
and the effect of leaves of absence. Any such rules and
regulations with reference to any option agreement shall be
consistent with the provisions of the Code and any applicable
rules and regulations thereunder. Nothing in the Plan or in any
award granted pursuant to the Plan shall confer upon any employee
any right to continue in the employ of the Corporation of any of
its subsidiaries or interfere in any way with the right of the
Corporation or any such subsidiary to terminate such employment
at any time.
12. Eligible Retirement, Death or Total Disability of Employee
If any employee to whom an option, right, restricted share
or restricted unit has been granted under the Plan shall die, or
suffer a Total Disability, while employed by the Corporation or
any of its subsidiaries or if an employee terminates his or her
employment pursuant to an Eligible Retirement, such option or
right may be exercised, as set forth herein, or such restricted
shares or restricted unit shall be deemed to be vested, whether
or not the employee was otherwise entitled at such time to
exercise such option or right, or be treated as vested in such
share or unit. Subject to the restrictions otherwise set forth
in this Plan, such option or right shall be exercisable by the
employee, a legatee or legatees of the employee under the
employee's last will, or by the employee's personal
representatives or distributees, whichever is applicable, at any
time (but in no case later than the date on which the option or
right terminates in accordance with the terms of grant) within
16<PAGE>
three years after the date of the earlier of (i) the employee's
death or Total Disability (if the employee shall have died or
suffered a Total Disability while employed by the Corporation or
its subsidiaries), or (ii) such employee's Eligible Retirement.
For purposes of this paragraph 12, "Total Disability" is
defined as the permanent inability of an employee, as a result of
accident or sickness, to perform any and every duty pertaining
to such employee's occupation or employment for which the
employee is suited by reason of the employee's previous
training, education and experience.
13. Adjustments Upon Changes in Capitalization, etc.
Notwithstanding any other provision of the Plan, the
Committee may at any time make or provide for such adjustments to
the Plan, to the number and class of shares available thereunder
or to any outstanding options, restricted shares or restricted
units as it shall deem appropriate to prevent dilution or
enlargement of rights, including adjustments in the event of
distributions to holders of Common Stock other than a normal cash
dividend, changes in the outstanding Common Stock by reason of
stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations and the like. In the event of any
offer to holders of Common Stock generally relating to the
acquisition of their shares, the Committee may make such
adjustment as it deems equitable in respect of outstanding
options, rights, and restricted units including in the
Committee's discretion revision of outstanding options, rights,
and restricted units so that they may be exercisable for or
payable in the consideration payable in the acquisition
transaction. Any such determination by the Committee shall be
conclusive and binding on all parties. No adjustment shall be
made in the minimum number of shares with respect to which an
option may be exercised at any time. Any fractional shares
resulting from such adjustments to options, rights, limited
rights, or restricted units shall be eliminated.
14. Effective Date
The Plan as amended shall become effective as of June 1,
1990, subject to the approval of the Corporation's shareholders
at the Corporation's 1990 Annual Meeting of Shareholders. The
Committee may, in its discretion, grant awards under the Plan,
the grant, exercise or payment of which shall be expressly
subject to the conditions that to the extent required at the time
of grant, exercise or payment (i) the shares of Common Stock
covered by such awards shall be duly listed, upon official notice
of issuance, upon the New York Stock Exchange, and (ii) if the
Corporation deems it necessary or desirable a Registration
Statement under the Securities Act of 1933 with respect to such
shares shall be effective.
17<PAGE>
15. Termination and Amendment
The Board of Directors of the Corporation may suspend,
terminate, modify or amend the Plan, provided that if any such
amendment requires shareholder approval to meet the requirement
of the then applicable rules under Section 16(b) of the Exchange
Act, such amendment shall be subject to the approval of the
Corporation's shareholders; and provided further that no
amendment or modification to the penultimate sentence of Section
3(c), to Section 7(c) or to this Section 15, nor any suspension
or termination of the Plan, effectuated (i) at the request of a
third party who has indicated an intention or taken steps to
effect a Change in Control and who effectuates a Change in
Control, (ii) within six (6) months prior to, or otherwise in
connection with, or in anticipation of, a Change in Control which
has been threatened or proposed and which actually occurs, or
(iii) following a Change in Control, shall be effective if the
amendment, modification, suspension or termination adversely
affects the rights of any employee under the Plan. If the Plan
is terminated, the terms of the Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such
termination. In addition, no amendment, modification, suspension
or termination of the Plan shall adversely affect the rights of
any employee with respect to any award (including without
limitation any right with respect to the timing and method of
payment of any award) granted to the employee prior to the date
of the adoption of such amendment, modification, suspension or
termination without such employee's written consent.
16. Written Agreements
Each award of options, rights, restricted shares or
restricted units shall be evidenced by a written agreement,
executed by the employee and the Corporation, which shall contain
such restrictions, terms and conditions as the Committee may
require.
17. Effect on Other Stock Plans
The adoption of the Plan shall have no effect on awards made
or to be made pursuant to other stock plans covering employees of
the Corporation, its subsidiaries, or any successors thereto.
18<PAGE>
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of GPU, Inc. 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 February 5,
1997, on our audits of the consolidated financial statements and
financial statement schedule of GPU, Inc. and Subsidiaries as of
December 31, 1996 and 1995, and for each of the three years in
the period ended December 31, 1996, which report is included in
this Annual Report on Form 10-K, for the year ended December 31,
1996.
New York, New York
March 10, 1997<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 February 5, 1997, on our
audits of the consolidated financial statements and financial
statement schedule of Jersey Central Power & Light Company as of
December 31, 1996 and 1995, and for each of the three years in
the period ended December 31, 1996, which report is included in
this Annual Report on Form 10-K, for the year ended December 31,
1996.
New York, New York
March 10, 1997<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 33-53673-01) of our report dated
February 5, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Metropolitan
Edison Company and Subsidiaries as of December 31, 1996 and 1995,
and for each of the three years in the period ended December 31,
1996, which report is included in this Annual Report on Form
10-K, for the year ended December 31, 1996.
New York, New York
March 10, 1997<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
February 5, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Pennsylvania
Electric Company and Subsidiaries as of December 31, 1996 and
1995, and for each of the three years in the period ended
December 31, 1996, which report is included in this Annual Report
on Form 10-K, for the year ended December 31, 1996.
New York, New York
March 10, 1997<PAGE>
Exhibit 21(A)
JERSEY CENTRAL POWER & LIGHT COMPANY
SUBSIDIARIES OF THE REGISTRANT
NAME OF STATE OF
SUBSIDIARIES BUSINESS INCORPORATION
JCP&L CAPITAL, L.P SPECIAL-PURPOSE DELAWARE
<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 CAPITAL, L.P. SPECIAL-PURPOSE DELAWARE
<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 CAPITAL, L.P. SPECIAL-PURPOSE DELAWARE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000040779
<NAME> GPU, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,387,823
<OTHER-PROPERTY-AND-INVEST> 1,541,191
<TOTAL-CURRENT-ASSETS> 897,174
<TOTAL-DEFERRED-CHARGES> 2,115,031
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,941,219
<COMMON> 314,458
<CAPITAL-SURPLUS-PAID-IN> 750,569
<RETAINED-EARNINGS> 2,068,976
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,047,587 <F1>
444,000 <F2>
66,478
<LONG-TERM-DEBT-NET> 3,177,016
<SHORT-TERM-NOTES> 256,567
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 8,980
<LONG-TERM-DEBT-CURRENT-PORT> 168,583
10,000
<CAPITAL-LEASE-OBLIGATIONS> 6,623
<LEASES-CURRENT> 143,818
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,611,567
<TOT-CAPITALIZATION-AND-LIAB> 10,941,219
<GROSS-OPERATING-REVENUE> 3,918,089
<INCOME-TAX-EXPENSE> 166,572
<OTHER-OPERATING-EXPENSES> 3,243,238
<TOTAL-OPERATING-EXPENSES> 3,409,810
<OPERATING-INCOME-LOSS> 508,279
<OTHER-INCOME-NET> 30,253
<INCOME-BEFORE-INTEREST-EXPEN> 538,532
<TOTAL-INTEREST-EXPENSE> 240,180 <F3>
<NET-INCOME> 298,352
0
<EARNINGS-AVAILABLE-FOR-COMM> 298,352
<COMMON-STOCK-DIVIDENDS> 231,956
<TOTAL-INTEREST-ON-BONDS> 184,675
<CASH-FLOW-OPERATIONS> 642,669
<EPS-PRIMARY> 2.47
<EPS-DILUTED> 2.47
<FN>
<F1> INCLUDES REACQUIRED COMMON STOCK OF $86,416.
<F2> INCLUDES SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F2> SECURITIES OF $330,000.
<F3> INCLUDES DIVIDENDS ON SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $28,888, PREFERRED STOCK DIVIDENDS OF
<F3> SUBSIDIARIES OF $15,519, AND GAIN ON REACQUIRED PREFERRED STOCK
<F3> OF $9,288.
</FN>
<PAGE>
</TABLE>
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,934,684
<OTHER-PROPERTY-AND-INVEST> 388,308
<TOTAL-CURRENT-ASSETS> 389,342
<TOTAL-DEFERRED-CHARGES> 997,585
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,709,919
<COMMON> 153,713
<CAPITAL-SURPLUS-PAID-IN> 510,769
<RETAINED-EARNINGS> 825,001
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,489,483
239,000 <F1>
37,741
<LONG-TERM-DEBT-NET> 1,173,091
<SHORT-TERM-NOTES> 31,800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 100,075
10,000
<CAPITAL-LEASE-OBLIGATIONS> 933
<LEASES-CURRENT> 96,150
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,531,646
<TOT-CAPITALIZATION-AND-LIAB> 4,709,919
<GROSS-OPERATING-REVENUE> 2,057,918
<INCOME-TAX-EXPENSE> 71,080
<OTHER-OPERATING-EXPENSES> 1,729,532
<TOTAL-OPERATING-EXPENSES> 1,800,612
<OPERATING-INCOME-LOSS> 257,306
<OTHER-INCOME-NET> 5,381
<INCOME-BEFORE-INTEREST-EXPEN> 262,687
<TOTAL-INTEREST-EXPENSE> 106,384 <F2>
<NET-INCOME> 156,303
13,072
<EARNINGS-AVAILABLE-FOR-COMM> 143,231
<COMMON-STOCK-DIVIDENDS> 135,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 89,648
<CASH-FLOW-OPERATIONS> 341,898
<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 $10,700.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000065350
<NAME> METROPOLITAN EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,584,873
<OTHER-PROPERTY-AND-INVEST> 142,736
<TOTAL-CURRENT-ASSETS> 183,954
<TOTAL-DEFERRED-CHARGES> 561,415
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,472,978
<COMMON> 66,273
<CAPITAL-SURPLUS-PAID-IN> 370,200
<RETAINED-EARNINGS> 264,044
<TOTAL-COMMON-STOCKHOLDERS-EQ> 700,517
100,000 <F1>
12,056
<LONG-TERM-DEBT-NET> 563,252
<SHORT-TERM-NOTES> 50,667
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 40,020
0
<CAPITAL-LEASE-OBLIGATIONS> 380
<LEASES-CURRENT> 29,964
<OTHER-ITEMS-CAPITAL-AND-LIAB> 976,122
<TOT-CAPITALIZATION-AND-LIAB> 2,472,978
<GROSS-OPERATING-REVENUE> 910,408
<INCOME-TAX-EXPENSE> 49,844
<OTHER-OPERATING-EXPENSES> 733,664
<TOTAL-OPERATING-EXPENSES> 783,508
<OPERATING-INCOME-LOSS> 126,900
<OTHER-INCOME-NET> 1,271
<INCOME-BEFORE-INTEREST-EXPEN> 128,171
<TOTAL-INTEREST-EXPENSE> 59,104 <F2>
<NET-INCOME> 69,067
944
<EARNINGS-AVAILABLE-FOR-COMM> 71,845 <F3>
<COMMON-STOCK-DIVIDENDS> 60,000 <F4>
<TOTAL-INTEREST-ON-BONDS> 45,373
<CASH-FLOW-OPERATIONS> 165,572
<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> INCLUDES GAIN ON PREFERRED STOCK REACQUISITION OF $3,722.
<F4> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,811,337
<OTHER-PROPERTY-AND-INVEST> 61,465
<TOTAL-CURRENT-ASSETS> 217,900
<TOTAL-DEFERRED-CHARGES> 444,363
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,535,065
<COMMON> 105,812
<CAPITAL-SURPLUS-PAID-IN> 285,486
<RETAINED-EARNINGS> 363,702
<TOTAL-COMMON-STOCKHOLDERS-EQ> 755,000
105,000 <F1>
16,681
<LONG-TERM-DEBT-NET> 656,459
<SHORT-TERM-NOTES> 98,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 8,980
<LONG-TERM-DEBT-CURRENT-PORT> 26,010
0
<CAPITAL-LEASE-OBLIGATIONS> 4,129
<LEASES-CURRENT> 15,881
<OTHER-ITEMS-CAPITAL-AND-LIAB> 848,225
<TOT-CAPITALIZATION-AND-LIAB> 2,535,065
<GROSS-OPERATING-REVENUE> 1,019,645
<INCOME-TAX-EXPENSE> 45,648
<OTHER-OPERATING-EXPENSES> 840,288
<TOTAL-OPERATING-EXPENSES> 885,936
<OPERATING-INCOME-LOSS> 133,709
<OTHER-INCOME-NET> (553)
<INCOME-BEFORE-INTEREST-EXPEN> 133,156
<TOTAL-INTEREST-EXPENSE> 63,347 <F2>
<NET-INCOME> 69,809
1,503
<EARNINGS-AVAILABLE-FOR-COMM> 73,872 <F3>
<COMMON-STOCK-DIVIDENDS> 40,000 <F4>
<TOTAL-INTEREST-ON-BONDS> 49,654
<CASH-FLOW-OPERATIONS> 138,657
<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> INCLUDES GAIN ON PREFERRED STOCK REACQUISITIONS OF $5,566.
<F4> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
