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, 1999
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)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (973) 455-8200
1-3141 Jersey Central Power & Light Company 21-0485010
(a New Jersey corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
1-446 Metropolitan Edison Company 23-0870160
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
1-3522 Pennsylvania Electric Company 25-0718085
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
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 & First Mortgage Bonds:
Light Company 6 3/8% Series due 2003 New York Stock Exchange
7 1/8% Series due 2004 New York Stock Exchange
7 1/2% Series due 2023 New York Stock Exchange
6 3/4% Series due 2025 New York Stock Exchange
<PAGE>
Name of each exchange
Registrant Title of each class which registered
- ------------------------ ------------------- --------------------
Jersey Central Power & Cumulative Preferred
Light Company (continued) Stock, $100 stated value
4% Series New York Stock Exchange
7.52% Series New York Stock Exchange
8.65% Series New York Stock Exchange
Monthly Income Preferred
Securities, 8.56%
Series A, $25 stated
value (a) New York Stock Exchange
Metropolitan Edison Trust Preferred
Company Securities, 7.35% Series A,
$25 stated value (b) New York Stock Exchange
Pennsylvania Electric Trust Preferred
Company Securities, 7.34% 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 Trust, and represents a beneficial interest in
the trust equal to a cumulative preferred limited partnership interest in
Met-Ed Capital II, L.P.
(c) Issued by Penelec Capital Trust, and represents a beneficial interest in
the trust equal to a cumulative preferred limited partnership interest in
Penelec Capital II, L.P.
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 based on the closing price of $25.00 on March 15, 2000 was:
Registrant Amount
------------------------------------ --------------
GPU, Inc. $3,024,666,325
The number of shares outstanding of each of the registrants' classes of
voting stock as of March 15, 2000 was as follows:
Shares
Registrant Title Outstanding
- ------------------------------------ ----------------------------- -----------
GPU, Inc. Common Stock, $2.50 par value 120,986,653
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 2000 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 27
Item 3. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 31
Item 6. Selected Financial Data 31
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 32
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk 32
Item 8. Financial Statements and Supplementary Data 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 32
Part III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management 42
Item 13. Certain Relationships and Related Transactions 43
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 44
Signatures 58
<PAGE>
PART I
------
ITEM 1. BUSINESS.
GPU, Inc., a Pennsylvania corporation, is a holding company registered
under the Public Utility Holding Company Act of 1935 (1935 Act). 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). The
customer service function, transmission and distribution operations and the
operations of the remaining non-nuclear generating facilities of these electric
utilities are conducting business under the name GPU Energy. JCP&L, Met-Ed and
Penelec considered together are referred to as the "GPU Energy companies." The
nuclear generation operations of GPU Energy are conducted by GPU Nuclear, Inc.
(GPUN). GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own,
operate and fund the acquisition of electric and gas transmission and
distribution systems in foreign countries, and are referred to as "GPU
Electric." GPU International, Inc. and GPU Power, Inc. and their subsidiaries
develop, own and operate generation facilities in the United States and foreign
countries and are referred to as the "GPUI Group." Other subsidiaries of GPU,
Inc. include: GPU Advanced Resources, Inc. (GPU AR), which is involved in retail
energy sales; GPU Telcom Services, Inc. (GPU Telcom), which is engaged in
telecommunications-related businesses; and GPU Service, Inc. (GPUS), which
provides legal, accounting, financial and other services to the GPU companies.
All of these companies considered together are referred to as "GPU."
GPU is subject to regulation by the Securities and Exchange Commission
(SEC) under the 1935 Act. The GPU Energy companies' retail rates, conditions of
service, and issuance of securities 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
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
foreign subsidiaries and affiliates are subject to rate and other regulation
(see REGULATION section).
Financial information with respect to the business segments of GPU is
provided in Note 13, Segment Information, of the Combined Notes to the
Consolidated Financial Statements.
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
estimates, forecasts, assumptions, 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
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deregulation and increased competition in the industry; industry restructuring;
expected outcomes of legal proceedings; the completion of generation asset
divestiture; energy prices and availability; and uncertainties involved with
foreign operations including political risks and foreign currency fluctuations.
SIGNIFICANT DEVELOPMENTS
------------------------
Business Outlook
- ----------------
In 1999, GPU began implementing its strategy for building shareholder value
by focusing on its core business: energy infrastructure service. Part of GPU's
strategy has been to divest all of its generation assets. GPU has decided to
limit its exposure to fluctuating power prices, because it believes that, in a
deregulated environment, only very large generators with the resources to absorb
market risk could be successful in this arena. It was GPU's judgment that it did
not have sufficient size or resources to compete successfully as a major energy
supplier.
In March 1999, Penelec sold its 50% interest in the Homer City Station
(Homer City) to a subsidiary of Edison Mission Energy for approximately $900
million. This was followed by the sale of Penelec's 20% undivided ownership
interest in the Seneca Pumped Storage Facility to Cleveland Electric
Illuminating Company in July 1999 for $43 million, and finally, in November
1999, the sale of substantially all of the GPU Energy companies' remaining
fossil and hydroelectric generating assets to Sithe Energies (Sithe) for
approximately $1.6 billion. (In February 2000, Penelec agreed to sell its Deep
Creek Lake property to the State of Maryland for $17.6 million.)
Then, in December 1999, the GPU Energy companies completed the sale of the
Three Mile Island Unit 1 (TMI-1) nuclear generating station to AmerGen Energy
Company, LLC (AmerGen), a joint venture of PECO Energy and British Energy, for a
total purchase price of approximately $100 million. AmerGen has also agreed to
purchase JCP&L's Oyster Creek nuclear generating station (Oyster Creek), for
approximately $10 million.
With generation no longer a significant part of GPU's business, GPU will
now be able to focus more closely on its lower risk asset base by strengthening
the transmission and distribution core of its business. These assets, which
remain subject to regulation, are dependable sources of cash flow that GPU will
use to reduce outstanding debt, repurchase its common stock and pay common
dividends. To this end, in January 1999, the GPU, Inc. Board of Directors
authorized the repurchase of up to $350 million of common stock. Through
December 1999, 6.4 million shares of common stock, or approximately 5% of the
outstanding shares, have been repurchased since the start of the program at an
average price of $35.25 per share. GPU recognizes that the key to its future
success is the ability to effectively grow its infrastructure business. GPU also
sees the potential to expand its infrastructure business in other areas,
including telecommunications facilities and other energy service businesses.
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In addition to divesting its generation assets, GPU plans to raise at least
$500 million in cash by reducing its ownership in non-core and underperforming
assets. Since the mid 1990s, GPU has been acquiring regulated businesses abroad.
GPU's electric and gas transmission businesses serve 4.6 million customers
worldwide; GPU Energy in the United States, Midlands Electricity plc (Midlands)
in the United Kingdom (UK), Emdersa in Argentina and GPU PowerNet and GPU GasNet
in Australia. In July 1999, GPU purchased from Cinergy Corp. the 50% interest in
Midlands which it did not already own.
In December 1999, GPU announced it would seek to sell its Australian
subsidiaries - GPU PowerNet, an electric transmission network, acquired in
October 1997 and GPU GasNet, a gas transmission pipeline, acquired in June 1999.
GPU Electric paid approximately $1.9 billion and $675 million for the
businesses, respectively.
The proposed Australian asset sale represents GPU's determination to
effectively redeploy its capital. GPU is committed to the sale of
under-performing assets in order to retire debt, repurchase common stock
(through the $350 million share repurchase program) and invest in higher growth
initiatives.
GPU's goal is to achieve a 5% annual growth in earnings per share and is
looking to invest in non-regulated growth areas that fit within its utility
services focus.
In December 1999, GPU, Inc. agreed to acquire MYR Group Inc. (MYR). MYR, an
infrastructure service company based near Chicago, is the fifth largest
specialty contractor in the United States. It builds and maintains power lines
for electric utilities, telecommunications companies and industrial and
commercial facilities. MYR also builds cellular towers for the wireless
communications market. GPU, Inc. has agreed to purchase MYR for approximately
$215 million, or $30.10 per MYR share, subject to the receipt of regulatory
approval, and expects MYR to act as a platform for future growth in the
non-regulated construction services area. Other non-regulated activities GPU has
targeted include telecommunications and related utility infrastructure services.
GPU is also seeking to improve customer service in domestic markets. In
1999, customer service showed a major opportunity for improvement following the
widespread power outages that occurred during the summer's heat storm. In
response, GPU Energy has, among other things, committed another $40-50 million
to improve the reliability of its service.
GPU has also initiated a program of planned cost reductions of $100 million
($55 million in 2000 and $45 million in 2001). The GPU Energy companies are
targeting reductions of $30 million in 2000 and an additional $40 million in
2001. In addition, Midlands plans to make cost reductions of $25 million in 2000
and $5 million in 2001.
Competitive Business Risks
- --------------------------
Currently, and increasingly in the future, the GPU Energy companies expect
they will be serving customers in markets where there will be capped rates for
varying periods and their ability to seek rate increases will be more limited.
In addition, inflation could adversely affect the GPU Energy
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companies since these increased costs may not be recoverable under existing rate
caps. Although the GPU Energy companies have essentially exited the generation
business, they will continue to have the obligation to supply energy to
customers who do not choose an alternate supplier. This energy supply will
largely come from contracted and open market purchases. While management has
implemented an energy risk management program to address the market risks
associated with these purchases, there can be no assurance that the GPU Energy
companies will be able to supply electricity to customers at costs which they
will be able to recover.
GPU, Inc. has made significant investments in foreign businesses and
facilities through GPU Electric and the GPUI Group. At December 31, 1999, GPU's
investment in GPU Electric and the GPUI Group was $1.06 billion and $232
million, respectively. As of that date, GPU, Inc. had also guaranteed up to an
additional $1.04 billion and $30 million (including $9 million of guarantees
related to domestic operations) of GPU Electric and GPUI Group outstanding
obligations, respectively. Although management attempts to mitigate the risks of
investing in certain foreign countries by, among other things, securing
political risk insurance, GPU faces additional risks inherent to operating in
such locations, including foreign currency fluctuations. GPU uses derivative
instruments primarily to manage the risk of interest rate, foreign currency and
commodity price fluctuations. GPU does not intend to hold or issue derivative
instruments for trading purposes.
Restructuring Actions
- ---------------------
In May 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate
unbundling, stranded cost and restructuring filings. The Summary Order provides
for, among other things, customer choice of electric generation supplier
beginning August 1, 1999 and full recovery of stranded costs. New Jersey
utilities began accepting customer selection of suppliers in October 1999. By
year-end, approximately 2.5% of the GPU Energy companies' New Jersey
non-residential customers and less than 1% of their residential customers had
selected an alternate supplier.
In 1996, Pennsylvania adopted the Customer Choice Act, which provided for
the restructuring of the electric utility industry. In 1998, the PaPUC issued
Restructuring Orders to Met-Ed and Penelec which, among other things, provide
for recovery of a substantial portion of what otherwise would have become
stranded costs, subject to the results of the generation divestitures. The
Restructuring Orders also gave all Pennsylvania customers the ability to choose
their electric generation supplier beginning January 1, 1999. By year-end,
approximately 18% (approximately 70% of the energy delivered) of the GPU Energy
companies' Pennsylvania non-residential customers and 5% of their residential
customers had selected an alternate supplier.
Domestic Energy Supply
- ----------------------
As a result of the NJBPU and the PaPUC's restructuring decisions, the GPU
Energy companies are required to supply electricity to customers who do not
choose an alternate supplier. Given that the GPU Energy companies have largely
divested their generation business, there will be increased market risks
associated with supplying that electricity, since the GPU Energy companies will
have to supply energy to non-shopping customers entirely from
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contracted and open market purchases. While JCP&L is permitted to recover
reasonably and prudently incurred costs associated with providing basic
generation service to non-shopping customers, Met-Ed and Penelec are generally
unable to recover their energy costs in excess of established rate caps. While
management has implemented an energy risk management program, there can be no
assurance that the GPU Energy companies will be able to fully recover the costs
to supply electricity to customers who do not choose an alternate supplier.
Currently, the GPU Energy companies have 285 megawatts (MW) of generating
capacity remaining to meet customer needs. They also have contracts with
nonutility generators totaling 1,606 MW and JCP&L has agreements with other
utilities to provide for up to 584 MW of capacity and related energy. The GPU
Energy companies have agreed to purchase all of the capacity and energy from
TMI-1 through December 31, 2001 and from Oyster Creek (following its sale)
through March 31, 2003. In addition, the GPU Energy companies have the right to
call on the capacity of the Homer City Station (up to 942 MW) through May 31,
2001 and up to 4,117 MW of capacity from the generating stations sold to Sithe
through May 31, 2002 to satisfy the GPU Energy companies' installed capacity
obligations. The GPU Energy companies' remaining capacity and energy needs will
be met by short- to intermediate-term commitments (one month to three years)
during times of expected high energy price volatility and reliance on spot
market purchases during other periods.
As noted above, Met-Ed and Penelec's customers have been permitted to
choose their generation supplier since January 1, 1999. The PaPUC has approved a
competitive bid process to assign provider of last resort (PLR) service for 20%
of Met-Ed and Penelec's retail customers on June 1, 2000, 40% on June 1, 2001,
60% on June 1, 2002 and 80% on June 1, 2003, to licensed generation suppliers.
This alternative supply service is referred to as Competitive Default Service
(CDS). In 1999, Met-Ed and Penelec issued requests for bids to provide PLR
service for 20% of their customers, beginning in June 2000, as required by the
PaPUC. In February 2000, Met-Ed and Penelec announced that no bids were received
in response to their offer and, as a result, they would be increasing their
forward purchasing of electric power to accommodate the 20% of customers for
whom they will continue to be the default supplier. Met-Ed and Penelec are
developing a proposal for a comprehensive solution for default energy supply
service in Pennsylvania, which they plan to submit to the PaPUC.
JCP&L is required to provide basic generation service (BGS) to retail
customers who choose to remain with JCP&L as generation customers until July 31,
2002. Thereafter, BGS service will be bid out at the pre-established BGS rates.
Any payment received or required by JCP&L resulting from the bidding process
will be deferred for future refund or recovery. The specific details of the BGS
bidding process will be the subject of a future NJBPU proceeding.
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.
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The Energy Policy Act of 1992 (EPAct) furthered competition among utilities and
non-utility generators (NUGs) in the wholesale electric generation market,
accelerating industry restructuring. The FERC has required utilities to provide
open access and comparable transmission service to third parties. Pennsylvania
and New Jersey have adopted comprehensive legislation providing for the
restructuring of the electric utility industry, and implementing orders have
been issued by the PaPUC and the NJBPU.
GPU has been active both on the federal and state levels in helping to
shape electric industry restructuring while seeking to protect the interests of
its shareholders and customers, and is attempting to assess the impact that
these industry changes will have on its financial condition and results of
operations.
THE GPU ENERGY COMPANIES
------------------------
The electric generation 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 1999, the GPU Energy companies' revenues
were about equally divided between Pennsylvania customers and New Jersey
customers. During 1999, 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 47 46 55 46 36 42 36 28
Commercial 36 40 29 32 35 40 29 32
Industrial 15 13 15 18 27 17 34 36
Other* 2 1 1 4 2 1 1 4
--- --- --- --- --- --- --- ---
100 100 100 100 100 100 100 100
=== === === === === === === ===
* Rural electric cooperatives, municipalities, street and highway lighting,
and others.
The GPU Energy companies also make interchange and spot market sales of
electricity to other utilities. Revenues of JCP&L, Met-Ed and Penelec derived
from their largest single customers accounted for less than 1.5%, 1% and 1%,
respectively, of their electric operating revenues for the year and their 25
largest customers, in the aggregate, accounted for approximately 8%, 5% and 8%,
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 2.6
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 11,400.
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 1.2 million, approximately 28% of which
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is concentrated in 23 cities and boroughs, all with populations over 5,000.
Penelec also provides wholesale service to six municipalities in Pennsylvania,
five municipalities in New Jersey, and the 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 13,400 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 is a limited liability company governed by an independent board of managers
recognized by the FERC as an Independent System Operator. Also in 1997, the FERC
directed the GPU Energy companies to implement a single-system transmission
rate, effective April 1, 1998. The implementation of a single-system rate has
not affected total transmission revenues; however, it has increased the pricing
for transmission service in Met-Ed and Penelec's service territories and reduced
the pricing for transmission service in JCP&L's service territory.
The GPU Energy companies have requested the FERC to reconsider its ruling
requiring a single-system transmission rate. The Restructuring Orders for Met-Ed
and Penelec provide for a transmission and distribution rate cap exception to
recover the increase in the transmission rate from Met-Ed and Penelec's retail
customers in the event the FERC denies the request for reconsideration of the
single-system transmission rate. The FERC's ruling may also have the effect of
reducing JCP&L's transmission rates. There can be no assurance as to the outcome
of this matter.
Investments in FUCOS and EWGS
-----------------------------
GPU, Inc. has SEC authorization to finance investments in foreign utility
companies (FUCOs) and exempt wholesale generators (EWGs) up to an aggregate
amount equal to 100% of GPU's average consolidated retained earnings,
approximately $2.4 billion as of December 31, 1999. At December 31, 1999, GPU,
Inc. has remaining authorization to finance approximately $245 million of
additional investments in FUCOs and EWGs. GPU, Inc.'s investments in FUCOs and
EWGs are made through GPU Electric and the GPUI Group.
GPU Electric
------------
GPU Electric owns electric and gas transmission and distribution businesses
in England, Australia and Argentina. Through its ownership in Midlands, GPU
Electric also has ownership interests in operating generating facilities located
in foreign countries totaling 4,244 MW (of which GPU Electric's equity interest
represents 1,163 MW) of capacity. At December 31, 1999, GPU, Inc.'s aggregate
investment in GPU Electric was $1.06 billion. GPU, Inc. has also guaranteed up
to an additional $1.04 billion of outstanding GPU Electric obligations.
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Midlands operated an electricity supply business within and outside its
regulated area until June 1999 when Midlands' then owners, GPU and Cinergy Corp.
sold the business, including obligations under Midlands' power purchase
agreements, for $300 million ($150 million for GPU's share) plus an adjustment
for working capital.
Midlands will continue to own and operate its network of power cables and
substations.
Midlands' primary business is the distribution of electricity across its
authorized area, which has an estimated population of approximately 5 million
residents and includes the area of Birmingham, parts of Staffordshire and the
rural areas of Gloucestershire, Shropshire and Hereford and Worcester. Although
historically industrial, the area's economy is less dominated by heavy
manufacturing and has seen increased growth in the commercial sector. Midlands
provides service connections to customers as well as for street lighting,
traffic lights and other installations from its main networks.
Midlands is also engaged in non-regulated activities, including electricity
generation, electrical contracting, metering services and related businesses.
Through its subsidiary Midlands Power International Limited (MPI), Midlands
has ownership interests in several generating stations, including a 40% equity
interest in the Uch Power Project in Pakistan. As with many other independent
power projects in Pakistan, the Uch Power Project has experienced difficulties
and delays; however, the plant is currently anticipated to begin commercial
operation in 2000. At this time, MPI does not intend to invest in any new
generation projects.
GPU GasNet owns and maintains the high pressure gas transmission pipeline
network, which serves a total consumption base of approximately 1.3 million
residential customers and approximately 40,000 industrial and commercial users
throughout Victoria. GPU GasNet's primary responsibility is to transport gas
from the Longford gas treatment plant in South East Victoria and from gas fields
in the Southwest to the major load centers in Victoria.
The transmission assets consist of two networks - the Principal System and
the smaller Western System which are connected by the Southwest pipeline. GPU
GasNet's major assets are steel and other pipelines, compressors, regulating and
injector stations, transfer meters and a liquefied natural gas storage facility.
GPU GasNet has recently completed a number of strategic construction projects to
expand and augment its system, improve security of supply and take advantage of
expected growth in gas consumption, including completion of a major
interconnection between the Victorian and New South Wales transmission systems.
GPU GasNet's business consists of three distinct segments: Gas
Transmission, which is regulated by tariff and represents approximately 84% of
total revenues; Excluded Services, such as custody transfer metering and LNG
services which are regulated but not subject to formula-based price controls and
which represent about 15% of total revenues; and Competitive Services, such as
engineering and construction services, which are unregulated but account for
less than 1% of total revenues.
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GPU PowerNet owns and maintains the high voltage electricity transmission
system in Victoria covering an area of approximately 87,900 square miles and a
population of approximately 4.5 million. Its assets are comprised of overhead
transmission lines (ranging from 66KV to 500KV), underground cable, galvanized
steel towers and switchyards, terminal and transformer stations.
The primary function of GPU PowerNet is to transport electricity from power
stations to the major load centers in greater Melbourne as well as to the
neighboring state of New South Wales, and to large industrial users. VNSC
provides monitoring, remote control and operational coordination of the
transmission network.
Under the current Victorian regulatory regime, GPU PowerNet's operations
fall into three separate business segments: Prescribed Services, which are
subject to regulation under GPU PowerNet's tariff order; Excluded Services,
which are new transmission services not subject to revenue regulation, but
which, by law, must be provided on a "fair and reasonable" basis; and Other
Services, which represent all other business operations such as
telecommunication, asset management and technical services, and are not subject
to revenue regulation. Prescribed Services currently make up in excess of 95% of
GPU PowerNet's total revenues. This percentage is expected to decline over time,
however, with the growth in non-regulated business activities.
GPU Electric acquired Emdersa, an Argentine holding company in March 1999.
Emdersa's principal business operations consist of the distribution of
electricity through its three operating companies, Edesa, Edelar and Edesal.
These companies service approximately 335,000 customers in a 124,300 square mile
area in the three north western provinces of San Luis, La Rioja and Salta. The
customer base includes residential, commercial, industrial, public lighting and
irrigation customers.
Emdersa acquires electricity primarily from the Wholesale Electricity
Market. Each of Emdersa's three operating companies distributes electricity to
end users and operates on the basis of exclusive contracts to distribute
electricity, which have been granted by the respective provincial governments.
The operating companies' rates are embodied in and subject to specific tariff
structures which are in effect for five years and expire as follows: La Rioja in
June 2000; Salta in August 2001; and Edesal in March 2003.
GPUI GROUP
----------
The GPUI Group has ownership interests in six operating cogeneration plants
in the U.S. totaling 1,014 MW (of which the GPUI Group's equity interest
represents 496 MW) of capacity, and four operating generating facilities located
in foreign countries totaling 1,229 MW (of which the GPUI Group's equity
interest represents 424 MW) of capacity. At December 31, 1999, GPU, Inc.'s
aggregate investment in the GPUI Group was $232 million. GPU, Inc. has also
guaranteed up to an additional $29.9 million of outstanding GPUI Group
obligations.
In June 1998, Onondaga Cogeneration L.P. (Onondaga), a GPU International
subsidiary, and Niagara Mohawk Power Corporation (NIMO) renegotiated their
existing power purchase agreement and entered into a 10-year power put indexed
swap agreement.
9
<PAGE>
The power put agreement gives Onondaga the right, but not the obligation,
to sell energy and capacity to NIMO at a proxy market price up to the specified
contract quantity.
Under the indexed swap agreement, Onondaga pays NIMO the market price of
energy and capacity and NIMO pays Onondaga a contract price which is fixed for
the first two years and then adjusted monthly, according to an indexing formula,
for the remaining term. At December 31, 1999 and 1998, the unamortized balance
of the swap contract was valued at $55.1 million and $62.4 million,
respectively, and was included in Other - Deferred Debits and Other assets on
the Consolidated Balance Sheets. This valuation was derived using the discounted
estimated cash flows related to payments expected to be received by Onondaga. A
corresponding amount was recorded in deferred revenue and will be recognized to
income over a period not to exceed 10 years.
Concurrent with the establishment of a competitive market for electricity
in New York (Power Exchange) and meeting specific trading volume criteria,
certain rights between Onondaga and NIMO expire under the power put agreement.
As a result, in 2000, GPU International expects to recognize in income all
proceeds from the renegotiated agreements, including the unamortized balance of
the deferred revenue from the indexed swap agreement, which will be largely
offset by an impairment of the Onondaga facility and a provision for
out-of-market gas transportation costs.
CAPITAL PROGRAMS
----------------
GPU Energy Companies
- --------------------
The GPU Energy companies' capital spending in 1999 was $291 million (JCP&L
$141 million; Met-Ed $66 million; Penelec $78 million; Other $6 million), and
was used primarily to expand and improve existing transmission and distribution
(T&D) facilities, for new customer connections and to implement an integrated
information system. In 2000, capital expenditures are estimated to be $349
million (JCP&L $178 million; Met-Ed $57 million; Penelec $82 million; Other $32
million), primarily for ongoing T&D system development.
GPU Electric
- ------------
GPU Electric's capital spending in 1999 was $129 million and was used
primarily for improvements to GPU PowerNet, Emdersa and Midlands' facilities.
Infrastructure-related capital expenditures are forecasted to be $213 million in
2000.
GPUI Group
- ----------
The GPUI Group's capital spending was $32 million in 1999 and was used
primarily for construction by one of the GPUI Group's South American
subsidiaries. Capital expenditures are forecasted to be $6 million in 2000.
10
<PAGE>
FINANCING ARRANGEMENTS
----------------------
GPU, Inc.
- ---------
In January 1999, the GPU, Inc. Board of Directors authorized the
repurchase of up to $350 million of GPU, Inc. common stock. Through December
31, 1999, GPU, Inc. has repurchased 6.4 million shares of common stock at an
average price of $35.25 per share.
GPU has various credit facilities in place, the most significant of which
are discussed below. These credit facilities generally provide GPU bank loans at
negotiable market rates.
GPU, Inc. and the GPU Energy companies have available $450 million of
short-term borrowing facilities, which include a $250 million revolving credit
agreement and various bank lines of credit. In addition, GPU, Inc., JCP&L,
Met-Ed and Penelec can issue commercial paper in amounts of up to $100 million,
$150 million, $75 million and $100 million, respectively. From these sources,
GPU, Inc. has regulatory authority to have $250 million outstanding at any one
time. JCP&L, Met-Ed and Penelec are limited by their charters or SEC
authorization to $265 million, $150 million and $150 million, respectively, of
short-term debt outstanding at any one time.
GPU, Inc. has SEC approval to issue and sell up to $300 million of
unsecured debentures through 2001, the proceeds from which could be utilized to
repay short-term debt or to finance additional investments. Further significant
investments by GPU Electric and/or the GPUI Group, or otherwise, may require
GPU, Inc. to issue additional debt and/or common stock.
GPU Energy Companies
- --------------------
Met-Ed and Penelec have regulatory approval to issue through December 31,
2000 senior notes and preferred securities in aggregate amounts of $150 million
and $275 million, respectively, of which up to $25 million for each company may
consist of preferred securities. JCP&L has regulatory approval to issue through
December 31, 2000, senior notes in the aggregate amount of $300 million. Met-Ed
and JCP&L will be issuing secured senior notes (collateralized by first mortgage
bonds (FMBs) issued to the senior note trustee) until such time as more than 80%
of the outstanding FMBs are held by the senior note trustee. At that time, the
FMBs will be cancelled and the outstanding senior notes will become unsecured
obligations. Penelec's senior notes are unsecured.
Current plans call for the GPU Energy companies to issue senior notes
during the next three years to fund the redemption of maturing senior
securities, refinance outstanding senior securities and finance construction
activities. Following the initial issuance of senior notes, the GPU Energy
companies would not issue any additional FMBs other than as collateral for the
senior notes. The senior note indentures prohibit (subject to certain
exceptions) the GPU Energy companies from issuing any debt, which is senior to
the senior notes.
In August 1999, JCP&L filed a petition with the NJBPU requesting
authorization to issue transition bonds to securitize the recovery of bondable
stranded costs attributable to the projected net investment in Oyster Creek at
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<PAGE>
September 1, 2000. The petition also requests that the NJBPU Order provide for
the imposition and collection of a usage-based non-bypassable transition bond
charge (TBC) and for the transfer of the bondable transition property relating
to the TBC to another entity. JCP&L has amended its petition to include requests
to securitize the up-front decommissioning and outage payments it has agreed to
make under the Oyster Creek sale agreement.
The GPU Energy companies' bond indentures include provisions that limit the
amount of FMBs the companies may issue. The GPU Energy companies' interest
coverage ratios are currently in excess of indenture restrictions. JCP&L's
certificate of incorporation includes provisions that limit the amount of
preferred stock it may issue. JCP&L's preferred dividend coverage ratio is
currently in compliance with the charter restrictions.
In 1999, Met-Ed and Penelec redeemed all of their outstanding shares of
cumulative preferred stock for $12.5 million and $17.4 million, respectively.
Also in 1999, Met-Ed and Penelec redeemed all of their outstanding shares of
Subsidiary-obligated mandatorily redeemable preferred securities for $100
million and $105 million, respectively.
In 1999, JCP&L redeemed $30 million stated value of cumulative preferred
stock pursuant to mandatory and optional sinking fund provisions.
In 1999, Penelec redeemed $600 million of FMBs with proceeds from the sale
of its interest in Homer City and issued $350 million of unsecured senior notes,
the proceeds from which were used to redeem or repurchase other outstanding
securities, reduce short-term borrowings, fund its construction program and for
other corporate purposes.
In 1999, Met-Ed and Penelec each issued $100 million of trust preferred
securities, at 7.35% and 7.34%, respectively.
The GPU Energy companies' cost of capital and ability to obtain external
financing are affected by their security ratings, which are periodically
reviewed by the credit rating agencies. The GPU Energy companies' FMBs are
currently rated at an equivalent of "A" or higher by the major credit rating
agencies, while the preferred stock, mandatorily redeemable preferred securities
and trust preferred securities have been assigned an equivalent of "BBB+" or
higher. In addition, the GPU Energy companies' commercial paper is rated as
having high credit quality.
At December 31, 1999, Met-Ed and Penelec had retained earnings available
to pay common stock dividends of $10 million and $49 million, respectively, net
of amounts restricted under the companies' respective FMB indentures. In
addition, Met-Ed and Penelec had capital surplus of $400 million and $285
million, respectively, which would also be available to pay common dividends, to
the extent authorized by the SEC and as may be permitted under their respective
FMB indentures. Met-Ed and Penelec have requested SEC approval to utilize
amounts now accounted for as capital surplus to declare and pay common
dividends, from time to time through December 31, 2001, so long as their common
equity ratios and GPU, Inc.'s common equity ratio are not less than 30% of total
capitalization. At December 31, 1999, the common equity ratios of Met-Ed,
Penelec and GPU, Inc. were 43.7%, 44.4% and 30.2%, respectively.
12
<PAGE>
Payments for maturing long-term debt were $83 million (JCP&L $3 million;
Met-Ed $30 million; Penelec $50 million) in 1999, and are expected to total $101
million (JCP&L $51 million; Met-Ed $50 million) in 2000 and $51 million for
JCP&L in 2001. Management estimates that a substantial portion of the GPU Energy
companies' 2000 capital outlays will be satisfied through internally generated
funds.
Met-Ed Capital Trust and Penelec Capital Trust
- ----------------------------------------------
Met-Ed Capital Trust (Met-Ed Trust) was created in May 1999 as a statutory
business trust under the laws of the State of Delaware solely for the purpose of
issuing trust preferred securities (Trust Preferred Securities) each
representing a 7.35% Cumulative Preferred Security (Met-Ed Partnership Preferred
Securities) of Met-Ed Capital II, L.P. Met-Ed Capital II, L.P. is the sponsor of
Met-Ed Trust. As of December 31, 1999, the assets of Met-Ed Trust consisted
solely of 4 million outstanding shares of Met-Ed Partnership Preferred
Securities with an aggregate stated liquidation amount of $100 million.
Distributions were made on the Trust Preferred Securities during 1999 in the
aggregate amount of $3,736,250. Expenses of Met-Ed Trust for 1999 were
approximately $15,000, all of which were paid by Met-Ed Preferred Capital II,
Inc., the general partner of Met-Ed Capital II, L.P. The Trust Preferred
Securities are issued in book-entry form only.
Penelec Capital Trust (Penelec Trust) was created in June 1999 as a
statutory business trust under the laws of the State of Delaware solely for the
purpose of issuing Trust Preferred Securities each representing a 7.34%
Cumulative Preferred Security (Penelec Partnership Preferred Securities) of
Penelec Capital II, L.P. Penelec Capital II, L.P. is the sponsor of Penelec
Trust. As of December 31, 1999, the assets of Penelec Trust consisted solely of
4 million outstanding shares of Penelec Partnership Preferred Securities with an
aggregate stated liquidation amount of $100 million. Distributions were made on
the Trust Preferred Securities during 1999 in the aggregate amount of
$3,364,167. Expenses of Penelec Trust for 1999 were approximately $15,000, all
of which were paid by Penelec Preferred Capital II, Inc., the general partner of
Penelec Capital II, L.P. The Trust Preferred Securities are issued in book-entry
form only.
GPU Electric
- ------------
GPU Capital has a $1 billion 364-day senior revolving credit agreement due
in December 2000 supporting the issuance of commercial paper for its $1 billion
commercial paper program established to fund GPU Electric acquisitions. GPU,
Inc. has guaranteed GPU Capital's obligations under this program. At December
31, 1999, $768 million was outstanding under the commercial paper program, of
which $370 million is included in long-term debt on the Consolidated Balance
Sheets since it is management's intent to reissue this amount of the commercial
paper on a long-term basis.
In 1999, GPU Capital sold $373 million of commercial paper to refinance
all its outstanding borrowings related to the 1996 acquisition of a 50% interest
in Midlands. In addition, in 1999, GPU Capital sold $50 million of commercial
paper to partially fund the acquisition of Cinergy's 50% ownership of Midlands.
The Emdersa and GPU GasNet acquisitions, in 1999, were also partially funded by
commercial paper sales of $323 million and $180 million, respectively.
13
<PAGE>
Also in 1999, GPU Capital borrowed A$750 million (approximately US $495
million) under a senior credit facility to fund the acquisition of GPU GasNet
and (pound)245 million (approximately US $382 million) under a term loan to fund
its acquisition of the remaining 50% interest in Midlands.
GPU Australia Holdings, Inc. has $270 million available under its senior
revolving credit facility which expires in November 2002. This facility, in
combination with other GPU, Inc. credit facilities, serves as credit support for
GPU Australia Holdings' $350 million commercial paper program. GPU, Inc. has
guaranteed GPU Australia Holdings' obligations under this program. GPU Australia
Holdings has $182 million outstanding under its commercial paper program as of
December 31, 1999. In 1999, GPU Australia Holdings refinanced $350 million of
outstanding long-term debt associated with the GPU PowerNet acquisition.
Austran Holdings, Inc. (Austran), a wholly-owned indirect subsidiary of
GPU Electric, has a A$500 million (approximately US $328 million) commercial
paper program to refinance the maturing portion of the senior debt credit
facility used to finance the GPU PowerNet acquisition. GPU PowerNet has
guaranteed Austran's obligations under this program. As of December 31, 1999,
Austran had outstanding approximately A$420 million (approximately US $275
million) under this program.
In 1999, Austran refinanced A$220 million (approximately US $142 million)
of GPU PowerNet acquisition debt with proceeds from an Australian Dollar medium
term note issuance. In connection with this debt refinancing program, a loss of
A$20.3 million (approximately US $13.3 million) related to certain interest rate
swap positions was reflected in GPU's 1999 earnings. In addition, Austran issued
A$50 million (approximately US $32 million) of variable rate and A$120 million
(approximately US $77 million) of fixed rate medium term notes, proceeds of
which were used to refinance acquisition debt.
Midlands maintains a (pound)200 million (approximately US $323 million)
syndicated revolving credit facility with a bank for working capital purposes,
which matures May 2001. At December 31, 1999, (pound)87 million (approximately
US $140 million) was outstanding under this facility.
Payments for maturing long-term debt were $453 million in 1999, and are
expected to total $475 million in 2000 and $1 billion in 2001. Capital outlays
for 2000 will be satisfied through both internally generated funds and external
financings.
GPUI Group
- ----------
GPU International has a revolving credit agreement providing for
borrowings through December 2000 of up to $30 million outstanding at any one
time, of which up to $15 million may be utilized to provide letters of credit.
GPU, Inc. has guaranteed GPU International's obligations under this agreement.
At December 31, 1999, no borrowings or letters of credit were outstanding under
this facility.
Payments for maturing long-term debt were $28 million in 1999, and are
expected to total $5 million in 2000 and $7 million in 2001. Capital outlays for
2000 will be satisfied by means of internally generated funds and external
financings.
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<PAGE>
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.
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. They also 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, but in general, permit the GPU Energy
companies to issue additional FMBs against a like principal amount of previously
issued and retired FMBs.
Penelec issued $350 million of senior notes in 1999. It does not intend to
issue any additional FMBs under its Mortgage and Deed of Trust.
At December 31, 1999, net earnings requirements would have permitted JCP&L
and Met-Ed to issue $1.3 billion and $879 million, respectively, principal
amount of additional FMBs at an assumed 8% interest rate. However, JCP&L had
bondable value of property additions sufficient to permit it to issue only
approximately $370 million principal amount of additional FMBs, as well as issue
approximately $361 million of FMBs against retired FMBs. Met-Ed could issue
approximately $121 million of FMBs against retired FMBs.
In general, the FMB indentures permit the GPU Energy companies to direct
the trustee to utilize cash on deposit to purchase callable or maturing bonds
and to purchase bonds in the market at not more than 105% of their principal
amount, plus accrued interest.
Among other restrictions, JCP&L's charter provides 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, 1999, these provisions would
have permitted JCP&L to issue $950 million stated value of cumulative preferred
stock at an assumed 8.5% dividend rate.
JCP&L's charter also provides that, without the consent of the holders of
a majority of the total voting power of JCP&L's outstanding preferred stock,
JCP&L may not issue or assume any securities representing short-term unsecured
indebtedness, except to refund certain outstanding unsecured securities issued
or assumed by JCP&L 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
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<PAGE>
(or within three years of maturity for all unsecured indebtedness having
original maturities in excess of ten years) would exceed 10% of the aggregate of
(a) the total principal amount of all outstanding secured indebtedness issued or
assumed by JCP&L and (b) the capital and surplus of JCP&L. At December 31, 1999,
these restrictions would have permitted JCP&L to have approximately $265 million
of unsecured indebtedness outstanding.
JCP&L has obtained authorization from the SEC to incur short-term debt
(including indebtedness under the revolving credit agreement and commercial
paper program) up to its charter limitation.
In February 1999, Met-Ed and Penelec redeemed all their cumulative
preferred stock. As a result, their charters no longer restrict the amount of
preferred stock or unsecured indebtedness they may have outstanding. Met-Ed and
Penelec are each limited by SEC authorization to $150 million of short-term debt
outstanding at any one time.
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 or acquire additional utility
businesses. 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. 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 ownership and operation of nuclear
generating stations and other related matters. See Electric Generation and
Environmental Matters for additional information.
Midlands' distribution operations are regulated under its Public
Electricity Supply License (PES License). Accordingly, income generated by the
distribution business is subject to a price cap regulatory framework, which
provides for an allowed increase in revenue based on increases in the volume of
electricity distributed. Under its PES License, Midlands provides distribution
services to virtually all electricity customers in its franchise area and, in
addition, is obliged to offer electricity supply services to these customers. In
June 1999, Midlands sold its supply business to National Power and National
Power assumed Midlands' supply obligation under the PES License. An agency
agreement with National Power serves as a backstop for the supply tariff
Midlands is allowed to charge its customers, since National Power has assumed
any risks of the costs of supplying power exceeding the tariff rates.
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<PAGE>
Midlands' distribution rates are determined in accordance with a formula
set by the Director General of Electricity Supply (DGES), which is ordinarily
reviewed every five years. The outcome of the most recent review will take
effect in April 2000.
GPU PowerNet is presently regulated by the Victorian Office of the
Regulator-General according to an incentive-based regulatory mechanism for the
period which subjects revenues for prescribed services to a cap. The revenue cap
changes annually in accordance with the consumer price index, less a so called X
factor set by the regulator (CPI-X). Effective January 1, 2001, regulatory
responsibility will be transferred to the Australian Competition and Consumer
Commission (ACCC). A revenue reset is scheduled to occur in 2002, with effect
from January 1, 2003.
GPU GasNet is presently regulated by the ACCC according to a similar
incentive-based regulatory mechanism. GPU GasNet's tariff order establishes an
initial tariff and a CPI-X formula, which adjusts that tariff annually through
December 31, 2002. The next regulatory review is scheduled for 2002, and will be
effective for five years commencing January 1, 2003.
Edesa, Edelar and Edesal operate under a specific tariff structure that
may be revised by the provincial regulators every five years in accordance with
the Regulatory Framework Law. In general, tariffs for electricity distribution
in Argentina are set in accordance with a model that takes four factors into
consideration: 1) the pass-through cost of electricity purchased, 2) the cost of
electricity losses, 3) distribution cost and 4) quality of service. The rate
structure allows distribution companies to retain the benefit of operational
efficiencies they are able to achieve until tariffs are reset.
Empresa Guaracachi S.A., the GPUI Group's electric generation company in
Bolivia, is subject to regulation under the Electricity Law of 1994. Twice each
year, the Superintendency of Electricity recalculates the prices that Empresa
Guaracachi S.A. and other electric generators may charge for capacity based upon
an estimated cost of constructing a new generating unit. In addition, energy
prices are recalculated semi-annually based upon a projected cost of generation,
including fuel and nonfuel variable operation and maintenance costs.
NUCLEAR FACILITIES
------------------
In December 1999, the GPU Energy companies sold TMI-1 to AmerGen for
approximately $100 million and AmerGen assumed all TMI-1 decommissioning
liabilities. In addition, JCP&L has agreed to sell Oyster Creek to AmerGen for
$10 million and reimbursement of the cost (estimated at $88 million) of the next
refueling outage. Three Mile Island Unit 2 (TMI-2), which was damaged during a
1979 accident, is jointly owned by JCP&L, Met-Ed and Penelec in the percentages
of 25%, 50% and 25%, respectively. JCP&L's net investment, including nuclear
fuel, in Oyster Creek in 1999 and 1998 was $10 million and $682 million,
respectively. The 1999 reduction in net investment reflects the impairment
write-down resulting from the proposed sale of the facility to AmerGen. JCP&L's
net investment in TMI-2 at December 31, 1999 and 1998 was $61 million and $66
million, respectively. JCP&L is collecting revenues for
17
<PAGE>
TMI-2 on a basis which provides for the recovery of its remaining investment in
the plant by 2008. Met-Ed and Penelec's remaining investments in TMI-2 were
written off in 1998 after receiving the PaPUC's Restructuring Orders.
Oyster Creek
- ------------
The operating license for the Oyster Creek station, a 619 MW boiling water
reactor, expires in 2009. In October 1999, JCP&L agreed to sell Oyster Creek to
AmerGen. The sale is subject to the receipt of various federal and state
regulatory approvals. Highlights of the agreements are presented in the
Competitive Environment and Rate Matters section of Management's Discussion and
Analysis. For 1999, Oyster Creek operated at a 97% unit capability factor. Its
next refueling outage is scheduled to begin in the fall of 2000.
TMI-2
- -----
As a result of the 1979 TMI-2 accident, individual claims for alleged
personal injury (including claims for punitive damages), which are material in
amount, were asserted against GPU, Inc. and the GPU Energy companies.
Approximately 2,100 of such claims were filed in the US 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.
In 1995, the US 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 US Supreme Court denied petitions filed by GPU, Inc. and the GPU
Energy companies to review the Court of Appeals' rulings.
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<PAGE>
In 1996, the District Court granted a motion for summary judgment filed by
GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test
cases," which had been selected for a test case trial as well as all of the
remaining 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 appealed the District Court's ruling to the
Court of Appeals for the Third Circuit. In November 1999, the Third Circuit
affirmed the District Court's dismissal of the ten "test cases," but set aside
the dismissal of the additional pending claims, remanding them to the District
Court for further proceedings. In remanding these claims, the Third Circuit held
that the District Court had erred in extending its summary judgment decision to
the other plaintiffs and imposing on these plaintiffs the District Court's
finding that radiation exposures below 10 rems were too speculative to establish
a causal link to cancer. The Court of Appeals stated that the non-test case
plaintiffs should be permitted to present their own individual evidence that
exposure to radiation from the accident caused their cancers.
GPU, Inc. and the GPU Energy companies believe that the Third Circuit has
misinterpreted the record before the District Court as it applies to the
non-test case plaintiffs, and in November 1999, filed petitions seeking a
rehearing and reconsideration of the Court's decision regarding the remaining
claims. The "test case" plaintiffs also requested a rehearing of the Court's
decision upholding the dismissal of their claims. In January 2000, the Court of
Appeals denied both petitions. The "test case" plaintiffs have stated that they
intend to seek, and GPU, Inc. and the GPU Energy companies are considering
whether to seek, Supreme Court review of the District Court's decision. There
can be no assurance as to the outcome of this litigation.
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 US Department of Energy (DOE).
In 1995, a consultant to GPUN performed site-specific studies of TMI-2 and
Oyster Creek (updated in 1998), 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. Under NRC regulations, JCP&L is making periodic payments
to complete the funding for Oyster Creek retirement costs by the end of the
plant's license term of 2009. The TMI-2 funding completion date is 2014,
consistent with TMI-2's remaining in long-term storage. The NRC may require an
acceleration of the decommissioning funding for Oyster Creek if the pending sale
is not completed and the plant is retired early. The retirement cost estimates
under the 1995 site-specific studies, assuming decommissioning of TMI-2 and
Oyster Creek in 2014 and 2009, respectively, are as follows (in 1999 dollars):
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(in millions)
Oyster
GPU TMI-2 Creek
- --- ----- -----
Radiological decommissioning $435 $591
Nonradiological cost of removal 34* 32
--- ---
Total $469 $623
=== ===
* Net of $12.6 million spent as of December 31, 1999.
Each of the GPU Energy companies is responsible for retirement costs in
proportion to its respective ownership percentage. The ultimate cost of retiring
the GPU Energy companies' nuclear facilities may be different from the cost
estimates contained in these site-specific studies. Also, the cost estimates
contained in these site-specific studies are significantly greater than the
decommissioning funding targets established by the NRC.
The 1995 Oyster Creek site-specific study was updated in 1998 in response
to the previously announced potential early closure of the plant in 2000. An
early shutdown would increase the retirement costs shown above to $632 million
($600 million for radiological decommissioning and $32 million for
nonradiological cost of removal). Both estimates include substantial spending
for an on-site dry storage facility for spent nuclear fuel and significant costs
for storing the fuel until the DOE complies with the Nuclear Waste Policy Act of
1982. For additional information, see OTHER COMMITMENTS AND CONTINGENCIES
section of Note 12, Commitments and Contingencies, of the Combined Notes to the
Consolidated Financial Statements.
The agreements to sell Oyster Creek to AmerGen provide, among other
things, that upon financial closing, JCP&L will transfer $430 million in
decommissioning trust funds to AmerGen, which will assume all liability for
decommissioning Oyster Creek.
The NJBPU has granted JCP&L annual revenues for Oyster Creek retirement
costs of $22.5 million based on the 1995 site-specific study. In August 2000,
the recovery of Oyster Creek retirement costs escalates to $34.4 million
annually if the plant is retired in 2000.
In the event JCP&L does not complete the pending sale of Oyster Creek,
management believes that any retirement costs, in excess of those currently
recognized for ratemaking purposes, should be recoverable from customers.
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, 1999 and 1998 are $497 million (JCP&L $124 million; Met-Ed $249
million; Penelec $124 million) and $484 million (JCP&L $121 million; Met-Ed $242
million; Penelec $121 million), respectively. These amounts are based upon the
1995 site-specific study estimates (in 1999 and 1998 dollars, respectively)
discussed above and an estimate for remaining incremental monitored storage
costs of $27 million (JCP&L $7 million; Met-Ed $13 million; Penelec $7 million)
for 1999 and $29 million (JCP&L $7 million; Met-Ed $15 million; Penelec $7
million) for 1998, as a result of TMI-2's entering long-term monitored storage
in 1993.
20
<PAGE>
Offsetting the $497 million liability at December 31, 1999 is $193 million
(JCP&L $14 million; Met-Ed $144 million; Penelec $35 million) which management
believes is probable of recovery from customers and included in Regulatory
assets, net on the Consolidated Balance Sheets, and $355 million (JCP&L $114
million; Met-Ed $144 million; Penelec $97 million) in trust funds for TMI-2 and
is included in Nuclear decommissioning trusts, at market on the Consolidated
Balance Sheets.
The NJBPU has granted JCP&L revenues for TMI-2 retirement costs based on
the 1995 site-specific estimates. In addition, JCP&L is recovering its share of
TMI-2 incremental monitored storage costs. The PaPUC Restructuring Orders
granted Met-Ed and Penelec recovery of TMI-2 decommissioning costs as part of
the competitive transition charge (CTC), but also allowed Met-Ed and Penelec to
defer as a regulatory asset those amounts that are above the level provided for
in the CTC.
At December 31, 1999, the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $77 million (JCP&L $19 million; Met-Ed
$39 million; Penelec $19 million), which is based on the 1995 site-specific
study estimates (in 1999 dollars).
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 Oyster Creek totals $2.75 billion. In addition,
GPU has purchased property and decontamination insurance coverage for TMI-2
totaling $150 million. 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 Oyster Creek to approximately $9.5 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 Oyster Creek, could result in an assessment of up to
21
<PAGE>
$88 million per incident, subject to an annual maximum payment of $10 million
per incident per reactor. Although TMI-2 is exempt from this assessment, the
plant is still covered by the provisions of the Price-Anderson Act. In addition
to the retrospective premiums payable under the Price-Anderson Act, the GPU
Energy companies are also subject to retrospective premium assessments of up to
$10.5 million for insurance policies currently in effect applicable to nuclear
operations and facilities. The GPU Energy companies are also subject to other
retrospective premium assessments related to policies applicable to TMI-1 prior
to the sale of the plant to AmerGen.
JCP&L has insurance coverage for incremental replacement power costs
should an accident-related outage at Oyster Creek occur. Coverage would commence
after a 12-week waiting period at $2.1 million per week for 52 weeks, decreasing
to 80% of such amount for the next 110 weeks.
ELECTRIC GENERATION AND ENVIRONMENTAL MATTERS
---------------------------------------------
Approximately 47% (JCP&L 59%; Met-Ed 33%; Penelec 53%) of the GPU Energy
companies' total energy requirements in 1999 were supplied by utility contracts,
NUG purchases, and interchange. The balance was provided by GPU Energy owned
generation. Substantially all of the GPU Energy companies' 2000 energy
requirements will be supplied by external sources.
In 1999, the GPU Energy companies completed the sales of TMI-1 and
substantially all of their fossil and hydroelectric generating stations. For
additional information, see Note 6, Accounting for Extraordinary and
Non-Recurring Items in the Combined Notes to Consolidated Financial Statements.
Nuclear fuel disposal: 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. AmerGen has assumed all liability for
disposal costs related to spent fuel generated after its purchase of TMI-1 and
has agreed to assume this liability for Oyster Creek following its purchase of
that plant. In 1996, the DOE notified the GPU Energy companies and other
standard contract holders that it would be unable to begin acceptance of spent
nuclear fuel for disposal by 1998, as mandated by the NWPA. The DOE's inability
to accept spent nuclear fuel 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. In June 1997, a consortium of electric
utilities, including GPUN, filed a license application with the NRC seeking
permission to build an interim storage facility for spent nuclear fuel in Utah.
The NRC is not expected to make a decision whether to approve construction of an
interim storage facility until late 2001. There can be no assurance as to the
outcome of these matters.
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 FERC
and of nuclear power projects by the NRC. Such licensing and other actions by
federal agencies with respect to GPU's domestic operations are also subject to
the National Environmental Policy Act.
22
<PAGE>
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 (MGP), coal mine
refuse piles and generation facilities.
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, 1999, GPU has liabilities recorded on its balance
sheets for environmental matters, as follows:
Company Amount (in millions)
------- --------------------
JCP&L $56.2
Met-Ed 0.7
Penelec 8.3
GPUN 0.5
GPU, Inc. 3.5
----
Total $69.2
====
Under the agreements entered into for the purchase of the GPU Energy
companies' generating facilities, the buyers, in general, have agreed to assume
all on-site environmental liabilities other than up to $6 million of the
remediation costs associated with contaminants from certain coal mine refuse
piles at the Seward Station, which liability Penelec has retained. Penelec
expects recovery of these remediation costs in Phase II of its restructuring
proceeding and has recorded a corresponding regulatory asset at December 31,
1999.
Nuclear: Reference is made to the NUCLEAR FACILITIES section for
-------
information regarding the TMI-2 accident, its aftermath and the GPU Energy
companies' other nuclear facilities.
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,
1999 amounted to $25 million (JCP&L $15 million; Met-Ed $7 million; Penelec $3
million). JCP&L is recovering these costs from customers through its BGS and
market transition charge rates while Met-Ed and Penelec anticipate recovery in
Phase II of their restructuring proceedings which began in early 2000.
Air: With respect to air quality, the GPU-owned generating stations are
---
subject to certain state environmental regulations of the New Jersey Department
of Environmental Protection (NJDEP) and the Pennsylvania Department of
Environmental Protection (PaDEP). The stations are also subject to certain
federal environmental regulations of the Environmental Protection Agency (EPA).
One of the major sets of regulations that governs air quality is the Federal
Clean Air Act of 1970.
23
<PAGE>
Electromagnetic Fields (EMF): 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 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 exposure to residential electric
and magnetic fields produce cancer, adverse neurobehavioral effects, or
reproductive and developmental effects." In June 1999, the National Institutes
of Environmental Health Sciences issued a report on the health effects from
exposure to power-line electric and magnetic fields. The report notes that EMF
exposure would not be included as an agent "reasonably anticipated to be a human
carcinogen", but recommends that inexpensive and safe reductions in field
exposure levels should be encouraged, until stronger evidence provides that
there is no link between exposures and health effects.
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 New Jersey Committee
on Radiation Protection, 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 results of operations and financial
position.
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 contain 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 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. JCP&L has entered into agreements with the NJDEP for the
investigation and remediation of 17 formerly owned MGP sites. JCP&L has also
entered into various cost-sharing agreements with other utilities for
24
<PAGE>
most of the sites. As of December 31, 1999, JCP&L has spent approximately $36
million in connection with the cleanup of these sites. In addition, JCP&L has
recorded an estimated environmental liability of $52 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 the $52 million due to significant uncertainties, including changes in
acceptable remediation methods and technologies. In addition, federal and state
law provides for payment by responsible parties for damage to natural resources.
In 1997, the NJBPU approved JCP&L's request to establish a Remediation
Adjustment Clause for the recovery of MGP remediation costs. As a result of the
NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was
transferred to the Societal Benefits Charge. At December 31, 1999, JCP&L had
recorded on its Consolidated Balance Sheet a regulatory asset of $44 million.
JCP&L is continuing to pursue 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, and has settled with all but
one of those insurance companies.
In 1997, the EPA filed a complaint against GPU, Inc. in the US District
Court for the District of Delaware for enforcement of its Unilateral Order
(Order) issued against GPU, Inc. to clean up the former Dover Gas Light Company
(Dover) manufactured gas production site (Site) in Dover, Delaware. Dover was
part of the AGECO/AGECORP group of companies from 1929 until 1942; GPU, Inc.
emerged from the AGECO/AGECORP reorganization proceedings in 1946. All of
Dover's common stock, which was sold in 1942 to an unaffiliated entity, was
subsequently acquired by Chesapeake Utilities Corporation (Chesapeake), which
merged with Dover in 1960. Chesapeake is currently performing the cleanup at the
Site. According to the complaint, the EPA is seeking (1) enforcement of the
Order against GPU; (2) recovery of its past response costs, (3) a declaratory
judgment that GPU is liable for any remaining cleanup costs of the Site and (4)
statutory penalties for noncompliance with the Order. The EPA has stated that it
has incurred approximately $1 million of past response costs as of December 31,
1999. The EPA estimates the total Site cleanup costs at approximately $4.2
million. Consultants to Chesapeake have estimated the remaining remediation
groundwater costs at approximately $10.5 million. In accordance with its penalty
policy, and in discussions with GPU, the EPA has demanded penalties calculated
at a daily rate of $8,800, rather than the statutory maximum of $27,500 per day.
At December 31, 1999, if the statutory maximum is applied, the total amount of
penalties would be approximately $34 million. GPU believes that it has
meritorious defenses to the imposition of penalties, or that if a penalty is
assessed, it should be at a lower daily rate. Chesapeake has also sued GPU, Inc.
for contribution to the cleanup of the Dover Site. The United States District
Court for the District of Delaware has consolidated the case filed by Chesapeake
with the case filed by the EPA and discovery is proceeding. There can be no
assurance as to the outcome of these proceedings.
The Federal Resource Conservation and Recovery Act of 1976, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
25
<PAGE>
(CERCLA) and the Superfund Amendment and Reauthorization Act of 1986 authorize
the EPA to issue orders 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.
In addition, federal and state law provides for payment by responsible parties
for damage to natural resources. 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
----- ------ ------- ---- --------- -----
6 4 2 1 1 11
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 (which are material in amount) for hazardous and/or
toxic substances allegedly released into the environment. As of December 31,
1999, a liability of approximately $6 million was recorded for 9 PRP sites where
it is probable that a loss has been incurred and the amount could be reasonably
estimated.
The ultimate cost of remediation of all 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 company involved.
FRANCHISES AND CONCESSIONS
--------------------------
JCP&L operates pursuant to franchises in the territory served by it and
has the right to occupy and use the public streets and ways of the state with
its poles, wires and equipment upon obtaining the consent in writing of the
owners of the soil, and also to occupy the public streets and ways underground
with its conduits, cables and equipment, where necessary, for its electric
operation. JCP&L has the requisite legal franchise for the operation of its
electric business within the State of New Jersey, including in incorporated
cities and towns where designations of new streets, public ways, etc., may be
obtained upon application to such municipalities. JCP&L holds a FERC license
expiring in 2013 authorizing it to operate and maintain the Yards Creek Station
in which JCP&L has a 50% ownership interest.
26
<PAGE>
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.
EMPLOYEE RELATIONS
------------------
GPU, Inc. and consolidated affiliates have approximately 10,800 employees
worldwide, of which 6,100 are employed in the US and 3,700 are employed in the
United Kingdom. The majority of the US workforce is employed by the GPU Energy
companies, of which approximately 4,000 are represented by unions for collective
bargaining purposes. In the United Kingdom, approximately 2,800 Midlands
employees are represented by unions; terms and conditions of the various
bargaining agreements are generally reviewed annually, on the first of April.
Approximately 225 GPU PowerNet and 70 GPU GasNet employees are covered by
Enterprise Agreements regarding their terms and conditions of employment. These
agreements generally extend for one year and in practice continue to apply until
replaced. JCP&L, Met-Ed and Penelec's collective bargaining agreements with the
International Brotherhood of Electrical Workers expire on October 31, 2002,
April 30, 2000 and May 14, 2002, respectively. Penelec's collective bargaining
agreement with the Utility Workers Union of America expires on June 30, 2001.
ITEM 2. PROPERTIES.
GPU Energy Companies' Generating Stations
- -----------------------------------------
At December 31, 1999, the generating stations of the GPU Energy companies
had an aggregate effective capability of 904,000 net kilowatts (KW), as follows:
Name of GPU Energy Year of Net KW
Station Company Installation (Summer)
------- ---------- ------------ --------
NUCLEAR:
Oyster Creek JCP&L 1969 619,000
GAS/OIL-FIRED:
Combustion
Turbines JCP&L 1989 66,000
HYDROELECTRIC:
York Haven Met-Ed 1905-1930 19,000
PUMPED STORAGE:(a)
Yards Creek JCP&L 1965 200,000
---------
TOTAL 904,000
=========
27
<PAGE>
(a) Represents JCP&L's undivided interest in this station, which is a net user
rather than a net producer of electric energy.
Substantially all of the GPU Energy companies' properties are subject to
the lien of their respective FMB indentures.
The all-time peak loads of the GPU Energy companies are as follows:
(In KW)
Company Date Peak Load
-------- ------------- ---------
GPU Energy companies Jul. 06, 1999 10,075,000*
JCP&L Jul. 06, 1999 5,180,000
Met-Ed Jul. 19, 1999 2,384,000
Penelec Jan. 19, 1997 2,652,000
* System peak load.
GPU Electric Generating Facilities
- ----------------------------------
At December 31, 1999, GPU Electric had ownership interests in 5 operating
natural gas-fired power production facilities located internationally, with an
aggregate capability of 4,244,500 KW as follows:
Name of Year of Ownership
Facility Location Installation Total KW Interest (KW)
- -------- -------- ------------ ---------- -------------
Teesside England 1993 1,875,000 498,800
Redditch* England 1991 29,000 29,000
Hereford England 1980 15,000 15,000
Humber England 1997-1999 1,261,500 237,200
Marmara Turkey 1999 478,000 148,200
Uch Pakistan ** 586,000 234,400
--------- ---------
Total 4,244,500 1,162,600
========= =========
* Sold in January 2000.
** Expected to begin commercial operation in 2000.
GPUI Group Generating Facilities
- --------------------------------
At December 31, 1999, the GPUI Group had ownership interests in 10
operating natural gas-fired cogeneration and other nonutility power production
facilities located both domestically and internationally, with an aggregate
capability of 2,243,300 KW as follows:
Name of Year of Ownership
Facility Location Installation Total KW Interest (KW)
- -------- -------- ------------ ---------- -------------
U.S. Facilities
---------------
Mid Georgia GA 1998 300,000 150,000
Selkirk* NY 1992-94 350,000 69,600
Lake FL 1993 110,000 109,900
Pasco FL 1993 109,000 54,400
Onondaga NY 1993 80,000 80,000
PELP (Marcal) NJ 1989 65,000 32,500
--------- ---------
Total 1,014,000 496,400
--------- ---------
28
<PAGE>
Foreign Facilities
------------------
Termobarran-
quilla Colombia 1972-98 890,000 254,500
Guaracachi Bolivia 1975-99 287,700 143,900
Aranjuez Bolivia 1974-94 36,900 18,500
Karachipampa Bolivia 1982 14,700 7,400
--------- ---------
Total 1,229,300 424,300
--------- ---------
Total capability 2,243,300 920,700
========= =========
* The GPUI Group does not have operating responsibility for this facility.
Transmission and Distribution System
- ------------------------------------
At December 31, 1999, the GPU Energy companies owned the following
transmission and distribution facilities:
JCP&L Met-Ed Penelec Total
----------- ---------- ---------- ----------
Transmission and Distribution
Substations 302 248 472 1,022
========== ========== ========== ==========
Aggregate Installed Transformer
Capacity of Substations
(in kilovoltamperes - KVA) 18,882,066 9,639,466 13,109,009 41,630,541
========== ========== ========== ==========
Transmission System (estimate):
- -------------------
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 232 385 1,330 1,947
69 KV, 46 KV and 34.5 KV 1,769 469 364 2,602
---------- ---------- ---------- ----------
Total 2,589 1,428 2,739 6,756
========== ========== ========== ==========
Distribution System (estimate):
- -------------------
Line Transformer Capacity (KVA) 10,348,078 6,176,550 7,031,077 23,555,705
========== ========== ========== ==========
Pole Miles of Overhead Lines 16,080 12,613 22,656 51,349
========== ========== ========== ==========
Trench Miles of Underground
Cable 7,311 2,287 2,013 11,611
========== ========== ========== ==========
Foreign Utility Companies
Electric Transmission and Distribution:
- --------------------------------------
In addition, Midlands, which provides service to 2.3 million customers in
a 5,135 square mile area in England, owns a total of 39,544 miles of overhead
and underground lines and has over 33,000 transformers mounted on
29
<PAGE>
poles and over 13,800 ground mounted transformers. GPU PowerNet, which serves
all of Victoria, Australia covering an area of approximately 87,900 square miles
and a population of 4.5 million, owns a total of 4,062 miles of overhead and
underground lines. Emdersa, which owns three electric distribution companies
servicing three provinces in northwest Argentina with approximately 335,000
customers within 206,340 square miles, has over 7,000 transformers, and owns
6,238 and 55 miles of overhead and underground lines, respectively.
Gas Transmission:
- ----------------
GPU GasNet, a natural gas transmission business, encompasses 1,239 miles
of pipeline consisting of two separate networks, the Principal System and the
Western System, which supply all of the natural gas consumed in Victoria,
Australia. The two networks service approximately 1.3 million residential
customers and approximately 40,000 industrial and commercial customers
throughout Victoria.
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to Significant Developments - Competitive Business
Risks; Restructuring Actions; and Domestic Energy Supply under Item 1 and to
Note 12, Commitments and Contingencies, of the Combined Notes to the
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.
30
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
All of JCP&L, Met-Ed and Penelec's outstanding common stock is owned by
GPU, Inc. During 1999, JCP&L, Met-Ed and Penelec paid dividends on their common
stock to GPU, Inc. in the following amounts: JCP&L $335 million, Met-Ed $315
million and Penelec $460 million.
In general, the JCP&L, Met-Ed and Penelec FMB indentures restrict the
payment of dividends or distributions on or with respect to their common stock
to amounts credited to earned surplus since approximately the dates of the
indentures. At such dates, the GPU Energy companies had balances in their earned
surplus accounts (which would not be available for dividends or other
distributions) as follows: JCP&L - $1.7 million; Met-Ed - $3.4 million; and
Penelec - $10.1 million. Met-Ed and Penelec have requested authorization from
the SEC to declare and pay common dividends from amounts now accounted for as
capital surplus, subject to their FMB indentures and other conditions. See the
Financing Arrangements section in Item 1 for additional information.
Stock Trading
GPU, Inc. is listed as GPU on the New York Stock Exchange. On March
15, 2000, there were 34,986 registered holders of GPU, Inc. common stock.
Dividends
GPU, Inc. common stock dividend declaration dates are the first Thursdays
of December, April, June and October. Dividend payment dates fall on the last
Wednesday of February, May, August and November. Dividend declarations and
quarterly stock price ranges for 1999 and 1998 are set forth below.
Common Stock
------------
Dividends Declared Price Ranges*
- ------------------------- ----------------------------------------------
1999 1998
1999 1998 Quarter High/Low High/Low
----- ----- ------- ------------------ ------------------
April $.53 $.515 First $45 $37 1/4 $44 11/16 $38 11/16
June .53 .515 Second 44 5/8 36 1/2 44 7/16 36 1/2
October .53 .515 Third 42 9/16 32 43 5/16 35 3/16
December .53 .515 Fourth 34 13/16 28 3/4 47 3/16 41 3/8
* 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.
31
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See pages F-1 and F-2 for references to each registrant's Management's
Discussion and Analysis of Financial Condition and Results of Operations
required by this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See pages F-22 through F-24 for references to GPU, Inc.'s Quantitative and
Qualitative Disclosures About Market Risk 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
32
<PAGE>
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 the BOARD OF DIRECTORS section of GPU, Inc.'s Proxy Statement for the 2000
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:
- --------------------
F. D. Hafer (a) 59 Chairman of the Board and 1996 1978 1994
Chief Executive Officer
R. L. Wise (b) 56 President 1999 1999 1999
M. P. O'Flynn (c) 54 Vice President - Finance 1999 1999 1999
and Rates and
Comptroller
C. B. Snyder (d) 54 Director 1997 1997 1997
JCP&L only:
- ----------
G. E. Persson (e) 67 Director 1983
S. C. Van Ness (f) 65 Director 1983
S. B. Wiley (g) 69 Director 1982
(a) Mr. Hafer is Chairman, Chief Executive Officer and President of GPU, Inc.
and GPUS (which he also serves as a director). He became President and
Chief Operating Officer of GPU and GPUS in July 1996 and was elected to the
additional positions of Chairman and Chief Executive Officer in May 1997.
He is also Chairman of the Board, Chief Executive Officer, and a director
of JCP&L, Met-Ed and Penelec (which do business as GPU Energy); Chairman of
the Board and a director of GPUN; Chairman, Chief Executive Officer and a
director of GPU AR; Chairman and a director of GPU Capital, Inc. (GPU
Capital); a director of GPU International, Inc. (GPUI), GPU Power, Inc.
(GPU Power), GPU Electric, Inc. (GPU Electric), Avon Energy Partners
Holdings (Avon), Midlands, GPU Telcom and Saxton Nuclear Experimental
Corporation (Saxton), all subsidiaries of GPU, Inc. He is President and
Chief Executive Officer of the GPU Foundation. Mr. Hafer, who has been
associated with the GPU companies since 1962, served as President of Met-Ed
from 1986 to 1996 and as President of Penelec from 1994 to 1996. Mr. Hafer
is also a director of the U.S. Chamber of Commerce and Utilities Mutual
Insurance Company, a director and past president of the Manufacturers
Association of Berks County and a director and past Chairman of the Board
of the Pennsylvania Electric Association. He is a director of the Reading
Hospital and Medical Center, a trustee of the Caron Foundation and
immediate past chairman and a member of the Board of Trustees of Drug-Free
Pennsylvania.
33
<PAGE>
(b) Mr. Wise was elected President of JCP&L, Met-Ed and Penelec in 1999. Mr.
Wise is also President, Chief Executive Officer and a director of GPU
Telcom; and President-Operations Division and a director of GPUS,
President and a director of Waverly Electric Light and Power Company and
a director of GPUN and Saxton. Prior to assuming these positions he
served as President and a director of GPUI, GPU Power and GPU Electric
from December 1998 to October 1999. From June 1996 to November 1999,
Mr. Wise served as President and a director of GPU Generation, Inc.
Prior to that, Mr. Wise served as President and a director of Penelec
since 1986. He is also a director of US Bancorp Trust Company, US
Bancorp, Inc., U.S. National Bank of Johnstown, PA. and Utilities Mutual
Insurance Company.
(c) Mr. O'Flynn was elected Vice President - Finance and Rates and Comptroller
of JCP&L, Met-Ed and Penelec in 1999. From February 1997 to August 1999, he
served as a self-employed consultant in the energy field. Prior to that, he
held various positions with Columbia Energy from 1970 to 1997.
(d) Mrs. Snyder was elected Executive Vice President - Corporate Affairs of
GPUS in 1998. She is also a director of GPUS, GPU AR and Midlands.
Previously, she served as Senior Vice President - Corporate Affairs of
GPUS, Vice President - Public Affairs of JCP&L since 1996 and Vice
President - Public Affairs of Met-Ed and Penelec since 1994.
(e) Mrs. Persson has served in the N.J. Division of Consumer Affairs Elder
Fraud Investigation Unit since 1999. She previously served 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.
(f) Mr. Van Ness is Of Counsel in the firm of Hubert, Van Ness, Gayri and
Goodell of Princeton, NJ since 1998. Prior to that he was 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.
(g) 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:
34
<PAGE>
Year First
Name Age Position Elected
- ---- --- -------- ---------
GPU, Inc.:
- ---------
F. D. Hafer (a) 59 Chairman, President and Chief 1996
Executive Officer
R. L. Wise (b) 56 President, JCP&L, Met-Ed and Penelec 1999
I. H. Jolles (c) 61 Senior Vice President and General 1990
Counsel
B. L. Levy (d) 44 Senior Vice President and Chief 1998
Financial Officer and President,
GPU Capital, Inc.
P. E. Maricondo (e) 53 Vice President, Comptroller and 1998
Chief Accounting Officer
T. G. Howson (f) 51 Vice President and Treasurer 1994
S. L. Guibord (g) 51 Secretary 1999
T. G. Broughton (h) 54 President, GPUN 1996
C. B. Snyder (i) 54 Executive Vice President - 1997
Corporate Affairs, GPUS
Year First Elected
Name Age Position JCP&L Met-Ed Penelec
- ---- --- -------- ----- ------ -------
JCP&L/Met-Ed/Penelec:
- --------------------
F. D. Hafer (a) 59 Chairman and Chief 1996 1978 1994
Executive Officer
R. L. Wise (b) 56 President and Chief 1999 1999 1999
Operating Officer
I. H. Jolles (c) 61 Vice President and 1996 1996 1996
General Counsel
B. L. Levy (d) 44 Vice President and 1998 1998 1998
Chief Financial Officer
T. G. Howson (f) 51 Vice President 1994 1994 1994
and Treasurer
S. L. Guibord (g) 51 Secretary 1996 1996 1996
C. Brooks (j) 50 Vice President - Human and 1997 1997 1997
Technical Resources
C. A. Mascari (k) 52 Vice President - Power 1997 1997 1997
Services
M. P. O'Flynn (l) 54 Vice President - 1999 1999 1999
Finance and Rates
and Comptroller
M. B. Roche (m) 48 Vice President - 1999 2000 2000
Customer Services and
Sr. Vice President -
New Jersey Operations
R. S. Zechman (n) 56 Vice President - 1996 1990 1994
Engineering and Operations
(a) See Note (a) on page 33.
(b) See Note (b) on page 34.
(c) Mr. Jolles is also Executive Vice President, General Counsel and a director
of GPUS, General Counsel of GPUN and a director of GPUS, GPUI, GPU Power,
GPU Capital, GPU Electric and Midlands. He is also a director of Utilities
Mutual Insurance Company.
35
<PAGE>
(d) Mr. Levy is also a director of GPUS, GPUI, GPU Power, GPU Capital, GPU
Electric, Avon and Midlands. Mr. Levy is also President of GPU Capital.
Prior to assuming his current position, Mr. Levy served as President,
Chief Executive Officer and director of GPUI since 1991.
(e) Mr. Maricondo was elected Vice President, Comptroller and Chief Accounting
Officer of GPU, Inc. and GPUS in 1998 and Vice President and Comptroller of
GPU Capital in 1999. Prior to that he served as Vice President - Internal
Auditing of GPUS since 1997 and as Vice President and Comptroller of GPUN
from 1993.
(f) Mr. Howson is also Vice President and Treasurer of GPUN, GPU AR, Saxton
and GPU Telcom.
(g) Mr. Guibord has also served as Corporate Compliance Auditing Director of
GPUS since 1994. Mr. Guibord also serves as Secretary of GPUS, GPUN,
GPU AR, GPU Telcom and Saxton.
(h) Mr. Broughton is also a director of GPUN. He previously served as Executive
Vice President of GPUN since 1995. Prior to that, he served as Vice
President - TMI of GPUN since 1991.
(i) See Note (d) on Page 34.
(j) Mr. Brooks previously served as Vice President - Collect and Disburse
Money of GPU Generation, Inc. since 1996. Prior to that, he was Vice
President - Materials and Services of GPUS since 1990.
(k) Mr. Mascari previously served as Vice President - System Planning of
GPUS since 1994.
(l) See Note (c) on page 34.
(m) Prior to assuming his current position, Mr. Roche served as Vice
President - Oyster Creek since June 1995.
(n) Mr. Zechman has also served as Vice President - Administrative Services
of Met-Ed since 1992.
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.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item with respect to GPU, Inc. is
incorporated by reference to the EXECUTIVE COMPENSATION section of GPU, Inc.'s
Proxy Statement for the 2000 Annual Meeting of Stockholders. The following table
sets forth remuneration paid, as required by this Item, to the Chief Executive
Officer and the five other most highly compensated executive officers of JCP&L,
Met-Ed and Penelec for the year ended December 31, 1999.
36
<PAGE>
<TABLE>
<CAPTION>
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
1999, 1998 and 1997.
Remuneration of Executive Officers
- ----------------------------------
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Name and Annual Underlying LTIP All Other
Principal Compens- Options Payouts Compens-
Position Year Salary($) Bonus($) ation($)(1) Granted(#) ($)(2) ation ($)
- -------- ---- --------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
F. D. Hafer
Chairman of the
Board and Chief
Executive Officer (3) (3) (3) (3) (3) (3) (3)
R. L. Wise
President (4) (4) (4) (4) (4) (4) (4)
R. S. Zechman 1999 170,000 120,000 - 1,400 21,043 22,083 (5)
Vice President - 1998 170,000 60,000 538 4,850 18,669 17,623
Engineering & Operations 1997 162,538 32,000 637 - 20,085 15,843
C. A. Mascari 1999 170,000 112,000 - 1,400 20,218 27,090 (6)
Vice President - 1998 170,000 50,000 - 4,850 21,002 20,762
Power Services 1997 156,228 32,000 - - 18,727 16,997
D. J. Howe 1999 170,000 95,000 - 1,400 - 18,604 (7)
Vice President - 1998 170,000 55,000 - 4,850 - 14,033
Customer Services 1997 162,308 32,000 - - - 11,524
<FN>
(1) Consists of earnings on "Long-Term Incentive Plan" ("LTIP") compensation
paid in the year the award vests.
(2) Consists of Performance Cash Incentive Awards paid on the 1992, 1993 and
1994 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. The restricted
units issued each year since 1995 under the 1990 Stock Plan are performance
based. The 1999 awards are shown in "Long-Term Incentive Plans - Awards in
Last Fiscal Year" table (the "LTIP table"). Dividend equivalents are earned
on the aggregate restricted units awarded under the 1990 Stock Plan and
reinvested in additional units.
The aggregate number and value (based on the stock price per share at
December 31, 1999) of unvested and deferred vested stock-equivalent
restricted units (including reinvested dividend equivalents) includes the
amounts shown on the LTIP table, and at the end of 1999 were:
</FN>
37
</TABLE>
<PAGE>
Aggregate Units Aggregate Value
--------------- ---------------
F. D. Hafer see note (3) see note (3)
R. L. Wise see note (4) see note (4)
R. S. Zechman 6,722 $199,980
C. A. Mascari 7,926 235,799
D. J. Howe 4,811 143,127
(3) Mr. Hafer was compensated by GPUS for his overall service on behalf of GPU
and accordingly was not compensated directly by the other subsidiary
companies for his services. Information with respect to Mr. Hafer's
compensation is included in the EXECUTIVE COMPENSATION section of GPU,
Inc.'s Proxy Statement for the 2000 Annual Meeting of Stockholders, which
is incorporated herein by reference.
(4) Information with respect to Mr. Wise's compensation is included in the
EXECUTIVE COMPENSATION section of GPU, Inc.'s Proxy Statement for the 2000
Annual Meeting of Stockholders, which is incorporated herein by reference.
(5) Consists of GPU's matching contributions under the Savings Plan ($6,400),
matching contributions under the non-qualified deferred compensation plan
($2,800), above-market interest accrued on the retirement portion of
deferred compensation ($351), and earnings on LTIP compensation not paid
in the current year ($12,532).
(6) Consists of GPU's matching contributions under the Savings Plan ($6,400),
matching contributions under the non-qualified deferred compensation plan
($2,400), above-market interest accrued on the retirement portion of
deferred compensation ($3,314), and earnings on LTIP compensation not paid
in the current year ($14,976).
(7) Consists of GPU's matching contributions under the Savings Plan ($6,400),
matching contributions under the non-qualified deferred compensation plan
($2,600), above-market interest accrued on the retirement portion of
deferred compensation ($901), and earnings on LTIP compensation not paid
in the current year ($8,703).
Option Grants In Last Fiscal Year
- ---------------------------------
The following table summarizes option grants made during 1999 to the Named
Executive Officers. All of these options were granted with an exercise price
equal to the fair market value of GPU stock on the date of grant.
38
<PAGE>
<TABLE>
<CAPTION>
Individual Grants
Number of
Securities % of Total
Underlying Options
Options Granted to
Grant Granted(1) Employees in Base Price Expiration Grant Date
Name Date (#) Fiscal Year ($/Sh) Date Present Value(2)
- --------------- -------- --------- ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
F. D. Hafer (3) (3) (3) (3) (3) (3)
R. L. Wise (4) (4) (4) (4) (4) (4)
R. S. Zechman 06/03/99 1,400 1.5% $42.9375 06/03/09 $9,240
C. A. Mascari 06/03/99 1,400 1.5% 42.9375 06/03/09 9,240
D. J. Howe 06/03/99 1,400 1.5% 42.9375 06/03/09 9,240
<FN>
(1) Options become exercisable in three equal annual installments beginning on
the first anniversary of the date of the grant. These grants will fully
vest upon termination of employment resulting from death or disability.
Options may be exercised after retirement in accordance with the terms of
the 1999 Stock Option Agreement. In the event of a change in control during
the option term, all options will immediately become exercisable.
(2) Options are valued using a Black-Scholes option pricing model, a
mathematical formula widely used to value options. The model as applied
used the applicable grant dates and the exercise prices shown on the table,
and the fair market value of Common Stock on the respective grant dates,
which was in each case the same as the exercise price. For the June 1999
grant, the model assumed (i) a risk-free rate of return of 6.14%, which
approximates the rate on 10-year U.S. Treasury zero coupon bonds on the
grant date; (ii) a stock price volatility of 20.21%, based on the average
historical volatility for the 36-month period ending on the grant date;
(iii) an average dividend yield of 5.42%, based on the average yield for a
36-month period; (iv) the exercise of all options on the final day of their
10-year terms; and (v) 3% discount for risk of forfeiture prior to the
options becoming exercisable. No discount from the theoretical value was
taken to reflect the restrictions on the transfer of the options and the
likelihood of the options being exercised in advance of the final day of
their terms.
(3) Information with respect to Mr. Hafer's options is included in the
EXECUTIVE COMPENSATION section of GPU, Inc.'s Proxy Statement for the 2000
Annual Meeting of Stockholders, which is incorporated herein by reference.
(4) Information with respect to Mr. Wise's options is included in the EXECUTIVE
COMPENSATION section of GPU, Inc.'s Proxy Statement for the 2000 Annual
Meeting of Stockholders, which is incorporated herein by reference.
</FN>
39
</TABLE>
<PAGE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Value
The following table summarizes the number and value of all unexercised
options held by the Named Executive Officers. In 1999, no options were exercised
by any Named Executive Officer.
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year-End (#) at Fiscal Year-End ($)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
F. D. Hafer (3) (3) (3) (3)
R. L. Wise (4) (4) (4) (4)
R. S. Zechman 1,617 4,633 0 0
C. A. Mascari 1,617 4,633 0 0
D. J. Howe 1,617 4,633 0 0
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
------------------------------------------------------
This table shows the LTIP awards made to the Named Executive Officers for
the performance period January 1, 1999 through December 31, 2003.
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 (#) (#) (#)
---- ------------- ------------- ----------- ---- ------
F. D. Hafer (2) (2) (2) (2) (2)
R. L. Wise (2) (2) (2) (2) (2)
R. S. Zechman 1,100 5 year vesting 550 1,100 2,200
C. A. Mascari 1,100 5 year vesting 550 1,100 2,200
D. J. Howe 1,100 5 year vesting 550 1,100 2,200
(1) The restricted units awarded in 1999 under the 1990 Stock Plan provide for
a performance adjustment to the aggregate number of units vesting for the
recipient, including the accumulated reinvested dividend equivalents, 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% below the 40th percentile. The minimum payout or "Threshold" begins at
the 40th percentile, which results in a payout of 50% of target. A ranking
below the 40th percentile would result in no award. 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.
40
<PAGE>
(2) Information with respect to Mr. Hafer's and Mr. Wise's long-term incentive
plans is included in the EXECUTIVE COMPENSATION section of GPU, Inc.'s
Proxy Statement for the 2000 Annual Meeting of Stockholders, which is
incorporated herein by reference.
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 companies' pension plans provide for pension benefits, payable for
life after retirement, based upon years of creditable service with the GPU
companies and the employee's career average compensation as defined below.
Federal law limits the amount of an employee's pension benefits that may be paid
from a qualified trust established pursuant to a qualified pension plan (such as
the GPU companies' plans). 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, 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 from
funded and unfunded sources resulting from employer contributions to the
qualified trust and direct payments payable upon retirement in 2000 (computed on
a single life annuity basis) to persons in specified compensation and years of
service classifications:
ESTIMATED ANNUAL RETIREMENT BENEFITS (2) (3) (4)
BASED UPON CAREER AVERAGE COMPENSATION
(2000 Retirement)
Career
Average
Compen- Years of Service
sation(1) -------------------------------------------------------
15 20 25 30 35 40
--------- -------- -------- -------- -------- -------- ------
$ 50,000 $ 13,810 $18,413 $ 23,016 $27,620 $ 32,223 $ 36,585
100,000 28,810 38,413 48,016 57,620 67,223 76,185
150,000 43,810 58,413 73,016 87,620 102,223 115,785
200,000 58,810 78,413 98,016 117,620 137,223 155,385
250,000 73,810 98,413 123,016 147,620 172,223 194,985
300,000 88,810 118,413 148,016 177,620 207,223 234,585
350,000 103,810 138,413 173,016 207,620 242,223 274,185
400,000 118,810 158,413 198,016 237,620 277,223 313,785
450,000 133,810 178,413 223,016 267,620 312,223 353,385
500,000 148,810 198,413 248,016 297,620 347,223 392,985
550,000 163,810 218,413 273,016 327,620 382,223 432,585
600,000 178,810 238,413 298,016 357,620 417,223 472,185
650,000 193,810 258,413 323,016 387,620 452,223 511,785
700,000 208,810 278,413 348,016 417,620 487,223 551,385
750,000 223,810 298,413 373,016 447,620 522,223 590,985
800,000 238,810 318,413 398,016 477,620 557,223 630,585
41
<PAGE>
(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. Hafer - $414,320; Wise - $304,694; Zechman - $139,754;
Mascari - $138,924; and Howe - $119,362.
(2) Years of Creditable Service at December 31, 1999: Messrs. Hafer - 37 years;
Wise - 36 years; Zechman - 30 years; Mascari - 26 years; and Howe - 23
years.
(3) Based on an assumed retirement at age 65 in 1999. 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%, as defined in the pension plan, of the average
compensation during the highest paid 36 calendar months. As of December 31,
1999, none of the Named Executive Officers exceed the 55% limit.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item for GPU, Inc. is incorporated by
reference to the SECURITY OWNERSHIP section of GPU, Inc.'s Proxy Statement for
the 2000 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., 300 Madison Avenue, Morristown, NJ 07962.
The following table sets forth, as of February 1, 2000, the beneficial
ownership of equity securities (and stock-equivalent units) of each of the
directors and each of the executive officers named in the Summary Compensation
Table, and of all directors and executive officers of each of the respective GPU
Energy companies as a group. The shares of Common Stock owned by all directors
and executive officers as a group constitute less than 1% of the total shares
outstanding.
42
<PAGE>
Amount and Nature of Beneficial Ownership
Shares(1) Stock-Equivalent
Name Title of Security Direct Indirect Units(2)
---- ------------------ ----- ------- -------
JCP&L/Met-Ed/Penelec:
F. D. Hafer GPU Common Stock 12,421 154 34,547
R. L. Wise GPU Common Stock 4,111 - 23,370
R. S. Zechman GPU Common Stock 1,914 - 6,722
C. A. Mascari GPU Common Stock - 6 7,926
D. J. Howe GPU Common Stock - 481 4,811
C. B. Snyder GPU Common Stock 955 - 7,726
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 43,095 3,442 142,530
(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, Inc. and Subsidiaries (the "1990 Stock Plan").
These amounts also include restricted units, which have vested under the
1990 Stock Plan, but which were deferred pursuant to that Plan by the
following officers: Mr. Wise - 6,765 units, Mr. Zechman - 689 units, and
Mr. Mascari - 2,001 units. See Summary Compensation Table above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
GPU and its subsidiaries have business arrangements with organizations with
which certain GPU directors and certain owners of 5% or more of GPU stock are
affiliated. These arrangements are conducted in the ordinary course of business,
at arms-length, and on standard commercial terms and conditions.
43
<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 - Incorporated by reference to Exhibit 3-A-2, 1996
Annual Report on Form 10-K, SEC File No. 1-6047.
3-B By-Laws of GPU, Inc. as amended May 6, 1999.
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 dated March 8,
1999.
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-F-1 By-Laws of Met-Ed dated May 22, 1997 - Incorporated by
reference to Exhibit B-35 to GPU, Inc.'s Annual Report on Form
U5S, SEC File No. 30-126.
3-G Restated Articles of Incorporation of Penelec dated March 8,
1999.
44
<PAGE>
3-H By-Laws of Penelec dated May 22 1997, as amended -
Incorporated by reference to Exhibit B-45, 1997 Annual Report
of GPU on Form U5S, SEC File No. 30-126.
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.
45
<PAGE>
4-A-12 Twentieth Supplemental Indenture of JCP&L, dated November 1,
1971 - Incorporated by reference to Exhibit 5-A-12,
Registration No. 2-59875.
4-A-13 Twenty-first Supplemental Indenture of JCP&L, dated August 1,
1972 - Incorporated by reference to Exhibit 5-A-13,
Registration No. 2-59785.
4-A-14 Twenty-second Supplemental Indenture of JCP&L, dated August 1,
1973 - Incorporated by reference to Exhibit 5-A-14,
Registration No. 2-59785.
4-A-15 Twenty-third Supplemental Indenture of JCP&L, dated October 1,
1973 - Incorporated by reference to Exhibit 5-A-15,
Registration No. 2-59785.
4-A-16 Twenty-fourth Supplemental Indenture of JCP&L, dated December
1, 1973 - Incorporated by reference to Exhibit 5-A-16,
Registration No. 2-59785.
4-A-17 Twenty-fifth Supplemental Indenture of JCP&L, dated November
1, 1974 - Incorporated by reference to Exhibit 5-A-17,
Registration No. 2-59785.
4-A-18 Twenty-sixth Supplemental Indenture of JCP&L, dated March 1,
1975 - Incorporated by reference to Exhibit 5-A-18,
Registration No. 2-59785.
4-A-19 Twenty-seventh Supplemental Indenture of JCP&L, dated July 1,
1975 - Incorporated by reference to Exhibit 5-A-19,
Registration No. 2-59785.
4-A-20 Twenty-eighth Supplemental Indenture of JCP&L, dated October
1, 1975 - Incorporated by reference to Exhibit 5-A-20,
Registration No. 2-59785.
4-A-21 Twenty-ninth Supplemental Indenture of JCP&L, dated February
1, 1976 - Incorporated by reference to Exhibit 5-A-21,
Registration No. 2-59785.
4-A-22 Supplemental Indenture No. 29A of JCP&L, dated May 31, 1976
- Incorporated by reference to Exhibit 5-A-22, Registration
No. 2-59785.
4-A-23 Thirtieth Supplemental Indenture of JCP&L, dated June 1, 1976
- Incorporated by reference to Exhibit 5-A-23, Registration
No. 2-59785.
4-A-24 Thirty-first Supplemental Indenture of JCP&L, dated May 1,
1977 - Incorporated by reference to Exhibit 5-A-24,
Registration No. 2-59785.
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.
46
<PAGE>
4-A-26 Thirty-third Supplemental Indenture of JCP&L, dated January 1,
1979 - Incorporated by reference to Exhibit A-20(b),
Certificate Pursuant to Rule 24, SEC File No. 70-6242.
4-A-27 Thirty-fourth Supplemental Indenture of JCP&L, dated June 1,
1979 - Incorporated by reference to Exhibit A-28, Certificate
Pursuant to Rule 24, SEC File No. 70-6290.
4-A-28 Thirty-sixth Supplemental Indenture of JCP&L, dated October 1,
1979 - Incorporated by reference to Exhibit A-30, Certificate
Pursuant to Rule 24, SEC File No. 70-6354.
4-A-29 Thirty-seventh Supplemental Indenture of JCP&L, dated
September 1, 1984 - Incorporated by reference to Exhibit
A-1(cc), Certificate Pursuant to Rule 24, SEC File No.
70-7001.
4-A-30 Thirty-eighth Supplemental Indenture of JCP&L, dated July 1,
1985 - Incorporated by reference to Exhibit A-1(dd),
Certificate Pursuant to Rule 24, SEC File No. 70-7109.
4-A-31 Thirty-ninth Supplemental Indenture of JCP&L, dated April 1,
1988 - Incorporated by reference to Exhibit A-1(a),
Certificate Pursuant to Rule 24, SEC File No. 70-7263.
4-A-32 Fortieth Supplemental Indenture of JCP&L, dated June 14, 1988
- Incorporated by reference to Exhibit A-1(ff), Certificate
Pursuant to Rule 24, SEC File No. 70-7603.
4-A-33 Forty-first Supplemental Indenture of JCP&L, dated April 1,
1989 - Incorporated by reference to Exhibit A-1(gg),
Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-34 Forty-second Supplemental Indenture of JCP&L, dated July 1,
1989 - Incorporated by reference to Exhibit A-1(hh),
Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-35 Forty-third Supplemental Indenture of JCP&L, dated March 1,
1991 - Incorporated by reference to Exhibit 4-A-35,
Registration No. 33-45314.
4-A-36 Forty-fourth Supplemental Indenture of JCP&L, dated March 1,
1992 - Incorporated by reference to Exhibit 4-A-36,
Registration No. 33-49405.
4-A-37 Forty-fifth Supplemental Indenture of JCP&L, dated October 1,
1992 - Incorporated by reference to Exhibit 4-A-37,
Registration No. 33-49405.
4-A-38 Forty-sixth Supplemental Indenture of JCP&L, dated April 1,
1993 - Incorporated by reference to Exhibit C-15, 1992 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
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.
47
<PAGE>
4-A-40 Forty-eighth Supplemental Indenture of JCP&L, dated April 15,
1993 - Incorporated by reference to Exhibit C-17, 1992 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-A-41 Forty-ninth Supplemental Indenture of JCP&L, dated October 1,
1993 - Incorporated by reference to Exhibit C-18, 1993 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-A-42 Fiftieth Supplemental Indenture of JCP&L, dated August 1, 1994
- Incorporated by reference to Exhibit C-19, 1994 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-A-43 Fifty-first Supplemental Indenture of JCP&L, dated August 15,
1996 - Incorporated by reference to Exhibit 4-A-43, 1996
Annual Report on Form 10-K, SEC File No. 1-6047.
4-A-44 Fifty-second Supplemental Indenture of JCP&L dated July 1,
1999 - Incorporated by reference to Item 16 Exhibit 4-B-44
Registration No. 333-88783.
4-A-45 Fifty-third Supplemental Indenture of JCP&L dated November 1,
1999.
4-A-46 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-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.
48
<PAGE>
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.
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.
49
<PAGE>
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.
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 -
Incorporated by reference to Exhibit 4-B-35, 1996 Annual
Report on Form 10-K, SEC File No. 1-446.
50
<PAGE>
4-B-36 Supplemental Indenture of Met-Ed dated May 1, 1997 -
Incorporated by reference to Exhibit 4-B-36, 1997 Annual
Report on Form 10-K, SEC File No. 1-446.
4-B-37 Indenture between Met-Ed and United States Trust Company of
New York dated May 1, 1999 - Incorporated by reference to
Exhibit A-11(a), Certificate Pursuant to Rule 24, SEC File No.
70-9329.
4-B-38 Supplemental Indenture between Met-Ed and United States Trust
Company of New York dated July 1, 1999.
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.
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.
51
<PAGE>
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 -
Incorporated by reference to Exhibit 4-C-12, 1996 Annual
Report on Form 10-K, SEC File No. 1-3522.
4-C-13 Senior Note Indenture between Penelec and United States Trust
Company of New York dated April 1, 1999.
4-C-14 Indenture between Penelec and United States Trust Company of
New York dated June 1, 1999 - Incorporated by reference to
Exhibit A-11(a), Certificate Pursuant to Rule 24, SEC File No.
70-9327.
4-D 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-E 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-F 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-G Payment and Guarantee Agreement of Met-Ed, dated May 28, 1999
- Incorporated by reference to Exhibit B-1(a), Certificate
Pursuant to Rule 24, SEC No. 70-9329.
4-H Amendment No. 1 to Payment and Guarantee Agreement of
Met-Ed, dated November 23, 1999.
4-I Payment and Guarantee Agreement of Penelec, dated June 16,
1999 - Incorporated by reference to Exhibit B-1(a),
Certificate Pursuant to Rule 24, SEC File No. 70-9327.
4-J Amendment No. 1 to Payment and Guarantee Agreement of
Penelec, dated November 23, 1999.
4-K Form of Rights Agreement between GPU, Inc. and ChaseMellon
Shareholder Services, L.L.C. - Incorporated by reference to
Exhibit 4, June 30, 1998 Quarterly Report on Form 10-Q, SEC
File No. 1-6047.
52
<PAGE>
10-A GPU System Companies Deferred Compensation Plan dated June 5,
1997 - Incorporated by reference to Exhibit 10-A, 1997 Annual
Report on Form 10-K, SEC File No. 1-6047, 1-3141, 1-446 and
1-3522.
10-B 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-C 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-D 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-E Incentive Compensation Plan for Elected Officers of JCP&L
dated February 6, 1997 - Incorporated by reference to Exhibit
10-G, 1997 Annual Report on Form 10-K, SEC File No. 1-3141.
10-F Incentive Compensation Plan for Elected Officers of Met-Ed
dated February 6, 1997 - Incorporated by reference to Exhibit
10-H, 1997 Annual Report on Form 10-K, SEC File No. 1-446.
10-G Incentive Compensation Plan for Elected Officers of Penelec
dated February 6, 1997 - Incorporated by reference to Exhibit
10-I, 1997 Annual Report on Form 10-K, SEC File No. 1-3522.
10-H Deferred Remuneration Plan for Outside Directors of JCP&L
dated June 5, 1997 - Incorporated by reference to Exhibit
10-J, 1997 Annual Report on Form 10-K, SEC File No. 1-3141.
10-I JCP&L Supplemental and Excess Benefits Plan dated June 5, 1997
- Incorporated by reference to Exhibit 10-K, 1997 Annual
Report on Form 10-K, SEC File No. 1-3141.
10-J Met-Ed Supplemental and Excess Benefits Plan dated June 5,
1997 - Incorporated by reference to Exhibit 10-L, 1997 Annual
Report on Form 10-K, SEC File No. 1-446.
10-K Penelec Supplemental and Excess Benefits Plan dated June 5,
1997 - Incorporated by reference to Exhibit 10-M, 1997 Annual
Report on Form 10-K, SEC File No. 1-3522.
10-L Letter agreement dated August 7, 1997 relating to terms of
employment and pension benefits for I.H. Jolles - Incorporated
by reference to Exhibit 10-O, 1997 Annual Report on Form 10-K,
SEC File No. 1-6047.
10-M GPU, Inc. Restricted Stock Plan for Outside Directors dated
June 4, 1998 - Incorporated by reference to Exhibit 10-O, 1998
Annual Report on Form 10-K, SEC File No. 1-6047.
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<PAGE>
10-N Retirement Plan for Outside Directors of GPU, Inc. dated
June 5, 1997 - Incorporated by reference to Exhibit 10-R,
1997 Annual Report on Form 10-K, SEC File No. 1-6047.
10-O Deferred Remuneration Plan for Outside Directors of GPU,
Inc. dated October 8, 1997 - Incorporated by reference to
Exhibit 10-R, 1997 Annual Report on Form 10-S, SEC File No.
1-6047.
10-P Second Amended and Restated Nuclear Material Lease Agreement,
dated as of November 5, 1998, between Oyster Creek Fuel Corp.
and JCP&L - Incorporated by reference to Exhibit 10-S, 1998
Annual Report on Form 10-K, SEC File No. 1-3141.
10-Q Letter Agreement, dated as of November 5, 1998, from JCP&L
relating to Oyster Creek Nuclear Material Lease Agreement -
Incorporated by reference to Exhibit 10-S, 1998 Annual Report
on Form 10-K, SEC File No. 1-3141.
10-R Form of 1998 Stock Option Agreement under the 1990 Stock Plan
for Employees of GPU, Inc. and Subsidiaries - Incorporated by
reference to Exhibit 10-O, 1997 Annual Report on Form 10-K,
SEC File No. 1-6047.
10-S Form of 1998 Performance Units Agreement under the 1990 Stock
Plan for Employees of GPU, Inc. and Subsidiaries- Incorporated
by reference to Exhibit 10-O, 1997 Annual Report on Form 10-K,
SEC File No. 1-6047.
10-T Amended and Restated GPU System Companies Master Directors'
Benefits Protection Trust effective June 1, 1999.
10-U Amended and Restated GPU System Companies Master Executives'
Benefits Protection Trust effective June 1, 1999.
10-V GPU, Inc. 1990 Stock Plan for Employees of GPU, Inc. and
Subsidiaries as amended and restated to reflect amendments
through June 3, 1999.
10-W Form of 1999 Stock Option Agreement under the 1990 Stock Plan
for Employees of GPU, Inc. and Subsidiaries.
10-X Form of 1999 Performance Units Agreement under the 1990 Stock
Plan for Employees of GPU, Inc. and Subsidiaries.
10-Y Letter agreement dated February 23, 2000 relating to terms
and conditions of the supplemental pension for Robert L.
Wise.
10-Z Severance Protection Agreement for Thomas G. Broughton, dated
November 5, 1998 - Incorporated by reference to Exhibit C-26
to GPU, Inc.'s Annual Report on Form U5S for the year 1998,
SEC File No. 30-126.
54
<PAGE>
10-AA Severance Protection Agreement for Fred D. Hafer, dated
November 5, 1998 - Incorporated by reference to Exhibit C-24
to GPU, Inc.'s Annual Report on Form U5S for the year 1998,
SEC File No. 30-126.
10-BB Severance Protection Agreement for Ira H. Jolles, dated
November 5, 1998- Incorporated by reference to Exhibit C-25 to
GPU, Inc.'s Annual Report on Form U5S for the year 1998, SEC
File No. 30-126.
10-CC Severance Protection Agreement for Bruce L. Levy, dated
December 16, 1998 - Incorporated by reference to Exhibit C-28
to GPU, Inc.'s Annual Report on Form U5S for the year 1998,
SEC File No. 30-126.
10-DD Severance Protection Agreement for Carole B. Snyder, dated
November 30, 1998 - Incorporated by reference to Exhibit C-27
to GPU, Inc.'s Annual Report on Form U5S for the year 1998,
SEC File No. 30-126.
10-EE Severance Protection Agreement for Robert L. Wise, as
amended and restated, dated February 23, 2000.
10-FF GPU Companies Supplemental Executive Retirement Plan, as
adopted effective July 1, 1999.
10-GG Oyster Creek Nuclear Generating Station Purchase and Sale
Agreement by and among GPU Nuclear, Inc. and JCP&L, as
sellers, and AmerGen Energy Company, LLC, as buyer, dated as
of October 15, 1999.
10-HH Agreement and Plan of Merger by and among GPU, Inc., MYR
Group Inc. and GPX Acquisition Corp. - Incorporated by
reference to Exhibit (c) (1) to GPU Inc.'s. Schedule 14D-1
Tender Offer Statement, SEC File No. 1-6047.
10-II Letter Agreement with Charles M. Brennan III and Byron D.
Nelson, dated December 21, 1999 - Incorporated by reference to
exhibit (c) (2) to GPU, Inc.'s Schedule 14D-1 Tender Offer
Statement, SEC File No. 1-6047.
10-JJ Forms of Estate Enhancement Program Agreements.
12 Statements Showing Computation of Ratio of Earnings to
Fixed Charges and Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
21 Subsidiaries of the Registrants
A - JCP&L
B - Met-Ed
C - Penelec
55
<PAGE>
23 Consent of Independent Accountants
A - GPU, Inc.
B - JCP&L
C - Met-Ed
D - Penelec
27 Financial Data Schedules
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
56
<PAGE>
(b) Reports on Form 8-K:
GPU, Inc.:
---------
Dated December 2, 1999, under Item 2 (Acquisition or
Disposition of Assets) and Item 5 (Other Events).
Dated December 22, 1999, under Item 5 (Other Events).
Dated December 27, 1999, under Item 2 (Acquisition or
Disposition of Assets).
Dated December 27, 1999, under Item 5 (Other Events).
Dated December 29, 1999, under Item 5 (Other Events).
Dated February 4, 2000, under Item 5 (Other Events).
Dated March 3, 2000, under Item 7 (Financial
Statements, Pro Forma Financial Information and
Exhibits).
Jersey Central Power & Light Company:
------------------------------------
Dated November 18, 1999, under Item 5 (Other Events).
Dated December 2, 1999, under Item 2 (Acquisition or
Disposition of Assets) and Item 5 (Other Events).
Dated December 27, 1999, under Item 2 (Acquisition or
Disposition of Assets).
Metropolitan Edison Company:
---------------------------
Dated December 2, 1999, under Item 2 (Acquisition or
Disposition of Assets) and Item 5 (Other Events).
Dated December 27, 1999, under Item 2 (Acquisition or
Disposition of Assets).
Dated February 4, 2000, under Item 5 (Other Events).
Pennsylvania Electric Company:
-----------------------------
Dated December 2, 1999, under Item 2 (Acquisition or
Disposition of Assets) and Item 5 (Other Events).
Dated December 27, 1999, under Item 2 (Acquisition or
Disposition of Assets).
Dated February 4, 2000, under Item 5 (Other Events).
57
<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 20, 2000 BY: /s/ F. D. Hafer
---------------
F. D. Hafer, 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/ F. D. Hafer March 20, 2000
- ----------------------------------------------
F. D. Hafer, Chairman (Chief Executive
Officer) and President and Director
/s/ B. L. Levy March 20, 2000
- ----------------------------------------------
B. L. Levy, Senior Vice President
(Chief Financial Officer)
/s/ P. E. Maricondo March 20, 2000
- ----------------------------------------------
P. E. Maricondo, Vice President and
Comptroller (Chief Accounting Officer)
/s/ T. H. Black March 20, 2000
- ----------------------------------------------
T. H. Black, Director
/s/ T. B. Hagen March 20, 2000
- ----------------------------------------------
T. B. Hagen, Director
/s/ H. F. Henderson, Jr. March 20, 2000
- ----------------------------------------------
H. F. Henderson, Jr., Director
/s/ J. M. Pietruski March 20, 2000
- ----------------------------------------------
J. M. Pietruski, Director
/s/ C. A. Rein March 20, 2000
- ----------------------------------------------
C. A. Rein, Director
/s/ B. S. Townsend March 20, 2000
- ----------------------------------------------
B. S. Townsend, Director
/s/ C. A. H. Trost March 20, 2000
- ----------------------------------------------
C. A. H. Trost, Director
/s/ K. L. Wolfe March 20, 2000
- ----------------------------------------------
K. L. Wolfe, Director
/s/ P. K. Woolf March 20, 2000
- ----------------------------------------------
P. K. Woolf, Director
58
<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 20, 2000 BY: /s/ R. L. Wise
--------------
R. L. Wise, 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/ F. D. Hafer March 20, 2000
- ----------------------------------------------
F. D. Hafer, Chairman
(Principal Executive Officer) and Director
/s/ R. L. Wise March 20, 2000
- ----------------------------------------------
R. L. Wise, President
(Principal Operating Officer) and Director
/s/ B. L. Levy March 20, 2000
- ----------------------------------------------
B. L. Levy, Vice President
(Principal Financial Officer)
/s/ M. P. O'Flynn March 20, 2000
- ----------------------------------------------
M. P. O'Flynn, Vice President-Finance
and Rates & Comptroller and Director
(Principal Accounting Officer)
/s/ C. B. Snyder March 20, 2000
- ----------------------------------------------
C. B. Snyder, Director
/s/ G. E. Persson March 20, 2000
- ----------------------------------------------
G. E. Persson, Director
/s/ S. C. Van Ness March 20, 2000
- ----------------------------------------------
S. C. Van Ness, Director
/s/ S. B. Wiley March 20, 2000
- ----------------------------------------------
S. B. Wiley, Director
59
<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 20, 2000 BY: /s/ R. L. Wise
--------------
R. L. Wise, 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/ F. D. Hafer March 20, 2000
- ----------------------------------------------
F. D. Hafer, Chairman
(Principal Executive Officer) and Director
/s/ R. L. Wise March 20, 2000
- ----------------------------------------------
R. L. Wise, President
(Principal Operating Officer) and Director
/s/ B. L. Levy March 20, 2000
- ----------------------------------------------
B. L. Levy, Vice President
(Principal Financial Officer)
/s/ M. P. O'Flynn March 20, 2000
- ----------------------------------------------
M. P. O'Flynn, Vice President-Finance
and Rates & Comptroller and Director
(Principal Accounting Officer)
/s/ C. B. Snyder March 20, 2000
- ----------------------------------------------
C. B. Snyder, Director
60
<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 20, 2000 BY: /s/ R. L. Wise
--------------
R. L. Wise, 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/ F. D. Hafer March 20, 2000
- ----------------------------------------------
F. D. Hafer, Chairman
(Principal Executive Officer) and Director
/s/ R. L. Wise March 20, 2000
- ----------------------------------------------
R. L. Wise, President
(Principal Operating Officer) and Director
/s/ B. L. Levy March 20, 2000
- ----------------------------------------------
B. L. Levy, Vice President
(Principal Financial Officer)
/s/ M. P. O'Flynn March 20, 2000
- ----------------------------------------------
M. P. O'Flynn, Vice President-Finance
and Rates & Comptroller and Director
(Principal Accounting Officer)
/s/ C. B. Snyder March 20, 2000
- ----------------------------------------------
C. B. Snyder, Director
61
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-41
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-42
Consolidated Statements of Income for the
Years Ended December 31, 1999, 1998 and 1997 F-44
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1999, 1998 and 1997 F-45
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 1999, 1998 and 1997 F-45
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997 F-46
Combined Notes to Consolidated Financial Statements F-47
Financial Statement Schedules
- -----------------------------
Schedule II - Valuation and Qualifying Accounts for the
Years 1997-1999 F-104
JERSEY CENTRAL POWER & LIGHT COMPANY
------------------------------------
Supplementary Data
- ------------------
Company Statistics F-105
Selected Financial Data F-106
Quarterly Financial Data F-107
Financial Statements
- --------------------
Report of Independent Accountants F-108
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-109
Consolidated Statements of Income for the
Years Ended December 31, 1999, 1998 and 1997 F-111
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1999, 1998 and 1997 F-112
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 1999, 1998 and 1997 F-112
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997 F-113
Financial Statement Schedules
- -----------------------------
Schedule II - Valuation and Qualifying Accounts for the
Years 1997-1999 F-114
F-1
<PAGE>
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
-------------------------------------------------
AND FINANCIAL STATEMENT SCHEDULES
---------------------------------
METROPOLITAN EDISON COMPANY
---------------------------
Supplementary Data
Company Statistics F-115
Selected Financial Data F-116
Quarterly Financial Data F-117
Financial Statements
Report of Independent Accountants F-118
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-119
Consolidated Statements of Income for the
Years Ended December 31, 1999, 1998 and 1997 F-121
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1999, 1998 and 1997 F-122
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 1999, 1998 and 1997 F-122
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997 F-123
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1997-1999 F-124
PENNSYLVANIA ELECTRIC COMPANY
-----------------------------
Supplementary Data
Company Statistics F-125
Selected Financial Data F-126
Quarterly Financial Data F-127
Financial Statements
Report of Independent Accountants F-128
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-129
Consolidated Statements of Income for the
Years Ended December 31, 1999, 1998 and 1997 F-131
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 1999, 1998 and 1997 F-132
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 1999, 1998 and 1997 F-132
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997 F-133
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 1997-1999 F-134
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>
<CAPTION>
GPU, Inc. and Subsidiary Companies
GPU ENERGY COMPANIES' STATISTICS
For The Years Ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
Capacity at System Peak (in MW):
<S> <C> <C> <C> <C> <C>
Company owned 5,765 6,751 6,740 6,680 6,637
Contracted 3,192 4,275 3,930 3,536 3,604
------ ------ ------ ------ -----
Total capacity (a) 8,957 11,026 10,670 10,216 10,241
====== ====== ====== ====== ======
Hourly Peak Load (in MW):
Summer peak 10,075 9,412 9,555 8,497 9,101
Winter peak 8,046 7,579 7,736 7,756 7,861
Reserve at system peak (%) (11.1) 17.0 11.7 20.2 12.5
Load factor (%) (b) 57.2 59.4 57.6 64.2 57.5
Sources of Energy (in thousands of MWH):
Coal 12,116 19,675 19,390 18,133 17,500
Nuclear 11,479 11,358 10,992 11,439 11,582
Gas, hydro & oil 736 888 800 812 1,019
------ ------ ------ ------ ------
Net generation 24,331 31,921 31,182 30,384 30,101
Utility purchases and interchange 11,047 8,782 9,004 8,795 10,297
Nonutility purchases 10,875 10,952 11,119 11,046 10,712
------ ------ ------ ------ ------
Total sources of energy 46,253 51,655 51,305 50,225 51,110
Energy from alternate suppliers 10,034 - - - -
Company use, line loss, etc. (4,783) (4,300) (5,437) (5,777) (5,357)
------ ------ ------ ------ ------
Total delivered MWH sales 51,504 47,355 45,868 44,448 45,753
====== ====== ====== ====== =======
Fuel Expense (in millions):
Coal $ 162 $ 263 $ 268 $263 $251
Nuclear 67 67 63 70 74
Gas & oil 31 32 40 38 38
----- ---- ---- --- ---
Total $ 260 $ 362 $ 371 $371 $363
===== ==== ==== === ====
Power Purchased and Interchanged (in millions):
Utility and interchange purchases $ 422 $ 311 $ 294 $ 267 $ 351
Nonutility purchases 783 788 759 730 671
Deferred nonutility costs (PA) (66) (17) (25) - -
Amortization of nonutility buyout costs 26 30 19 9 -
----- ----- ----- ----- ----
Total $1,165 $1,112 $1,047 $1,006 $1,022
===== ===== ===== ===== =====
Delivered MWH Sales (in thousands):
Residential 16,107 15,347 15,091 15,298 14,802
Commercial 15,431 14,778 14,281 14,017 13,544
Industrial 12,239 12,644 12,469 12,093 11,982
Other 811 996 1,110 1,105 1,143
------ ------ ------ ------ -------
Sales to customers 44,588 43,765 42,951 42,513 41,471
Sales to other utilities 6,916 3,590 2,917 1,935 4,282
------ ------ ------ ------ ------
Total 51,504 47,355 45,868 44,448 45,753
====== ====== ====== ====== ======
Operating Revenues (in millions):
Residential $1,618 $1,579 $1,617 $1,599 $1,542
Commercial 1,229 1,350 1,372 1,324 1,258
Industrial 498 795 833 803 780
Other 60 66 75 71 73
----- ----- ----- ----- -----
Sales to customers 3,405 3,790 3,897 3,797 3,653
Provision for rate refunds (56) (62) - - -
Sales to other utilities 233 132 77 57 101
----- ----- ----- ----- ------
Total electric energy sales 3,582 3,860 3,974 3,854 3,754
Other revenues 104 93 70 64 51
----- ----- ----- ----- ------
Total $3,686 $3,953 $4,044 $3,918 $3,805
===== ===== ===== ===== =====
Customers at Year-End (in thousands):
Total customers 2,063 2,041 2,021 1,997 1,976
Customers choosing alternate suppliers 72 - - - -
(a) Summer ratings at December 31, 1999 of owned and contracted capacity were
904 MW and 7,828 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
SELECTED FINANCIAL DATA
For The Years Ended December 31, 1999(1) 1998(2) 1997(3) 1996(4) 1995(5)
- -------------------------------------------------------------------------------------------------------------
Common Stock Data
Earnings per common share before extraordinary item:
<S> <C> <C> <C> <C> <C>
Basic $ 3.66 $ 3.03 $ 2.78 $ 2.48 $ 3.79
Diluted $ 3.66 $ 3.03 $ 2.77 $ 2.47 $ 3.79
Earnings per common share:
Basic $ 3.66 $ 2.83 $ 2.78 $ 2.48 $ 3.79
Diluted $ 3.66 $ 2.83 $ 2.77 $ 2.47 $ 3.79
Cash dividends paid per share $ 2.105 $ 2.045 $ 1.985 $ 1.925 $ 1.86
Book value per share $ 28.45 $ 27.01 $ 25.59 $ 25.21 $ 24.66
Closing market price per share $ 29 3/4 $44 3/16 $ 42 1/8 $ 33 5/8 $ 34
Common shares outstanding (in thousands):
Basic average 125,368 127,093 120,722 120,513 116,063
Diluted average 125,570 127,312 121,002 120,751 116,179
At year-end 121,806 127,996 120,833 120,611 120,423
Market price to book value at year-end 105% 164% 165% 133% 138%
Price/earnings ratio 8.1 15.6 15.2 13.6 9.0
Return on average common equity 13.0% 10.7% 10.7% 9.8% 16.0%
Financial Data (in millions)
Operating revenues $4,757.1 $4,248.8 $4,143.4 $3,970.7 $3,822.5
Other operation and maintenance expense 1,495.4 1,106.9 993.7 1,114.9 965.1
Income before extraordinary item 459.0 385.9 335.1 298.4 440.1
Net income 459.0 360.1 335.1 298.4 440.1
Net utility plant in service 7,836.5 6,565.1 7,100.5 5,942.4 5,862.4
Total assets 21,718.1 16,288.1 12,822.9 10,851.4 9,751.5
Long-term debt 5,850.6 3,825.6 4,326.0 3,177.0 2,567.9
Long-term capital lease obligations 2.2 2.6 3.3 6.6 11.7
Trust preferred securities 200.0 - - - -
Subsidiary-obligated mandatorily
redeemable preferred securities 125.0 330.0 330.0 330.0 330.0
Cumulative preferred stock with
mandatory redemption 73.2 86.5 91.5 114.0 134.0
Capital expenditures and
investments (includes acquisitions) 2,131.7 468.2 2,268.6 977.5 626.7
Employees 10,830 8,957 9,346 9,345 10,286
<FN>
(1) Results for 1999 include net gains of $36.1 million (after-tax), or $0.29
per share, as a result of the sales of substantially all the GPU Energy
companies' electric generating stations as well as a gain on the sale of the
Midlands supply business of $6.8 million (after-tax), or $0.05 per share.
Also in 1999, as a result of the NJBPU Restructuring Order, GPU recorded a
non-recurring charge of $68 million (after-tax), or $0.54 per share. For
additional information, see Note 7, Acquisitions.
(2) Results for 1998 include an extraordinary charge of $25.8 million
(after-tax), or $0.20 per share, as a result of the PaPUC's Restructuring
Orders on Met-Ed and Penelec's restructuring plans. Also in 1998, as a
result of the PaPUC Orders, GPU recorded a non-recurring charge of $40
million (after-tax), or $0.32 per share, related to the obligation to refund
1998 revenues; and for the establishment of a sustainable energy fund.
(3) Results for 1997 reflect a non-recurring charge of $109.3 million, or $0.90
per share, for a windfall profits tax imposed on privatized utilities,
including Midlands, by the Government of the United Kingdom.
(4) Results for 1996 reflect a non-recurring charge of $74.5 million
(after-tax), or $0.62 per share, for costs related to voluntary enhanced
retirement programs.
(5) 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 non-recurring 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-4
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
------------------------- ----------------------
in thousands, except
per share data 1999 (1) 1998 1999(2) 1998 (3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $1,068,703 $1,043,109 $892,700 $1,015,087
Operating income 298,633 259,634 132,027 215,622
Income before extraordinary item 190,719 133,780 47,262 79,937
Net income/(loss) 190,719 133,780 47,262 (195,173)
Basic earnings per share before
extraordinary item 1.49 1.07 0.39 0.62
Diluted earnings per share before
extraordinary item 1.49 1.07 0.38 0.62
Basic earnings/(loss) per share 1.49 1.07 0.39 (1.54)
Diluted earnings/(loss) per share 1.49 1.07 0.38 (1.54)
Third Quarter Fourth Quarter
----------------------- ------------------
in thousands, except
per share data 1999 1998 (4) 1999(5) 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $1,424,286 $1,168,779 $1,371,435 $1,021,817
Operating income 376,970 225,950 201,200 194,873
Income before extraordinary item 147,547 88,691 73,486 83,473
Net income 147,547 338,046 73,486 83,473
Basic earnings per share before
extraordinary item 1.18 0.69 0.60 0.65
Diluted earnings per share before
extraordinary item 1.18 0.69 0.60 0.65
Basic earnings per share 1.18 2.65 0.60 0.65
Diluted earnings per share 1.18 2.65 0.60 0.65
<FN>
(1) Results for the first quarter of 1999 include an increase of $27.8 million
after-tax, or $0.22 per share, for the gain on the sale of Penelec's Homer
City Station, related to wholesale operations.
(2) Results for the second quarter of 1999 include a reduction of $68 million
after-tax, or $0.54 per share, as a result of the NJBPU's Restructuring
Order on JCP&L, and an after-tax increase of $9.7 million, or $0.08 per
share, for the gain on the sale of the Midlands supply business.
(3) Results for the second quarter of 1998 were affected by an extraordinary
charge of $275.1 million after-tax, or $2.16 per share, as a result of the
Pennsylvania Public Utility Commission's (PaPUC) June 30, 1998 Restructuring
Orders on Met-Ed and Penelec's restructuring plans.
(4) In the third quarter of 1998, as a result of amended PaPUC Restructuring
Orders, GPU reversed $266.3 million after-tax, or $2.09 per share, of the
extraordinary charge taken in the second quarter, primarily related to
above-market nonutility generation costs; and recorded an additional
extraordinary charge of $17 million after-tax, or $0.13 per share, primarily
related to the write-off of FERC jurisdictional assets. Also in the third
quarter of 1998, as a result of the amended PaPUC Orders, GPU recorded a
non-recurring charge of $40 million after-tax, or $0.32 per share, related
to the obligation to refund 1998 revenues; and for the establishment of a
sustainable energy fund.
(5) Results for the fourth quarter of 1999 include an increase of $8.3 million
after-tax, or $0.07 per share, for the net gains on the sales of
substantially all of GPU Energy's remaining generating assets; and, as a
result of adjustments to the working capital estimate, a reduction of $2.9
million after-tax, or $0.03 per share, was taken against the previously
recorded gain on the sale of the Midlands supply business. In addition, the
aggregate effect on earnings of other fourth quarter 1999 adjustments was a
loss of approximately $23 million after-tax, or approximately $0.19 per
share.
F-5
</FN>
</TABLE>
<PAGE>
GPU, Inc. and Subsidiary Companies
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GPU, Inc. 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). The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear generating facilities of these electric utilities are
conducting business under the name GPU Energy. JCP&L, Met-Ed and Penelec
considered together are referred to as the "GPU Energy companies." The nuclear
generation operations of GPU Energy are conducted by GPU Nuclear, Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric and gas transmission and distribution systems
in foreign countries, and are referred to as "GPU Electric." GPU International,
Inc. and GPU Power, Inc. and their subsidiaries develop, own and operate
generation facilities in the United States and foreign countries and are
referred to as the "GPUI Group." Other subsidiaries of GPU, Inc. include GPU
Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU
Telcom Services, Inc. (GPU Telcom), which is engaged in
telecommunications-related businesses; and GPU Service, Inc. (GPUS), which
provides legal, accounting, financial and other services to the GPU companies.
All of these companies considered together are referred to as "GPU."
The matters discussed in 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 estimates, forecasts, assumptions, 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; the
completion of generation asset divestiture; energy prices and availability; and
uncertainties involved with foreign operations including political risks and
foreign currency fluctuations.
GPU RESULTS OF OPERATIONS
-------------------------
EARNINGS PER SHARE CONTRIBUTION:
- --------------------------------
(on a diluted basis) 1999 1998 Change 1998 1997 Change
- -----------------------------------------------------------------------------
Operations:
GPU Energy companies * $ 3.51 $ 2.90 $ 0.61 $ 2.90 $ 3.21 $(0.31)
GPU Electric 0.38 0.44 (0.06) 0.44 0.75 (0.31)
GPUI Group 0.15 0.11 0.04 0.11 (0.13) 0.24
GPU AR (0.04) (0.01) (0.03) (0.01) (0.04) 0.03
GPU, Inc. (Corporate) (0.14) (0.09) (0.05) (0.09) (0.12) 0.03
----- ----- ----- ----- ----- -----
Total operations 3.86 3.35 0.51 3.35 3.67 (0.32)
Non-recurring items:
GPU Energy companies (0.25) (0.52) 0.27 (0.52) - (0.52
GPU Electric 0.05 - 0.05 - (0.90) 0.90
----- ----- ----- ----- ----- -----
Total $ 3.66 $ 2.83 $ 0.83 $ 2.83 $ 2.77 $ 0.06
===== ===== ===== ===== ===== =====
* Includes GPU Telcom
F-6
<PAGE>
GPU's 1999 earnings were $459.0 million, or $3.66 per share, compared with
earnings of $360.1 million, or $2.83 per share, for 1998. GPU's return on
average common equity was 13.0% in 1999, compared to 10.7% in 1998. Both periods
reflect non-recurring items.
Excluding the following non-recurring items, earnings for 1999 would have
been $484.1 million, or $3.86 per share: the net gain of $36.1 million
after-tax, or $0.29 per share, for the sales of the GPU Energy companies'
generating facilities related to wholesale operations; the non-recurring charge
of $68 million after-tax, or $0.54 per share, resulting from a Summary
Restructuring Order (Summary Order) issued to JCP&L by the New Jersey Board of
Public Utilities (NJBPU); and the gain on the sale of the Midlands Electricity
plc (Midlands) supply business of $6.8 million after-tax, or $0.05 per share.
Excluding the effect of the Pennsylvania Public Utility Commission's (PaPUC)
rate actions, earnings for 1998 would have been $425.9 million, or $3.35 per
share. Return on average common equity for 1999 and 1998 on this basis would
have been 13.7% and 12.4%, respectively.
The $0.51 per share earnings increase in 1999 versus 1998, excluding
non-recurring items, was due to increased earnings from the GPU Energy companies
primarily as a result of higher sales to other utilities, lower operation and
maintenance (O&M) expense and lower depreciation expense. Also contributing to
the increase was higher profits from operations at Midlands. Partially
offsetting these increases were lower generation sales to customers by the GPU
Energy companies as a result of some customers choosing alternate suppliers; and
the absence of gains realized in 1998 on the sale of GPU Electric's interest in
Solaris Power (Solaris) and the sale of AllGas Energy stock.
In 1997, a non-recurring charge of $109.3 million, or $0.90 per share, was
taken for a windfall profits tax assessed on privatized utilities by the
Government of the United Kingdom. Excluding the impact of non-recurring items in
both years, GPU's earnings for 1998 would have been $425.9 million, compared to
$444.4 million in 1997, and earnings per share for 1998 would have been $3.35,
compared to $3.67 in 1997. Return on average common equity for 1998 and 1997 on
this basis would have been 12.4% and 14%, respectively.
The 1998 earnings per share decrease on this basis was due to lower income
from the GPU Energy companies, and increased shares outstanding due to the sale
of GPU, Inc. common stock in February 1998. The GPU Energy companies' earnings
reduction for the period was due to increased O&M expenses primarily related to
the implementation of a new company-wide computer software system and
restructuring costs related to staff reductions, partially offset by higher
electric sales. After adjusting for the related impacts of the windfall profits
tax, GPU Electric's income contribution increased for the year and partially
offset the GPU Energy companies' decrease.
OPERATING REVENUES:
- ------------------
Operating revenues increased $508.3 million to $4.8 billion in 1999, and
increased $105.4 million to $4.2 billion in 1998. The components of the changes
are as follows:
F-7
<PAGE>
Changes (in millions)
--------------------------------
1999 1998
---- ----
GPU Energy companies:
Kilowatt-hour (KWH) revenues $(570.8) $ 30.9
Energy and restructuring-related
revenues 220.2 49.8
Obligation to refund revenues (58.6) (56.4)
Competitive transition charge
(CTC) revenues 138.7 -
GPU Telcom revenues (9.7) 16.1
Other revenues 12.7 (130.9)
----- ------
Total GPU Energy companies (267.5) (90.5)
GPU Electric 683.5 151.6
GPUI Group 18.6 34.7
GPU AR 73.7 9.6
----- -----
Total increase $ 508.3 $ 105.4
===== =====
GPU Energy companies
Kilowatt-hour revenues
- ----------------------
1999
The decrease was primarily due to lower generation-related revenues of
approximately $430 million as a result of some Pennsylvania customers choosing
another electric energy supplier and a decrease of approximately $325 million in
nonutility generation (NUG) revenues for Met-Ed and Penelec (which did not have
an impact on earnings since NUG-related revenues are now being collected through
the CTC effective January 1, 1999). Partially offsetting these decreases were
increased sales to other utilities of approximately $160 million, the absence of
an earnings cap adjustment (since JCP&L was not in an over earnings position in
1999) which reduced JCP&L's 1998 revenues and higher weather-related sales.
1998
The increase in KWH revenues was primarily due to an increase in
residential and commercial customer usage, partially offset by lower
weather-related sales to residential and commercial customers, and the absence
in 1998 of the step increase in unbilled revenue recorded by Met-Ed.
Energy and restructuring-related revenues (JCP&L only)
- ------------------------------------------------------
1999 and 1998
The 1999 increase was primarily due to a change in the estimate for
unbilled revenue and the inclusion of revenues, effective August 1, 1999, for
the recovery of stranded costs due to restructuring in New Jersey. Changes in
energy and restructuring-related revenues do not affect earnings as they are
offset by corresponding changes in expense. The 1998 increase was due primarily
to increased sales to other utilities and higher residential and commercial
customer sales.
Obligation to refund revenues to customers
- ------------------------------------------
1999
The decrease was primarily due to the NJBPU's Summary Order issued to JCP&L
which requires JCP&L to refund customers 5% from rates in effect as of April 30,
1997. As a result, JCP&L recorded a reduction to operating
F-8
<PAGE>
revenues of $115 million. Partially offsetting the effect of the decrease was
the absence of rate reductions to operating revenues of $56.4 million, recorded
in 1998, as a result of PaPUC Restructuring Orders for Met-Ed and Penelec.
1998
In 1998, as a result of amended PaPUC Restructuring Orders, Met-Ed and
Penelec recorded reductions to operating revenues of $56.4 million to reflect
their obligation to make refunds to customers from 1998 revenues (2.5% for
Met-Ed customers and 3% for Penelec customers).
Competitive transition charge (CTC) revenues (Met-Ed and Penelec only)
- ----------------------------------------------------------------------
1999
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Met-Ed and Penelec's final Restructuring Orders
effective January 1, 1999. Changes in CTC revenues generally do not affect
earnings as they are offset by corresponding changes in expense.
Other revenues
- --------------
1999
The increase was due primarily to increased transmission revenues at Met-Ed
and Penelec as a result of customer shopping in Pennsylvania.
1998
The 1998 decrease was primarily due to lower revenue taxes as a result of
New Jersey tax legislation that eliminated the gross receipts and franchise tax
on utility bills and replaced it with a sales tax, a corporate business tax and
a transitional energy facilities assessment, effective January 1, 1998. This
decrease did not have an impact on earnings.
GPU Electric
1999
The increase in revenues was primarily due to the inclusion of revenues
from: Midlands (of which the remaining 50% was acquired in July 1999), $503.9
million; Empresa Distribuidora Electrica Regional, S.A. (Emdersa) (acquired in
March 1999), $136 million; and GPU GasNet (acquired in June 1999), $31.3
million. For additional information, see Note 7, Acquisitions.
1998
The increase in revenues was due mainly to including the full year effect
of GPU PowerNet (acquired in November 1997).
GPUI Group
1999
The increase was primarily due to an increase in Empresa Guaracachi S.A.
(EGSA) energy and capacity revenues of $2.4 million, and the full year effect of
consolidating Onondaga Cogen, L.P. (Onondaga) of $11 million.
1998
The increase in revenues was due mainly to including the full year effect
of Lake Cogen, Ltd. (Lake), and the effect of including Onondaga beginning in
August 1998.
F-9
<PAGE>
GPU AR
1999
The increase was primarily due to an increase in energy sales to customers
who chose GPU AR as their electric energy supplier as part of retail customer
choice in Pennsylvania. Some of GPU AR's customers are located in the GPU Energy
companies' service territories.
1998
GPU AR's 1998 revenues were derived from energy sales to customers who
chose it as their energy supplier as part of the retail access pilot program in
Pennsylvania.
OPERATING INCOME:
- ----------------
Operating income increased $112.8 million to $1.01 billion in 1999, and
increased $25.3 million to $896.1 million in 1998. The components of the changes
are as follows:
Changes (in millions)
--------------------------------
1999 1998
---- ----
GPU Energy companies $ (30.2) $ (74.7)
GPU Electric 143.9 90.4
GPUI Group 11.5 2.0
GPU AR (3.6) 3.8
GPU, Inc. (8.8) 3.8
----- -----
Total increase $ 112.8 $ 25.3
===== =====
GPU Energy companies
1999
The decrease was due to lower revenues as discussed above (see Operating
Revenues section for additional information). Also contributing to the decrease
was a pre-tax reserve of $25 million for Met-Ed and Penelec related to the
regulatory uncertainty of the full recoverability of stranded costs in Phase II
of the Pennsylvania restructuring proceedings. Partially offsetting this
decrease was lower O&M expenses primarily due to the sale of Penelec's interest
in the Homer City Station (Homer City), lower depreciation expense due to the
effect of the impairment write-down of the Oyster Creek (Oyster Creek) nuclear
generating station and Three Mile Island Unit 1 (TMI-1) nuclear generating
facility in 1999 and 1998, respectively; and the sale of Homer City.
1998
The decrease was due primarily to lower revenues as discussed above (see
Operating Revenues section for additional information). Also contributing to the
decrease was higher O&M expenses primarily due to the implementation of a new
company-wide computer software system, costs related to staff reductions and the
full year inclusion of O&M expenses for GPU Telcom. The decrease also included
additional amortization expense related to JCP&L's Final Settlement representing
the portion of JCP&L's return on equity which exceeded the maximum amount
allowed and must be applied against JCP&L's stranded cost pool.
F-10
<PAGE>
GPU Electric
1999
The increase was due primarily to the consolidation of Midlands since the
acquisition of the remaining 50% ownership in 1999, and the inclusion of Emdersa
and GPU GasNet from their acquisition dates in 1999.
1998
The increase was due to higher revenues as discussed above, partially
offset by an increase in O&M expenses primarily due to the full year effect of
including GPU PowerNet.
GPUI Group
1999
The increase was primarily due to higher revenues as discussed above, and
the full year effect of consolidating Onondaga.
1998
The increase was primarily due to higher revenues as discussed above,
mostly offset by an increase in O&M expenses primarily due to the full year
effect of including Lake, as well as the effect of including Onondaga beginning
August 1998.
GPU AR
1999
The decrease was primarily due to increased prices for power purchases due
to the hot summer of 1999, partially offset by higher revenues as discussed
above.
1998
The increase was primarily due to higher revenues as discussed above,
partially offset by increased power purchases.
OTHER INCOME AND DEDUCTIONS:
- ---------------------------
Other income and deductions increased $54.5 million to $175.8 million in
1999, and increased $142.7 million to $121.3 million in 1998. The components of
the changes are as follows:
Changes (in millions)
--------------------------------
1999 1998
---- ----
GPU Energy companies $ 78.8 $(13.4)
GPU Electric (25.6) 114.4
GPUI Group 0.4 42.1
GPU AR 0.1 0.1
GPU, Inc. 0.8 (0.5)
---- -----
Total increase $ 54.5 $142.7
==== =====
GPU Energy companies
1999
The increase was primarily due to the recognition of net gains of $61.3
million pre-tax, as a result of the sale of substantially all the GPU Energy
companies' electric generating stations. Also contributing to the increase
F-11
<PAGE>
was the absence of a charge for start-up payments for the establishment of an
environmental fund for Met-Ed and Penelec; and the absence of a charge to
terminate a contract with one of Met-Ed's wholesale customers, both in 1998.
1998
The decrease was primarily due to a charge taken by Met-Ed and Penelec for
start-up payments for the establishment of a sustainable energy fund as a result
of the PaPUC's Restructuring Orders; and a charge by Met-Ed for the Middletown
settlement.
GPU Electric
1999
The decrease was primarily due to a pre-tax loss of $8.5 million for the
write-down, to market value, of the investment in certain marketable securities
due to GPU Electric's pending sale of this investment; and the absence of a
pre-tax gain of $45 million realized in 1998 from the sale of Solaris.
Offsetting the decrease was the pre-tax gain on the sale of the Midlands supply
business of $10.5 million and increased earnings from Midlands' operations prior
to the acquisition from Cinergy of the remaining 50%. Also contributing to the
offset was the gain on the sale of the Enersis Group generation facility in
Portugal.
1998
The increase was primarily due to the absence of a $109.3 million charge
taken in 1997 for a windfall profits tax imposed on Midlands by the Government
of the United Kingdom. Also contributing to the increase was the pre-tax gain of
$45 million realized from GPU Electric's sale of its interest in Solaris.
GPUI Group
1999
In 1999, the GPUI Group sold its interests in two cogeneration projects and
its shares of Niagara Mohawk Power Corporation stock (that it received as part
of the 1998 master restructuring agreement for the Onondaga cogeneration
project) for a total pre-tax gain of $12 million. Offsetting this increase was
the recording of an impairment of $6.5 million, in 1999, related to the
investment in the Lake cogeneration project and the absence of a pre-tax gain
from the 1998 sale of a 50% interest in the Mid-Georgia cogeneration project of
$9.1 million, which is offset by $2.5 million of deferred revenues recognized in
income in 1999.
1998
The increase was due primarily to the pre-tax gain of $9.1 million realized
from the sale of half its interest in the Mid-Georgia cogeneration plant and
higher investment income of $21.5 million.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
- ----------------------------------------
Interest charges and preferred dividends increased $93.3 million to $482.5
million in 1999, and increased $69.9 million to $389.2 million in 1998. The
components of the changes are as follows:
F-12
<PAGE>
Changes (in millions)
--------------------------------
1999 1998
---- ----
GPU Energy companies $(21.1) $ (7.1)
GPU Electric 114.6 76.3
GPUI Group 1.5 (0.1)
GPU, Inc. (1.7) 0.8
---- -----
Total increase $ 93.3 $ 69.9
==== =====
GPU Energy companies
1999
The decrease was primarily due to the following: in 1999 Met-Ed and Penelec
redeemed all their company-obligated mandatorily redeemable preferred securities
and cumulative preferred stock (the redemption of preferred stock resulted in
losses of $0.5 million and $0.7 million, respectively, for Met-Ed and Penelec);
and Penelec redeemed $600 million of first mortgage bonds (FMBs). Also in 1999,
JCP&L redeemed $30 million of cumulative preferred stock (which resulted in a
loss of $0.8 million). Partially offsetting these decreases was increased
interest expense associated with Penelec's issuance of $350 million of senior
notes in 1999.
1998
In 1998, JCP&L redeemed $15 million stated value of cumulative preferred
stock.
GPU Electric
1999
The increase was primarily due to higher debt levels from the 1999
acquisitions of Emdersa, GPU GasNet and Midlands (the remaining 50%), which
resulted in additional interest expense of $8 million, $21.3 million and $66.8
million, respectively.
1998
The increase was due primarily to debt associated with the GPU PowerNet
acquisition in November 1997.
EXTRAORDINARY ITEM:
- ------------------
1998
The extraordinary loss was due to the impact of the PaPUC Restructuring
Orders received by Met-Ed and Penelec. For additional information, see Note 6,
Accounting for Extraordinary and Non-recurring Items.
JCP&L RESULTS OF OPERATIONS
---------------------------
JCP&L's earnings for 1999 were $162.9 million, compared to 1998 earnings of
$212.4 million. JCP&L's return on average common equity was 10.7% in 1999,
compared to 13.5% in 1998. The decrease was due to a non-recurring charge of $68
million after-tax, as a result of the NJBPU's Summary Order issued to JCP&L.
Excluding the non-recurring charge, earnings for 1999 would have been $230.9
million. The increase in earnings on this basis was due primarily to increased
sales to new customers, higher weather-related sales and a decrease in
depreciation expense.
F-13
<PAGE>
Earnings in 1998 were $212.4 million, compared to 1997 earnings of $200.6
million. Contributing to this earnings increase were increased residential and
commercial customer sales, partially offset by increased operation and
maintenance expenses. JCP&L's return on average common equity was 13.5% in 1998,
compared to 13.1% in 1997.
OPERATING REVENUES:
- ------------------
Operating revenues decreased $51.4 million to $2.02 billion in 1999, and
decreased $24.3 million to $2.07 billion in 1998. The components of the changes
are as follows:
Changes (in millions)
-------------------------------
1999 1998
---- ----
KWH revenues $(156.3) $ 64.0
Energy and restructuring-related
revenues 220.2 48.2
Obligation to refund revenues (115.0) -
Other revenues (0.3) (136.5)
------ ------
Decrease in revenues $ (51.4) $ (24.3)
====== ======
KWH revenues
- -------------
1999
The decrease was primarily due to decreased customer usage and decreased
sales to other utilities of approximately $10 million. Partially offsetting the
decrease was the absence of an earnings cap adjustment (since JCP&L was not in
an over earnings position through July 1999) which reduced JCP&L's 1998
revenues; increased sales to new customers and higher weather-related sales.
1999 Delivered KWH Sales by Service Class
------------------------------------------
Residential 42%
Commercial 40%
Industrial/Other 18%
1998
The increase was due to higher residential and commercial customer usage
and an increase in new residential and commercial customer sales partially
offset by lower weather-related sales.
Energy and restructuring-related revenues
- -----------------------------------------
1999 and 1998
The 1999 increase was primarily due to a change in the estimate for
unbilled revenue and the inclusion of revenues, effective August 1, 1999, for
the recovery of stranded costs due to restructuring in New Jersey. Changes in
energy and restructuring-related revenues do not affect earnings as they are
offset by corresponding changes in expense. The 1998 increase was due primarily
to increased sales to other utilities and higher residential and commercial
customer sales.
Obligation to refund revenues to customers
- ------------------------------------------
1999
The decrease was due to the NJBPU's Summary Order issued to JCP&L which
requires JCP&L to refund customers 5% from rates in effect as of
F-14
<PAGE>
April 30, 1997. As a result, JCP&L recorded a reduction to operating revenues of
$115 million.
Other revenues
- --------------
1998
The decrease was primarily due to lower revenue taxes as a result of New
Jersey tax legislation that eliminated the gross receipts and franchise tax on
utility bills and replaced it with a sales tax, a corporate business tax and a
transitional energy facilities assessment, effective January 1, 1998. This
decrease did not have an impact on earnings.
OPERATING INCOME:
- ----------------
Operating income decreased $96.3 million to $365.8 million in 1999, and
increased $26.5 million to $462.1 million in 1998.
1999
The decrease was due to the obligation to make refunds to customers and
lower KWH revenues as discussed above. Partially offsetting this decrease was
lower depreciation expense due to the effect of the impairment write-down of
Oyster Creek and TMI-1 in 1999 and 1998, respectively.
1998
The increase was due primarily to increased KWH revenues as discussed above
and lower reserve capacity expense. Partially offsetting the increase was higher
O&M expenses primarily due to the implementation of a new company-wide computer
software system and costs related to staff reductions. Furthermore, operating
income was reduced by additional amortization expense related to JCP&L's Final
Settlement representing the portion of JCP&L's return on equity which exceeded
the maximum amount allowed and must be applied against JCP&L's stranded cost
pool.
OTHER INCOME AND DEDUCTIONS:
- ---------------------------
Other income and deductions decreased $1.5 million to $12.5 million in
1999, and increased $12.1 million to $14.0 million in 1998.
1998
The increase was due primarily to the absence of the charges incurred in
1997 for the termination of a NUG contract and for a loss on the sale of fuel
oil from the Gilbert generating station.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
- ----------------------------------------
Interest charges and preferred dividends decreased $4.2 million to $114.4
million in 1999, and decreased $6.1 million to $118.6 million in 1998.
1999
The decrease was primarily due to lower other interest expense (excludes
interest on debt). Also contributing to the decrease was the redemption of $30
million of cumulative preferred stock, which resulted in a loss of $0.8 million.
F-15
<PAGE>
1998
The decrease was due to lower short-term debt levels and the redemption of
$15 million stated value of cumulative preferred stock.
MET-ED RESULTS OF OPERATIONS
----------------------------
Met-Ed's earnings for 1999 were $94.5 million, compared to 1998 earnings of
$50.4 million. Met-Ed's return on average common equity was 13.9% in 1999
compared to 7.5% in 1998. Excluding the net gain of $1.2 million after-tax for
the sales of Met-Ed's generating facilities related to wholesale operations,
earnings for 1999 would have been $93.3 million. Excluding the effect of the
PaPUC rate actions, earnings for 1998 would have been $76.4 million. The
increase in earnings on this basis was primarily due to increased sales to other
utilities, higher weather-related sales and a decrease in depreciation expense.
Earnings in 1998 were $50.4 million, compared to 1997 earnings of $93
million. Met-Ed's return on average common equity was 7.5% in 1998 compared to
12.9% in 1997. In 1998, a non-recurring charge of $26 million after-tax was
taken as a result of the PaPUC's Restructuring Order for Met-Ed. Also
contributing to the earnings decrease was increased operation and maintenance
expenses primarily related to the implementation of a new computer software
system and restructuring costs related to staff reductions.
OPERATING REVENUES:
- ------------------
Operating revenues decreased $16.8 million to $902.8 million in 1999, and
decreased $23.5 million to $919.6 million in 1998. The components of the changes
are as follows:
Changes (in millions)
-------------------------------
1999 1998
---- ----
KWH revenues $(152.0) $ (4.5)
Obligation to refund revenues 27.2 (27.2)
CTC revenues 90.0 -
Other revenues 18.0 8.2
------ -----
Decrease in revenues $ (16.8) $(23.5)
====== =====
KWH revenues
1999
The decrease was primarily due to lower generation-related revenues of
approximately $220 million as a result of some Pennsylvania customers choosing
another electric energy supplier and a decrease of approximately $155 million in
NUG revenues (which did not have an impact on earnings since NUG-related
revenues are now being collected through the CTC effective January 1, 1999).
Partially offsetting these decreases was increased sales to other utilities of
approximately $130 million and higher weather-related sales.
1999 Delivered KWH Sales by Service Class
-----------------------------------------
Residential 36%
Commercial 29%
Industrial/Other 35%
F-16
<PAGE>
1998
The decrease was due to the absence in 1998 of the step increase in
unbilled revenue as a result of Met-Ed including its ECR in base rates,
amounting to $13 million, and lower weather-related sales. Partially offsetting
these decreases were increased sales to other utilities, an increase in new
commercial and residential customer sales and increased customer usage.
Obligation to refund revenues to customers
- ------------------------------------------
1999
The increase was due to the absence of rate refunds of $27.2 million,
recorded in 1998, as a result of the PaPUC Restructuring Order for Met-Ed.
1998
In 1998, as a result of the amended PaPUC Restructuring Order, Met-Ed
recorded a reduction to operating revenues of $27.2 million to reflect its
obligation to make refunds, of 2.5%, to customers from 1998 revenues.
CTC revenues
- ------------
1999
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Met-Ed's final Restructuring Order effective
January 1, 1999. Changes in CTC revenues generally do not affect earnings as
they are offset by corresponding changes in expense.
Other revenues
- --------------
1999
The increase was due primarily to increased transmission revenues as a
result of customer shopping in Pennsylvania.
OPERATING INCOME:
- ----------------
Operating income increased $45.8 million to $213.2 million in 1999, and
decreased $47.0 million to $167.4 million in 1998.
1999
The increase was primarily due to increased sales to other utilities, the
absence of rate refunds of $27.2 million recorded in 1998 and lower depreciation
expense due to the effect of the impairment write-down of TMI-1 in 1998 and
lower O&M expenses. Partially offsetting this decrease was lower revenues due to
customer shopping and the recording of a pre-tax reserve of $18.7 million
related to the regulatory uncertainty of the full recoverability of stranded
costs in Phase II of the Pennsylvania restructuring proceedings.
1998
The decrease was primarily due to lower revenues as a result of rate
refunds of $27.2 million and higher O&M expenses due to increased costs from the
implementation of a new computer software system and increased costs related to
staff reductions. Also contributing to the decrease was higher depreciation and
amortization expense due to additions to plant in service and higher
depreciation rates.
F-17
<PAGE>
OTHER INCOME AND DEDUCTIONS:
- ---------------------------
Other income and deductions increased $17.5 million to $4.1 million in
1999, and decreased $16.9 million to a net expense of $13.4 million in 1998.
1999
The increase was primarily due to the absence of a charge for start-up
payments for the establishment of an environmental fund; and the absence of a
charge to terminate a contract with Middletown, both in 1998. Also contributing
to the increase was the recognition of net gains of $2 million pre-tax, as a
result of the sale of substantially all of Met-Ed's electric generating
stations.
1998
The decrease was due primarily to a charge for start-up payments for the
establishment of an environmental fund per the PaPUC's Restructuring Order and a
charge for the Middletown settlement.
INTEREST CHARGES AND PREFERRED DIVIDENDS:
- -----------------------------------------
Interest charges and preferred dividends increased $2.1 million to $61.4
million in 1999, and increased $0.2 million to $59.3 million in 1998.
1999
The increase was due to the issuance of $100 million of trust preferred
securities. Partially offsetting the increase was a decrease in interest on debt
due to lower debt levels and lower preferred stock dividends due to the
redemption of all of Met-Ed's preferred stock, which resulted in a loss of $0.5
million.
EXTRAORDINARY ITEM:
- -------------------
1998
The extraordinary loss was due to the impact of the PaPUC Restructuring
Order received by Met-Ed. For additional information, see Note 6, Accounting for
Extraordinary and Non-recurring Items.
PENELEC RESULTS OF OPERATIONS
-----------------------------
Penelec's 1999 earnings were $151.6 million, compared to 1998 earnings of
$38.9 million. Penelec's return on average common equity was 26.6% in 1999
compared to 5% in 1998. Excluding the net gain of $34.9 million after-tax for
the sales of Penelec's generating facilities related to wholesale operations,
earnings for 1999 would have been $116.7 million. Excluding the effect of the
PaPUC rate actions, earnings for 1998 would have been $78.7 million. The
increase in earnings on this basis was primarily due to increased sales to other
utilities, higher weather-related sales and a decrease in depreciation expense.
F-18
<PAGE>
Earnings in 1998 were $38.9 million, compared to 1997 earnings of $94.4
million. Penelec's return on average common equity was 5% in 1998 compared to
12.1% in 1997. In 1998, a non-recurring charge of $39.8 million after-tax was
taken as a result of the PaPUC's Restructuring Order for Penelec. Also
contributing to the earnings decrease was increased operation and maintenance
expenses primarily related to the implementation of a new computer software
system and restructuring costs related to staff reductions.
OPERATING REVENUES:
- -------------------
Operating revenues decreased $110.3 million to $922 million in 1999, and
decreased $20.7 million to $1.0 billion in 1998. The components of the changes
are as follows:
Changes (in millions)
--------------------------------
1999 1998
---- ----
KWH revenues $(203.3) $ 13.9
Obligation to refund revenues 29.2 (29.2)
CTC revenues 48.7 -
Other revenues 15.1 (5.4)
------ -----
Decrease in revenues $(110.3) $(20.7)
====== =====
KWH revenues
- ------------
1999
The decrease was primarily due to lower generation-related revenues of
approximately $210 million as a result of some Pennsylvania customers choosing
another electric energy supplier and a decrease of approximately $170 million in
NUG revenues (which did not have an impact on earnings since NUG-related
revenues are now being collected through the CTC effective January 1, 1999).
Partially offsetting these decreases was increased sales to other utilities of
approximately $40 million and higher weather-related sales.
1999 Delivered KWH Sales by Service Class
-----------------------------------------
Residential 28%
Commercial 32%
Industrial/Other 40%
1998
The increase was primarily due to increased sales to other utilities and
increased industrial customer usage offset by lower weather-related sales. The
revenue comparison was also affected by the absence in 1998 of the step increase
in unbilled revenue as a result of Penelec including its ECR in base rates,
amounting to $15 million.
Obligation to refund revenues to customers
- ------------------------------------------
1999
The increase was due to the absence of rate refunds of $29.2 million,
recorded in 1998, as a result of the PaPUC Restructuring Order for Penelec.
1998
In 1998, as a result of the amended PaPUC Restructuring Order, Penelec
recorded a reduction to operating revenues of $29.2 million to reflect its
obligation to make refunds, of 3%, to customers from 1998 revenues.
F-19
<PAGE>
CTC revenues
- ------------
1999
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Penelec's Restructuring Order effective January 1,
1999. Changes in CTC revenues generally do not affect earnings as they are
offset by corresponding changes in expense.
Other revenues
- --------------
1999
The increase was due primarily to increased transmission revenues as a
result of customer shopping in Pennsylvania.
OPERATING INCOME:
- ----------------
Operating income increased $20.8 million to $191.6 million in 1999, and
decreased $57.5 million to $170.8 million in 1998.
1999
The increase was primarily due to increased sales to other utilities, the
absence of rate refunds of $29.2 million recorded in 1998, lower O&M expenses
primarily due to the sale of Penelec's interest in Homer City, lower
depreciation expense due to the effect of the impairment write-down of TMI-1 in
1998 and the sale of Homer City. Partially offsetting this increase was lower
KWH revenues as discussed above and a pre-tax reserve of $6.3 million related to
the regulatory uncertainty of the full recoverability of stranded costs in Phase
II of the Pennsylvania restructuring proceedings.
1998
The decrease was due primarily to lower revenues as a result of rate
refunds of $29.2 million. Also contributing to the decrease was higher O&M
expenses primarily due to the implementation of a new company-wide computer
software system and costs related to staff reductions; and higher depreciation
and amortization expense due to additions to plant in service and higher
depreciation rates.
OTHER INCOME AND DEDUCTIONS:
- ---------------------------
Other income and deductions increased $65.7 million to $59.3 million in
1999, and decreased $8.9 million to a net expense of $6.4 million in 1998.
1999
The increase was primarily due to the recognition of net gains of $59.3
million pre-tax, as a result of the sale of substantially all of Penelec's
electric generating stations. Also contributing to the increase was the absence
of a charge for start-up payments for the establishment of an environmental fund
in 1998.
1998
The decrease was primarily due to a charge taken by Penelec for start-up
payments for the establishment of an environmental fund as a result of the
PaPUC's Restructuring Order.
F-20
<PAGE>
INTEREST CHARGES AND PREFERRED DIVIDENDS:
- ----------------------------------------
Interest charges and preferred dividends decreased $18.9 million to $45
million in 1999, and decreased $1.2 million to $63.9 million in 1998.
1999
The decrease was primarily due to Penelec's redemption of all its
company-obligated mandatorily redeemable preferred securities and cumulative
preferred stock, which resulted in a loss of $0.7 million; and the redemption of
$600 million of FMBs. Partially offsetting the decrease was increased interest
expense associated with Penelec's issuance of $350 million of senior notes in
1999.
EXTRAORDINARY ITEM:
- ------------------
1998
The extraordinary loss was due to the impact of the PaPUC Restructuring
Order received by Penelec. For additional information, see Note 6, Accounting
for Extraordinary and Non-recurring Items.
INVESTMENTS IN FUCOs AND EWGs
------------------------------
GPU, Inc. has Securities and Exchange Commission (SEC) authorization to
finance investments in foreign utility companies (FUCOs) and exempt wholesale
generators (EWGs) up to an aggregate amount equal to 100% of GPU's average
consolidated retained earnings, or approximately $2.4 billion as of December 31,
1999. At December 31, 1999, GPU, Inc. has remaining authorization to finance
approximately $245 million of additional investments in FUCOs and EWGs. GPU,
Inc.'s investments in FUCOs and EWGs are made through GPU Electric and the GPUI
Group.
GPU ELECTRIC
------------
GPU Electric has ownership interests in electric and gas transmission and
distribution businesses in England, Australia and Argentina. Through its
ownership in Midlands, GPU Electric also has investments in operating generating
facilities located in foreign countries totaling 4,244 megawatts (MW) (of which
GPU Electric's equity interest represents 1,163 MW) of capacity. At December 31,
1999, GPU, Inc.'s aggregate investment in GPU Electric was $1.06 billion. GPU,
Inc. has also guaranteed up to an additional $1.04 billion of outstanding GPU
Electric obligations.
In July 1999, GPU Electric acquired Cinergy's 50% ownership interest in
Avon Energy Partners Holdings (Avon), which owns Midlands, for British Pound
452.5 million (approximately US $714 million). As a result of this transaction,
GPU Electric assumed debt of US $1 billion. GPU and Cinergy had jointly formed
Avon in 1996 to acquire Midlands, an English regional electric company serving
2.3 million customers.
In June 1999, National Power plc acquired all the assets and liabilities of
Midlands' supply business, including obligations under Midlands' power purchase
agreements, for $300 million ($150 million for GPU's share) plus an adjustment
for working capital. As a result, in 1999 GPU recorded an after-tax gain on the
sale of $6.8 million.
F-21
<PAGE>
In June 1999, GPU Electric acquired Transmission Pipelines Australia (TPA),
a natural gas transmission business, from the State of Victoria, Australia for
A$1.025 billion (approximately US $675 million). TPA (which has since been
renamed GPU GasNet) was sold as part of Victoria's privatization of the natural
gas industry. The GPU GasNet system encompasses 1,105 miles of transmission
pipelines, and consists of two separate networks serving approximately 1.3
million residential customers and about 40,000 industrial and commercial
customers throughout Victoria.
In March 1999, GPU Electric acquired Emdersa for $375 million. Emdersa owns
three electric distribution companies that serve three provinces in northwest
Argentina. As a result of this transaction, GPU Electric assumed debt of US $76
million.
For additional information on GPU's acquisitions, see Note 7, Acquisitions.
GPU has initiated plans to raise at least US $500 million through the sale
of assets and use the proceeds to reduce debt, provide funding for additional
repurchases of its common stock and invest in growth initiatives. In December
1999, GPU announced that it would seek proposals to purchase at least 50% of
GPU's ownership in GPU PowerNet and GPU GasNet.
Management expects that future foreign acquisitions, if made, would likely
be small in size and would serve to expand capabilities to grow the
non-regulated businesses or to provide critical mass to the current portfolio of
holdings. For additional information, see COMPETITIVE ENVIRONMENT AND RATE
MATTERS section of Management's Discussion and Analysis.
GPUI GROUP
-----------
The GPUI Group has ownership interests in six operating cogeneration plants
in the US totaling 1,014 MW (of which the GPUI Group's equity interest
represents 496 MW) of capacity and four operating generating facilities located
in foreign countries totaling 1,229 MW (of which the GPUI Group's equity
interest represents 424 MW) of capacity. At December 31, 1999, GPU, Inc.'s
aggregate investment in the GPUI Group was $232 million. GPU, Inc. has also
guaranteed up to an additional $29.9 million of GPUI Group obligations.
PLANNED ACQUISITION OF MYR GROUP
----------------------------------
In December 1999, GPU, Inc. and MYR Group Inc. (MYR) entered into an
agreement under which GPU would acquire the utility infrastructure construction
firm for $215 million cash, or $30.10 per share of MYR common stock. Following
the transaction MYR would become a wholly-owned subsidiary of GPU, Inc. The
acquisition, which is subject to approval by the SEC and other conditions, is
expected to be completed by the first quarter of 2000. For additional
information, see Note 7, Acquisitions.
Market Risk Sensitive Instruments
----------------------------------
GPU Electric uses interest rate swap agreements to manage the risk of
increases in variable interest rates. All of the agreements effectively convert
variable rate debt, including commercial paper, to fixed rate debt. None of
these swap agreements are held for trading purposes. During 1999, GPU
F-22
<PAGE>
PowerNet began a program of refinancing much of its floating rate bank
borrowings with fixed rate publicly issued debt. As a result, certain swaps
associated with the floating rate bank borrowings were marked to market. As of
December 31, 1999, most of these positions were terminated, which resulted in
swap breakage and mark to market costs of A$16.8 million (approximately US $10.9
million). The following summarizes the principal characteristics of swap
agreements in effect as of December 31, 1999:
<TABLE>
<CAPTION>
(in thousands)
Fixed Variable
Notional Fair Termination Pay/Receive Interest Interest Rate
Amount Value(a) Date Characteristic Rate at 12/31/99
--------- -------- ------------- -------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
GPU PowerNet A$ 39,250 A$ 423 10/1/00 fixed/variable 4.75% 5.22%
A$ 26,000 A$ 270 10/1/00 fixed/variable 4.79% 5.22%
A$ 42,250 A$ 429 10/1/00 fixed/variable 4.81% 5.22%
A$ 26,000 A$ 281 10/3/00 fixed/variable 4.77% 5.15%
A$ 26,000 A$ 273 10/3/00 fixed/variable 4.80% 5.15%
A$ 212,000 A$ (383) 11/6/00 fixed/variable 6.14% 5.15-5.56%
A$ 481,250 A$ 2,835 11/6/02 fixed/variable 6.56% 5.15-5.56%
A$ 385,000 A$ 3,246 11/8/04 fixed/variable 6.82% 5.15-5.56%
A$ 14,172 A$ 98 11/6/07 fixed/variable 7.15% 5.22-5.41%
--------- ---------
A$1,251,922 A$ 7,472
--------- ---------
GPU GasNet A$ 112,500 A$ 194 6/2/00 fixed/variable 5.37% 5.56%
A$ 375,000 A$ 7,800 6/3/02 fixed/variable 5.90% 5.56%
A$ 225,000 A$ 10,248 6/2/06 fixed/variable 6.33% 5.56%
--------- ---------
A$ 712,500 A$ 18,242
========= ---------
British Pound
-------------
<S> <C> <C> <C> <C> <C> <C>
Midlands 65,000 545 9/11/01 fixed/variable 5.98% 5.98%
60,000 452 9/14/01 fixed/variable 6.02% 5.98%
-------- --------
125,000 997
========= =========
<FN>
Exchange rates at December 31, 1999 were as follows: A$1.5244/US$ and British
Pound 0.6191/US$.
(a) Represents the amount GPU Electric would (pay)/receive to terminate the
swap agreements as of December 31, 1999 (prior to their scheduled
termination dates).
The amount of debt obligations covered by swap agreements and the expected
variable interest rates of such debt, for each of the next five years, is as
follows:
</FN>
<CAPTION>
(in thousands) GPU PowerNet GPU GasNet Midlands
- -------------------------------------------------------------------------------------------------
Expected Expected Expected
Average Variable Average Variable Average Variable
Debt Interest Debt Interest Debt Interest
Year Covered Rates Covered Rates Covered Rates
- -------------------------------------------------------------------------------------------------
British Pound
-------------
<C> <C> <C> <C> <C> <C> <C>
2000 A$1,176,714 6.4-6.5% A$646,875 5.8-6.3% 125,000 7.15%
2001 A$ 880,423 7.2-7.5% A$600,000 7.2-7.5% 88,542 6.91%
2002 A$ 800,214 7.4-7.6% A$381,250 7.4-7.9% - -
2003 A$ 399,173 7.4-7.6% A$225,000 7.4-7.7% - -
2004 A$ 335,006 7.5-7.8% A$ 93,750 7.5-7.9% - -
F-23
</TABLE>
<PAGE>
The expected variable interest rates included above, for the years 2000
through 2004, were provided by the financial institutions with which the swap
agreements were executed, and were derived from their proprietary models based
upon recognized financial principles.
At December 31, 1999, these agreements covered approximately $1.3 billion
of debt, including commercial paper, and are scheduled to expire on various
dates through November 2007. For the year ended December 31, 1999, fixed rate
interest expense exceeded variable rate interest by approximately $20.7 million.
GPU Electric uses currency swap agreements to manage currency risk caused by
fluctuations in the US dollar exchange rate related to debt issued in the US by
Avon. These swap agreements effectively convert principal and interest payments
on this US dollar debt to fixed sterling principal and interest payments, and
expire on the maturity dates of the bonds. Interest expense is recorded based on
the fixed sterling interest rate. The following summarizes the characteristics
of the currency swap agreements as of December 31, 1999:
Fixed Fixed
Currency USD Sterling Sterling USD USD
Swap Notional Notional Termination Interest Interest Fair
Type Value Value Date Rate Rate Value(a)
- -------- --------- --------- ----------- -------- -------- --------
British Pound
- -------------
$ $350,000 212,122 12/11/02 7.66% 6.73% (2,838)
$ $100,000 60,606 12/11/07 7.75% 7.05% (4,776)
$ $150,000 90,909 12/11/07 7.70% 7.05% (7,604)
$ $250,000 153,374 03/04/08 6.94% 6.46% (14,036)
(a) Represents the amount GPU Electric would (pay)/receive to terminate the
swap agreements as of December 31, 1999 (prior to their scheduled
termination dates).
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Capital Expenditures and Investments*
- ------------------------------------
(in millions)
------------------------------------------
2000** 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
GPU Energy companies $349 $ 291 $328 $ 356 $404 $462
GPU Electric 213 1,809 59 1,800 516 -
GPUI Group 5 32 81 112 58 165
GPU, Inc. 215 - - - - -
----------------------------------------
Total $782 $2,132 $468 $2,268 $978 $627
=== ===== === ===== === ===
* Includes acquisitions, net of cash acquired.
** Estimate includes $215 million for the anticipated acquisition of MYR.
GPU Energy companies
The GPU Energy companies' capital spending was $291 million (JCP&L $141
million; Met-Ed $66 million; Penelec $78 million; Other $6 million) in 1999, and
was used primarily to expand and improve existing transmission and distribution
(T&D) facilities, for new customer connections and to implement an integrated
information system. In 2000, capital expenditures for the GPU Energy companies
are estimated to be $349 million (JCP&L $178 million; Met-Ed
F-24
<PAGE>
$57 million; Penelec $82 million; Other $32 million), primarily for ongoing T&D
system development. Expenditures for maturing long-term debt were $83 million
(JCP&L $3 million; Met-Ed $30 million; Penelec $50 million) in 1999, and are
expected to total $101 million (JCP&L $51 million; Met-Ed $50 million) in 2000,
and $51 million (JCP&L $51 million) in 2001. Management estimates that a
substantial portion of the GPU Energy companies' 2000 capital outlays will be
satisfied through internally generated funds.
GPU Electric
GPU Electric's capital spending was $1.8 billion in 1999 and primarily
represents the cost of acquiring Emdersa, GPU GasNet and the remaining 50% of
Midlands, and also includes $128.6 million of improvements to GPU PowerNet,
Emdersa and Midlands' facilities. For 2000, infrastructure-related capital
expenditures are forecasted to be $213 million. In 1999, expenditures for
maturing long-term debt were $453 million, and are expected to total $475
million in 2000 and $1 billion in 2001. Capital outlays for 2000 will be
satisfied through both internally generated funds and external financings.
GPUI Group
The GPUI Group's capital spending was $32 million in 1999 and was used
primarily for construction activities at one of the GPUI Group's South American
investments. For 2000, capital expenditures are forecasted to be $6 million. In
1999, expenditures for maturing long-term debt were $28 million, and are
expected to total $5 million in 2000 and $7 million in 2001. Capital outlays for
2000 will be satisfied through both internally generated funds and external
financings.
Financing
- ---------
GPU, Inc.
In January 1999, the GPU, Inc. Board of Directors authorized the
repurchase of up to $350 million of GPU, Inc. common stock. Through December
31, 1999, GPU, Inc. has repurchased 6.4 million shares of common stock at an
average price of $35.25 per share.
GPU has various credit facilities in place, the most significant of which
are discussed below. These credit facilities generally provide GPU bank loans at
negotiable market rates.
GPU, Inc. and the GPU Energy companies have available $450 million of
short-term borrowing facilities, which include a $250 million revolving credit
agreement and various bank lines of credit. In addition, GPU, Inc., JCP&L,
Met-Ed and Penelec can issue commercial paper in amounts of up to $100 million,
$150 million, $75 million, and $100 million, respectively. From these sources,
GPU, Inc. has regulatory authority to have $250 million outstanding at any one
time. JCP&L, Met-Ed and Penelec are limited by their charters or SEC
authorization to $265 million, $150 million and $150 million, respectively, of
short-term debt outstanding at any one time.
GPU, Inc. has SEC approval to issue and sell up to $300 million of
unsecured debentures through 2001, the proceeds from which could be utilized to
repay short-term debt or to finance additional investments. Further significant
investments by GPU Electric and/or the GPUI Group, or otherwise, may require
GPU, Inc. to issue additional debt and/or common stock.
F-25
<PAGE>
GPU Energy companies
Met-Ed and Penelec have regulatory approval to issue through December 31,
2000 senior notes and preferred securities in aggregate amounts of $150 million
and $275 million, respectively, of which up to $25 million for each company may
consist of preferred securities. JCP&L has regulatory approval to issue through
December 31, 2000, senior notes and preferred securities in the aggregate amount
of $300 million. Met-Ed and JCP&L will be issuing secured senior notes
(collateralized by FMBs issued to the senior note trustee) until such time as
more than 80% of the outstanding FMBs are held by the senior note trustee. At
that time, the FMBs will be cancelled and the outstanding senior notes will
become unsecured obligations. Penelec's senior notes are unsecured.
Current plans call for the GPU Energy companies to issue senior notes
during the next three years to fund the redemption of maturing senior
securities, refinance outstanding senior securities and finance construction
activities. Following the initial issuance of senior notes, the GPU Energy
companies would not issue any additional FMBs other than as collateral for the
senior notes. The senior note indentures prohibit (subject to certain
exceptions) the GPU Energy companies from issuing any debt which is senior to
the senior notes.
The GPU Energy companies' bond indentures include provisions that limit the
amount of FMBs the companies may issue. The GPU Energy companies' interest
coverage ratios are currently in excess of indenture restrictions. JCP&L's
certificate of incorporation includes provisions that limit the amount of
preferred stock it may issue. JCP&L's preferred dividend coverage ratio is
currently in compliance with the charter restrictions.
In 1999, Met-Ed and Penelec redeemed all of their outstanding shares of
cumulative preferred stock for $12.5 million and $17.4 million, respectively. As
a result, a reacquisition loss of $1.3 million was charged to income ($0.6
million and $0.7 million for Met-Ed and Penelec, respectively). Also in 1999,
Met-Ed and Penelec redeemed all of their outstanding shares of
Subsidiary-obligated mandatorily redeemable preferred securities for $100
million and $105 million, respectively.
In 1999, JCP&L redeemed $30 million stated value of cumulative preferred
stock pursuant to mandatory and optional sinking fund provisions. As a result, a
reacquisition loss of $0.8 million was charged to income.
In 1999, Penelec redeemed $600 million of FMBs with proceeds from the sale
of its interest in Homer City and issued $350 million of unsecured senior notes,
the proceeds from which were used to redeem or repurchase other outstanding
securities, reduce short-term borrowings, fund its construction program and for
other corporate purposes.
In 1999, Met-Ed and Penelec each issued $100 million of trust preferred
securities, at 7.35% and 7.34%, respectively.
GPU Electric
GPU Capital has a $1 billion 364-day senior revolving credit agreement due
in December 2000 supporting the issuance of commercial paper for its $1 billion
commercial paper program established to fund GPU Electric
F-26
<PAGE>
acquisitions. GPU, Inc. has guaranteed GPU Capital's obligations under this
program. At December 31, 1999, $768 million was outstanding under the commercial
paper program, of which $370 million is included in long-term debt on the
Consolidated Balance Sheets since it is management's intent to reissue this
amount of the commercial paper on a long-term basis.
In 1999, GPU Capital sold $373 million of commercial paper to refinance all
its outstanding borrowings related to the 1996 acquisition of a 50% interest in
Midlands. In addition, in 1999, GPU Capital sold $50 million of commercial paper
to partially fund the acquisition of Cinergy's 50% ownership of Midlands. The
Emdersa and GPU GasNet acquisitions, in 1999, were also partially funded by
commercial paper sales of $323 million and $180 million, respectively.
Also in 1999, GPU Capital borrowed A$750 million (approximately US $495
million) under a senior credit facility to fund the acquisition of GPU GasNet
and British Pound 245 million (approximately US $382 million) under a term loan
to fund its acquisition of the remaining 50% interest in Midlands.
GPU Australia Holdings, Inc. has $270 million available under its senior
revolving credit facility due in November 2002. This facility, in combination
with other GPU, Inc. credit facilities, serves as credit support for GPU
Australia Holdings' $350 million commercial paper program. GPU, Inc. has
guaranteed GPU Australia Holdings' obligations under this program. GPU Australia
Holdings has $182 million outstanding under its commercial paper program as of
December 31, 1999. In 1999, GPU Australia Holdings refinanced $350 million of
outstanding long-term debt associated with the GPU PowerNet acquisition, with
$345 million of commercial paper under this program.
Austran Holdings, Inc. (Austran), a wholly-owned indirect subsidiary of GPU
Electric, has a A$500 million (approximately US $328 million) commercial paper
program to refinance the maturing portion of the senior debt credit facility
used to finance the GPU PowerNet acquisition. GPU PowerNet has guaranteed
Austran's obligations under this program. As of December 31, 1999, Austran had
outstanding approximately A$420 million (approximately US $275 million) under
this program.
In 1999, Austran refinanced A$220 million (approximately US $142 million)
of GPU PowerNet acquisition debt with proceeds from an Australian Dollar medium
term note issuance. In connection with this debt refinancing program, a loss of
A$20.3 million (approximately US $13.3 million) related to certain interest rate
swap positions was reflected in GPU's 1999 earnings. In addition, Austran issued
A$50 million (approximately US $32 million) of variable rate and A$120 million
(approximately US $77 million) of fixed rate medium term notes, proceeds of
which were used to refinance acquisition debt.
Midlands maintains a British Pound 200 million (approximately US $323
million) syndicated revolving credit facility with a bank for working capital
purposes, which matures May 2001. At December 31, 1999, British Pound 87 million
(approximately US $140 million) was outstanding under this facility.
GPUI Group
GPU International has a revolving credit agreement providing for borrowings
through December 2000 of up to $30 million outstanding at any one time, of which
up to $15 million may be utilized to provide letters of
F-27
<PAGE>
credit. GPU, Inc. has guaranteed GPU International's obligations under this
agreement. At December 31, 1999, no borrowings or letters of credit were
outstanding under this facility.
Capitalization
Each of the GPU companies' target capitalization ratios is designed to
provide credit quality ratings that permit capital market access at reasonable
costs. The target capitalization ratios vary by subsidiary depending upon their
business and financial risk. GPU's actual capitalization ratios at December 31
for the years indicated, were as follows:
GPU, Inc. and Subsidiary Companies 1999 1998 1997
- ---------------------------------- ---- ---- ----
Common equity 30% 40% 35%
Preferred securities 4 6 6
Debt 66 54 59
--- --- ---
Total 100% 100% 100%
=== === ===
JCP&L
- -----
Common equity 50% 50% 50%
Preferred securities 8 8 9
Debt 42 42 41
--- --- ---
Total 100% 100% 100%
=== === ===
Met-Ed
- ------
Common equity 44% 47% 49%
Preferred securities 9 8 7
Debt 47 45 44
--- --- ---
Total 100% 100% 100%
=== === ===
Penelec
- -------
Common equity 44% 47% 47%
Preferred securities 10 7 7
Debt 46 46 46
--- --- ---
Total 100% 100% 100%
=== === ===
The increase in the debt ratio in 1999 resulted mainly from GPU Electric's
acquisitions of the following: the 50% of Midlands it did not already own; GPU
GasNet; and Emdersa. Since GPU Electric now owns 100% of Midlands and must
consolidate the entity, certain debt, which was previously excluded from its
balance sheet under the equity method of accounting, must now be included.
In 1999, the quarterly dividend on GPU, Inc.'s common stock was increased
by 2.9% to an annualized rate of $2.12 per share. GPU, Inc.'s dividend payout
rate in 1999 was 55% of earnings (excluding the non-recurring items). Management
will continue to review GPU, Inc.'s dividend policy to determine how to best
serve the long-term interests of shareholders.
At December 31, 1999, Met-Ed and Penelec had retained earnings available
to pay common stock dividends of $10 million and $49 million, respectively,
net of amounts restricted under the companies' respective FMB indentures. In
F-28
<PAGE>
addition, Met-Ed and Penelec had capital surplus of $400 million and $285
million, respectively, which would also be available to pay common dividends, to
the extent authorized by the SEC. Met-Ed and Penelec have requested SEC approval
to declare and pay common dividends from their capital surplus, from time to
time through December 31, 2001, so long as their common equity ratios and GPU,
Inc.'s common equity ratio are not less than 30% of total capitalization. At
December 31, 1999, the common equity ratios of Met-Ed, Penelec and GPU, Inc.
were 43.7%, 44.4% and 30.2%, respectively.
Year 2000 Issue
- ---------------
GPU has been addressing the Year 2000 issue by undertaking comprehensive
reviews of its computers, software and equipment with embedded systems such as
microcontrollers (together, "Year 2000 Components"), and of its business
relationships with third parties, including key customers, lenders, trading
partners, vendors, suppliers and service providers. GPU's Year 2000 project has
not caused any material delay in the GPU information technology services group
performing other planned projects.
As of January 31, 2000, GPU believes that its Year 2000 program was
effective since no significant Year 2000 issues were identified. GPU will
continue to monitor its systems generally through March 31, 2000.
Costs
The GPU Energy companies expect to spend a total of $42.3 million (JCP&L
$18.7 million; Met-Ed $11.9 million; Penelec $11.7 million) on the Year 2000
issue, as summarized below: $8.1 million (JCP&L $2.7 million; Met-Ed $2.7
million; Penelec $2.7 million) represents the avoided costs of having to upgrade
certain legacy systems, which were replaced by a new integrated information
system; $7.4 million (JCP&L $3.4 million; Met-Ed $1.9 million; Penelec $2.1
million) represents what would have been spent in any event for maintenance and
cyclical replacement plans; $13.9 million (JCP&L $6.5 million; Met-Ed $3.7
million; Penelec $3.7 million) represents the reallocation of resources to the
Year 2000 project; and $12.9 million (JCP&L $6.1 million; Met-Ed $3.6 million;
Penelec $3.2 million) represents the incremental or out-of-pocket costs for the
Year 2000 project. The GPU Energy companies are funding these costs from their
operations.
Through December 31, 1999, the GPU Energy companies have spent a total of
approximately $41.8 million (JCP&L $18.4 million; Met-Ed $11.7 million; Penelec
$11.7 million) on the Year 2000 issue, of which $21.2 million (JCP&L $9.8
million; Met-Ed $5.8 million; Penelec $5.6 million) was spent in 1999.
GPU Electric expects to spend a total of $14 million on the Year 2000
issue. Through December 31, 1999, GPU Electric has spent a total of
approximately $13.1 million on the Year 2000 issue, of which $9.3 million was
spent in 1999.
The total cost associated with the GPUI Group and GPU AR achieving Year
2000 readiness was not material to GPU's business operations or financial
position.
F-29
<PAGE>
Milestones
GPU established Inventory, Assessment, Remediation, Testing and Monitoring
of its mission-critical Year 2000 Components as the primary phases for its Year
2000 program. All stages of the Year 2000 program have been completed with the
exception of Monitoring, which will be completed by March 31, 2000.
Third Party Qualification
Due to the interdependence of computer systems and the reliance on other
organizations for materials, supplies or services, GPU contacted key customers,
lenders, trading partners, vendors, suppliers and service providers to assess
whether they adequately addressed the Year 2000 issue.
With respect to computer software and equipment with embedded systems, the
GPU Energy companies analyzed where they are dependent upon third parties and
identified several critical areas: (1) the Pennsylvania-New Jersey-Maryland
(PJM) Interconnection; (2) electric generation suppliers, such as cogeneration
operators and NUGs; (3) Electronic Data Interchange (EDI) with trading partners;
(4) Electronic Funds Transfer (EFT) with financial institutions; (5) vendors;
and (6) customers.
As of January 31, 2000, GPU believes that its planning concerning the Year
2000 readiness of critical third parties was effective. As of that date, no
significant Year 2000 issues have been identified.
Scenarios and Contingencies
As of January 31, 2000, GPU believes that its Year 2000 preparations were
effective relative to its mission-critical Year 2000 Components and has
established contingency plans to deal promptly with problems that may arise
during the monitoring phase of its Year 2000 program. GPU does not anticipate
any "most reasonably likely worst case Year 2000 scenarios" that would cause a
material adverse effect on its results of operations, liquidity or financial
condition.
COMPETITIVE ENVIRONMENT AND RATE MATTERS
----------------------------------------
GPU Business Plan
- -----------------
Currently, and increasingly in the future, the GPU Energy companies expect
they will have to serve customers in markets where there will be capped rates
for varying periods and their ability to seek rate increases will be more
limited. In addition, inflation could adversely affect GPU since these increased
costs may not be recoverable in an environment where there are capped rates.
Since the GPU Energy companies have, to a large extent, exited the generation
business, they will have to supply energy to customers who do not choose an
alternate supplier largely from contracted and open market purchases. Management
has identified and addressed market risks associated with these purchases
through implementation of an energy risk management program. However, there can
be no assurance that the GPU Energy companies will be able to supply electricity
to customers at costs which will be recoverable by the respective companies.
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<PAGE>
In October 1999, GPU initiated a program to enhance shareholder returns
through planned cost reductions of $100 million ($55 million in 2000 and $45
million in 2001) by increasing operating efficiency and by making investments of
$40 million to $50 million to improve the reliability of its domestic utility
operations.
The GPU Energy companies are targeting reductions of $30 million in 2000
and an additional $40 million in 2001. Cost reductions will be achieved by using
new tools from its enterprise resource planning system to eliminate significant
amounts of operational overhead expense and by improving the productivity of all
its operations. Midlands plans cost reductions of US $25 million in 2000 and US
$5 million in 2001. Cost reductions will be achieved by eliminating activities
not provided for in its new regulated rate level, which will take effect in the
Spring of 2000, and by realizing productivity benefits from its new systems and
organization. Furthermore, GPU plans to raise at least $500 million in cash from
its current investment portfolio by reducing GPU's ownership in non-core and
under-performing assets.
The GPU Energy Companies' Supply Plan
- -------------------------------------
As a result of the NJBPU and the PaPUC's restructuring orders, the GPU
Energy companies are required to provide generation service to customers who do
not choose an alternate supplier. (For additional information, see the Provider
of Last Resort and Basic Generation Service Provider sections below.) Given that
the GPU Energy companies have largely divested their generation business, there
will be increased market risks associated with providing generation service
since the GPU Energy companies will have to supply energy to non-shopping
customers from contracted and open market purchases. Under its order, JCP&L is
permitted to recover reasonably and prudently incurred costs associated with
providing basic generation service. The PaPUC's restructuring orders, however,
generally do not allow Met-Ed and Penelec to recover their energy costs in
excess of established rate caps which are in effect for varying periods. While
management has implemented an energy risk management program, there can be no
assurance that the GPU Energy companies will be able to supply electricity to
customers that do not choose an alternate supplier at costs which will be
recoverable by the respective companies.
Following the sales in 1999 of the GPU Energy companies' generating
facilities, GPU has 200 MW of capacity and related energy from Yards Creek
Pumped Storage Facility (Yards Creek) remaining to meet customer needs (see
Generation Asset Divestiture for a discussion of the pending sale of Oyster
Creek) and an additional 704 MW of nuclear, combustion turbine and hydroelectric
generation, the sales of which are pending. The GPU Energy companies also have
contracts with NUG facilities totaling 1,606 MW (JCP&L 928 MW; Met-Ed 273 MW;
Penelec 405 MW) and JCP&L has agreements with other utilities to provide for up
to 584 MW (reduced to 400 MW on January 1, 2000) of capacity and related energy.
The GPU Energy companies have agreed to purchase all of the capacity and energy
from TMI-1 through December 31, 2001 and from Oyster Creek (following its sale)
through March 31, 2003. In addition, the GPU Energy companies have the right to
call the capacity of the Homer City station (942 MW) through May 31, 2001 and
the capacity of the generating stations sold to Sithe Energies (Sithe)(4,117 MW)
through May 31, 2002. The GPU Energy companies' remaining capacity and energy
needs will be met by short- to intermediate-term commitments (one month to three
years) during times of expected high energy price volatility and reliance on
spot market purchases during other periods.
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<PAGE>
Provider of Last Resort
- -----------------------
Under the PaPUC Restructuring Orders, Met-Ed and Penelec customers have
been permitted to shop for their generation supplier since January 1, 1999. A
PaPUC approved competitive bid process was to assign provider of last resort
(PLR) service for 20% of Met-Ed and Penelec's retail customers on June 1, 2000,
40% on June 1, 2001, 60% on June 1, 2002, and 80% on June 1, 2003, to licensed
generation suppliers referred to as Competitive Default Service (CDS). Any
retail customers assigned to CDS may return to Met-Ed and Penelec as the default
PLR at no additional charge. Met-Ed and Penelec may meet any remaining PLR
obligation at rates not less than the lowest rate charged by the winning CDS
provider, but no higher than Met-Ed and Penelec's rate cap. In 1999, Met-Ed and
Penelec issued requests for bids to provide competitive bidding for default
energy supply service for 20% of their customers, beginning in June 2000, as
required by the PaPUC. In February 2000, GPU Energy announced that no bids were
received in response to its offer and, as a result, it would be increasing its
forward purchasing of electric power to accommodate the 20% of customers for
whom it will now continue to be the default supplier. GPU estimates that these
additional energy purchases will reduce its 2000 earnings per share by $0.04 to
$0.08, but expects to mitigate this impact through additional common stock
repurchases. GPU Energy is also developing a comprehensive solution for default
energy supply service in Pennsylvania, which it plans to submit to the PaPUC.
Management's best estimates for PLR load are based upon regional economic
data, normal weather (20 year average), forecasts of retail customer shopping,
and implementation of CDS. As of December 31, 1999 a hypothetical 10% increase
in the cost of energy not already under contract to serve the estimated PLR load
would result in an estimated $9 million decrease in pre-tax earnings during
2000.
Basic Generation Service Provider
- ---------------------------------
JCP&L is required to provide basic generation services (BGS) to retail
customers who choose to remain with JCP&L as generation customers for a
three-year period ending July 31, 2002. The responsibility for BGS thereafter
will be bid out. JCP&L's BGS rates are pre-determined for the period through
July 31, 2003. Bidders will bid for the right to provide BGS during the year
commencing August 1, 2002 at the pre-established BGS rates. Any payment received
or required by JCP&L resulting from the bidding process will be deferred for
future refund or recovery.
GPU Energy Supply Market Risk
- -----------------------------
The GPU Energy companies manage the risks associated with the purchases and
sales of electric energy and natural gas which result from its obligation to
provide electricity as PLR service in Pennsylvania and BGS in New Jersey. This
also involves managing the purchase and sale of installed capacity and ancillary
services to minimize business risk associated with its reliability obligation in
the PJM Interconnection, LLC (PJM).
The focus for the Pennsylvania operating companies is to avoid large
earnings volatility due to fixed price sales to Pennsylvania customers, while
cost stability for New Jersey customers is the goal for JCP&L to minimize
deferred balances for BGS. The GPU Energy companies will transact in
supply/hedging market instruments for hedging purposes only. Supply/risk
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<PAGE>
management transactions will be made based on the objective of decreasing both
price and volume uncertainty.
Market Risk - Electricity
- -------------------------
The GPU Energy companies electricity supply profile generally reflects a
shortage of economic on-peak electricity, resulting in a net short position
(load in excess of supply). Consequently, the GPU Energy companies are generally
at risk of rising prices for electricity and electricity-related commodities.
These risks may differ during some months of the year. To manage these risks,
the GPU Energy companies employ a portfolio approach primarily consisting of two
party forward purchases and options, but may also include NYMEX PJM electricity
futures and similar instruments as they become widely available. This portfolio
includes transactions of various durations ranging from one hour to greater than
one year.
The GPU Energy companies' electricity market risks can be price-related,
volume-related, or cost-related as follows:
- - Price-related risk refers to the price exposure associated with having to
purchase amounts of electricity, installed capacity, and ancillary services
for load requirements from the PJM interchange spot market. To the extent
the GPU Energy companies must rely on the PJM pool to satisfy load
requirements, financial exposure exists for the difference between the PJM
energy and installed capacity spot market prices and the rates paid by
customers.
- - Volume-related risk refers to the uncertainty associated with the amount of
load the GPU Energy companies are required to serve. Deregulation of the
electric utility industry has resulted in the ability of their customers to
purchase energy from other electric suppliers. This customer shopping,
combined with deviations in weather, which affects customer energy usage,
can affect the GPU Energy companies' position.
- - Cost recovery-related risk refers to the financial risk associated with the
potential prudency audits of the NJBPU that are part of JCP&L's deferred
energy clause. Cost recovery-related risk also refers to the prudency risk
associated with future NUG cost recovery under the restructuring orders
approved by the PaPUC and the NJBPU which require continued mitigation of
above market NUG costs.
Market Risk - Natural Gas
- -------------------------
As part of its NUG cost mitigation program, the GPU Energy companies manage
the natural gas requirements of certain NUGs that produce and sell energy to
JCP&L under long-term contracts. Under this obligation, the GPU Energy companies
must manage both natural gas volume and price risk in a manner that will satisfy
potential prudency audits of the NJBPU. Prudently incurred costs associated with
natural gas commodity and transportation for these NUGs are included in JCP&L's
deferred energy clause.
The GPU Energy companies employ a portfolio approach consisting of two
party forward purchases and NYMEX natural gas futures contracts. The GPU Energy
companies' natural gas market risks can be price-related, volume-related or cost
recovery-related as follows:
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<PAGE>
- - Price-related risk refers to the price exposure associated with having to
purchase volumes of natural gas for New Jersey NUG requirements from the
spot market.
- - Volume-related risk refers to the uncertainty associated with the amount of
natural gas required for the dispatchable NUGs.
- - Cost recovery-related risk refers to the financial risk associated with the
potential prudency audits of the NJBPU that are part of JCP&L's deferred
energy clause.
Generation Asset Divestiture
- ----------------------------
As discussed below, in 1999, the GPU Energy companies completed the sales
of TMI-1 and substantially all their fossil-fuel and hydroelectric generating
stations.
Penelec sold its 50% interest in Homer City to a subsidiary of Edison
Mission Energy for approximately $900 million. In addition, Penelec's 20%
undivided ownership interest in the Seneca Pumped Storage Facility was sold to
Cleveland Electric Illuminating Company for $43 million.
The GPU Energy companies completed the sales of substantially all their
remaining fossil fuel and hydroelectric generating facilities to Sithe for
approximately $1.6 billion (JCP&L $416 million; Met-Ed $641 million; Penelec
$558 million) (JCP&L's 50% interest in Yards Creek is not included in the sale
and the sales of the 66 MW Forked River combustion turbines and 19 MW York Haven
hydroelectric station were postponed). The GPU Energy companies have agreed to
assume up to $20 million (JCP&L $7 million; Met-Ed $9 million; Penelec $4
million) of employee severance costs for employees not hired by Sithe. The net
proceeds from the sales will be used to fund future stranded costs, invest in
the reliability of the GPU Energy companies' T&D network, reduce outstanding
debt, and repurchase GPU, Inc. common stock. For additional information, see
Note 6, Accounting for Extraordinary and Non-recurring items.
These sales have resulted in an after-tax gain of $37.2 million (Met-Ed
$1.4 million; Penelec $ $35.8 million), or $0.30 per share, during 1999 for the
portion of the gains related to wholesale operations and the deferral as a
regulatory liability of the remaining gain of $1.3 billion (Met-Ed $389.1
million; Penelec $938.3 million) pending Phase II of the Pennsylvania
restructuring proceeding and a separate review by the NJBPU.
The GPU Energy companies sold TMI-1 to AmerGen Energy Company, LLC
(AmerGen), a joint venture of PECO Energy and British Energy, for a total
purchase price of approximately $100 million. AmerGen will pay approximately $77
million of the purchase price which is allocable to nuclear fuel, in five annual
installments, beginning in December 2000, and is obligated to make certain
contingent payments to the GPU Energy companies of up to $80 million, depending
on the level of energy prices through 2010. The GPU Energy companies have
transferred $320 million to AmerGen for decommissioning, and AmerGen has assumed
all liability and obligation for decommissioning TMI-1. This sale did not have a
significant impact on 1999 earnings (a loss of $1.1 million, or $0.01 per share,
was recorded related to wholesale operations) since TMI-1 had been written down
to its fair market value in 1998. The majority of the amount written down and
the majority of the remaining loss
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<PAGE>
from the sale resulted in the deferral of $528.3 million (JCP&L $133.1 million;
Met-Ed $270.7 million; Penelec $124.5 million) as a regulatory asset and a
charge to 1998 income of $10 million.
In October 1999, JCP&L agreed to sell Oyster Creek to AmerGen for $10
million. As part of the terms of the transaction, AmerGen will assume full
responsibility for decommissioning the plant. JCP&L will transfer at closing
$430 million of decommissioning trust funds as well as funds for the station's
outage cost, including the fuel reload for the next refueling outage scheduled
for the Fall of 2000. AmerGen will repay these outage costs (estimated at $88
million) to JCP&L in nine equal annual installments without interest, beginning
one year after the closing. The sale is subject to various conditions including
the receipt of satisfactory federal and state regulatory approvals and favorable
rulings by the Internal Revenue Service.
Recent Regulatory Actions
- -------------------------
New Jersey Restructuring
In May 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate
unbundling, stranded cost and restructuring filings. JCP&L is awaiting a more
detailed order from the NJBPU. This Summary Order provides for, among other
things, the following:
- customer choice of electric generation supplier for all consumers
beginning August 1, 1999 with utilities accepting customer selection of
suppliers in October 1999;
- a 5% rate reduction commencing August 1, 1999; additional reductions of
1% in 2000 and 2% in 2001; and an additional net 3% reduction in 2002
inclusive of a 5% rate refund from rates in effect as of April 30, 1997,
partially offset by a 2% increase in the Market Transition Charge (MTC).
The total rate reduction of 11% will remain in effect through July 2003;
- the removal from regulation of the costs associated with providing
electric generation service. JCP&L must provide BGS through July 31,
2002 to retail customers who do not choose an alternative generation
supplier, after which BGS will be bid out;
- the average shopping credits will range from 5.14 cents per KWH in 1999
to 5.40 cents in 2003;
- an average distribution rate of 3.35 cents per KWH;
- the ability to recover stranded costs;
- the ability to securitize approximately $400 million of stranded costs
associated with Oyster Creek (see below for additional information);
- effective August 1, 1999, JCP&L is no longer subject to an earnings
cap;
- the establishment of a non-bypassable societal benefits charge to
recover costs associated with nuclear plant decommissioning, demand-side
management, manufactured gas plant remediation, universal service fund
and consumer education; and
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<PAGE>
- the NJBPU will conduct an annual review and assessment of the
reasonableness and prudency of costs incurred by JCP&L in the
procurement of energy and capacity needed to serve BGS load as well as
of NUG and utility power purchase agreement stranded costs.
In addition, JCP&L will implement a non-bypassable MTC through which JCP&L will
collect:
- above-market costs associated with long-term NUG and utility power
purchase agreements;
- any under-recovered deferred costs as of August 1, 1999 resulting from
JCP&L's previous levelized energy adjustment clause;
- early retirement and severance-related costs of $130 million over 11
years should Oyster Creek be retired from service in 2000; and
- the amortization of Oyster Creek sunk costs, pending securitization.
In August 1999, JCP&L filed a petition with the NJBPU requesting
authorization to issue transition bonds to securitize the recovery of bondable
stranded costs attributable to the projected net investment in Oyster Creek at
September 1, 2000. The petition also requests that the NJBPU order provide for
the imposition and collection of a usage based non-bypassable transition bond
charge (TBC) and for the transfer of the bondable transition property relating
to the TBC to another entity. JCP&L has amended its petition to include the
up-front decommissioning and outage payments included in the Oyster Creek sale
agreement.
Pennsylvania Restructuring
In 1996, Pennsylvania adopted comprehensive legislation (Customer Choice
Act) which provides for the restructuring of the electric utility industry. In
October 1998, the PaPUC issued amended Restructuring Orders, approving
Settlement Agreements entered into by Met-Ed and Penelec. An appeal by one
intervenor in the restructuring proceedings is pending before the Pennsylvania
Supreme Court. There can be no assurance as to the outcome of this appeal.
The results of Met-Ed and Penelec's sale of their generating facilities
(see Generation Asset Divestiture section) will be addressed in Phase II of the
Pennsylvania restructuring proceeding, which is expected to begin in early 2000.
In 1999, Penelec deposited a portion of the proceeds from its generation asset
sale into a NUG Trust, which has a balance at December 31, 1999 of $266.7
million. To the extent Penelec incurs above-market NUG costs in excess of the
CTC revenues allocated for such costs Penelec may withdraw amounts from the
trust. There can be no assurance as to the outcome of these matters.
Federal Regulation
In November 1997, the Federal Energy Regulatory Commission (FERC) issued an
order to the PJM Power Pool which, among other things, directed the GPU Energy
companies to implement a single-system transmission rate, effective April 1,
1998. The implementation of the single-system rate has not affected
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<PAGE>
total transmission revenues; however, it has increased the pricing for
transmission service in Met-Ed and Penelec's service territories and reduced the
pricing for transmission service in JCP&L's service territory.
The GPU Energy companies have requested the FERC to reconsider its ruling
requiring a single-system transmission rate. The Restructuring Orders for Met-Ed
and Penelec provide for a transmission and distribution rate cap exception to
recover the increase in the transmission rate from Met-Ed and Penelec's retail
customers in the event the FERC denies the request for reconsideration of the
single-system transmission rate. The FERC's ruling may also have an effect on
JCP&L's distribution rates. There can be no assurance as to the outcome of this
matter.
Several bills have been introduced in Congress providing for a
comprehensive restructuring of the electric utility industry. These bills
proposed, among other things, retail choice for all utility customers, the
opportunity for utilities to recover their prudently incurred stranded costs in
varying degrees, and repeal of both the Public Utility Regulatory Policies Act
(PURPA) and the Public Utility Holding Company Act of 1935 (PUHCA).
In April 1999, the Clinton administration introduced the Comprehensive
Electricity Competition Act, which proposes a flexible mandate for customer
choice by January 1, 2003, reliability standards, environmental provisions, and
the repeal of both PURPA and PUHCA. The flexible mandate allows states to opt
out of the mandate if they believe consumers would be better served by an
alternative policy.
Nonutility Generation Agreements
- --------------------------------
Pursuant to the mandates of PURPA and state regulatory directives, the GPU
Energy companies have been required to enter into power purchase agreements with
NUGs for the purchase of energy and capacity which agreements have remaining
terms of up to 21 years. As of December 31, 1999, facilities covered by these
agreements having 1,606 MW (JCP&L 928 MW; Met-Ed 273 MW; Penelec 405 MW) of
capacity were in service.
The NJBPU Summary Order and PaPUC Restructuring Orders provide the GPU
Energy companies assurance of full recovery of their NUG costs (including
above-market NUG costs and certain buyout costs). Accordingly, the GPU Energy
companies have recorded a liability of $3.2 billion (JCP&L $1.6 billion; Met-Ed
$0.7 billion; Penelec $0.9 billion)on the Consolidated Balance Sheets for
above-market NUG costs which is fully offset by Regulatory assets, net. In
addition, JCP&L recorded a liability of $64 million for above-market utility
power purchase agreements with a corresponding offset to Regulatory assets, net,
since there is assurance of full recovery. The GPU Energy companies are
continuing efforts to reduce the above-market costs of these agreements and
will, where beneficial, attempt to renegotiate the prices of the agreements,
offer contract buyouts and attempt to convert must-run agreements to
dispatchable agreements. There can be no assurance as to the extent to which
these efforts will be successful. For additional information, see the
Competition and the Changing Regulatory Environment section of Note 12 of the
Notes to Consolidated Financial Statements.
In 1998, Met-Ed entered into a buyout agreement with Solar Turbines, Inc.
(Solar), contingent upon Met-Ed obtaining a final and non-appealable PaPUC order
allowing for full recovery of the buyout payment through retail rates.
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<PAGE>
In October 1999, Met-Ed paid Solar $51.3 million under an amended agreement
which obligates Solar to refund to Met-Ed these amounts if the PaPUC rescinds
its current approval of the buyout which was received as part of Met-Ed's
Restructuring Order.
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 (MGP), coal mine
refuse piles and generation facilities.
GPU records environmental 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, 1999, the GPU Energy companies have
liabilities recorded on their balance sheets for environmental remediation
totaling $66 million (JCP&L $56 million; Met-Ed $1 million; Penelec $8 million;
Other $1 million).
For more information, see the Environmental Matters section of Note 12 of
the Notes to Consolidated Financial Statements.
LEGAL MATTERS - TMI-2 ACCIDENT CLAIMS
-------------------------------------
As a result of the 1979 TMI-2 accident, individual claims for alleged
personal injury (including claims for punitive damages), which are material in
amount, were asserted against GPU, Inc. and the GPU Energy companies.
Approximately 2,100 of such claims were filed in the US 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.
In 1996, the District Court granted a motion for summary judgment filed by
GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test
cases," which had been selected for a test case trial as well as all of the
remaining 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 appealed the District Court's ruling to the
Court of Appeals for the Third Circuit. On November 2, 1999, the Third Circuit
affirmed the District Court's dismissal of the ten "test cases," but set aside
the dismissal of the additional pending claims, remanding them to the District
Court for further proceedings. In remanding these claims, the Third Circuit held
that the District Court had erred in extending its summary judgment decision to
the other plaintiffs and imposing on these plaintiffs the District Court's
finding that radiation exposures below 10 rems were too speculative to establish
a causal link to cancer. The Court of Appeals stated that the non-test case
plaintiffs should be permitted to present their own individual evidence that
exposure to radiation from the accident caused their cancers.
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<PAGE>
GPU, Inc. and the GPU Energy companies believe that the Third Circuit has
misinterpreted the record before the District Court, as it applies to the
non-test case plaintiffs and on November 16, 1999, filed petitions seeking a
rehearing and reconsideration of the Court's decision regarding these remaining
claims. The "test case" plaintiffs also requested a rehearing of the Court's
decision upholding the dismissal of their claims. In January 2000, the Court of
Appeals denied both petitions. The "test case" plaintiffs have stated that they
intend to seek Supreme Court review of the District Court's decision. There can
be no assurance as to the outcome of this litigation.
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.
ACCOUNTING MATTERS
------------------
Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation," applies to regulated utilities
that have the ability to recover their costs through rates established by
regulators and charged to customers. In June 1997, the Financial Accounting
Standards Board's (FASB) Emerging Issues Task Force (EITF) (Issue 97-4)
concluded that utilities are no longer subject to FAS 71, for the relevant
portion of their business, when they know details of their individual transition
plans to a competitive electric generation marketplace. The EITF also concluded
that utilities can continue to carry previously recorded regulated assets, as
well as any newly established regulated assets (including those related to
generation), on their balance sheets if regulators have assured a regulated cash
flow stream to recover the cost of these assets.
On May 24, 1999, the NJBPU issued a Summary Order regarding JCP&L's
unbundling, stranded cost and restructuring filings which essentially
deregulated the electric generation portion of JCP&L's business. Accordingly, in
the second quarter of 1999, JCP&L discontinued the application of FAS 71 and
adopted the provisions of Statement of Financial Accounting Standards No. 101
(FAS 101), "Regulated Enterprises - Accounting for the Discontinuation of
Application of FASB Statement No. 71" and EITF Issue 97-4 with respect to its
electric generation operations. In 1998, Met-Ed and Penelec, in conjunction with
receiving their Restructuring Orders, discontinued the application of FAS 71 and
adopted the provisions of FAS 101 and EITF 97-4 for their generation operations.
The transmission and distribution portion of the GPU Energy companies'
operations continue to be subject to the provisions of FAS 71.
In accordance with the Statement of Financial Accounting Standards No. 121
(FAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," impairment tests performed by the GPU
Energy companies on the net book values of their remaining generation facilities
determined that the net investment in Oyster Creek was impaired. As of December
31, 1999, this resulted in a write-down of $678 million to reflect Oyster
Creek's fair market value. The total impairment amount of Oyster Creek has been
reestablished as a regulatory asset since the Summary Order provides for its
recovery in the restructuring process.
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<PAGE>
Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. FAS 133
requires that companies recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
GPU will be required to include its derivative transactions on its balance sheet
at fair value, and recognize the subsequent changes in fair value as either
gains or losses in earnings or report them as a component of other comprehensive
income, depending upon the intended use and designation of the derivative as a
hedge. FAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. GPU will adopt FAS 133 in the first quarter of 2001 and is
in the process of evaluating the impact of the implementation of this statement.
GPU's use of derivative instruments is intended to manage the risk of interest
rate, foreign currency and commodity price fluctuations and may include such
transactions as electricity and natural gas forward and futures contracts,
foreign currency swaps, interest rate swaps and options. GPU does not intend to
hold or issue derivative instruments for trading purposes.
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of GPU, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of GPU,
Inc. and Subsidiary Companies at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. 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 of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 10, 2000
F-41
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 1999 1998
- -------------------------------------------------------------------------------------------
ASSETS
Utility Plant:
<S> <C> <C>
Transmission, distribution and general plant $11,240,218 $ 7,579,455
Generation plant 526,228 3,445,984
---------- -----------
Utility plant in service (Notes 6 & 7) 11,766,446 11,025,439
Accumulated depreciation (3,929,963) (4,460,341)
---------- ------------
Net utility plant in service (Note 1) 7,836,483 6,565,098
Construction work in progress 170,317 94,005
Other, net 18,128 145,792
---------- -----------
Net utility plant 8,024,928 6,804,895
---------- -----------
Other Property and Investments:
Equity investments 85,756 658,974
Goodwill, net (Note 1) 2,615,301 545,262
Nuclear decommissioning trusts, at market (Note 12) 636,284 716,274
Nuclear fuel disposal trust, at market 119,293 116,871
Other, net 837,415 262,562
---------- -----------
Total other property and investments 4,294,049 2,299,943
---------- -----------
Current Assets:
Cash and temporary cash investments 471,548 72,755
Special deposits 42,687 62,673
Accounts receivable:
Customers, net 445,745 286,278
Other 238,840 126,088
Unbilled revenues (Note 1) 152,263 144,076
Materials and supplies, at average cost or less:
Construction and maintenance 100,807 155,827
Fuel 208 42,697
Investments held for sale 26,946 48,473
Deferred income taxes (Note 8) 72,249 47,521
Prepayments 161,602 76,021
---------- -----------
Total current assets 1,712,895 1,062,409
---------- -----------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 4,712,654 3,940,829
Deferred income taxes (Note 8) 2,528,393 2,004,278
Other 445,163 175,755
---------- -----------
Total deferred debits and other assets 7,686,210 6,120,862
---------- -----------
Total Assets $21,718,082 $16,288,109
========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 1999 1998
- -------------------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
<S> <C> <C>
Common stock $ 331,958 $ 331,958
Capital surplus 1,011,721 1,011,310
Retained earnings 2,426,350 2,230,425
Accumulated other comprehensive income/(loss) (6,341) (31,304)
---------- ----------
Total 3,763,688 3,542,389
Reacquired common stock, at cost (298,735) (77,741)
---------- ----------
Total common stockholders' equity (Note 5) 3,464,953 3,464,648
Cumulative preferred stock: (Note 4)
With mandatory redemption 73,167 86,500
Without mandatory redemption 12,649 66,478
Subsidiary-obligated mandatorily redeemable
preferred securities (Note 4) 125,000 330,000
Trust preferred securities (Note 4) 200,000 -
Long-term debt (Note 3) 5,850,596 3,825,584
---------- ----------
Total capitalization 9,726,365 7,773,210
---------- -----------
Current Liabilities:
Securities due within one year (Notes 3 & 4) 581,147 563,683
Notes payable (Note 2) 1,171,869 368,607
Bank overdraft (Note 1) 224,585 -
Obligations under capital leases (Note 11) 48,165 126,480
Accounts payable 489,075 394,815
Taxes accrued 309,509 92,339
Interest accrued 76,246 81,931
Deferred credits (Note 1) - 2,411
Other 732,110 377,594
---------- -----------
Total current liabilities 3,632,706 2,007,860
---------- -----------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 3,563,078 3,044,947
Unamortized investment tax credits 61,364 114,308
Three Mile Island Unit 2 future costs (Note 12) 496,944 483,515
Power purchase contract loss liability (Note 12) 3,300,878 1,803,820
Other 936,747 1,060,449
---------- ----------
Total deferred credits and other liabilities 8,359,011 6,507,039
---------- -----------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $21,718,082 $16,288,109
========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (Note 1) $4,757,124 $4,248,792 $4,143,379
---------- ---------- ----------
Operating Expenses:
Fuel 304,621 407,105 400,329
Power purchased and interchanged 1,253,228 1,122,841 1,046,906
Deferred costs, net (Note 1) (38,108) (25,542) 6,043
Other operation and maintenance (Note 9) 1,495,402 1,106,913 993,739
Depreciation and amortization (Note 1) 542,939 522,094 467,714
Taxes, other than income taxes (Note 9) 190,212 219,302 357,913
--------- ---------- ---------
Total operating expenses 3,748,294 3,352,713 3,272,644
--------- --------- ---------
Operating Income 1,008,830 896,079 870,735
--------- -------- --------
Other Income and Deductions:
Allowance for other funds used during construction 432 916 75
Equity in undistributed earnings of affiliates, net 89,746 72,012 (27,100)
Other income, net 85,616 48,366 5,585
--------- ------- --------
Total other income and deductions 175,794 121,294 (21,440)
--------- ------- ---------
Income Before Interest Charges
and Preferred Dividends 1,184,624 1,017,373 849,295
---------- ---------- --------
Interest Charges and Preferred Dividends:
Long-term debt and notes payable 432,368 345,172 275,296
Trust preferred securities 8,345 - -
Subsidiary-obligated mandatorily
redeemable preferred securities 24,627 28,888 28,888
Other interest 10,048 8,277 8,121
Allowance for borrowed funds used
during construction (3,897) (4,348) (5,508)
Preferred stock dividends of subsidiaries,
inclusive of $2,116 loss on reacquisitions in 1999 11,006 11,243 12,524
---------- ---------- --------
Total interest charges and preferred dividends 482,497 389,232 319,321
---------- ---------- ---------
Income Before Income Taxes and Minority Interest 702,127 628,141 529,974
Income taxes (Note 8) 239,623 240,089 193,536
Minority interest net income 3,490 2,171 1,337
---------- ---------- ----------
Income Before Extraordinary Item 459,014 385,881 335,101
Extraordinary item, net of income tax
benefit of $16,300 (Note 6) - (25,755) -
---------- ---------- ----------
Net Income $ 459,014 $360,126 $ 335,101
========== ======== ==========
Basic - Earnings Per Average Common Share
Before Extraordinary Item $ 3.66 $3.03 $ 2.78
Extraordinary Item - (0.20) -
---------- ---------- ----------
Earnings Per Average Common Share $ 3.66 $ 2.83 $ 2.78
========== ======== ==========
Average Common Shares Outstanding 125,368 127,093 120,722
========== ======== ==========
Diluted - Earnings Per Average Common Share
Before Extraordinary Item $ 3.66 $3.03 $ 2.77
---------- -------- ----------
Extraordinary Item - (0.20) -
---------- -------- ----------
Earnings Per Average Common Share $ 3.66 $ 2.83 $ 2.77
========== ======== ==========
Average Common Shares Outstanding 125,570 127,312 121,002
========== ======== ==========
Cash Dividends Paid Per Share $ 2.105 $ 2.045 $ 1.985
========== ======== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
For The Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $459,014 $360,126 $335,101
------- -------- --------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gain on investments 5,838 8,987 6,374
Foreign currency translation 13,859 (9,461) (48,929)
Minimum pension liability 5,266 (1,534) (1,495)
------- -------- --------
Total other comprehensive income/(loss) 24,963 (2,008) (44,050)
------- -------- --------
Comprehensive income $483,977 $358,118 $291,051
======= ======= ========
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands)
For The Years Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $2,230,425 $2,140,712 $2,054,222
Net income 459,014 360,126 335,101
Cash dividends declared on common stock (263,089) (263,561) (241,517)
Other adjustments, net - (6,852) (7,094)
--------- ---------- -----------
Balance at end of year $2,426,350 $2,230,425 $2,140,712
========= ========= ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For The Years Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C> <C>
Net income $ 459,014 $360,126 $ 335,101
Extraordinary item (net of income tax
benefit of $16,300) - 25,755 -
--------- ---------- ---------
Income before extraordinary item 459,014 385,881 335,101
Adjustments to reconcile income to cash provided:
Depreciation and amortization 568,832 552,795 487,962
Amortization of property under capital leases 47,584 49,913 50,108
NJBPU/PaPUC restructuring rate orders 115,000 68,500 -
Gain on sale of investments, net (64,019) (43,548) -
Equity in undistributed (earnings)/losses of
affiliates, net of distributions received (62,170) (44,621) 69,862
Deferred income taxes and investment tax
credits, net (717,768) (165,860) (29,248)
Deferred costs, net (37,841) (24,482) 8,193
Changes in working capital:
Receivables (84,282) 91,285 (76,178)
Materials and supplies 81,297 704 4,803
Special deposits and prepayments 42,247 (18,514) 28,371
Payables and accrued liabilities (22,972) (18,645) 49,025
Nonutility generation contract buyout costs (94,034) (54,018) (56,550)
Other, net (79,636) 13,476 (27,186)
--------- ---------- ---------
Net cash provided by operating activities 151,252 792,866 844,263
--------- --------- ---------
Investing Activities:
<S> <C> <C> <C>
Acquisitions, net of cash acquired (1,670,739) - (1,798,338)
Capital expenditures and investments (460,952) (468,223) (470,299)
Proceeds from sale of investments 2,581,151 160,244 -
Contributions to nonutility generation trusts (266,701) - -
Contributions to decommissioning trusts (168,657) (51,039) (40,283)
Other, net 61,560 (37,876) 34,500
--------- ---------- ---------
Net cash provided/(required)
by investing activities 75,662 (396,894) (2,274,420)
--------- ---------- ---------
Financing Activities:
Issuance of long-term debt 1,787,094 749,724 1,893,219
Retirement of long-term debt (1,883,850) (1,036,110) (184,015)
Increase/(Decrease) in notes payable, net 882,352 (62,292) 87,667
Issuance of trust preferred securities 193,070 - -
Redemption of subsidiary-obligated mandatorily
redeemable preferred securities (205,383) - -
Redemption of preferred stock of subsidiaries (60,944) (15,000) (20,000)
Capital lease principal payments (51,040) (50,663) (49,560)
Issuance of common stock - 269,448 -
Reacquisition of common stock (225,821) - -
Dividends paid on common stock (264,448) (258,058) (239,597)
--------- ---------- ---------
Net cash provided/(required)
by financing activities 171,030 (402,951) 1,487,714
--------- ---------- ---------
Effect of exchange rate changes on cash 849 (5,365) (4,062)
--------- ---------- ---------
Net increase/(decrease) in cash and temporary cash
investments from above activities 398,793 (12,344) 53,495
Cash and temporary cash investments, beginning of year 72,755 85,099 31,604
--------- ---------- ----------
Cash and temporary cash investments, end of year $ 471,548 $ 72,755 $ 85,099
========= ========== ==========
Supplemental Disclosure:
Interest and preferred dividends paid $ 459,496 $ 370,303 $ 307,064
========= ========== ==========
Income taxes paid $ 702,355 $ 333,994 $ 229,373
========= ========== ===========
New capital lease obligations incurred $ 37,662 $ 37,793 $ 41,898
========= ========== ==========
Common stock dividends declared but not paid $ 64,557 $ 65,917 $ 60,414
========= ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
</TABLE>
<PAGE>
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GPU, Inc. 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). The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear generating facilities of these electric utilities are
conducting business under the name GPU Energy. JCP&L, Met-Ed and Penelec
considered together are referred to as the "GPU Energy companies." The nuclear
generation operations of GPU Energy are conducted by GPU Nuclear, Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric and gas transmission and distribution systems
in foreign countries, and are referred to as "GPU Electric." GPU International,
Inc. and GPU Power, Inc. and their subsidiaries develop, own and operate
generation facilities in the United States and foreign countries and are
referred to as the "GPUI Group." Other subsidiaries of GPU, Inc. include GPU
Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU
Telcom Services, Inc. (GPU Telcom), which is engaged in
telecommunications-related businesses; and GPU Service, Inc. (GPUS), which
provides legal, accounting, financial and other services to the GPU companies.
All of these companies considered together are referred to as "GPU."
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). GPU's accounting records also comply with the Securities and Exchange
Commission's (SEC) rules and regulations.
CONSOLIDATION
-------------
The GPU consolidated financial statements include the accounts of its
wholly-owned subsidiaries and any affiliates in which it has a controlling
financial interest (generally evidenced by a greater than 50% ownership
interest). All significant intercompany transactions and accounts are eliminated
in consolidation. GPU also uses the equity method of accounting for investments
in affiliates in which it has the ability to exercise significant influence.
F-47
<PAGE>
Effective in the third quarter of 1999, GPU began accounting for its
Midlands Electricity plc (Midlands) investment as a consolidated entity due to
GPU's purchase from Cinergy Corp. (Cinergy) of the remaining 50% ownership
interest in Midlands which GPU did not own. As a result of this change, GPU's
remaining equity investments are no longer presented in the Notes to
Consolidated Financial Statements since these investments as of December 31,
1999 are considered immaterial to GPU's results of operations and financial
condition.
REGULATORY ACCOUNTING
---------------------
Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation," applies to regulated utilities
that have the ability to recover their costs through rates established by
regulators and charged to customers. The GPU Energy companies' transmission and
distribution operations are currently accounted for under the provisions of FAS
71. In accordance with FAS 71, GPU has deferred certain costs pursuant to
actions of the NJBPU and PaPUC and is recovering or expects to recover such
costs in regulated rates charged to customers. Regulatory assets and liabilities
are reflected net in the Deferred Debits and Other Assets section of the
Consolidated Balance Sheets. For additional information about regulatory assets
and liabilities, see Note 12, Commitments and Contingencies.
With the receipt of the NJBPU Summary Restructuring Order (Summary Order)
in 1999 and the PaPUC Restructuring Orders (Restructuring Orders) in 1998, GPU
determined that the GPU Energy companies' electric generation operations no
longer met the criteria for the continued application of FAS 71, and therefore
adopted, for that portion of its business, the provisions of Statement of
Financial Accounting Standards No. 101 (FAS 101), "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB Statement No. 71" and
Emerging Issues Task Force Issue 97-4 (EITF)(Issue 97-4), Deregulation of the
Pricing of Electricity - Issues Related to the Application of FASB Statement No.
71 "Accounting for the Effects of Certain Types of Regulation" and No. 101
"Regulated Enterprises - Accounting for the Discontinuation of Application of
FASB Statement No. 71."
CURRENCY TRANSLATION
--------------------
In accordance with Statement of Financial Accounting Standards No. 52 (FAS
52), "Foreign Currency Translation," balance sheet accounts of foreign
operations are translated from foreign currencies into US dollars at year-end
rates, while income statement accounts are translated at the average month-end
exchange rates for the relevant period. The resulting translation adjustments
are included in Accumulated other comprehensive income/(loss), net of deferred
taxes, on the Consolidated Balance Sheets. Gains and losses resulting from
foreign currency transactions are included in Net Income.
REVENUES
--------
GPU recognizes operating revenues for services rendered to the end of the
relevant accounting period. GPU Electric and the GPU Energy companies' electric
operating revenues also include an estimate for unbilled revenues.
F-48
<PAGE>
DEFERRED COSTS
--------------
JCP&L recovers its prudently incurred generation-related costs through a
Market Transition Charge (MTC) and Basic Generation Service (BGS) charge, and
defers any differences between actual costs and amounts recovered from customers
through rates. Met-Ed and Penelec use deferred accounting for the above-market
portion of nonutility generation (NUG) costs which are collected through the
Competitive Transition Charge (CTC).
UTILITY PLANT
-------------
At December 31, 1999 and 1998, the GPU Energy companies' generation plants
are valued at the lower of cost or market. All other utility plant and additions
are valued at cost. The assets of acquired companies are carried at their fair
value as of the acquisition date, less accumulated depreciation.
DEPRECIATION
------------
GPU generally 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, resulted in annual rates as follows:
GPU JCP&L Met-Ed Penelec
--- ----- ------ -------
1999 2.96% 2.94% 3.01% 2.81%
1998 3.43% 3.65% 3.53% 3.25%
1997 3.34% 3.60% 3.39% 3.08%
GPU GasNet uses the volumetric depreciation method to amortize the cost of its
gas pipeline.
AMORTIZATION POLICIES
---------------------
Accounting for TMI-2 and Forked River Investments:
- -------------------------------------------------
At December 31, 1999, $61 million is included in Regulatory assets, net on
the Consolidated Balance Sheets for JCP&L's investment in Three Mile Island Unit
2 (TMI-2). JCP&L is collecting annual revenues for the amortization of TMI-2 of
$9.6 million. This level of revenue will be sufficient to recover the remaining
investment by 2008. Met-Ed and Penelec have collected all of their TMI-2
investment attributable to retail customers. At December 31, 1999, $56 million
is included in Regulatory assets, net 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 2006. Because JCP&L has 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.
Nuclear Fuel:
- ------------
The GPU Energy companies amortize nuclear fuel on a unit-of-production
basis. Rates are determined and periodically revised to amortize the cost of the
fuel over its useful life.
F-49
<PAGE>
At December 31, 1999 and 1998, 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 $25 million (JCP&L $15 million; Met-Ed $7 million; Penelec $3
million) and $28 million (JCP&L $18 million; Met-Ed $7 million; Penelec $3
million), respectively, 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. JCP&L is recovering these costs from customers
through its BGS and MTC rates while Met-Ed and Penelec anticipate recovery in
Phase II of their restructuring proceedings which are expected to begin in early
2000.
Goodwill:
- --------
Goodwill, resulting from GPU's purchase of various businesses, is recorded
on the Consolidated Balance Sheets and amortized to expense, on a straight-line
basis, over its useful life not to exceed 40 years. Goodwill amortization
expense amounted to $51.6 million, $14 million and $2.8 million for the years
ended December 31, 1999, 1998 and 1997, respectively. In addition, GPU's
investments accounted for under the equity method or cost method include
goodwill (net of amortization) totaling $21 million and $18.5 million as of
December 31, 1999 and 1998, respectively, which is amortized on a straight-line
basis over 20 years. Amortization expense on this goodwill (which is reflected
on the Consolidated Statements of Income in Other Income and Deductions)
amounted to $1.9 million, $1.6 million and $3.6 million for the years ended
December 31, 1999, 1998 and 1997, respectively. GPU periodically reviews
undiscounted projections of future cash flows from operations to assess whether
any potential intangible impairment exists on its goodwill. For additional
information of goodwill resulting from acquisitions, see Note 7, Acquisitions.
NUCLEAR FUEL DISPOSAL FEE
-------------------------
The GPU Energy companies are providing for estimated future disposal costs
for spent nuclear fuel at the Oyster Creek nuclear generating station (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 US Department of Energy (DOE) for the disposal of spent nuclear fuel. The
total liability under these contracts, including interest, at December 31, 1999,
all of which relates to spent nuclear fuel from nuclear generation through April
1983, amounted to $198 million (JCP&L $148 million; Met-Ed $33 million; Penelec
$17 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 in Regulatory assets, net. The distribution rates presently charged to
customers provide for the collection of these costs, plus interest, over a
remaining period of seven years for JCP&L. Met-Ed and Penelec are recovering
these costs through their respective CTC.
The GPU Energy companies' current rates provide for the recovery of costs
for spent nuclear fuel disposal costs resulting from nuclear generation
subsequent to April 1983. The GPU Energy companies are making quarterly payments
to the DOE based on one mill per kilowatt-hour. These remittances have ceased
for TMI-1 and will cease for Oyster Creek when that facility is
F-50
<PAGE>
sold. 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, see Note 12, Commitments and Contingencies.
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 purchase accounting
adjustments, liberalized depreciation methods, deferred costs, decommissioning
funds and discounted Forked River and TMI-2 investments, reflect the impact of
temporary differences between the amounts of assets and liabilities recognized
for financial reporting purposes and the amounts recognized for tax purposes.
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.
DERIVATIVE INSTRUMENTS
----------------------
GPU's use of derivative instruments is intended primarily to manage the
risk of interest rate, foreign currency and commodity price fluctuations. GPU
does not intend to hold or issue derivative instruments for trading purposes.
Commodity Derivatives:
- ---------------------
The GPU Energy companies use futures contracts to manage the risk of
fluctuations in the market price of electricity and natural gas. These contracts
qualify for hedge accounting treatment under current accounting rules since
price movements of the commodity derivatives are highly correlated with the
underlying hedged commodities and the transactions are designated as hedges at
inception. Accordingly, under the deferral method of accounting, gains and
losses related to commodity derivatives are recognized in Power purchased and
interchanged in the Consolidated Statements of Income when the hedged
transaction closes or if the commodity derivative is no longer sufficiently
correlated. Prior to income or loss recognition, deferred gains and losses
relating to these transactions are recorded in Current Assets or Current
Liabilities in the Consolidated Balance Sheets.
Interest Rate Swap Agreements:
- -----------------------------
GPU Electric uses interest rate swap agreements to manage the risk of
increases in variable interest rates. At December 31, 1999, these agreements
covered approximately $1.3 billion of debt, including commercial paper, and were
scheduled to expire on various dates through November 2007. Differences between
amounts paid and received under interest rate swaps are recorded as
F-51
<PAGE>
adjustments to the interest expense of the underlying debt since the swaps are
related to specific assets, liabilities or anticipated transactions. All of the
agreements effectively convert variable rate debt, including commercial paper,
to fixed rate debt. For the year ended December 31, 1999, fixed rate interest
expense incurred in connection with the swap agreements exceeded the variable
rate interest expense that would have been incurred had the swaps not been in
place by approximately $20.7 million.
Currency Swap Agreements:
- ------------------------
GPU Electric uses currency swap agreements to manage currency risk caused
by fluctuations in the US dollar exchange rate related to debt issued in the US
by Avon Energy Partners Holdings (Avon). These swap agreements effectively
convert principal and interest payments on this US dollar debt to fixed sterling
principal and interest payments, and expire on the maturity dates of the bonds.
Interest expense is recorded based on the fixed sterling interest rate. At
December 31, 1999, these currency swap agreements covered British Pound 517
million (US $850 million) of debt. Interest expense would have been British
Pound 16.6 million (US $26.9 million) as compared to British Pound 18.2 million
(US $29.5 million) for the year ended December 31, 1999 had these agreements not
been in place.
Indexed Swap Agreement:
- ----------------------
As part of an amended power purchase agreement with Niagara Mohawk Power
Corporation (NIMO), Onondaga Cogeneration L.P. (Onondaga), a GPU International
subsidiary, entered into a 10-year indexed swap agreement in 1998 which is
intended to provide Onondaga a fixed revenue stream. At December 31, 1999 and
1998, the indexed swap agreement is valued at $55.1 million and $62.4 million,
respectively and is included in Other - Deferred Debits and Other Assets on the
Consolidated Balance Sheets. This valuation was derived using the discounted
estimated cash flows related to payments expected to be received by Onondaga.
The indexed swap is being amortized to expense over the life of the swap
agreement. As a result of the anticipated expiration of a related power put
agreement between Onondaga and NIMO, GPU International expects to recognize in
income the unamortized balance of the indexed swap agreement, mostly offset by a
plant impairment, resulting in a slight gain in 2000.
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. Cash flows
are reported using the US dollar equivalent of the functional
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<PAGE>
currencies in effect at the time of the cash transaction. The effect of
exchange rate changes on cash balances held in foreign currencies are reported
as a separate line item on the Consolidated Statements of Cash Flows.
Avon and Midlands have a formal agreement with a United Kingdom bank, under
which they maintain available cash balances in a number of subsidiary bank
accounts and an overdraft in the main Midlands operating account. The overdraft
balance was $224.6 million as of December 31, 1999, while total cash at Midlands
was $274.6 million. Since Midlands manages the overdraft balance in such a way
that it does not exceed the available cash balances in the other associated
accounts, no interest or fees are paid under this arrangement. In effect,
Midlands uses the overdraft facility to utilize the available cash in the other
bank accounts. The overdraft position and the offsetting cash balances subject
to this arrangement are shown on the Consolidated Balance Sheets in Bank
overdraft and Cash and temporary cash investments, respectively.
2. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 1999 and 1998, short-term debt outstanding consisted of the
following:
1999 1998
---- ----
Balance Weighted Balance Weighted
Company Facility Outstanding Avg. Rate Outstanding Avg. Rate
- ------- -------- ------------- --------- ----------- ---------
(in millions) (in millions)
GPU, Inc. Bank Loans $ 123 7 % $ 69 7 %
JCP&L Bank Loans - - 53 6.3
Commercial Paper - - 69 6.2
Met-Ed Bank Loans - - 17 6.1
Commercial Paper - - 63 6.4
Penelec Bank Loans - - 32 5.9
Commercial Paper 54 6.9 54 6.1
GPUI Bank Loans - - 12 6.2
GPU Electric Bank Loans 147 6.1 - -
Commercial Paper 848 6.5 - -
----- ---
Total $1,172 $369
===== ===
GPU's weighted average interest rate on the short-term borrowings was 6.5%
and 6.4% at December 31, 1999 and 1998, respectively.
GPU has various credit facilities in place, the most significant of which
are discussed below. These credit facilities generally provide GPU bank loans at
negotiable market rates. In addition, commitment fees or facility fees are
determined by market rates at the time the facility is put in place, and can
change based on the borrower's current bond rating.
GPU, Inc. and GPU Energy companies
GPU, Inc. and the GPU Energy companies have available $450 million of
short-term borrowing facilities, which includes a $250 million revolving
credit agreement and various bank lines of credit. In addition, GPU, Inc.,
JCP&L, Met-Ed and Penelec can issue commercial paper in amounts of up to $100
million, $150 million, $75 million, and $100 million, respectively. From
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<PAGE>
these sources, GPU, Inc. has regulatory authority to have $250 million
outstanding at any one time. JCP&L, Met-Ed and Penelec are limited by their
charters or SEC authorization to $265 million, $150 million and $150 million,
respectively, of short-term debt outstanding at any one time. As of December 31,
1999, GPU, Inc. and the GPU Energy companies had $123.5 million and $53.6
million, respectively, of short-term debt outstanding.
GPU Electric
GPU Capital has a $1 billion 364-day senior revolving credit agreement due
in December 2000 supporting the issuance of commercial paper for its $1 billion
commercial paper program established to fund GPU Electric acquisitions. GPU,
Inc. has guaranteed GPU Capital's obligations under this program. At December
31, 1999, $768 million was outstanding under the commercial paper program, of
which $370 million is included in long-term debt on the Consolidated Balance
Sheets since it is management's intent to reissue this amount of the commercial
paper on a long-term basis. For additional information, see Note 3 Long-Term
Debt.
GPU Australia Holdings, Inc. has $270 million available under its senior
revolving credit facility due in November 2002. This facility, in combination
with other GPU, Inc. credit facilities, serves as credit support for GPU
Australia Holdings' $350 million commercial paper program. GPU, Inc. has
guaranteed GPU Australia Holdings' obligations under this program. At December
31, 1999, $182 million was outstanding under the commercial paper program.
Austran Holdings, Inc. (Austran), a wholly-owned indirect subsidiary of GPU
Electric, has a A$500 million (approximately US $328 million) commercial paper
program to refinance the maturing portion of the senior debt credit facility
used to finance the PowerNet Victoria (GPU PowerNet) acquisition. GPU PowerNet
has guaranteed Austran's obligations under this program. At December 31, 1999,
A$420 million (approximately US $275 million) was outstanding under this
program.
Midlands maintains a (pound)200 million (approximately US $323 million)
syndicated revolving credit facility with a bank for working capital purposes,
which matures May 2001. At December 31, 1999, (pound)87 million (approximately
US $140 million) was outstanding under this facility.
GPUI Group
GPU International has a revolving credit agreement providing for borrowings
through December 2000 of up to $30 million outstanding at any one time, of which
up to $15 million may be utilized to provide letters of credit. GPU, Inc. has
guaranteed GPU International's obligations under this agreement. At December 31,
1999, no borrowings or letters of credit were outstanding under this facility.
3. LONG-TERM DEBT
At December 31, 1999 and 1998, long-term debt outstanding consisted of the
following:
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GPU, Inc. and Subsidiary companies (in millions)
-----------------------------------
Total Due
Interest Debt Within
1999 Maturities Rates Outstanding One Year
---- ---------- ----- ----------- --------
GPU Energy companies & GPUS:
First mortgage bonds(a) 2000-2027 5.35-9.48% $1,783 (1) $ 90
Senior notes 2004-2019 5.75-6.63% 350 -
Other long-term debt 2000-2039 6.76-7.69% 34 -
GPU Electric:
Bank loans 2000-2014 4.16-13% 2,483 475
Bonds 2002-2008 7.38-7.46% 1,092 -
Commercial paper/Medium
term notes 2000-2002 6.3 -7.65% 633 (2) -
GPUI Group 2000-2022 4.5 -7% 46 5
----- -----
Total $6,421 $ 570
===== ====
(1) Amount is less unamortized net discount of $4.6 million.
(2) Amount includes $370 million of commercial paper, which is included in
long-term debt on the Consolidated Balance Sheets since it is management's
intent to reissue this amount on a long-term basis.
1998 (in millions)
- ----
First mortgage bonds(a) $2,418
Amounts due within one year (80)
Unamortized net discount (3)
-----
Total GPU Energy companies 2,335
Other long-term debt:
GPU Electric (excludes amounts due within one year of $453) 1,434
GPUI Group (excludes amounts due within one year of $28) 23
Other 34
-----
Total $3,826
======
JCP&L
- -----
First Mortgage Bonds - Series as noted (a): (in thousands)
1999 1998
---- ----
6.04% due 2000 $ 40,000 $ 40,000
6.45% due 2001 40,000 40,000
9% due 2002 50,000 50,000
6.375% due 2003 150,000 150,000
7.125% due 2004 160,000 160,000
6.78% due 2005 50,000 50,000
8.25% due 2006 50,000 50,000
6.85% due 2006 40,000 40,000
7.90% due 2007 40,000 40,000
7.125% due 2009 6,300 6,300
7.10% due 2015 12,200 12,200
9.20% due 2021 50,000 50,000
8.55% due 2022 30,000 30,000
8.82% due 2022 12,000 12,000
8.85% due 2022 38,000 38,000
8.32% due 2022 40,000 40,000
7.98% due 2023 40,000 40,000
7.5% due 2023 125,000 125,000
8.45% due 2025 50,000 50,000
6.75% due 2025 150,000 150,000
--------- ---------
Subtotal 1,173,500 1,173,500
Amounts due within one year (40,000) -
Unamortized net discount (2,752) (2,992)
--------- ---------
Total 1,130,748 1,170,508
Other long-term debt
(excludes amounts due within one year
of $13 for 1999 and $12 for 1998) 3,012 3,024
--------- ---------
Total long-term debt $1,133,760 $1,173,532
========= =========
F-55
<PAGE>
Met-Ed
- ------
First Mortgage Bonds - Series as noted (a): (in thousands)
1999 1998
---- ----
7.05% due 1999 $ - $ 30,000
6.2% due 2000 30,000 30,000
9.48% due 2000 20,000 20,000
8.05% due 2002 30,000 30,000
6.6% due 2003 20,000 20,000
7.22% due 2003 40,000 40,000
9.1% due 2003 30,000 30,000
6.34% due 2004 40,000 40,000
6.77% due 2005 30,000 30,000
7.35% due 2005 20,000 20,000
6.36% due 2006 17,000 17,000
6.40% due 2006 33,000 33,000
6.00% due 2008 8,700 8,700
6.1% due 2021 28,500 28,500
8.6% due 2022 30,000 30,000
8.8% due 2022 30,000 30,000
6.97% due 2023 30,000 30,000
7.65% due 2023 30,000 30,000
8.15% due 2023 60,000 60,000
5.95% due 2027 13,690 13,690
------- -------
Subtotal 540,890 570,890
Amounts due within one year (50,000) (30,000)
Unamortized net discount (31) (35)
------- -------
Total 490,859 540,855
Other long-term debt
(excludes amounts due within one year
of $25 for 1999 and $24 for 1998) 6,024 6,049
------- -------
Total long-term debt $ 496,883 $ 546,904
======= =======
F-56
<PAGE>
Penelec
- -------
First Mortgage Bonds - Series as noted (a): (in thousands)
1999 1998
---- ----
5.99% due 1999 $ - $ 50,000
6.15% due 2000 - 30,000
6.8% due 2001 - 20,000
8.70% due 2001 - 30,000
7.40% due 2002 - 10,000
7.43% due 2002 - 30,000
7.92% due 2002 - 10,000
7.40% due 2003 - 10,000
6.60% due 2003 - 30,000
7.02% due 2003 - 20,000
7.48% due 2004 - 40,000
6.10% due 2004 - 30,000
6.7% due 2005 - 30,000
6.35% due 2006 - 40,000
8.05% due 2006 - 10,000
6.125% due 2007 4,110 4,110
6.55% due 2009 - 50,000
5.35% due 2010 12,310 12,310
5.35% due 2010 12,000 12,000
5.80% due 2020 20,000 20,000
8.33% due 2022 - 20,000
7.49% due 2023 - 30,000
8.38% due 2024 - 40,000
8.61% due 2025 - 30,000
7.53% due 2025 - 40,000
6.05% due 2025 25,000 25,000
------- -------
Subtotal 73,420 673,420
Amounts due within one year - (50,000)
Unamortized net discount (1,791) (11)
------- -------
Total 71,629 623,409
Senior Notes - Series as noted:
5.75% due 2004 125,000 -
6.125% due 2009 100,000 -
6.625% due 2019 125,000 -
------- -------
Total 350,000 -
Other long-term debt
(excludes amounts due within one year
of $13 for 1999 and $12 for 1998) 3,012 3,025
------- -------
Total long-term debt $ 424,641 $ 626,434
======= =======
(a) Substantially all of the utility plant owned by the GPU Energy companies is
subject to the liens of their respective mortgages.
For the years 2000, 2001, 2002, 2003 and 2004, GPU has long-term debt
maturities as follows:
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<PAGE>
(in millions)
Company 2000 2001 2002 2003 2004
- ------- ---- ---- ---- ---- ----
JCP&L $ 40 $ 40 $ 50 $150 $160
Met-Ed 50 - 30 90 40
Penelec - - - - 125
GPU Electric 475 1,007 1,074 14 12
GPUI Group 5 7 7 6 6
GPUS - 22 - - -
--- ----- ----- --- ---
Total $570 $1,076 $1,161 $260 $343
=== ===== ===== === ===
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. The estimated fair
value of GPU's long-term debt, including amounts due within one year, as of
December 31, 1999 and 1998 is as follows:
(in millions)
----------------------------------------------
1999 1998
----------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- ------- -----
JCP&L $1,174 $1,139 $1,174 $1,245
Met-Ed 547 532 577 614
Penelec 424 392 676 718
GPU Electric 4,208 4,186 - -
GPUI Group 46 41 1,938 1,856
GPUS 22 22 22 22
----- ----- ----- -----
Total $6,421 $6,312 $4,387 $4,455
===== ===== ===== =====
At December 31, 1999, GPU Electric had long-term debt outstanding of
approximately $470 million, which was guaranteed by GPU, Inc. The guaranteed
amount consisted of $370 million under the GPU Capital $1 billion commercial
paper program and up to $100 million under the British Pound 245 million credit
facility used to partially fund GPU's acquisition of Cinergy's 50% interest in
Midlands.
4. PREFERRED SECURITIES
Cumulative Preferred Stock:
- --------------------------
At December 31, 1999 and 1998, the following issues of cumulative preferred
stock were outstanding:
GPU, Inc. and Subsidiary Companies
(in thousands)
1999 1998
---- ----
Cumulative preferred stock (a):
With mandatory redemption (c)(d) $ 84,000 $ 89,000
Amounts due within one year (e) (10,833) ( 2,500)
------- -------
Total cumulative preferred stock
with mandatory redemption $ 73,167 $ 86,500
======= =======
Cumulative preferred stock (a):
Without mandatory redemption (b)(d)(f) $ 12,500 $ 65,996
Premium on cumulative preferred stock 149 482
------- -------
Total cumulative preferred stock
without mandatory redemption $ 12,649 $ 66,478
======= =======
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<PAGE>
JCP&L
- -----
Cumulative preferred stock, without par value, 15,600,000 shares authorized,
965,000 and 1,265,000 shares issued and outstanding in 1999 and 1998,
respectively. (a)
(in thousands)
1999 1998
---- ----
Cumulative preferred stock - without mandatory redemption (b)(d):
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
------ ------
Subtotal 12,500 37,500
Premium on cumulative preferred stock 149 241
------ ------
Total cumulative preferred stock -
without mandatory redemption $ 12,649 $ 37,741
====== ======
Cumulative preferred stock - with mandatory redemption (c)(d)(e):
8.65% Series J, 500,000 shares $ 50,000 $ 50,000
7.52% Series K,
340,000 shares at 12/31/99
390,000 shares at 12/31/98 34,000 39,000
------ -------
Subtotal 84,000 89,000
Amounts due within one year (e) (10,833) (2,500)
------ -------
Total cumulative preferred stock -
with mandatory redemption $ 73,167 $ 86,500
====== =======
Met-Ed
- ------
Cumulative preferred stock, without par value, 10,000,000 shares authorized,
119,475 shares issued and outstanding in 1998, without mandatory redemption. All
cumulative preferred stock issued and outstanding was redeemed February 1999.
(a)(b)(f)
(in thousands)
1999 1998
---- ----
3.90% Series, 64,384 shares,
callable at $105.625 a share $ - $ 6,438
4.35% Series, 22,517 shares,
callable at $104.25 a share - 2,252
3.85% Series, 9,252 shares,
callable at $104.00 a share - 925
3.80% Series, 7,982 shares,
callable at $104.70 a share - 798
4.45% Series, 15,340 shares,
callable at $104.25 a share - 1,534
------ ------
Subtotal - 11,947
Premium on cumulative preferred stock - 109
------ ------
Total cumulative preferred stock $ - $12,056
====== ======
F-59
<PAGE>
Penelec
- -------
Cumulative preferred stock, without par value, 11,435,000 shares authorized,
165,485 shares issued and outstanding in 1998, without mandatory redemption. All
cumulative preferred stock issued and outstanding was redeemed February 1999.
(a)(b)(f)
(in thousands)
1999 1998
---- ----
4.40% Series B, 29,678 shares,
callable at $108.25 per share $ - $ 2,968
3.70% Series C, 49,568 shares,
callable at $105.00 per share - 4,957
4.05% Series D, 28,219 shares,
callable at $104.53 per share - 2,822
4.70% Series E, 14,103 shares,
callable at $105.25 per share - 1,410
4.50% Series F, 17,081 shares,
callable at $104.27 per share - 1,708
4.60% Series G, 26,836 shares,
callable at $104.25 per share - 2,684
------ ------
Subtotal - 16,549
Premium on cumulative preferred stock - 132
------ ------
Total cumulative preferred stock $ - $16,681
====== ======
(a) At December 31, 1999 and 1998, the GPU Energy companies were authorized to
issue 37,035,000 of cumulative preferred stock. If dividends on any of the
cumulative preferred stock of JCP&L are in arrears for four quarters, the
holders of cumulative preferred stock, voting as a class, are entitled to
elect a majority of the Board of Directors until all dividends in arrears
have been paid. If JCP&L has failed to pay dividends in full on any
outstanding shares of cumulative preferred stock, thereafter and until
dividends in full on all such shares of cumulative preferred stock have
been paid, or declared and set apart for payment, for all past quarterly
dividend periods, JCP&L shall not redeem any cumulative preferred stock
unless all the shares of cumulative preferred stock outstanding are
redeemed and shall not purchase or otherwise acquire for value any shares
of cumulative preferred stock except in accordance with an offer (which may
vary with respect to shares of different series) made to all holders of
share of cumulative preferred stock.
(b) The outstanding shares of preferred stock without mandatory redemption are
callable at various prices above their stated values. At December 31, 1999,
JCP&L could call the 4% Series for $13.3 million.
(c) 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.
(d) During 1999, JCP&L redeemed all of its outstanding shares of 7.88%
cumulative preferred stock with a stated value of $25 million and $5
million stated value of its 7.52% cumulative preferred stock pursuant to
mandatory and optional sinking fund provisions. As a result, a
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<PAGE>
reacquisition loss of $0.8 million was charged to income. During 1998,
JCP&L redeemed $5 million stated value of its 7.52% cumulative preferred
stock and $10 million stated value of its 8.48% cumulative preferred stock
pursuant to mandatory and optional sinking fund provisions. JCP&L's total
redemption cost for 1999 and 1998 was $30.9 million and $15 million,
respectively.
(e) The shares with mandatory redemption have redemption requirements of $10.8
million for each year of the next five years. The fair value of the
preferred stock with mandatory redemption, including amounts due within one
year, based on market price quotations at December 31, 1999 and 1998, was
$86.5 million and $94.7 million, respectively.
(f) In 1999, Met-Ed and Penelec redeemed all of their outstanding shares of
cumulative preferred stock for $12.5 million and $17.4 million,
respectively. As a result, a reacquisition loss of $1.3 million (Met-Ed
$0.6 million; Penelec $0.7 million) was charged to income.
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 at 8.56% (5 million shares at $25 per share) of mandatorily
redeemable preferred securities (MIPS) and in 1994, Met-Ed Capital, L.P. and
Penelec Capital, L.P. issued $100 million at 9% (4 million shares at $25 per
share) and $105 million at 8.75% (4.2 million shares at $25 per share),
respectively, of MIPS. The proceeds were loaned to JCP&L, Met-Ed and Penelec,
respectively, which, in turn, issued their deferrable interest subordinated
debentures to the partnerships. In 1999, Met-Ed and Penelec redeemed all of
their outstanding shares of MIPS for $100 million and $105 million,
respectively. At December 31, 1999, JCP&L's outstanding shares of MIPS had a
fair value of $120.6 million.
The MIPS of JCP&L Capital, L.P. mature in 2044 and are redeemable at the
option of JCP&L beginning in May of 2000 at 100% of their principal amount, or
earlier under certain limited circumstances, including the loss of the federal
tax deduction for interest paid on the subordinated debentures. JCP&L has fully
and unconditionally guaranteed payment of distributions, to the extent there is
sufficient cash on hand to permit such payments and legally available funds, and
payments on liquidation or redemption of its Preferred Securities. Distributions
on the MIPS (and interest on the subordinated debentures) may be deferred for up
to 60 months, but JCP&L, may not pay dividends on, or redeem or acquire, any of
its cumulative preferred or common stock until deferred payments on its
subordinated debentures are paid in full.
Trust Preferred Securities:
- --------------------------
In 1999, $100 million of trust preferred securities were issued on behalf
of each of Met-Ed and Penelec at 7.35% and 7.34%, respectively. The trust
preferred securities were issued by Met-Ed Capital Trust and Penelec Capital
Trust and represent a beneficial interest in the trust equal to a cumulative
preferred limited partnership interest in Met-Ed Capital II, L.P. and Penelec
Capital II, L.P. The preferred securities are the sole assets of the trust
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<PAGE>
and the only revenues of the trust will be distributions on the trust
preferred securities. Each trust security has entitled the holder to receive
quarterly cash distributions. Met-Ed and Penelec unconditionally guaranteed
the payments by Met-Ed Capital II, L.P. and Penelec Capital II, L.P.,
respectively.
The fair value of the Met-Ed and Penelec trust preferred securities at
December 31, 1999 was $81 million and $80.8 million, respectively.
5. STOCKHOLDERS' EQUITY
The following table presents information relating to the common stock
($2.50 par value) of GPU, Inc.:
1999 1998 1997
---- ---- ----
Authorized shares 350,000,000 350,000,000 350,000,000
Issued shares 132,783,338 132,783,338 125,783,338
Reacquired shares 10,977,798 4,787,657 4,950,727
Outstanding shares 121,805,540 127,995,681 120,832,611
Outstanding restricted units 283,602 268,360 247,955
Outstanding stock options 394,750 335,950 -
In 1999, GPU, Inc. reacquired 6.4 million shares of common stock at a total
cost of $225.8 million.
At December 31, 1999 and 1998, the following issues of common stock were
outstanding:
(in thousands)
GPU, Inc. 1999 1998
- --------- ---- ----
Common stock, par value $2.50 per share $331,958 $331,958
======= =======
JCP&L
- -----
Common stock, par value $10 per share,
16,000,000 shares authorized, 15,371,270
shares issued and outstanding $153,713 $153,713
======= =======
Met-Ed
- ------
Common stock, no par value, 900,000 shares
authorized, 859,500 shares issued
and outstanding $ 66,273 $ 66,273
====== ======
Penelec
- -------
Common stock, par value $20 per share,
5,400,000 shares authorized, 5,290,596
shares issued and outstanding $105,812 $105,812
======= =======
Pursuant to the 1990 Employee Stock Plan (as restated to reflect amendments
through June 3, 1999), awards may be granted in the form of incentive stock
options, nonqualified stock options, restricted shares of common stock,
restricted units and stock appreciation rights, which may accompany options. In
1999, 1998 and 1997, GPU, Inc. issued restricted units
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<PAGE>
to officers representing rights to receive shares of common stock, on a
one-for-one basis, at the end of the restriction period. The number of shares
eventually issued will depend upon the degree to which GPU's performance goals
have been met for the restriction period and could range from 0% to 200% of the
originally awarded units plus additional units resulting from reinvested
dividend equivalents. In 1999, GPU, Inc. granted stock options to its officers
to purchase 90,600, 1,000 and 1,000 shares at $42.9375, $34.50 and $34.6875 per
share, respectively. In 1998, GPU, Inc. granted stock options to its officers to
purchase 305,950 and 30,000 shares at $36.625 per share and $44.25 per share,
respectively. All options have an exercise price equal to the fair market value
of GPU, Inc. common stock on the grant date. Options are exercisable in
accordance with the terms set forth in the Stock Option Agreement. In 1999 and
1998, no options were exercised.
Since 1997, pursuant to the Deferred Stock Unit Plan for Outside Directors,
restricted units were issued to outside directors representing rights to receive
shares of GPU, Inc. common stock, on a one-for-one basis. All restricted units
are considered common stock equivalents and, accordingly, are reflected in the
computation of diluted earnings per share shown on the Consolidated Statements
of Income. The restricted units accrue dividend equivalents on a quarterly
basis, which are reinvested in additional restricted units.
In 1999, 1998 and 1997, through the above-mentioned plans, officers and
outside directors were awarded 56,994, 53,260 and 64,941 restricted units,
respectively. In 1999, 1998 and 1997, also through those plans, GPU, Inc. issued
a total of 20,215, 20,611 and 54,491 shares of common stock, respectively, from
previously reacquired shares.
In 1996, GPU adopted the disclosure requirements of 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. As permitted by FAS 123 GPU continues to
follow the intrinsic value method set forth in APB Opinion No. 25, "Accounting
for Stock Issued to Employees" and disclose the pro forma effects on net income
(loss) had the fair value of the options been expensed. 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.
Accumulated Other Comprehensive Income/(Loss):
- ----------------------------------------------
In 1997, GPU adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." At December 31, 1999 and 1998, GPU
had on the Consolidated Balance Sheets the following amounts in Accumulated
other comprehensive income/(loss):
GPU, Inc. and Subsidiary Companies
- ----------------------------------
(in thousands)
1999 1998
---- ----
Net unrealized gains on investments $ 34,183 $ 28,345
Foreign currency translation (40,518) (54,377)
Minimum pension liability (6) (5,272)
------ ------
Accumulated other comprehensive income/(loss) $( 6,341) $(31,304)
====== ======
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<PAGE>
JCP&L 1999 1998
----- ------ ------
Net unrealized gain on investments $ 7 $ -
Minimum pension liability - (425)
------ -----
Accumulated other comprehensive income/(loss) $ 7 $ (425)
====== =====
Met-Ed
- -------
Net unrealized gain on investments $ 21,369 $ 17,054
Minimum pension liability (6) (534)
------ ------
Accumulated other comprehensive income $ 21,363 $ 16,520
====== ======
Penelec
- -------
Net unrealized gain on investments $ 10,619 $ 8,518
Minimum pension liability - (165)
------ ------
Accumulated other comprehensive income $ 10,619 $ 8,353
====== ======
The components of the change in accumulated other comprehensive
income/(loss), and the related tax effects, for the years 1999, 1998 and 1997
are as follows:
GPU, Inc. and Subsidiary Companies
- ----------------------------------
(in thousands)
Amount Income Tax Amount
Before (Expense) Net of
Taxes Benefit Taxes
------- --------- -------
1999
- ----
Net unrealized gains on investments $12,516 $( 4,680) $ 7,836
Adjustment for amounts included in income ( 1,998) - ( 1,998)
------ ------- ------
Net change in accumulated other
comprehensive income 10,518 ( 4,680) 5,838
------ ------- ------
Foreign currency translation adjustments 19,735 ( 6,907) 12,828
Adjustment for amounts included in income 1,586 (555) 1,031
------ ------- ------
Net change in accumulated other
comprehensive income 21,321 ( 7,462) 13,859
------ ------- ------
Minimum pension liability 8,957 ( 3,691) 5,266
------ ------- ------
Total change in accumulated other
comprehensive income/(loss) $40,796 $(15,833) $24,963
====== ======= ======
1998
- ----
Net unrealized gains on investments $ 13,235 $( 4,248) $ 8,987
------ ------ ------
Foreign currency translation adjustments (23,295) 8,233 (15,062)
Adjustment for amounts included in income 8,737 ( 3,136) 5,601
------ ------ ------
Net change in accumulated other
comprehensive income/(loss) (14,558) 5,097 ( 9,461)
------ ------ ------
Minimum pension liability ( 2,605) 1,071 ( 1,534)
------ ------ ------
Total change in accumulated other
comprehensive income/(loss) $( 3,928) $ 1,920 $( 2,008)
====== ====== ======
1997
- ----
Net unrealized gains on investments $ 10,895 $( 4,521) $ 6,374
Foreign currency translation adjustments (73,115) 24,186 (48,929)
Minimum pension liability ( 2,541) 1,046 ( 1,495)
------ ------ ------
Total change in accumulated other
comprehensive income/(loss) $(64,761) $ 20,711 $(44,050)
====== ====== ======
F-64
<PAGE>
(in thousands)
JCP&L Amount Income Tax Amount
- ----- Before (Expense) Net of
1999 Taxes Benefit Taxes
---- ------ ------- -------
Net unrealized gain on investments $ 7 $ - $ 7
Minimum pension liability 718 (293) 425
---- ---- ----
Total change in accumulated
other comprehensive income/(loss) $ 725 $ (293) $ 432
==== ===== ====
1998
----
Net unrealized gain on investments $ - $ - $ -
Minimum pension liability (718) 293 (425)
---- ---- ----
Total change in accumulated
other comprehensive income/(loss) $ (718) $ 293 $ (425)
==== ==== ====
Met-Ed
- ------
1999
----
Net unrealized gain on investments $ 7,388 $(3,073) 4,315
Minimum pension liability 901 (373) 528
----- ----- ------
Total change in accumulated
other comprehensive income/(loss) $ 8,289 $(3,446) $ 4,843
===== ===== =====
1998
- ----
Net unrealized gain on investments $ 6,990 $(2,842) $ 4,148
Minimum pension liability (196) 81 (115)
----- ----- -----
Total change in accumulated
other comprehensive income/(loss) $ 6,794 $(2,761) $ 4,033
===== ===== =====
1997
----
Net unrealized gain on investments $ 7,263 $(3,014) $ 4,249
Minimum pension liability (267) 110 (157)
----- ----- -----
Total change in accumulated
other comprehensive income/(loss) $ 6,996 $(2,904) $ 4,092
===== ===== =====
Penelec
1999
----
Net unrealized gain on investments$ 3,708 (1,607) $ 2,101
Minimum pension liability 282 (117) 165
----- ---- -----
Total change in accumulated
other comprehensive income/(loss) $ 3,990 $(1,724) $ 2,266
===== ===== =====
1998
----
Net unrealized gain on investments $ 3,471 $(1,406) $ 2,064
Minimum pension liability (73) 30 (43)
----- ----- -----
Total change in accumulated
other comprehensive income/(loss) $ 3,397 $(1,376) $ 2,021
===== ===== =====
1997
Net unrealized gain on investments $ 3,632 $(1,507) $ 2,125
Minimum pension liability (209) 87 (122)
----- ----- -----
Total change in accumulated
other comprehensive income/(loss) $ 3,423 $(1,420) $ 2,003
===== ===== =====
F-65
<PAGE>
6. ACCOUNTING FOR EXTRAORDINARY AND NON-RECURRING ITEMS
JCP&L Restructuring Write-off:
- -----------------------------
In 1999, the NJBPU issued a Summary Order regarding JCP&L's unbundling,
stranded cost and restructuring filings. Accordingly, in 1999 JCP&L discontinued
the application of FAS 71 and adopted the provisions of FAS 101 and EITF 97-4
with respect to its electric generation operations. The transmission and
distribution operations of JCP&L continue to be subject to the provisions of FAS
71.
In 1999, JCP&L recorded a reduction in operating revenues of $115 million
relating to the Summary Order which resulted in an after-tax charge to earnings
of $68 million, or $0.54 per share. This reduction reflects JCP&L's obligation
to refund to customers 5% from rates in effect as of April 30, 1997. The refund
will be made to customers from August 1, 2002 through July 31, 2003.
Since JCP&L is no longer subject to FAS 71 for the generation portion of
its business, GPU performed an impairment test on Oyster Creek in accordance
with Statement of Financial Accounting Standards No. 121 (FAS 121) "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This test determined that JCP&L's net investment in Oyster Creek, including
plant, nuclear fuel and materials and supplies inventories, was impaired. This
investment was written down by a total of $678 million (pre-tax) in 1999 to
reflect the plant's fair market value. This impairment, which was recorded as an
extraordinary deduction, was reversed and reestablished as a regulatory asset
since the Summary Order provides for rate recovery.
Generation Asset Divestiture:
- ----------------------------
As discussed below, in 1999, the GPU Energy companies completed the sales of
TMI-1 and substantially all of their fossil-fuel and hydroelectric stations.
The GPU Energy companies sold TMI-1 to AmerGen Energy Company, LLC
(AmerGen), a joint venture of PECO Energy and British Energy, for a total
purchase price of approximately $100 million. The sale did not have a
significant impact on 1999 earnings since TMI-1 had been written down to its
fair market value in 1998. The majority of the amount written down and the
majority of the remaining loss from the sale resulted in the deferral of $528.3
million (JCP&L $133.1 million; Met-Ed $270.7 million; Penelec $124.5 million) as
a regulatory asset pending separate and further reviews by the NJBPU and the
PaPUC (Phase II of the Pennsylvania restructuring proceedings).
The GPU Energy companies completed the sales of substantially all their
fossil fuel and hydroelectric generating facilities to Sithe Energies (Sithe)
for approximately $1.6 billion (JCP&L $416 million; Met-Ed $641 million; Penelec
$558 million) (JCP&L's 50% interest in Yards Creek was not included in the sale
and the sales of the 66 MW Forked River combustion turbines and 19 MW York Haven
hydroelectric station were postponed). The sale resulted in the recording of an
after-tax gain of $13.4 million (Met-Ed $1.4 million; Penelec $12 million) in
1999 for the portion of the gain related to wholesale
F-66
<PAGE>
operations and the deferral of the remaining pre-tax gain of $706.5 million
(Met-Ed $389.1 million; Penelec $317.4 million) as a regulatory liability
pending separate and further reviews by the NJBPU and the PaPUC.
Penelec sold its 20% interest in the Seneca Pumped Storage Hydroelectric
Generating Station to The Cleveland Electric Illuminating Company for $43
million. The sale resulted in the recording of an after-tax gain of $1.2 million
in 1999 for the portion of the gain related to wholesale operations and the
deferral of the remaining pre-tax gain of $30.2 million as a regulatory
liability pending further review by the PaPUC.
Penelec sold its 50% interest in the Homer City Station to a subsidiary of
Edison Mission Energy for approximately $900 million. As a result, Penelec
recorded an after-tax gain of $22.6 million in 1999 for the portion of the gain
related to wholesale operations and deferred as a regulatory liability the
remaining pre-tax gain of $590.7 million pending further review by the PaPUC.
Midlands sold its electric supply business to National Power plc for
approximately $300 million. As a result, in 1999 GPU recorded an after-tax gain
on the sale of $6.8 million.
For information on JCP&L's pending sale of Oyster Creek, see Note 12,
Commitments and Contingencies.
Pennsylvania Restructuring Write-offs:
- -------------------------------------
In 1998, Met-Ed and Penelec received PaPUC Restructuring Orders which,
among other things, essentially removed from regulation the costs associated
with providing electric generation service to Pennsylvania consumers, effective
January 1, 1999. Accordingly, in 1998 Met-Ed and Penelec discontinued the
application of FAS 71 and adopted the provisions of FAS 101 and EITF Issue 97-4
with respect to their electric generation operations. The transmission and
distribution operations of Met-Ed and Penelec continue to be subject to the
provisions of FAS 71.
As a result of the Restructuring Orders, Met-Ed and Penelec recorded an
extraordinary charge of $25.8 million (after-tax) or $0.20 per share and a
non-recurring charge of $40 million (after-tax), or $0.32 per share, for
customer refunds of 1998 revenues and for the establishment of a sustainable
energy fund.
In accordance with FAS 121, impairment tests were performed and determined
that the net investment in TMI-1 was impaired at December 31, 1998, resulting in
a write-down of $518 million (pre-tax) to reflect TMI-1's fair market value. Of
the amount written down for TMI-1, $508 million was reestablished as a
regulatory asset because management believes it is probable of recovery in the
restructuring process and $10 million (the FERC jurisdictional portion) was
charged to expense as an extraordinary item in 1998.
Windfall Profits Tax Write-off:
- ------------------------------
In 1997, the Government of the United Kingdom imposed a windfall profits
tax on privatized utilities, including Midlands. As a result, a one-time charge
to income of $109.3 million, or $0.90 per share, was taken in 1997.
F-67
<PAGE>
7. ACQUISITIONS
Empresa Distribuidora Electrica Regional, S.A.
----------------------------------------------
In March 1999, GPU Electric acquired Empresa Distribuidora Electrica
Regional, S.A. (Emdersa) for US $375 million. The fair value of the assets
acquired totaled approximately $320 million and the amount of liabilities
assumed totaled approximately $153 million, including debt of $76 million.
Emdersa owns three electric distribution companies that serve three provinces in
northwest Argentina.
The acquisition was financed through the issuance of commercial paper by
GPU Capital, guaranteed by GPU, Inc., and a $50 million capital contribution
from GPU, Inc.
The acquisition has been accounted for under the purchase method of
accounting. The total acquisition cost exceeded the estimated value of net
assets by approximately $208 million. This excess is considered goodwill and is
being amortized on a straight-line basis over 40 years.
Transmission Pipelines Australia
--------------------------------
In June 1999, GPU Electric acquired Transmission Pipelines Australia (TPA),
a natural gas transmission business, from the State of Victoria, Australia for
A$1.025 billion (approximately US $675 million). TPA has been renamed GPU
GasNet. The fair value of the assets acquired totaled approximately US $704
million and the amount of liabilities assumed totaled approximately US $116
million.
The acquisition was financed through: (1) an A$750 million (approximately
US $495 million) senior credit facility, which is non-recourse to GPU, Inc.; and
(2) an equity contribution from GPU Capital of A$275 million (approximately US
$180 million) provided through the issuance of commercial paper guaranteed by
GPU, Inc.
The acquisition has been accounted for under the purchase method. The total
acquisition cost exceeded the estimated value of net assets acquired by
approximately $88 million. This excess is considered goodwill and is being
amortized on a straight-line basis over 40 years.
Midlands Electricity plc
------------------------
In July 1999, GPU Electric acquired Cinergy's 50% ownership interest in
Avon, which owns Midlands, for British Pounds 452.5 million (approximately US
$714 million). GPU and Cinergy had jointly formed Avon in 1996 to acquire
Midlands. The fair value of the assets acquired totaled approximately US $2.1
billion and the liabilities totaled approximately US $1.5 billion, including
debt of US $1 billion.
GPU Electric financed the acquisition through a combination of equity and
debt. The equity was funded from: (1) a US $250 million contribution from GPU,
Inc., and (2) the issuance of US $50 million of commercial paper by GPU Capital,
which is guaranteed by GPU, Inc. The debt has been provided through a two-year
(pound)245 million (approximately US $382 million) credit agreement entered into
by EI UK Holdings, of which GPU, Inc. has guaranteed approximately US $100
million.
F-68
<PAGE>
As a result of GPU's purchase of Cinergy's 50% ownership in Midlands,
effective in the third quarter of 1999, GPU began accounting for Midlands as a
consolidated entity, rather than under the equity method of accounting as was
previously the practice. Consequently, Goodwill, net on the Consolidated Balance
Sheet increased by approximately $1.8 billion in the third quarter of 1999. Of
this amount, $1.7 billion relates to the previous 1996 acquisition of Midlands
by GPU and Cinergy and approximately $119 million represents goodwill resulting
from GPU's purchase of Cinergy's 50% share of Midlands. The goodwill is being
amortized on a straight-line basis over 40 years.
Concurrent with GPU's July 1999 acquisition of the 50% of Midlands which it
did not already own, GPU began to evaluate existing restructuring plans and
formulate additional plans to reduce operating expenses and achieve ongoing cost
reductions. As of December 31, 1999, GPU had identified and approved a cost
reduction plan. At the acquisition date, Midlands had recorded a liability of
$28.6 million related to previous cost reduction plans. GPU retained $25.7
million of this liability, related to contractual termination and other
severance benefits for 276 employees identified in a 1999 business process
reengineering project. GPU identified an additional 355 employees (234 in
Engineering Services, 38 in metering, 21 in Network Services and 62 from other
specific functions) to be terminated as part of the plan and recorded an
additional liability of $39.3 million. A net charge of $18.2 million for GPU's
50% share of these adjustments is included in expense and the other 50% was
recorded as a purchase accounting adjustment.
As of December 31, 1999, $7.2 million of severance benefits had been paid
to 172 of these employees. The remaining severance liability of $29.5 million
for the remaining 459 employees is included in Other current liabilities, and
$28.3 million to be funded out of pension plan assets is included as a pension
liability. Management expects the plan will be substantially completed by June
2000.
The following unaudited pro forma consolidated results of operations for
the years 1999 and 1998 presents information assuming Emdersa, GPU GasNet and
the 50% of Midlands GPU did not already own were acquired January 1, 1998. The
pro forma amounts include certain adjustments, primarily to recognize interest
expense, amortization of goodwill and depreciation of assets having stepped-up
bases, and are not necessarily indicative of the actual results that would have
been realized had the acquisitions occurred on the assumed date of January 1,
1998, nor are they necessarily indicative of future results. The pro forma
operating results are for information purposes only and are as follows:
1999 1998
- ----------------------------------------------------------------------------
(in thousands, except As As
per share data) Reported Pro Forma* Reported Pro Forma*
- ----------------------------------------------------------------------------
Revenues $ 4,757,124 $ 6,030,514 $ 4,248,792 $ 6,901,012
Income before extra-
ordinary item $ 459,014 $ 493,449 $ 385,881 $ 441,776
Net income $ 459,014 $ 493,449 $ 360,126 $ 416,021
Basic and Diluted earnings
per share before
extraordinary item $ 3.66 $ 3.94 $ 3.03 $ 3.47
Basic and Diluted earnings
per share $ 3.66 $ 3.94 $ 2.83 $ 3.27
* Unaudited
F-69
<PAGE>
GPU PowerNet
------------
In 1997, GPU Electric acquired the business of GPU PowerNet from the State
of Victoria, Australia for A$2.6 billion (approximately US $1.9 billion). The
fair value of the assets acquired totaled approximately US $2 billion and the
amount of liabilities assumed totaled approximately US $142.9 million. GPU
PowerNet owns and operates the high-voltage electricity transmission system in
the State of Victoria serving an area of approximately 87,900 square miles and a
population of approximately 4.5 million.
The acquisition was financed through: (1) a senior debt credit facility
of A$1.9 billion (approximately US $1.4 billion), which is non-recourse to
GPU, Inc.; (2) a five-year US $450 million bank credit agreement which is
guaranteed by GPU, Inc.; and (3) an equity contribution from GPU, Inc. of US
$50 million.
The acquisition was accounted for under the purchase method of accounting.
The total acquisition costs exceeded the estimated value of net assets by A$877
million (approximately US $537 million). This excess is considered goodwill and
is being amortized on a straight-line basis over 40 years.
GPU PowerNet has been included in GPU's consolidated financial statements
since its purchase on November 6, 1997. The unaudited consolidated pro forma
information for 1997, assuming debt financing and an acquisition date of January
1, 1997, is as follows: operating revenues of $4.32 billion; net income of $327
million; basic earnings per share of $2.71 and; diluted earnings per share of
$2.70. The pro forma results, which are for information purposes only, are not
necessarily indicative of the actual results that would have been realized had
the acquisition occurred on the assumed date of January 1, 1997, nor are they
necessarily indicative of future results.
Planned Acquisition of MYR Group Inc.
-------------------------------------
In December 1999, GPU, Inc., and MYR Group Inc. (MYR) entered into an
agreement under which GPU has agreed to acquire the utility infrastructure
construction firm for $215 million cash, or $30.10 per share of MYR common
stock. Following the acquisition, MYR would become a wholly-owned subsidiary of
GPU, Inc. The acquisition, which is subject to approval by the SEC and other
conditions, is expected to be completed in the first quarter of 2000. The
acquisition will be initially financed through short-term debt and will be
accounted for under the purchase method of accounting.
8. INCOME TAXES
As of December 31, 1999 and 1998, Regulatory assets, net on the
Consolidated Balance Sheets reflected $296 million and $450 million,
respectively, of Income taxes recoverable through future rates (primarily
related to liberalized depreciation), and Income taxes refundable through future
rates of $28 million and $53 million, respectively (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:
F-70
<PAGE>
(in millions)
1999 1998
---- ----
Income Taxes Recoverable Through Future Rates:
JCP&L $ 2 $173
Met-Ed 124 134
Penelec 170 143
--- ---
Total $296 $450
=== ===
Income Taxes Refundable Through Future Rates:
JCP&L $ 14 $ 36
Met-Ed 8 11
Penelec 6 6
--- ---
Total $ 28 $ 53
=== ===
Summaries of the components of deferred taxes as of December 31, 1999 and
1998 are as follows:
GPU, Inc. and Subsidiary Companies:
- ----------------------------------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
- ------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
Current: Current:
Unbilled revenue $ 12 $ 31 Revenue taxes $ 5 $ 8
Deferred energy - - Deferred energy 3 4
----- -----
Other 60 16 Total $ 8 $ 12
----- ----- ===== =====
Total $ 72 $ 47
===== =====
Noncurrent: Noncurrent:
Unamortized ITC $ 36 $ 70 Liberalized
Decommissioning 77 151 depreciation:
Contributions in aid Previously flowed
of construction 28 26 through $ 222 $ 202
Cumulative translation Future revenue
adjustment 22 29 requirements 147 155
----- -----
Above-market NUGs 798 748
Customer transition Subtotal 369 357
charge 533 534 Liberalized
Revenue subject depreciation 659 719
to refund 47 23 Customer transition
Generation revenue charge 1,451 1,684
requirements 47 44 Net loss on genera-
Net gain on genera- tion asset sale 218 -
tion asset sale 499 -
Other 441 379 Other 866 285
----- ----- ----- -----
Total $2,528 $2,004 Total $3,563 $3,045
===== ===== ===== =====
F-71
<PAGE>
JCP&L:
- ------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
- ------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
Current: Current:
Unbilled revenue $ 2 $ 21 Revenue taxes $ 5 $ 12
Deferred energy - - Deferred Energy 3 -
--- --- ---- ---
Total $ 2 $ 21 Total $ 8 $ 12
=== === ==== ===
Noncurrent: Noncurrent:
Unamortized ITC $ 23 $ 36 Liberalized
Decommissioning 31 46 depreciation:
Contributions in aid Previously flowed
of construction 21 20 through $ 35 $ 46
DOE SNF interest 25 Future revenue
Revenues subject requirements 29 49
--- ---
to refund 47 - Subtotal 64 95
Net gain on genera- Liberalized
tion asset sale 73 - depreciation 368 375
Other 27 52 Forked River 7 5
--- ---
Total $222 $179 TMI-1 investment/loss - 60
=== ===
Net loss on genera-
tion asset sale 58 -
Other 74 136
--- ---
Total $571 $671
=== ===
Met-Ed:
- ------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
- ------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
Noncurrent:
Current: Liberalized
Unbilled revenue $ 3 $ 3 depreciation:
=== ===
Previously flowed
through $ 81 $ 57
Future revenue
Noncurrent: requirements 49 50
----- -----
Unamortized ITC $ 8 $ 16
Decommissioning 27 65 Subtotal 130 107
Contributions in aid Liberalized
of construction 4 3 depreciation 129 127
Customer transition Customer transition
charge 160 160 charge 594 737
Above-market NUGs 303 327 Net loss on genera-
Revenue subject tion asset sale 110 -
to refund 11 Other 30 40
----- -----
Generation revenue Total $ 993 $1,011
===== =====
requirements 24 23
Net gain on genera-
tion asset sale 161 -
Other 51 109
--- ---
Total $738 $714
=== ===
F-72
<PAGE>
Penelec:
- -------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
1999 1998 1999 1998
---- ---- ---- ----
Noncurrent:
Current: Liberalized
Unbilled revenue $ 8 $ 8 depreciation:
===== ===
Previously flowed
Noncurrent: through $ 103 $ 96
Unamortized ITC $ 5 $ 19 Future revenue
Decommissioning 19 41 requirements 69 55
------ -----
Contributions in aid
of construction 3 3 Subtotal 172 151
Customer transition Liberalized
charge 374 373 depreciation 155 212
Above-market NUGs 494 421 Customer transition
Revenue subject charge 856 948
to refund - 12 Net loss on genera-
Generation revenue tion asset sale 51 -
requirements 23 21 Other 16 27
------ -----
Net gain on genera- Total $1,250 $1,338
===== =====
tion asset sale 264 -
Other 43 61
----- ---
Total $1,225 $951
===== ===
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)
1999 1998 1997
---- ---- ----
Net income $459 $360 $335
Preferred stock dividends 9 11 13
Loss on preferred stock reacquisition 2 - -
Income tax expense 294 250 234
--- --- ---
Book income subject to tax $764* $621* $582*
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 5 5 4
Amortization of ITC (6) (1) (2)
Other 4 1 3
--- --- ---
Effective income tax rate 38% 40% 40%
=== === ===
* Includes pre-tax foreign operations income of $331 million, $238 million, and
$34 million, of which $85 million, $88 million and $20 million, respectively
for 1999, 1998 and 1997, are included in Equity in undistributed
earnings/(losses) of affiliates in the Consolidated Statements of Income.
F-73
<PAGE>
JCP&L:
- ------
(in millions)
1999 1998 1997
---- ---- ----
Net income $172 $222 $212
Income tax expense 101 145 112
--- --- ---
Book income subject to tax $273 $367 $324
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 6 5 -
Amortization of ITC, net (5) - -
Other 1 (1) -
--- --- ---
Effective income tax rate 37% 39% 35%
=== === ===
Met-Ed:
- ------
Net income $ 96 $ 51 $ 93
Income tax expense 61 33 66
--- --- ---
Book income subject to tax $157 $ 84 $159
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 7 6 6
Amortization of ITC (8) (2) -
Other 5 - -
--- --- ---
Effective income tax rate 39% 39% 41%
=== === ===
Penelec:
- -------
Net income $153 $ 40 $ 95
Income tax expense 54 31 71
--- --- ---
Book income subject to tax $207 $ 71 $166
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 7 8 6
Amortization of ITC, net (11) - -
Other (5) 1 2
--- --- ---
Effective income tax rate 26% 44% 43%
=== === ===
Federal and state income tax expense is comprised of the following:
F-74
<PAGE>
GPU, Inc. and Subsidiary Companies:
- ----------------------------------
(in millions)
1999 1998 1997
---- ---- ----
Provisions for taxes currently payable:
Domestic $ 775 $290 $206
Foreign 60 22 40
---- --- ---
Total provision for taxes $ 835 $312 $246
Deferred income taxes:
Liberalized depreciation $(252) $ 2 $ 14
Foreign deferred taxes 80 31 4
Unbilled revenues 19 - (8)
Gain/(loss) on sale of property (406) - -
Decommissioning 87 (19) (5)
PA Restructuring (FAS 71) 61 (15) -
Global settlement 2 (8) -
Pension expense/Voluntary Enhanced
Retirement Programs (1) (8) (10)
Nonutility generation contract buyout costs (14) (11) 5
Provision for rate refunds (47) (10) -
OPEBS 2 (12) 5
Other (25) (3) (7)
---- --- ---
Deferred income taxes, net (494) (53) (2)
---- --- ---
Amortization of ITC, net (47) (9) (10)
---- --- ---
Income tax expense $ 294 $250 $234
==== === ===
The foreign taxes in the above table for 1999, 1998 and 1997 include $53
million ($16 million Current; $37 million Deferred), $27 million ($10 million
Current; $17 million Deferred) and $41 million ($37 million Current; $4 million
Deferred) in foreign tax expense which is netted in Equity in undistributed
earnings/(loss) of affiliates in the Consolidated Statements of Income. Included
in the ITC Amortization is the recognition of $36 million of ITC benefit
resulting from the sale of generation plants.
JCP&L:
(in millions)
1999 1998 1997
---- ---- ----
Provisions for taxes currently payable $197 $187 $139
Deferred income taxes:
Liberalized depreciation $(49) $(11) $ (3)
Gain/Loss on reacquired debt - 3 (1)
New Jersey revenue tax - (2) (3)
Deferral of energy costs (1) 10 (2)
Abandonment loss - Forked River (4) (4) (5)
Nuclear outage maintenance costs 3 3 (4)
Accretion income - 4 4
Unbilled revenue 19 - (3)
Decommissioning 22 (12) (3)
Pension expense/VERP (2) (2) (5)
Nonutility generation contract buyout costs (19) - 6
Demand-side management (7) - (3)
Other postemployment benefits 4 (5) 2
Global settlement 2 (8) -
Gas site & investigation MGP
insurance recovery - (8) -
Provision for rate refund (47) - -
Gain (loss) sale of property (16) - -
Other 11 (6) (2)
--- --- ---
Deferred income taxes, net (84) (38) (22)
--- --- ---
Amortization of ITC, net (12) (4) ( 5)
--- --- ---
Income tax expense $101 $145 $112
=== === ===
F-75
<PAGE>
Met-Ed:
- ------
(in millions)
1999 1998 1997
---- ---- ----
Provisions for taxes currently payable $140 $ 56 $ 63
Deferred income taxes:
Liberalized depreciation $(88) $ 5 $ 6
Deferral of energy costs - - -
Unbilled revenue - - 3
Decommissioning 42 (5) (2)
PA Restructuring (FAS 71) 30 15 -
Pension expense/VERP - (3) (3)
Nonutility generation contract buyout costs 2 (9) (6)
Nuclear outage maintenance costs 3 (3) 3
Nonutility generation contract
over collections - 8 4
Other postemployment benefits - (5) (1)
Provision for rate refund - (11) -
CTC NUG deferrals - (5) -
Sustainable energy fund - (2) -
Gain (loss) sale of property (51) - -
Other (5) (6) 1
--- --- ---
Deferred income taxes, net (67) (21) 5
-- --- ---
Amortization of ITC, net (12) (2) (2)
--- --- ---
Income tax expense $ 61 $ 33 $ 66
=== === ===
Penelec:
- -------
Provisions for taxes currently payable $ 472 $ 47 $ 61
Deferred income taxes:
Liberalized depreciation $(114) $ 2 $ 6
Deferral of energy costs - - (1)
Unbilled revenue - - (7)
Decommissioning 23 (2) -
PA Restructuring (FAS 71) 31 (11) -
Pension expense/VERP - (2) (2)
Nonutility generation contract buyout costs 3 (1) 5
Nuclear outage maintenance costs 2 (1) 1
Nonutility generation contract
over collections - 6 6
Other postemployment benefits (2) (2) 3
Gain (loss) sale of property (339) - -
Other 1 (3) 2
--- --- ---
Deferred income taxes, net (395) (14) 13
--- --- ---
Amortization of ITC, net (23) (2) (3)
--- --- ---
Income tax expense $ 54 $ 31 $ 71
=== === ===
The Internal Revenue Service (IRS) has completed its examinations of GPU's
federal income tax returns through 1995.
F-76
<PAGE>
9. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses consisted
of the following:
(in millions)
1999 1998 1997
---- ---- ----
Maintenance:
JCP&L $ 84 $ 91 $102
Met-Ed 48 49 46
Penelec 54 62 68
Other 24 - -
--- --- ---
Total Maintenance $210 $202 $216
=== === ===
Other Taxes:
New Jersey Transitional Energy
Facility Assessment $ 59 $ 67 $ -
New Jersey Unit Tax (JCP&L) - - 211
--- --- ---
Total $ 59 $ 67 $211
--- --- ---
Pennsylvania State Gross Receipts:
Met-Ed $ 27 $ 39 $ 39
Penelec 27 40 42
--- --- ---
Total $ 54 $ 79 $ 81
--- --- ---
Real Estate and Personal Property:
JCP&L $ 5 $ 9 $ 9
Met-Ed 4 6 8
Penelec 6 8 10
Other 24 - -
--- --- ---
Total $ 39 $ 23 $ 27
--- --- ---
Value Added and Stamp Taxes (U.K.) $ 6 $ - $ -
--- --- ---
Other:
JCP&L $ 13 $ 19 $ 12
Met-Ed 9 13 12
Penelec 9 16 15
Other 2 2 -
--- --- ---
Total $ 33 $ 50 $ 39
--- --- ---
Total Other Taxes $191 $219 $358
=== === ===
The cost of services rendered to the GPU Energy companies by their
affiliates is as follows:
(in millions)
1999 1998 1997
---- ---- ----
JCP&L:
- ------
Cost of services rendered by GPUN $189 $182 $156
Cost of services rendered by GPUS 366 26 31
Cost of services rendered by Genco 69 51 52
--- --- ---
Total $624 $259 $239
=== === ===
Amount Charged to Income $446 $239 $228
=== === ===
F-77
<PAGE>
(in millions)
1999 1998 1997
---- ---- ----
Met-Ed:
- ------
Cost of services rendered by GPUN $102 $ 59 $ 78
Cost of services rendered by GPUS 215 40 31
Cost of services rendered by Genco 96 108 91
--- --- ---
Total $413 $207 $200
=== === ===
Amount Charged to Income $281 $180 $179
=== === ===
Penelec:
- -------
Cost of services rendered by GPUN $ 51 $ 30 $ 40
Cost of services rendered by GPUS 255 17 19
Cost of services rendered by Genco 102 163 162
--- --- ---
Total $408 $210 $221
=== === ===
Amount Charged to Income $280 $170 $195
=== === ===
For the years 1999, 1998 and 1997, JCP&L purchased $22 million, $26 million
and $24 million, respectively, of energy from a cogeneration project in which an
affiliate has a 50% partnership interest.
10. EMPLOYEE BENEFITS
Pension Plans and Other Postretirement Benefits:
- -----------------------------------------------
GPU maintains defined benefit pension plans covering substantially all
employees. GPU also provides certain retiree health care and life insurance
benefits for substantially all U.S. employees who reach retirement age while
working for GPU. The following tables provide a reconciliation of the changes in
the plans' benefit obligation and fair value of assets for the years ended
December 31, 1999 and 1998, a statement of the funded status of the plans, the
amounts recognized in the Consolidated Balance Sheets as of December 31, 1999
and 1998 and the weighted average assumptions used in the measurement of the
benefit obligation. The pension benefit disclosure amounts for GPU, Inc. and
Subsidiary Companies for the year 1999 reflect the acquisition of the remaining
50% of Midlands stock by GPU in July of that year. Accordingly, the July 1999
benefit obligation and fair value of plan assets balances for Midlands are shown
next to the line items entitled "Acquisitions" and the post-acquisition amounts
occurring in the second half of 1999 are included in the tables.
GPU, Inc. and Subsidiary Companies
- ----------------------------------
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Change in benefit obligation:
Benefit obligation
at January 1: $ 1,897.0 $ 1,791.7 $ 790.5 $ 798.0
Acquisitions 1,502.5 - - -
Service cost 46.2 36.1 15.9 16.4
Interest cost 158.0 121.6 52.2 54.4
Plan amendments 2.5 9.6 - (6.0)
Actuarial (gain)/loss and
other items (182.8) 26.2 (36.9) (55.7)
Currency exchange (4.0) - - -
Benefits paid (171.0) (123.9) (39.8) (30.2)
Curtailments and settlements (139.4) 6.8 (44.8) 12.5
Termination benefits 48.8 28.9 - 1.1
-------- -------- ------ -------
Benefit obligation
at December 31: $ 3,157.8 $ 1,897.0 $ 737.1 $ 790.5
======== ======== ====== =======
F-78
<PAGE>
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Change in plan assets:
Fair value of plan assets
at January 1: $ 2,258.8 $ 2,033.3 $ 507.1 $ 403.0
Acquisitions 1,710.2 - - -
Actual return on plan assets 579.4 342.9 61.0 78.9
Employer contributions 1.8 6.5 15.0 55.4
Benefits paid (171.0) (123.9) (39.8) (30.2)
Currency exchange (5.8) - - -
Settlement and other items (30.0) - - -
-------- -------- ------ -------
Fair value of plan assets
at December 31: $ 4,343.4 $ 2,258.8 $ 543.3 $ 507.1
======== ======== ====== =======
Funded Status:
Funded status at December 31: $ 1,185.6 $ 361.8 $(193.8) $ (283.4)
Unrecognized net actuarial
(gain)/loss (953.0) (439.5) (54.2) (37.8)
Unrecognized prior service cost 21.5 27.6 2.9 4.3
Unrecognized net transition
(asset)/obligation (1.4) (1.9) 143.3 210.7
-------- -------- ------ -------
Net amount recognized $ 252.7 $ (52.0) $(101.8) $ (106.2)
======== ======== ====== =======
Amounts recognized in the Consolidated Balance Sheet at December 31:
Prepaid benefit cost $ 297.2 $ 42.0 $ 24.2 $ 43.8
Accrued benefit liability (45.3) (103.0) (126.0) (150.0)
Intangible asset 0.8 - - -
Accumulated other comprehensive
income - 5.3 - -
Deferred income taxes - 3.7 - -
-------- -------- ------- -------
Net amount recognized $ (252.7) $ (52.0) $ (101.8) $ (106.2)
======== ======== ======= =======
JCP&L
- -----
Change in benefit obligation:
Benefit obligation
at January 1: $ 509.7 $ 496.6 $ 198.2 $ 203.8
Transfer to GPUS (502.4) - (197.7) -
Service cost 0.1 7.2 - 2.9
Interest cost 0.4 33.7 - 13.9
Plan amendments - - - -
Actuarial (gain)/loss (2.8) 3.9 - (16.6)
Benefits paid (0.1) (34.8) - (7.3)
Curtailments - 0.6 - 1.2
Termination benefits - 2.5 - 0.3
-------- -------- ------- -------
Benefit obligation
at December 31: $ 4.9 $ 509.7 $ 0.5 $ 198.2
======== ======== ======= =======
F-79
<PAGE>
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
Change in plan assets:
Fair value of plan assets
at January 1: $ 639.9 $ 577.1 $ 137.0 $ 99.0
Transfer to GPUS (634.4) - (136.9) -
Actual return on plan assets 0.8 97.1 - 20.0
Employer contributions - - - 25.8
Benefits paid (0.1) (34.8) - (7.3)
Change in allocations - 0.5 - (0.5)
-------- -------- ------- -------
Fair value of plan assets
at December 31: $ 6.2 $ 639.9 $ 0.1 $ 137.0
======== ======== ======= =======
Funded Status:
Funded status at December 31: $ 1.3 $ 130.2 $ (0.4) $ (61.2)
Unrecognized net actuarial
(gain)/loss (3.2) (139.3) (0.2) (16.1)
Unrecognized prior service
Cost - 8.3 - 0.5
Unrecognized net transition
(asset)/obligation 0.1 (1.0) 0.1 61.0
-------- -------- ------- -------
Net amount recognized $ (1.8) $ (1.8) $ (0.5) $ (15.8)
======== ======== ======= =======
Amounts recognized in the Consolidated Balance Sheet at December 31:
Prepaid benefit cost $ - $ 18.8 $ - $ 27.2
Accrued benefit liability (1.9) (21.3) (0.5) (43.0)
Intangible Asset 0.1 - - -
Accumulated other
Comprehensive income - 0.4 - -
Deferred income taxes - 0.3 - -
-------- -------- ------- -------
Net amount recognized $ (1.8) $ (1.8) $ (0.5) $ (15.8)
======== ======== ======= =======
Met-Ed
- ------
Change in benefit obligation:
Benefit obligation
at January 1: $ 377.9 $ 345.9 $ 163.0 $ 152.5
Transfer to GPUS (367.9) - (160.8) -
Service cost 0.2 6.3 0.1 2.9
Interest cost 0.5 23.4 0.2 11.2
Plan amendments - 3.1 - (2.2)
Actuarial (gain)/loss (0.2) 14.3 (0.6) (0.1)
Benefits paid (0.2) (22.8) - (5.2)
Curtailments - 0.5 - 3.4
Termination benefits - 7.2 - 0.5
-------- -------- ------- -------
Benefit obligation
at December 31: $ 10.3 $ 377.9 $ 1.9 $ 163.0
======== ======== ======= =======
F-80
<PAGE>
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
Change in plan assets:
Fair value of plan assets
at January 1: $ 428.3 $ 373.2 $ 62.4 $ 49.5
Transfer to GPUS (420.2) - (61.9) -
Actual return on plan assets 1.1 65.0 0.1 9.9
Employer contributions - - - 5.3
Benefits paid (0.2) (22.8) - (5.2)
Change in allocations - 12.9 - 2.9
-------- -------- ------- -------
Fair value of plan assets
at December 31: $ 9.0 $ 428.3 $ 0.6 $ 62.4
======== ======== ======= =======
Funded Status:
Funded status at December 31: $ (1.3) $ 50.4 $ (1.3) $ (100.6)
Unrecognized net actuarial
(gain)/loss 0.4 (65.2) 0.7 20.5
Unrecognized prior service
Cost - 7.6 - 0.9
Unrecognized net transition
(asset)/obligation - (0.6) 0.3 39.7
-------- -------- ------- -------
Net amount recognized $ (0.9) $ (7.8) $ (0.3) $ (39.5)
======== ======== ======= =======
Amounts recognized in the Consolidated Balance Sheet at December 31:
Prepaid benefit cost $ - $ - $ - $ -
Accrued benefit liability (0.9) (8.7) (0.3) (39.5)
Accumulated other comprehensive
income - 0.5 - -
Deferred income taxes - 0.4 - -
-------- -------- ------- -------
Net amount recognized $ (0.9) $ (7.8) $ (0.3) $ (39.5)
======== ======== ======= =======
Penelec
- -------
Change in benefit obligation:
Benefit obligation
at January 1: $ 419.7 $ 404.4 $ - $ 236.1
Transfer to GPUS (416.1) - - -
Service cost - 4.1 - 2.1
Interest cost 0.2 27.2 - 15.1
Plan amendments - 4.3 - (3.5)
Actuarial (gain)/loss (0.7) 8.9 - (35.4)
Benefits paid (0.1) (37.6) - (6.9)
Curtailments - 0.7 - 4.5
Termination benefits - 7.7 - -
-------- -------- ------- -------
Benefit obligation
at December 31: $ 3.0 $ 419.7 $ - $ 212.0
======== ======== ======= =======
F-81
<PAGE>
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Change in plan assets:
Fair value of plan assets
at January 1: $ 535.2 $ 486.8 $ - $ 130.4
Transfer to GPUS (533.5) - - -
Actual return on plan assets 0.3 81.9 - 22.9
Employer contributions - 0.1 - 10.0
Benefits paid (0.1) (37.6) - (6.9)
Change in allocations - 4.0 - (12.6)
-------- -------- ------- -------
Fair value of plan assets
at December 31: $ 1.9 $ 535.2 $ - $ 143.8
======== ======== ======= =======
Funded Status:
Funded status at December 31: $ (1.1) $ 115.5 $ - $ (68.2)
Unrecognized net actuarial
(gain)/loss 0.1 (105.9) - (4.4)
Unrecognized prior service
Cost - 10.3 - 0.3
Unrecognized net transition
obligation 0.1 1.4 - 60.0
-------- -------- ------- -------
Net amount recognized $ (0.9) $ 21.3 $ - $ (12.3)
======== ======== ======= =======
Amounts recognized in the Consolidated Balance Sheet at December 31:
Prepaid benefit cost $ - $ 22.5 $ - $ 16.5
Accrued benefit liability (1.0) (1.5) - (28.8)
Intangible Asset 0.1 - - -
Accumulated other
comprehensive income - 0.2 - -
Deferred income taxes - 0.1 - -
-------- --------- ------- -------
Net amount recognized $ (0.9) $ 21.3 $ - $ (12.3)
======== ======== ======= =======
Weighted average assumptions
as of December 31 for GPU, Inc.
and Subsidiary Companies:
Discount rate 7.0% 6.75% 7.5% 6.75%
Expected return on plan assets 8.1% 8.5% 8.5% 8.5%
Rate of compensation increase 4.7% 4.5% - -
Weighted average assumptions as of December 31 for JCP&L, Met-Ed and Penelec:
Discount rate 7.5% 6.75% 7.5% 6.75%
Expected return on plan assets 8.5% 8.5% 8.5% 8.5%
Rate of compensation increase 4.5% 4.5% - -
The following tables provide the components of net periodic pension and other
postretirement benefit costs. As previously discussed, the 1999 net periodic
pension cost for GPU, Inc. and Subsidiary Companies reflects post-acquisition
amounts related to Midlands for the second half of the year.
F-82
<PAGE>
Pension Plans:
(in millions)
GPU, Inc. and Subsidiary Companies 1999 1998 1997
- ---------------------------------- ---- ---- ----
Service cost $ 46.2 $ 36.1 $ 31.1
Interest cost 158.0 121.6 122.2
Expected return on plan assets (198.0) (140.1) (131.5)
Amortization of transition (asset)/obligation (0.5) (0.5) (0.5)
Other amortization 2.1 1.1 0.2
----- ------ -----
Net periodic pension cost $ 7.8 $ 18.2 $ 21.5
===== ====== =====
JCP&L
- -----
Service cost $ 0.1 $ 7.2 $ 6.1
Interest cost 0.4 33.7 34.2
Expected return on plan assets (0.3) (39.6) (37.5)
Amortization of transition (asset)/obligation - (0.3) (0.3)
Other amortization - 0.6 0.1
----- ------ -----
Net periodic pension cost $ 0.2 $ 1.6 $ 2.6
===== ====== =====
Met-Ed
- ------
Service cost $ 0.2 $ 6.3 $ 4.3
Interest cost 0.5 23.4 21.8
Expected return on plan assets (0.5) (25.4) (22.3)
Amortization of transition (asset)/obligation - (0.1) (0.1)
Other amortization - 0.4 0.6
------ ------ -----
Net periodic pension cost $ 0.2 $ 4.6 $ 4.3
====== ====== =====
Penelec
- -------
Service cost $ - $ 4.1 $ 3.3
Interest cost 0.2 27.2 26.2
Expected return on plan assets (0.1) (33.1) (29.7)
Amortization of transition (asset)/obligation - 0.3 0.3
Other amortization - 0.4 0.2
------ ------ -----
Net periodic pension cost $ 0.1 $ (1.1) $ 0.3
====== ====== =====
In 1999, the effect of increasing the discount rate assumption for the U.S.
pension plans from 6.75% to 7.5% resulted in a $162 million (JCP&L $0.5 million;
Met-Ed $1.0 million; Penelec $0.3 million; Other $160.2 million) decrease in the
benefit obligation as of December 31, 1999. In 1998, the effect of decreasing
the discount rate assumption from 7% to 6.75% was partially offset by the effect
of decreasing the salary scale assumption from 5% to 4.5% and resulted in a $35
million (JCP&L $7 million; Met-Ed $7 million; Penelec $8 million; Other $13
million)increase in the benefit obligation as of December 31, 1998.
The above net periodic pension cost amount for 1999 excludes pre-tax credits
of $31 million, of which $30 million was deferred for return to customers,
resulting from employee terminations related to generation asset divestiture. No
portion of these amounts relate to JCP&L, Met-Ed or Penelec. The above net
periodic pension cost amount for 1998 excludes pre-tax charges of $30 million
(JCP&L $8 million; Met-Ed $11 million; Penelec $9 million; Other $2 million), of
which $22 million (JCP&L $6 million; Met-Ed $9 million; Penelec $7 million) was
deferred pending future rate recovery, resulting from early retirement programs
in 1998.
F-83
<PAGE>
Other Postretirement Benefits:
(in millions)
GPU, Inc. and Subsidiary Companies 1999 1998 1997
- ---------------------------------- ---- ---- ----
Service cost $ 15.9 $ 16.4 $ 10.7
Interest cost 52.2 54.4 51.7
Expected return on plan assets (37.5) (29.5) (23.7)
Amortization of transition (asset)/obligation 14.6 15.8 16.8
Other amortization 1.6 5.0 2.3
----- ----- -----
Net periodic postretirement benefit cost 46.8 62.1 57.8
Deferred for future recovery - - (13.0)
----- ----- -----
Postretirement benefit cost,
net of deferrals $ 46.8 $ 62.1 $ 44.8
===== ===== =====
JCP&L
- -----
Service cost $ - $ 2.9 $ 1.5
Interest cost - 13.9 13.2
Expected return on plan assets - (7.3) (5.7)
Amortization of transition obligation - 4.4 4.7
Other amortization - 0.7 0.6
----- ----- -----
Net periodic postretirement benefit cost - 14.6 14.3
Deferred for future recovery - - (0.8)
----- ----- -----
Postretirement benefit cost,
net of deferrals $ - $ 14.6 $ 13.5
===== ===== =====
Met-Ed
- ------
Service cost $ 0.1 $ 2.9 $ 1.5
Interest cost 0.2 11.2 10.0
Expected return on plan assets - (3.9) (3.1)
Amortization of transition obligation - 3.1 3.2
Other amortization - 1.7 0.8
----- ----- -----
Net periodic postretirement benefit cost 0.3 15.0 12.4
Deferred for future recovery - - (5.1)
----- ----- -----
Postretirement benefit cost,
net of deferrals $ 0.3 $ 15.0 $ 7.3
===== ===== =====
Penelec
- -------
Service cost $ - $ 2.0 $ 1.5
Interest cost - 15.1 13.7
Expected return on plan assets - (8.9) (6.6)
Amortization of transition obligation - 4.8 4.8
Other amortization - 1.4 0.6
----- ----- -----
Net periodic postretirement benefit cost - 14.4 14.0
Deferred for future recovery - - -
----- ----- ----
Postretirement benefit cost,
net of deferrals $ - $ 14.4 $ 14.0
===== ===== =====
F-84
<PAGE>
In 1999, the effect of increasing the assumption associated with medical
inflation rates was partially offset by the effect of increasing the discount
rate assumption from 6.75% to 7.5% and resulted in a $45 million increase in the
benefit obligation as of December 31, 1999. No significant portion of this
amount relates to JCP&L, Met-Ed or Penelec. In 1998, the effect of decreasing
the assumption relating to the long-term medical cost of managed care plans was
partially offset by the effect of decreasing the discount rate assumption from
7% to 6.75% and resulted in a $40 million (JCP&L $12 million; Met-Ed $7 million;
Penelec $5 million; Other $16 million) decrease in the benefit obligation as of
December 31, 1998. The benefit obligation was determined by application of the
terms of the medical and life insurance plans, including the effects of
established maximums on covered costs, together with relevant actuarial
assumptions and health-care cost trend rates of 10% for those not eligible for
Medicare and 11% for those eligible for Medicare, then decreasing gradually to
6% in 2010 and thereafter. These costs also reflect the implementation of an
annual cost-cap of 6% for individuals who retire after December 31, 1995 and
reach age 65. The effect of a 1% change in these assumed cost trend rates would
increase or decrease the benefit obligation by $39.2 million or $36.9 million,
respectively. In addition, such a 1% change would increase or decrease the
aggregate service and interest cost components of net periodic postretirement
health-care cost by $3.5 million or $3.4 million, respectively. No significant
portion of the effect of such a 1% change rebates to JCP&L, Met-Ed or Penelec.
The above net periodic postretirement benefit cost amount for 1999 excludes
pre-tax charges of $3 million, which was deferred pending future rate recovery,
resulting from employee terminations related to generation asset divestiture. No
portion of this amount relates to JCP&L, Met-Ed or Penelec. The above net
periodic postretirement benefit cost amount for 1998 excludes pre-tax charges of
$20 million (JCP&L $6 million; Met-Ed $6 million; Penelec $7 million; Other $1
million), of which $12 million (JCP&L $3 million; Met-Ed $5 million; Penelec $4
million) was deferred pending future rate recovery, resulting from early
retirement programs in 1998.
In JCP&L's 1993 base rate proceeding, the NJBPU allowed JCP&L to collect $3
million annually for incremental postretirement benefit costs, charged to
expense, and recognized as a result of FAS 106. Based on the final order, and in
accordance with EITF Issue 92-12, "Accounting for OPEB Costs by Rate-Regulated
Enterprises," JCP&L has deferred the amounts above that level. A 1997
Stipulation of Final Settlement (Final Settlement) allows JCP&L to recover and
amortize the deferred balance at December 31, 1997 over a fifteen-year period.
In addition, the Final Settlement allows JCP&L to recover current amounts
accrued pursuant to FAS 106, including amortization of the transition
obligation. Met-Ed has deferred the incremental postretirement benefit costs
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 accordance with EITF
Issue 92-12, effective January 1998, Met-Ed has ceased deferring these costs.
The approximately one-third generation-related portion of the deferred balance
at December 31, 1997 is to be recovered in rates over a twelve-year period
pursuant to the PaPUC's Restructuring Orders. The remaining two-thirds for the
transmission and distribution-related portion is to be amortized over a
fourteen-year period beginning January 1999, pursuant to the Restructuring
Orders. In 1994, Penelec determined that its FAS 106 costs, including costs
deferred since January 1993, were not probable of recovery and charged those
deferred costs to expense.
F-85
<PAGE>
Savings Plans:
- --------------
GPU also maintains savings plans for substantially all US employees. These
plans provide for employee contributions up to specified limits and for various
levels of employer matching contributions. The matching contributions for GPU
were as follows:
(in millions)
Company 1999 1998 1997
- ------- ---- ---- ----
JCP&L $ 0.1 $ 2.8 $ 2.4
Met-Ed 0.1 3.4 3.1
Penelec - 1.6 1.3
Other 13.8 5.8 5.8
---- ----- -----
Total $14.0 $ 13.6 $ 12.6
==== ===== =====
11. LEASES
GPU Energy companies
The GPU Energy companies' capital leases consist primarily of leases for
nuclear fuel. Nuclear fuel capital lease obligations at December 31, 1999 and
1998 totaled $48 million (JCP&L $48 million), and $126 million(JCP&L $85
million; Met-Ed $27 million; Penelec $14 million).
Prior to the sale of TMI-1 to AmerGen in December 1999, the GPU Energy
companies had nuclear fuel lease agreements with nonaffiliated fuel trusts for
the plant. Upon the sale of TMI-1, the related fuel leases were terminated and
all outstanding amounts due under the related credit facility were paid. The
Oyster Creek fuel lease agreement will be terminated upon the sale of Oyster
Creek to AmerGen. 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, 1999, 1998, and 1997, these amounts were as follows:
(in millions)
Company 1999 1998 1997
- ------- ---- ---- ----
JCP&L $ 34 $ 30 $ 31
Met-Ed 13 16 12
Penelec 6 8 6
----- ----- -----
Total $ 53 $ 54 $ 49
===== ===== =====
Met-Ed and JCP&L have sold and leased back a portion of their respective
ownership interests in the Merrill Creek Reservoir project (Merrill Creek). The
annual minimum lease payments under these operating leases, which have remaining
terms of 33 years, range from approximately $3.6 million to $6.7 million (Met-Ed
$1.6 million to $2.9 million; JCP&L $2 million to $3.8 million) over the next
five years, net of reimbursements from sublessees. Met-Ed believes that its
Merrill Creek lease payments will be a recoverable stranded cost in Phase II
rate proceedings pending before the PaPUC. JCP&L is recovering its Merrill Creek
lease payments, net of reimbursements, through distribution rates.
F-86
<PAGE>
GPUI Group
A subsidiary of GPU International sold and leased back an electric
cogeneration facility for an initial term of eleven years (facility lease) for
which GPU, Inc. has guaranteed payments of up to $8.1 million. In addition, a
20-year site lease was entered into commencing in 1993. The leases are accounted
for as operating leases and rent expense is recorded on a straight-line basis
over the initial 11-year term of the facility lease. Rent expense at December
31, 1999 and 1998 totaled $12.3 million and $11.3 million, respectively. The
minimum lease payments for 2000, 2001, 2002, 2003 and 2004 are $13.4 million,
$14.1 million, $14.8 million, $15.8 million and $12 million, respectively.
12. COMMITMENTS AND CONTINGENCIES
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
---------------------------------------------------
Generation Asset Divestiture:
- ----------------------------
In 1999, the GPU Energy companies completed the sales of TMI-1 and
substantially all of their fossil and hydroelectric generating stations. For
additional information on the completed sales, see Note 6, Accounting for
Extraordinary and Non-recurring Items.
In October 1999, JCP&L agreed to sell Oyster Creek to AmerGen for $10
million and reimbursement of the cost (estimated at $88 million) of the next
scheduled refueling outage. This transaction is subject to the receipt of
various federal and state regulatory approvals.
JCP&L and Public Service Electric & Gas Company (PSE&G) each hold a 50%
undivided ownership interest in Yards Creek Pumped Storage Facility (Yards
Creek). In December 1998, JCP&L filed a petition with the NJBPU seeking a
declaratory order that PSE&G's right of first refusal to purchase JCP&L's
ownership interest at its current book value under a 1964 agreement between the
companies is void and unenforceable. Management believes that the fair market
value of JCP&L's ownership interest in Yards Creek is substantially in excess of
its December 31, 1999 book value of $22 million. There can be no assurance as to
the outcome of this matter.
Stranded Costs and Regulatory Restructuring Orders:
- --------------------------------------------------
With the current market price of electricity being below the cost of some
utility-owned generation and power purchase commitments, and the ability of
customers to choose their energy suppliers, certain costs, which generally would
be recoverable in a regulated environment, may not be recoverable in a
competitive environment. These costs are generally referred to as stranded
costs.
In 1998, the PaPUC issued Restructuring Orders to Met-Ed and Penelec which,
among other things, provide for Met-Ed and Penelec's recovery of a substantial
portion of what otherwise would have become stranded costs, and provide for a
Phase II proceeding following the completion of their generation divestitures to
make a final determination of the extent of that stranded cost recovery. An
appeal by one intervenor in the restructuring proceedings is pending before the
Pennsylvania Supreme Court. There can be no assurance as to the outcome of this
appeal.
F-87
<PAGE>
In April 1999, JCP&L entered into a settlement agreement with several
parties to its stranded cost and rate unbundling proceedings, pending before the
NJBPU. In May 1999, the NJBPU issued a Summary Order, approving the settlement
with certain modifications. Among other things, the Summary Order provides for
full recovery of JCP&L's stranded costs. The Summary Order did not address the
pending sale of Oyster Creek, because at the time the Summary Order was issued,
it was uncertain whether the plant would be sold or retired early. As a result
of the NJBPU's actions, in the second quarter of 1999, JCP&L recorded a
reduction in operating revenues of $115 million reflecting JCP&L's obligation to
make refunds to customers. JCP&L is awaiting a final order from the NJBPU. For
additional information, see Note 6, Accounting for Extraordinary and
Non-recurring Items.
Under the NJBPU and the PaPUC restructuring orders, the GPU Energy
companies are required to provide generation service to customers who do not
choose an alternate supplier. As noted above, the GPU Energy companies have sold
or agreed to sell substantially all of their generation assets. Consequently,
there will be increased market risks associated with providing generation
service since the GPU Energy companies will have to supply energy almost
entirely from contracted and open market purchases. Under the Summary Order,
JCP&L is permitted to recover reasonable and prudently incurred costs associated
with providing basic generation service and to defer the portion of these costs
that cannot be recovered currently. The PaPUC's Restructuring Orders, however,
generally do not allow Met-Ed and Penelec to recover their costs, including
their energy costs in excess of established rate caps. An inability of the GPU
Energy companies to supply electricity to customers who do not choose an
alternate supplier at a cost recoverable under their capped rates, would have an
adverse effect, which may be material, on GPU's results of operations.
Generation Agreements:
- ---------------------
The emerging competitive generation market has created uncertainty
regarding the forecasting of the GPU Energy companies' energy supply needs,
which has caused the GPU Energy companies to seek shorter-term agreements
offering more flexibility. The GPU Energy companies' supply plan focuses on
short- to intermediate-term commitments (one month to three years) covering
times of expected high energy price volatility (that is, peak demand periods)
and reliance on spot market purchases during other periods.
As of December 31, 1999, the GPU Energy companies have entered into
agreements with third party suppliers to purchase capacity and energy. Payments
pursuant to these agreements, which include firm commitments as well as certain
assumptions regarding, among other things, call/put arrangements and the timing
of the pending Oyster Creek sale, are estimated to be $709 million in 2000, $565
million in 2001, $328 million in 2002, $144 million in 2003 and $44 million in
2004.
Pursuant to the mandates of the federal Public Utility Regulatory Policies
Act and state regulatory directives, the GPU Energy companies have been required
to enter into power purchase agreements with NUGs for the purchase of energy and
capacity which have remaining terms of up to 21 years. The rates under virtually
all of the GPU Energy companies' NUG agreements are substantially in excess of
current and projected prices from alternative sources. The projected cost of
energy from new generation supply sources has
F-88
<PAGE>
also decreased due to improvements in power plant technologies and lower
forecasted fuel prices. The following table shows actual payments from 1997
through December 31, 1999, and estimated payments thereafter through 2004.
Payments Under NUG Agreements
-----------------------------
(in millions)
Total JCP&L Met-Ed Penelec
----- ----- ------ -------
1997 759 384 172 203
1998 788 403 174 211
1999 774 388 167 219
2000 794 405 157 232
2001 778 410 154 214
2002 799 422 158 219
2003 802 413 163 226
2004 808 407 168 233
The NJBPU Summary Order and PaPUC Restructuring Orders provide the GPU
Energy companies assurance of full recovery of their NUG costs (including
above-market NUG costs and certain buyout costs). Accordingly, the GPU Energy
companies have recorded, on a present value basis, a liability for above-market
NUG costs of $3.2 billion (JCP&L 1.6 billion; Met-Ed $0.7 billion; Penelec $0.9
billion) on the Consolidated Balance Sheets which is fully offset by Regulatory
assets, net. In addition, JCP&L recorded a liability of $64 million for
above-market utility power purchase agreements with a corresponding offset to
Regulatory assets, net, since there is also assurance of full recovery of these
costs. The GPU Energy companies are continuing efforts to reduce the
above-market costs of these agreements and will, where beneficial, attempt to
renegotiate the prices of the agreements, offer contract buyouts and attempt to
convert must-run agreements to dispatchable agreements. There can be no
assurance as to the extent to which these efforts will be successful.
In 1997, the NJBPU approved a Stipulation of Final Settlement which, among
other things, provided for the recovery of costs associated with the buyout of
the Freehold Cogeneration power purchase agreement (Freehold buyout). The NJBPU
approved the cost recovery of up to $135 million, over a seven-year period, on
an interim basis subject to refund. The NJBPU's Summary Order provides for the
continued recovery of the Freehold buyout in the MTC, but has not altered the
interim nature of such recovery, pending a final decision by the NJBPU. There
can be no assurance as to the outcome of this matter.
ACCOUNTING MATTERS
------------------
JCP&L, in 1999, and Met-Ed and Penelec in 1998, discontinued the
application of FAS 71, and adopted the provisions of FAS 101, and EITF Issue
97-4 with respect to their electric generation operations. The transmission and
distribution portion of the GPU Energy companies' operations continue to be
subject to the provisions of FAS 71.
F-89
<PAGE>
Regulatory assets, net as reflected in the December 31, 1999 and December
31, 1998 Consolidated Balance Sheets in accordance with the provisions of FAS 71
and EITF Issue 97-4 were as follows:
GPU, Inc. and Subsidiaries
- --------------------------
(in thousands)
---------------------------
1999 1998
------------- ----------
Market transition charge (MTC) / basic
generation service (NJ) $2,358,844 $ -
Competitive transition charge (CTC) (PA) 803,064 1,023,815
Reserve for generation divestiture 536,904 1,527,985
Power purchase contract loss not in CTC (PA) 369,290 369,290
Costs recoverable through distribution rates (NJ) 296,841 -
Income taxes recoverable through future rates, net 280,268 396,937
Three Mile Island Unit 2 (TMI-2)
decommissioning costs 100,794 119,571
Societal benefits charge (NJ) 116,941 -
Other postretirement benefits 25,335 73,770
Nonutility generation contract buyout costs - 123,208
Unamortized property losses (NJ) - 80,287
Net investment in TMI-2 (NJ) - 65,787
Environmental remediation (NJ) - 50,214
Above market NUG deferral costs (252,348) (16,067)
Other, net 76,721 126,032
--------- ---------
Total regulatory assets, net $4,712,654 $3,940,829
========= =========
JCP&L
- -----
Regulatory assets, net:
MTC / basic generation service $2,358,844 $ -
Costs recoverable through distribution rates 296,841 -
Societal benefits charge 116,941 -
Net divestiture proceeds recoverable through MTC 37,175 -
Reserve for generation divestiture - 146,419
Income taxes recoverable through future rates, net - 137,217
Nonutility generation contract buyout costs - 120,708
Unamortized property losses - 80,287
Net investment in TMI-2 - 65,787
Environmental remediation - 50,214
Other, net - 162,868
--------- ---------
Total regulatory assets, net $2,809,801 $ 763,500
========= =========
Met-Ed
- ------
Regulatory assets, net:
CTC $ 591,316 $ 680,213
Power purchase contract loss not in CTC 271,270 271,270
Reserve for generation divestiture 137,037 435,386
Income taxes recoverable through future rates, net 115,713 122,781
TMI-2 decommissioning costs 65,455 68,091
Other, net 50,349 37,985
--------- ---------
Total regulatory assets, net $1,231,140 $1,615,726
========= =========
Penelec
- -------
Regulatory assets, net:
Reserve for generation divestiture $ 399,867 $ 946,181
Above market NUG deferral costs (252,893) -
CTC 211,748 343,602
Income taxes recoverable through future rates, net 164,555 136,939
Power purchase contract loss not in CTC 98,020 98,020
Other, net 50,416 36,861
--------- ---------
Total regulatory assets, net $ 671,713 $1,561,603
========= =========
F-90
<PAGE>
Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. FAS 133
requires that companies recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
GPU will be required to include its derivative transactions on its balance sheet
at fair value, and recognize the subsequent changes in fair value as either
gains or losses in earnings or report them as a component of other comprehensive
income, depending upon the intended use and designation of the derivative as a
hedge. FAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. GPU will adopt FAS 133 in the first quarter of 2001 and is
in the process of evaluating the impact of the implementation of this statement.
GPU's use of derivative instruments is intended to manage the risk of interest
rate, foreign currency and commodity price fluctuations and may include such
transactions as electricity and natural gas forward and futures contracts,
foreign currency swaps, interest rate swaps and options. GPU does not intend to
hold or issue derivative instruments for trading purposes.
NUCLEAR FACILITIES
------------------
Investments:
- -----------
In December 1999, the GPU Energy companies sold TMI-1 to AmerGen for
approximately $100 million. In addition, JCP&L has agreed to sell Oyster Creek
to AmerGen for $10 million and reimbursement of the cost (estimated at $88
million) of the next refueling outage. TMI-2, which was damaged during a 1979
accident, is jointly owned by JCP&L, Met-Ed and Penelec in the percentages of
25%, 50% and 25%. JCP&L's net investment in TMI-2 at December 31, 1999 and 1998
was $61 million and $66 million, respectively. JCP&L is collecting revenues for
TMI-2 on a basis which provides for the recovery of its remaining investment in
the plant by 2008. Met-Ed and Penelec's remaining investments in TMI-2 were
written off in 1998 after receiving the PaPUC's Restructuring Orders.
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. 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.
TMI-2:
- ------
As a result of the 1979 TMI-2 accident, individual claims for alleged
personal injury (including claims for punitive damages), which are material in
amount, were asserted against GPU, Inc. and the GPU Energy companies.
Approximately 2,100 of such claims were filed in the US District Court for
F-91
<PAGE>
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 Nuclear Regulatory Commission
(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 1995, the US 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 US Supreme Court denied petitions filed by GPU, Inc. and the GPU
Energy companies to review the Court of Appeals' rulings.
In 1996, the District Court granted a motion for summary judgment filed by
GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test
cases," which had been selected for a test case trial as well as all of the
remaining 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 appealed the District Court's ruling to the
Court of Appeals for the Third Circuit. In November 1999, the Third Circuit
affirmed the District Court's dismissal of the ten "test cases," but set aside
the dismissal of the additional pending claims, remanding them to the District
Court for further proceedings. In remanding these claims, the Third Circuit held
that the District Court had erred in extending its summary judgment decision to
the other plaintiffs and imposing on these plaintiffs the District Court's
finding that radiation exposures below 10 rems were too speculative to establish
a causal link to cancer. The Court of Appeals stated that the non-test case
plaintiffs should be permitted to present their own individual evidence that
exposure to radiation from the accident caused their cancers.
F-92
<PAGE>
GPU, Inc. and the GPU Energy companies believe that the Third Circuit has
misinterpreted the record before the District Court as it applies to the
non-test case plaintiffs, and in November 1999, filed petitions seeking a
rehearing and reconsideration of the Court's decision regarding the remaining
claims. The "test case" plaintiffs also requested a rehearing of the Court's
decision upholding the dismissal of their claims. In January 2000, the Court of
Appeals denied both petitions. The "test case" plaintiffs have stated that they
intend to seek, and GPU, Inc. and the GPU Energy companies are considering
whether to seek, Supreme Court review of the District Court's decision. There
can be no assurance as to the outcome of this litigation.
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 DOE.
In 1995, a consultant to GPUN performed site-specific studies of TMI-2 and
Oyster Creek (updated in 1998), 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. Under NRC regulations, JCP&L is making periodic payments
to complete the funding for Oyster Creek retirement costs by the end of the
plant's license term of 2009. The TMI-2 funding completion date is 2014,
consistent with TMI-2's remaining in long-term storage. The NRC may require an
acceleration of the decommissioning funding for Oyster Creek if the pending sale
is not completed and the plant is retired early. The retirement cost estimates
under the 1995 site-specific studies, assuming decommissioning of TMI-2 and
Oyster Creek in 2014 and 2009, respectively, are as follows (in 1999 dollars):
(in millions)
Oyster
TMI-2 Creek
----- ------
Radiological decommissioning $435 $591
Nonradiological cost of removal 34* 32
--- ---
Total $469 $623
=== ===
* Net of $12.6 million spent as of December 31, 1999.
Each of the GPU Energy companies is responsible for retirement costs in
proportion to its respective ownership percentage. The ultimate cost of retiring
the GPU Energy companies' nuclear facilities may be different from the cost
estimates contained in these site-specific studies. Also, the cost estimates
contained in these site-specific studies are significantly greater than the
decommissioning funding targets established by the NRC.
The 1995 Oyster Creek site-specific study was updated in 1998 in response
to the previously announced potential early closure of the plant in 2000. An
early shutdown would increase the retirement costs shown above to $632
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<PAGE>
million ($600 million for radiological decommissioning and $32 million for
nonradiological cost of removal). Both estimates include substantial spending
for an on-site dry storage facility for spent nuclear fuel and significant costs
for storing the fuel until the DOE complies with the Nuclear Waste Policy Act of
1982. For additional information, see OTHER COMMITMENTS AND CONTINGENCIES
section.
Upon the sale of TMI-1, AmerGen assumed all TMI-1 decommissioning
liabilities and the GPU Energy companies transferred $320 million to AmerGen for
decommissioning.
The agreements to sell Oyster Creek to AmerGen provide, among other things,
that upon financial closing, JCP&L will transfer $430 million in decommissioning
trust funds to AmerGen, which will assume all liability for decommissioning
Oyster Creek.
The GPU Energy companies charge to depreciation expense and accrue
retirement costs based on amounts being collected from customers. Customer
collections are contributed to external trust funds. These deposits, including
the related earnings, are classified as Nuclear decommissioning trusts, at
market on the Consolidated Balance Sheets.
The NJBPU has granted JCP&L annual revenues for Oyster Creek retirement
costs of $22.5 million based on the 1995 site-specific study. In August 2000,
the recovery of Oyster Creek retirement cost escalates to $34.4 million annually
if the plant is retired in 2000.
In the Restructuring Orders, the PaPUC granted Met-Ed and Penelec recovery
of TMI-1 decommissioning costs of $103.4 million and $67.8 million,
respectively, as part of the CTC. These amounts, which are computed on a present
value basis, are based on the 1995 site-specific study and will be adjusted in
Phase II of Met-Ed and Penelec's restructuring proceedings, once the net
proceeds from the generation asset divestiture are determined.
In the event JCP&L does not complete the pending sale of Oyster Creek,
management believes that any retirement costs, in excess of those currently
recognized for ratemaking purposes, should be recoverable from customers.
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, 1999 and December 31, 1998 are $497 million (JCP&L $124 million;
Met-Ed $249 million; Penelec $124 million) and $484 million (JCP&L $121 million;
Met-Ed $242 million; Penelec $121 million), respectively. These amounts are
based upon the 1995 site-specific study estimates (in 1999 and 1998 dollars,
respectively) discussed above and an estimate for remaining incremental
monitored storage costs of $27 million (JCP&L $7 million; Met-Ed $13 million;
Penelec $7 million) as of December 31, 1999 and $29 million (JCP&L $7 million;
Met-Ed $15 million; Penelec $7 million) as of December 31, 1998, 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 $1.8
million (JCP&L $450 thousand; Met-Ed $900 thousand; Penelec $450 thousand).
Offsetting the $497 million liability at December 31, 1999 is $193 million
(JCP&L $14 million; Met-Ed $144 million; Penelec $35 million) which management
believes is probable of recovery from customers and included in
F-94
<PAGE>
Regulatory assets, net on the Consolidated Balance Sheets, and $355 million
(JCP&L $114 million; Met-Ed $144 million; Penelec $97 million) in trust funds
for TMI-2 and included in Nuclear decommissioning trusts, at market on the
Consolidated Balance Sheets. Earnings on trust fund deposits are included in
amounts shown on the Consolidated Balance Sheets under Regulatory assets, net.
TMI-2 decommissioning costs charged to depreciation expense in 1999 amounted to
$14.3 million (JCP&L $2.3 million; Met-Ed $11.2 million; Penelec $0.8 million).
The NJBPU has granted JCP&L revenues for TMI-2 retirement costs based on
the 1995 site-specific estimates. In addition, JCP&L is recovering its share of
TMI-2 incremental monitored storage costs. The PaPUC Restructuring Orders
granted Met-Ed and Penelec recovery of TMI-2 decommissioning costs as part of
the CTC, but also allowed Met-Ed and Penelec to defer as a regulatory asset
those amounts that are above the level provided for in the CTC.
At December 31, 1999, the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $77 million (JCP&L $19 million; Met-Ed
$39 million; Penelec $19 million), which is based on the 1995 site-specific
study estimate (in 1999 dollars). In connection with rate case resolutions at
the time, JCP&L, Met-Ed and Penelec have made contributions to irrevocable
external trusts relating to their shares of the accident-related portions of the
decommissioning liability in the amounts of $15 million, $40 million and $20
million, respectively. These contributions were not recoverable from customers
and have been expensed. The GPU Energy companies will not pursue recovery from
customers for any amounts contributed in excess of the $77 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 Oyster Creek totals $2.75 billion. In addition,
GPU has purchased property and decontamination insurance coverage for TMI-2
totaling $150 million. 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.
F-95
<PAGE>
The Price-Anderson Act limits GPU's liability to third parties for a
nuclear incident at Oyster Creek to approximately $9.5 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 Oyster Creek, could result in an assessment of up to
$88 million per incident, subject to an annual maximum payment of $10 million
per incident per reactor. Although TMI-2 is exempt from this assessment, the
plant is still covered by the provisions of the Price-Anderson Act. In addition
to the retrospective premiums payable under the Price-Anderson Act, the GPU
Energy companies are also subject to retrospective premium assessments of up to
$10.5 million (JCP&L $10.1 million; Met-Ed $0.3 million; Penelec $0.1 million)
for insurance policies currently in effect applicable to nuclear operations and
facilities. The GPU Energy companies are also subject to other retrospective
premium assessments related to policies applicable to TMI-1 prior to the sale of
the plant to AmerGen.
JCP&L has insurance coverage for incremental replacement power costs should
an accident-related outage at Oyster Creek occur. Coverage would commence after
a 12-week waiting period at $2.1 million per week for 52 weeks, decreasing to
80% of such amount for the next 110 weeks.
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 (MGP), coal mine
refuse piles and generation facilities.
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 11 hazardous and/or toxic waste sites (in some
cases, more than one company is named for a given site).
JCP&L MET-ED PENELEC GPUN GPU,INC. TOTAL
----- ------ ------- ---- ------- -----
6 4 2 1 1 11
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 (which are material in amount) 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.
F-96
<PAGE>
In 1997, the EPA filed a complaint against GPU, Inc. in the US District
Court for the District of Delaware for enforcement of its Unilateral Order
(Order) issued against GPU, Inc. to clean up the former Dover Gas Light Company
(Dover) manufactured gas production site (Site) in Dover, Delaware. Dover was
part of the AGECO/AGECORP group of companies from 1929 until 1942; GPU, Inc.
emerged from the AGECO/AGECORP reorganization proceedings in 1946. All of
Dover's common stock, which was sold in 1942 to an unaffiliated entity, was
subsequently acquired by Chesapeake, which merged with Dover in 1960. Chesapeake
is currently performing the cleanup at the Site. According to the complaint, the
EPA is seeking (1) enforcement of the Order against GPU; (2) recovery of its
past response costs, (3) a declaratory judgment that GPU is liable for any
remaining cleanup costs of the Site and (4) statutory penalties for
noncompliance with the Order. The EPA has stated that it has incurred
approximately $1 million of past response costs as of December 31, 1999. The EPA
estimates the total Site cleanup costs at approximately $4.2 million.
Consultants to Chesapeake have estimated the remaining remediation groundwater
costs at approximately $10.5 million. In accordance with its penalty policy, and
in discussions with GPU, the EPA has demanded penalties calculated at a daily
rate of $8,800, rather than the statutory maximum of $27,500 per day. At
December 31, 1999, if the statutory maximum is applied, the total amount of
penalties would be approximately $34 million. GPU believes that it has
meritorious defenses as to why no penalty should be assessed or if a penalty is
assessed, why it should be at a lower daily rate. Chesapeake has also sued GPU,
Inc. for contribution to the cleanup of the Dover Site. The US District Court
for the District of Delaware has consolidated the case filed by Chesapeake with
the case filed by the EPA and discovery is proceeding. There can be no assurance
as to the outcome of these proceedings.
In connection with the sale of its Seward Generation Station to Sithe,
Penelec has assumed up to $6 million of remediation costs associated with
certain coal mine refuse piles which are the subject of an earlier consent
decree with the Pennsylvania Department of Environmental Protection. Penelec
expects recovery of these remediation costs in Phase II of its restructuring
proceeding and has recorded a corresponding regulatory asset of approximately $6
million at December 31, 1999.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection for the investigation and remediation of 17 formerly
owned MGP sites. JCP&L has also entered into various cost-sharing agreements
with other utilities for most of the sites. As of December 31, 1999, JCP&L has
spent approximately $36 million in connection with the cleanup of these sites.
In addition, JCP&L has recorded an estimated environmental liability of $52
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 $52 million due to significant uncertainties,
including changes in acceptable remediation methods and technologies. In
addition, federal and state law provides for payment by responsible parties for
damage to natural resources.
In 1997, the NJBPU approved JCP&L's request to establish a Remediation
Adjustment Clause for the recovery of MGP remediation costs. As a result of the
NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was
transferred to the Societal Benefits Charge. At December 31, 1999,
F-97
<PAGE>
JCP&L had recorded on its Consolidated Balance Sheet a regulatory asset of $44
million. JCP&L is continuing to pursue reimbursement from its insurance carriers
for remediation costs already spent and for future estimated costs. In 1994,
JCP&L commenced litigation in the New Jersey Superior Court against several of
its insurance carriers, relative to these MGP sites, and has settled with all
but one of those insurance companies.
OTHER COMMITMENTS AND CONTINGENCIES
-----------------------------------
Class Action Litigation:
- -----------------------
GPU Energy
In July 1999, New Jersey experienced a severe heat storm that resulted in
major power outages and temporary service interruptions including in JCP&L's
service territory. As a result, the NJBPU has initiated an investigation into
the reliability of the transmission and distribution systems of all New Jersey
utilities and their response to power outages. In addition, two class action
lawsuits have been commenced in New Jersey Superior Court against GPU, Inc. and
the GPU Energy companies, seeking both compensatory and punitive damages for
alleged losses suffered due to service interruptions. The GPU defendants
originally requested the Court to stay or dismiss the litigation in deference to
the NJBPU's primary jurisdiction. The Court denied the motion, but in January
2000 the Appellate Division agreed to review the Court's decision. In response
to GPU's demand for a statement of damages, the plaintiffs have stated that they
are seeking damages of $700 million, subject to the results of pre-trial
discovery. GPU has notified its insurance carriers who have reserved their
rights to contest coverage under GPU's insurance policies for losses which GPU
may incur. There can be no assurance as to the outcome of these matters.
GPU Electric
As a result of the fire and explosion in September 1998, at the Longford
natural gas plant in Victoria, Australia, three class actions have been brought
in Australian Federal Court against Esso Australia Limited and its affiliate
(Esso), the owner and operator of the plant, for losses suffered due to the lack
of natural gas supply and related damages. Plaintiffs claim that Esso was, among
other things, negligent in designing, maintaining and operating the Longford
plant and also assert claims under various Australian fair trade practices laws.
Esso has joined as third party defendants the State of Victoria (State) and
various State-owned entities which operated the Victorian gas industry prior to
its privatization, including TPA and its affiliate Transmission Pipelines
(Assets) Australia (TPAA). GPU, Inc. through GPU GasNet acquired the assets of
TPA and the shares of TPAA from the State in June 1999. Esso has also named GPU
GasNet as a third party defendant. Under the acquisition agreement with the
State, GPU GasNet has indemnified TPA and the State against third party claims.
Esso is seeking contribution and indemnity from the third party defendants for
any damages for which Esso may be found liable. In addition, Esso has asserted
several separate claims against the State and the former State-owned entities
for damages, and contends that GPU GasNet assumed TPA's liabilities as part of
the State's privatization process.
F-98
<PAGE>
GPU GasNet and TPAA have filed answers denying liability, which could be
material and have moved to dismiss portions of Esso's claims. GPU GasNet and
TPAA have also notified their insurance carriers of this action. The insurers
have reserved their rights to deny coverage. There can be no assurance as to the
outcome of this matter.
Investments and Guarantees:
- --------------------------
GPU, Inc.
GPU, Inc. has made significant investments in foreign businesses and
facilities through its subsidiaries, GPU Electric and the GPUI Group. At
December 31, 1999, GPU, Inc.'s investment in GPU Electric and the GPUI Group was
$1.06 billion and $232 million, respectively. As of that date, GPU, Inc. has
also guaranteed an additional $1.04 billion and $29.9 million (including $8.7
million of guarantees related to domestic operations) of GPU Electric and GPUI
Group outstanding obligations, respectively. Although management attempts to
mitigate the risks of investing in certain foreign countries by, among other
things, securing political risk insurance, GPU faces additional risks inherent
to operating in such locations, including foreign currency fluctuations.
GPU Electric
Midlands has a 40% ownership interest in a 586 MW power project in Pakistan
(the Uch Power Project), which was originally scheduled to begin commercial
operation in late 1998, but testing and commercial operation have been delayed.
In June 1999, certain Project lenders issued notices of default to the
Project sponsors (including Midlands) for, among other things, failure to pay
principal and interest under various loan agreements. In November 1999, the
Project sponsors and lenders reached an agreement under which repayment of the
construction loan will be extended, principal and interest payments deferred,
and the sponsors will fund the completion of the plant through the remaining
equity contribution commitments. Midlands' investment in the Uch Power Project
at December 31, 1999 was approximately $43 million, and its share of the
projected completion costs represents an additional $8 million commitment.
Cinergy has agreed to fund up to an aggregate of $20 million of the required
capital contributions and/or certain future "cash losses" which could be
incurred on the Uch Power Project. Cinergy has reimbursed Midlands $3 million of
capital contributions as of December 31, 1999, leaving a remaining commitment of
up to $17 million. Testing of the plant has begun and the start of commercial
operations is now anticipated in 2000. There can be no assurance as to the
outcome of this matter.
As part of the sale of the Midlands' supply business and the purchase of the
50% of Midlands GPU did not already own, certain long-term obligations under
natural gas supply contracts were retained. Most of these contracts were at
fixed prices in excess of the market price of gas as of December 31, 1999. A
liability was previously established for the estimated loss under such
contracts, which extend to September 2005. The estimated liability at December
31, 1999 was $55.1 million.
F-99
<PAGE>
GPUI Group
On July 9, 1999, DIAN (the Columbian national tax authority) issued a
"Special Requirement" on the Termobarranquilla S.A., Empresa de Servicios
Publicos (TEBSA, an investment in which GPU Power has a 29% interest) 1996
income tax return which challenges the exclusion from taxable income of an
inflation adjustment related to the value of assets used for power generation.
The failure to give notice of this Special Requirement to the US Export
Import Bank may be asserted as a technical event of default under the loan
agreement. An event of default would entitle TEBSA's lenders to accelerate the
payment of outstanding loans of TEBSA and require payment of certain standby
equity commitments by TEBSA's shareholders and equity guarantors, which include
a subsidiary of GPU Power and GPU, Inc. respectively. The lenders have not
asserted that an event of default has occurred or indicated whether they will
pursue remedies under the project financing documents.
As of December 31, 1999, GPU Power has an investment of approximately $79
million in TEBSA and GPU, Inc. has guaranteed $21.3 million in standby equity
commitments. There can be no assurance as to the outcome of these matters.
Other:
- -----
GPU AR has entered into contracts to supply electricity to retail customers
through May 2001. In connection with meeting its supply obligations, GPU AR has
entered into firm purchase commitments for energy and capacity with payment
obligations totaling approximately $27 million as of December 31, 1999. GPU,
Inc. has guaranteed up to $19 million of these payments.
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. AmerGen has assumed all liability for disposal costs related
to spent fuel generated after its purchase of TMI-1 and has agreed to assume
this liability for Oyster Creek following its purchase of that plant. In 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 requested recommendations from contract
holders for handling the delay. The DOE's inability to accept spent nuclear fuel
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.
In June 1997, a consortium of electric utilities, including GPUN, filed a
license application with the NRC seeking permission to build an interim
above-ground disposal facility for spent nuclear fuel in Utah. There can be no
assurance as to the outcome of these matters.
GPU, Inc. and consolidated affiliates have approximately 10,800 employees
worldwide, of which 6,100 are employed in the US and 3,700 are employed in the
United Kingdom. The majority of the US workforce is employed by the GPU Energy
companies, of which approximately 4,000 are represented by unions for collective
bargaining purposes. In the United Kingdom, approximately 2,800 Midlands
employees are represented by unions; terms and conditions of the
F-100
<PAGE>
various bargaining agreements are generally reviewed annually, on April 1.
JCP&L, Met-Ed and Penelec's collective bargaining agreements with the
International Brotherhood of Electrical Workers expire on October 31, 2002,
April 30, 2000 and May 14, 2002, respectively. Penelec's collective bargaining
agreement with the Utility Workers Union of America expires on June 30, 2001.
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 GPU's financial position or results of
operations, there can be no assurance that this will continue to be the case.
13. SEGMENT INFORMATION
The following is presented in accordance with Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information."
GPU's reportable segments are strategic business units that are managed
separately due to their different operating and regulatory environments. GPU's
management evaluates the performance of its business units based upon income
before extraordinary and non-recurring items. For the purpose of providing
segment information, domestic electric utility operations (GPU Energy) is
comprised of the three electric utility operating companies serving customers in
New Jersey and Pennsylvania, as well as GPU Generation, Inc. (sold in late
1999), GPUN, GPU Telcom and GPUS. For additional information on GPU's
organizational structure and businesses, see preface to the Notes to
Consolidated Financial Statements.
F-101
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
Business Segment Data (in thousands)
Income
Interest Before Extra-
Depreciation Charges and Income Tax ordinary and Investments
Operating and Preferred Expense/ Non-recurring Total and Capital
Revenues Amortization Dividends (Benefit)(a) Items Assets Expenditures(b)
--------- ------------ ----------- ----------- -------------- ------ --------------
1999
- ----
Domestic Segments:
Electric Utility Operations
<S> <C> <C> <C> <C> <C> <C> <C>
(GPU Energy) $3,685,821 $ 409,345 $ 209,769 $ 238,591 $ 440,983 $13,244,301 $ 291,391
Independ Power Prod
(GPU International) 83,434 9,401 1,044 9,478 11,337 359,374 1,225
Electric Retail Energy
Sales (GPU AR) 84,681 - - (2,393) (4,558) 24,630 -
--------- ------- ------- -------- -------- ---------- --------
Subtotal 3,853,936 418,746 210,813 245,676 447,762 13,628,305 292,616
--------- ------- ------- -------- -------- ---------- --------
Foreign Segments:
Electric/Gas Utility
Operations: (GPU Electric)
Electric Distribution-United Kingdom 504,826 52,847 91,433 21,208 54,836(c) 4,687,476 727,793
Electric Distribution - Argentina 135,938 15,273 23,414 (960) (1,778) 579,907 407,225
Electric Transmission - Australia 193,366 42,850 110,059 (1,171) (6,715) 1,824,309 19,889
Gas Transmission - Australia 31,326 6,933 28,821 (12,156) (39) 795,527 653,747
Independ Power Prod -
S. America (GPU Power) 37,732 6,290 3,560 5,152 8,116 238,644 30,421
--------- ------- ------- -------- -------- ---------- --------
Subtotal 903,188 124,193 257,287 12,073 54,420 8,125,863 1,839,075
--------- ------- ------- -------- -------- ---------- --------
Corporate and Eliminations - - 14,397 - (18,068) (36,086) -
--------- ------- ------- -------- -------- ---------- --------
Consolidated Total $4,757,124 $ 542,939 $ 482,497 $ 257,749 $ 484,114 $21,718,082 $2,131,691
========= ========= ========= ======= ========= ========== ==========
1998
- ----
Domestic Segments:
Electric Utility Operations
<S> <C> <C> <C> <C> <C> <C> <C>
(GPU Energy) $3,953,254 $ 469,623 $241,886 271,336 $ 369,752 $13,298,257 $ 328,418
Independ Power Prod
(GPU International) 72,256 4,560 748 9,103 11,622 397,523 21,375
Electric Retail Energy Sales (GPU AR) 10,938 - - (1,201) (2,231) 2,651 34
--------- ------- ------- -------- -------- ---------- --------
Subtotal 4,036,448 474,183 242,634 279,238 379,143 13,698,431 349,827
--------- ------- ------- -------- -------- ---------- --------
Foreign Segments:
Electric/Gas Utility Operations:
(GPU Electric)
Electric Distribution -
United Kingdom 944 1,226 30,859 (6,489) 37,249(d) 617,737 -
Electric Transmission - Australia 181,059 40,841 108,227 11,421 18,885 1,788,877 58,549
Independ Power Prod -
S. America (GPU Power) 33,136 5,844 4,219 719 2,499 237,162 59,847
--------- ------- ------- -------- -------- ---------- --------
Subtotal 215,139 47,911 143,305 5,651 58,633 2,643,776 118,396
--------- ------- ------- -------- -------- ---------- --------
Corporate and Eliminations (2,795) - 3,293 - (11,818) (54,098) -
--------- ------- ------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Total $4,248,792 $ 522,094 $ 389,232 $284,889 $ 425,958 $16,288,109 $ 468,223
========= ======== ======= ======= ======== ========== ========
</TABLE>
F-102
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
Income
Interest Before Extra-
Depreciation Charges and Income Tax ordinary and Investments
Operating and Preferred Expense/ Non-recurring Total and Capital
(in thousands) Revenues Amortization Dividends (Benefit)(a) Items Assets Expenditures(b)
--------- ------------ ----------- ----------- -------------- ------ --------------
1997
Domestic Segments:
Electric Utility Operations
<S> <C> <C> <C> <C> <C> <C> <C>
(GPU Energy) $4,045,233 $ 451,009 $ 249,015 $ 249,184 $ 388,030 $ 9,850,784 $ 356,416
Independ Power Prod
(GPU International) 38,727 778 713 (3,115) (13,362) 318,592 111,700
Electric Retail Energy Sales
(GPU AR) 1,339 - - (2,576) (4,782) 5,122 -
--------- ------------ -------- ------- -------- ---------- --------
Subtotal 4,085,299 451,787 249,728 243,493 369,886 10,174,498 468,116
--------- ------------ -------- ------- -------- ---------- --------
Foreign Segments:
Electric/Gas Utility Operations:
(GPU Electric)
Electric Distribution -
United Kingdom - 354 39,312 (44,438) 78,463(d) 568,997 449
Electric Transmission &
Distribution-Australia 30,339 9,412 23,397 (5,184) 12,631 1,967,946 1,800,072
Independ Power Prod -
S. America (GPU Power) 29,174 6,161 3,202 (335) (2,301) 145,859 -
--------- ------------ -------- ------- -------- ---------- --------
Subtotal 59,513 15,927 65,911 (49,957) 88,793 2,682,802 1,800,521
--------- ------------ -------- ------- -------- ---------- --------
Corporate and Eliminations (1,433) - 3,682 - (14,278) (34,366) -
--------- ------------ -------- ------- -------- ---------- --------
Consolidated Total $4,143,379 $ 467,714 $ 319,321 $193,536 $ 444,401 $12,822,934 $2,268,637
========== ========== ========== ======== ========== =========== ==========
(a) Represents income taxes on income before extraordinary and non-recurring
items.
(b) Includes acquisitions, net of cash acquired of $1,671 million in 1999
(Midlands $653 million; Emdersa $369 million; GPU GasNet $649 million) and
$1,798 million in 1997 (GPU PowerNet).
(c) Includes equity in net income of investee accounted for under the equity
method of $74 million, for the period prior to the consolidation of
Midlands.
(d) Includes equity in net income of investee accounted for under the equity
method of $62 million in 1998 and $74 million in 1997.
F-103
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GPU, Inc. and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(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
- ------------------------------- --------- --------- -------- ---------- ---------
Year ended December 31, 1999
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $51,045(e) $31,458 $120,161(a) $143,261(b) $59,403
Allowance for inventory
obsolescence 218(e) 581 - 160(c) 639
Year ended December 31, 1998
Allowance for doubtful
accounts $ 8,087 $16,169 $ 5,564(a) $21,486(b) $ 8,334
Allowance for inventory
obsolescence 1,484 - (13)d) 1,311(c) 160
Year ended December 31, 1997
Allowance for doubtful
accounts $ 8,660 $17,984 $ 6,069(a) $ 24,626(b) $ 8,087
Allowance for inventory
obsolescence 2,256 - 8(d) 780(c) 1,484
<FN>
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Sale of inventory previously written off.
(e) Beginning balance is adjusted for 1999 acquisitions ($42,711 relating to
the allowance for doubtful accounts and $58 relating to the allowance for
inventory obsolescence). For more information, see Note 7 of the Notes to
Consolidated Financial Statements.
</FN>
F-104
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
COMPANY STATISTICS
For The Years Ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
Capacity at Company Peak (in MW):
<S> <C> <C> <C> <C> <C>
Company owned 2,685 2,729 2,718 2,850 2,749
Contracted 1,512 2,933 2,794 2,497 2,462
------ ------ ------ ------ ------
Total capacity (a) 4,197 5,662 5,512 5,347 5,211
====== ====== ====== ====== ======
Hourly Peak Load (in MW):
Summer peak 5,180 4,817 4,817 4,130 4,554
Winter peak 3,402 3,175 3,168 3,173 3,260
Reserve at company peak (%) (19.0) 17.3 14.4 29.5 14.4
Load factor (%) (b) 46.1 47.7 46.5 53.9 47.1
Sources of Energy (in thousands of MWH):
Coal 1,936 2,224 2,215 2,105 1,929
Nuclear 6,911 6,064 6,553 6,114 6,791
Gas, hydro & oil 419 487 548 535 861
------ ------ ------ ------ ----
Net generation 9,266 8,775 9,316 8,754 9,581
Utility purchases and interchange 7,862 7,567 6,044 6,608 6,304
Nonutility purchases 5,323 5,271 5,342 5,439 5,850
------ ------ ------ ------ -----
Total sources of energy 22,451 21,613 20,702 20,801 21,735
Energy from alternate suppliers 21 - - - -
Company use, line loss, etc. (1,878) (1,558) (1,794) (2,127) (1,749)
------ ------ ------ ------ ------
Total electric energy sales 20,594 20,055 18,908 18,674 19,986
====== ====== ====== ====== =======
Fuel Expense (in millions):
Coal $24 $27 $ 28 $ 30 $ 26
Nuclear 43 37 39 40 44
Gas & oil 24 22 34 31 31
-- -- --- --- ---
Total $91 $86 $101 $101 $101
== == === === ====
Power Purchased and Interchanged (in millions):
Utility and interchange purchases $377 $293 $234 $246 $279
Nonutility purchases 398 403 384 370 382
Amortization of nonutility buyout costs 23 20 9 - -
--- --- --- --- ---
Total $798 $716 $627 $616 $661
=== === === === ====
Delivered MWH Sales (in thousands):
Residential 7,978 7,551 7,256 7,266 7,112
Commercial 7,624 7,259 6,974 6,829 6,611
Industrial 3,289 3,474 3,536 3,497 3,562
Other 81 81 79 78 77
------ ------ ------ ------ ----
Sales to customers 18,972 18,365 17,845 17,670 17,362
Sales to other utilities 1,622 1,690 1,063 1,004 2,624
------ ------ ------ ------ -----
Total 20,594 20,055 18,908 18,674 19,986
====== ====== ====== ====== ======
Operating Revenues (in millions):
Residential $ 933 $ 891 $ 907 $ 895 $ 881
Commercial 807 779 797 775 742
Industrial 276 288 313 311 315
Other 21 21 21 21 21
----- ----- ----- ----- ----
Sales to customers 2,037 1,979 2,038 2,002 1,959
Provision for rate refunds (112) (6) - - -
Sales to other utilities 64 75 36 35 62
----- ----- ----- ----- ----
Total electric energy sales 1,989 2,048 2,074 2,037 2,021
Other revenues 29 22 20 21 15
----- ----- ----- ----- ----
Total $2,018 $2,070 $2,094 $2,058 $2,036
===== ===== ===== ===== ======
Customers at Year-End (in thousands):
Total customers 996 982 969 954 940
Customers choosing alternate suppliers 4 - - - -
<FN>
(a) Summer ratings at December 31, 1999 of owned and contracted capacity were
885 MW and 3,312 MW, respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year
to the peak load occurring during the year.
</FN>
F-105
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31, 1999(1 1998 1997 1996(2) 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $2,018.2 $2,069.6 $2,094.0 $2,057.9 $2,035.9
Other operation and
maintenance expense 482.9 485.0 455.0 556.1 475.4
Net income 172.4 222.4 212.0 156.3 199.1
Earnings available for
common stock 162.9 212.4 200.6 143.2 184.6
Net utility plant
in service 1,729.3 2,538.2 2,664.1 2,717.1 2,641.6
Total assets 5,811.0 4,582.1 4,641.6 4,676.7 4,418.8
Long-term debt 1,133.8 1,173.5 1,173.3 1,173.1 1,192.9
Long-term obligations
under capital leases - - - 0.1 2.4
Company-obligated
mandatorily redeemable
preferred securities 125.0 125.0 125.0 125.0 125.0
Cumulative preferred stock
with mandatory redemption 73.2 86.5 91.5 114.0 134.0
Capital expenditures and
investments 140.9 154.9 172.2 199.8 217.8
Return on average
common equity 10.7% 13.5% 13.1% 9.5% 13.1%
(1) Results for 1999 reflect a non-recurring charge of $68 million
(after-tax) related to the NJBPU Restructuring Order.
(2) Results for 1996 reflect a non-recurring charge of $39.4 million
(after-tax) for costs related to voluntary enhanced retirement programs.
F-106
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power and Light Company and Subsidiary Company
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
----------------------- -----------------
In Thousands 1999 1998 1999(1) 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $516,889 $472,334 $391,025 $478,894
Operating income 113,127 110,318 11,285 92,750
Net income/(loss) 53,697 52,816 (5,855) 40,285
Earnings/(loss) available for common stock 51,265 50,078 (8,225) 37,720
Third Quarter Fourth Quarter
----------------------- -----------------
In Thousands 1999 1998 1999(2) 1998
- ----------------------------------------------------------------------------------------
Operating revenues $670,245 $647,625 $440,050 $470,795
Operating income 194,846 177,081 46,531 81,910
Net income 102,903 91,607 21,635 37,734
Earnings available for common stock 100,565 89,277 19,257 35,302
(1) Results for the second quarter of 1999 include a reduction of $68 million
after-tax as a result of the NJBPU's Restructuring Order on JCP&L.
(2) The aggregate effect on earnings of fourth quarter 1999 adjustments was a
gain of approximately $3 million after-tax.
F-107
</TABLE>
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Jersey Central Power & Light
Company:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Jersey
Central Power & Light Company and Subsidiary Company at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 10, 2000
F-108
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- -----------------------------------------------------------------------------
ASSETS
Utility Plant:
Transmission, distribution, and general plant $3,097,150 $3,108,697
Generation plant 504,545 1,646,576
--------- ---------
Utility plant in service (Note 6) 3,601,695 4,755,273
Accumulated depreciation (1,872,422) (2,217,108)
--------- ---------
Net utility plant in service (Note 1) 1,729,273 2,538,165
Construction work in progress 80,671 48,126
Other, net 14,781 98,491
--------- --------
Net utility plant 1,824,725 2,684,782
--------- ---------
Other Property and Investments:
Nuclear decommissioning trusts, at market
(Note 12) 394,941 422,277
Nuclear fuel disposal trust, at market 119,293 116,871
Other, net 1,252 9,596
--------- --------
Total other property and investments 515,486 548,744
--------- --------
Current Assets:
Cash and temporary cash investments 68,684 1,850
Special deposits 1,035 6,047
Accounts receivable:
Customers, net 164,099 152,120
Other 83,086 32,562
Unbilled revenues (Note 1) 78,251 56,391
Materials and supplies, at average cost or less:
Construction and maintenance - 79,863
Fuel - 13,144
Deferred income taxes (Note 8) 1,652 20,812
Prepayments 23,000 27,648
--------- -------
Total current assets 419,807 390,437
--------- ---------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 2,809,801 763,500
Deferred income taxes (Note 8) 221,668 179,237
Other 19,510 15,422
--------- --------
Total deferred debits and other assets 3,050,979 958,159
--------- -----------
Total Assets $5,810,997 $4,582,122
========= ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-109
<PAGE>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- ----------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 153,713 $153,713
Capital surplus 510,769 510,769
Retained earnings 720,878 893,016
Accumulated other comprehensive income/(loss) 7 (425)
--------- ----------
Total common stockholder's equity (Note 5) 1,385,367 1,557,073
Cumulative preferred stock: (Note 4)
With mandatory redemption 73,167 86,500
Without mandatory redemption 12,649 37,741
Company-obligated mandatorily redeemable
preferred securities (Note 4) 125,000 125,000
Long-term debt (Note 3) 1,133,760 1,173,532
--------- ---------
Total capitalization 2,729,943 2,979,846
--------- ---------
Current Liabilities:
Securities due within one year (Notes 3 & 4) 50,846 2,512
Notes payable (Note 2) - 122,344
Obligations under capital leases (Note 11) 48,165 85,366
Accounts payable:
Affiliates 60,527 40,861
Other 82,355 80,233
Taxes accrued 13,079 5,559
Interest accrued 24,523 26,678
Deferred credits (Note 1) - 2,411
Other 36,169 104,408
--------- --------
Total current liabilities 315,664 470,372
--------- --------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 570,568 670,961
Unamortized investment tax credits 32,114 50,225
Nuclear fuel disposal fee 148,009 141,270
Three Mile Island Unit 2 future costs (Note 12) 124,241 120,904
Power purchase contract loss liability (Note 12) 1,624,769 -
Other 265,689 148,544
--------- --------
Total deferred credits and other liabilities 2,765,390 1,131,904
--------- ---------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $5,810,997 $4,582,122
========= ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-110
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (Note 1) $2,018,209 $2,069,648 $2,093,972
---------- ---------- ----------
Operating Expenses:
Fuel 91,044 86,431 101,030
Power purchased and interchanged:
Affiliates 127,406 57,643 15,979
Others 670,538 658,742 610,792
Deferred costs, net (Note 1) (38,108) (25,542) 6,043
Other operation and maintenance (Note 9) 482,874 485,054 454,991
Depreciation and amortization (Note 1) 241,842 250,675 237,461
Taxes, other than income taxes (Note 9) 76,824 94,586 232,086
---------- ---------- ----------
Total operating expenses 1,652,420 1,607,589 1,658,382
---------- ---------- ----------
Operating Income 365,789 462,059 435,590
---------- ---------- ----------
Other Income and Deductions:
Allowance for other funds used during construction - 786 -
Other income, net 12,461 13,227 1,919
---------- ---------- ----------
Total other income and deductions 12,461 14,013 1,919
---------- ---------- ----------
Income Before Interest Charges 378,250 476,072 437,509
---------- ---------- ----------
Interest Charges:
Long-term debt and notes payable 95,325 95,361 100,706
Company-obligated mandatorily
redeemable preferred securities 10,700 10,700 10,700
Other interest 650 4,129 4,292
Allowance for borrowed funds used during
construction (1,775) (1,638) (2,319)
---------- ---------- ----------
Total interest charges 104,900 108,552 113,379
---------- ---------- ----------
Income Before Income Taxes 273,350 367,520 324,130
Income taxes (Note 8) 100,970 145,078 112,116
---------- ---------- ----------
Net Income 172,380 222,442 212,014
Preferred stock dividends 8,670 10,065 11,376
Loss on preferred stock reacquisition 848 - -
---------- ---------- ----------
Earnings Available for Common Stock $ 162,862 $ 212,377 $ 200,638
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-111
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $172,380 $222,442 $212,014
-------- -------- --------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gain on investments 7 - -
Minimum pension liability 425 (425) -
-------- -------- --------
Total other comprehensive income/(loss) 432 (425) -
-------- -------- --------
Comprehensive income $172,812 $222,017 $212,014
======== ======== ========
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 893,016 $ 875,639 $ 825,001
Net income 172,380 222,442 212,014
-------- -------- --------
Total 1,065,396 1,098,081 1,037,015
--------- --------- ---------
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) (1,162) (1,970) (1,970)
8.48% Series I ($8.48 a share) - (212) (1,272)
8.65% Series J ($8.65 a share) (4,325) (4,325) (4,325)
7.52% Series K ($7.52 a share) (2,683) (3,058) (3,309)
Common stock (not declared on a
per share basis) (335,000) (195,000) (150,000)
-------- -------- --------
Total (343,670) (205,065) (161,376)
-------- -------- --------
Loss on preferred stock reacquisition (848) - -
-------- -------- --------
Balance at end of year $ 720,878 $ 893,016 $ 875,639
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-112
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C> <C>
Net income $ 172,380 $222,442 $ 212,014
Adjustments to reconcile income to cash provided:
Depreciation and amortization 272,284 277,950 253,278
Amortization of property under capital leases 29,507 26,739 28,703
NJBPU restructuring rate order 115,000 - -
Voluntary enhanced retirement programs - - -
Nuclear outage maintenance costs, net - (6,640) 11,615
Deferred income taxes and investment tax
credits, net (96,183) (41,865) (27,449)
Deferred costs, net (37,841) (24,482) 8,193
Allowance for other funds used during
construction - (786) -
Changes in working capital:
Receivables (84,364) (9,407) (6,261)
Materials and supplies 46,023 3,863 7,721
Special deposits and prepayments 9,660 (12,450) 6,844
Payables and accrued liabilities (195) 1,418 (31,854)
Nonutility generation contract buyout costs (35,500) (15,000) (30,500)
Other, net (12,327) 13,091 (4,479)
------- ------ ------
Net cash provided by operating activities 378,444 434,873 427,825
------- ------- -------
Investing Activities:
Capital expenditures (140,915) (154,918) (172,243)
Proceeds from sale of investments 413,753 - -
Contributions to decommissioning trusts (59,175) (28,003) (18,003)
Other, net (2,162) (10,720) (10,989)
--------- -------- ---------
Net cash provided/(used) for investing activities 211,501 (193,641) (201,235)
--------- -------- ---------
Financing Activities:
Increase/(decrease) in notes payable, net (122,344) 7,090 83,454
Retirement of long-term debt (12) (11) (100,075)
Capital lease principal payments (27,347) (29,084) (26,496)
Redemption of preferred stock (30,940) (15,000) (20,000)
Dividends paid on preferred stock (7,468) (10,371) (11,800)
Dividends paid on common stock (335,000) (195,000) (150,000)
--------- -------- ---------
Net cash required by financing activities (523,111) (242,376) (224,917)
--------- -------- ---------
Net increase/(decrease) in cash and temporary cash
investments from above activities 66,834 (1,144) 1,673
Cash and temporary cash investments, beginning of year 1,850 2,994 1,321
--------- -------- ---------
Cash and temporary cash investments, end of year $ 68,684 $1,850 $ 2,994
========= ======== =========
Supplemental Disclosure:
Interest and preferred dividends paid $ 115,624 $116,942 $ 126,223
========= ======== =========
Income taxes paid $ 189,304 $192,335 $ 133,689
========= ======== =========
New capital lease obligations incurred $ 9,407 $32,680 $ 11,048
========= ======== =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-113
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jersey Central Power & Light Company and Subsidiary Company
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(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
- ------------------------------ --------- ---------- -------- ---------- ----------
Year ended December 31, 1999
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $1,764 $9,549 $37,098(a) $42,355(b) $6,056
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1998
Allowance for doubtful
accounts $1,414 $4,670 $1,729(a) $6,049(b) $1,764
Allowance for inventory
obsolescence (16) - - 16(c) -
Year ended December 31, 1997
Allowance for doubtful
accounts $1,670 $4,976 $1,939 $7,171(b) $1,414
Allowance for inventory
obsolescence 206 - 1(d) 223(c) (16)
<FN>
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Sale of inventory previously written off.
</FN>
F-114
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
COMPANY STATISTICS
For The Years Ended December 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------
Capacity at Company Peak (in MW):
<S> <C> <C> <C> <C> <C>
Company owned 1,738 1,738 1,738 1,705 1,604
Contracted 261 568 507 853 492
------ ------ ------ ------ ------
Total capacity (a) 1,999 2,306 2,245 2,558 2,096
====== ====== ====== ====== ======
Hourly Peak Load (in MW):
Summer peak 2,384 2,176 2,224 2,017 2,186
Winter peak 2,100 2,082 2,054 2,114 2,012
Reserve at company peak (%) (16.1) 6.0 .9 21.0 (4.1)
Load factor (%) (b) 62.6 66.1 63.5 66.3 61.4
Sources of Energy (in thousands of MWH):
Coal 4,835 5,363 5,203 4,760 4,334
Nuclear 3,045 3,529 2,959 3,550 3,194
Gas, hydro & oil 235 329 204 182 253
------ ------ ------ ------ ------
Net generation 8,115 9,221 8,366 8,492 7,781
Utility purchases and interchange 1,655 1,671 2,424 2,021 3,087
Nonutility purchases 2,283 2,389 2,481 2,406 2,066
------ ------ ------ ------ -----
Total sources of energy 12,053 13,281 13,271 12,919 12,934
Energy from alternate suppliers 5,113 - - - -
Company use, line loss, etc. (624) (387) (790) (718) (856)
------ ------ ------ ------ -----
Total electric energy sales 16,542 12,894 12,481 12,201 12,078
====== ====== ====== ====== ======
Fuel Expense (in millions):
Coal $65 $71 $72 $69 $61
Nuclear 16 20 16 20 20
Gas & oil 5 8 4 5 6
-- -- -- -- ---
Total $86 $99 $92 $94 $87
== == == == ====
Power Purchased and Interchanged (in millions):
Utility and interchange purchases $ 63 $ 58 $ 70 $ 54 $ 84
Nonutility purchases 167 174 162 168 131
Deferred nonutility costs (8) (4) - - -
Amortization of nonutility buyout costs 3 10 10 9 -
--- --- --- --- ----
Total $225 $238 $242 $231 $215
=== === === === ===
Delivered MWH Sales (in thousands):
Residential 4,265 4,040 4,034 4,135 3,925
Commercial 3,488 3,321 3,209 3,144 3,011
Industrial 4,085 4,174 4,098 4,033 3,957
Other 122 202 210 213 209
------ ------ ------ ------ ----
Sales to customers 11,960 11,737 11,551 11,525 11,102
Sales to other utilities 4,582 1,157 930 676 976
------ ------ ------ ------ ----
Total 16,542 12,894 12,481 12,201 12,078
====== ====== ====== ====== ======
Operating Revenues (in millions):
Residential $362 $361 $368 $365 $339
Commercial 193 260 259 247 229
Industrial 98 244 253 243 228
Other 8 14 14 14 13
--- --- --- --- ---
Sales to customers 661 879 894 869 809
Provision for rate refunds 27 (27) - - -
Sales to other utilities 163 34 24 20 26
--- --- --- --- ----
Total electric energy sales 851 886 918 889 835
Other revenues 52 33 25 21 20
--- --- --- --- ----
Total $903 $919 $943 $910 $855
=== === === === ===
Customers at Year-End (in thousands):
Total customers 489 482 477 470 465
Customers choosing alternate suppliers 33 - - - -
<FN>
(a) Summer ratings at December 31, 1999 of owned and contracted capacity were 19
MW and 1,872 MW, respectively.
(b) The ratio of the average hourly load in kilowatts supplied during the year
to the peak load occurring during the year.
</FN>
F-115
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31, 1999(1) 1998(2) 1997 1996(3) 1995(4)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 902.8 $ 919.6 $ 943.1 $ 910.4 $ 854.7
Other operation
and maintenance expense 250.2 247.2 228.3 250.0 229.6
Income before
extraordinary item 95.1 57.7 93.5 69.1 148.5
Net income 95.1 50.9 93.5 69.1 148.5
Earnings/(loss) available for
common stock 94.5 50.4 93.0 71.8 147.6
Net utility plant
in service 1,059.4 1,239.2 1,492.0 1,455.7 1,477.0
Total assets 3,488.2 4,065.0 2,509.8 2,447.0 2,410.7
Long-term debt 496.9 546.9 576.9 563.3 603.3
Long-term obligations
under capital leases - - - 0.4 1.0
Company-obligated
mandatorily redeemable
preferred securities - 100.0 100.0 100.0 100.0
Trust preferred securities 100.0 - - - -
Capital expenditures and
investments 66.4 75.1 87.6 76.7 112.6
Return on average
common equity 13.9% 7.5% 12.9% 10.3% 23.5%
<FN>
(1) Results for 1999 include a net gain of $1.2 million (after-tax) as a result
of the sale of substantially all of Met-Ed's electric generating stations.
(2) Results for 1998 include an extraordinary charge of $6.8 million (after-tax)
as a result of the PaPUC's Restructuring Order. Also in 1998, as a result of
the PaPUC Order, Met-Ed recorded a non-recurring charge of $19 million
(after-tax) related to the obligation to refund 1998 revenues; and for the
establishment of a sustainable energy fund.
(3) Results for 1996 reflect a non-recurring charge of $15.4 million (after-tax)
for costs related to voluntary enhanced retirement programs.
(4) 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 non-recurring charge to income of $5.7 million (after-tax) of TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
F-116
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
---------------------- ---------------------
In Thousands 1999 1998 1999 1998(1)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $229,157 $234,748 $198,010 $226,030
Operating income 76,252 57,874 44,623 53,704
Income before extraordinary item 32,832 24,730 19,142 18,548
Net income/(loss) 32,832 24,730 19,142 (168,732)
Earnings/(loss) available for common stock 32,224 24,609 19,142 (168,853)
Third Quarter Fourth Quarter
---------------------- ---------------------
In Thousands 1999 1998(2) 1999(3) 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $280,235 $229,051 $195,425 $229,765
Operating income 81,257 13,604 11,116 42,244
Income/(loss) before extraordinary item 41,622 (3,544) 1,527 17,986
Net income 41,622 176,931 1,527 17,986
Earnings available for common stock 41,622 176,811 1,527 17,865
<FN>
(1)Results for the second quarter of 1998 were affected by an extraordinary
charge of $187.3 million after-tax as a result of the Pennsylvania Public
Utility Commission's (PaPUC) June 30, 1998 Restructuring Order on Met-Ed's
restructuring plans.
(2)In the third quarter of 1998, as a result of the amended PaPUC Restructuring
Order, Met-Ed reversed $183.2 million after-tax of the extraordinary charge
taken in the second quarter, primarily related to above-market nonutility
generation costs; and recorded an additional extraordinary charge of $3
million after-tax primarily related to the write-off of FERC assets. Also, in
the third quarter of 1998, as a result of the amended PaPUC Order, Met-Ed
recorded a non-recurring charge of $19 million after-tax related to the
obligation to refund 1998 revenues; and for the establishment of a
sustainable energy fund.
(3) Results for the fourth quarter of 1999 include an increase of $1.2 million
after-tax for the net gain on the sale of substantially all of Met-Ed's
generating assets, related to wholesale operations. In addition, the
aggregate effect on earnings of other fourth quarter 1999 adjustments was a
loss of approximately $5 million after-tax.
</FN>
F-117
</TABLE>
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Metropolitan Edison Company:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Metropolitan Edison Company and Subsidiary Companies at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 10, 2000
F-118
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- ------------------------------------------------------------------------------
ASSETS
Utility Plant:
Transmission, distribution and general plant $1,500,417 $1,481,958
Generation plant 21,683 765,669
---------- ----------
Utility plant in service (Note 6) 1,522,100 2,247,627
Accumulated depreciation (462,709) (1,008,438)
---------- ----------
Net utility plant in service (Note 1) 1,059,391 1,239,189
Construction work in progress 25,329 19,380
Other, net 643 27,819
---------- ----------
Net utility plant 1,085,363 1,286,388
--------- ---------
Other Property and Investments:
Nuclear decommissioning trusts, at market (Note 12) 144,261 211,194
Other, net 3,010 11,742
---------- ----------
Total other property and investments 147,271 222,936
---------- ----------
Current Assets:
Cash and temporary cash investments 10,899 442
Special deposits 160 1,062
Accounts receivable:
Customers, net 60,188 60,012
Other 149,760 41,895
Unbilled revenues (Note 1) 28,956 43,687
Materials and supplies, at average cost or less:
Construction and maintenance - 24,727
Fuel - 12,218
Deferred income taxes (Note 8) 2,945 2,945
Prepayments 16,715 20,616
---------- ----------
Total current assets 269,623 207,604
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 1,231,140 1,615,726
Deferred income taxes (Note 8) 738,189 714,202
Other 16,607 18,113
---------- ----------
Total deferred debits and other assets 1,985,936 2,348,041
---------- ----------
Total Assets $3,488,193 $4,064,969
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-119
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- ------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 66,273 $66,273
Capital surplus 400,200 370,200
Retained earnings 13,581 234,066
Accumulated other comprehensive income (Note 5) 21,363 16,520
------- -------
Total common stockholder's equity 501,417 687,059
Cumulative preferred stock (Note 4) - 12,056
Company-obligated mandatorily redeemable
preferred securities (Note 4) - 100,000
Trust preferred securities 100,000 -
Long-term debt (Note 3) 496,883 546,904
------- -------
Total capitalization 1,098,300 1,346,019
--------- ---------
Current Liabilities:
Securities due within one year (Note 3) 50,025 30,024
Notes payable (Note 2) - 79,540
Obligations under capital leases (Note 11) - 27,135
Accounts payable:
Affiliates 125,179 75,933
Other 30,106 102,390
Taxes accrued 35,976 19,463
Interest accrued 16,738 16,747
Other 18,208 42,598
------- -------
Total current liabilities 276,232 393,830
------- -------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 993,427 1,010,982
Three Mile Island Unit 2 future costs (Note 12) 248,381 241,707
Unamortized investment tax credits 15,010 27,157
Nuclear fuel disposal fee 33,430 31,912
Power purchase contract loss liability (Note 12) 735,833 787,440
Other 87,580 225,922
--------- ---------
Total deferred credits and other liabilities 2,113,661 2,325,120
--------- ---------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $3,488,193 $4,064,969
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-120
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (Note 1) $902,827 $919,594 $943,109
------- -------- --------
Operating Expenses:
Fuel 86,156 99,511 92,726
Power purchased and interchanged:
Affiliates 3,415 17,766 17,936
Others 221,516 220,095 223,948
Other operation and maintenance (Note 9) 250,220 247,189 228,258
Depreciation and amortization (Note 1) 88,989 109,148 106,437
Taxes, other than income taxes (Note 9) 39,283 58,459 59,339
------- -------- --------
Total operating expenses 689,579 752,168 728,644
------- -------- --------
Operating Income 213,248 167,426 214,465
------- -------- --------
Other Income and Deductions:
Allowance for other funds used during construction 164 130 75
Other income/(expense), net 3,901 (13,539) 3,371
------- -------- --------
Total other income and deductions 4,065 (13,409) 3,446
------- -------- --------
Income Before Interest Charges 217,313 154,017 217,911
------- -------- --------
Interest Charges:
Long-term debt and notes payable 45,996 47,557 48,789
Trust preferred securities 4,369 - -
Other interest 2,527 3,130 1,861
Allowance for borrowed funds used during
construction (1,048) (813) (1,025)
Company-obligated mandatorily
redeemable preferred securities 8,950 9,000 9,000
------- -------- --------
Total interest charges 60,794 58,874 58,625
------- ------ ------
Income Before Income Taxes 156,519 95,143 159,286
Income taxes (Note 8) 61,396 37,423 65,769
-------- -------- --------
Income Before Extraordinary Item 95,123 57,720 93,517
Extraordinary item (net of income taxes
of $4,708) (Note 6) - (6,805) -
-------- -------- --------
Net Income 95,123 50,915 93,517
Preferred stock dividends 66 483 483
Loss on preferred stock reacquisition 542 - -
------- -------- --------
Earnings Available for Common Stock $ 94,515 $ 50,432 $ 93,034
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-121
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 95,123 $ 50,915 $ 93,517
-------- -------- --------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gain on investments 4,315 4,148 4,249
Minimum pension liability 528 (115) (157)
-------- -------- --------
Total other comprehensive income 4,843 4,033 4,092
-------- -------- --------
Comprehensive income $ 99,966 $ 54,948 $ 97,609
======== ======== ========
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------
Balance at beginning of year $234,066 $268,634 $255,649
Net income 95,123 50,915 93,517
-------- -------- --------
Total 329,189 319,549 349,166
-------- -------- --------
Cash dividends on capital stock:
Cumulative preferred stock
(at the annual rates indicated below):
3.90% Series ($3.90 a share) (34) (251) (251)
4.35% Series ($4.35 a share) (14) (98) (98)
3.85% Series ($3.85 a share) (5) (36) (36)
3.80% Series ($3.80 a share) (4) (30) (30)
4.45% Series ($4.45 a share) (9) (68) (68)
Common stock (not declared on a
per share basis) (315,000) (85,000) (80,000)
-------- -------- --------
Total (315,066) (85,483 (80,483)
-------- -------- --------
Loss on preferred stock reacquisition (542) - -
Other adjustments, net - - (49)
-------- -------- --------
Balance at end of year $ 13,581 $234,066 $268,634
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-122
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C> <C>
Net income $ 95,123 $50,915 $ 93,517
Extraordinary item (net of income tax
benefit of $4,708) - 6,805 -
--------- ------- ---------
Income before extraordinary item 95,123 57,720 93,517
Adjustments to reconcile income to cash provided:
Depreciation and amortization 91,575 114,961 113,662
Amortization of property under capital leases 12,041 14,666 11,637
PaPUC restructuring rate orders - 32,900 -
Gain on sale of investments (2,011) - -
Nuclear outage maintenance costs, net (7,595) 6,494 (6,169)
Deferred income taxes and investment tax
credits, net (79,142) (23,152) 3,137
Allowance for other funds used during
construction (164) (130) (75)
Changes in working capital:
Receivables (108,040) (11,292) (28,393)
Materials and supplies 36,944 (1,911) 845
Special deposits and prepayments 4,803 (13,861) 10,489
Payables and accrued liabilities (30,924) 23,504 47,819
Nonutility generation contract buyout costs (55,034) (32,917) (16,050)
Other, net (61,924) 6,566 (17,942)
--------- ------- ---------
Net cash provided/(required) by operating activities (104,348) 173,548 212,477
--------- ------- ---------
Investing Activities:
Capital expenditures (66,388) (75,068) (87,613)
Proceeds from sale of investments 641,273 - -
Contributions to decommissioning trusts (33,556) (17,766) (16,992)
Other, net (45) 465 (363)
--------- ------- ---------
Net cash provided/(used) for investing activities 541,284 (92,369) (104,968)
--------- ------- ---------
Financing Activities:
Issuance of trust preferred securities 96,535 - -
Issuance of long-term debt - - 13,577
Increase/(decrease) in notes payable, net (79,540) 12,261 16,612
Retirement of long-term debt (30,024) (22) (40,020)
Capital lease principal payments (15,786) (13,609) (12,744)
Contributions from parent company 30,000 - -
Redemption of preferred stock (12,598) - -
Redemption of company-obligated mandatorily
redeemable preferred securities (100,000) - -
Dividends paid on preferred stock (66) (483) (719)
Dividends paid on common stock (315,000) (85,000) (80,000)
--------- ------- ---------
Net cash required by financing activities (426,479) (86,853) (103,294)
--------- ------- ---------
Net increase/(decrease) in cash and temporary cash
investments from above activities 10,457 (5,674) 4,215
Cash and temporary cash investments, beginning of year 442 6,116 1,901
--------- ------- ---------
Cash and temporary cash investments, end of year $ 10,899 $442 $ 6,116
========= ======== =========
Supplemental Disclosure:
Interest and preferred dividends paid $ 59,380 $ 57,891 $ 60,538
========= ======== =========
Income taxes paid $ 120,277 $ 77,296 $ 55,375
========= ======== =========
New capital lease obligations incurred $ 18,840 $3,399 $ 19,695
========= ======== =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
F-123
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Edison Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(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
- ------------------------------ --------- --------- -------- ---------- ---------
Year ended December 31, 1999
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $3,335 $7,095 $42,811(a) $48,484(b) $4,757
Allowance for inventory
obsolescence 160 - - 160(c) -
Year ended December 31, 1998
Allowance for doubtful
accounts $3,147 $5,673 $1,712(a) $7,197(b) $3,335
Allowance for inventory
obsolescence 1,433 - (13)(d) 1,260(c) 160
Year ended December 31, 1997
Allowance for doubtful
accounts $3,172 $6,644 $1,944(a) $8,613(b) $3,147
Allowance for inventory
obsolescence 1,864 - 7(d) 438(c) 1,433
<FN>
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Sale of inventory previously written off.
</FN>
F-124
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
COMPANY STATISTICS
For The Years Ended December 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------
Capacity at Company Peak (in MW):
<S> <C> <C> <C> <C> <C>
Company owned 2,365 2,284 2,365 2,365 2,365
Contracted 692 717 867 782 868
----- ----- ----- ----- -----
Total capacity (a) 3,057 3,001 3,232 3,147 3,233
===== ===== ===== ===== =====
Hourly Peak Load (in MW):
Summer peak 2,567 2,560 2,535 2,410 2,495
Winter peak 2,613 2,515 2,652 2,574 2,589
Reserve at company peak (%) 17.0 17.2 21.9 22.3 24.9
Load factor (%) (b) 72.1 72.5 69.7 71.1 67.6
Sources of Energy (in thousands of MWH):
Coal 5,345 12,088 11,972 11,268 11,237
Nuclear 1,523 1,765 1,480 1,775 1,597
Gas, hydro & oil 82 72 48 95 (95)
----- ----- ----- ----- -----
Net generation 6,950 13,925 13,500 13,138 12,739
Utility purchases and interchange 4,473 2,439 2,297 2,268 3,071
Nonutility purchases 3,269 3,292 3,296 3,201 2,796
----- ----- ----- ----- -----
Total sources of energy 14,692 19,656 19,093 18,607 18,606
Energy from alternate suppliers 4,900 - - - -
Company use, line loss, etc. (2,282) (2,355) (2,853) (2,932) (2,751)
----- ----- ----- ----- -----
Total electric energy sales 17,310 17,301 16,240 15,675 15,855
====== ====== ====== ====== ======
Fuel Expense (in millions):
Coal $ 73 $165 $168 $164 $164
Nuclear 8 10 8 10 10
Gas & oil 2 2 2 2 1
----- ----- ----- ----- -----
Total $ 83 $177 $178 $176 $175
===== ===== ===== ===== =====
Power Purchased and Interchanged (in millions):
Utility and interchange purchases $119 $ 38 $ 27 $ 18 $ 43
Nonutility purchases 218 211 188 192 158
Deferred nonutility costs (58) (13) - - -
----- ----- ----- ----- -----
Total $279 $236 $215 $210 $201
===== ===== ===== ===== =====
Delivered MWH Sales (in thousands):
Residential 3,864 3,756 3,801 3,897 3,765
Commercial 4,319 4,198 4,098 4,044 3,922
Industrial 4,865 4,996 4,835 4,563 4,463
Other 608 713 821 814 857
----- ----- ----- ----- -----
Sales to customers 13,656 13,663 13,555 13,318 13,007
Sales to other utilities 3,654 3,638 2,685 2,357 2,848
----- ----- ----- ----- -----
Total 17,310 17,301 16,240 15,675 15,855
===== ===== ===== ===== =====
Operating Revenues (in millions):
Residential $323 $ 327 $ 342 $ 339 $322
Commercial 229 311 316 302 287
Industrial 124 263 267 249 237
Other 31 31 40 36 39
----- ----- ----- ----- -----
Sales to customers 707 932 965 926 885
Provision for rate refunds 29 (29) - - -
Sales to other utilities 143 101 54 53 68
----- ----- ----- ----- -----
Total electric energy sales 879 1,004 1,019 979 953
Other revenues 43 28 34 41 28
----- ----- ----- ----- -----
Total $922 $1,032 $1,053 $1,020 $981
===== ===== ===== ===== =====
Customers at Year-End (in thousands):
Total customers 578 577 575 573 571
Customers choosing alternate suppliers 35 - - - -
<FN>
(a) Summer ratings at December 31, 1999 of contracted capacity were 2,658 MW.
(b) The ratio of the average hourly load in kilowatts supplied during the year
to the peak load occurring during the year.
</FN>
F-125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31, 1999(1) 1998(2) 1997 1996(3) 1995(4)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 922.0 $1,032.2 $1,052.9 $1,019.6 $ 981.3
Other operation and
maintenance expense 248.0 275.1 258.4 293.9 266.3
Income before
extraordinary item 152.5 58.6 95.0 69.8 111.0
Net income 152.5 39.6 95.0 69.8 111.0
Earnings available
for common stock 151.6 38.9 94.4 73.9 109.5
Net utility plant
in service 1,179.9 1,626.5 1,720.8 1,715.7 1,692.9
Total assets 3,695.8 4,524.8 2,563.0 2,503.4 2,439.6
Long-term debt 424.6 626.4 676.4 656.5 642.5
Long-term obligations
under capital leases 2.2 2.6 3.3 4.1 5.3
Company-obligated
mandatorily redeemable
preferred securities - 105.0 105.0 105.0 105.0
Trust preferred securities 100.0 - - - -
Capital expenditures and
investments 78.3 89.6 99.1 114.7 130.5
Return on average
common equity 26.6% 5.0% 12.1% 10.0% 15.8%
<FN>
(1) Results for 1999 include a gain of $34.9 million (after-tax) as a result of
the sale of Penelec's remaining electric generating stations.
(2) Results for 1998 include an extraordinary charge of $19 million (after-tax)
as a result of the PaPUC's Restructuring Order. Also in 1998, as a result
of the PaPUC Order, Penelec recorded a non-recurring charge of $21 million
(after-tax) related to the obligation to refund 1998 revenues; and for the
establishment of a sustainable energy fund.
(3) Results for 1996 reflect a non-recurring charge of $19.7 million
(after-tax) for costs related to voluntary enhanced retirement programs.
(4) Results for 1995 reflect the reversal of $32.1 million (after-tax) of
certain future TMI-2 retirement costs written off in 1994. The reversal of
this write-off resulted from a 1995 Pennsylvania Supreme Court decision
that overturned a 1994 lower court order, and restored a 1993 PaPUC order
allowing for the recovery of such costs. Partially offsetting this increase
was a non-recurring charge to income of $2.7 million (after-tax) of TMI-2
monitored storage costs deemed not probable of recovery through ratemaking.
</FN>
F-126
</TABLE>
<PAGE>
<TABLE>
Pennsylvania Electric Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
------------- --------------
In Thousands 1999(1) 1998 1999 1998(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $246,249 $263,655 $205,097 $250,355
Operating income 72,642 62,623 45,009 45,803
Income before extraordinary item 65,490 26,645 19,945 19,751
Net income/(loss) 65,490 26,645 19,945 (68,079)
Earnings/(loss) available for common stock 64,610 26,529 19,945 (68,310)
Third Quarter Fourth Quarter
------------- --------------
In Thousands 1999 1998(3) 1999(4) 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $254,609 $259,354 $216,010 $258,862
Operating income 41,613 11,759 32,336 50,588
Income/(loss) before extraordinary item 22,515 (5,860) 44,541 18,054
Net income 22,515 63,020 44,541 18,054
Earnings available for common stock 22,515 62,846 44,541 17,880
<FN>
(1) Results for the first quarter of 1999 include an increase of $27.8 million
after-tax for the gain on the sale of Penelec's Homer City Station,
related to wholesale operations.
(2) Results for the second quarter of 1998 were affected by an extraordinary
charge of $87.8 million after-tax as a result of the Pennsylvania Public
Utility Commission's (PaPUC) June 30, 1998 Restructuring Order on
Penelec's restructuring plans.
(3) In the third quarter of 1998, as a result of the amended PaPUC
Restructuring Order, Penelec reversed $83.1 million after-tax of the
extraordinary charge taken in the second quarter, primarily related to
above-market nonutility generation costs; and recorded an additional
extraordinary charge of $14 million after-tax primarily related to the
write-off of FERC assets. Also, in the third quarter of 1998, as a result
of the amended PaPUC Order, Penelec recorded a non-recurring charge of $21
million after-tax related to the obligation to refund 1998 revenues; and
for the establishment of a sustainable energy fund.
(4) Results for the fourth quarter of 1999 includes an increase of $7.1
million after-tax for the net gain on the sale of Penelec's remaining
generating assets, related to wholesale operations. In addition, the
aggregate effect on earnings of other fourth quarter 1999 adjustments was
a gain of approximately $14 million after-tax.
</FN>
F-127
</TABLE>
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Pennsylvania Electric Company:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Pennsylvania Electric Company and Subsidiary Companies at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. 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 of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 10, 2000
F-128
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- ------------------------------------------------------------------------------
ASSETS
Utility Plant:
Transmission, distribution and general plant $1,732,386 $1,768,621
Generation plant - 1,033,739
--------- ---------
Utility plant in service (Note 6) 1,732,386 2,802,360
Accumulated depreciation (552,449) (1,175,842)
--------- ---------
Net utility plant in service (Note 1) 1,179,937 1,626,518
Construction work in progress 30,329 18,862
Other, net 2,704 19,482
--------- ---------
Net utility plant 1,212,970 1,664,862
--------- ---------
Other Property and Investments:
Nonutility generation trusts, at market 266,700 -
Nuclear decommissioning trusts, at market (Note 12) 97,082 82,803
Other, net 1,233 7,705
--------- ---------
Total other property and investments 365,015 90,508
--------- ---------
Current Assets:
Cash and temporary cash investments 32,250 2,750
Special deposits 233 2,632
Accounts receivable:
Customers, net 69,752 69,887
Other 53,406 28,893
Unbilled revenues (Note 1) 30,836 43,998
Materials and supplies, at average cost or less:
Construction and maintenance - 39,452
Fuel - 17,107
Deferred income taxes (Note 8) 7,589 7,589
Prepayments 15,484 31,551
--------- ---------
Total current assets 209,550 243,859
--------- ---------
Deferred Debits and Other Assets:
Regulatory assets, net: (Notes 1 & 12) 671,713 1,561,603
Deferred income taxes (Note 8) 1,225,150 951,471
Other 11,393 12,504
--------- ---------
Total deferred debits and other assets 1,908,256 2,525,578
--------- ---------
Total Assets $3,695,791 $4,524,807
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-129
<PAGE>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, 1999 1998
- ------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 105,812 $105,812
Capital surplus 285,486 285,486
Retained earnings 59,265 367,653
Accumulated other comprehensive income 10,619 8,353
---------- --------
Total common stockholder's equity (Note 5) 461,182 767,304
Cumulative preferred stock (Note 4) - 16,681
Company-obligated mandatorily redeemable
preferred securities (Note 4) - 105,000
Trust preferred securities 100,000 -
Long-term debt (Note 3) 424,641 626,434
---------- --------
Total capitalization 985,823 1,515,419
---------- --------
Current Liabilities:
Securities due within one year (Note 3) 13 50,012
Notes payable (Note 2) 53,600 86,023
Obligations under capital leases (Note 11) - 13,979
Accounts payable:
Affiliates 66,223 47,164
Other 34,845 47,795
Taxes accrued 108,005 32,755
Interest accrued 6,588 19,700
Other 17,567 37,272
---------- --------
Total current liabilities 286,841 334,700
---------- --------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 1,250,490 1,338,235
Three Mile Island Unit 2 future costs (Note 12) 124,322 120,904
Unamortized investment tax credits 14,240 36,926
Nuclear fuel disposal fee 16,717 15,956
Power purchase contract loss liability (Note 12) 940,276 1,016,380
Other 77,082 146,287
---------- --------
Total deferred credits and other liabilities 2,423,127 2,674,688
---------- --------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $3,695,791 $4,524,807
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-130
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (Note 1) $ 921,965 $1,032,226 $1,052,936
---------- ------- ----------
Operating Expenses:
Fuel 82,397 176,548 177,256
Power purchased and interchanged:
Affiliates 6,422 2,729 3,252
Others 273,082 233,395 212,166
Other operation and maintenance (Note 9) 248,034 275,107 258,416
Depreciation and amortization (Note 1) 78,384 109,800 107,111
Taxes, other than income taxes (Note 9) 42,046 63,874 66,395
---------- ------- ----------
Total operating expenses 730,365 861,453 824,596
---------- ------- ----------
Operating Income 191,600 170,773 228,340
---------- ------- ----------
Other Income and Deductions:
Allowance for other funds used during construction 268 - -
Other income/(expense), net 59,081 (6,429) 2,469
---------- ------- ----------
Total other income and deductions 59,349 (6,429) 2,469
---------- ------- ----------
Income Before Interest Charges 250,949 164,344 230,809
---------- ------- ----------
Interest Charges:
Long-term debt and notes payable 34,588 54,907 56,095
Trust preferred securities 3,976 - -
Other interest 1,608 1,019 1,368
Allowance for borrowed funds used during
construction (1,074) (1,897) (2,164)
Company-obligated mandatorily
redeemable preferred securities 4,977 9,188 9,188
---------- ------- ----------
Total interest charges 44,075 63,217 64,487
---------- ------- ----------
Income Before Income Taxes 206,874 101,127 166,322
Income taxes (Note 8) 54,383 42,537 71,299
---------- ------- ----------
Income Before Extraordinary Item 152,491 58,590 95,023
Extraordinary item (net of income taxes
of $11,592) (Note 6) - (18,950) -
---------- ------- ----------
Net Income 152,491 39,640 95,023
Preferred stock dividends 154 695 665
Loss on preferred stock reacquisition 726 - -
---------- ------- ----------
Earnings Available for Common Stock $ 151,611 $38,945 $ 94,358
========== ======= ==========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
F-131
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $152,491 $ 39,640 $ 95,023
-------- ------- -------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gains on investments 2,101 2,064 2,125
Minimum pension liability 165 (42) (122)
-------- ------- -------
Total other comprehensive income 2,266 2,022 2,003
-------- ------- -------
Comprehensive income $154,757 $ 41,662 $ 97,026
======== ======== ========
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $367,653 $393,708 $359,373
Net income 152,491 39,640 95,023
-------- ------- -------
Total 520,144 433,348 454,396
-------- ------- -------
Cash dividends on capital stock:
Cumulative preferred stock (at the annual rates indicated below):
4.40% Series B ($4.40 a share) (29) (131) (125)
3.70% Series C ($3.70 a share) (41) (183) (174)
4.05% Series D ($4.05 a share) (25) (114) (109)
4.70% Series E ($4.70 a share) (15) (66) (64)
4.50% Series F ($4.50 a share) (17) (77) (74)
4.60% Series G ($4.60 a share) (27) (124) (119)
Common stock (not declared on a
per share basis) (460,000) (65,000) (60,000)
-------- ------- -------
Total (460,154) (65,695) (60,665)
-------- ------- -------
Loss on preferred stock reacquisition (725) - -
Other adjustments, net - - (23)
Balance at end of year $ 59,265 $367,653 $393,708
======== ======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-132
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C> <C>
Net income $ 152,491 $39,640 $ 95,023
Extraordinary item (net of income tax
benefit of $11,592) - 18,950 -
-------- ------- -------
Income before extraordinary item 152,491 58,590 95,023
Adjustments to reconcile income to cash provided:
Depreciation and amortization 78,072 107,239 99,688
Amortization of property under capital leases 6,036 7,319 7,954
PaPUC restructuring rate orders - 35,600 -
Gain on sale of investments (59,313) - -
Nuclear outage maintenance costs, net (3,803) 3,251 (3,072)
Deferred income taxes and investment tax
credits, net (417,559) (15,496) 10,193
Allowance for other funds used during
construction (268) - -
Changes in working capital:
Receivables (24,378) (2,661) (20,426)
Materials and supplies 56,559 (1,310) (3,763)
Special deposits and prepayments 18,466 (1,878) 6,973
Payables and accrued liabilities 48,543 39,061 19,736
Nonutility generation contract buyout costs (3,500) (6,101) (10,000)
Other, net (116,803) (31,479) (22,963)
-------- ------- -------
Net cash provided/(required) by operating activities (265,457) 192,135 179,343
-------- ------- -------
Investing Activities:
Capital expenditures (78,331) (89,550) (99,074)
Proceeds from sale of investments 1,493,444 - -
Contributions to nonutility generation trusts (266,701) - -
Contributions to decommissioning trusts (75,926) (5,270) (5,288)
Other, net 1,002 (520) 454
-------- ------- -------
Net cash provided/(used) for investing activities 1,073,488 (95,340) (103,908)
-------- ------- -------
Financing Activities:
Issuance of trust preferred securities 96,535 - -
Issuance of long-term debt 348,218 - 49,875
Increase/(Decrease) in notes payable, net (32,423) 8,442 (30,099)
Retirement of long-term debt (600,011) (30,011) (26,010)
Capital lease principal payments (7,907) (6,781) (8,506)
Redemption of preferred stock (17,406) - -
Redemption of company-obligated mandatorily
Redeemable preferred securities (105,383) - -
Dividends paid on preferred stock (154) (695) (695)
Dividends paid on common stock (460,000) (65,000) (60,000)
-------- ------- -------
Net cash required by financing activities (778,531) (94,045) (75,435)
-------- ------- -------
Net increase in cash and temporary cash
investments from above activities 29,500 2,750 -
Cash and temporary cash investments, beginning of year 2,750 - -
-------- ------- -------
Cash and temporary cash investments, end of year $ 32,250 $ 2,750 $ -
========= ========= =========
Supplemental Disclosure:
Interest and preferred dividends paid $ 55,779 $ 64,057 $ 62,514
========== ======== =========
Income taxes paid $ 413,810 $46,732 $ 48,348
========== ======== =========
New capital lease obligations incurred $ 9,415 $1,714 $ 11,155
========== ======== =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
F-133
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Electric Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(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
- ----------------------------- --------- --------- -------- ---------- ---------
Year ended December 31, 1999
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $3,235 $8,447 $38,374(a) $44,768(b) $5,288
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1998
Allowance for doubtful
accounts $3,526 $5,826 $2,123(a) $8,240(b) $3,235
Allowance for inventory
obsolescence 67 - - 67(c) -
Year ended December 31, 1997
Allowance for doubtful
accounts $3,818 $6,364 $2,186(a) $8,842(b) $3,526
Allowance for inventory
obsolescence 186 - - 119(c) 67
<FN>
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
</FN>
F-134
</TABLE>
<PAGE>
Exhibits to be filed by EDGAR
3-B By-Laws of GPU, Inc. as amended May 6, 1999.
3-E Restated Articles of Incorporation of Met-Ed dated March 8,
1999.
3-G Restated Articles of Incorporation of Penelec dated March 8,
1999.
4-A-45 Fifty-third Supplemental Indenture of JCP&L dated November
1, 1999.
4-B-38 Supplemental Indenture between Met-Ed and United States
Trust Company of New York dated July 1, 1999.
4-C-13 Senior Note Indenture between Penelec and United States
Trust Company of New York dated April 1, 1999.
4-H Amendment No. 1 to Payment and Guarantee Agreement of
Met-Ed, dated November 23, 1999.
4-J Amendment No. 1 to Payment and Guarantee Agreement of
Penelec, dated November 23, 1999.
10-T Amended and Restated GPU System Companies Master Directors'
Benefits Protection Trust effective June 1, 1999.
10-U Amended and Restated GPU System Companies Master Executives'
Benefits Protection Trust effective June 1, 1999.
10-V GPU, Inc. 1990 Stock Plan for Employees of GPU, Inc. and
Subsidiaries as amended and restated to reflect amendments
through June 3, 1999.
10-W Form of 1999 Stock Option Agreement under the 1990 Stock
Plan for Employees of GPU, Inc. and Subsidiaries.
10-X Form of 1999 Performance Units Agreement under the 1990
Stock Plan for Employees of GPU, Inc. and Subsidiaries.
10-Y Letter agreement dated February 23, 2000 relating to terms
and conditions of the supplemental pension for Robert L.
Wise.
10-EE Severance Protection Agreement for Robert L. Wise, as
amended and restated, dated February 23, 2000.
10-FF GPU Companies Supplemental Executive Retirement Plan, as
adopted effective July 1, 1999.
10-GG Oyster Creek Nuclear Generating Station Purchase and Sale
Agreement by and among GPU Nuclear, Inc. and JCP&L, as
sellers, and AmerGen Energy Company, LLC, as buyer, dated as
of October 15, 1999.
10-JJ Forms of Estate Enhancement Program Agreements.
<PAGE>
12 Statements Showing Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
21 Subsidiaries of the Registrants
A - JCP&L
B - Met-Ed
C - Penelec
23 Consent of Independent Accountants
A - GPU, Inc.
B - JCP&L
C - Met-Ed
D - Penelec
27 Financial Data Schedules
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
Exhibit 3-B
=========================================================================
GPU, INC.
-----------------
By-Laws
(As Amended May 6, 1999)
-----------------
=========================================================================
<PAGE>
(As Amended May 6, 1999)
GPU, INC.
BY-LAWS
Offices
-------
1. The principal office of the Corporation shall be in the County of
Morris, State of New Jersey. The Corporation may also have offices at such other
places as the Board of Directors may from time to time designate or the business
of the Corporation may require.
Seal
----
2. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal" and
"Pennsylvania". If authorized by the Board of Directors, the corporate seal may
be affixed to any certificates of stock, bonds, debentures, notes or other
engraved, lithographed or printed instruments, by engraving, lithographing or
printing thereon such seal or a facsimile thereof, and such seal or facsimile
thereof so engraved, lithographed or printed thereon shall have the same force
and effect, for all purposes, as if such corporate seal had been affixed thereto
by indentation.
Stockholders' Meetings
- ----------------------
3. All meetings of stockholders shall be held at the principal office of
the Corporation or at such other place as shall be stated in the notice of the
meeting. Such meetings shall be presided over by the chief executive officer of
the Corporation or, in his absence, by such other officer as shall have been
designated for the purpose by the Board of Directors, except when by statute the
election of a presiding officer is required.
4. Annual meetings of stockholders shall be held during the month of May
in each year on such day and at such time as shall be determined by the Board of
Directors and specified in the notice of the meeting. At the annual meeting the
stockholders entitled to vote shall elect by ballot a Board of Directors and
transact such other business as may properly be brought before the meeting. In
advance of any meeting of stockholders, the Board of Directors shall appoint
three judges of election, who need not be stockholders, to act at such meeting
or an adjournment thereof. If judges of election are not so appointed, the
chairman of any such meeting may, and on the request of any stockholder or his
proxy shall, make such appointment at the meeting. In case any person appointed
as a judge of election fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board of Directors in advance of convening
the meeting, or at the meeting by the chairman of the meeting. No director,
nominee for director or other office, or officer of the Corporation shall be
eligible for appointment or election as a judge.
5. Except as otherwise provided by law or by the Articles of
Incorporation, as amended, the holders of a majority of the shares of stock of
the Corporation 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. If, however, the holders of a majority of such
shares of stock shall not be present or represented by proxy at any such
1
<PAGE>
meeting, the stockholders entitled to vote thereat, present in person or by
proxy, shall have power, by vote of the holders of a majority of the shares of
capital stock present or represented at the meeting, to adjourn the meeting from
time to time without notice other than announcement at the meeting, until the
holders of the amount of stock requisite to constitute a quorum, as aforesaid,
shall be present in person or by proxy. At any adjourned meeting at which such
quorum shall be present, in person or by proxy, any business may be transacted
which might have been transacted at the meeting as originally noticed.
6. At each meeting of stockholders each holder of record of shares of
capital stock then entitled to vote shall be entitled to vote in person, or by
proxy appointed by instrument executed in writing by such stockholder or by his
duly authorized attorney; but no proxy shall be valid after the expiration of
eleven months from the date of its execution unless the stockholder executing it
shall have specified therein the length of time it is to continue in force,
which shall be for some specified period. As provided by the Articles of
Incorporation, as amended, at all elections of directors each holder of record
of shares of capital stock then entitled to vote, shall be entitled to as many
votes as shall equal the number of votes which (except for such 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 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 the Articles of Incorporation, as amended, each
holder of record of shares of capital stock entitled to vote at any meeting of
stockholders shall be entitled to one vote for every share of capital stock
standing in his name on the books of the Corporation. Shares of capital stock of
the Corporation, belonging to the Corporation or to a corporation controlled by
the Corporation through stock ownership or through majority representation on
the board of directors thereof, shall not be voted and shall not be counted in
determining the total number of outstanding shares for voting purposes at any
given time. All elections shall be determined by a plurality vote, and, except
as otherwise provided by law or by the Articles of Incorporation, as amended,
all other matters shall be determined by a vote of the holders of a majority of
the shares of the capital stock present or represented at a meeting and voting
on such questions.
7. A complete list of the stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order, with the residence of each, and
the number of shares held by each, shall be prepared by the Secretary and filed
in the principal office of the Corporation at least five days before the
meeting, and shall be open to the examination of any stockholder at all times
prior to such meeting, during the usual hours for business, and shall be
available at the time and place of such meeting and open to the examination of
any stockholder.
8. Special meetings of the stockholders for any purpose or purposes,
unless otherwise prescribed by law, may be called by the Chairman or by the
President, and shall be called by the chief executive officer or Secretary at
the request in writing of any three members of the Board of Directors. Business
transacted at all special meetings of the stockholders shall be confined to the
purposes stated in the call.
9. (a) Notice of every meeting of stockholders, setting forth the time
and the place and briefly the purpose or purposes thereof, shall be mailed, not
less than ten nor more than ninety days prior to such meeting, to each
stockholder of record (at his address appearing on the stock books of the
2
<PAGE>
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request) as
of a date fixed by the Board of Directors pursuant to Section 41 of the By-Laws.
Except as otherwise provided by law, by the Articles of Incorporation, as
amended, or by the By-Laws, items of business, in addition to those specified in
the notice of meeting, may be transacted at the annual meeting.
(b) At any annual meeting of stockholders, only such new business
shall be conducted, and only such proposals shall be acted upon, as shall have
been brought before the meeting (i) by, or at the direction of, the Board of
Directors or (ii) by any stockholder entitled to vote at such meeting. Only such
new business and only such proposals that have been raised in accordance with
the procedures set forth in this Section 9(b) shall be eligible for action or
consideration at an annual meeting.
In order for a proposal to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation as set forth in this Section
9(b). To be timely, a stockholder's notice must be delivered, mailed or
telegraphed to the principal executive offices of the Corporation not less than
30 days nor more than 75 days prior to the date of the originally scheduled
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that, if less than 40 days' notice
of the date of the scheduled meeting is given or made by the Corporation, notice
by the stockholder, to be timely, must be so delivered, mailed or telegraphed to
the Corporation not later than the close of business on the 10th day following
the day on which notice of the date of the scheduled meeting was first mailed to
stockholders. Such stockholder's notice shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
proposal desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the number
of shares of the Corporation's common stock beneficially owned by such
stockholder on the date of such stockholder's notice and (d) any financial or
other interest of such stockholder in the proposal.
The Board of Directors may reject any stockholder proposal not
timely made in accordance with this Section 9(b). If the Board of Directors
determines that the information provided in a stockholder's notice does not
satisfy the informational requirements hereof, the Secretary of the Corporation
shall promptly notify such stockholder of the deficiency in the notice. The
stockholder shall then have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to
exceed ten days from the date such deficiency notice is given to the
stockholder, as the Board of Directors shall determine. If the deficiency is not
cured within such period, or if the Board of Directors determines that the
additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
Section 9(b), then the Board of Directors may reject such stockholder's
proposal. The Secretary of the Corporation shall notify a stockholder in writing
whether his proposal has been made in accordance with the time and information
requirements hereof.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors and
committees of the Board of Directors, but in connection therewith no new
3
<PAGE>
business shall be acted upon at any such meeting unless stated, filed and
received as herein provided.
Directors
---------
10. (a) The business and affairs of the Corporation shall be managed by
its Board of Directors. 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 third succeeding annual
meeting of the stockholders. For the purposes hereof, the initial Class I, Class
II and Class III directors shall be the directors elected at the May 2, 1988
annual meeting and 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 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. 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.
(d) A director serving in the status of director emeritus under
By-Laws in effect prior to July 2, 1987 shall be eligible to continue to serve
in that status.
(e) Nominations, other than those made by, or at the direction of,
a majority of the entire Board of Directors or a committee thereof shall be made
only if timely written notice of such nomination or nominations has been given
to the Secretary of the Corporation. To be timely, such notice shall be
delivered, mailed or telegraphed to the principal executive office of the
Corporation not less than 30 days nor more than 75 days prior to the meeting
irrespective of any deferrals, postponements or adjournments thereof to a later
date; provided, however, that in the event that less than 40 days'
4
<PAGE>
notice of the date of the meeting is given or made by the Corporation to
stockholders, notice by the stockholder to be timely must be so delivered,
mailed or telegraphed to the Corporation not later than the close of business on
the 10th day following the day on which such notice of the date of the meeting
was first mailed to stockholders. Each such notice to the Secretary of the
Corporation shall set forth: (i) the name and address of record of the
stockholder who intends to make the nomination; (ii) a representation that the
stockholder is a holder of record of shares of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) the name, age,
business and residence addresses, and principal occupation or employment of each
nominee; (iv) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (v) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission as then in
effect; and (vi) the consent of each nominee to serve as a director of the
Corporation if so elected. The Corporation may require any proposed nominee to
furnish such other information as may be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of the
Corporation.
The Board of Directors may reject any nomination by a stockholder
not timely made or otherwise not in accordance with the terms of this Section
10(e). If the Board of Directors reasonably determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Section 10(e), the Secretary of the Corporation shall
promptly notify such stockholder of the deficiency in writing. The stockholder
shall have an opportunity to cure the deficiency by providing additional
information to the Secretary within such period of time, not to exceed ten days
from the date such deficiency notice is given to the stockholder, as the Board
of Directors shall determine. If the deficiency is not cured within such period,
or if the Board of Directors determines that the additional information provided
by the stockholder, together with the information previously provided, does not
satisfy the requirements of this Section 10(e), then the Board of Directors may
reject such stockholder's nomination. The Secretary of the Corporation shall
notify a stockholder in writing whether the nomination has been made in
accordance with the time and information requirements of this Section 10(e).
11. In addition to the powers and authority by the By-Laws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Articles of Incorporation, as amended, or by the By-Laws directed or required to
be exercised or done by the stockholders.
12. Unless otherwise required by law, in the absence of fraud no contract
or transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any corporation, partnership,
association and other organization in which one or more of its directors or
officers, are directors or officers, or have a financial interest shall be void
or voidable solely for such reason or solely because the director or officer is
present at or participates in the meeting of the Board of Directors which
authorize the contract or transaction, or solely because his votes are counted
for such purpose if:
5
<PAGE>
(a) The material facts as to his interest and as to the contract
or transaction are disclosed or known to the Board of Directors, and the Board
authorized the contract or transaction by a vote sufficient for such purposes
without counting the vote of the interested director or officer; or
(b) The material facts as to his interest and as to the
contract or transaction are disclosed or known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors
or the stockholders.
No director or officer shall be liable to account to the Corporation for
any profit realized by him from or through any such contract or transaction of
the Corporation by reason of his interest as aforesaid in such contract or
transaction if such contract or transaction shall be authorized, approved or
ratified as aforesaid.
No contract or other transaction between the Corporation and any of its
subsidiaries shall in any case be void or voidable or otherwise affected because
of the fact that directors or officers of the Corporation are directors or
officers of such subsidiary, nor shall any such director or officer, because of
such relation, be deemed interested in such contract or other transaction under
any of the provisions of this Section 12, nor shall any such director be liable
to account because of such relation. For the purpose of this Section 12, the
term "subsidiary" shall mean any corporation, more than 50% of whose issued and
outstanding shares having ordinary voting power may at the time be owned by this
Corporation and/or by one or more subsidiaries as said term is herein defined.
Nothing herein shall create liability in any of the events described in
this Section 12 or prevent the authorization, ratification or approval, in any
other manner provided by law, of any contract or transaction described in this
Section 12.
Meetings of the Board of Directors
----------------------------------
13. The first meeting of the Board of Directors, for the purpose of
organization, the election of officers, and the transaction of any other
business which may come before the meeting, shall be held on call of the
Chairman within one week after the annual meeting of stockholders. If the
Chairman shall fail to call such meeting, it may be called by the President or
by any director. Notice of such meeting shall be given in the manner prescribed
for Special Meetings of the Board of Directors.
14. Regular meetings of the Board of Directors may be held without notice
except for the purpose of taking action on matters as to which notice is in the
By-Laws required to be given, at such time and place as shall from time to time
be designated by the Board, but in any event at intervals of not more than three
months. Special meetings of the Board of Directors may be called by the Chairman
or by the President or in the absence or disability of the Chairman and the
President, by a Vice President, or by any two directors, and may be held at the
time and place designated in the call and notice of the meeting.
6
<PAGE>
15. Except as otherwise provided by the By-Laws, any item or business may
be transacted at any meeting of the Board of Directors, whether or not such item
of business shall have been specified in the notice of meeting. Where notice of
any meeting of the Board of Directors is required to be given by the By-Laws,
the Secretary or other officer performing his duties shall give notice either
personally or by telephone or telegraph at least twenty-four hours before the
meeting, or by mail at least three days before the meeting. Meetings may be held
at any time and place without notice if all the directors are present or if
those not present waive notice in writing either before or after the meeting.
16. At all meetings of the Board of Directors a majority of the directors
in office shall be requisite for, and shall constitute, a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law or by the
Articles of Incorporation, as amended, or by the By-Laws.
17. Any regular or special meeting may be adjourned to any time or place
by a majority of the directors present at the meeting, whether or not a quorum
shall be present at such meeting, and no notice of the adjourned meeting shall
be required other than announcement at the meeting.
Committees
----------
18. The Board of Directors may, by the vote of a majority of the directors
in office, create an Executive Committee, consisting of three or more members,
of whom one shall be the chief executive officer of the Corporation. The other
members of the Executive Committee shall be designated by the Board of Directors
from their number, shall hold office for such period as the Board of Directors
shall determine and may be removed at any time by the Board of Directors. When a
member of the Executive Committee ceases to be a director, he shall cease to be
a member of the Executive Committee. The Executive Committee shall have all the
powers specifically granted to it by the By-Laws and, between meetings of the
Board of Directors, may also exercise all the powers of the Board of Directors
except such powers as the Board of Directors may exercise by virtue of Section
11 of the By-Laws. The Executive Committee shall have no power to revoke any
action taken by the Board, and shall be subject to any restriction imposed by
law, by the By-Laws, or by the Board of Directors.
19. The Executive Committee shall cause to be kept regular minutes of its
proceedings, which may be transcribed in the regular minute book of the
Corporation, and all such proceedings shall be reported to the Board of
Directors at its next succeeding meeting, and the action of the Executive
Committee shall be subject to revision or alteration by the Board of Directors,
provided that no rights which, in the absence of such revision or alteration,
third persons would have had shall be affected by such revision or alteration. A
majority of the Executive Committee shall constitute a quorum at any meeting.
The Board of Directors may by vote of a majority of the directors in office fill
any vacancies in the Executive Committee. The Executive Committee shall
designate one of its number as Chairman of the Executive Committee and may, from
time to time, prescribe rules and regulations for the calling and conduct of
meetings of the Committee, and other matters relating to its procedure and the
exercise of its powers.
20. From time to time the Board of Directors may appoint any other
committee or committees for any purpose or purposes, which committee or
committees shall have such powers and such tenure of office as shall be
specified in the resolution of appointment.
7
<PAGE>
Compensation and Reimbursement of Directors and Members of the Executive
- ------------------------------------------------------------------------
Committee
- ---------
21. Directors, other than salaried officers, shall receive compensation
and benefits for their services as directors, at such rate or under such
conditions as shall be fixed from time to time by the Board, and all directors
shall be reimbursed for their reasonable expenses, if any, of attendance at each
regular or special meeting of the Board of Directors.
22. Directors who are members of any Committee of the Board shall receive
compensation for their services as such members as shall be fixed from time to
time by the Board and shall be reimbursed for their reasonable expenses, if any,
in attending meetings of such Committee or otherwise performing their duties as
members of such Committee.
Officers
--------
23. The officers of the Corporation shall be chosen by vote of a majority
of the directors in office and shall be a President, one or more Vice
Presidents, a Secretary, a Treasurer, and a Comptroller, and may include a
Chairman, one or more Assistant Secretaries, one or more Assistant Treasurers,
and one or more Assistant Comptrollers. If a Chairman shall be chosen, the Board
of Directors shall designate either the Chairman or the President as chief
executive officer of the Corporation. If a Chairman shall not be chosen, the
President shall be the chief executive officer of the Corporation. The Chairman
and a President who is designated chief executive officer of the Corporation
shall be chosen from among the directors. A President who is not chief executive
officer of the Corporation and none of the other officers need be a director.
Any two offices may be occupied and the duties thereof may be performed by one
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity.
24. The officers of the Corporation shall receive such salaries as shall
be determined from time to time by the Board of Directors. Pending action by the
Board of Directors, the Executive Committee, or, if there be none, the chief
executive officer may choose, and determine the salaries of, persons who may
temporarily fill the offices of Assistant Secretary or Assistant Treasurer.
25. The Board of Directors or the Executive Committee may appoint such
officers and such representatives or agents as shall be deemed necessary, who
shall hold office for such terms, exercise such powers, perform such duties, and
receive such salaries or other compensation, as shall be determined from time to
time by action of the Board of Directors, or, pending action of the Board of
Directors, by the Executive Committee.
26. The salary or other compensation of all other employees shall, in the
absence of any action by the Board of Directors, be fixed by the chief executive
officer of the Corporation or by such other officer as shall be designated for
that purpose by the Board of Directors.
27. The officers of the Corporation shall hold office until the first
meeting of the Board of Directors after the next succeeding annual meeting of
stockholders and until their respective successors are chosen and qualify. Any
officer elected pursuant to Section 23 of the By-Laws may be removed at any
time, with or without cause, by the vote of a majority of the directors in
office. Any other officer and any representative, employee or agent of the
Corporation may be removed at any time, with or without cause, by action of the
Board of Directors, or, in the absence of action by the Board of
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Directors, by the Executive Committee, or the chief executive officer of the
Corporation, or such other officer as shall have been designated for that
purpose by the chief executive officer of the Corporation.
The Chairman
------------
28. (a) If a Chairman shall be chosen by the Board of Directors, he
shall preside at all meetings of the Board at which he shall be present.
(b) If a Chairman shall be chosen by the Board of Directors and
if he shall be designated by the Board as chief executive officer of the
Corporation,
(i) he shall have supervision, direction and control of
the conduct of the business of the Corporation, subject,
however, to the control of the Board of Directors and the
Executive Committee, if there be one;
(ii) he may sign in the name and on behalf of the
Corporation any and all contracts, agreements or other
instruments pertaining to matters which arise in the
ordinary course of business of the Corporation, and, when
authorized by the Board of Directors or the Executive
Committee, if there be one, may sign in the name and on
behalf of the Corporation any and all contracts, agreements
or other instruments of any nature pertaining to the
business of the Corporation;
(iii) he may, unless otherwise directed by the Board of
Directors pursuant to Section 38 of the By-Laws, attend in
person or by substitute or proxy appointed by him and act
and vote on behalf of the Corporation at all meetings of
stockholders of any corporation in which the Corporation
holds stock and grant any consent, waiver, or power of
attorney in respect of such stock;
(iv) he shall, whenever it may in his opinion be necessary
or appropriate, prescribe the duties of officers and
employees of the Corporation whose duties are not otherwise
defined; and
(v) he shall have such other powers and perform such other
duties as may be prescribed from time to time by law, by the
By-Laws, or by the Board of Directors.
(c) If a Chairman shall be chosen by the Board of Directors and if
he shall not be designated by the Board as chief executive officer of the
Corporation,
(i) he may sign in the name and on behalf of the Corporation
any and all contracts, agreements or other instruments
pertaining to matters which arise in the ordinary course of
business of the Corporation and, when authorized by the
Board of Directors or the Executive Committee, if there be
one, may sign in the name and on behalf of the Corporation
any and all contracts, agreements or other instruments of
any nature pertaining to the business of the Corporation;
(ii) he shall have such other powers and perform such other
duties as may be prescribed from time to time by law, by the
By-Laws, or by the Board of Directors.
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The President
-------------
29. (a) If a Chairman shall not be chosen by the Board of Directors,
the President shall preside at all meetings of the Board at which he shall be
present.
(b) If the President shall be designated by the Board of Directors
as chief executive officer of the Corporation,
(i) he shall have supervision, direction and control of
the conduct of the business of the Corporation, subject,
however, to the control of the Board of Directors and the
Executive Committee, if there be one;
(ii) he may sign in the name and on behalf of the
Corporation any and all contracts, agreements or other
instruments pertaining to matters which arise in the
ordinary course of business of the Corporation, and, when
authorized by the Board of Directors or the Executive
Committee, if there be one, may sign in the name and on
behalf of the Corporation any and all contracts,
agreements, or other instruments of any nature pertaining
to the business of the Corporation;
(iii) he may, unless otherwise directed by the Board of
Directors pursuant to Section 38 of the By-Laws, attend in
person or by substitute or proxy appointed by him and act
and vote on behalf of the Corporation at all meetings of
the stockholders of any corporation in which the
Corporation holds stock and grant any consent, waiver, or
power of attorney in respect of such stock;
(iv) he shall, whenever it may in his opinion be necessary
or appropriate, prescribe the duties of officers and
employees of the Corporation whose duties are not
otherwise defined; and
(v) he shall have such other powers and perform such other
duties as may be prescribed from time to time by law, by
the By-Laws, or by the Board of Directors.
(c) If the Chairman shall be designated by the Board of Directors
as chief executive officer of the Corporation, the President,
(i) shall be the chief operating officer of the
Corporation;
(ii) shall have supervision, direction and control of the
conduct of the business of the Corporation or in the
absence or disability of the Chairman, subject, however, to
the control of the Board of Directors and the Executive
Committee, if there be one;
(iii) may sign in the name and on behalf of the Corporation
any and all contracts, agreements or other instruments
pertaining to matters which arise in the ordinary course of
business of the Corporation, and, when authorized by the
Board of Directors or the Executive Committee, if there be
one, may sign in the name and on behalf of the Corporation
any and all contracts, agreements or other instruments of
any nature pertaining to the business of the Corporation;
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(iv) at the request or in the absence or disability of the
Chairman, may, unless otherwise directed by the Board of
Directors pursuant to Section 38 of the By-Laws, attend in
person or by substitute or proxy appointed by him and act
and vote on behalf of the Corporation at all meetings of
the stockholders of any corporation in which the
Corporation holds stock and grant any consent, waiver, or
power of attorney in respect of such stock;
(v) at the request or in the absence or disability of the
Chairman, whenever in his opinion it may be necessary or
appropriate, shall prescribe the duties of officers and
employees of the Corporation whose duties are not otherwise
defined; and
(vi) shall have such other powers and perform such other
duties as may be prescribed from time to time by law, by
the By-Laws, or by the Board of Directors.
Vice President
--------------
30. (a) The Vice President shall, in the absence or disability of the
President, if the President has been designated chief executive officer of the
Corporation or if the President is acting pursuant to the provisions of
Subsection 29 (c) (ii) of the By-Laws, have supervision, direction and control
of the conduct of the business of the Corporation, subject, however, to the
control of the Directors and the Executive Committee, if there be one.
(b) He may sign in the name of and on behalf of the Corporation
any and all contracts, agreements or other instruments pertaining to matters
which arise in the ordinary course of business of the Corporation, and, when
authorized by the Board of Directors or the Executive Committee, if there be
one, except in cases where the signing thereof shall be expressly delegated by
the Board of Directors or the Executive Committee to some other officer or agent
of the Corporation.
(c) He may, if the President has been designated chief executive
officer of the Corporation or if the President is acting pursuant to the
provisions of Subsection 29 (c) (ii) of the By-Laws, at the request or in the
absence or disability of the President or in case of the failure of the
President to appoint a substitute or proxy as provided in Subsections 29 (b)
(iii) and 29 (c) (iv) of the By-Laws, unless otherwise directed by the Board of
Directors pursuant to Section 38 of the By-Laws, attend in person or by
substitute or proxy appointed by him and act and vote on behalf of the
Corporation at all meetings of the stockholders of any corporation in which the
Corporation holds stock and grant any consent, waiver or power of attorney in
respect of such stock.
(d) He shall have such other powers and perform such other duties
as may be prescribed from time to time by law, by the By-Laws, or by the Board
of Directors.
(e) If there be more than one Vice President, the Board of
Directors may designate one or more of such Vice Presidents as a Senior Vice
President. The Board of Directors may assign to such Vice Presidents their
respective duties and may, if the President has been designated chief executive
officer of the Corporation or if the President is acting pursuant to the
provisions of Subsection 29 (c) (ii) of the By-Laws, designate the order in
which the respective Vice Presidents shall have supervision, direction and
control of the business of the Corporation in the absence or disability of the
President.
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The Secretary
-------------
31. (a) The Secretary shall attend all meetings of the Board of Directors
and all meetings of the stockholders and record all votes and the minutes of all
proceedings in books to be kept for that purpose; and he shall perform like
duties for the Executive Committee and any other committees created by the Board
of Directors.
(b) He shall give, or cause to be given, notice of all meetings of
the stockholders, the Board of Directors, or the Executive Committee of which
notice is required to be given by law or by the By-Laws.
(c) He shall have such other powers and perform such other duties
as may be prescribed from time to time by law, by the By-Laws, or the Board of
Directors.
(d) Any records kept by the Secretary shall be the property of the
Corporation and shall be restored to the Corporation in case of his death,
resignation, retirement or removal from office.
(e) He shall be the custodian of the seal of the Corporation and,
pursuant to Section 45 of the By-Laws and in other instances where the execution
of documents in behalf of the Corporation is authorized by the By-Laws or by the
Board of Directors, may affix the seal to all instruments requiring it and
attest the ensealing and the execution of such instruments.
(f) He shall have control of the stock ledger, stock certificate
book and all books containing minutes of any meeting of the stockholders, Board
of Directors, or Executive Committee or other committee created by the Board of
Directors, and of all formal records and documents relating to the corporate
affairs of the Corporation.
(g) Any Assistant Secretary or Assistant Secretaries shall assist
the Secretary in the performance of his duties, shall exercise his powers and
duties at his request or in his absence or disability, and shall exercise such
other powers and duties as may be prescribed by the Board of Directors.
The Treasurer
-------------
32. (a) The Treasurer shall be responsible for the safekeeping of the
corporate funds and securities of the Corporation, and shall maintain and keep
in his custody full and accurate accounts of receipts and disbursements in books
belonging to the Corporation, and shall deposit all moneys and other funds of
the Corporation in the name and to the credit of the Corporation, in such
depositories as may be designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation in such manner
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements.
(c) Pursuant to Section 45 of the By-Laws, he may, when authorized
by the Board of Directors, affix the seal to all instruments requiring it and
shall attest the ensealing and execution of said instruments.
(d) He shall exhibit at all reasonable times his accounts and
records to any director of the Corporation upon application during business
hours at the office of the Corporation where such accounts and records are kept.
(e) He shall render an account of all his transactions as
Treasurer at all regular meetings of the Board of Directors, or whenever the
Board may require it, and at such other times as may be requested by the Board
or by any director of the Corporation.
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(f) If required by the Board of Directors, he shall give the
Corporation a bond, the premium on which shall be paid by the Corporation, in
such form and amount and with such surety or sureties as shall be satisfactory
to the Board, for the faithful performance of the duties of his office, and for
the restoration to the Corporation in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging to the
Corporation.
(g) He shall perform all duties generally incident to the office
of Treasurer, and shall have other powers and duties as from time to time may be
prescribed by law, by the By-Laws, or by the Board of Directors.
(h) Any Assistant Treasurer or Assistant Treasurers shall assist
the Treasurer in the performance of his duties, shall exercise his powers and
duties at his request or in his absence or disability, and shall exercise such
other powers and duties as may be prescribed by the Board of Directors. If
required by the Board of Directors, any Assistant Treasurer shall give the
Corporation a bond, the premium on which shall be paid by the Corporation,
similar to that which may be required to be given by the Treasurer.
Comptroller
-----------
33. (a) The Comptroller of the Corporation shall be the principal
accounting officer of the Corporation and shall be accountable and report
directly to the Board of Directors. If required by the Board of Directors, the
Comptroller shall give the Corporation a bond, the premium on which shall be
paid by the Corporation in such form and amount and with such surety or sureties
as shall be satisfactory to the Board, for the faithful performance of the
duties of his office.
(b) He shall keep or cause to be kept full and complete books of
account of all operations of the Corporation and of its assets and liabilities.
(c) He shall have custody of all accounting records of the
Corporation other than the record of receipts and disbursements and those
relating to the deposit or custody of money or securities of the Corporation,
which shall be in the custody of the Treasurer.
(d) He shall exhibit at all reasonable times his books of account
and records to any director of the Corporation upon application during business
hours at the office of the Corporation where such books of account and records
are kept.
(e) He shall render reports of the operations and business and of
the condition of the finances of the Corporation at regular meetings of the
Board of Directors, and at such other times as he may be requested by the Board
or by any director of the Corporation, and shall render a full financial report
at the annual meeting of the stockholders, if called upon to do so.
(f) He shall receive and keep in his custody an original copy of
each written contract made by or on behalf of the Corporation.
(g) He shall receive periodic reports from the Treasurer of the
Corporation of all receipts and disbursements, and shall see that correct
vouchers are taken for all disbursements for any purpose.
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(h) He shall perform all duties generally incident to the office
of Comptroller, and shall have such other powers and duties as from time to time
may be prescribed by law, by the By-Laws, or by the Board of Directors.
(i) Any Assistant Comptroller or Assistant Comptrollers shall
assist the Comptroller in the performance of his duties, shall exercise his
powers and duties at his request or in his absence or disability and shall
exercise such other powers and duties as may be conferred or required by the
Board of Directors. If required by the Board of Directors, any Assistant
Comptroller shall give the Corporation a bond, the premium on which shall be
paid by the Corporation, similar to that which may be required to be given by
the Comptroller.
Vacancies
---------
34. If the office of any director becomes vacant by reason of death,
resignation, retirement, disqualification, increase in the number of directors,
or otherwise, the remaining directors, by the vote of a majority of those then
in office, at a meeting, the notice of which shall have specified the filling of
such vacancy as one of its purposes, may choose a successor, who shall hold
office until the next succeeding annual meeting of stockholders of the
Corporation and until his successor shall have been elected and qualified. If
the office of any officer of the Corporation shall become vacant for any reason,
the Board of Directors, at a meeting, the notice of which shall have specified
the filling of such vacancy as one of its purposes, may choose a successor who
shall hold office for the unexpired term in respect of which such vacancy
occurred. Pending action by the Board of Directors at such meeting, the Board of
Directors or the Executive Committee may choose a successor temporarily to serve
as an officer of the Corporation.
Resignations
------------
35. Any officer or any director of the Corporation may resign at any time,
such resignation to be made in writing and transmitted to the Secretary. Such
resignation shall take effect from the time of its acceptance, unless some time
be fixed in the resignation, and then from that time. Nothing herein shall be
deemed to relieve any officer from liability for breach of any contract of
employment resulting from any such resignation.
Duties of Officers May be Delegated
-----------------------------------
36. In case of the absence or disability of any officer of the
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board, by vote of a majority of directors then in office may,
notwithstanding any other provisions of the By-Laws, delegate or assign, for the
time being, the powers or duties, or any of them, of such officer to any other
officer or to any director.
Indemnification of Directors, Officers and Employees
----------------------------------------------------
37. (a) A director shall not be personally liable for monetary damages as
such for any action taken, or any failure to take any action, on or after
January 27, 1987 unless the director has breached or failed to perform the
duties of his office under Section 1721 of the Business Corporation Law as the
same may be amended from time to time, and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. The provisions of
this subsection (a) shall not apply to the responsibility or liability of a
director pursuant to any criminal statute, or the liability of a director for
the payment of taxes pursuant to local, state or Federal law.
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(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Corporation or otherwise, by reason of the fact that he was a
director, officer or employee of the Corporation (and may indemnify any person
who was an agent of the Corporation), or a person serving at the request of the
Corporation as a director, officer, partner, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, to the fullest extent permitted by law, including without limitation
indemnification against expenses (including attorneys' fees and disbursements),
damages, punitive damages, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such proceeding unless the act or failure to act giving rise to the claim for
indemnification is finally determined by a court to have constituted willful
misconduct or recklessness.
(c) The Corporation shall pay the expenses (including attorneys'
fees and disbursements) actually and reasonably incurred in defending a civil or
criminal action, suit or proceeding on behalf of any person entitled to
indemnification under subsection (b) in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation, and may pay such expenses in advance on
behalf of any agent on receipt of a similar undertaking. The financial ability
of such person to make such repayment shall not be a prerequisite to the making
of an advance.
(d) For purposes of this Section: (i) the Corporation shall be
deemed to have requested an officer, director, employee or agent to serve as
fiduciary with respect to an employee benefit plan where the performance by such
person of duties to the Corporation also imposes duties on, or otherwise
involves services by, such person as a fiduciary with respect to the plan; (ii)
excise taxes assessed with respect to any transaction with an employee benefit
plan shall be deemed "fines"; and (iii) action taken or omitted by such person
with respect to an employee benefit plan in the performance of duties for a
purpose reasonably believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
(e) To further effect, satisfy or secure the indemnification
obligations provided herein or otherwise, the Corporation may maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security interest in any assets or
properties of the Corporation, or use any other mechanism or arrangement
whatsoever in such amounts, at such costs, and upon such other terms and
conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be
deemed a contract between the Corporation and the person entitled to
indemnification under this Section pursuant to which the Corporation and each
such person intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall not limit, but may expand, any rights
or obligations in respect of any proceeding whether commenced prior to or after
such change to the extent such proceeding pertains to actions or failures to act
occurring prior to such change.
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(g) The indemnification, as authorized by this Section, shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any statute, agreement, vote of
shareholders, or disinterested directors or otherwise, both as to action in an
official capacity and as to action in any other capacity while holding such
office. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section shall continue as to a person who has ceased to be an
officer, director, employee or agent in respect of matters arising prior to such
time, and shall inure to the benefit of the heirs, executors and administrators
of such person.
Stock of Other Corporations
---------------------------
38. The Board of Directors may authorize any director, officer or other
person on behalf of the Corporation to attend, act and vote at meetings of the
stockholders of any corporation in which the Corporation shall hold stock, and
to exercise thereat any and all of the rights and powers incident to the
ownership of such stock and to execute waivers of notice of such meetings and
calls therefor.
Certificates of Stock
---------------------
39. (a) Shares of the Corporation shall be represented by certificates
or, except as limited by law, uncertificated shares.
(b) The certificates of stock of the Corporation shall be numbered
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and may include his
address. No fractional shares of stock shall be issued. Certificates of stock
shall be signed by the Chairman, President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and shall be sealed with the seal of the Corporation. Where certificate of stock
is signed by a transfer agent (who may but not need be an officer or employee of
the Corporation) and registrar, the signature of any such Chairman, President,
Vice President, Secretary, Assistant Secretary, Treasurer, or Assistant
Treasurer upon such certificate may be facsimiles, engraved or printed. In case
any such officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such before such certificate of
stock is issued, it may be issued by the Corporation with the same effect as if
such officer had not ceased to be such at the date of its issue.
(c) Uncertificated shares may be issued upon initial issuance of
shares or upon transfer of certificated shares after surrender thereof to the
Corporation. Within a reasonable time after issuance or transfer of
uncertificated shares, the Corporation shall send to the registered owner the
information required to be set forth on the face of the certificate by Section
39(b) above.
Transfer of Stock
-----------------
40. Transfers of stock shall be made on the books of the Corporation only
by the person named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor.
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Fixing of Record Date
---------------------
41. The Board of Directors is hereby authorized to fix a time, not
exceeding ninety (90) days preceding the date of any meeting of stockholders or
the date fixed for the payment of any dividend or the making of any
distribution, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of capital stock, as
a record time for the determination of the stockholders entitled to notice of
and to vote at such meeting or entitled to receive any such dividend,
distribution, rights or interests, as the case may be; and all persons who are
holders of record of capital stock at the time so fixed and no others, shall be
entitled to notice of and to vote at such meeting, and only stockholders of
record at such time shall be entitled to receive any such notice, dividend,
distribution, rights or interests.
Registered Stockholders
-----------------------
42. The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly shall not
be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by statutes of the Commonwealth
of Pennsylvania.
Lost Certificates
-----------------
43. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact, whereupon a new certificate
may be issued of the same tenor and for the same number of shares as the one
alleged to be lost or destroyed; provided, however, that the Board of Directors
may require, as a condition to the issuance of a new certificate, the payment of
the reasonable expenses of such issuance or the furnishing of a bond of
indemnity in such form and amount and with such surety or sureties, or without
surety, as the Board of Directors shall determine or both the payment of such
expenses and the furnishing of a bond of indemnity in such form and amount and
with such surety expenses and the furnishings of such bond, and may also require
the advertisement of such loss in such manner as the Board of Directors may
prescribe.
Inspection of Books
-------------------
44. The Board of Directors may determine whether and to what extent, and
at what time and places and under what conditions and regulations, the accounts
and books of the Corporation (other than the books required by statute to be
open to the inspection of stockholders), or any of them, shall be open to the
inspection of stockholders, and no stockholder shall have any right to inspect
any account or book or document of the Corporation, except as such right may be
conferred by statutes of the Commonwealth of Pennsylvania or by the By-Laws or
by resolution of the Board of Directors or of the stockholders.
Checks, Notes, Bonds and Other Instruments
------------------------------------------
45. (a) All checks or demands for money and notes of the Corporation shall
be signed by such person or persons (who may but need not be an officer or
officers of the Corporation) as the Board of Directors may from time to time
designate, either directly or through such officers of the Corporation as
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shall, by resolution of the Board of Directors, be authorized to designate such
person or persons. If authorized by the Board of Directors, the signatures of
such persons, or any of them, upon any checks for the payment of money may be
made by engraving, lithographing or printing thereon a facsimile of such
signatures, in lieu of actual signatures, and such facsimile signatures so
engraved, lithographed or printed thereon shall have the same force and effect
as if such persons had actually signed the same.
(b) All bonds, mortgages and other instruments requiring a seal,
when required in connection with matters which arise in the ordinary course of
business or when authorized by the Board of Directors, shall be executed on
behalf of the Corporation by the Chairman, or the President or a Vice President,
and the seal of the Corporation shall be thereupon affixed by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer, who shall,
when required, attest the ensealing and execution of said instrument. If
authorized by the Board of Directors, a facsimile of the seal may be employed
and such facsimile of the seal may be engraved, lithographed or printed and
shall have the same force and effect as an impressed seal. If authorized by the
Board of Directors, the signatures of the Chairman, or the President, or a Vice
President and the Secretary, or an Assistant Secretary, or the Treasurer, or an
Assistant Treasurer upon any engraved, lithographed or printed bonds,
debentures, notes or other instruments may be made by engraving, lithographing
or printing thereon a facsimile of such signatures, in lieu of actual
signatures, and such facsimile signatures so engraved, lithographed or printed
thereon shall have the same force and effect as if such officers had actually
signed the same. In case any officer who has signed, or whose facsimile
signature appears on, any such bonds, debentures, notes or other instruments
shall cease to be such officer before such bonds, debentures, notes or other
instruments shall have been delivered by the Corporation, such bonds,
debentures, notes or other instruments may nevertheless be adopted by the
Corporation and be issued and delivered as though the person who signed the
same, or whose facsimile signature appears thereon, had not ceased to be such
officer of the Corporation.
Receipts for Securities
-----------------------
46. All receipts for stocks, bonds or other securities received by the
Corporation shall be signed by the Treasurer or an Assistant Treasurer, or by
such other person or persons as the Board of Directors or Executive Committee
shall designate.
Fiscal Year
-----------
47. The fiscal year shall begin the first day of January in each year.
Dividends
---------
48. (a) Dividends in the form of cash or securities, upon the capital
stock of the Corporation, to the extent permitted by law, may be declared by the
Board of Directors at any regular or special meeting.
(b) The Board of Directors shall have power to fix and determine,
and from time to time to vary, the amount to be reserved as working capital; to
determine whether any, and if any, what part of any, surplus of the Corporation
shall be declared as dividends; to determine the date or dates for the
declaration and payment or distribution of dividends; and, before payment of any
dividend or the making of any distribution to set aside out of the surplus of
the Corporation such amount or amounts as the Board of Directors
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from time to time, in its absolute discretion, may think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for such other
purpose as it shall deem to be in the interests of the Corporation.
Directors' Annual Statement
---------------------------
49. The Board of Directors shall present or cause to be presented at each
annual meeting of stockholders, and when called for by vote of the stockholders
at any special meeting of the stockholders, a full and clear statement of the
business and condition of the Corporation.
Notices
-------
50. (a) Whenever under the provisions of the By-Laws notice is required to
be given to any director, officer or stockholder, it shall not be construed to
require personal notice, but, except as otherwise specifically provided, such
notice may be given in writing, by mail, by depositing a copy of the same in a
post office, letter box or mail chute, maintained by the United States Postal
Service, postage prepaid, addressed to such stockholder, officer or director, at
his address as the same appears on the books of the Corporation.
(b) A stockholder, director or officer may waive in writing any
notice required to be given to him by law or by the By-Laws.
Participation in Meetings by Telephone
--------------------------------------
51. At any meeting of the Board of Directors or the Executive Committee or
any other committee designated by the Board of Directors, one or more directors
may participate in such meeting in lieu of attendance in person by means of the
conference telephone or similar communications equipment by means of which all
persons participating in the meeting will be able to hear and speak.
Oath of Judges of Election
--------------------------
52. The judges of election appointed to act at any meeting of the
stockholders shall, before entering upon the discharge of their duties, be sworn
faithfully to execute the duties of judge at such meeting with strict
impartiality and according to the best of their ability.
Amendments
----------
53. The By-Laws may be altered or amended by the affirmative vote of the
holders of a majority of the capital stock represented and entitled to vote at a
meeting of the stockholders duly held, provided that the notice of such meeting
shall have included notice of such proposed amendment. Any amendment of the
By-Laws proposed by an officer or the Board of Directors of the Corporation for
consideration at a meeting of stockholders, or any amendment proposed for such
consideration in writing to the Secretary by a stockholder consistently with the
then applicable rules and regulations of the Securities and Exchange Commission
relating to proxy solicitation, shall be included in the notice of the meeting.
The By-Laws may also be altered or amended by the affirmative vote of a majority
of the directors in office at a meeting of the Board of Directors, the notice of
which shall have included notice of the proposed amendment. In the event of the
adoption, amendment, or repeal of any By-Law by the Board of Directors pursuant
to this Section, there shall be set forth in the notice of the next meeting of
stockholders for the election of directors the By-Law so adopted, amended or
repealed together with a concise statement of the changes made. By the
affirmative vote of the holders of a
19
<PAGE>
majority of the capital stock represented and entitled to vote at such meeting,
the By-Laws may, without further notice, be altered or amended by amending or
repealing such action by the Board of Directors.
54. Subchapter G of the Business Corporation Law of 1988 (relating to
control-share acquisitions) shall not be applicable to the Corporation.
55. Subchapter H of the Business Corporation Law of 1988 (relating to
disgorgement by certain controlling shareholders following attempts to acquire
control) shall not be applicable to the Corporation.
20
Exhibit 3-E
METROPOLITAN EDISON COMPANY
RESTATED ARTICLES OF INCORPORATION
I. The name of the Company is METROPOLITAN EDISON COMPANY.
II. The location and post office address of the registered office of the
Company in the Commonwealth of Pennsylvania is:
2800 Pottsville Pike
Muhlenberg Township
Berks County, Pennsylvania 19605
III. The purposes for which the Company is incorporated are as follows:
A. The production, generation, manufacture, transmission,
transportation, distribution, furnishing and supply of electricity to or for the
public.
B. The engaging in all other lawful business for which
corporations may be incorporated under the Business Corporation Law of 1988.
IV. The term of existence of the Company shall be perpetual.
V. The aggregate number of shares which the Company shall have authority
to issue shall be:
A. 900,000 shares of Common Stock without par value; and
B. 10,000,000 shares of Preferred Stock, without par value,
having a maximum aggregate stated value of $250,000,000.
VI. The board of directors shall have the authority to determine the
designations, preferences, voting powers, qualifications, limitations,
restrictions, and special or relative rights in respect of any class or series
of the Preferred Stock.
VII. If authorized by the board of directors of the Company, any or all classes
or series of shares, or any part thereof, may be uncertificated shares, except
that with respect to any outstanding shares of the Company represented by a
certificate, such shares shall not be uncertificated shares until the
certificate is surrendered to the Company.
Exhibit 3-G
PENNSYLVANIA ELECTRIC COMPANY
RESTATED ARTICLES OF INCORPORATION
I. The name of the Company is PENNSYLVANIA ELECTRIC COMPANY.
II. The location and post office address of the registered office of the
Company in the Commonwealth of Pennsylvania is:
2800 Pottsville Pike
Muhlenberg Township
Berks County, Pennsylvania 19605
III. The purposes for which the Company is incorporated are as follows:
A. The production, generation, manufacture, transmission,
transportation, distribution, furnishing and supply of
electricity to or for the public.
B The engaging in all other lawful business for which corporations may
be incorporated under the Business Corporation Law of 1988.
IV. The term of existence of the Company shall be perpetual.
V. The aggregate number of shares which the Company shall have authority
to issue shall be:
A. 5,400,000 shares of Common Stock of the par value of $20 per
share having an aggregate par value of $108,000,000; and
B. 11,435,000 shares of Preferred Stock, without par value, and
having a maximum aggregate stated value of $250,000,000.
VI. The board of directors shall have the authority to determine the
designations, preferences, voting powers, qualifications, limitations,
restrictions, and special or relative rights in respect of any class or series
of the Preferred Stock.
VII. If authorized by the board of directors of the Company, any or all classes
or series of shares, or any part thereof, may be uncertificated shares, except
that with respect to any outstanding shares of the Company represented by a
certificate, such shares shall not be uncertificated shares until the
certificate is surrendered to the Company.
Exhibit 4-A-45
-----------------------------------
Executed in 50 Counterparts of which
this is Counterpart No. ______
-----------------------------------
--------------------------------------------------------------
MORTGAGE
JERSEY CENTRAL POWER & LIGHT COMPANY
to
UNITED STATES TRUST COMPANY OF NEW YORK,
Successor Trustee
---------------------
FIFTY-THIRD SUPPLEMENTAL INDENTURE
FIRST MORTGAGE BONDS,
DESIGNATED SENIOR NOTE SERIES E BONDS
---------------------
Dated as of November 1, 1999
--------------------------------------------------------------
This instrument prepared by:
-----------------------
Marc B. Lasky, Esq.
<PAGE>
TABLE OF CONTENTS
- -----------------
PARTIES............................................................ 1
RECITALS........................................................... 1
GRANT.............................................................. 6
EXCEPTED PROPERTY.................................................. 6
GENERAL SUBJECT CLAUSES............................................ 6
ARTICLE I.
CONCERNING THE TRUSTEE
SECTION 1.01 Acceptance by Trustee of Property
in Trust............................................ 7
SECTION 1.02 Recitals by Company................................. 7
ARTICLE II.
CREATION, DESCRIPTION AND FORM OF THE SENIOR NOTE SERIES E BONDS
SECTION 2.01 Creation of Senior Note Series E
Bonds................................... 7
SECTION 2.02 $200,000,000 of Senior Note Series E
Bonds issuable.......................... 7
SECTION 2.03 Dating, maturity and payment of
principal and interest of Senior
Note Series E Bonds..................... 7
SECTION 2.04 Payment on Series E Notes
sufficient.............................. 9
SECTION 2.05 Registered in name of Senior Note
Trustee................................. 10
SECTION 2.06 Senior Note Series E Bonds not
transferable............................ 10
SECTION 2.07 Redemption provisions................... 10
SECTION 2.08 Redemption on demand of Senior
Note Trustee............................ 11
i
<PAGE>
SECTION 2.09 Senior Note Series E Bonds as
"Related Senior Note First
Mortgage Bonds"......................... 11
SECTION 2.10 Surrender of Senior Note Series E
Bonds................................... 11
SECTION 2.11 Discharge from and after Release
Date.................................... 11
SECTION 2.12 Form of Senior Note Series E Bonds...... 11
ARTICLE III.
MISCELLANEOUS
SECTION 3.01 Meaning of Certain Terms................ 18
SECTION 3.02 Original Indenture and
Supplemental Indentures Ratified
and Confirmed........................... 18
SECTION 3.03 Execution in Counterparts............... 18
TESTIMONIUM ........................................ 18
SIGNATURES AND SEALS ........................................ 19
ACKNOWLEDGMENTS ........................................ 20
CERTIFICATE OF RESIDENCE ........................................ 24
ii
<PAGE>
MORTGAGE
--------
FIFTY-THIRD SUPPLEMENTAL INDENTURE, dated as of the 1st day of
November, 1999, 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
<PAGE>
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 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, a Fiftieth Supplemental Indenture dated as of August 1,
1994, a Fifty-first Supplemental Indenture dated as of August 15, 1996 and a
Fifty-second Supplemental Indenture dated as of July 1, 1999 (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
2
<PAGE>
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 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," "Fiftieth
Supplemental Indenture," "Fifty-first Supplemental Indenture," and "Fifty-second
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-10 155 &c
Hunterdon 439 284 &c
Mercer 732 280 &c
Middlesex 871 101 &c
Monmouth 136 1 &c
Morris Z-1 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
3
<PAGE>
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
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 Company has entered into an Indenture dated as of July 1,
1999 (the "Senior Note Indenture") with United States Trust Company of New York,
as trustee (the "Senior Note Trustee"), providing for the issuance of notes
thereunder (the "Senior Notes") from time to time, and pursuant to the Senior
Note Indenture the Company has agreed to issue to the Senior Note Trustee, as
security for the Senior Notes, a new series of bonds under the Indenture at the
time of authentication of each series of Senior Notes issued prior to the
Release Date (as defined in the Senior Note Indenture); and
WHEREAS, for such purposes the Company desires to issue a new series of
bonds and by appropriate corporate action in conformity with the terms of the
Indenture has duly determined to create a separate series of bonds, which shall
be designated as "First Mortgage Bonds, Senior Note Series E" (hereinafter
sometimes referred to as the "Senior Note Series E Bonds"), which said Senior
Note Series E Bonds are to be substantially in the form set forth in Article II
hereof with the insertion of numbers, denominations, date or dates from which
interest shall accrue, maturities, interest rates (or method of determination
thereof), interest payment dates and other terms as determined in accordance
with the terms of the Indenture; and
WHEREAS, the Senior Note Series E Bonds shall be issued to the Senior
Note Trustee in connection with the issuance by the Company of its Senior Notes,
Series E (the "Series E Notes"); and
WHEREAS, all acts and things prescribed by law and by the certificate
of incorporation and by-laws of the Company necessary to make the Senior Note
Series E Bonds, when executed by the Company and authenticated by the Trustee,
as in the Indenture provided, valid, binding and legal obligations of the
Company, entitled in all respects to the security of the Indenture, have been
performed or will have been performed prior to execution of such Senior Note
Series E Bonds by the Company and authentication thereof by the Trustee; and
4
<PAGE>
WHEREAS, the Original Indenture authorizes the Company and the Trustee
to enter into supplemental indentures for the purpose, among others, of
conveying, transferring and assigning to the Trustee, and subjecting to the lien
thereof, additional properties thereafter acquired by the Company; and
WHEREAS, the Company desires to subject specifically to the lien of the
Indenture certain property acquired by the Company since July 1, 1999; and
WHEREAS, by the provisions of Article XVII of the Original Indenture,
indentures supplemental to the Original Indenture may be executed and delivered
for the purpose of setting forth the terms, provisions and form of the Senior
Note Series E Bonds and supplementing the Original Indenture in a manner which
is not inconsistent with the provisions thereof and does not adversely affect
the interests nor modify the rights of outstanding bonds and for the other
purposes therein more fully set forth; 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-third
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-third 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 FIFTY-THIRD 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-third 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:
5
<PAGE>
FIRST
All property additions, as defined in and by Section 1.03 of the
Original Indenture, acquired by the Company on or after July 1, 1999, and prior
to November 1, 1999, 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.
EXPRESSLY EXCEPTING AND EXCLUDING, HOWEVER, from this Fifty-third
Supplemental Indenture and from the lien and operation of the Indenture, all
property which, prior to the date of this Fifty-third 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-third 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 FIFTY-THIRD 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:
6
<PAGE>
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-third 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.
CREATION, DESCRIPTION AND FORM OF
THE SENIOR NOTE SERIES E BONDS
SECTION 2.01. The Company hereby creates a series of bonds to be issued
under and secured by the Indenture, to be designated and to be distinguished
from bonds of all other series by the title "First Mortgage Bonds, Senior Note
Series E."
SECTION 2.02. An aggregate principal amount of Two Hundred Million
Dollars ($200,000,000) of Senior Note Series E Bonds, being authenticated and
delivered from time to time, may forthwith be executed by the Company and
delivered to the Trustee and shall be authenticated by the Trustee and delivered
(either before or after the filing or recording hereof) to or upon the order of
the designated officer or officers of the Company specifying, among other
things, the principal amount of the Senior Note Series E Bonds to be issued on
the specified date of issuance, the numbers, denominations, date or dates from
which interest shall accrue, maturities, interest rates (or method of
determination thereof), interest payment dates and other terms of such Senior
Note Series E Bonds, upon receipt by the Trustee of the cash, resolutions,
certificates, opinions and documents required to be delivered upon the issue of
bonds from time to time as provided in the Indenture.
SECTION 2.03. Each Senior Note Series E Bond shall be dated the date of
its authentication ("issue date") and shall bear interest from the issue date of
said bond or from the most recent interest payment date to which interest has
been paid or duly provided for with respect to the Senior Note Series E Bonds,
except that so long as there is no existing default in the payment of interest
on the Senior Note Series E Bonds, any Senior Note Series E Bond authenticated
by the Trustee between the
7
<PAGE>
record date (as hereinafter defined) for any interest payment date for such bond
and such interest payment date shall bear interest from such interest payment
date; provided, however, that if and to the extent the Company shall default in
payment of the interest due on such interest payment date, then any such Senior
Note Series E Bond shall bear interest from the most recent interest payment
date to which interest has been paid or duly provided for with respect to the
Senior Note Series E Bonds, or, if no interest has been paid on the Senior Note
Series E Bonds, then from its issue date. All Senior Note Series E Bonds shall
be payable on their respective maturity dates in such coin or currency of the
United States of America as at the time of payment is legal tender for the
payment of public and private debts, and shall bear interest payable in like
coin or currency, (i) at the interest rate specified on such Senior Note Series
E Bonds, or in accordance with the method for determining such rate set forth
therein, payable on the interest payment dates specified pursuant to Section
2.02, and on the maturity date, according to the terms of the Senior Note Series
E Bonds or on prior redemption or by declaration or otherwise, commencing with
the interest payment date first following the issue date of said bond; provided,
however, if the issue date of a Senior Note Series E Bond is between the record
date for an interest payment date and the interest payment date, interest
payments on said bond will commence on the second interest payment date
following the issue date, and (ii) at the highest rate of interest borne by any
of the bonds outstanding under the Indenture from such date of maturity until
they shall be paid or payment thereof shall have been duly provided for, and (to
the extent that payment of such interest is enforceable under applicable law)
interest on any overdue installment of interest shall be payable at the highest
rate of interest borne by any of the bonds outstanding under the Indenture.
Principal of and interest on the Senior Note Series E Bonds shall be payable at
the office or agency of the Company in the Borough of Manhattan, The City of New
York.
The persons in whose names the Senior Note Series E Bonds are
registered at the close of business on any record date (as hereinafter defined)
with respect to any interest payment date shall be entitled to receive the
interest payable on such interest payment date (except that in case of any
redemption of the Senior Note Series E Bonds as provided for herein on a date
subsequent to the record date and prior to such interest payment date, interest
on such redeemed bonds shall be payable only to the date fixed for redemption
thereof and only against surrender of such bonds for redemption in accordance
with the notice of such redemption) notwithstanding the cancellation of any
Senior Note Series E Bonds upon any registration of transfer or exchange
subsequent to the record date and prior to such interest payment date; provided,
however, that if, and to the extent, the Company
8
<PAGE>
shall default in the payment of the interest due on any interest payment date,
such defaulted interest shall be paid to the persons in whose names outstanding
Senior Note Series E Bonds are registered on the day immediately preceding the
date of payment of such defaulted interest or, at the election of the Company,
on a subsequent record date established by notice given by mail by or on behalf
of the Company to the holders of Senior Note Series E Bonds not less than
fifteen days preceding such subsequent record date.
Unless otherwise specified in the written order of the Company
delivered pursuant to Section 4.07(a) of the Original Indenture with respect to
any Senior Note Series E Bonds, the term "record date" shall mean, with respect
to any regular interest payment date, the close of business on the 15th day of
the calendar month next preceding such interest payment date or, in the case of
defaulted interest, the close of business on any subsequent record date
established as provided above.
SECTION 2.04. Upon any payment of the principal of, premium, if any,
and interest on, all or any portion of the Series E Notes, whether at maturity
or prior to maturity by redemption or otherwise or upon provision for the
payment thereof having been made in accordance with Section 5.01(a) of the
Senior Note Indenture, Senior Note Series E Bonds in a principal amount equal to
the principal amount of such Series E Notes and having both a corresponding
maturity date and interest rate shall, to the extent of such payment of
principal, premium, if any, and interest, be deemed paid and the obligation of
the Company thereunder to make such payment shall be discharged to such extent
and, in the case of the payment of principal (and premium, if any), Senior Note
Series E Bonds in a principal amount equal to the related Series E Notes shall
be surrendered to the Company for cancellation as provided in Section 4.06 of
the Senior Note Indenture. The Trustee may at any time and all times
conclusively assume that the obligation of the Company to make payments with
respect to the principal of and premium, if any, and interest on the Senior Note
Series E Bonds, so far as such payments at the time have become due, has been
fully satisfied and discharged pursuant to the foregoing sentence unless and
until the Trustee shall have received a written notice from the Senior Note
Trustee signed by one of its officers stating (i) that timely payment of
principal of, or premium or interest on, the Series E Notes has not been so
made, (ii) that the Company is in arrears as to the payments required to be made
by it to the Senior Note Trustee pursuant to the Senior Note Indenture, and
(iii) the amount of the arrearage.
9
<PAGE>
SECTION 2.05. Each Senior Note Series E Bond is to be issued to and
registered in the name of United States Trust Company of New York, as the Senior
Note Trustee, or a successor trustee thereto, under the Senior Note Indenture to
secure any and all obligations of the Company under the Series E Notes and any
other series of Senior Notes from time to time outstanding under the Senior Note
Indenture.
SECTION 2.06. Except (i) as required to effect an assignment to a
successor Trustee under the Senior Note Indenture, (ii) pursuant to Section 4.03
or Section 4.06 of the Senior Note Indenture, or (iii) in compliance with a
final order of a court of competent jurisdiction in connection with any
bankruptcy or reorganization proceeding of the Company, the Senior Note Series E
Bonds are not transferable. The Senior Note Series E Bonds shall be exchangeable
for other registered bonds of the same series and for the same aggregate
principal amount, in the manner and upon the conditions prescribed in the
Indenture, upon the surrender of such bonds at the office or agency of the
Company in the Borough of Manhattan, The City of New York. The Company covenants
and agrees that, notwithstanding Section 2.03 of the Original Indenture, it will
not charge any sum for or in connection with any exchange or transfer of any
Senior Note Series E Bond.
SECTION 2.07. (a) Senior Note Series E Bonds shall not be redeemed
except (i) as set forth in Section 2.08 hereof; and (ii) by the surrender
thereof by the Senior Note Trustee to the Trustee for cancellation at a
redemption price of zero upon redemption of all other series of bonds pursuant
to Section 8.08 of the Indenture.
(b) In the event the Company redeems any Series E Notes prior
to maturity in accordance with the provisions of the Senior Note Indenture, the
Senior Note Trustee shall on the same date deliver to the Company Senior Note
Series E Bonds in principal amounts corresponding to the Series E Notes so
redeemed, as provided in Section 4.06 of the Senior Note Indenture.
(c) Senior Note Series E Bonds are not redeemable by the
operation of the improvement fund pursuant to Section 5.22 and Section 9.06 of
the Indenture or otherwise or by operation of the maintenance and replacement
provisions of Section 5.07 and Section 9.06 of the Indenture or otherwise or
with the proceeds of released property pursuant to Section 9.06 of the Indenture
or otherwise.
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SECTION 2.08. The Senior Note Series E Bonds shall be immediately
redeemed at a redemption price of 100% of the principal amount thereof, plus
interest accrued to the redemption date, in whole, upon a written demand for
redemption by the Senior Note Trustee stating that the principal of all Senior
Notes then outstanding under the Senior Note Indenture has been declared to be
immediately due and payable pursuant to the provisions of the first sentence of
Section 8.01(a) thereof.
SECTION 2.09. For purposes of Section 4.07 of the Senior Note
Indenture, the Senior Note Series E Bonds shall be deemed to be the "Related
Senior Note First Mortgage Bonds" in respect of the Series E Notes.
SECTION 2.10. At any time a Series E Note shall cease to be entitled to
any lien, benefit or security under the Senior Note Indenture pursuant to
Section 5.01(b) thereof and the Company shall have provided the Senior Note
Trustee with notice thereof, the Senior Note Trustee shall surrender an equal
principal amount of the Related Senior Note First Mortgage Bonds, subject to the
limitations of Section 4.06 of the Senior Note Indenture, to the Company for
cancellation.
SECTION 2.11. As provided in Section 4.09 of the Senior Note Indenture,
from and after the Release Date, the obligations of the Company with respect to
the Senior Note Series E Bonds shall be deemed to be satisfied and discharged,
the Senior Note Series E Bonds shall cease to secure in any manner any Senior
Notes outstanding under the Senior Note Indenture, and, pursuant to Section 4.06
of the Senior Note Indenture, the Senior Note Trustee shall forthwith deliver
the Senior Note Series E Bonds to the Company for cancellation.
SECTION 2.12. Unless otherwise specified in the written order of the
Company delivered pursuant to Section 4.07(a) of the Original Indenture with
respect to any Senior Note Series E Bonds, the form of the Senior Note Series E
Bonds and the Trustee's authentication certificate to be endorsed thereon shall
be substantially as follows, the maturity date or dates, denominations, interest
rates (or method of determination thereof), interest payment dates and other
terms thereof to be appropriately inserted as provided in Section 2.01 of the
Original Indenture.
[FORM OF SENIOR NOTE SERIES E BONDS]
11
<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY
FIRST MORTGAGE BOND, SENIOR NOTE SERIES E
$-------------- No. -------
Issue Date Interest Rate Maturity Date
- ---------- ------------- -------------
Interest Payment Dates:
JERSEY CENTRAL POWER & LIGHT COMPANY, a corporation organized and
existing under the laws of the State of New Jersey (hereinafter called the
"Company"), for value received, hereby promises to pay to United States Trust
Company of New York, as Trustee under the Company's Indenture dated as of July
1, 1999, or registered assigns, --------------- Dollars on the Maturity Date
specified above, unless this Bond shall have been duly called for previous
redemption in whole or in part and payment of the redemption price shall have
been duly made or provided for, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay to the registered holder hereof
interest thereon, at said office or agency, in like coin or currency, from the
Issue Date specified above, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, until said principal sum has
been paid or provided for, at the Interest Rate per annum specified above, on
the Interest Payment Dates specified above and on the maturity date specified
above; provided, however, if the Issue Date is between the record date for an
Interest Payment Date and the Interest Payment Date, interest payments will
commence on the second Interest Payment Date following the Issue Date; and, to
the extent permitted by law, to pay interest on overdue interest at the highest
rate of interest borne by any of the bonds outstanding under the Mortgage
hereinafter mentioned.
This bond is one of an issue of bonds of the Company (hereinafter
referred to as the "bonds"), not limited in principal amount except as provided
in the Mortgage hereinafter mentioned, which may mature at different times, may
bear interest at different rates, and may otherwise vary as in the Mortgage
hereinafter mentioned provided, and is one of a series known as its First
Mortgage Bonds, Senior Note Series E (herein called the "Senior Note Series E
Bonds"), all bonds issued and to be issued under and equally and ratably secured
(except insofar as any sinking fund or analogous fund, established in accordance
with the provisions of the Mortgage hereinafter mentioned, may afford additional
security for the bonds of any particular series) by an Indenture, dated as of
March 1, 1946, executed by the Company to
12
<PAGE>
City Bank Farmers Trust Company, Trustee (herein, together with any indentures
supplemental thereto, including, but not by way of limitation, the Fifty-third
Supplemental Indenture, dated as of November 1, 1999, called the "Mortgage"),
under which United States Trust Company of New York is Successor Trustee (herein
called the "Trustee"), to which Mortgage reference is made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights and limitations of rights of the holders of the bonds and of the Company
in respect thereof, the rights, duties and immunities of the Trustee, and the
terms and conditions upon which the bonds are, and are to be, issued and
secured. The Senior Note Series E Bonds are described in the Fifty-third
Supplemental Indenture dated as of November 1, 1999 between the Company and the
Trustee (the "Fifty-third Supplemental Indenture").
Under an Indenture dated as of July 1, 1999 (hereinafter sometimes
referred to as the "Senior Note Indenture"), between the Company and United
Trust Company of New York, as trustee (hereinafter sometimes called the "Senior
Note Trustee"), the Company will issue, concurrently with the issuance of this
bond, an issue of notes under the Senior Note Indenture entitled Senior Notes,
Series E (the "Series E Notes"). Pursuant to Article IV of the Senior Note
Indenture, this bond is issued to the Senior Note Trustee to secure any and all
obligations of the Company under the Series E Notes and any other series of
senior notes from time to time outstanding under the Senior Note Indenture.
Payment of principal of, or premium, if any, or interest on, the Series E Notes
shall constitute payments on this bond as further provided herein and in the
Fifty-third Supplemental Indenture.
As provided in Section 4.09 of the Senior Note Indenture, from and
after the Release Date (as defined in the Senior Note Indenture), the
obligations of the Company with respect to this bond shall be deemed to be
satisfied and discharged, this bond shall cease to secure in any manner any
senior notes outstanding under the Senior Note Indenture, and, pursuant to
Section 4.06 of the Senior Note Indenture, the Senior Note Trustee shall
forthwith deliver this bond to the Company for cancellation.
Upon any payment of the principal of, premium, if any, and interest on,
all or any portion of the Series E Notes, whether at maturity or prior to
maturity by redemption or otherwise or upon provision for the payment thereof
having been made in accordance with Section 5.01(a) of the Senior Note
Indenture, Senior Note Series E Bonds in a principal amount equal to the
principal amount of such Series E Notes and having both a corresponding maturity
date and interest rate shall, to the extent of such payment of principal,
premium, if any, and interest, be deemed paid and the obligation of the Company
thereunder to make such
13
<PAGE>
payment shall be discharged to such extent and, in the case of the payment of
principal (and premium, if any), Senior Note Series E Bonds in principal amount
equal to the related Series E Notes shall be surrendered to the Company for
cancellation as provided in Section 4.06 of the Senior Note Indenture. The
Trustee may at anytime and all times conclusively assume that the obligation of
the Company to make payments with respect to the principal of and premium, if
any, and interest on the Senior Note Series E Bonds, so far as such payments at
the time have become due, has been fully satisfied and discharged pursuant to
the foregoing sentence unless and until the Trustee shall have received a
written notice from the Senior Note Trustee signed by one of its officers
stating (i) that timely payment of principal of, or premium or interest on, the
Series E Notes has not been made, (ii) that the Company is in arrears as to the
payments required to be made by it to the Senior Note Trustee pursuant to the
Senior Note Indenture, and (iii) the amount of the arrearage.
For purposes of Section 4.07 of the Senior Note Indenture, this bond
shall be deemed to be the "Related Senior Note First Mortgage Bonds" in respect
of the Series E Notes.
The Mortgage contains provisions permitting the holders of not less
than seventy-five per centum (75%) in principal amount of all the bonds at the
time outstanding, determined and evidenced as provided in the Mortgage, or in
case the rights under the Mortgage of the holders of bonds of one or more, but
less than all, of the series of bonds outstanding shall be affected, the holders
of not less than seventy-five per centum (75%) in principal amount of the
outstanding bonds of such one or more series affected, except that if any such
action would affect the bonds of two or more series, the holders of not less
than seventy-five per centum (75%) in principal amount of outstanding bonds of
such two or more series, which need not include seventy-five per centum (75%) in
principal amount of outstanding bonds of each of such series, determined and
evidenced as provided in the Mortgage, on behalf of the holders of all the
bonds, to waive any past default under the Mortgage and its consequences except
a completed default, as defined in the Mortgage, in respect of the payment of
the principal of or interest on any bond or except a default arising from the
creation of any lien ranking prior to or equal with the lien of the Mortgage on
any of the mortgaged property, subject to the condition that, in case the rights
of the holders of less than all of the series of bonds outstanding shall be
affected, no waiver of any past default or its consequences shall be effective
unless approved by the holders of not less than a majority of all the bonds at
the time outstanding. The Mortgage also contains provisions permitting the
Company and the Trustee, with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the bonds at the time
outstanding, determined and evidenced as provided in
14
<PAGE>
the Mortgage, or in case the rights under the Mortgage of the holders of bonds
of one or more, but less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than seventy-five per
centum (75%) in principal amount of the outstanding bonds of such one or more
series affected, except that if any such action would affect the bonds of two or
more series, the holders of not less than seventy-five per centum (75%) in
principal amount of outstanding bonds of such two or more series, which need not
include seventy-five per centum (75%) in principal amount of outstanding bonds
of each of such series, determined and evidenced as provided in the Mortgage, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Mortgage or modifying in any
manner the rights of the holders of the bonds and coupons thereunto
appertaining; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any bonds, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof, or, subject
to the provisions of the Mortgage, limit the right of a bondholder to institute
suit for the enforcement of payment of principal or interest in accordance with
the terms of the bonds, without the consent of the holder of each bond so
affected, or (ii) reduce the aforesaid percentage of bonds, the holders of which
are required to consent to any such supplemental indenture, without the consent
of the holders of all bonds then outstanding, or (iii) permit the creation of
any lien ranking prior to or equal with the lien of the Mortgage on any of the
mortgaged property without the consent of the holders of all bonds then
outstanding, or (iv) deprive the holder of any outstanding bond of the lien of
the Mortgage on any of the mortgaged property. Any such waiver or consent by the
holder of this bond (unless effectively revoked as provided in the Mortgage)
shall be conclusive and binding upon such holder and upon all future holders of
this bond, irrespective of whether or not any notation of such waiver or consent
is made upon this bond.
No reference herein to the Mortgage and no provision of this bond or of
the Mortgage shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this bond at
the time and place and at the rate and in the coin or currency herein
prescribed.
The Senior Note Series E Bonds are issuable only in fully registered
form and in denominations of $1,000 or any higher integral multiple of $1,000.
Senior Note Series E Bonds shall not be redeemed except as set forth
below and except by the surrender thereof by the Senior Note Trustee to the
Trustee for cancellation at a redemption price of zero upon redemption of all
other series of bonds
15
<PAGE>
pursuant to Section 8.08 of the Mortgage. In the event the Company redeems any
Series E Notes prior to maturity in accordance with the provisions of the Senior
Note Indenture, the Senior Note Trustee shall on the same date deliver to the
Company Senior Note Series E Bonds in principal amounts corresponding to the
Series E Notes so redeemed, as provided in Section 4.06 of the Senior Note
Indenture. Senior Note Series E Bonds are not redeemable by the operation of the
improvement fund pursuant to Section 5.22 and Section 9.06 of the Indenture or
otherwise or by operation of the maintenance and replacement provisions of
Section 5.07 and Section 9.06 of the Indenture or otherwise or with the proceeds
of released property pursuant to Section 9.06 of the Indenture or otherwise.
The Senior Note Series E Bonds shall be immediately redeemed at a
redemption price of 100% of the principal amount thereof, plus interest accrued
to the redemption date, in whole, upon a written demand for redemption by the
Senior Note Trustee stating that the principal of all Senior Notes then
outstanding under the Senior Note Indenture have been declared to be immediately
due and payable pursuant to the provisions of the first sentence of Section
8.01(a) thereof.
The Mortgage provides that if the Company shall deposit with the
Trustee in trust for the purpose funds sufficient to pay the principal of all of
the bonds of any series, or such of the bonds of any series as have been or are
to be called for redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and payable, at
maturity or upon redemption or otherwise, and complies with the other provisions
of the Mortgage in respect thereof, then from the date of such deposit such
bonds shall no longer be secured by the lien of the Mortgage.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a completed default as in
the Mortgage provided.
This bond is not transferable except (i) as required to effect an
assignment to a successor Trustee under the Senior Note Indenture, (ii) pursuant
to Section 4.03 or Section 4.06 of the Senior Note Indenture, or (iii) in
compliance with a final order of a court of competent jurisdiction in connection
with any bankruptcy or reorganization proceeding of the Company. This bond shall
be exchangeable for other registered bonds of the same series and for the same
aggregate principal amount, in the manner and upon the conditions prescribed in
the Mortgage, upon the surrender of such bonds at the office or agency of the
Company in the Borough of Manhattan, the City of New York. However,
16
<PAGE>
notwithstanding the provisions of Section 2.03 of the Mortgage, no charge shall
be made upon any registration of transfer or exchange of bonds of said series.
The Company and the Trustee, any paying agent and any bond registrar may deem
and treat the person in whose name this bond is registered as the absolute owner
hereof, whether or not this bond shall be overdue, for the purpose of receiving
payment and for all other purposes and neither the Company nor the Trustee nor
any paying agent nor any bond registrar shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Mortgage, or in any bond or coupon thereby secured, or because
of any indebtedness thereby secured, shall be had against any incorporator, or
against any past, present or future stockholder, officer or director, as such,
of the Company or of any successor corporation, either directly or through the
Company or any successor corporation under any rule of law, statute or
constitution, or by the enforcement of any assessment or by any legal or
equitable proceeding or otherwise; it being expressly agreed and understood that
the Mortgage, and the obligations thereby secured, are solely corporate
obligations, and that no personal liability whatever shall attach to, or be
incurred by, such incorporators, stockholders, officers or directors, as such,
of the Company or of any successor corporation, or any of them because of the
incurring of the indebtedness thereby authorized or under or by reason of any of
the obligations, covenants or agreements contained in the Mortgage or in any of
the bonds or coupons thereby secured, or implied therefrom.
This bond shall not become valid or obligatory for any purpose until
UNITED STATES TRUST COMPANY OF NEW YORK, the Trustee under the Mortgage, or its
successor thereunder, shall have signed the certificate of authentication
endorsed hereon.
IN WITNESS WHEREOF, JERSEY CENTRAL POWER & LIGHT COMPANY has caused
this bond to be signed in its name by the manual or facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be affixed hereto and attested by the manual or facsimile signature
of its Secretary or one of its Assistant Secretaries.
Dated:
JERSEY CENTRAL POWER & LIGHT COMPANY
By:
--------------------------------
(Vice) President
Attest:
- ------------------------------
(Assistant) Secretary
17
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein designated, provided
for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By-------------------------------------
Authorized Officer
[END OF FORM OF SENIOR NOTE SERIES E BOND]
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-third 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-third
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
SECTION 3.03. This Fifty-third 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
18
<PAGE>
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:---------------------------------
Vice President
ATTEST:
- -----------------------------
Assistant Secretary
Signed, sealed and delivered by
JERSEY CENTRAL POWER & LIGHT COMPANY
in the presence of:
- -----------------------------
- -----------------------------
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:
- -----------------------------
- -----------------------------
19
<PAGE>
STATE OF NEW JERSEY )
ss.:
COUNTY OF MORRIS )
BE IT REMEMBERED that on this ---------- day of November, 1999 before
me, the subscriber, a notary public in and for said County and State, personally
appeared M.E. Gramlich, an Assistant Secretary of JERSEY CENTRAL POWER & LIGHT
COMPANY, the corporation named in and which executed the foregoing instrument,
who, being by me duly sworn according to law, does depose and say and make proof
to my satisfaction that she resides at Sparta, New Jersey; that she is an
Assistant Secretary of JERSEY CENTRAL POWER & LIGHT COMPANY; that the seal
affixed to said instrument is the corporate seal of said corporation, the same
being well known to her; that it was so affixed by the order of the Board of
Directors of said corporation; that T.G. Howson is a Vice President of said
corporation; that she saw said T.G. Howson as such Vice President sign such
instrument, and affix said seal thereto and deliver said instrument and heard
him declare that he signed, sealed and delivered said instrument as the
voluntary act and deed of said corporation by its order and by order of its
Board of Directors, for the uses and purposes therein expressed; and that the
said M.E. Gramlich signed her name thereto at the same time as subscribing
witness, and that Jersey Central Power & Light Company, the mortgagor, has
received a true copy of said instrument.
-------------------------
Assistant Secretary
Subscribed and sworn to
before me the day and
year aforesaid
-------------------------
[NOTARIAL SEAL]
20
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this --------------- day of November, 1999 before
me, the subscriber, a notary public in and for said County and State, personally
appeared Kevin Fox, an Assistant Secretary of UNITED STATES TRUST COMPANY OF NEW
YORK, the corporation named in and which executed the foregoing instrument, who,
being by me duly sworn according to law, does depose and say and make proof to
my satisfaction that he resides at Hoboken, New Jersey; that he is an Assistant
Secretary of UNITED STATES TRUST COMPANY OF NEW YORK; that the seal affixed to
said instrument is the corporate seal of said corporation, the same being well
known to him; that it was so affixed by him pursuant to authority granted by the
Board of Directors of said corporation; that Louis P. Young is a Vice President
of said corporation; that he saw said Louis P. Young as such Vice President sign
and deliver said instrument and heard him declare that he signed and delivered
said instrument as the voluntary act and deed of said corporation pursuant to
authority granted by its Board of Directors, for the uses and purposes therein
expressed; and that the said Kevin Fox signed his name thereto at the same time
as subscribing witness.
---------------------
Assistant Secretary
Subscribed and sworn to
before me the day and
year aforesaid
---------------------
[NOTARIAL SEAL]
21
<PAGE>
STATE OF NEW JERSEY )
ss.:
COUNTY OF MORRIS )
On this ----------- day of November, 1999, before me came T.G. Howson, to
me known, who, being by me duly sworn, did say that he resides at Madison, New
Jersey; that he is a Vice President of JERSEY CENTRAL POWER & LIGHT COMPANY, one
of the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that said seal was so affixed by order of the Board of
Directors of said corporation; and that he signed his name to said instrument by
like order.
-------------------------
Subscribed and sworn to
before me the day and
year aforesaid
-------------------------
[NOTARIAL SEAL]
22
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this ---------- day of November, 1999, before me came Louis P. Young,
to me known, who, being by me duly sworn, did say that he resides at Plainview,
New York; that he is a Vice President of UNITED STATES TRUST COMPANY OF NEW
YORK, one of the corporations described in and which executed the above
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that said seal was so affixed by
authority of the Board of Directors of said corporation; and that he signed his
name to said instrument by like authority.
----------------------_
Subscribed and sworn to
before me the day and
year aforesaid
-----------------------
[NOTARIAL SEAL]
23
<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
24
Exhibit 4-B-38
METROPOLITAN EDISON COMPANY
TO
UNITED STATES TRUST COMPANY OF NEW YORK, SUCCESSOR TRUSTEE
--------------------
SUPPLEMENTAL INDENTURE
(First Mortgage Bonds, Senior Note Series D)
--------------------
Dated as of July 1, 1999
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, made and entered
into by and between METROPOLITAN EDISON COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), party
of the first part, and UNITED STATES TRUST COMPANY OF NEW YORK, a bank and trust
company organized under the laws of the State of New York as Successor Trustee
under the Mortgage (hereinafter sometimes called the "Trustee"), party of the
second part.
WHEREAS, the Company has heretofore executed and delivered its
Indenture (hereinafter called the "Original Indenture"), dated as of the first
day of November, 1944, to Guaranty Trust Company of New York, as trustee, which
was duly amended and supplemented by various indentures supplemental thereto,
and which is hereby further supplemented by this Supplemental Indenture, all of
which are herein collectively referred to as the "Mortgage"; and
WHEREAS, United States Trust Company of New York is now the Successor
Trustee under the Mortgage; and
WHEREAS, the Company has entered into an Indenture dated as of July 1,
1999 (the "Senior Note Indenture") with United States Trust Company of New York,
as trustee (the "Senior Note Trustee"), providing for the issuance of notes
thereunder (the "Senior Notes") from time to time, and pursuant to the Senior
Note Indenture the Company has agreed to issue to the Senior Note Trustee, as
security for the Senior Notes, a new series of bonds under the Mortgage at the
time of authentication of each series of Senior Notes issued prior to the
Release Date (as defined in the Senior Note Indenture); and
WHEREAS, for such purposes the Company desires to issue a new series of
bonds and by appropriate corporate action in conformity with the terms of the
Mortgage has duly determined to create a separate series of bonds, which shall
be designated as "First Mortgage Bonds, Senior Note Series D" (hereinafter
sometimes referred to as the "Senior Note Series D Bonds"), which said Senior
Note Series D Bonds are to be substantially in the form set forth in Article II
hereof with the insertion of numbers, denominations, date or dates from which
interest shall accrue, maturities, interest rates (or method of determination
thereof), interest payment dates and other terms as determined in accordance
with the terms of the Mortgage; and
WHEREAS, the Senior Note Series D Bonds shall be issued to the Senior
Note Trustee in connection with the issuance by the Company of its Senior Notes,
Series D (the "Series D Notes"); and
<PAGE>
WHEREAS, all acts and things prescribed by law and by the charter and
by-laws of the Company necessary to make the Senior Note Series D Bonds, when
executed by the Company and authenticated by the Trustee, as in the Mortgage
provided, valid, binding and legal obligations of the Company, entitled in all
respects to the security of the Mortgage, have been performed or will have been
performed prior to execution of such Senior Note Series D Bonds by the Company
and authentication thereof by the Trustee; and
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That in
consideration of the premises, and of the sum of One Dollar ($1.00) to the
Company duly paid by the Trustee at or before the ensealing and delivery of
these presents, and for other valuable considerations, the receipt whereof is
hereby acknowledged, the Company hereby covenants and agrees to and with the
Trustee and its successors in the trusts under the Mortgage, as follows:
ARTICLE I
SENIOR NOTE SERIES D BONDS
SECTION 1. The Company hereby creates a series of bonds to be issued
under and secured by the Mortgage, to be designated and to be distinguished from
bonds of all other series by the title "First Mortgage Bonds, Senior Note Series
D."
SECTION 2. An aggregate principal amount of One Hundred Fifty Million
Dollars ($150,000,000) of Senior Note Series D Bonds, being authenticated and
delivered from time to time, may forthwith be executed by the Company and
delivered to the Trustee and shall be authenticated by the Trustee and delivered
(either before or after the filing or recording hereof) to or upon the order of
the designated officer or officers of the Company specifying, among other
things, the principal amount of the Senior Note Series D Bonds to be issued on
the specified date of issuance, the numbers, denominations, date or dates from
which interest shall accrue, maturities, interest rates (or method of
determination thereof), interest payment dates and other terms of such Senior
Note Series D Bonds, upon receipt by the Trustee of the cash, resolutions,
certificates, opinions and documents required to be delivered upon the issue of
bonds from time to time as provided in the Mortgage.
SECTION 3. Each Senior Note Series D Bond shall be dated the date of
its authentication ("issue date") and shall bear interest from the issue date of
said bond or from the most recent interest payment date to which interest has
been paid or duly
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provided for with respect to the Senior Note Series D Bonds, except that so long
as there is no existing default in the payment of interest on the Senior Note
Series D Bonds, any Senior Note Series D Bond authenticated by the Trustee
between the record date (as hereinafter defined) for any interest payment date
for such bond and such interest payment date shall bear interest from such
interest payment date; provided, however, that if and to the extent the Company
shall default in payment of the interest due on such interest payment date, then
any such Senior Note Series D Bond shall bear interest from the most recent
interest payment date to which interest has been paid or duly provided for with
respect to the Senior Note Series D Bonds, or, if no interest has been paid on
the Senior Note Series D Bonds, then from its issue date. All Senior Note Series
D Bonds shall be payable on their respective maturity dates in such coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts, and shall bear interest
payable in like coin or currency, (i) at the interest rate specified on such
Senior Note Series D Bonds, or in accordance with the method for determining
such rate set forth therein, payable on the interest payment dates specified
pursuant to Article I, Section 2, and on the maturity date, according to the
terms of the Senior Note Series D Bonds or on prior redemption or by declaration
or otherwise, commencing with the interest payment date first following the
issue date of said bond; provided, however, if the issue date of a Senior Note
Series D Bond is between the record date for an interest payment date and the
interest payment date, interest payments on said bond will commence on the
second interest payment date following the issue date, and (ii) at the highest
rate of interest borne by any of the bonds outstanding under the Mortgage from
such date of maturity until they shall be paid or payment thereof shall have
been duly provided for, and (to the extent that payment of such interest is
enforceable under applicable law) interest on any overdue installment of
interest shall be payable at the highest rate of interest borne by any of the
bonds outstanding under the Mortgage. Principal of and interest on the Senior
Note Series D Bonds shall be payable at the office or agency of the Company in
the Borough of Manhattan, The City of New York.
The persons in whose names the Senior Note Series D Bonds are
registered at the close of business on any record date (as hereinafter defined)
with respect to any interest payment date shall be entitled to receive the
interest payable on such interest payment date (except that in case of any
redemption of the Senior Note Series D Bonds as provided for herein on a date
subsequent to the record date and prior to such interest payment date, interest
on such redeemed bonds shall be payable only to the date fixed for redemption
thereof and only against surrender of such bonds for redemption in accordance
with the notice of
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such redemption) notwithstanding the cancellation of any Senior Note Series D
Bonds upon any registration of transfer or exchange subsequent to the record
date and prior to such interest payment date; provided, however, that if, and to
the extent, the Company shall default in the payment of the interest due on any
interest payment date, such defaulted interest shall be paid to the persons in
whose names outstanding Senior Note Series D Bonds are registered on the day
immediately preceding the date of payment of such defaulted interest or, at the
election of the Company, on a subsequent record date established by notice given
by mail by or on behalf of the Company to the holders of Senior Note Series D
Bonds not less than fifteen (15) days preceding such subsequent record date.
Unless otherwise specified in the written order of the Company
delivered pursuant to Section 4.07(a) of the Original Indenture with respect to
any Senior Note Series D Bonds, the term "record date" shall mean, with respect
to any regular interest payment date, the close of business on the 15th day of
the calendar month next preceding such interest payment date or, in the case of
defaulted interest, the close of business on any subsequent record date
established as provided above.
SECTION 4. Upon any payment of the principal of, premium, if any, and
interest on, all or any portion of the Series D Notes, whether at maturity or
prior to maturity by redemption or otherwise or upon provision for the payment
thereof having been made in accordance with Section 5.01(a) of the Senior Note
Indenture, Senior Note Series D Bonds in a principal amount equal to the
principal amount of such Series D Notes and having both a corresponding maturity
date and interest rate shall, to the extent of such payment of principal,
premium, if any, and interest, be deemed paid and the obligation of the Company
thereunder to make such payment shall be discharged to such extent and, in the
case of the payment of principal (and premium, if any), the Senior Note Series D
Bonds in a principal amount equal to the related Series D Notes shall be
surrendered to the Company for cancellation as provided in Section 4.06 of the
Senior Note Indenture. The Trustee may at any time and all times conclusively
assume that the obligation of the Company to make payments with respect to the
principal of and premium, if any, and interest on the Senior Note Series D
Bonds, so far as such payments at the time have become due, has been fully
satisfied and discharged pursuant to the foregoing sentence unless and until the
Trustee shall have received a written notice from the Senior Note Trustee signed
by one of its officers stating (i) that timely payment of principal of, or
premium or interest on, the Series D Notes has not been so made, (ii) that the
Company is in arrears as to the payments required to be made by
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it to the Senior Note Trustee pursuant to the Senior Note Indenture, and (iii)
the amount of the arrearage.
SECTION 5. Each Senior Note Series D Bond is to be issued to and
registered in the name of United States Trust Company of New York, as the Senior
Note Trustee, or a successor trustee thereto, under the Senior Note Indenture to
secure any and all obligations of the Company under the Series D Notes and any
other series of Senior Notes from time to time outstanding under the Senior Note
Indenture.
SECTION 6. Except (i) as required to effect an assignment to a
successor Trustee under the Senior Note Indenture, (ii) pursuant to Section 4.03
or Section 4.06 of the Senior Note Indenture, or (iii) in compliance with a
final order of a court of competent jurisdiction in connection with any
bankruptcy or reorganization proceeding of the Company, the Senior Note Series D
Bonds are not transferable. The Senior Note Series D Bonds shall be exchangeable
for other registered bonds of the same series and for the same aggregate
principal amount, in the manner and upon the conditions prescribed in the
Mortgage, upon the surrender of such bonds at the "office" or agency of the
Company in the Borough of Manhattan, The City of New York. The Company covenants
and agrees that, notwithstanding Section 2.03 of the Original Indenture, it will
not charge any sum for or in connection with any exchange or transfer of any
Senior Note Series D Bond.
SECTION 7. (a) Senior Note Series D Bonds shall not be redeemed except
(i) as set forth in Article I, Section 8 hereof; ; and (ii) by the surrender
thereof by the Senior Note Trustee to the Trustee for cancellation at a
redemption price of zero upon redemption of all other series of bonds pursuant
to Section 8.08 of the Mortgage.
(b) In the event the Company redeems any Series D Notes prior to
maturity in accordance with the provisions of the Senior Note Indenture, the
Senior Note Trustee shall on the same date deliver to the Company the Senior
Note Series D Bonds in principal amounts corresponding to the Series D Notes so
redeemed, as provided in Section 4.06 of the Senior Note Indenture.
(c) Senior Note Series D Bonds are not redeemable by the operation of
the improvement fund pursuant to Section 5.07 and Section 9.06 of the Mortgage
or otherwise, by operation of the maintenance and replacement provisions
pursuant to Sections 5.08 and 9.06 of the Mortgage or otherwise, or with the
proceeds of released property pursuant to Section 9.06 of the Mortgage or
otherwise.
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SECTION 8. The Senior Note Series D Bonds shall be immediately redeemed
at a redemption price of 100% of the principal amount thereof, plus interest
accrued to the redemption date, in whole, upon a written demand for redemption
by the Senior Note Trustee stating that the principal of all Senior Notes then
outstanding under the Senior Note Indenture has been declared to be immediately
due and payable pursuant to the provisions of the first sentence of Section
8.01(a) thereof.
SECTION 9. For purposes of Section 4.07 of the Senior Note Indenture,
the Senior Note Series D Bonds shall be deemed to be the "Related Senior Note
First Mortgage Bonds" in respect of the Series D Notes.
SECTION 10. At any time a Series D Note shall cease to be entitled to
any lien, benefit or security under the Senior Note Indenture pursuant to
Section 5.01(b) thereof and the Company shall have provided the Senior Note
Trustee with notice thereof, the Senior Note Trustee shall surrender an equal
principal amount of the Related Senior Note First Mortgage Bonds, subject to the
limitations of Section 4.06 of the Senior Note Indenture, to the Company for
cancellation.
SECTION 11. As provided in Section 4.09 of the Senior Note Indenture,
from and after the Release Date, the obligations of the Company with respect to
the Senior Note Series D Bonds shall be deemed to be satisfied and discharged,
the Senior Note Series D Bonds shall cease to secure in any manner any Senior
Notes outstanding under the Senior Note Indenture, and, pursuant to Section 4.06
of the Senior Note Indenture, the Senior Note Trustee shall forthwith deliver
the Senior Note Series D Bonds to the Company for cancellation.
ARTICLE II
FORM OF THE SENIOR NOTE SERIES A BONDS
SECTION 1. Unless otherwise specified in the written order of the
Company delivered pursuant to Section 4.07(a) of the Original Indenture with
respect to any Senior Note Series D Bonds, the form of the Senior Note Series D
Bonds and the Trustee's authentication certificate to be endorsed thereon shall
be substantially as follows, the maturity date or dates, denominations, interest
rates (or method of determination thereof), interest payment dates and other
terms thereof to be appropriately inserted as provided in Section 2.01 of the
Original Indenture.
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[FORM OF SENIOR NOTE SERIES A BONDS]
METROPOLITAN EDISON COMPANY
FIRST MORTGAGE BOND, SENIOR NOTE SERIES A
$ No.
Issue Date Interest Rate Maturity Date
---------- ------------- -------------
Interest Payment Dates:
METROPOLITAN EDISON COMPANY, a corporation of the Commonwealth of
Pennsylvania (hereinafter called the "Company"), for value received, hereby
promises to pay to United States Trust Company of New York, as Trustee under the
Company's Indenture dated as of July 1, 1999, or registered assigns,
_______________ Dollars on the maturity date specified above, unless this Bond
shall have been duly called for previous redemption in whole or in part and
payment of the redemption price shall have been duly made or provided for, at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and
to pay to the registered holder hereof interest thereon, at said office or
agency, in like coin or currency, from the Issue Date specified above, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, until said principal sum has been paid or provided for, at the
Interest Rate per annum specified above, on the Interest Payment Dates specified
above and on the maturity date specified above, provided, however, if the Issue
Date is between the record date for an Interest Payment Date and the Interest
Payment Date, interest payments will commence on the second Interest Payment
Date following the Issue Date, and, to the extent permitted by law, to pay
interest on overdue interest at the highest rate of interest borne by any of the
bonds outstanding under the Mortgage hereinafter mentioned.
This bond is one of an issue of bonds of the Company (hereinafter
referred to as the "bonds"), not limited in principal amount except as provided
in the Mortgage hereinafter mentioned, which may mature at different times, may
bear interest at different rates, and may otherwise vary as in the Mortgage
hereinafter mentioned provided, and is one of a series known as its First
Mortgage Bonds, Senior Note Series D (herein called the "Senior Note Series D
Bonds"), all bonds issued and to be issued under and equally and ratably secured
(except insofar as any sinking fund or analogous fund, established in accordance
with the provisions of the Mortgage hereinafter mentioned, may afford
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additional security for the bonds of any particular series) by a Mortgage
(herein, together with any indentures supplemental thereto, called the
"Mortgage") dated November 1, 1944, executed by the Company to GUARANTY TRUST
COMPANY OF NEW YORK under which UNITED STATES TRUST COMPANY OF NEW YORK, is
Successor Trustee (herein called the "Trustee"), to which Mortgage reference is
made for a description of the property mortgaged and pledged, the nature and
extent of the security, the rights and limitations of rights of the holders of
the bonds and of the Company in respect thereof, the rights, duties and
immunities of the Trustee, and the terms and conditions upon which the bonds
are, and are to be, issued and secured. The Senior Note Series D Bonds are
described in the Supplemental Indenture dated as of July 1, 1999 between the
Company and the Trustee (the "Supplemental Indenture").
Under an Indenture dated as of July 1, 1999 (hereinafter sometimes
referred to as the "Senior Note Indenture"), between the Company and United
Trust Company of New York, as trustee (hereinafter sometimes called the "Senior
Note Trustee"), the Company will issue, concurrently with the issuance of this
bond, an issue of notes under the Senior Note Indenture entitled Senior Notes,
Series D (the "Series D Notes"). Pursuant to Article IV of the Senior Note
Indenture, this bond is issued to the Senior Note Trustee to secure any and all
obligations of the Company under the Series D Notes. Payment of principal of, or
premium, if any, or interest on, the Series D Notes shall constitute payments on
this bond as further provided herein and in the Supplemental Indenture.
As provided in Section 4.09 of the Senior Note Indenture, from and
after the Release Date (as defined in the Senior Note Indenture), the
obligations of the Company with respect to this bond shall be deemed to be
satisfied and discharged, this bond shall cease to secure in any manner any
senior notes outstanding under the Senior Note Indenture, and, pursuant to
Section 4.06 of the Senior Note Indenture, the Senior Note Trustee shall
forthwith deliver this bond to the Company for cancellation.
Upon any payment of the principal of, premium, if any, and interest on,
all or any portion of the Series D Notes, whether at maturity or prior to
maturity by redemption or otherwise or upon provision for the payment thereof
having been made in accordance with Section 5.01(a) of the Senior Note
Indenture, Senior Note Series D Bonds in a principal amount equal to the
principal amount of such Series D Notes and having both a corresponding maturity
date and interest rate shall, to the extent of such payment of principal,
premium, if any, and interest, be deemed paid and the obligation of the Company
thereunder to make such payment shall be discharged to such extent and, in the
case of the payment of principal (and premium, if any) ), Senior Note
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Series D Bonds in a principal amount equal to the related Series D Notes shall
be surrendered to the Company for cancellation as provided in Section 4.06 of
the Senior Note Indenture. The Trustee may at any time and all times
conclusively assume that the obligation of the Company to make payments with
respect to the principal of and premium, if any, and interest on the Senior Note
Series D Bonds, so far as such payments at the time have become due, has been
fully satisfied and discharged pursuant to the foregoing sentence unless and
until the Trustee shall have received a written notice from the Senior Note
Trustee signed by one of its officers stating (i) that timely payment of
principal of, or premium or interest on, the Series D Notes has not been made,
(ii) that the Company is in arrears as to the payments required to be made by it
to the Senior Note Trustee pursuant to the Senior Note Indenture, and (iii) the
amount of the arrearage.
For purposes of Section 4.07 of the Senior Note Indenture, this bond
shall be deemed to be the "Related Senior Note First Mortgage Bond" in respect
of the Series D Notes.
The Mortgage contains provisions permitting the holders of not less
than seventy-five per centum (75%) in principal amount of all the bonds at the
time outstanding, determined and evidenced as provided in the Mortgage, or in
case the rights under the Mortgage of the holders of bonds of one or more, but
less than all, of the series of bonds outstanding shall be affected, then with
the consent of the holders of not less than seventy-five per centum (75%) in
principal amount of the outstanding bonds of such one or more series affected,
except that if any such action would affect the bonds of two or more series, the
holders of not less than seventy-five per centum (75%) in principal amount of
outstanding bonds of such two or more series, which need not include
seventy-five per centum (75%) in principal amount of outstanding bonds of each
of such series, determined and evidenced as provided in the Mortgage, on behalf
of the holders of all the bonds, to waive any past default under the Mortgage
and its consequences except a completed default, as defined in the Mortgage, in
respect of the payment of the principal of or interest on any bond or a default
arising from the creation of any lien ranking prior to or equal with the lien of
the Mortgage on any of the mortgaged property, subject to the condition that, in
case the rights of the holders of less than all of the series of bonds
outstanding shall be affected, no waiver of any past default or its consequences
shall be effective unless approved by the holders of not less than a majority of
all the bonds at the time outstanding. The Mortgage also contains provisions
permitting the Company and the Trustee, with the consent of the holders of not
less than seventy-five per centum (75%) in principal amount of all the bonds at
the time outstanding, determined and evidenced as provided in the Mortgage, or
in case the rights under the Mortgage of the holders of bonds of
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one or more, but less than all, of the series of bonds outstanding shall be
affected, then with the consent of the holders of not less than seventy-five per
centum (75%) in principal amount of the outstanding bonds of such one or more
series affected, except that if any such action would affect the bonds of two or
more series, the holders of not less than seventy-five per centum (75%) in
principal amount of outstanding bonds of such two or more series, which need not
include seventy-five per centum (75%) in principal amount of outstanding bonds
of each of such series, determined and evidenced as provided in the Mortgage, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Mortgage or modifying in any
manner the rights of the holders of the bonds and coupons thereunto
appertaining; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any bonds, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof, or, subject
to the provisions of the Mortgage, limit the right of a bondholder to institute
suit for the enforcement of payment of principal or interest in accordance with
the terms of the bonds, without the express consent of the holder of each bond
so affected, or (ii) reduce the aforesaid percentage of bonds, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all bonds then outstanding, or (iii) permit the
creation of any lien ranking prior to or equal with the lien of the Mortgage on
any of the mortgaged property without the consent of the holders of all bonds
then outstanding, or (iv) deprive the holder of any outstanding bond of the lien
of the Mortgage on any of the mortgaged property. Any such waiver or consent by
the holder of this bond (unless effectively revoked as provided in the Mortgage)
shall be conclusive and binding upon such holder and upon all future holders of
this bond, irrespective of whether or not any notation of such waiver or consent
is made upon this bond.
No reference herein to the Mortgage and no provision of this bond or of
the Mortgage shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this bond at
the time and place and at the rate and in the coin or currency herein
prescribed.
The Senior Note Series D Bonds are issuable only in fully registered
form in denominations of $1,000 or any higher integral multiple of $1,000.
The Senior Note Series D Bonds shall not be redeemed except as set
forth below and except by the surrender thereof by the Senior Note Trustee to
the Trustee for cancellation at a redemption price of zero upon redemption of
all other series of bonds pursuant to Section 8.08 of the Mortgage. In the event
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the Company redeems any Series D Notes prior to maturity in accordance with the
provisions of the Senior Note Indenture, the Senior Note Trustee shall on the
same date deliver to the Company Senior Note Series D Bonds in principal amounts
corresponding to the Series D Notes so redeemed, as provided in Section 4.06 of
the Senior Note Indenture. Senior Note Series D Bonds are not redeemable by the
operation of the improvement fund pursuant to Section 5.07 and Section 9.06 of
the Mortgage or otherwise, by operation of the maintenance and replacement
provisions pursuant to Sections 5.08 and 9.06 of the Mortgage or otherwise, or
with the proceeds of released property pursuant to Section 9.06 of the Mortgage
or otherwise.
The Senior Note Series D Bonds shall be immediately redeemed at a
redemption price of 100% of the principal amount thereof, plus interest accrued
to the redemption date, in whole, upon a written demand for redemption by the
Senior Note Trustee stating that the principal of all Senior Notes then
outstanding under the Senior Note Indenture have been declared to be immediately
due and payable pursuant to the provisions of the first sentence of Section
8.01(a) thereof.
The Mortgage provides that if the Company shall deposit with the
Trustee in trust for the purpose funds sufficient to pay the principal of all of
the bonds of any series, or such of the bonds of any series as have been or are
to be called for redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and payable, at
maturity or upon redemption or otherwise, and complies with the other provisions
of the Mortgage in respect thereof, then from the date of such deposit such
bonds shall no longer be secured by the lien of the Mortgage.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a completed default as in
the Mortgage provided.
This bond is not transferable except (i) as required to effect an
assignment to a successor Trustee under the Senior Note Indenture, (ii) pursuant
to Section 4.03 or Section 4.06 of the Senior Note Indenture, or (iii) in
compliance with a final order of a court of competent jurisdiction in connection
with any bankruptcy or reorganization proceeding of the Company. This bond shall
be exchangeable for other registered bonds of the same series and for the same
aggregate principal amount, in the manner and upon the conditions prescribed in
the Mortgage, upon the surrender of such bonds at the "office" or agency of the
Company in the Borough of Manhattan, the City of New York. However,
notwithstanding the provisions of Section 2.05 of the Mortgage,
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no charge shall be made upon any registration of transfer or exchange of bonds
of said series. The Company and the Trustee, any paying agent and any bond
registrar may deem and treat the person in whose name this bond is registered as
the absolute owner hereof, whether or not this bond shall be overdue, for the
purpose of receiving payment and for all other purposes and neither the Company
nor the Trustee nor any paying agent nor any bond registrar shall be affected by
any notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Mortgage, or in any bond or coupon thereby secured, or because
of any indebtedness thereby secured, shall be had against any incorporator, or
against any past, present or future stockholder, officer or director, as such,
of the Company or of any successor corporation, either directly or through the
Company or any successor corporation under any rule of law, statute or
constitution, or by the enforcement of any assessment or by any legal or
equitable proceeding or otherwise; it being expressly agreed and understood that
the Mortgage, and the obligations thereby secured, are solely corporate
obligations, and that no personal liability whatever shall attach to, or be
incurred by, such incorporators, stockholders, officers or directors, as such,
of the Company or of any successor corporation, or any of them because of the
incurring of the indebtedness thereby authorized or under or by reason of any of
the obligations, covenants or agreements contained in the Mortgage or in any of
the bonds or coupons thereby secured, or implied therefrom.
This bond shall not become valid or obligatory for any purpose until
UNITED STATES TRUST COMPANY OF NEW YORK, the Trustee under the Mortgage, or its
successor thereunder, shall have signed the certificate of authentication
endorsed hereon.
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IN WITNESS WHEREOF, METROPOLITAN EDISON COMPANY has caused this bond to
be signed in its name by the manual or facsimile signature of its President or
one of its Vice Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature of its
Secretary or one of its Assistant Secretaries.
Dated:
METROPOLITAN EDISON COMPANY
By -------------------------------
(Vice) President
Attest:
- -------------------------
(Assistant) Secretary
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[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein designated, provided
for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By: -----------------------------------
Authorized Officer
[END OF FORM OF SENIOR NOTE SERIES A BOND]
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ARTICLE III
Subjecting Certain Property Specifically
to the Lien of the Mortgage
AND THIS SUPPLEMENTAL INDENTURE FURTHER WITNESSETH: That in
consideration of the premises, and of the sum of One Dollar ($1.00) to the
Company duly paid by the Trustee at or before the ensealing and delivery of
these presents, Metropolitan Edison Company has granted, bargained, sold,
aliened, enfeoffed, released, conveyed, assigned, transferred, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, alien, enfeoff,
release, convey, assign, transfer, pledge, set over and confirm, unto United
States Trust Company of New York, as Trustee, and to its successors and assigns
forever, all of the following described property, to wit:
All property, real, personal and mixed, tangible and intangible, owned
by the Company, or in which it owns an interest, on the date of the execution
hereof, or (subject to the provisions of Article XIII of the Mortgage) which may
hereafter be acquired by it, wheresoever situate, and necessary or appropriate
to the public utility plant and business of the Company and to its operation as
a going concern, except such property as is hereinafter expressly excepted an
excluded from the lien and operation of the Mortgage.
The property covered by the lien of the Mortgage shall include
particularly, among other property, without prejudice to the generality of the
language hereinbefore or hereinafter contained, the following described
property:
FIRST.
PARCEL NUMBER ONE
STRABAN SUB SITE
ALL THAT CERTAIN tract of land situate in Straban Township, Adams
County, Pennsylvania, being the same premises granted and conveyed unto
Metropolitan Edison Company, d/b/a GPU Energy by Robert W. Paris, Sr. and
Margaret A. Paris, husband and wife, and Robert W. Paris, Jr., single, by Deed
dated June 18, 1997, recorded June 20, 1997, in Adams County Record Book Vol.
1392, Page 339.
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PARCEL NUMBER TWO
DELAWARE TOWNSHIP COMMUNICATION SITE
ALL THAT CERTAIN parcel or tract of land situate partly in the Township
of Delaware and partly in the Township of Dingman, County of Pike, and
Commonwealth of Pennsylvania, being the same premises granted and conveyed unto
Metropolitan Edison Company, d/b/a/ GPU Energy, by Susan Hines, single, by Deed
dated August 19, 1997, recorded August 20, 1997, in Pike County Record Book
1396, Page 300.
PARCEL NUMBER THREE
FREDERICKSBURG SUB SITE
ALL THAT CERTAIN tract of land, situate in Bethel Township, Lebanon
County, Pennsylvania, being the same premises granted and conveyed unto
Metropolitan Edison Company, d/b/a GPU Energy, by Glenn L. Heagy and Carol L.
Heagy, husband and wife, by Deed dated and recorded April 6, 1998, in Lebanon
County Record Book 338, Page 860.
PARCEL NUMBER FOUR
SOUTH LEBANON TOWNSHIP 230 kV LINE SITE
ALL THAT CERTAIN parcel or tract of land situate in South Lebanon
Township, County of Lebanon, Pennsylvania, being the same premises granted and
conveyed unto Metropolitan Edison Company, d/b/a GPU Energy, by Robert B. Heist
and Katharine L. Heist, his wife, by Deed dated March 1, 1999, and recorded
March 25, 1999, in Lebanon County Record Book 348, Page 1106.
SECOND.
Also all power houses, plants, buildings, distributing stations,
substations, transforming stations and other structures for or used for or
intended for use in connection with the manufacture, generation, transmission or
furnishing of electricity, and the machinery, fixtures, fittings and equipment
thereof or appurtenant thereto, including, without limiting the generality of
the foregoing, all dynamos, engines, turbines, boilers, pumps, generators,
transformers, converters, regulators, exciters, meters, shafting and belting and
all other apparatus and appliances for generating or producing electricity,
which are owned by the Company, or in which it owns an interest, on the date of
the execution hereof or (subject to the provision of Article XIII of the
Mortgage) which may be hereafter acquired by it, wheresoever situate, and
necessary or appropriate to the
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public utility plant and business of the Company and to its operation as a going
concern, except such property as is hereinafter expressly excepted and excluded
from the lien and operation of the Mortgage.
THIRD.
Also all transmission and distribution lines and systems, whether
underground, surface or overhead, for or used for or intended for use in
connection with the transmission and distribution of electricity, and the
conduits, poles, cross arms, insulators, transformers, cables, wires, meters,
fixtures, tools, supplies and all other apparatus and appliances connected
therewith or appurtenant thereto which are owned by the Company, or in which it
owns an interest, on the date of the execution hereof or (subject to the
provisions of Article XIII of the Mortgage) which may be hereafter acquired by
it.
FOURTH.
Also all franchises, immunities, privileges, permits, licenses,
easements and rights of way authorizing, permitting or facilitating the
erection, maintenance or operation upon, over or under any streets, avenues,
highways, alleys, lanes, walks, parks and other public places in any county,
city, borough, town, township or village or upon, over or under any private
property of poles, towers, wires, conduits, mains, pipes or other structures or
apparatus for the transmission or distribution of electricity or otherwise
relating to the business of producing, transmitting and distributing
electricity, which are owned by the Company, or in which it owns an interest, on
the date of the execution hereof or (subject to the provisions of Article XIII
of the Mortgage) which may be hereafter acquired by it.
GENERAL SUBJECT CLAUSES.
SUBJECT, HOWEVER, to the reservations, mining rights, exceptions,
conditions, limitations and restrictions contained in the several deeds,
franchises and contracts or other instruments through which the Company acquired
or clams title to or enjoys the use of said properties; to statutory and
municipal requirements relating to land and buildings; to the rights of the
public and others in streets, roads and highways, opened, or laid out but
unopened, crossing or bounding any of the said parcels; to the rights of owners
abutting thereon in any stream, drain or ditch crossing or bounding any of the
said parcels; to the rights of the Commonwealth of Pennsylvania in and to any of
the lands located in any streams or rivers abutting any of the said parcels; and
to the rights of electric, gas, telephone, telegraph and pipeline companies to
maintain and operate pole lines and gas
17
<PAGE>
and petroleum products mains and pies over or through any of the said parcels or
on or in the streets, roads or highways abutting thereon as the same existed at
the time of acquisition of said parcels by the Company; and to any easements
visible on the ground at the time of such acquisition, but not evidenced by
recorded agreements or grants.
EXCEPTED PROPERTY
EXPRESSLY EXCEPTING AND EXCLUDING, HOWEVER, from this Supplemental
Indenture and from the lien and operation hereof, all property of every kind and
type excepted and excluded from the Mortgage by subdivisions II (to the extent
that such real estate is still owned by the Company) and III under the heading
"Excepted Property" therein to the extent there indicated and reference is
hereby made to said Mortgage for a description thereof.
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the property covered by
this Supplemental Indenture or intended so to be, or any part thereof, with the
reversion and reversions, remainder and remainders and (subject to the
provisions of Section 9.01 of the Mortgage) the tolls, rents, revenues, issues,
earnings, income, product and profits thereof, and all the estate, right, title
and interest an claim whatsoever, at law as well as in equity, which the Company
now has or may hereafter acquire in and to the property covered by this
Supplemental Indenture or intended so to be and every part and parcel thereof.
TO HAVE AND TO HOLD the property covered by this Supplemental Indenture
or intended so to be to the Trustee, its successors and assigns, forever, upon
and subject to the trusts, uses, condition, covenants and provisions of the
Mortgage.
18
<PAGE>
ARTICLE IV
MISCELLANEOUS
SECTION 1. The Trustee, for itself and its successors in said trusts,
hereby accepts the conveyance, transfer and assignment of the property included
in this Supplemental Indenture upon the trusts, terms and conditions expressed
in the Mortgage.
SECTION 2. 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. 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 4. 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.
SECTION 5. The recitals of fact contained herein and in the Senior Note
Series D Bonds (other than the Trustee's certificate of authentication and
certification of residence) shall be taken as the statements of the Company and
the Trustee assumes no responsibility for the correctness of the same.
19
<PAGE>
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, party of the second
part, 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.
ATTEST: METROPOLITAN EDISON COMPANY
- --------------------- By:-------------------------------
(Assistant) Secretary (Vice) President
[CORPORATE SEAL]
Signed, sealed and delivered by said
Metropolitan Edison Company
in the presence of:
- -------------------------------
- -------------------------------
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK
As Successor Trustee as
aforesaid
- -------------------------------- By:---------------------------
Assistant Secretary Vice President
[CORPORATE SEAL]
Signed, sealed and delivered by said
United States Trust Company of New York
in the presence of:
- -------------------------------
- -------------------------------
20
<PAGE>
STATE OF NEW JERSEY )
:ss.:
COUNTY OF MORRIS )
BE IT REMEMBERED that on this ---------- day of ------, 1999 before me,
the subscriber, a notary public in and for said County and State, personally
appeared ---------------------, an (Assistant) Secretary of METROPOLITAN EDISON
COMPANY, the corporation named in and which executed the foregoing instrument,
who, being by me duly sworn according to law, does depose and say and make proof
to my satisfaction that he resides at --------------------------------------;
that he is an (Assistant) Secretary of METROPOLITAN EDISION COMPANY; that the
seal affixed to said instrument is the corporate seal of said corporation, the
same being well known to him; that it was so affixed by the order of the Board
of Directors of said corporation; that --------------- is a (Vice) President of
said corporation; that he saw said --------------- as such (Vice) President sign
such instrument, and affix said seal thereto and deliver said instrument and
heard him declare that he signed, sealed and delivered said instrument as the
voluntary act and deed of said corporation by its order and by order of its
Board of Directors, for the uses and purposes therein expressed; and that the
said ------------------ signed his name thereto at the same time as subscribing
witness, and that Metropolitan Edison Company, the mortgagor, has received a
true copy of said instrument.
--------------------------
(Assistant) Secretary
Subscribed and sworn to
before me the day and
year aforesaid
--------------------------
[NOTARIAL SEAL]
21
<PAGE>
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this --------------- day of -----------, 1999
before me, the subscriber, a notary public in and for said County and State,
personally appeared ------------------, an Assistant Secretary of UNITED STATES
TRUST COMPANY OF NEW YORK, the corporation named in and which executed the
foregoing instrument, who, being by me duly sworn according to law, does depose
and say and make proof to my satisfaction that he resides at
- ---------------------------; that he is an Assistant Secretary of UNITED STATES
TRUST COMPANY OF NEW YORK; that the seal affixed to said instrument is the
corporate seal of said corporation, the same being well known to him; that it
was so affixed by him pursuant to authority granted by the Board of Directors of
said corporation; that ------------------- is a Vice President of said
corporation; that he saw said ----------------- as such Vice President sign and
deliver said instrument and heard him declare that he signed and delivered said
instrument as the voluntary act and deed of said corporation pursuant to
authority granted by its Board of Directors, for the uses and purposes therein
expressed; and that the said --------------- signed his name thereto at the same
time as subscribing witness.
--------------------------
Assistant Secretary
Subscribed and sworn to
before me the day and
year aforesaid
--------------------------
[NOTARIAL SEAL]
22
<PAGE>
STATE OF NEW JERSEY )
:ss.:
COUNTY OF MORRIS )
On this ----------- day of ----------, 1999, before me came
- -------------------, to me known, who, being by me duly sworn, did say that he
resides at ---------------------------; that he is a (Vice) President of
METROPOLITAN EDISION COMPANY, one of the corporations described in and which
executed the above instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that said seal was
so affixed by order of the Board of Directors of said corporation; and that he
signed his name to said instrument by like order.
-----------------------
Subscribed and sworn to
before me the day and
year aforesaid
[NOTARIAL SEAL]
23
<PAGE>
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this ---------- day of -----------, 1999, before me came
- ------------------------, to me known, who, being by me duly sworn, did say that
he resides at -----------------------------; that he is a Vice President of
UNITED STATES TRUST COMPANY OF NEW YORK, one of the corporations described in
and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that said seal was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name to said instrument by like authority.
----------------------
Subscribed and sworn to
before me the day and
year aforesaid
[NOTARIAL SEAL]
24
<PAGE>
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this ---- day of , 199---, before me, ----------------------, a
Notary Public for the State and County aforesaid, the undersigned officer,
personally appeared ----------------------, who acknowledged himself to be a
(Vice) President of 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 , 199---, before me, -----------------------, a
Notary Public for the State and County aforesaid, the undersigned officer,
personally appeared -----------------------, who acknowledged herself to be a
(Senior) Vice President of United States Trust Company of New York, a
corporation, and that he as such (Senior) Vice President, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as (Senior) Vice President.
I am not a director or officer of said United States Trust Company of
New York.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------
Notary Public
25
<PAGE>
[NOTARIAL SEAL]
CERTIFICATE OF RESIDENCE
United States Trust Company of New York, Mortgagee and Trustee within
named, hereby certifies that its precise residence is 114 West 47th Street, in
the Borough of Manhattan, in the City of New York, in the State of New York.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:---------------------------
(Vice) President)
26
Exhibit 4-C-13
PENNSYLVANIA ELECTRIC COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK
TRUSTEE
-----------------
INDENTURE
DATED AS OF APRIL 1, 1999
============================================================
<PAGE>
CROSS REFERENCE SHEET SHOWING THE LOCATION IN THE INDENTURE
OF THE PROVISIONS INSERTED PURSUANT TO SECTIONS 310
THROUGH 318(a),INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939
Trust Indenture Act Indenture
Section Section
310 (a) (1).............................................................7.08
(a) (2)..............................................................7.07
(a) (3)....................................................Not Applicable
(a) (4)....................................................Not Applicable
(a) (5) .............................................................7.08
(b)..................................................................7.07
(c)........................................................Not Applicable
311 (a)................................................................ 7.13
(b)..................................................................7.13
(c)........................................................Not Applicable
312 (a).....................................................6.01 and 6.02(a)
(b)...............................................................6.02(b)
(c)...............................................................6.02(c)
313 (a)..............................................................6.04(a)
(b). .............................................................6.04(b)
(c). .............................................................6.04(d)
(d)...............................................................6.04(c)
314 (a)........................................................6.03 and 5.05
(c) (1)....................................................1.03 and 13.05
(c) (2)....................................................1.03 and 13.05
(c) (3)....................................................Not Applicable
(d)..................................................................1.03
(e)...............................................................13.05(b)
(f)........................................................Not Applicable
315 (a).................................................................7.01
(c)...............................................................7.01(a)
(d)...............................................................7.01(b)
(e)..................................................................7.09
316 (a) .......................................................7.07 and 8.04
(b).....................................................7.04(b) and 11.02
(c)..................................................................8.06
317 (a)(1) ..........................................................7.02(b)
(a) (2)...........................................................7.02(c)
(b).........................................................4.02 and 5.04
318 (a)................................................................13.07
- ------------
NOTE: This cross-reference sheet shall not, for any purpose, be deemed
to be a part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 General ...............................................1
Section 1.02 Trust Indenture Act....................................1
Section 1.03 Definitions............................................2
ARTICLE II
FORM, ISSUE, EXECUTION, REGISTRATION AND
EXCHANGE OF NOTES
Section 2.01 Form Generally. .......................................9
Section 2.02 Form Of Trustee's Certificate Of Authentication.......10
Section 2.03 Amount Unlimited......................................10
Section 2.04 Denominations, Dates, Interest Payment
And Record Dates .....................................10
Section 2.05 Execution, Authentication, Delivery And Dating........11
Section 2.06 Exchange And Registration Of Transfer Of Notes........15
Section 2.07 Mutilated, Destroyed, Lost Or Stolen Notes............16
Section 2.08 Temporary Notes.......................................17
Section 2.09 Cancellation Of Notes Paid, Etc.......................17
Section 2.10 Interest Rights Preserved.............................17
Section 2.11 Special Record Date...................................18
Section 2.12 Payment Of Notes......................................18
Section 2.13 Notes Issuable In The Form Of A Global Note...........19
ARTICLE III
REDEMPTION OF NOTES
Section 3.01 Applicability Of Article..............................22
Section 3.02 Notice Of Redemption; Selection Of Notes..............22
Section 3.03 Payment Of Notes On Redemption; Deposit Of
Redemption Price......................................23
iii
<PAGE>
ARTICLE IV
SATISFACTION AND DISCHARGE;
UNCLAIMED MONEYS
Section 4.01 Satisfaction And Discharge............................25
Section 4.02 Deposited Moneys To Be Held In Trust By Trustee.......27
Section 4.03 Paying Agent To Repay Moneys Held.....................27
Section 4.04 Return Of Unclaimed Moneys............................28
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.01 Payment Of Principal And Interest.....................28
Section 5.02 Offices For Payments, Etc.............................28
Section 5.03 Appointment To Fill A Vacancy In Office
Of Trustee............................................29
Section 5.04 Provision As To Paying Agent..........................29
Section 5.05 Certificates And Notice To Trustee....................30
Section 5.06 Restrictions On Liens.................................30
Section 5.07 Restrictions On Sale And Lease-Back
Transactions..........................................33
Section 5.08 Corporate Existence...................................33
Section 5.09 Issuance of Additional First Mortgage Bonds...........34
ARTICLE VI
NOTEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
Section 6.01 Company To Furnish Noteholder Lists...................34
Section 6.02 Preservation and Disclosure of Noteholder Lists.......34
Section 6.03 Reports By The Company................................36
Section 6.04 Reports By The Trustee................................36
iv
<PAGE>
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON EVENTS OF DEFAULT
Section 7.01 Events Of Default.....................................37
Section 7.02 Collection Of Indebtedness By Trustee;
Trustee May Prove Debt................................40
Section 7.03 Application Of Proceeds...............................42
Section 7.04 Limitations On Suits By Noteholders...................43
Section 7.05 Suits For Enforcement.................................43
Section 7.06 Powers And Remedies Cumulative; Delay Or
Omission Not Waiver Of Default........................44
Section 7.07 Direction of Proceedings and Waiver of
Defaults By Majority of Noteholders...................44
Section 7.08 Notice of Default.....................................45
Section 7.09 Undertaking To Pay Costs..............................45
Section 7.10 Restoration of Rights on Abandonment of
Proceedings...........................................46
Section 7.11 Waiver of Usury, Stay or Extension Laws...............46
ARTICLE XIII
CONCERNING THE TRUSTEE
Section 8.01 Duties and Responsibilities of Trustee................46
Section 8.02 Reliance on Documents, Opinions, Etc..................47
Section 8.03 No Responsibility For Recitals, Etc...................49
Section 8.04 Trustee, Authenticating Agent, Paying
Agent Or Registrar May Own Notes......................49
Section 8.05 Moneys To Be Held In Trust............................49
Section 8.06 Compensation And Expenses Of Trustee..................49
Section 8.07 Officers' Certificate As Evidence.....................50
Section 8.08 Conflicting Interest Of Trustee.......................50
Section 8.09 Existence And Eligibility Of Trustee..................50
Section 8.10 Resignation Or Removal Of Trustee.....................51
Section 8.11 Appointment Of Successor Trustee......................52
Section 8.12 Acceptance By Successor Trustee.......................52
Section 8.13 Succession By Merger, Etc.............................53
Section 8.14 Limitations On Rights Of Trustee As A Creditor........54
Section 8.15 Authenticating Agent..................................54
v
<PAGE>
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.01 Action By Noteholders.................................55
Section 9.02 Proof Of Execution By Noteholders.....................55
Section 9.03 Persons Deemed Absolute Owners. ......................55
Section 9.04 Company-Owned Notes Disregarded.......................56
Section 9.05 Revocation Of Consents; Future Holders Bound. ........56
Section 9.06 Record Date For Noteholder Acts.......................56
ARTICLE X
NOTEHOLDERS' MEETING
Section 10.01 Purposes Of Meetings..................................57
Section 10.02 Call Of Meetings By Trustee...........................57
Section 10.03 Call Of Meetings By Company Or Noteholders............58
Section 10.04 Qualifications For Voting.. ..........................58
Section 10.05 Regulations...........................................58
Section 10.06 Voting. ..............................................59
Section 10.07 Rights Of Trustee Or Noteholders Not Delayed..........59
ARTICLE XI
CONSOLIDATION, MERGER, SALE, TRANSFER OR CONVEYANCE
Section 11.01 Company May Consolidate, Etc. Only
On Certain Terms......................................60
Section 11.02 Successor Corporation Substituted.....................60
ARTICLE XII
SUPPLEMENTAL INDENTURES
Section 12.01 Supplemental Indentures Without
Consent Of Noteholders................................61
Section 12.02 Supplemental Indentures With Consent
Of Noteholders........................................62
Section 12.03 Compliance With Trust Indenture Act;
Effect Of Supplemental Indentures.....................64
Section 12.04 Notation On Notes.....................................64
Section 12.05 Evidence Of Compliance Of Supplemental
Indenture To Be Furnished Trustee.....................64
vi
<PAGE>
ARTICLE XIII
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 13.01 Indenture And Notes Solely Corporate
Obligations...........................................64
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 14.01 Provisions Binding On Company's Successors............65
Section 14.02 Official Acts By Successor Corporation................65
Section 14.03 Notices...............................................65
Section 14.04 Governing Law.........................................65
Section 14.05 Evidence Of Compliance With Conditions
Precedent.............................................65
Section 14.06 Business Days.........................................67
Section 14.07 Trust Indenture Act To Control........................67
Section 14.08 Table Of Contents, Headings, Etc......................67
Section 14.09 Execution In Counterparts.............................67
Section 14.10 Manner Of Mailing Notice To Noteholders...............68
Section 14.11 Approval By Trustee Of Expert Or Counsel..............68
EXHIBIT A - Form of Global Note.................................A-1
EXHIBIT B - Form of Note........................................B-1
vii
<PAGE>
THIS INDENTURE, dated as of April 1, 1999, between PENNSYLVANIA
ELECTRIC COMPANY, a corporation duly organized and existing under the laws of
the Commonwealth of Pennsylvania (the "COMPANY"), and UNITED STATES TRUST
COMPANY OF NEW YORK, as trustee (the "TRUSTEE").
WITNESSETH
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance from time to time of its Notes (as hereinafter defined), to be issued
as in this Indenture provided;
AND WHEREAS, all acts and things necessary to make this Indenture a
valid agreement according to its terms have been done and performed, and the
execution of this Indenture and the issue hereunder of the initial series of
Notes have in all respects been duly authorized;
NOW THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be authenticated, issued and delivered, and in consideration of
the premises, of the purchase and acceptance of the Notes by the Holders thereof
and of the sum of one dollar duly paid to it by the Trustee at the execution of
this Indenture, the receipt whereof is hereby acknowledged, the Company,
intending to be legally bound hereby, covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective Holders from time to time
of the Notes, as follows:
ARTICLE I
DEFINITIONS
Section 1.01 General. The terms defined in this Article I (whether or
not capitalized and except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Article I.
Section 1.02 Trust Indenture Act. (a) Whenever this Indenture refers to
a provision of the Trust Indenture Act of 1939 (the "TIA"), such provision is
incorporated by reference in and made a part of this Indenture.
<PAGE>
(b) Unless otherwise indicated, all terms used in this
Indenture that are defined by the TIA, defined by the TIA by reference to
another statute or defined by a rule of the Commission under the TIA shall have
the meanings assigned to them in the TIA or such statute or rule as in force on
the date of execution of this Indenture.
Section 1.03 Definitions. For purposes of this Indenture, the following
terms shall have the following meanings.
"Authenticating Agent" shall mean any agent of the Trustee which shall
be appointed and acting pursuant to Section 8.15 hereof.
"Authorized Agent" shall mean any agent of the Company designated as
such by an Officers' Certificate delivered to the Trustee.
"Board Of Directors" shall mean the Board of Directors of the Company
or the Executive Committee of such Board or any other duly authorized committee
of such Board.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors or any duly authorized committee thereof and to be in
full force and effect on the date of such certification.
"Business Day" shall mean each day that is not a day on which banking
institutions or trust companies in the Borough of Manhattan, the City and State
of New York, or in the city where the corporate trust office of the Trustee is
located, are obligated or authorized by law or executive order to close.
"Capital Lease" shall mean any lease which has been or would be
capitalized on the books of the lessee in accordance with GAAP.
"Capitalization" shall mean the total of all the following items
appearing on, or included in, the consolidated balance sheet of the Company: (i)
liabilities for indebtedness maturing more than twelve (12) months from the date
of determination; and (ii) common stock, preferred stock, Hybrid Preferred
Securities, premium on capital stock, capital surplus, capital in excess of par
value, and retained earnings (however the foregoing may be designated), less, to
the extent not otherwise deducted, the cost of shares of capital stock of the
Company held in its treasury. Subject to the foregoing, Capitalization shall be
determined in accordance with GAAP and practices applicable to the type of
business in which the Company is engaged and that are approved by
2
<PAGE>
independent accountants regularly retained by the Company, and may be determined
as of a date not more than sixty (60) days prior to the happening of an event
for which such determination is being made.
"Commission" shall mean the United States Securities and Exchange
Commission, or if at any time hereafter the Commission is not existing or
performing the duties now assigned to it under the TIA, then the body performing
such duties.
"Company" shall mean the corporation named as the "Company" in the
first paragraph of this Indenture, and its successors and assigns permitted
hereunder.
"Company Order" shall mean a written order signed in the name of the
Company by one of the Chairman, the President, any Vice President (whether or
not designated by a number or numbers or a word or words added before or after
the title "Vice President"), the Treasurer or an Assistant Treasurer, of the
Company, and delivered to the Trustee. At the Company's option, a Company Order
may take the form of a supplemental indenture to this Indenture.
"Consolidated Subsidiary" shall mean any Subsidiary whose accounts are
or are required to be consolidated with the accounts of the Company in
accordance with GAAP.
"Corporate Trust Office of The Trustee", or other similar term, shall
mean the corporate trust office of the Trustee, at which at any particular time
its corporate trust business shall be principally administered, which office is
at the date of the execution of this Indenture located at 114 West 47th Street,
25th Floor, New York, New York, 10036-1532.
"Debt" shall mean any outstanding debt for money borrowed evidenced by
notes, debentures, bonds, or other securities, or guarantees of any thereof.
"Depositary" shall mean, unless otherwise specified in a Company Order
pursuant to Section 2.05 hereof, The Depository Trust Company, New York, New
York, or any successor thereto registered and qualified as a clearing agency
under the Securities Exchange Act of 1934, or other applicable statute or
regulation.
"Event Of Default" shall mean any event specified in Section 7.01
hereof, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.
3
<PAGE>
"Expert" shall mean any officer of the Company familiar with the terms
of this Indenture, any law firm, any investment banking firm, or any other
Person, satisfactory in the reasonable judgment of the Trustee.
"First Mortgage" shall mean the Mortgage and Deed of Trust, dated as of
January 1, 1942, from the Company to United States Trust Company of New York, as
successor trustee, as supplemented and amended from time to time.
"First Mortgage Bonds" shall mean all first mortgage bonds issued by
the Company and outstanding under the First Mortgage.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, applied on a basis consistent with those used in the
preparation of any financial statements referred to herein, unless otherwise
stated herein.
"Global Note" shall mean a Note that, pursuant to Section 2.05 hereof,
is issued to evidence Notes, that is delivered to the Depositary or pursuant to
the instructions of the Depositary and that shall be registered in the name of
the Depositary or its nominee.
"Hybrid Preferred Securities" shall mean any preferred securities
issued by a Hybrid Preferred Securities Subsidiary, where such preferred
securities have the following characteristics:
(i) such Hybrid Preferred Securities Subsidiary lends
substantially all of the proceeds from the issuance of such preferred securities
to the Company, or a wholly owned subsidiary of the Company, in exchange for
Subordinated Indebtedness issued by the Company;
(ii) such preferred securities contain terms providing for the
deferral of interest payments corresponding to provisions providing for the
deferral of interest payments on the related Subordinated Indebtedness; and
(iii) the Company makes periodic interest payments on the
related Subordinated Indebtedness, which interest payments are in turn used by
the Hybrid Preferred Securities Subsidiary to make corresponding payments to the
holders of the preferred securities.
"Hybrid Preferred Securities Subsidiary" shall mean any limited
partnership or business trust (or similar entity) (i) all of the general
partnership or common equity interest of which is owned (either directly or
indirectly through one or more wholly-
4
<PAGE>
owned Subsidiaries of the Company or any Consolidated Subsidiary of the Company)
at all times by the Company, (ii) that has been formed for the purpose of
issuing Hybrid Preferred Securities and (iii) substantially all of the assets of
which consist at all times solely of Subordinated Indebtedness issued by the
Company and payments made from time to time on such Subordinated Indebtedness.
"Indenture" shall mean this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented.
"Interest Payment Date" shall mean (a) each date designated as such for
the payment of interest on a Note specified in a Company Order pursuant to
Section 2.05 hereof (provided that the first Interest Payment Date for any Note,
the Original Issue Date of which is after a Regular Record Date but prior to the
respective Interest Payment Date, shall be the Interest Payment Date following
the next succeeding Regular Record Date), (b) a date of maturity of such Note
and (c) only with respect to defaulted interest on such Note, the date
established by the Trustee for the payment of such defaulted interest pursuant
to Section 2.11 hereof.
"Lien" shall mean any mortgage, security interest, pledge or lien.
"Maturity," when used with respect to any Note, shall mean the date on
which the principal of such Note (together with all accumulated and accrued
interest) becomes due and payable as therein or herein provided, whether at the
stated maturity thereof or by declaration of acceleration, redemption or
otherwise.
"Mortgage Trustee" shall mean the Person serving as trustee at the time
under the First Mortgage.
"Note" or "Notes" shall mean any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including any Global Note.
"Noteholder", "Holder of Notes" or "Holder" shall mean any Person in
whose name at the time a particular Note is registered on the books of the
Trustee kept for that purpose in accordance with the terms hereof.
"Officers' Certificate" when used with respect to the Company, shall
mean a certificate signed by one of the Chairman, the President, any Vice
President (whether or not designated by a number or numbers or a word or words
added before or after the
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title "Vice President"), and by one of the Chief Financial Officer, Treasurer,
any Assistant Treasurer, the Secretary or an Assistant Secretary of the Company;
provided, that no individual shall be entitled to sign in more than one
capacity.
"Operating Property" shall mean (i) any interest in real property owned
by the Company and (ii) any asset owned by the Company that is depreciable in
accordance with GAAP, excluding, in either case, any interest of the Company as
lessee under a Capital Lease (except for a lease that results from a Sale and
Lease-Back Transaction).
"Opinion Of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of the Company, meeting the applicable
requirements of Section 14.05 hereof. If the Indenture requires the delivery of
an Opinion of Counsel to the Trustee, the text and substance of which has been
previously delivered to the Trustee, the Company may satisfy such requirement by
the delivery by the legal counsel that delivered such previous Opinion of
Counsel of a letter to the Trustee to the effect that the Trustee may rely on
such previous Opinion of Counsel as if such Opinion of Counsel was dated and
delivered the date delivery of such Opinion of Counsel is required. Any Opinion
of Counsel may contain reasonable conditions and qualifications satisfactory to
the Trustee.
"Original Issue Date" shall mean for a Note, or portion thereof, the
date upon which it, or such portion, was issued by the Company pursuant to this
Indenture and authenticated by the Trustee (other than in connection with a
transfer, exchange or substitution).
"Outstanding", when used with reference to Notes, shall, subject to
Section 9.04 hereof, mean, as of any particular time, all Notes authenticated
and delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Company), provided that if
such Notes are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article III, or provisions
satisfactory to the Trustee shall have been made for giving such notice;
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(c) Notes, or portions thereof, that have been paid and
discharged or are deemed to have been paid and discharged pursuant to the
provisions of this Indenture; and
(d) Notes in lieu of or in substitution for which other Notes
shall have been authenticated and delivered, or which have been paid, pursuant
to Section 2.07 hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agent or political subdivision
thereof.
"Principal Executive Offices Of The Company" shall mean 2800 Pottsville
Pike, Reading, Pennsylvania 19605, or such other place where the main corporate
offices of the Company are located as designated in writing to the Trustee by an
Authorized Agent.
"Regular Record Date" shall mean, unless otherwise specified in a
Company Order pursuant to Section 2.05, for an Interest Payment Date for a
particular Note (a) the fifteenth day of the calendar month next preceding each
Interest Payment Date (unless the Interest Payment Date is the date of maturity
of such Note, in which event, the Regular Record Date shall be as described in
clause (b) hereof) and (b) the date of maturity of such Note.
"Responsible Officer" or "Responsible Officers" when used with respect
to the Trustee shall mean one or more of the following: the chairman of the
board of directors, the vice chairman of the board of directors, the chairman of
the executive committee, the president, any vice president (whether or not
designated by a number or a word or words added before or after the title "Vice
President"), the secretary, the treasurer, any trust officer, any assistant
trust officer, any second or assistant vice president, any assistant secretary,
any assistant treasurer, or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Sale and Lease-Back Transaction" shall mean any arrangement with any
Person providing for the leasing to the Company of any Operating Property
(except for leases for a term, including any renewal thereof, of not more than
forty-eight (48) months), which Operating Property has been or is to be sold or
transferred by the Company to such Person; provided, however, Sale and Lease-
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Back Transaction shall not include any arrangement first entered into prior to
the date of this Indenture.
"Special Record Date" shall mean, with respect to any Note, the date
established by the Trustee in connection with the payment of defaulted interest
on such Note pursuant to Section 2.11 hereof.
"Stated Maturity" shall mean with respect to any Note, the last date on
which principal on such Note becomes due and payable as therein or herein
provided, other than by declaration of acceleration or by redemption.
"Subordinated Indebtedness" shall mean any unsecured Debt of the
Company (i) issued in exchange for the proceeds of Hybrid Preferred Securities
and (ii) subordinated to the rights of the Holders hereunder.
"Subsidiary" shall mean, as to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other Persons performing similar functions are at the
time owned directly or indirectly by such Person.
"Tangible Assets" shall mean the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (i) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense and (ii)
appropriate adjustments, if any, on account of minority interests. Tangible
Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants regularly retained by the Company, and may be
determined as of a date not more than sixty (60) days prior to the happening of
the event for which such determination is being made.
"Trustee" shall mean United States Trust Company of New York and,
subject to Article VIII, shall also include any successor Trustee.
"U.S. Government Obligations" shall mean (i) direct non-callable
obligations of, or non-callable obligations guaranteed as to timely payment of
principal and interest by, the United States of America or obligations of a
person controlled or supervised by and acting as an agency or instrumentality
thereof for the payment of which obligations or guarantee the full faith and
credit of the United States is pledged, or (ii) certificates
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or receipts representing direct ownership interests in obligations or specified
portions (such as principal or interest) of obligations described in clause (i)
above, which obligations are held by a custodian in safekeeping in a manner
satisfactory to the Trustee.
"Value" shall mean, with respect to a Sale and Lease-Back Transaction,
as of any particular time, the amount equal to the greater of (i) the net
proceeds to the Company from the sale or transfer of the property leased
pursuant to such Sale and Lease-Back Transaction or (ii) the net book value of
such property, as determined in accordance with GAAP by the Company, in either
case multiplied by a fraction, the numerator of which shall be equal to the
number of full years of the term of the lease that is part of such Sale and
Lease-Back Transaction remaining at the time of determination and the
denominator of which shall be equal to the number of full years of such term,
without regard, in any case, to any renewal or extension options contained in
such lease.
ARTICLE II
FORM, ISSUE, EXECUTION, REGISTRATION AND
EXCHANGE OF NOTES
Section 2.01 Form Generally.
--------------
(a) If the Notes are in the form of a Global Note they shall be in
substantially the form set forth in Exhibit A to this Indenture, and, if the
Notes are not in the form of a Global Note, they shall be in substantially the
form set forth in Exhibit B to this Indenture, or, in any case, in such other
form as shall be established by a Board Resolution, or a Company Order pursuant
to a Board Resolution, or in one or more indentures supplemental hereto, in each
case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, or any indentures
supplemental hereto, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with applicable rules of any securities exchange or of the
Depositary or with applicable law or as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their execution
of such Notes.
(b) The definitive Notes shall be typed, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Notes, as evidenced by their
execution of such Notes.
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Section 2.02 Form Of Trustee's Certificate Of Authentication. The
Trustee's certificate of authentication on all Notes shall be in substantially
the following form:
Trustee's Certificate of Authentication
This Note is one of the Notes of the series herein designated,
described or provided for in the within-mentioned Indenture.
United States Trust Company of New York
By:--------------------------------
Authorized Officer
Section 2.03 Amount Unlimited. The aggregate principal amount of Notes
that may be authenticated and delivered under this Indenture is unlimited,
subject to compliance with the provisions of this Indenture.
Section 2.04 Denominations, Dates, Interest Payment And Record Dates
(a) The Notes shall be issuable in registered form without coupons in
denominations of $1,000 and integral multiples thereof or such other amount or
amounts as may be authorized by the Board of Directors or a Company Order
pursuant to a Board Resolution or in one or more indentures supplemental hereto;
provided, that the principal amount of a Global Note shall not exceed
$200,000,000 unless otherwise permitted by the Depositary.
(b) Each Note shall be dated and issued as of the date of its
authentication by the Trustee, and shall bear an Original Issue Date; each Note
issued upon transfer, exchange or substitution of a Note shall bear the Original
Issue Date or Dates of such transferred, exchanged or substituted Note, subject
to the provisions of Section 2.13(e) hereof.
(c) Each Note shall bear interest from the later of (1) its Original
Issue Date or the date specified in such Note or (2) the most recent date to
which interest has been paid or duly provided for with respect to such Note
until the principal of such Note is paid or made available for payment, and
interest on each Note shall be payable on each Interest Payment Date after the
Original Issue Date.
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(d) Each Note shall mature on a stated maturity specified in the Note.
The principal amount of each Outstanding Note shall be payable on the maturity
date or dates specified therein.
(e) Unless otherwise specified in a Company Order pursuant to Section
2.05 hereof, interest on each of the Notes shall be calculated on the basis of a
360-day year of twelve 30-day months and shall be computed at a fixed rate until
the maturity of such Notes. The method of computing interest on any Notes not
bearing a fixed rate of interest shall be set forth in a Company Order pursuant
to Section 2.05 hereof. Unless otherwise specified in a Company Order pursuant
to Section 2.05 hereof, principal, interest and premium, if any, on the Notes
shall be payable in the currency of the United States.
(f) Except as provided in the following sentence, the Person in whose
name any Note is registered at the close of business on any Regular Record Date
or Special Record Date with respect to an Interest Payment Date for such Note
shall be entitled to receive the interest payable on such Interest Payment Date
notwithstanding the cancellation of such Note upon any registration of transfer,
exchange or substitution of such Note subsequent to such Regular Record Date or
Special Record Date and prior to such Interest Payment Date. Any interest
payable at maturity shall be paid to the Person to whom the principal of such
Note is payable.
(g) So long as the Trustee is the registrar and paying agent, the
Trustee shall, as soon as practicable but no later than the Regular Record Date
preceding each applicable Interest Payment Date, provide to the Company a list
of the principal, interest and premium to be paid on Notes on such Interest
Payment Date. The Trustee shall assume responsibility for withholding taxes on
interest paid as required by law except with respect to any Global Note.
Section 2.05 Execution, Authentication, Delivery And Dating.
----------------------------------------------
(a) The Notes shall be executed on behalf of the Company by one of its
Chairman, President, any Vice President (whether or not designated by a number
or numbers or a word or words added before or after the title "Vice President"),
its Treasurer or an Assistant Treasurer of the Company and attested by the
Secretary or an Assistant Secretary of the Company. The signature of any of
these officers on the Notes may be manual or facsimile. Typographical and other
minor errors or defects in any such signature shall not affect the validity or
enforceability of any Note that has been duly authenticated and delivered by the
Trustee.
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(b) Notes bearing the manual or facsimile signatures of individuals who
were at the time of execution the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Notes executed by the Company to the
Trustee for authentication, together with or preceded by one or more Company
Orders for the authentication and delivery of such Notes, and the Trustee in
accordance with any such Company Order shall authenticate and make available for
delivery such Notes. The Notes shall be issued in series. Such Company Order
shall specify the following with respect to each series of Notes: (i) any
limitations on the aggregate principal amount of the Notes to be issued as part
of such series, (ii) the Original Issue Date for such series, (iii) the stated
maturity or maturities of Notes of such series, (iv) the interest rate or rates,
or method of calculation of such rate or rates, for such series and the date
from which such interest will accrue, (v) the terms, if any, regarding the
optional or mandatory redemption of such series, including redemption date or
dates of such series, if any, and the price or prices applicable to such
redemption, (vi) whether or not the Notes of such series shall be issued in
whole or in part in the form of a Global Note and, if so, the Depositary for
such Global Note, (vii) the designation of such series, (viii) if the form of
the Notes of such series is not as described in Exhibit A or Exhibit B hereto,
the form of the Notes of such series, (ix) the maximum annual interest rate, if
any, of the Notes permitted for such series, (x) any other information necessary
to complete the Notes of such series, (xi) the establishment of any office or
agency pursuant to Section 5.02 hereof, and (xii) any other terms of such series
not inconsistent with this Indenture. Prior to authenticating Notes of any
series, and in accepting the additional responsibilities under this Indenture in
relation to such Notes, the Trustee shall receive from the Company the following
at or before the issuance of the initial Note of such series of Notes, and
(subject to Section 8.01 hereof) shall be fully protected in relying upon,
unless and until such documents have been superseded or revoked prior to such
issuance:
(1) A Board Resolution authorizing such Company Order or
Orders and, if the form of Notes is established by a Board Resolution
or a Company Order pursuant to a Board Resolution, a copy of such Board
Resolution;
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(2) At the option of the Company, either an Opinion of Counsel
or a letter addressed to the Trustee permitting it to rely on an
Opinion of Counsel, stating substantially the following subject to
customary qualifications and exceptions:
(A) if the form of Notes has been
established by or pursuant to a Board Resolution, a Company
Order pursuant to a Board Resolution, or in a supplemental
indenture as permitted by Section 2.01 hereof, that such form
has been established in conformity with this Indenture;
(B) that the Indenture has been duly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar
laws of general application relating to or affecting the
enforcement of creditors' rights, the application of general
principles of equity (regardless of whether such application
is made in a proceeding at law or in equity) and by an implied
covenant of good faith and fair dealing and except as
enforcement of provisions of the Indenture may be limited by
state laws affecting the remedies for the enforcement of the
security provided for in the Indenture;
(C) that the Indenture is qualified to the
extent necessary under the TIA;
(D) that such Notes have been duly
authorized and executed by the Company, and when authenticated
by the Trustee and issued by the Company in the manner and
subject to any conditions specified in such Opinion of
Counsel, will constitute valid and binding obligations of the
Company, enforceable in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar
laws of general application relating to or affecting the
enforcement of creditors' rights, the application of general
principles of equity (regardless of whether such application
is made in a proceeding at law or in equity) and by an implied
covenant of good faith and fair dealing and except as
enforcement of provisions of this Indenture may be limited by
state laws affecting
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the remedies for the enforcement of the security provided for
in this Indenture;
(E) that all consents or approvals of any
federal or state regulatory agency required in connection with
the Company's execution and delivery of this Indenture and
such series of Notes have been obtained and are in full force
and effect (except that no statement need be made with respect
to state securities laws); and
(F)that all conditions that must be met by
the Company to issue Notes under this Indenture have been met.
(3) An Officers' Certificate stating that (i) the Company is
not, and upon the authentication by the Trustee of the series of Notes,
will not be in default under any of the terms or covenants contained in
this Indenture and (ii) all conditions that must be met by the Company
to issue Notes under this Indenture have been met.
(d) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual or facsimile signature of an authorized
officer, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
(e) If all Notes of a series are not to be authenticated and issued at
one time, the Company shall not be required to deliver the Company Order, Board
Resolutions, Officers' Certificate and Opinion of Counsel (including any of the
foregoing that would be otherwise required pursuant to Section 14.05 hereof)
described in Section 2.05(c) hereof at or prior to the authentication of each
Note of such series, if such items are delivered at or prior to the time of
authentication of the first Note of such series to be authenticated and issued.
If all of the Notes of a series are not authenticated and issued at one time,
for each issuance of Notes after the initial issuance of Notes, the Company
shall be required only to deliver to the Trustee the Note and a written request
(executed by one of the Chairman, the President, any Vice President, the
Treasurer, or an Assistant Treasurer) to the Trustee to authenticate such Note
and to deliver such Note in accordance with the instructions specified by such
request. Any such request shall constitute a representation and warranty by the
Company that the statements
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made in the Officers' Certificate delivered to the Trustee prior to the
authentication and issuance of the first Note of such series are true and
correct on the date thereof as if made on and as of the date thereof.
Section 2.06 Exchange And Registration Of Transfer Of Notes.
----------------------------------------------
(a) Subject to Section 2.13 hereof, Notes may be exchanged for one or
more new Notes of any authorized denominations and of a like aggregate principal
amount, series and stated maturity and having the same terms and Original Issue
Date. Notes to be exchanged shall be surrendered at any of the offices or
agencies to be maintained pursuant to Section 5.02 hereof, and the Trustee shall
authenticate and deliver in exchange therefor the Note or Notes which the
Noteholder making the exchange shall be entitled to receive.
(b) The Trustee shall keep, at one of said offices or agencies, a
register or registers in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall register or cause to be registered Notes and shall
register or cause to be registered the transfer of Notes as in this Article II
provided. Such register shall be in written form or in any other form capable of
being converted into written form within a reasonable time. At all reasonable
times, such register shall be open for inspection by the Company. Upon due
presentment for registration of transfer of any Note at any such office or
agency, the Company shall execute and the Trustee shall register, authenticate
and deliver in the name of the transferee or transferees one or more new Notes
of any authorized denominations and of a like aggregate principal amount, series
and stated maturity and having the same terms and Original Issue Date.
(c) All Notes presented for registration of transfer or for exchange,
redemption or payment shall be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee and duly executed by, the Holder or the attorney in fact of such
Holder duly authorized in writing.
(d) No service charge shall be made for any exchange or registration of
transfer of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
(e) The Trustee shall not be required to exchange or register the
transfer of any Notes selected, called or being called for redemption (including
Notes, if any, redeemable at the option of the Holder provided such Notes are
then redeemable at
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such Holder's option) except, in the case of any Note to be redeemed in part,
the portion thereof not to be so redeemed.
(f) If the principal amount, and applicable premium, of part, but not
all, of a Note is paid, then upon surrender to the Trustee of such Note, the
Company shall execute, and the Trustee shall authenticate, deliver and register,
a Note in an authorized denomination in aggregate principal amount equal to, and
having the same terms, Original Issue Date and series as, the unpaid portion of
such Note.
Section 2.07 Mutilated, Destroyed, Lost Or Stolen Notes. (a) If any
Note shall become mutilated or be destroyed, lost or stolen, the Company shall
execute, and upon its written request the Trustee shall authenticate and
deliver, a new Note of like form and principal amount and having the same terms
and Original Issue Date and bearing a number not contemporaneously Outstanding,
in exchange and substitution for the mutilated Note, or in lieu of and in
substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, the Trustee and
any paying agent or Authenticating Agent such security or indemnity as may be
required by them to save each of them harmless, and, in every case of
destruction, loss or theft of a Note, the applicant shall also furnish to the
Company and to the Trustee evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
(b) The Trustee shall authenticate any such substituted Note and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Note, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
If any Note which has matured, is about to mature, has been redeemed or called
for redemption shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substituted Note, pay or authorize the payment
of the same (without surrender thereof except in the case of a mutilated Note)
if the applicant for such payment shall furnish to the Company, the Trustee and
any paying agent or Authenticating Agent such security or indemnity as may be
required by them to save each of them harmless and, in case of destruction, loss
or theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Note and of the ownership thereof.
(c) Every substituted Note issued pursuant to this Section 2.07 by
virtue of the fact that any Note is mutilated, destroyed, lost or stolen shall
constitute an additional contractual
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obligation of the Company, whether or not such destroyed, lost or stolen Note
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder. All Notes shall be held and owned upon the express condition that, to
the extent permitted by law, the foregoing provisions are exclusive with respect
to the replacement or payment of mutilated, destroyed, lost or stolen Notes and
shall preclude to the full extent permitted by applicable law any and all other
rights or remedies with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
Section 2.08 Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee shall authenticate and deliver
temporary Notes (printed, lithographed or otherwise reproduced). Temporary Notes
shall be issuable in any authorized denomination and substantially in the form
of the definitive Notes but with such omissions, insertions and variations as
may be appropriate for temporary Notes, all as may be determined by the Company.
Every such temporary Note shall be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company shall execute and
shall deliver to the Trustee definitive Notes and thereupon any or all temporary
Notes shall be surrendered in exchange therefor at the Corporate Trust Office of
the Trustee, and the Trustee shall authenticate, deliver and register in
exchange for such temporary Notes an equal aggregate principal amount of
definitive Notes. Such exchange shall be made by the Company at its own expense
and without any charge therefor to the Noteholders. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as definitive Notes authenticated and delivered hereunder.
Section 2.09 Cancellation Of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, exchange or registration of transfer shall
be surrendered to the Trustee for cancellation and promptly canceled by it and
no Notes shall be issued in lieu thereof except as expressly permitted by this
Indenture. The Company shall surrender to the Trustee any Notes so acquired by
it and such Notes shall be canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes so canceled.
Section 2.10 Interest Rights Preserved. Each Note delivered under this
Indenture upon transfer of or in exchange for or in lieu of any other Note shall
carry all the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Note, and each such Note shall be so dated that neither
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gain nor loss of interest shall result from such transfer, exchange or
substitution.
Section 2.11 Special Record Date. If and to the extent that the Company
fails to make timely payment or provision for timely payment of interest on any
series of Notes (other than on an Interest Payment Date that is a maturity
date), that interest shall cease to be payable to the Persons who were the
Noteholders of such series at the applicable Regular Record Date. In that event,
when moneys become available for payment of the interest, the Trustee shall (a)
establish a date of payment of such interest and a Special Record Date for the
payment of that interest, which Special Record Date shall be not more than 15 or
fewer than 10 days prior to the date of the proposed payment and (b) mail notice
of the date of payment and of the Special Record Date not fewer than 10 days
preceding the Special Record Date to each Noteholder of such series at the close
of business on the 15th day preceding the mailing at the address of such
Noteholder, as it appeared on the register for the Notes. On the day so
established by the Trustee the interest shall be payable to the Holders of the
applicable Notes at the close of business on the Special Record Date.
Section 2.12 Payment Of Notes. Payment of the principal, interest and
----------------
premium, if any, on all Notes shall be payable as follows:
(a) On or before 9:30 a.m., New York City time, or such other time as
shall be agreed upon between the Trustee and the Company, of the day on which
payment of principal, interest and premium, if any, is due on any Global Note
pursuant to the terms thereof, the Company shall deliver to the Trustee funds
available on such date sufficient to make such payment, by wire transfer of
immediately available funds or by instructing the Trustee to withdraw sufficient
funds from an account maintained by the Company with the Trustee or such other
method as is acceptable to the Trustee. On or before 12:00 noon, New York City
time, or such other time as shall be agreed upon between the Trustee and the
Depositary, of the day on which any payment of interest is due on any Global
Note (other than at maturity), the Trustee shall pay to the Depositary such
interest in same day funds. On or before 1:00 p.m., New York City time, or such
other time as shall be agreed upon between the Trustee and the Depositary, of
the day on which principal, interest payable at maturity and premium, if any, is
due on any Global Note, the Trustee shall deposit with the Depositary the amount
equal to the principal, interest payable at maturity and premium, if any, by
wire transfer into the account specified by the Depositary. As a condition to
the payment, at maturity or upon redemption, of any part of the principal of,
interest on and applicable premium of any Global
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Note, the Depositary shall surrender, or cause to be surrendered, such Global
Note to the Trustee, whereupon a new Global Note shall be issued to the
Depositary pursuant to Section 2.06(f) hereof.
(b) With respect to any Note that is not a Global Note, principal,
applicable premium and interest due at the maturity of the Note shall be payable
in immediately available funds when due upon presentation and surrender of such
Note at the corporate trust office of the Trustee or at the authorized office of
any paying agent. Interest on any Note that is not a Global Note (other than
interest payable at maturity) shall be paid by check mailed to the Holder
thereof at such Holder's address as it appears on the register by check payable
in clearinghouse funds; provided that if the Trustee receives a written request
from any Holder of Notes, the aggregate principal amount of which having the
same Interest Payment Date equals or exceeds $10,000,000, on or before the
applicable Regular Record Date for such Interest Payment Date, interest shall be
paid by wire transfer of immediately available funds to a bank within the
continental United States designated by such Holder in its request or by direct
deposit into the account of such Holder designated by such Holder in its request
if such account is maintained with the Trustee or any paying agent.
Section 2.13 Notes Issuable In The Form Of A Global Note.
-------------------------------------------
(a) If the Company shall establish pursuant to Section 2.05 hereof that
the Notes of a particular series are to be issued in whole or in part in the
form of one or more Global Notes, then the Company shall execute and the Trustee
shall, in accordance with Section 2.05 hereof and the Company Order delivered to
the Trustee thereunder, authenticate and deliver such Global Note or Notes,
which (i) shall represent, shall be denominated in an amount equal to the
aggregate principal amount of, and shall have the same terms as, the Outstanding
Notes of such series to be represented by such Global Note or Notes, (ii) shall
be registered in the name of the Depositary or its nominee, (iii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction and (iv) shall bear a legend substantially to the following effect:
"This Note is a Global Note registered in the name of the Depositary (referred
to herein) or a nominee thereof and, unless and until it is exchanged in whole
or in part for the individual Notes represented hereby, this Global Note may not
be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
Global Note is presented by an
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authorized representative of The Depository Trust Company (55 Water Street, New
York, New York), to the Trustee for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment is made to Cede & Co., any transfer, pledge or
other use hereof for value or otherwise by or to any person is wrongful since
the registered owner hereof, Cede & Co., has an interest herein" or such other
legend as may be required by the rules and regulations of the Depositary.
(b) Notwithstanding any other provision of Section 2.06 hereof or of
this Section 2.13, unless the terms of a Global Note expressly permit such
Global Note to be exchanged in whole or in part for individual Notes, a Global
Note may be transferred, in whole but not in part, only as described in the
legend thereto.
(c) (i) If at any time the Depositary for a Global Note notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Note or if at any time the Depositary for the Global Note shall no longer be
eligible or in good standing under the Securities Exchange Act of 1934 or other
applicable statute or regulation, the Company shall appoint a successor
Depositary with respect to such Global Note. If a successor Depositary for such
Global Note is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company's
election pursuant to Section 2.05(c)(vi) hereof shall no longer be effective
with respect to the series of Notes evidenced by such Global Note and the
Company shall execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of individual Notes of such series in exchange for
such Global Note, shall authenticate and deliver, individual Notes of such
series of like tenor and terms in definitive form in an aggregate principal
amount equal to the principal amount of the Global Note in exchange for such
Global Note. The Trustee shall not be charged with knowledge or notice of the
ineligibility of a Depositary unless a Responsible Officer assigned to and
working in its corporate trustee administration department shall have actual
knowledge thereof.
(ii) (A) The Company may at any time and in its sole
discretion determine that all Outstanding (but not less than all) Notes of a
series issued or issuable in the form of one or more Global Notes shall no
longer be represented by such Global Note or Notes. In such event the Company
shall execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of individual Notes in exchange for such Global
Note, shall authenticate and deliver individual Notes of like
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tenor and terms in definitive form in an aggregate principal amount equal to the
principal amount of such Global Note or Notes in exchange for such Global Note
or Notes.
(B) Within seven days after the occurrence of an
Event of Default, the Company shall execute, and the Trustee shall authenticate
and deliver, Notes of such series in definitive registered form in any
authorized denominations and in aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(iii) In any exchange provided for in any of the preceding two
paragraphs, the Company will execute and the Trustee will authenticate and
deliver individual Notes in definitive registered form in authorized
denominations. Upon the exchange of a Global Note for individual Notes, such
Global Note shall be canceled by the Trustee. Notes issued in exchange for a
Global Note pursuant to this Section shall be registered in such names and in
such authorized denominations as the Depositary for such Global Note, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Notes to the Depositary for
delivery to the persons in whose names such Notes are so registered, or if the
Depositary shall refuse or be unable to deliver such Notes, the Trustee shall
deliver such Notes to the persons in whose names such Notes are registered,
unless otherwise agreed upon between the Trustee and the Company, in which event
the Company shall cause the Notes to be delivered to the persons in whose names
such Notes are registered.
(d) Neither the Company, the Trustee, any Authenticating Agent nor any
paying agent shall have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests of a Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
(e) Pursuant to the provisions of this subsection, at the option of the
Trustee and upon 30 days' written notice to the Depositary but not prior to the
first Interest Payment Date of the respective Global Notes, the Depositary shall
be required to surrender any two or more Global Notes which have identical
terms, including, without limitation, identical maturities, interest rates and
redemption provisions (but which may have differing Original Issue Dates) to the
Trustee, and the Company shall execute and the Trustee shall authenticate and
deliver to, or at the direction of, the Depositary a Global Note in principal
amount equal to the aggregate principal amount of, and with all terms identical
to, the Global Notes surrendered thereto and that shall indicate each applicable
Original Issue Date and the
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principal amount applicable to each such Original Issue Date. The exchange
contemplated in this subsection shall be consummated at least 30 days prior to
any Interest Payment Date applicable to any of the Global Notes surrendered to
the Trustee. Upon any exchange of any Global Note with two or more Original
Issue Dates, whether pursuant to this Section or pursuant to Section 2.06 or
Section 3.03 hereof, the aggregate principal amount of the Notes with a
particular Original Issue Date shall be the same before and after such exchange,
after giving effect to any retirement of Notes and the Original Issue Dates
applicable to such Notes occurring in connection with such exchange.
ARTICLE III
REDEMPTION OF NOTES
Section 3.01 Applicability Of Article. Such of the Notes as are, by
their terms, redeemable prior to their stated maturity date at the option of the
Company, may be redeemed by the Company at such times, in such amounts and at
such prices as may be specified therein and in accordance with the provisions of
this Article III.
Section 3.02 Notice Of Redemption; Selection Of Notes.
----------------------------------------
(a) The election of the Company to redeem any Notes shall be evidenced
by an Officer's Certificate which shall be given with notice of redemption to
the Trustee at least 45 days (or such shorter period acceptable to the Trustee
in its sole discretion) prior to the redemption date specified in such notice.
(b) Notice of redemption to each Holder of Notes to be redeemed as a
whole or in part shall be given by the Trustee, in the manner provided in
Section 14.10 hereof, no less than 30 or more than 60 days prior to the date
fixed for redemption. Any notice which is given in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Noteholder receives the notice. In any case, failure duly to give such notice,
or any defect in such notice, to the Holder of any Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
(c) Each such notice shall specify the date fixed for redemption, the
places of redemption and the redemption price (or the method for calculation
thereof) at which such Notes are to be redeemed, and shall state that (subject
to subsection (e) of this Section) payment of the redemption price of such Notes
or portion
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thereof to be redeemed will be made upon surrender of such Notes at such places
of redemption, that interest accrued to the date fixed for redemption will be
paid as specified in such notice, and that from and after such date interest
thereon shall cease to accrue. If less than all of a series of Notes having the
same terms are to be redeemed, the notice shall specify the Notes or portions
thereof to be redeemed. If any Note is to be redeemed in part only, the notice
which relates to such Note shall state the portion of the principal amount
thereof to be redeemed, and shall state that, upon surrender of such Note, a new
Note or Notes having the same terms in aggregate principal amount equal to the
unredeemed portion thereof will be issued.
(d) Unless otherwise provided by a supplemental indenture or Company
Order under Section 2.05 hereof, if less than all of a series of Notes, or any
tranche thereof, is to be redeemed, the Trustee shall select in such manner as
it shall deem appropriate and fair in its discretion the particular Notes to be
redeemed in whole or in part and shall thereafter promptly notify the Company in
writing of the Notes so to be redeemed. If less than all of a series of Notes
represented by a Global Note is to be redeemed, the particular Notes or portions
thereof of such series to be redeemed shall be selected by the Depositary for
such series of Notes in such manner as the Depositary shall determine. Notes
shall be redeemed only in denominations of $1,000, provided that any remaining
principal amount of a Note redeemed in part shall be a denomination authorized
under this Indenture.
(e) If at the time of the mailing of any notice of redemption at the
option of the Company, the Company shall not have irrevocably directed the
Trustee to apply funds then on deposit with the Trustee or held by it and
available to be used for the redemption of Notes to redeem all the Notes called
for redemption, such notice, at the election of the Company, may state that it
is conditional and subject to the receipt of the redemption moneys by the
Trustee on or before the date fixed for redemption and that such notice shall be
of no effect unless such moneys are so received on or before such date.
Section 3.03 Payment Of Notes On Redemption; Deposit Of Redemption Price.
-----------------------------------------------------------
(a) If notice of redemption for any Notes shall have been given as
provided in Section 3.02 hereof and such notice shall not contain the language
permitted at the Company's option under Section 3.02(e) hereof, such Notes or
portions of Notes called for redemption shall become due and payable on the date
and at the places stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption of such Notes.
Interest on the Notes or portions
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thereof so called for redemption shall cease to accrue and such Notes or
portions thereof shall be deemed not to be entitled to any benefit under this
Indenture except to receive payment of the redemption price together with
interest accrued thereon to the date fixed for redemption. Upon presentation and
surrender of such Notes at the place of payment specified in such notice, such
Notes or the specified portions thereof shall be paid and redeemed at the
applicable redemption price, together with interest accrued thereon to the date
fixed for redemption.
(b) If notice of redemption shall have been given as provided in
Section 3.02 hereof and such notice shall contain the language permitted at the
Company's option under Section 3.02(e) hereof, such Notes or portions of Notes
called for redemption shall become due and payable on the date and at the places
stated in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption of such Notes, and interest on the
Notes or portions thereof so called for redemption shall cease to accrue and
such Notes or portions thereof shall be deemed not to be entitled to any benefit
under this Indenture except to receive payment of the redemption price together
with interest accrued thereon to the date fixed for redemption; provided that,
in each case, the Company shall have deposited with the Trustee or a paying
agent on or prior to 11:00 a.m. New York City time on such redemption date an
amount sufficient to pay the redemption price together with interest accrued to
the date fixed for redemption. Upon the Company making such deposit and, upon
presentation and surrender of such Notes at such a place of payment in such
notice specified, such Notes or the specified portions thereof shall be paid and
redeemed at the applicable redemption price, together with interest accrued
thereon to the date fixed for redemption. If the Company shall not make such
deposit on or prior to the redemption date, the notice of redemption shall be of
no force and effect and the principal on such Notes or specified portions
thereof shall continue to bear interest as if the notice of redemption had not
been given.
(c) No notice of redemption of Notes shall be mailed during the
continuance of any Event of Default, except (1) that, when notice of redemption
of any Notes has been mailed, the Company shall redeem such Notes but only if
funds sufficient for that purpose have prior to the occurrence of such Event of
Default been deposited with the Trustee or a paying agent for such purpose, and
(2) that notices of redemption of all Outstanding Notes may be given during the
continuance of an Event of Default.
(d) Upon surrender of any Note redeemed in part only, the Company shall
execute, and the Trustee shall authenticate, deliver and register, a new Note or
Notes of authorized
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denominations in aggregate principal amount equal to, and having the same terms,
Original Issue Date or Dates and series as, the unredeemed portion of the Note
so surrendered.
ARTICLE IV
SATISFACTION AND DISCHARGE; UNCLAIMED MONEYS
Section 4.01 Satisfaction And Discharge.
--------------------------
(a) If at any time:
(1) the Company shall have paid or caused to be paid the
principal of and premium, if any, and interest on all the Outstanding
Notes, as and when the same shall have become due and payable,
(2) the Company shall have delivered to the Trustee for
cancellation all Outstanding Notes, or
(3) the Company shall have irrevocably deposited or caused to
be irrevocably deposited with the Trustee as trust funds the entire
amount in (A) cash, (B) U.S. Government Obligations maturing as to
principal and interest in such amounts and at such times as will insure
the availability of cash, or (C) a combination of cash and U.S.
Government Obligations, in any case sufficient, without reinvestment,
as certified by an independent public accounting firm of national
reputation in a written certification delivered to the Trustee, to pay
at maturity or the applicable redemption date (provided that notice of
redemption shall have been duly given or irrevocable provision
satisfactory to the Trustee shall have been duly made for the giving of
any notice of redemption) all Outstanding Notes, including principal
and any premium, if any, and interest due or to become due to such date
of maturity, as the case may be, and, unless all Outstanding Notes are
to be due within 90 days of such deposit by redemption or otherwise,
shall also deliver to the Trustee an opinion of counsel expert in
federal income tax matters to the effect that the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling or similar pronouncement by the Internal Revenue Service or that
there has been a change of law (collectively, an "External Tax
Pronouncement"), in either case to the effect that the Holders of the
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or discharge of the Indenture,
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and if, in any such case, (x) the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company and (y) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this
Indenture have been complied with, then this Indenture shall cease to
be of further effect (except as to (i) rights of registration of
transfer and exchange of Notes, (ii) substitution of mutilated,
defaced, destroyed, lost or stolen Notes, (iii) rights of Noteholders
to receive payments of principal thereof, and any premium and interest
thereon, upon the original stated due dates therefor or upon the
applicable redemption date (but not upon acceleration of maturity) from
the moneys and U.S. Government Obligations held by the Trustee pursuant
to Section 4.02 hereof, (iv) the rights and immunities of the Trustee
hereunder, (v) the obligations of the Company under Sections 5.02 and
5.03 hereof, (vi) the obligations and rights of the Trustee and the
Company under Section 4.04 hereof, and (vii) the duties of the Trustee
with respect to any of the foregoing), and the Company shall be deemed
to have paid and discharged the entire indebtedness represented by, and
its obligations under, the Notes, and the Trustee, on demand of the
Company and at the cost and expense of the Company, shall execute
proper instruments acknowledging such satisfaction and discharge of
this Indenture and the Trustee shall at the request of the Company
return to the Company all property and money held by it under this
Indenture and determined by it from time to time in accordance with the
certification pursuant to this Section 4.01(a)(3) to be in excess of
the amount required to be held under this Section.
If the Notes are deemed to be paid and discharged pursuant to
Section 4.01(a)(3) hereof, within 60 days after those Notes are so deemed to be
paid and discharged, the Trustee shall cause a written notice to be given to
each Holder in the manner provided by Section 14.10 hereof. The notice shall:
(i) state that the Notes are deemed to be paid and discharged;
(ii) set forth a description of any U.S. Government
Obligations and cash held by the Trustee as described above;
(iii) if any Notes will be called for redemption, specify the
date or dates on which those Notes are to be called for redemption.
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Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 8.06
hereof shall survive.
(b) If the Company shall have paid or caused to be paid the principal
of and premium, if any, and interest on any Note, as and when the same shall
have become due and payable or the Company shall have delivered to the Trustee
for cancellation any Outstanding Note, such Note shall cease to be entitled to
any lien or benefit under this Indenture.
(c) If the Company makes the deposit of cash and/or U.S. Government
Obligations with respect to one or more series of Notes described in Section
4.01(a) hereof and otherwise complies with the requirements of such Section for
the satisfaction and discharge of this Indenture (except that the opinion of
counsel referred to in Section 4.01(a)(3) need not be based on an External Tax
Pronouncement, and shall be to the effect that the Holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and the release of the Company from its obligations referred to in
this Section 4.01(c) under this Indenture), then the provisions of this
Indenture shall remain in full force and effect and the indebtedness represented
by, and the Company's obligations under, such Notes shall be deemed satisfied,
the Company shall be released with respect to such series of Notes from its
obligations under Sections 5.06, 5.07, 5.08, 5.09 and Article XI hereof.
Section 4.02 Deposited Moneys To Be Held In Trust By Trustee. Subject
to Section 4.04, all moneys and U.S. Government Obligations deposited with the
Trustee pursuant to Section 4.01 hereof, shall be held in trust and applied by
it to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the Holders of the particular
Notes for the payment or redemption of which such moneys and U.S. Government
Obligations have been deposited with the Trustee of all sums due and to become
due thereon for principal and premium, if any, and interest.
Section 4.03 Paying Agent To Repay Moneys Held. Upon the satisfaction
and discharge of this Indenture all moneys then held by any paying agent for the
Notes (other than the Trustee) shall, upon written demand by the Company, be
repaid to the Company or paid to the Trustee, and thereupon such paying agent
shall be released from all further obligations with respect to such moneys.
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Section 4.04 Return Of Unclaimed Moneys. Any moneys deposited with or
paid to the Trustee for payment of the principal of or any premium or interest
on any Notes and not applied but remaining unclaimed by the Holders of such
Notes for two years after the date upon which the principal of or any premium or
interest on such Notes, as the case may be, shall have become due and payable,
shall be repaid to the Company, subject to applicable abandoned property laws,
by the Trustee on written demand by the Company; and any Holder of any of such
Notes shall thereafter look only to the Company for any payment which such
Holder may be entitled to collect.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.01 Payment Of Principal And Interest. The Company covenants
and agrees for the benefit of the Holders of the Notes that it will duly and
punctually pay or cause to be paid the principal of and any premium and
interest, if any, on, each of the Notes at the places, at the respective times
and in the manner provided in such Notes or in this Indenture.
Section 5.02 Offices For Payments, Etc. So long as any Notes are
Outstanding hereunder, the Company will maintain in the Borough of Manhattan,
The City of New York, State of New York an office or agency where the Notes may
be presented for payment, for exchange as in this Indenture provided and for
registration of transfer as in this Indenture provided. The Corporate Trust
Office of the Trustee shall serve as the initial location of such office.
The Company will maintain in the Borough of Manhattan, The City of New
York, State of New York an office or agency where notices and demands to or upon
the Company in respect of the Notes or this Indenture may be served. The
Corporate Trust Office of the Trustee shall serve as the initial location of
such office.
In case the Company shall fail to maintain any office or agency
required by this Section to be located in the Borough of Manhattan, The City of
New York, State of New York or shall fail to give such notice of the location or
of any change in the location of any of the above offices or agencies,
presentations and demands may be made and notices may be served at the Corporate
Trust Office of the Trustee, and, in such event, the Trustee shall act as the
Company's agent to receive all such presentations, surrenders, notices and
demands.
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The Company may from time to time designate one or more additional
offices or agencies where the Notes may be presented for payment, for exchange
as in this Indenture provided and for registration of transfer as in this
Indenture provided, and the Company may from time to time rescind any such
designation; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain any office or
agency provided for in this Section. The Company will give to the Trustee prompt
written notice of any such designation or rescission thereof and of any change
in the location of any such other office or agency.
Section 5.03 Appointment To Fill A Vacancy In Office Of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.04 Provision As To Paying Agent. The Trustee shall be the
paying agent for the Notes and, at the option of the Company, the Company may
appoint additional paying agents (including without limitation itself). Whenever
the Company shall appoint a paying agent other than the Trustee with respect to
the Notes, it will cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section:
(1) that such paying agent will hold all sums received by it
as such agent for the payment of the principal of, premium, if any, or
interest, on the Notes (whether such sums have been paid to it by the
Company or by any other obligor on the Notes) in trust for the benefit
of the Holders of the Notes, or of the Trustee until such sums shall be
paid to such Holders or otherwise disposed of as herein provided;
(2) that such paying agent will give the Trustee notice of any
failure by the Company (or by any other obligor on Notes) to make any
payment of the principal of, premium, if any, or interest on the Notes
when the same shall be due and payable; and
(3) that such paying agent will at any time during the
continuance of any such failure, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such
paying agent.
The Company will, on or prior to each due date of the
principal of and any premium, if any, or interest on the Notes, deposit with the
paying agent a sum sufficient to pay such
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principal and any premium or interest so becoming due, such sum to be held in
trust for the benefit of the Holders of the Notes entitled to such principal of
and any premium or interest, and (unless such paying agent is the Trustee) the
Company will promptly notify the Trustee of any failure to take such action.
If the Company shall act as its own paying agent with respect
to the Notes, it will, on or before each due date of the principal of (and
premium, if any,) or interest, if any, on the Notes, set aside, segregate and
hold in trust for the benefit of the Holders of the Notes, a sum sufficient to
pay such principal (and premium, if any,) or interest, if any, so becoming due
until such sums shall be paid to such Holders or otherwise disposed of as herein
provided. The Company will promptly notify the Trustee of any failure to take
such action.
The Company may at any time pay or cause to be paid to the
Trustee all sums held in trust by it or any paying agent hereunder, as required
by this Section, such sums to be held by the Trustee upon the trusts herein
contained, and, upon such payment by any paying agent to the Trustee, such
paying agent shall be released from all further liability with respect to such
money.
Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Sections 4.03 and 4.04.
Section 5.05 Certificates And Notice To Trustee. The Company shall, on
or before April 1, of each year, commencing April 1, 2000, deliver to the
Trustee a certificate from its principal executive officer, principal financial
officer or principal accounting officer covering the preceding calendar year and
stating whether or not, to the knowledge of such Person, the Company has
complied with all conditions and covenants under this Indenture, and, if not,
describing in reasonable detail any failure by the Company to comply with any
such conditions or covenants. For purposes of this Section, compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture.
Section 5.06 Restrictions On Liens (a) So long as any Notes are
Outstanding, the Company will not issue, assume, guarantee or permit to exist
any Debt secured by any Lien on any Operating Property of the Company, whether
owned at the date of this Indenture or thereafter acquired, without in any such
case effectively securing the Outstanding Notes (together with, if the Company
shall so determine, any other Debt of or guaranteed by the Company ranking
equally with, the Notes) equally and ratably
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with such Debt (but only so long as such Debt is so secured); provided, however,
that the foregoing restriction shall not apply to Debt secured by any of the
following:
(i)......Liens on any Operating Property existing at the time
of acquisition thereof (which Liens may also extend to subsequent repairs,
alterations and improvements to such Operating Property);
(ii).....Liens on operating property of a corporation existing
at the time such corporation is merged into or consolidated with the Company, or
at the time of a sale, lease, or other disposition of the properties of such
corporation or a division thereof as an entirety or substantially as an entirety
to the Company;
(iii)....Liens on Operating Property to secure all or part of
the cost of acquiring, constructing, developing, or substantially repairing,
altering, or improving such property, or to secure indebtedness incurred to
provide funds for any such purpose or for reimbursement of funds previously
expended for any such purpose, provided such Liens are created or assumed
contemporaneously with, or within eighteen (18) months after, such acquisition
or the completion of construction, development, or substantial repair,
alteration or improvement;
(iv).....Liens in favor of any State, or any department,
agency, or instrumentality or political subdivision of any State, or for the
benefit of holders of securities issued by any such entity (or providers of
credit enhancement with respect to such securities), to secure any Debt
(including, without limitation, obligations of the Company with respect to
industrial development, pollution control or similar revenue bonds) incurred for
the purpose of financing all or any part of the purchase price or the cost of
constructing, developing, or substantially repairing, altering, or improving
Operating Property of the Company;
(v) Liens under the First Mortgage, where such Debt has
been issued for purposes of any transaction described in (iv) above;
(vi) Liens under Section 8.06 hereof; or
(vii) Any extension, renewal or replacement (or successive
extensions, renewals, or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses (i) to (vi), inclusive; provided, however,
that the principal amount of Debt secured thereby and not otherwise authorized
by said clauses (i) to (vi), inclusive, shall not exceed the principal amount of
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Debt, plus any premium or fee payable in connection with any such extension,
renewal, or replacement, so secured at the time of such extension, renewal, or
replacement.
(b) Notwithstanding the provisions of Section 5.06(a), the Company may
issue, assume, or guarantee Debt, or permit to exist any Debt, in each case,
secured by Liens which would otherwise be subject to the restrictions of Section
5.06(a) up to an aggregate principal amount that, together with the principal
amount of all other Debt of the Company secured by Liens (other than Liens
permitted by Section 5.06(a) that would otherwise be subject to any of the
foregoing restrictions) and the Value of all Sale and Lease-Back Transactions in
existence at such time (other than any Sale and Lease-Back Transaction that, if
such Sale and Lease-Back Transaction had been a Lien, would have been permitted
by Section 5.06(a), other than Sale and Lease-Back Transactions permitted by
Section 5.07 because the commitment by or on behalf of the purchaser was
obtained no later than eighteen (18) months after the later of events described
in (i) or (ii) of Section 5.07, and other than Sale and Lease-Back Transactions
as to which application of amounts have been made in accordance with clause (z)
of Section 5.07), does not at the time exceed the greater of fifteen percent
(15%) of Tangible Assets or fifteen percent (15%) of Capitalization.
(c) If the Company shall issue, assume, or guarantee any Debt secured
by any Lien and if Section 5.06(a) requires that the Outstanding Notes be
secured equally and ratably with such Debt, the Company will promptly execute,
at its expense, any instruments necessary to so equally and ratably secure the
Outstanding Notes and deliver the same to the Trustee along with:
(i) An Officers' Certificate stating that the covenant of the
Company contained in Section 5.06(a) has been complied with; and
(ii) An Opinion of Counsel to the effect that the Company has
complied with the covenant contained in Section 5.06(a), and that any
instruments executed by the Company in the performance of such covenant comply
with the requirements of such covenant.
In the event that the Company shall hereafter secure
Outstanding Notes equally and ratably with any other obligation or indebtedness
pursuant to the provisions of this Section 5.06, the Company will, upon the
request of the Trustee, enter into an indenture or agreement supplemental hereto
and take such other action, if any, as the Trustee may reasonably request to
enable it to enforce effectively the rights of the Holders of
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Outstanding Notes so secured, equally and ratably with such other obligation or
indebtedness.
Section 5.07 Restrictions On Sale And Lease-Back Transactions. So long
as any Notes are Outstanding, the Company will not enter into or permit to exist
any Sale and Lease-Back Transaction with respect to any Operating Property if,
in any case, the commitment by or on behalf of the purchaser is obtained more
than eighteen (18) months after the later of (i) the completion of the
acquisition, construction, or development of such Operating Property or (ii) the
placing in operation of such Operating Property or of such Operating Property as
constructed, developed, or substantially repaired, altered, or improved, unless
(x) the Company would be entitled pursuant to Section 5.06(a) to issue, assume,
guarantee or permit to exist Debt secured by a Lien on such Operating Property
without equally and ratably securing the Notes or (y) the Company would be
entitled pursuant to Section 5.06(b), after giving effect to such Sale and
Lease-Back Transaction, to incur $1.00 of additional Debt secured by Liens
(other than Liens permitted by Section 5.06(a)) or (z) the Company shall apply
or cause to be applied, in the case of a sale or transfer for cash, an amount
equal to the net proceeds thereof (but not in excess of the net book value of
such Operating Property at the date of such sale or transfer) and, in the case
of a sale or transfer otherwise than for cash, an amount equal to the fair value
(as determined by the Board of Directors) of the Operating Property so leased,
to the retirement, within one hundred eighty (180) days after the effective date
of such Sale and Lease-Back Transaction, of Notes (in accordance with their
terms) or other Debt of the Company ranking senior to, or equally with, the
Notes; provided, however, that the amount to be applied to such retirement of
Debt shall be reduced by an amount equal to the principal amount, plus any
premium or fee paid in connection with any redemption in accordance with the
terms of Debt voluntarily retired by the Company within such one hundred eighty
(180) day period, excluding retirement pursuant to mandatory sinking fund or
prepayment provisions and payments at maturity.
Section 5.08 Corporate Existence. Subject to the rights of the Company
under Article XII, the Company shall do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence; provided,
however, that the Company shall not be required to preserve any such right or
franchise if, in the judgment of the Company, the preservation thereof is no
longer desirable in the conduct of the business of the Company.
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Section 5.09 Issuance of Additional First Mortgage Bonds. After the
issuance of the first series of Notes, the Company shall not issue any
additional First Mortgage Bonds under the First Mortgage.
ARTICLE VI
NOTEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
Section 6.01 Company To Furnish Noteholder Lists. The Company and any
other obligor on the Notes shall furnish or cause to be furnished to the Trustee
a list in such form as the Trustee may reasonably require of the names and
addresses of the Holders of the Notes:
(a) semi-annually and not more than 15 days after each Regular Record
Date for each Interest Payment Date that is not a maturity date, as of such
Regular Record Date, and such list need not include information received after
such date; and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request, as of a date not more
than 15 days prior to the time such information is furnished, and such list need
not include information received after such date;
provided that if and so long as the Trustee shall be the registrar for the
Notes, such list shall not be required to be furnished.
Section 6.02 Preservation And Disclosure Of Noteholder Lists.
-----------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of the
Notes (i) contained in the most recent lists furnished to it as provided in
Section 6.01, (ii) received by it in the capacity of registrar for the Notes, if
so acting, and (iii) filed with it within the two preceding years pursuant to
Section 6.04(d)(2). The Trustee may destroy any list furnished to it as provided
in Section 6.01 upon receipt of a new list so furnished.
(b) In case three or more Holders of Notes (hereinafter referred to as
"applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Note for a period of at
least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of Notes
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with respect to their rights under this Indenture or under the Notes and such
application is accompanied by a copy of the form of proxy or other communication
which such applicants propose to transmit, then the Trustee shall, within five
Business Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section; or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved at the
time by the Trustee. in accordance with the provisions of such subsection (a)
and as to the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of Notes, whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of such subsection (a) a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender the Trustee shall mail to such applicants and file
with the Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the Holders or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met, and shall enter an order so declaring, the Trustee shall mail copies
of such material to all such Holders with reasonable promptness after the entry
of such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every Holder of a Note, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of the Company or the Trustee shall be held accountable by reason
of the
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disclosure of any such information as to the names and addresses of the Holders
of Notes in accordance with the provisions of subsection (b) of this Section,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under such subsection (b).
Section 6.03 Reports By The Company. The Company shall:
----------------------
(a) file with the Trustee, within 15 days after the Company is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934;
or, if the Company is not required to file information, documents or reports
pursuant to either of said Sections, then it will file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Securities Exchange Act of 1934 in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(c) transmit by mail to all Holders of Notes, within 30 days after the
filing thereof with the Trustee in the manner and to the extent provided in
Section 6.04(d), such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (a) and (b) of this
Section as may be required by rules and regulations prescribed from time to time
by the Commission.
Section 6.04 Reports By The Trustee.
----------------------
(a) Annually, not later than August 15 of each year, the Trustee shall
transmit by mail a brief report dated as of such date that complies with Section
313(a) of the TIA (to the extent required by such Section).
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(b) The Trustee shall from time to time transmit by mail brief reports
that comply, both in content and date of delivery, with Section 313(b) of the
TIA (to the extent required by such Section).
(c) A copy of each such report filed pursuant to this section shall, at
the time of such transmission to such Holders, be filed by the Trustee with each
stock exchange upon which any Notes are listed and also with the Commission. The
Company will notify the Trustee promptly in writing upon the listing of such
Notes on any stock exchange.
(d) Reports pursuant to this Section shall be transmitted
(1) by mail to all Holders of Notes, as their names and
addresses appear in the register for the Notes;
(2) by mail to such Holders of Notes as have, within the two
years preceding such transmission, filed their names and addresses with
the Trustee for such purpose;
(3) by mail, except in the case of reports pursuant to Section
6.04(b) and (c) hereof, to all Holders of Notes whose names and
addresses have been furnished to or received by the Trustee pursuant to
Section 6.01 and 6.02(a)(ii) hereof; and
(4) at the time such report is transmitted to the Holders of
the Notes, to each exchange on which Notes are listed and also with the
Commission.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON EVENTS OF DEFAULT
Section 7.01 Events Of Default.
-----------------
(a) If one or more of the following Events of Default shall have
occurred and be continuing:
(1) default in the payment of any installment of interest upon
any of the Notes as and when the same shall due and payable, and
continuance of such default for a period of sixty (60) days;
(2) default in the payment of the principal of or any
premium on any of the Notes as and when the same shall become due and
payable;
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(3) failure on the part of the Company duly to
observe or perform any other of the covenants or agreements on the part
of the Company contained in the Notes or in this Indenture for a period
of ninety (90) days after the date on which written notice specifying
such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that the Company remedy the same, shall have
been given to the Company by the Trustee by registered mail, or to the
Company and the Trustee by the Holders of not less than 33% in
aggregate principal amount of the Notes at the time Outstanding;
(4) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable law, or appointing a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Company or for any substantial part of the property of
the Company, or ordering the winding up or liquidation of the affairs
of the Company, and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days; or
(5) the Company shall commence a voluntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or any other case or proceeding
to be adjudicated a bankrupt or insolvent, or consent to the entry of a
decree or order for relief in an involuntary case under any such law,
or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable law, or
consent to the filing of such petition or to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or for any
substantial part of the property of the Company, or make any general
assignment for the benefit of creditors, or the notice by it in writing
of its inability to pay its debts generally as they become due, or the
taking of any corporate action by the Company in furtherance of any
such action;
then, unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of a majority in aggregate principal
amount of the Notes then Outstanding, by notice in writing to the Company (and
to the
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Trustee if given by such Holders), may declare the principal of all the Notes to
be due and payable immediately and upon any such declaration the same shall
become immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding.
The foregoing paragraph, however, is subject to the condition
that if, at any time after the principal of the Notes shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all of the Notes and the principal of and
any premium on any and all Notes which shall have become due otherwise than by
acceleration (with interest on overdue installments of interest, to the extent
that payment of such interest is enforceable under applicable law, and on such
principal and applicable premium at the rate borne by the Notes to the date of
such payment or deposit) and all sums paid or advanced by the Trustee hereunder,
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 8.06 hereof, and any and all defaults under this Indenture, other than
the non-payment of principal of and accrued interest on Notes which shall have
become due solely by acceleration of maturity, shall have been cured or waived
- -- then and in every such case such payment or deposit shall cause an automatic
waiver of the Event of Default and its consequences and shall cause an automatic
rescission and annulment of the acceleration of the Notes; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon.
(b) If the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceeding had been taken.
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Section 7.02 Collection Of Indebtedness By Trustee; Trustee May Prove Debt.
-------------------------------------------------------------
(a) The Company covenants that if an Event of Default described in
clause (a)(1) or (a)(2) of Section 7.01 shall have occurred and be continuing,
then, upon demand of the Trustee, the Company shall pay to the Trustee, for the
benefit of the Holders of the Notes, the whole amount that then shall have so
become due and payable on all such Notes for principal or interest, as the case
may be, with interest upon the overdue principal and any premium and (to the
extent that payment of such interest is enforceable under applicable law) upon
the overdue installments of interest at the rate borne by the Notes; and, in
addition thereto, such further amounts as shall be sufficient to cover the costs
and expenses of collection, including reasonable compensation to the Trustee,
its agents, attorneys and counsel, any expenses or liabilities incurred by the
Trustee hereunder other than through its negligence or bad faith. Until such
demand is made by the Trustee, the Company may pay the principal of and interest
on the Notes to the Holders, whether or not the Notes be overdue.
(b) In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may enforce
any such judgment or final decree against the Company or any other obligor on
the Notes and collect in the manner provided by law out of the property of the
Company or any other obligor on such series of Notes wherever situated, the
moneys adjudged or decreed to be payable.
(c) In case there shall be pending proceedings relative to the Company
or any other obligor upon the Notes under Title 11 of the United States Code or
any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Company or its property or such other obligor, or in
case of any other comparable judicial proceedings relative to the Company or
such other obligor, or to the creditors or property of the Company or such other
obligor, the Trustee, irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in
such proceedings or otherwise:
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(1) to file and prove a claim or claims for the whole amount
of the principal and interest owing and unpaid in respect of the Notes,
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any
amounts due to the Trustee under Section 8.06 hereof) and of the
Noteholders allowed in any judicial proceedings relative to the Company
or such other obligor, or to the creditors or property of the Company
or such other obligor; and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Noteholders and of
the Trustee on their behalf; and any trustee, receiver, liquidator,
custodian or other similar official is hereby authorized by each of the
Noteholders to make payments to the Trustee, and, in the event that the
Trustee shall consent to the making of the payments directly to the
Noteholders, to pay to the Trustee such amounts due pursuant to Section
8.06 hereof.
(d) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes of any series or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding except to vote for the election of a trustee in bankruptcy or similar
person.
(e) All rights of action and of asserting claims under this Indenture,
or under any of the Notes may be prosecuted and enforced by the Trustee without
the possession of any of the Notes or the production thereof at any trial or
other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee and its agents,
attorneys and counsel, shall be for the ratable benefit of the Holders of the
Notes in respect of which such action was taken.
(f) In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Notes in respect to which action as taken, and it shall not be
necessary to make any Holders of such Notes parties to any such proceedings.
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Section 7.03 Application Of Proceeds. Any moneys collected by the
Trustee with respect to any of the Notes pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee for
the distribution of such moneys, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender thereof
if fully paid.
FIRST: To the payment of all amounts due to the Trustee pursuant to
Section 8.06 hereof;
SECOND: In case the principal of the Outstanding Notes in respect of
which such moneys have been collected shall not have become due and be unpaid,
to the payment of interest on the Notes, in the order of the maturity of the
installments of such interest, with interest (to the extent allowed by law) upon
the overdue installments of interest at the rate borne by the Notes, such
payments to be made ratably to the persons entitled thereto, and then to the
payment to the Holders entitled thereto of the unpaid principal of and
applicable premium on any of the Notes which shall have become due (other than
Notes previously called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), whether at stated maturity or by
redemption, in the order of their due dates, beginning with the earliest due
date, and if the amount available is not sufficient to pay in full all Notes due
on any particular date, then to the payment thereof ratably, according to the
amounts of principal and applicable premium due on that date, to the Holders
entitled thereto, without any discrimination or privilege;
THIRD: In case the principal of the Outstanding Notes in respect of
which such moneys have been collected shall have become due, by declaration or
otherwise, to the payment of the whole amount then owing and unpaid upon the
Notes for principal and any premium and interest thereon, with interest on the
overdue principal and any premium and (to the extent allowed by law) upon
overdue installments of interest at the rate borne by the Notes; and in case
such moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Notes, then to the payment of such principal and any premium and
interest without preference or priority of principal and any premium over
interest, or of interest over principal and any premium or of any installment of
interest over any other installment of interest, or of any Note over any other
Note, ratably to the aggregate of such principal and any premium and accrued and
unpaid interest; and
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FOURTH: To the payment of the remainder, if any, to the Company or its
successors or assigns, or to whomsoever may lawfully be entitled to the same, or
as a court of competent jurisdiction may determine.
Section 7.04 Limitations On Suits By Noteholders.
-----------------------------------
(a) No Holder of any Note shall have any right by virtue of or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such Holder previously shall have given to the Trustee written
notice of an Event of Default with respect to such Note and of the continuance
thereof, as hereinabove provided, and unless also Noteholders of a majority in
aggregate principal amount of the Notes then Outstanding affected by such Event
of Default shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
the taker and Holder of every Note with every other taker and Holder and the
Trustee, that no one or more Holders of Notes shall have any right in any manner
whatever by virtue of or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holder of Notes, or to
obtain or seek to obtain priority over or preference to any other such Holder or
to enforce any right under this Indenture, except in the manner herein provided
and for the equal, ratable and common benefit of all Holders of Notes. For the
protection and enforcement of the provisions of this Section, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
(b) Notwithstanding any other provision in this Indenture, however, the
rights of any Holder of any Note to receive payment of the principal of and any
premium and interest on such Note, on or after the respective due dates
expressed in such Note or on the applicable redemption date, or to institute
suit for the enforcement of any such payment on or after such respective dates
are absolute and unconditional, and shall not be impaired or affected without
the consent of such Holder.
Section 7.05 Suits For Enforcement. In case an Event of Default has
---------------------
occurred, has not been waived and is continuing hereunder, the Trustee may in
its discretion proceed to protect
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and enforce the rights vested in it by this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted to it under this Indenture, or to enforce any other legal
or equitable right vested in the Trustee by this Indenture or by law.
Section 7.06 Powers And Remedies Cumulative; Delay Or Omission Not
Waiver Of Default. No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Notes is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
No delay or omission of the Trustee or of any Holder of Notes to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and, subject to Section 7.04, every right and power given by this
Indenture or by law to the Trustee or to the Holders of Notes may be exercised
from time to time, and as often as shall be deemed expedient, by the Trustee or
by the Holders of Notes, as the case may be.
Section 7.07 Direction Of Proceedings And Waiver Of Defaults By
--------------------------------------------------
Majority Of Noteholders.
- -----------------------
(a) The Holders of a majority in aggregate principal amount of the
Notes at the time Outstanding shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided that such
direction shall not be otherwise than in accordance with law and the provisions
of this Indenture; and provided further that (subject to Section 8.01 hereof)
the Trustee shall have the right to decline to follow any such direction if the
Trustee being advised by counsel determines that the action or proceeding so
directed may not lawfully be taken or if the Trustee in good faith by its board
of directors or trustees, executive committee, or a trust committee of directors
or trustees or Responsible Officers shall determine that the action or
proceeding so directed would involve the Trustee in personal liability. Nothing
in this Indenture shall impair the right of the Trustee in its discretion to
take
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any action deemed proper by the Trustee and which is not inconsistent with such
direction or directions by Noteholders.
(b) The Holders of a majority in aggregate principal amount of the
Notes at the time Outstanding may on behalf of all of the Holders of the Notes
waive any past default or Event of Default hereunder and its consequences except
a default in the payment of principal of or any premium or interest on the
Notes. Upon any such waiver the Company, the Trustee and the Holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively, but no such waiver shall extend to any subsequent or other default
or Event of Default or impair any right consequent thereon. Upon any such
waiver, such default shall cease to exist and be deemed to have been cured and
not to be continuing, and any Event of Default arising therefrom shall be deemed
to have been cured and not to be continuing, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
Section 7.08 Notice Of Default. The Trustee shall, within 90 days after
the occurrence of a default with respect to the Notes, give to all Holders of
the Notes, in the manner provided in Section 14.10, notice of such default known
to the Trustee, unless such default shall have been cured or waived before the
giving of such notice, the term "default" for the purpose of this Section 7.08
being hereby defined to be any event which is or after notice or lapse of time
or both would become an Event of Default; provided that, except in the case of
default in the payment of the principal of or any premium or interest on any of
the Notes, the Trustee shall be protected in withholding such notice if and so
long as its board of directors or trustees, executive committee, or a trust
committee of directors or trustees or Responsible Officers in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Notes.
Section 7.09 Undertaking To Pay Costs. All parties to this Indenture
agree, and each Holder of any Note by acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but this Section 7.09 shall not apply to any suit
instituted by the Trustee, or to any suit
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instituted by any Noteholder, or group of Noteholders, holding in the aggregate
more than 10% in principal amount of the Notes Outstanding, or to any suit
instituted by any Noteholder for the enforcement of the payment of the principal
of or any premium or interest on any Note on or after the due date expressed in
such Note or the applicable redemption date.
Section 7.10 Restoration Of Rights On Abandonment Of Proceedings. In
case the Trustee or any Holder shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee or to
such Holder, then, and in every such case, the Company, the Trustee and the
Holders shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and
the Holders shall continue as though no such proceedings had been taken.
Section 7.11 Waiver Of Usury, Stay Or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01 Duties And Responsibilities Of Trustee.
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(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Indenture. If an Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
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(b) No provisions of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(1) prior to the occurrence of any Event of Default and
after the curing or waiving of all Events of Default which may have
occurred
(A) the duties and obligations of the
Trustee shall be determined solely by the express provisions
of this Indenture, and the Trustee shall not be liable except
for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(B) in the absence of bad faith or actual
knowledge on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction, pursuant to this Indenture, of the Holders of a majority in
principal amount of the Notes, including, but not limited to, Section
7.07 hereof relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee under this Indenture.
Section 8.02 Reliance On Documents, Opinions, Etc. Except as otherwise
------------------------------------
provided in Section 8.01 hereof:
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(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, note or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof is herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders, pursuant to this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred by such
exercise;
(e) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, note or other paper or document, unless requested in writing to
do so by the Holders of at least a majority in principal amount of the then
Outstanding Notes; provided that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
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(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through agents or attorneys;
provided that the Trustee shall not be liable for the conduct or acts of any
such agent or attorney that shall have been appointed in accordance herewith
with due care.
Section 8.03 No Responsibility For Recitals, Etc. The recitals
contained herein and in the Notes (except in the certificate of authentication)
shall be taken as the statements of the Company, 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 Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with this Indenture.
Section 8.04 Trustee, Authenticating Agent, Paying Agent Or Registrar
May Own Notes. The Trustee and any Authenticating Agent, paying agent or
registrar, in its individual or other capacity, may become the owner or pledgee
of Notes with the same rights it would have if it were not Trustee,
Authenticating Agent or paying agent.
Section 8.05 Moneys To Be Held In Trust. Subject to Section 4.04
hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee may allow and credit to the Company interest on any money
received hereunder at such rate, if any, as may be agreed upon by the Company
and the Trustee from time to time as may be permitted by law.
Section 8.06 Compensation And Expenses Of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
law in regard to the compensation of a trustee of an express trust), and the
Company shall pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with this Indenture (including the reasonable compensation and the
reasonable expenses and disbursements of its counsel and agents, including any
Authenticating Agents, and of all persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Company also covenants to indemnify the Trustee for, and to hold
it harmless against, any loss, liability or expense incurred without
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negligence or bad faith on the part of the Trustee and arising out of or in
connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim or liability. The
obligations of the Company under this Section 8.06 to compensate the Trustee and
to pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Notes upon all property and funds held
or collected by the Trustee as such, except funds held in trust for the benefit
of the Holders of any particular Notes.
Section 8.07 Officers' Certificate As Evidence. Whenever in the
administration of this Indenture, the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to the taking, suffering
or omitting of any action hereunder, such matter (unless other evidence in
respect thereof is herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Trustee, and
such Officers' Certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken,
suffered or omitted by it under this Indenture in reliance thereon.
Section 8.08 Conflicting Interest Of Trustee. The Trustee shall be
subject to and shall comply with the provisions of Section 310(b) of the TIA.
Nothing in this Indenture shall be deemed to prohibit the Trustee or the Company
from making any application permitted pursuant to such section.
Section 8.09 Existence And Eligibility Of Trustee. There shall at all
times be a Trustee hereunder which Trustee shall at all times be a corporation
organized and doing business under the laws of the United States or any State
thereof or of the District of Columbia having a combined capital and surplus of
at least $50,000,000 and which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by Federal
or State authorities. Such corporation shall have its principal place of
business in the Borough of Manhattan, The City of New York, State of New York,
if there be such a corporation in such location willing to act upon reasonable
and customary terms and conditions. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid authority, then for the purposes of this Section 8.09, the combined
capital and surplus shall be deemed to be as set forth in its most recent report
of condition so published. No obligor upon the Notes or Person directly or
indirectly controlling, controlled by, or under common control with such obligor
shall
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serve as Trustee. If at any time the Trustee shall cease to be eligible in
accordance with this Section 8.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.10 hereof.
Section 8.10 Resignation Or Removal Of Trustee.
---------------------------------
(a) Pursuant to the provisions of this Article, the Trustee may at any
time resign and be discharged of the trusts created by this Indenture by giving
at least 30 days prior written notice to the Company specifying the day upon
which such resignation shall take effect, and such resignation shall take effect
immediately upon the later of the appointment of a successor trustee and such
day.
(b) Any Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with such Trustee and signed and
acknowledged by the Holders of a majority in principal amount of the then
Outstanding Notes or by their attorneys in fact duly authorized.
(c) So long as no Event of Default has occurred and is continuing, and
no event has occurred and is continuing that, with the giving of notice or the
lapse of time or both, would become an Event of Default, the Company may remove
any Trustee upon written notice to the Holder of each Note Outstanding and the
Trustee and appoint a successor Trustee meeting the requirements of Section
8.09. The Company or the successor Trustee shall give notice to the Holders, in
the manner provided in Section 14.10, of such removal and appointment within 30
days of such removal and appointment.
(d) If at any time (i) the Trustee shall cease to be eligible in
accordance with Section 8.09 hereof and shall fail to resign after written
request therefor by the Company or by any Holder who has been a bona fide Holder
for at least six months, (ii) the Trustee shall fail to comply with Section 8.08
hereof after written request therefor by the Company or any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trustee may be removed forthwith by an instrument or
concurrent instruments in writing filed with the Trustee and either:
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(1) signed by the Chairman, President or any Vice President
of the Company and attested by the Secretary or an Assistant Secretary
of the Company; or
(2) signed and acknowledged by the Holders of a majority in
principal amount of Outstanding Notes or by their attorneys in fact
duly authorized.
(e) Any resignation or removal of the Trustee shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 8.12 hereof.
Section 8.11 Appointment Of Successor Trustee.
--------------------------------
(a) If at any time the Trustee shall resign or be removed, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee.
(b) The Company shall provide written notice of its appointment of a
successor Trustee to the Holder of each Note Outstanding following any such
appointment.
(c) If no appointment of a successor Trustee shall be made pursuant to
Section 8.11(a) hereof within 60 days after appointment shall be required, any
Noteholder or the resigning Trustee may apply to any court of competent
jurisdiction to appoint a successor Trustee. Said court may thereupon after such
notice, if any, as such court may deem proper and prescribe, appoint a successor
Trustee.
(d) Any Trustee appointed under this Section 8.11 as a successor
Trustee shall be a bank or trust company eligible under Section 8.09 hereof and
qualified under Section 8.08 hereof.
Section 8.12 Acceptance By Successor Trustee.
-------------------------------
(a) Any successor Trustee appointed as provided in Section 8.11 hereof
shall execute, acknowledge and deliver to the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee
herein; but nevertheless, on the written request of the Company or of the
successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to Section 8.06 hereof, execute and deliver an instrument
transferring to such successor Trustee all the rights and powers of the Trustee
so ceasing to act. Upon request of any
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such successor Trustee, the Company shall execute any and all instruments in
writing in order more fully and certainly to vest in and confirm to such
successor Trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to Section 8.06 hereof.
(b) No successor Trustee shall accept appointment as provided in this
Section 8.12 unless at the time of such acceptance such successor Trustee shall
be qualified under Section 8.08 hereof and eligible under Section 8.09 hereof.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section 8.12, the successor Trustee shall mail notice of its succession
hereunder to all Holders of Notes as the names and addresses of such Holders
appear on the registry books.
Section 8.13 Succession By Merger, Etc.
-------------------------
(a) Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided such corporation shall be otherwise qualified and
eligible under this Article.
(b) If at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificates
of the Trustee shall have; provided that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Notes in the name of
any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
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Section 8.14 Limitations On Rights Of Trustee As A Creditor. The
Trustee shall be subject to, and shall comply with, the provisions of Section
311 of the TIA.
Section 8.15 Authenticating Agent.
--------------------
(a) There may be one or more Authenticating Agents appointed by the
Trustee with the written consent of the Company, with power to act on its behalf
and subject to the direction of the Trustee in the authentication and delivery
of Notes in connection with transfers and exchanges under Sections 2.06, 2.07,
2.08, 2.13, 3.03, and 12.04 hereof, as fully to all intents and purposes as
though such Authenticating Agents had been expressly authorized by those
Sections to authenticate and deliver Notes. For all purposes of this Indenture,
the authentication and delivery of Notes by any Authenticating Agent pursuant to
this Section 8.15 shall be deemed to be the authentication and delivery of such
Notes "by the Trustee." Any such Authenticating Agent shall be a bank or trust
company or other Person of the character and qualifications set forth in Section
8.09 hereof.
(b) Any corporation into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 8.15, without the execution or filing of any paper or any further act on
the part of the parties hereto or such Authenticating Agent or such successor
corporation.
(c) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section 8.15, the
Trustee may, with the written consent of the Company, appoint a successor
Authenticating Agent, and upon so doing shall give written notice of such
appointment to the Company and shall mail, in the manner provided in Section
14.10, notice of such appointment to the Holders of Notes.
(d) The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services, and the Trustee shall be entitled
to be reimbursed for such payments, in accordance with Section 8.06 hereof.
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(e) Sections 8.02, 8.03, 8.06, 8.07 and 8.09 hereof shall be applicable
to any Authenticating Agent.
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.01 Action By Noteholders. Whenever in this Indenture it is
provided that the Holders of a specified percentage in aggregate principal
amount of the Notes may take any action, the fact that at the time of taking any
such action the Holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by such Noteholders in person or by agent or proxy appointed in
writing, (b) by the record of such Noteholders voting in favor thereof at any
meeting of Noteholders duly called and held in accordance with Article X hereof,
or (c) by a combination of such instrument or instruments and any such record of
such a meeting of Noteholders.
Section 9.02 Proof Of Execution By Noteholders.
---------------------------------
(a) Subject to Sections 8.01, 8.02 and 10.05 hereof, proof of the
execution of any instruments by a Noteholder or the agent or proxy for such
Noteholder shall be sufficient if made in accordance with such reasonable rules
and regulations as may be prescribed by the Trustee or in such manner as shall
be satisfactory to the Trustee. The ownership of Notes shall be proved by the
register for the Notes maintained by the Trustee.
(b) The record of any Noteholders' meeting shall be proven in the
manner provided in Section 10.06 hereof.
Section 9.03 Persons Deemed Absolute Owners. Subject to Sections
2.04(f) and 9.01 hereof, the Company, the Trustee, any paying agent and any
Authenticating Agent shall deem the person in whose name any Note shall be
registered upon the register for the Notes to be, and shall treat such person
as, the absolute owner of such Note (whether or not such Note shall be overdue)
for the purpose of receiving payment of or on account of the principal and
premium, if any, and interest on such Note, and for all other purposes; and
neither the Company nor the Trustee nor any paying agent nor any Authenticating
Agent shall be affected by any notice to the contrary. All such payments shall
be valid and effectual to satisfy and discharge the liability upon any such Note
to the extent of the sum or sums so paid.
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Section 9.04 Company-Owned Notes Disregarded. In determining whether
the Holders of the requisite aggregate principal amount of Outstanding Notes
have concurred in any direction, consent or waiver under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or by any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes shall
be disregarded and deemed not to be Outstanding for the purpose of any such
determination; provided that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Notes which the Trustee knows are so owned shall be so disregarded. Notes
so owned which have been pledged in good faith to third parties may be regarded
as Outstanding for the purposes of this Section 9.04 if the pledgee shall
establish the pledgee's right to take action with respect to such Notes and that
the pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In the case of a dispute as to such right, the Trustee may rely upon an
Opinion of Counsel and an Officers' Certificate to establish the foregoing.
Section 9.05 Revocation Of Consents; Future Holders Bound. Except as
may be otherwise required in the case of a Global Note by the applicable rules
and regulations of the Depositary, at any time prior to the taking of any action
by the Holders of the percentage in aggregate principal amount of the Notes
specified in this Indenture in connection with such action, any Holder of a
Note, which has been included in the Notes the Holders of which have consented
to such action may, by filing written notice with the Trustee at the Corporate
Trust Office of the Trustee and upon proof of ownership as provided in Section
9.02(a) hereof, revoke such action so far as it concerns such Note. Except as
aforesaid, any such action taken by the Holder of any Note shall be conclusive
and binding upon such Holder and upon all future Holders and owners of such Note
and of any Notes issued in exchange, substitution or upon registration of
transfer therefor, irrespective of whether or not any notation thereof is made
upon such Note or such other Notes.
Section 9.06 Record Date For Noteholder Acts. If the Company shall
solicit from the Noteholders any request, demand, authorization, direction,
notice, consent, waiver or other act, the Company may, at its option, by Board
Resolution, fix in advance a record date for the determination of Noteholders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other act may be given before or after the record
date,
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but only the Noteholders of record at the close of business on the record date
shall be deemed to be Noteholders for the purpose of determining whether Holders
of the requisite aggregate principal amount of Outstanding Notes have authorized
or agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other act, and for that purpose the Outstanding Notes
shall be computed as of the record date; provided that no such request, demand,
authorization, direction, notice, consent, waiver or other act by the
Noteholders on the record date shall be deemed effective unless it shall become
effective pursuant to this Indenture not later than six months after the record
date. Any such record date shall be at least 30 days prior to the date of the
solicitation to the Noteholders by the Company.
ARTICLE X
NOTEHOLDERS' MEETING
Section 10.01 Purposes Of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to this Article X for any of
the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any Event of Default
hereunder and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to Article XII;
(b) to remove the Trustee pursuant to Article VIII;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to Section 12.02 hereof; or
(d) to take any other action authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Notes, as the
case may be, under any other provision of this Indenture or under applicable
law.
Section 10.02 Call Of Meetings By Trustee. The Trustee may at any time
call a meeting of Holders of Notes to take any action specified in Section 10.01
hereof, to be held at such time and at such place as the Trustee shall
determine. Notice of every such meeting of Noteholders, setting forth the time
and the place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be given to Holders of the Notes that may be
affected by the action proposed to be taken at such meeting in the manner
provided in Section 14.10 hereof. Such notice shall be
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given not less than 20 nor more than 90 days prior to the date fixed for such
meeting.
Section 10.03 Call Of Meetings By Company Or Noteholders. If at any
time the Company, pursuant to a Board Resolution, or the Holders of at least 10%
in aggregate principal amount of the Notes then Outstanding, shall have
requested the Trustee to call a meeting of Noteholders, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed the notice of such meeting within
20 days after receipt of such request, then the Company or such Noteholders may
determine the time and the place for such meeting and may call such meeting to
take any action authorized in Section 10.01 hereof, by giving notice thereof as
provided in Section 10.02 hereof.
Section 10.04 Qualifications For Voting. To be entitled to vote at any
meetings of Noteholders a Person shall (a) be a Holder of one or more Notes
affected by the action proposed to be taken or (b) be a Person appointed by an
instrument in writing as proxy by a Holder of one or more such Notes. The only
Persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives (including employees) of the Trustee and its
counsel and any representatives (including employees) of the Company and its
counsel.
Section 10.05 Regulations.
------------
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Noteholders in regard to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall think fit.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by the Noteholders as provided in Section 10.03 hereof, in which case
the Company or Noteholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by the Holders of a majority in
aggregate principal amount of the Notes present in person or by proxy at the
meeting.
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(c) Subject to Section 9.04 hereof, at any meeting each Noteholder or
proxy shall be entitled to one vote for each $1,000 principal amount of Notes
held or represented by such Noteholder; provided that no vote shall be cast or
counted at any meeting in respect of any Note determined to be not Outstanding.
The chairman of the meeting shall have no right to vote other than by virtue of
Notes held by such chairman or instruments in writing as aforesaid duly
designating such chairman as the Person to vote on behalf of other Noteholders.
At any meeting of Noteholders duly called pursuant to Section 10.02 or 10.03
hereof, the presence of Persons holding or representing Notes in an aggregate
principal amount sufficient to take action on any business for the transaction
for which such meeting was called shall constitute a quorum. Any meeting of
Noteholders duly called pursuant to Section 10.02 or 10.03 hereof may be
adjourned from time to time by the Holders of a majority in aggregate principal
amount of the Notes present in person or by proxy at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.06 Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballots on which shall be subscribed
the signatures of the Holders of Notes or of their representatives by proxy and
the principal amount of Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of such meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was given as provided in
Section 10.02 hereof. The record shall show the aggregate principal amount of
the Notes voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee and the Trustee shall have
the ballots taken at the meeting attached to such duplicate. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
Section 10.07 Rights Of Trustee Or Noteholders Not Delayed. Nothing in
this Article X shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Noteholders or any rights expressly or impliedly
conferred
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hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Holders of Notes
under any of the provisions of this Indenture or of the Notes.
ARTICLE XI
CONSOLIDATION, MERGER, SALE,
TRANSFER OR CONVEYANCE
Section 11.01 Company May Consolidate, Etc. Only On Certain Terms. The
Company shall not consolidate with or merge into any other corporation or entity
or sell, or otherwise dispose of its properties as or substantially as an
entirety to any Person unless the Company has delivered to the Trustee the
supplemental indenture referred to in (b) below and an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger, conveyance
or transfer and such supplemental indenture comply with this Article XI and that
all conditions precedent herein provided for have been complied with, and the
corporation formed by such consolidation or into which the Company is merged or
the Person which receives such properties pursuant to such sale, transfer or
other disposition (a) shall be a corporation or other entity organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia; and (b) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the due and punctual payment of the principal of
and premium, if any, and interest on all of the Notes and the performance of
every covenant of this Indenture on the part of the Company to be performed or
observed.
Anything in this Indenture to the contrary notwithstanding, the
conveyance or other transfer by the Company of (a) all or any portion of its
facilities for the generation of electric energy, or (b) all of its facilities
for the transmission of electric energy, in each case considered alone or in any
combination with properties described in any other clause, shall in no event be
deemed to constitute a conveyance or other transfer of all the properties of the
Company, as or substantially as an entirety. The character of particular
facilities shall be determined in accordance with the Uniform System of Accounts
prescribed for public utilities and licensees subject to the Federal Power Act,
as amended, to the extent applicable.
Section 11.02 Successor Corporation Substituted. Upon any consolidation
---------------------------------
or merger, or any sale, transfer or other disposition of the properties of the
Company substantially as an entirety in accordance with Section 11.01 hereof,
the successor
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corporation formed by such consolidation or into which the Company is merged or
to which such sale, transfer or other disposition is made shall succeed to, and
be substituted for and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company herein and the Company shall be released from all
obligations hereunder.
ARTICLE XII
SUPPLEMENTAL INDENTURES
Section 12.01 Supplemental Indentures Without Consent Of Noteholders.
------------------------------------------------------
(a) The Company, when authorized by Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for one or more of the following purposes:
(1) to make such provision in regard to matters or questions
arising under this Indenture as may be necessary or desirable, and not
inconsistent with this Indenture or prejudicial to the interests of the
Holders in any material respect, for the purpose of supplying any
omission, curing any ambiguity, or curing, correcting or supplementing
any defective or inconsistent provision;
(2) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Note Outstanding created prior to the
execution of such supplemental indenture which is entitled to the
benefit of such provision or such change or elimination is applicable
only to Notes issued after the effective date of such change or
elimination;
(3) to establish the form of Notes as permitted by Section
2.01 hereof or to establish or reflect any terms of any Note determined
pursuant to Section 2.05 hereof;
(4) to evidence the succession of another corporation to the
Company as permitted hereunder, and the assumption by any such
successor of the covenants of the Company herein and in the Notes;
(5) to grant to or confer upon the Trustee for the benefit of
the Holders any additional rights, remedies, powers or authority;
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(6) to permit the Trustee to comply with any duties imposed
upon it by law;
(7) to specify further the duties and responsibilities of, and
to define further the relationships among the Trustee, any
Authenticating Agent and any paying agent;
(8) to add to the covenants of the Company for the benefit of
the Holders of one or more series of Notes, to add to the security for
the Notes, to surrender a right or power conferred on the Company
herein or to add any Event of Default with respect to one or more
series of Notes;
(9) to comply with the Company's obligations under Section
5.06; and
(10) to make any other change that is not prejudicial to the
Holders in any material respect.
(b) The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
(c) Any supplemental indenture authorized by this Section 12.01 may be
executed by the Company and the Trustee without the consent of the Holders of
any of the Notes at the time Outstanding, notwithstanding any of the provisions
of Section 12.02 hereof.
Section 12.02 Supplemental Indentures With Consent Of Noteholders.
----------------------------------------------------
(a) With the consent (evidenced as provided in Section 9.01 hereof) of
the Holders of a majority in aggregate principal amount of the Notes at the time
Outstanding, the Company, when authorized by Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the
Noteholders; provided that no such supplemental indenture shall:
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(1) change the maturity date of any Note, or reduce the rate
(or change the method of calculation thereof) or extend the time of
payment of interest thereon, or reduce the principal amount thereof or
any premium thereon, or change the coin or currency in which the
principal of any Note or any premium or interest thereon is payable, or
change the date on which any Note may be redeemed or adversely affect
the rights of the Noteholders to institute suit for the enforcement of
any payment of principal of or any premium or interest on any Note; or
(2) modify this Section 12.02(a) or reduce the aforesaid
percentage of Notes, the Holders of which are required to consent to
any such supplemental indenture or to reduce the percentage of Notes,
the Holders of which are required to waive Events of Default, in each
case, without the consent of the Holders of all of the Notes then
Outstanding.
(b) Upon the request of the Company, accompanied by a copy of the Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
(c) A supplemental indenture which changes or eliminates any covenant
or other provision of this Indenture (or any supplemental indenture) which has
expressly been included solely for the benefit of one or more series of Notes,
or which modifies the rights of the Holders of Notes of such series with respect
to such covenant or provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Notes of any other series.
(d) It shall not be necessary for the consent of the Holders of Notes
under this Section 12.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
(e) Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to this Section 12.02, the Trustee shall give
notice in the manner provided in Section 14.10 hereof, setting forth in general
terms the substance of such supplemental indenture, to all Noteholders. Any
failure of the Trustee to give such notice or any defect therein
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shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
Section 12.03 Compliance With Trust Indenture Act; Effect Of
Supplemental Indentures. Any supplemental indenture executed pursuant to this
Article XII shall comply with the TIA. Upon the execution of any supplemental
indenture pursuant to this Article XII, the Indenture shall be and be deemed to
be modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the Noteholders shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 12.04 Notation On Notes. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to this Article XII
may bear a notation in form approved by the Trustee as to any matter provided
for in such supplemental indenture. If the Company shall so determine, new Notes
so modified as approved by the Trustee and the Board of Directors with respect
to any modification of this Indenture contained in any such supplemental
indenture may be prepared and executed by the Company, authenticated by the
Trustee and delivered in exchange for the Notes then Outstanding.
Section 12.05 Evidence Of Compliance Of Supplemental Indenture To Be
Furnished Trustee. The Trustee, subject to Sections 8.01 and 8.02 hereof, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article XII.
ARTICLE XIII
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 13.01 Indenture And Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or any premium or interest on any
Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company,
contained in this Indenture or in any supplemental indenture, or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or
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future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issuance of the Notes.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 14.01 Provisions Binding On Company's Successors. All the
covenants, stipulations, promises and agreements made by the Company in this
Indenture shall bind its successors and assigns whether so expressed or not.
Section 14.02 Official Acts By Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful successor of the
Company.
Section 14.03 Notices. Any notice or demand which by any provision of
this Indenture is required or permitted to be given or served by the Trustee or
by the Noteholders on the Company may be given or served by being deposited
postage prepaid in a post office letter box addressed (until another address is
filed by the Company with the Trustee) at the principal executive offices of the
Company, to the attention of the Secretary. Any notice, direction, request or
demand by any Noteholder or the Company to or upon the Trustee shall be deemed
to have been sufficiently given or made, for all purposes, if given or made in
writing at the Corporate Trust Office of the Trustee, Attention: Corporate Trust
Department.
SECTION 14.04 GOVERNING LAW. THIS INDENTURE AND EACH NOTE SHALL BE
GOVERNED BY AND DEEMED TO BE A CONTRACT UNDER, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE, EXCEPT AS MAY OTHERWISE BE REQUIRED BY
MANDATORY PROVISIONS OF LAW.
Section 14.05 Evidence Of Compliance With Conditions Precedent.
------------------------------------------------
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(a) Upon any application or demand by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
an Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
(b) Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (other than the certificates delivered pursuant
to Section 5.05 hereof) shall include (1) a statement that each Person making
such certificate or opinion has read such covenant or condition and the
definitions relating thereto; (2) a brief statement as to the nature and scope
of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (3) a statement that, in the
opinion of each such Person, such Person has made such examination or
investigation as is necessary to enable such Person to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (4) a statement as to whether or not, in the opinion of each such Person,
such condition or covenant has been complied with.
(c) In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
(d) Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel delivered under the
Indenture may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such person knows, or in the exercise of
reasonable care should know, that the certificate
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or opinion of representations with respect to such matters are erroneous. Any
opinion of counsel delivered hereunder may contain standard exceptions and
qualifications reasonably satisfactory to the Trustee.
(e) Any certificate, statement or opinion of any officer of the
Company, or of counsel, may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an independent
public accountant or firm of accountants, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which the certificate, statement or
opinion of such officer or counsel may be based as aforesaid are erroneous, or
in the exercise of reasonable care should know that the same are erroneous. Any
certificate or opinion of any firm of independent public accountants filed with
the Trustee shall contain a statement that such firm is independent.
(f) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 14.06 Business Days. Unless otherwise provided pursuant to
Section 2.05(c) hereof, in any case where the date of maturity of the principal
of or any premium or interest on any Note or the date fixed for redemption of
any Note is not a Business Day, then payment of such principal or any premium or
interest need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and, in the case of timely payment thereof, no
interest shall accrue for the period from and after such Interest Payment Date
or the date on which the principal or premium, if any, of the Note is required
to be paid.
Section 14.07 Trust Indenture Act To Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the duties
imposed by the TIA, such required provision of the TIA shall govern.
Section 14.08 Table Of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 14.09 Execution In Counterparts. This Indenture may be executed
-------------------------
in any number of counterparts, each of which shall be
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an original, but such counterparts shall together constitute but one and the
same instrument.
Section 14.10 Manner Of Mailing Notice To Noteholders.
----------------------------------------
(a) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or the Company to or
on the Holders of Notes, as the case may be, shall be given or served by
first-class mail, postage prepaid, addressed to the Holders of such Notes at
their last addresses as the same appear on the register for the Notes referred
to in Section 2.06, and any such notice shall be deemed to be given or served by
being deposited in a post office letter box in the form and manner provided in
this Section 14.10. In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give notice to any
Holder by mail, then such notification to such Holder as shall be made with the
approval of the Trustee shall constitute a sufficient notification for every
purpose hereunder.
(b) The Company shall also provide any notices required under this
Indenture by publication, but only to the extent that such publication is
required by the TIA, the rules and regulations of the Commission or any
securities exchange upon which any series of Notes is listed.
Section 14.11 Approval By Trustee Of Expert Or Counsel. Wherever the
Trustee is required to approve an Expert or counsel who is to furnish evidence
of compliance with conditions precedent in this Indenture, such approval by the
Trustee shall be deemed to have been given upon the taking of any action by the
Trustee pursuant to and in accordance with the certificate or opinion so
furnished by such Expert or counsel.
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IN WITNESS WHEREOF, the undersigned, being duly authorized,
have executed this Indenture on behalf of the respective parties hereto as of
the date first above written.
PENNSYLVANIA ELECTRIC COMPANY
By: ---------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
AS TRUSTEE
By: ---------------------------
Name:
Title:
69
Exhibit 4-H
AMENDMENT NO. 1
TO
PAYMENT AND GUARANTEE AGREEMENT
THIS AMENDMENT NO. 1, dated November 23, 1999, is executed and
delivered by Metropolitan Edison Company, a Pennsylvania corporation, to amend
and supplement that certain PAYMENT AND GUARANTEE AGREEMENT, dated as of May 28,
1999 ("Guarantee Agreement") executed and delivered by Metropolitan Edison
Company. Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Guarantee Agreement.
WHEREAS, the Guarantor has previously executed the Guarantee
Agreement for the benefit of the Holder from time to time of the Preferred
Securities of the Issuer.
WHEREAS, the Guarantor desires to guarantee the payment of
certain additional obligations, as set forth below:
NOW, THEREFORE, in consideration of the premises and other
consideration, receipt of which is hereby acknowledged, the Guarantor, intending
to be legally bound hereby, agrees as follows:
SECTION 1.01. To the fullest extent permitted by law, this
Amendment No. 1 shall be effective retroactive to May 28, 1999.
SECTION 1.02. The following sentence is added at the end
of Section 2.01 of the Guarantee Agreement:
The Guarantor also hereby irrevocably and unconditionally
agrees to pay in full all of the costs and expenses of the
General Partner and all of the costs, expenses and liabilities
of the Issuer and Met-Ed Capital Trust that the General
Partner has agreed to pay pursuant to Section 8.03(c) of the
Limited Partnership Agreement or otherwise, to the extent such
costs and expenses are not otherwise paid.
SECTION 1.03. Except as expressly modified herein, the
Guarantee Agreement shall remain in full force and effect.
<PAGE>
THIS AMENDMENT NO. 1 TO THE GUARANTEE AGREEMENT is executed
as of the day and year first above written.
METROPOLITAN EDISON COMPANY
By: -----------------------------
Name: T.G. Howson
Title: Vice President and
Treasurer
2
Exhibit 4-J
AMENDMENT NO. 1
TO
PAYMENT AND GUARANTEE AGREEMENT
THIS AMENDMENT NO. 1, dated November 23, 1999, is executed and
delivered by Pennsylvania Electric Company, a Pennsylvania corporation, to amend
and supplement that certain PAYMENT AND GUARANTEE AGREEMENT, dated as of June
16, 1999 ("Guarantee Agreement") executed and delivered by Pennsylvania Electric
Company. Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Guarantee Agreement.
WHEREAS, the Guarantor has previously executed the Guarantee
Agreement for the benefit of the Holder from time to time of the Preferred
Securities of the Issuer.
WHEREAS, the Guarantor desires to guarantee the payment of
certain additional obligations, as set forth below:
NOW, THEREFORE, in consideration of the premises and other
consideration, receipt of which is hereby acknowledged, the Guarantor, intending
to be legally bound hereby, agrees as follows:
SECTION 1.01. To the fullest extent permitted by law, this
Amendment No. 1 shall be effective retroactive to June 16, 1999.
SECTION 1.02. The following sentence is added at the end
of Section 2.01 of the Guarantee Agreement:
The Guarantor also hereby irrevocably and unconditionally
agrees to pay in full all of the costs and expenses of the
General Partner and all of the costs, expenses and liabilities
of the Issuer and Penelec Capital Trust that the General
Partner has agreed to pay pursuant to Section 8.03(c) of the
Limited Partnership Agreement or otherwise, to the extent such
costs and expenses are not otherwise paid.
SECTION 1.03. Except as expressly modified herein, the
Guarantee Agreement shall remain in full force and effect.
<PAGE>
THIS AMENDMENT NO. 1 TO THE GUARANTEE AGREEMENT is executed as
of the day and year first above written.
PENNSYLVANIA ELECTRIC COMPANY
By: ------------------------------
Name: T.G. Howson
Title: Vice President and
Treasurer
2
Exhibit 10-T
GPU COMPANIES
MASTER DIRECTORS' BENEFITS PROTECTION TRUST
As Amended and Restated Effective [June] 1, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Article Title Page No.
- ------------------ --------
ARTICLE 1 Definitions 2
ARTICLE 2 Establishment of the Trusts 8
ARTICLE 3 Contributions and Accounts 9
ARTICLE 4 Payments to Participants and Beneficiaries 13
ARTICLE 5 Legal Defense Fund 19
ARTICLE 6 Insolvency 23
ARTICLE 7 Payments to Company 24
ARTICLE 8 Investment Authority and Disposition of Income 24
ARTICLE 9 General Powers and Duties of Trustee 26
ARTICLE 10 Taxes, Expenses, and Compensation of Trustee 31
ARTICLE 11 Accounting by Trustee 32
ARTICLE 12 Communications 33
ARTICLE 13 Resignation or Removal of Trustee 34
ARTICLE 14 Amendments and Termination 35
ARTICLE 15 Miscellaneous 36
<PAGE>
AGREEMENT made as of [June] 1, 1999, by and between GPU, INC., a
Pennsylvania corporation (the "Corporation"), GPU NUCLEAR, INC., a New Jersey
corporation, and JERSEY CENTRAL POWER & LIGHT COMPANY, 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 U.S. TRUST COMPANY, NATIONAL ASSOCIATION, a New York
corporation (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
and most recently amended as of November 6, 1997 between each of the Companies
and Summit Bank as 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 Company's Trust
shall constitute an unfunded arrangement and shall not affect the status of each
Company's Plans as unfunded for federal income tax purposes; and
WHEREAS, it is the intention of each Company to make contributions to
its Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under its Plans; and
WHEREAS, each of the Companies wishes to appoint U.S. Trust Company,
National Association to succeed Summit Bank as the trustee of its Trust
effective as of [June] 1, 1999, and U.S. Trust Company, National Association
wishes to accept such appointment, upon the terms and conditions set forth
herein; and
WHEREAS, the parties hereto wish to amend and restate the Prior
Agreement to reflect the appointment of U.S. Trust Company, National Association
as successor trustee of each Trust and to make certain other changes in the
Prior Agreement;
1
<PAGE>
NOW, THEREFORE, the Prior Agreement is hereby amended and restated
effective [June] 1, 1999 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
maintained hereunder, or any Plan, the Company that maintains 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.
(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
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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 with or into the Corporation or in
which securities of the Corporation are issued,
unless such merger, consolidation or reorganization
is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or
reorganization with or into the
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Corporation or in which securities of the Corporation
are issued 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.
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(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.
(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
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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.
(1) "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 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
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(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:
(1) in the case of a Threatened Change in Control
described in Section 1.l(n)(1), the date as of which any
Person described in Section 1.1(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 1.1(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 1.1(n)(3), the date as of which any
Person described in Section 1.1(n)(3) fails to
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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.
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.
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2.3 Each Trust established hereunder is intended to constitute a
"grantor trust", of which the Company is the grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Code, and shall be
construed accordingly.
2.4 The principal of each Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Applicable Company, and shall be
used exclusively for the uses and purposes of Participants under such Company's
Plans and general creditors of such Company, as herein set forth. Participants
and their Beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of any Trust. Any rights created under the
Plans and this Agreement shall be mere unsecured contractual rights of
Participants and their Beneficiaries against the Applicable Company. Any assets
held by each Trust will be subject to the claims of the Applicable Company's
general creditors under federal and state law in the event of the Applicable
Company's Insolvency, as defined in Section 1.1(h) herein.
2.5 Each Trust established hereunder shall be maintained by the Trustee
as a separate trust. However, the assets of any Trust may be commingled with the
assets of any other Trust, solely for investment purposes.
ARTICLE 3
Contributions and Accounts
--------------------------
3.1 Prior to a Change in Control, each Company may make contributions
to its Trust in such amounts, and at such times, as such Company may determine
in its sole discretion. Such contributions may be in the form of cash, or such
other property as may be determined by the Company and as may be acceptable to
the Trustee.
3.2 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
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Date preceding such contribution, will equal the sum of (i) the
aggregate Present Value of all Benefits accrued for all Participants
under all of such Company's Plans determined as of the most recent
Benefit Valuation Date preceding the date on which the Change in
Control occurred; and (ii) the aggregate Present Value of all other
Benefits for all Participants under all of such Company's Plans that
accrue as a result of the occurrence of the Change in Control,
determined as of the first day of the month coincident with or
immediately following the date on which the Change in Control occurred.
(b) Within 60 days after each Benefit Valuation Date following
the occurrence of a Change in Control, each Company shall make an
irrevocable contribution to its Trust in an amount that, when added to
the value of the Trust Fund for such Trust (exclusive of the value of
the Legal Defense Fund, if any, maintained within such Trust Fund)
determined as of the most recent Valuation Date preceding such
contribution, will equal the aggregate Present Value of all Benefits
accrued for all Participants under all of such Company's Plans
determined as of such Benefit Valuation Date.
3.2.2 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.
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(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 Upon, or at any time prior to, the occurrence of a Change in
Control or a Threatened Change in Control, each Company shall direct the Trustee
in writing to establish and maintain, within the Trust Fund for such Company's
Trust, a separate account (hereinafter referred to as a "Plan Account") for each
of the Company's Plans, and to establish and maintain within each such Plan
Account a separate sub-account (hereinafter referred to as a "Participant
Account") for each Participant of such Plan. Each such Plan Account and
Participant Account shall have as its initial balance the amount specified as
the initial balance for such Account in the written direction furnished by the
Applicable Company to the Trustee to establish such Account. 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 After Plan Accounts and Participant Accounts have been established
within the Trust Fund of any Company's Trust, each contribution that is made to
such Trust prior to a Change in Control but not during any Threatened Change in
Control Period 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. After Plan Accounts and Participant Accounts have been established
within the Trust Fund of any Company's Trust, the net investment income, gains
and losses of such Trust Fund for each calendar year that ends prior to a Change
in Control but not during a Threatened Change in
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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 Fund, in such manner as such 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 income, 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 Fund, based on the value of such Accounts
as of the immediately preceding Valuation Date or, if such Accounts were
established after such Valuation Date, based on the amount of the initial
balances of such Accounts as determined under Section 3.3. 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. The net investment income,
gains and losses of any Trust Fund for any year to be allocated among Plan
Accounts and Participant Accounts pursuant to this Section 3.5 shall not include
such portions of the total net investment income, gains and losses of such Trust
Fund for such year as are attributable to the Legal Defense Fund maintained
within such Trust Fund pursuant to Article 5.
3.6 Notwithstanding the provisions of Sections 3.4 and 3.5, the Trustee
shall adjust the balances of the Plan Accounts and/or the Participant Accounts
maintained within the Trust Fund of any Company's Trust at such times and in
such manner as such Company specifies in written instructions delivered to the
Trustee, but only if such instructions are delivered to the Trustee prior to the
occurrence of a Change in Control and not during any Threatened Change in
Control Period.
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 the date of 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)
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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 the date of such contribution. For purposes of the
foregoing, if a Plan Account or a Participant Account was not in existence on
the Valuation Date immediately preceding the date of a contribution made by a
Company to its Trust pursuant to Section 3.2.1(a), 3.2.1(b), 3.2.2(a) or
3.2.2(b), the balance of such Account shall be the initial balance of such
Account as determined under Section 3.3.
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 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 income, gains and losses pursuant to the second
sentence of Section 3.5, and in making any adjustments to the balance of any
Plan Account or 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 Company.
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:
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(a) Prior to a Change in Control, each Company shall deliver to the
Trustee a schedule ("Payment Schedule") substantially in the form annexed hereto
as Exhibit C for each Participant of each Plan whose Benefits under such Plan
may be paid from such Company's Trust after a Change in Control. The Payment
Schedule shall
(i) describe the events that must occur in order for the
Participant's Benefits to become payable under the terms of the Plan;
(ii) specify the amount of the Participant's Benefits accrued
under the Plan, as of the date on which the Payment Schedule is
furnished to the Trustee, and provide a formula or such other
instructions as will enable the Trustee to determine the amount of the
Participant's Benefits as of the time they become payable under the
terms of the Plan;
(iii) specify the form in which the Participant's Benefits
are to be paid, as provided for or available under the Plan;
(iv) specify the time of commencement for payment of the
Participant's Benefits under the Plan; and
(v) specify the address and social security number of the
Participant as well as the name, address, social security number and
relation to the Participant of the Participant's Beneficiary.
Prior to a Change in Control the Applicable Company may from time to
time substitute a new Payment Schedule for, or amend, an existing Payment
Schedule by delivering a new or amended Payment Schedule to the Trustee. Upon
receipt of such new or amended Payment Schedule, the previous Payment Schedule
shall be deemed revoked. Prior to a Change in Control, any Payment Schedule
previously filed with the Trustee may be revoked by the Applicable Company by
filing written notice of such revocation with the Trustee without delivering a
new or amended Payment Schedule to the Trustee. 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 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
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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.
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
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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 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 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
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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 maintained within such Plan Account for
the applicable Participant. Notwithstanding any other provision herein to the
contrary, the Trustee shall not make a payment with respect to a Participant's
Benefits under any Plan to the extent that the amount of the payment otherwise
required to be made exceeds the amount then held in the Plan Account for such
Plan or the amount then held in the Participant Account established within such
Plan Account for the applicable Participant.
If, because of the provisions of this Section 4.4, any amount otherwise
required to be paid by the Trustee to a Participant or Beneficiary with respect
to a Participant's Benefits under any Plan cannot be paid by the Trustee, such
amount shall be paid to the Participant or Beneficiary by the Applicable
Company.
4.5 At such time after a Change in Control as the aggregate amount of
the payments made hereunder from the Participant Account maintained within any
Plan Account for any Participant shall equal the maximum amount that may be paid
from such Participant Account pursuant to the most recent Payment Schedule filed
with respect to such Participant's Benefits under the Plan in question, the
balance then remaining in such Participant Account shall be allocated and
credited, on a pro rata basis, to all other Participant Accounts maintained
within such Plan Account, based on the respective values of such other
Participant Accounts determined as of the most recent Valuation Date preceding
the date as of which such allocation is made.
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, on a
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Account shall be allocated and credited 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 preceding the date as of which
such allocation is made.
4.6 Notwithstanding any other provision of this Agreement to the
contrary, if at any time any Trust is finally determined by the Internal Revenue
Service (the "IRS") not to be a "grantor trust," with the result that the income
of such Trust is not treated as income of the Applicable Company pursuant to
Sections 671 through 679 of the Code, such Trust shall immediately terminate and
the amounts allocated to each Plan Account and Participant Account within such
Trust shall be paid in a cash lump sum as soon as practicable by the Trustee to
the Participants for whom such Accounts were maintained. If any Company should
receive notice of such final determination from the IRS, such Company shall
promptly furnish written notice of such final determination to the Trustee.
4.7 Notwithstanding any other provision of this Agreement to the
contrary, if the IRS should finally determine that any amounts held in any Trust
are includible in the gross income of any Participant or Beneficiary prior to
payment of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Participant or Beneficiary from such
Trust. For purposes of this Section 4.7, the Trustee shall be entitled to rely
on an affidavit by a Participant or Beneficiary to the effect that such a
determination has occurred.
4.8 Each Company may make payment of Benefits directly to Participants
or their Beneficiaries as they become due under the terms of the Applicable
Plans. After a Change in Control, a Company that decides to make payment of
Benefits directly shall notify the Trustee in writing of its decision prior to
the time amounts are payable to the Participants or their Beneficiaries. In
addition, each Company shall remain primarily liable to pay all of the Benefits
provided for under its Plans, to the extent such Benefits are not payable from
such Company's Trust pursuant to this Agreement. Accordingly, if the principal
of the Applicable Company's Trust, and any earnings thereon, are not sufficient
to make payments of Benefits in accordance with the terms of such Company's
Plans, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Applicable Company in writing where principal and
earnings of the Company's Trust are not sufficient.
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ARTICLE 5
Legal Defense Fund
------------------
5. 1 On the written direction of a Company, the Trustee shall establish
within the Trust Fund for such Company's Trust a separate fund, hereinafter
referred to as a "Legal Defense Fund".
A Company's Legal Defense Fund shall consist of such portions of its
contributions to its Trust as the Company shall specify in writing at the time
of contribution, together with all income, gains and losses and proceeds from
the investment, reinvestment and sale thereof, less all payments therefrom and
expenses charged thereto in accordance with the provisions of this Article 5.
Subject to Article 6, a Company's Legal Defense Fund shall be held and
administered by the Trustee exclusively for the purpose of defraying the costs
and expenses incurred by the Trustee in performing its duties under Sections 5.3
and 5.4.
5.2 A Company's Legal Defense Fund shall be maintained and administered
as a separate segregated account, provided, however, that the assets of any
Legal Defense Fund may be commingled with all other assets of the same Trust,
and with the assets of any other Trust, solely for investment purposes.
5.3. If, at any time after a Change in Control, a Participant or
Beneficiary notifies the Trustee in writing that a Company has refused to pay a
claim asserted by such Participant or Beneficiary under any of such Company's
Plans, the Trustee shall promptly review such claim and determine whether it has
any basis in law and fact. If the Trustee determines that the claim has no basis
in law and fact, the Trustee shall notify the Participant or Beneficiary of such
determination, and thereafter shall take no further action with respect to the
claim. If the Trustee determines that there is a basis in law and fact for the
Participant's or Beneficiary's claim, the Trustee shall take the following
actions to assist the Participant or Beneficiary (hereafter referred to as the
"Claimant") to recover on such claim:
(a) The Trustee shall promptly attempt to negotiate with the
Applicable Company to obtain payment, settlement or other disposition
of the claim, subject to the Claimant's consent.
(b) If (i) negotiations fail after 60 days of their
commencement to result in a payment, settlement or other disposition
acceptable to the Claimant, (ii) the Trustee at any time reasonably
believes that further negotiations would not be in the Claimant's best
interest or (iii) any
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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 discretion, to take such action
as it deems appropriate in the Litigation, including settlement or
discontinuance of the Litigation; provided, however, that the Trustee
shall afford the Claimant at least 14 days' advance notice in writing
of any decision by the Trustee to settle or otherwise discontinue the
Litigation.
(e) A Claimant may at any time revoke the authorization of the
Trustee to continue any Litigation on his behalf by delivering to the
Trustee a written revocation in substantially the form attached as
Exhibit F hereto, and notifying the Trustee in writing that the
Claimant has appointed his own counsel (whose fees and expenses shall
not be paid from any Legal Defense Fund) to represent the Claimant in
the Litigation in lieu of counsel retained by the Trustee. Upon the
Trustee's receipt of such revocation and notice, the Trustee shall have
no obligation to proceed further on behalf of the Claimant in the
Litigation, or to pay any costs or expenses incurred in the Litigation
after
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the date on which such revocation and notice is delivered to the
Trustee.
(f) The Trustee shall be empowered to retain counsel and other
appropriate experts, including actuaries and accountants, to assist it
in making any determination under this Section 5.3, in determining
whether to pursue, settle or discontinue any Litigation, and to
prosecute and maintain any such Litigation on behalf of any Claimant.
Notwithstanding the foregoing, each Company, prior to a Change in
Control, may designate in writing the counsel to be retained by the
Trustee after a Change in Control to assist in enforcing the rights of
Claimants under such Company's Plans in accordance with the provisions
of this Section 5.3. If the counsel so designated declines to provide
representation, or if such counsel's representation would involve a
conflict of interest with the Trustee, or if the Trustee is not
satisfied with the quality of representation provided, the Trustee may
dismiss such counsel and engage another qualified law firm for this
purpose; provided, however, that any law firm so engaged may not be the
same law firm that represents any Company after a Change in Control. No
Company may dismiss or engage such counsel, or cause the Trustee to
engage or dismiss such counsel, after a Change in Control.
(g) All costs and expenses incurred by the Trustee in
connection with the performance of its duties under this Section 5.3,
including, without limitation, the payment of reasonable fees, costs
and disbursements of any counsel, actuaries, accountants or other
experts retained by the Trustee pursuant to Section 5.3(f), shall be
charged to and paid from the Applicable Company's Legal Defense Fund.
(h) Notwithstanding any provision herein to the contrary, the
Trustee shall be required to act under this Section 5.3, including,
without limitation, instituting or continuing any Litigation, only to
the extent there are sufficient amounts available in the Applicable
Company's Legal Defense Fund to defray the costs and expenses the
Trustee reasonably anticipates will be incurred in connection with such
action. If, at any time after a Claimant has filed a written notice
with the Trustee under Section 5.3(a) the Trustee determines that there
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
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expenses 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, 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.
Notwithstanding any provision herein to the contrary, the Trustee shall be
required to act under this Section 5.4 only to the extent there are sufficient
amounts available in the Applicable Company's Trust to defray the costs and
expenses the Trustee reasonably anticipates will be incurred in connection with
such action.
5.5 Each Company's Legal Defense Fund shall continue to be held and
administered by the Trustee for the purposes described in Section 5.1 until such
time as all Benefits to which all Participants are entitled under all of such
Company's Plans shall have been paid in full to such Participants or their
Beneficiaries. Any balance then remaining in a Company's Legal Defense Fund
shall be distributed to such Company.
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ARTICLE 6
Insolvency
----------
6.1 The Trustee shall cease making payment hereunder of Benefits payable to
Participants and their Beneficiaries pursuant to a Company's Plans if the
Company is Insolvent.
6.2 At all times during the continuance of each Trust, as provided in
Section 2.4 hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Applicable Company under federal and state
law as set forth below:
(a) The Board of Directors and Chief Executive
Officer of each Company shall have the duty to inform the Trustee in
writing of such Company's Insolvency. If a person claiming to be a
creditor of a Company alleges in writing to the Trustee that such
Company has become Insolvent, the Trustee shall determine whether the
Company is Insolvent and, pending such determination, the Trustee shall
discontinue making payment from such Company's Trust to Participants
and Beneficiaries.
(b) Unless the Trustee has actual knowledge of a Company's
Insolvency, or has received notice from a Company or a person claiming
to be a creditor of such Company alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on such
evidence 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
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Agreement only after the Trustee has determined that the Company is not
Insolvent, or is no longer Insolvent.
6.3 Provided that there are sufficient assets, if the Trustee
discontinues the payment of Benefits from any Trust pursuant to Section 6.2
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their Beneficiaries under the terms of the Applicable Company's
Plan for the period of such discontinuance, less the aggregate amount of any
payments made to Participants or their Beneficiaries by the Company in lieu of
the payments provided for hereunder during any such period of discontinuance.
ARTICLE 7
Payments to Company
-------------------
7.1 Prior to a Change in Control (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.
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
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acceptable to the Trustee or, at any time when no such investment guidelines are
in effect, in Permitted Investments.
8.2 Prior to a Change in Control, the Applicable Company may in its
sole discretion appoint an investment manager to manage the investment of any
part or all of the Trust Fund for any Trust. The Applicable Company shall
promptly inform the Trustee in writing of any such appointment, shall furnish
the Trustee with a copy of the instrument pursuant to which any investment
manager is so appointed, and shall inform the Trustee in writing as to the
specific portions of the Trust Fund for its Trust that will be subject to the
management of such investment manager. During the term of any such appointment,
the investment manager shall have the sole responsibility for the investment and
reinvestment of that portion of any Trust Fund subject to its investment
management, and the Trustee shall have no responsibility for, or liability with
respect to, the investment of such portion of such Trust Fund.
In exercising the powers granted to it hereunder, the Trustee shall
follow the directions of any investment manager with respect to the portion of
any Trust Fund subject to management by such investment manager. All directions
given by an investment manager to the Trustee shall be in writing, signed by an
officer (or a partner) of the investment manager, or by such other person or
persons as may be designated by an officer (or a partner) of the investment
manager. The investment manager may directly place orders for the purchase or
sale of securities, subject to such conditions as may be approved by the
Applicable Company in authorizing the investment manager to effect transactions
directly with respect to the portion of the Trust Fund for any Trust subject to
its management, provided that the Trustee shall nevertheless retain custody of
the assets comprising such portion of the Trust Fund.
The Applicable Company, by written notice to the Trustee, may at any
time terminate its appointment of any investment manager. In such event, the
Applicable Company shall either appoint a successor investment manager for the
portion of the Trust Fund in question, or direct that such portion of the Trust
Fund thereafter be invested and reinvested by the Trustee in accordance with the
provisions of Section 8.1. Until receipt of such written notice, the Trustee
shall be fully protected in relying upon the most recent prior written notice of
appointment of an investment manager.
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;
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provided, however, that the Trust Fund for each Trust shall be so invested and
reinvested only in Permitted Investments.
8.4 In no event may the assets of any Trust be invested in securities
(including stock or rights to acquire stock) or obligations issued by any
Company, other than a de minimis amount held in common investment vehicles in
which the Trustee invests. All rights associated with assets of each Trust shall
be exercised by the Trustee or an Investment Manager appointed under Section
8.2, and shall in no event be exercisable by or rest with Participants.
8.5 During the term of each Trust, all income received by the Trust,
net of expenses and taxes, shall be accumulated and reinvested.
ARTICLE 9
General Powers and Duties of Trustee
------------------------------------
9.1 In addition to the other powers granted to it under this Agreement,
the Trustee shall have the following administrative powers and authority with
respect to the property comprising the Trust Fund for each Trust:
(a) To sell, exchange or transfer any such property at public
or private sale for cash or on credit and grant options for the
purchase or exchange thereof, including call options for property held
in the Trust Fund and put options for the purchase of such property,
including, without limitation, at any time to sell any asset other than
cash held in the Trust Fund to pay Benefits if there is not sufficient
cash in the Trust Fund to pay Benefits.
(b) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to any such property, and to consent to or oppose any such
plan or any action thereunder, or any contract, lease, mortgage,
purchase, sale or other action by any corporation or other entity.
(c) To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited.
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(d) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to consent
to the reorganization, consolidation, merger or readjustment of the
finances of any corporation, company or association, or to the sale,
mortgage, pledge or lease of the property of any corporation, company
or association of any of the securities of which may at any time be
held in the Trust Fund and to do any act with reference thereto,
including the exercise of options, the making of agreements or
subscriptions and the payment of expenses, assessments or
subscriptions, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property
which it may so acquire.
(e) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust.
(f) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
securities or other such property.
(g) To borrow money from any lender in such amounts and upon
such terms and conditions as shall be deemed advisable or proper to
carry out the purposes of the Trust and to pledge any securities or
other property for the repayment of any such loan.
(h) To engage any legal counsel, including (except after the
occurrence of a Change in Control) counsel to any Company, any enrolled
actuary, any accountant or any other suitable agents, to consult with
such counsel, enrolled actuary, accountant or agents with respect to
the construction hereof, the duties of the Trustee hereunder, the
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
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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.
(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.
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The Trustee also shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an asset of any Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor trustee, or to loan to any person the
proceeds of any borrowing against such policy.
Prior to a Change in Control, the Trustee shall exercise the powers
referred to in Section 9.1(h) only as directed by the Applicable Company; and,
with respect to the portion of any Trust Fund for which an investment manager
has been appointed under Section 8.2, the Trustee shall exercise any power
referred to in this Section 9.1, as it relates to the investment management of
such portion of the Trust Fund, only as directed by such investment manager.
After a Change in Control, the Trustee may exercise such powers in its sole and
absolute discretion, except as otherwise provided in Article 8.
Notwithstanding any powers granted to the Trustee pursuant to this
Agreement or to applicable law, the Trustee shall not have any power that could
give any Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
9.2 After a Change in Control, the Trustee shall, subject to Article 6
hereof, discharge its duties under this Agreement solely in the interest of the
beneficiaries of each Trust and (i) for the exclusive purpose of providing
Benefits to such beneficiaries and defraying reasonable expenses of
administering such Trust; (ii) with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and (iii) by diversifying the
investments of the Trust Fund for each Trust so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so.
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.
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9.5 The Trustee shall be under no duties whatsoever except such duties
as are specifically set forth as such in this Agreement, and no implied covenant
or obligation shall be read into this Agreement against the Trustee. Except as
otherwise provided in Article 5, the Trustee shall not be required to take any
action toward the execution or performance of any Trust created hereunder or to
prosecute or defend any suit or claim in respect thereof, unless indemnified to
its satisfaction against loss, liability, and reasonable costs and expenses. The
Trustee shall be under no liability or obligation to anyone with respect to any
failure on the part of any Company to perform any of its obligations under any
Plan or under this Agreement.
9.6 The Applicable Company shall pay and shall protect, indemnify and
save harmless the Trustee and its officers, directors or trustees, employees and
agents from and against any and all losses, liabilities (including liabilities
for penalties), actions, suits, judgments, demands, damages, reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) of any nature arising from or relating to any action or failure to act
by the Trustee, its officers, directors or trustees, employees and agents with
respect to such Company's 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 attributable to any action or failure to act on the Trustee's part
(i) that occurs prior to a Change in Control and that constitutes negligence or
willful misconduct on the part of the Trustee, its officers, directors or
trustees, employees or agents, or (ii) that occurs after a Change in Control and
that constitutes a failure on the part of the Trustee to discharge its duties
under this Agreement in accordance with the standards set forth in Section 9.2.
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.
30
<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 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 preceding the date of payment, in the case of any amount so
charged and paid after a Change in Control.
31
<PAGE>
ARTICLE 11
Accounting by Trustee
---------------------
11.1 For each Trust the Trustee shall keep accurate and detailed
accounts of all its investments, receipts, and disbursements under this
Agreement. Such person or persons as the Applicable Company shall designate
shall be allowed to inspect the books of account relating to such Company's
Trust upon request at any reasonable time during the business hours of the
Trustee.
11.2 Within 90 days after the close of each calendar year, the Trustee
shall transmit to each Company, and certify the accuracy of, a written statement
of the assets and liabilities of the Trust Fund for such Company's Trust at the
close of that year, showing the current value of each asset at that date, and a
written account of all the Trustee's transactions relating to such Trust Fund
during the period from the last previous accounting to the close of that year.
For the purposes of this Section 11.2, the date of the Trustee's resignation or
removal as provided in Article 13 hereof shall be deemed to be the close of a
calendar year.
11.3 Unless a Company shall have filed with the Trustee written
exceptions or objections to any such statement and account within 90 days after
receipt thereof such Company shall be deemed to have approved such statement and
account; and in such case or upon the written approval by such Company of any
such statement and account, the Trustee shall be forever released and discharged
with respect to all matters and things embraced in such statement and account as
though it had been settled by decree of a court of competent jurisdiction in an
action or proceeding to which the Company and all persons having any beneficial
interest in its Trust were parties.
11.4 Nothing contained in this Agreement or in any Plan shall deprive
the Trustee of the right to have a judicial settlement of its accounts with
respect to any Trust. In any proceeding for a judicial settlement of the
Trustee's accounts or for instructions in connection with any Trust, the only
other necessary party thereto in addition to the Trustee shall be the Applicable
Company. If the Trustee so elects, it may bring in as a party or parties
defendant any other person or persons. No person interested in any Trust, other
than the Applicable Company, shall have a right to compel an accounting,
judicial or otherwise, by the Trustee, and each such person shall be bound by
all accounting by the Trustee to such Company, as herein provided, as if the
account had been settled by decree of a court
32
<PAGE>
of competent jurisdiction in an action or proceeding to which such person was a
party.
ARTICLE 12
Communications
--------------
12.1 With respect to any Trust, the Trustee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by an officer of the Applicable Company. Each Company from time to time
shall furnish the Trustee with the names and specimen signatures of the officers
of the Company authorized to act or give directions hereunder and shall promptly
notify the Trustee of the termination of office of any such officer of the
Company and the appointment of a successor thereto. Until notified in writing to
the contrary, the Trustee shall be fully protected in relying upon the most
recent list of the officers of the Company furnished to it by the Company.
12.2 Any action required by any provision of this Agreement to be taken
by the board of directors of a Company shall be evidenced by a resolution of
such board of directors certified to the Trustee by the Secretary or an
Assistant Secretary of the Company under its corporate seal, and the Trustee
shall be fully protected in relying upon any resolution so certified to it.
Unless other evidence with respect thereto has been specifically prescribed in
this Agreement any other action of a Company under any provision of this
Agreement, including any approval of or exceptions to the Trustee's accounts,
shall be evidenced by a certificate signed by an officer of the Company, and the
Trustee shall be fully protected in relying upon such certificate. The Trustee
may accept a certificate signed by an authorized officer of a Company as proof
of any fact or matter that it deems necessary or desirable to have established
in the administration of such Company's Trust (unless other evidence of such
fact or matter is expressly prescribed herein) and the Trustee shall be fully
protected in relying upon the statements in the certificate.
12.3 The Trustee shall be entitled conclusively to rely upon any
written notice, instruction, direction, certificate or other communication
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.
33
<PAGE>
12.4 Until notice be given to the contrary, communications to the
Trustee shall be sent to it at its office at 114 West 47th Street, New York, New
York 10056-1532, Attention: Otis A. Sinnott, Jr.; and communications to any
Company shall be sent to it c/o GPU Service, Inc., 310 Madison Avenue,
Morristown, New Jersey 07962-1957, 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 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
34
<PAGE>
be allowed as administrative expenses of the Trust and shall be paid by the
Applicable Company.
13.4 Each successor trustee shall have the powers and duties conferred
upon the Trustee in this Agreement and the term "Trustee" as used in this
Agreement, except where the context otherwise requires, shall be deemed to
include any successor trustee. Upon designation or appointment of a successor
trustee for any Trust, the Trustee shall transfer and deliver the Trust Fund for
such Trust to the successor trustee, reserving such sums as the Trustee shall
deem necessary to defray its expenses in settling its accounts with respect to
such Trust, to pay any of its compensation with respect to such Trust that is
due and unpaid, and to discharge any obligation of such Trust for which the
Trustee may be liable. If the sums so reserved are not sufficient for these
purposes, the Trustee shall be entitled to recover the amount of any deficiency
from either the Applicable Company or the successor trustee, or both. When the
Trust Fund for such Trust shall have been transferred and delivered to the
successor trustee and the accounts of the Trustee for such Trust have been
settled as provided in Article 11 hereof, the Trustee shall be released and
discharged from all further accountability or liability for the Trust Fund for
such Trust and shall not be responsible in any way for the further disposition
of such Trust Fund or any part thereof.
ARTICLE 14
Amendments and Termination
--------------------------
14.1 Subject to Section 14.2, any or all of the provisions of this
Agreement and any Exhibits annexed hereto, as they relate to any Company's
Trust, may be amended at any time, without the consent of any Participant or
Beneficiary, by a written instrument of amendment, duly executed by the
Applicable Company (or, in the case of an amendment to any Exhibit attached
hereto, as it relates to any Company's Trust, by either the Senior Vice
President, Corporate Affairs of GPU, Inc. or the Senior Vice President and
General Counsel of GPU, Inc.) and by 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
35
<PAGE>
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 Company's Plans. Upon termination of any Trust, any assets remaining
in the Trust Fund for such Trust shall be paid by the Trustee to the Applicable
Company.
ARTICLE 15
Miscellaneous
-------------
15.1 Any provision of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
15.2 Benefits payable to Participants and their Beneficiaries under
this Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
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.
36
<PAGE>
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.
GPU INC.
By:
-------------------------
F. D. Hafer, Chairman and
Chief Executive Officer
ATTEST:
GPU NUCLEAR, INC.
By:
-------------------------
T.G. Broughton, President and
Chief Executive Officer
ATTEST:
JERSEY CENTRAL POWER & LIGHT
COMPANY
By:
--------------------------
F. D. Hafer, Chairman of the
Board and Chief Executive
Officer
ATTEST:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------
[Add Name and Title]
ATTEST:
37
<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. R. Leva
J. W. Oswald
J. M. Pietruski
C. A. Rein
P. R. Roedel
C. A. Trost
P. K. Woolf
GPU Nuclear, Inc. L. L. Humphreys
R. V. Laney
J. D. Townsend
C. A. Trost
W. A. Wilson
W. F. Witzig
Jersey Central Power & Light Company G. E. Persson
S. C. Van Ness
S. B. Wiley
38
<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.
3. All benefit amounts payable under the Deferred Stock Unit 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.
39
<PAGE>
EXHIBIT C
Payment Schedule
----------------
[Material To Be Added.]
40
<PAGE>
EXHIBIT D
PARTICIPANT'S PAYMENT REQUEST FORM
----------------------------------
I, , a Participant [or Beneficiary] in the GPU Companies Master
Directors' Benefits Protection Trust (the "Trust"), adopted September 1, 1995
and most recently amended as of [June] 1, 1999, 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:
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
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.]
41
<PAGE>
EXHIBIT E
AUTHORIZATION TO TRUSTEE
------------------------
TO COMMENCE LITIGATION
----------------------
I, ------------------------------------------------------------------------ , a
Participant in the GPU Companies Master Directors' Benefits Protection Trust
(the "Trust"), adopted September 1, 1995 and most recently amended as of [June]
1, 1999, 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 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.]
42
<PAGE>
EXHIBIT F
REVOCATION OF TRUSTEE'S AUTHORITY
---------------------------------
TO MAINTAIN LITIGATION
----------------------
I, , a Participant in the GPU Companies Master Directors' Benefits
Protection Trust (the "Trust"), adopted September 1, 1995 and most recently
amended as of [June] 1, 1999, 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 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.]
43
<PAGE>
EXHIBIT G
Trustee's Fee Schedule
[Material To Be Added]
44
Exhibit 10-U
GPU COMPANIES
MASTER EXECUTIVES' BENEFITS PROTECTION TRUST
As Amended and Restated Effective [June] 1, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Article Title Page No.
- ------- ------ --------
ARTICLE 1 Definitions 3
ARTICLE 2 Establishment of the Trusts 9
ARTICLE 3 Contributions and Accounts 10
ARTICLE 4 Payments to Participants and Beneficiaries 14
ARTICLE 5 Legal Defense Fund 20
ARTICLE 6 Insolvency 24
ARTICLE 7 Payments to Company 25
ARTICLE 8 Investment Authority and Disposition of Income 25
ARTICLE 9 General Powers and Duties of Trustee 27
ARTICLE 10 Taxes, Expenses, and Compensation of Trustee 32
ARTICLE 11 Accounting by Trustee 33
ARTICLE 12 Communications 34
ARTICLE 13 Resignation or Removal of Trustee 35
ARTICLE 14 Amendments and Termination 36
ARTICLE 15 Miscellaneous 37
<PAGE>
AGREEMENT made as of [June] 1, 1999, by and between GPU, INC., a
Pennsylvania corporation (the "Corporation"), GPU SERVICE, INC., a Pennsylvania
corporation, GPU NUCLEAR, INC., a New Jersey corporation, and JERSEY CENTRAL
POWER & LIGHT COMPANY, 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 U.S. TRUST
COMPANY, NATIONAL ASSOCIATION, a New York corporation (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
and most recently amended as of November 6, 1997 between the Corporation, each
of the Companies, and Summit Bank as 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 Company's Trust
shall constitute an unfunded arrangement and shall not affect the status of each
Company's Plans as unfunded for purposes of those provisions of Title I of the
Employee 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, each of the Companies wishes to appoint U.S. Trust Company,
National Association to succeed Summit Bank as the trustee of its Trust
effective as of [June] 1, 1999, and U.S. Trust Company, National Association
wishes to accept such appointment, upon the terms and conditions set forth
herein; and
WHEREAS, the Corporation, the Companies and the Trustee desire to amend
and restate the Prior Agreement to reflect the appointment of U.S. Trust
Company, National Association as
2
<PAGE>
successor trustee of each Trust and to make certain other changes in the Prior
Agreement;
NOW, THEREFORE, the Prior Agreement is hereby amended and restated
effective [June] 1, 1999 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
maintained hereunder, or any Plan, the Company that maintains 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.
(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,
3
<PAGE>
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 with or into the Corporation or in
which securities of the Corporation are issued,
unless such merger, consolidation or
reorganization is a "Non-Control Transaction".
4
<PAGE>
A "Non-Control Transaction" shall mean a merger,
consolidation or reorganization with or into the
Corporation or in which securities of the
Corporation are issued 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
5
<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 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.
(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 Untied 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
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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 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
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(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:
(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 1.1(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
1.1(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
1.1(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.
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ARTICLE 2
Establishment of the Trusts
---------------------------
2.1 Each Company hereby establishes with the Trustee, and the Trustee
hereby accepts, a Trust consisting of such sums of money and other property
acceptable to the Trustee as such Company shall pay or deliver to the Trustee
from time to time. All such money and other property, all investments and
reinvestments made therewith or proceeds thereof and all earnings and profits
thereon, less all payments therefrom and charges thereto as authorized herein,
are hereinafter referred to as the "Trust Fund" for such Trust. Each Trust Fund
shall be held, administered and disposed of by the Trustee as provided in this
Agreement.
2.2 Prior to a Change in Control, each Trust established hereunder may be
revoked, in whole or in part, by the Applicable Company giving to the Trustee
written notice of such revocation; 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.
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
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any Trust. Any rights created under the Plans and this Agreement shall be mere
unsecured contractual rights of Participants and their Beneficiaries against the
Applicable Company. Any assets held by each Trust will be subject to the claims
of the Applicable Company's general creditors under federal and state law in the
event of the Applicable Company's Insolvency, as defined in Section 1.1(h)
herein.
2.5 Each Trust established hereunder shall be maintained by the Trustee
as a separate trust. However, the assets of any Trust may be commingled with the
assets of any other Trust, solely for investment purposes.
ARTICLE 3
Contributions and Accounts
--------------------------
3.1 Prior to a Change in Control, each Company may make contributions to
its Trust in such amounts, and at such times, as such Company may determine in
its sole discretion. Such contributions may be in the form of cash, or such
other property as may be determined by the Company and as may be acceptable to
the Trustee.
3.2 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.
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(b) Within 60 days after each Benefit Valuation Date following
the occurrence of a Change in Control, each Company shall make an
irrevocable contribution to its Trust in an amount that, when added to
the value of the Trust Fund for such Trust (exclusive of the value of
the Legal Defense Fund, if any, maintained within such Trust Fund)
determined as of the most recent Valuation Date preceding such
contribution, will equal the aggregate Present Value of all Benefits
accrued for all Participants under all of such Company's Plans
determined as of such Benefit Valuation Date.
3.2.2 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.
(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
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Change in Control had occurred on such Benefit Valuation Date.
3.3 Upon, or at any time prior to, the occurrence of a Change in
Control or a Threatened Change in Control, each Company shall direct the Trustee
in writing to establish and maintain, within the Trust Fund for such Company's
Trust, a separate account (hereinafter referred to as a "Plan Account") for each
of the Company's Plans, and to establish and maintain within each such Plan
Account a separate sub-account (hereinafter referred to as a "Participant
Account") for each Participant of such Plan. Each such Plan Account and
Participant Account shall have as its initial balance the amount specified as
the initial balance for such Account in the written direction furnished by the
Applicable Company to the Trustee to establish such Account.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 After Plan Accounts and Participant Accounts have been established
within the Trust Fund of any Company's Trust, each contribution that is made to
such Trust prior to a Change in Control but not during any Threatened Change in
Control Period 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. After Plan Accounts and Participant Accounts have been established
within the Trust Fund of any Company's Trust, the net investment income, gains
and losses of such 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 Fund, in
such manner as such 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 income, 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 Fund, based on the value of such Accounts as of the
immediately preceding Valuation Date or, if such Accounts were established after
such Valuation Date, based on the amount of the initial balances of such
Accounts as
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<PAGE>
determined under Section 3.3. 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. The net investment income, gains and losses of any Trust Fund for
any year to be allocated among Plan Accounts and Participant Accounts pursuant
to this Section 3.5 shall not include such portions of the total net investment
income, gains and losses of such Trust Fund for such year as are attributable to
the Legal Defense Fund maintained within such Trust Fund pursuant to Article 5.
3.6 Notwithstanding the provisions of Sections 3.4 and 3.5, the Trustee
shall adjust the balances of the Plan Accounts and/or the Participant Accounts
maintained within the Trust Fund of any Company's Trust at such times and in
such manner as such Company specifies in written instructions delivered to the
Trustee, but only if such instructions are delivered to the Trustee prior to the
occurrence of a Change in Control and not during any Threatened Change in
Control Period.
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 the date of 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 the date of such contribution. For purposes
of the foregoing, if a Plan Account or a Participant Account was not in
existence on the Valuation Date immediately preceding the date of a contribution
made by a Company to its Trust pursuant to Section 3.2.1(a), 3.2.1(b), 3.2.2(a)
or 3.2.2(b), the balance of such Account shall be the initial balance of such
Account as determined under Section 3.3.
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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 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 income, gains and losses pursuant to the second
sentence of Section 3.5, and in making any adjustments to the balance of any
Plan Account or 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 Company.
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;
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(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 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
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Control shall first file with the Trustee a written request for payment in
substantially the form annexed hereto as Exhibit D ("Payment Request Form"). In
the Payment Request Form so filed, the Participant or Beneficiary shall
(i) identify the Plan or Plans under which the Participant
or Beneficiary has become entitled to payment of Benefits;
(ii) describe the events that entitle the Participant or
Beneficiary to receive payment of Benefits under the terms of the Plan
or Plans, and affirm under oath that such events have occurred;
(iii) affirm under oath that no amount of the Benefits with
respect to which payment from the Trust Fund is sought was previously
paid by the Applicable Company; and
(iv) provide such information (including, without limitation,
information as to the Participant's period of service, compensation and
conditions of employment after a Change in Control) as will enable the
Trustee to determine the amount of the Benefits that the Participant or
Beneficiary is entitled to receive in accordance with the Payment
Schedules furnished to the Trustee with respect to the Participant's
Benefits under the Plan or Plans.
In the case of any Beneficiary seeking payments from a Trust Fund, the
Beneficiary shall furnish to the Trustee, along with the Payment Request Form, a
certified copy of the death certificate of the Participant, an inheritance tax
waiver and such other documents as the Trustee may reasonably require,
including, without limitation, certified copies of letters testamentary. For all
purposes under this Agreement, the Trustee may rely, and shall be fully
protected in relying, on the information contained in any Payment Request Form
(and in any documents accompanying such form) filed with it by any Participant
or Beneficiary.
(c) As soon as practicable after a Payment Request Form has been filed
with it by a Participant or Beneficiary, the Trustee, solely out of the
applicable Trust Fund and with no obligation otherwise to make any payments,
shall make payments to such Participant or Beneficiary in such manner, and at
such times, and in such amounts, as the Trustee shall determine to be payable to
such Participant or Beneficiary under the relevant Plan or Plans based on the
most recent Payment Schedules applicable to the Participant or Beneficiary that
were furnished to the Trustee by the Applicable Company prior to a Change in
Control, and on the information contained in the Payment Request Form (and in
any
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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 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 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
17
<PAGE>
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 maintained within such Plan Account for
the applicable Participant. Notwithstanding any other provision herein to the
contrary, the Trustee shall not make a payment with respect to a Participant's
Benefits under any Plan to the extent that the amount of the payment otherwise
required to be made exceeds the amount then held in the Plan Account for such
Plan or the amount then held in the Participant Account established within such
Plan Account for the applicable Participant.
If, because of the provisions of this Section 4.4, any amount otherwise
required to be paid by the Trustee to a Participant or Beneficiary with respect
to a Participant's Benefits under any Plan cannot be paid by the Trustee, such
amount shall be paid to the Participant or Beneficiary by the Applicable
Company.
4.5 At such time after a Change in Control as the aggregate amount of
the payments made hereunder from the Participant Account maintained within any
Plan Account for any Participant shall equal the maximum amount that may be paid
from such Participant Account pursuant to the most recent Payment Schedule filed
with respect to such Participant's Benefits under the Plan in question, the
balance then remaining in such Participant Account shall be allocated and
credited, on a pro rata basis, to all other Participant Accounts maintained
within such Plan Account, based on the respective values of such other
Participant Accounts determined as of the most recent Valuation Date preceding
the date as of which such allocation is made.
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
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recent Valuation Date preceding the date as of which such allocation is made.
4.6 Notwithstanding any other provision of this Agreement to the
contrary, if at any time any Trust is finally determined by the Internal Revenue
Service (the "IRS") not to be a "grantor trust," with the result that the income
of such Trust is not treated as income of the Applicable Company pursuant to
Sections 671 through 679 of the Code, such Trust shall immediately terminate and
the amounts allocated to each Plan Account and Participant Account within such
Trust shall be paid in a cash lump sum as soon as practicable by the Trustee to
the Participants for whom such Accounts were maintained. If any Company should
receive notice of such final determination from the IRS, such Company shall
promptly furnish written notice of such final determination to the Trustee.
4.7 Notwithstanding any other provision of this Agreement to the
contrary, if the IRS should finally determine that any amounts held in any Trust
are includible in the gross income of any Participant or Beneficiary prior to
payment of such amounts from the Trust, the Trustee shall, as soon as
practicable, pay such amounts to such Participant or Beneficiary from such
Trust. For purposes of this Section 4.7, the Trustee shall be entitled to rely
on an affidavit by a Participant or Beneficiary to the effect that such a
determination has occurred.
4.8 Each Company may make payment of Benefits directly to Participants
or their Beneficiaries as they become due under the terms of the Applicable
Plans. After a Change in Control, a Company that decides to make payment of
Benefits directly shall notify the Trustee in writing of its decision prior to
the time amounts are payable to the Participants or their Beneficiaries. In
addition, each Company shall remain primarily liable to pay all of the Benefits
provided for under its Plans, to the extent such Benefits are not payable from
such Company's Trust pursuant to this Agreement. Accordingly, if the principal
of the Applicable Company's Trust, and any earnings thereon, are not sufficient
to make payments of Benefits in accordance with the terms of such Company's
Plans, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Applicable Company in writing where principal and
earnings of the Company's Trust are not sufficient.
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ARTICLE 5
Legal Defense Fund
------------------
5.1 On the written direction of a Company, the Trustee shall establish
within the Trust Fund for such Company's Trust a separate fund, hereinafter
referred to as a "Legal Defense Fund". A Company's Legal Defense Fund shall
consist of such portions of its contributions to its Trust as the Company shall
specify in writing at the time of contribution, together with all income, gains
and losses and proceeds from the investment, reinvestment and sale thereof, less
all payments therefrom and expenses charged thereto in accordance with the
provisions of this Article 5. Subject to Article 6, a Company's Legal Defense
Fund shall be held and administered by the Trustee exclusively for the purpose
of defraying the costs and expenses incurred by the Trustee in performing its
duties under Sections 5.3 and 5.4.
5.2 administered as a separate segregated account, provided, however,
that the assets of any Legal Defense Fund may be commingled with all other
assets of the same Trust, and with the assets of any other Trust, solely for
investment purposes.
5.3 If at any time after a Change in Control a Participant or
Beneficiary notifies the Trustee in writing that a Company has refused to pay a
claim asserted by such Participant or Beneficiary under any of such Company's
Plans, the Trustee shall promptly review such claim and determine whether it has
any basis in law and fact. If the Trustee determines that the claim has no basis
in law and fact, the Trustee shall notify the Participant or Beneficiary of such
determination, and thereafter shall take no further action with respect to the
claim. If the Trustee determines that there is a basis in law and fact for the
Participant's or Beneficiary's claim, the Trustee shall take the following
actions to assist the Participant or Beneficiary (hereafter referred to as the
"Claimant") to recover on such claim:
(a) The Trustee shall promptly attempt to negotiate with the
Applicable Company to obtain payment, settlement or other disposition
of the claim, subject to the Claimant's consent.
(b) If (i) negotiations fail after 60 days of their
commencement to result in a payment, settlement or other disposition
acceptable to the Claimant, (ii) the Trustee at any time reasonably
believes that further negotiations would not be in the Claimant's best
interest or (iii) any applicable statute of limitations would otherwise
expire within 60 days, the Trustee shall advise the Claimant of
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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 discretion, to take such action
as it deems appropriate in the Litigation, including settlement or
discontinuance of the Litigation; provided, however, that the Trustee
shall afford the Claimant at least 14 days' advance notice in writing
of any decision by the Trustee to settle or otherwise discontinue the
Litigation.
(e) A Claimant may at any time revoke the authorization of the
Trustee to continue any Litigation on his behalf by delivering to the
Trustee a written revocation in substantially the form attached as
Exhibit F hereto, and notifying the Trustee in writing that the
Claimant has appointed his own counsel (whose fees and expenses shall
not be paid from any Legal Defense Fund) to represent the Claimant in
the Litigation in lieu of counsel retained by the Trustee. Upon the
Trustee's receipt of such revocation and notice, the Trustee shall have
no obligation to proceed further on behalf of the Claimant in the
Litigation, or to pay any costs or expenses incurred in the Litigation
after the date on which such revocation and notice is delivered to the
Trustee.
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(f) The Trustee shall be empowered to retain counsel and other
appropriate experts, including actuaries and accountants, to assist it
in making any determination under this Section 5.3, in determining
whether to pursue, settle or discontinue any Litigation, and to
prosecute and maintain any such Litigation on behalf of any Claimant.
Notwithstanding the foregoing, each Company, prior to a Change in
Control, may designate in writing the counsel to be retained by the
Trustee after a Change in Control to assist in enforcing the rights of
Claimants under such Company's Plans in accordance with the provisions
of this Section 5.3. If the counsel so designated declines to provide
representation, or if such counsel's representation would involve a
conflict of interest with the Trustee, or if the Trustee is not
satisfied with the quality of representation provided, the Trustee may
dismiss such counsel and engage another qualified law firm for this
purpose; provided, however, that any law firm so engaged may not be the
same law firm that represents any Company after a Change in Control. No
Company may dismiss or engage such counsel, or cause the Trustee to
engage or dismiss such counsel, after a Change in Control.
(g) All costs and expenses incurred by the Trustee in
connection with the performance of its duties under this Section 5.3,
including, without limitation, the payment of reasonable fees, costs
and disbursements of any counsel, actuaries, accountants or other
experts retained by the Trustee pursuant to Section 5.3(f), shall be
charged to and paid from the Applicable Company's Legal Defense Fund.
(h) Notwithstanding any provision herein to the contrary, the
Trustee shall be required to act under this Section 5.3, including,
without limitation, instituting or continuing any Litigation, only to
the extent there are sufficient amounts available in the Applicable
Company's Legal Defense Fund to defray the costs and expenses the
Trustee reasonably anticipates will be incurred in connection with such
action. If, at any time after a Claimant has filed a written notice
with the Trustee under Section 5.3(a) the Trustee determines that there
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
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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, 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.
Notwithstanding any provision herein to the contrary, the Trustee shall be
required to act under this Section 5.4 only to the extent there are sufficient
amounts available in the Applicable Company's Trust to defray the costs and
expenses the Trustee reasonably anticipates will be incurred in connection with
such action.
5.5 Each Company's Legal Defense Fund shall continue to be held and
administered by the Trustee for the purposes described in Section 5.1 until such
time as all Benefits to which all Participants are entitled under all of such
Company's Plans shall have been paid in full to such Participants or their
Beneficiaries. Any balance then remaining in a Company's Legal Defense Fund
shall be distributed to such Company.
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ARTICLE 6
Insolvency
----------
6.1 The Trustee shall cease making payment hereunder of Benefits
payable to Participants and their Beneficiaries pursuant to a Company's Plans if
the Company is Insolvent.
6.2 At all times during the continuance of each Trust, as provided in
Section 2.4 hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Applicable Company under federal and state
law as set forth below:
(a) The Board of Directors and Chief Executive Officer of each
Company shall have the duty to inform the Trustee in writing of such
Company's Insolvency. If a person claiming to be a creditor of a Company
alleges in writing to the Trustee that such Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall discontinue making
payment from such Company's Trust to Participants and Beneficiaries.
(b) Unless the Trustee has actual knowledge of a Company's
Insolvency, or has received notice from a Company or a person claiming
to be a creditor of such Company alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on such
evidence 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.
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6.3 Provided that there are sufficient assets, if the Trustee
discontinues the payment of Benefits from any Trust pursuant to Section 6.2
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their Beneficiaries under the terms of the Applicable Company's
Plan for the period of such discontinuance, less the aggregate amount of any
payments made to Participants or their Beneficiaries by the Company in lieu of
the payments provided for hereunder during any such period of discontinuance.
ARTICLE 7
Payments to Company
-------------------
7.1 Prior to a Change in Control (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.
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.
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8.2 Prior to a Change in Control, the Applicable Company may in its
sole discretion appoint an investment manager to manage the investment of any
part or all of the Trust Fund for any Trust. The Applicable Company shall
promptly inform the Trustee in writing of any such appointment, shall furnish
the Trustee with a copy of the instrument pursuant to which any investment
manager is so appointed, and shall inform the Trustee in writing as to the
specific portions of the Trust Fund for its Trust that will be subject to the
management of such investment manager. During the term of any such appointment,
the investment manager shall have the sole responsibility for the investment and
reinvestment of that portion of any Trust Fund subject to its investment
management, and the Trustee shall have no responsibility for, or liability with
respect to, the investment of such portion of such Trust Fund.
In exercising the powers granted to it hereunder, the Trustee shall
follow the directions of any investment manager with respect to the portion of
any Trust Fund subject to management by such investment manager. All directions
given by an investment manager to the Trustee shall be in writing, signed by an
officer (or a partner) of the investment manager, or by such other person or
persons as may be designated by an officer (or a partner) of the investment
manager. The investment manager may directly place orders for the purchase or
sale of securities, subject to such conditions as may be approved by the
Applicable Company in authorizing the investment manager to effect transactions
directly with respect to the portion of the Trust Fund for any Trust subject to
its management, provided that the Trustee shall nevertheless retain custody of
the assets comprising such portion of the Trust Fund.
The Applicable Company, by written notice to the Trustee, may at any
time terminate its appointment of any investment manager. In such event, the
Applicable Company shall either appoint a successor investment manager for the
portion of the Trust Fund in question, or direct that such portion of the Trust
Fund thereafter be invested and reinvested by the Trustee in accordance with the
provisions of Section 8.1. Until receipt of such written notice, the Trustee
shall be fully protected in relying upon the most recent prior written notice of
appointment of an investment manager.
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.
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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
------------------------------------
In addition to the other powers granted to it under this Agreement, the
Trustee shall have the following administrative powers and authority with
respect to the property comprising the Trust Fund for each Trust:
(a) To sell, exchange or transfer any such property at public
or private sale for cash or on credit and grant options for the
purchase or exchange thereof, including call options for property held
in the Trust Fund and put options for the purchase of such property,
including, without limitation, at any time to sell any asset other than
cash held in the Trust Fund to pay Benefits if there is not sufficient
cash in the Trust Fund to pay Benefits.
(b) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to any such property, and to consent to or oppose any such
plan or any action thereunder, or any contract, lease, mortgage,
purchase, sale or other action by any corporation or other entity.
(c) To deposit any such property with any protective,
reorganization or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited.
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(d) To exercise any conversion privilege or subscription right
available in connection with any such property; to oppose or to consent
to the reorganization, consolidation, merger or readjustment of the
finances of any corporation, company or association, or to the sale,
mortgage, pledge or lease of the property of any corporation, company
or association of any of the securities of which may at any time be
held in the Trust Fund and to do any act with reference thereto,
including the exercise of options, the making of agreements or
subscriptions and the payment of expenses, assessments or
subscriptions, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property
which it may so acquire.
(e) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to settle,
compromise or submit to arbitration, any claims, debts or damages, due
or owing to or from the Trust.
(f) To exercise, personally or by general or limited power of
attorney, any right, including the right to vote, appurtenant to any
securities or other such property.
(g) To borrow money from any lender in such amounts and upon
such terms and conditions as shall be deemed advisable or proper to
carry out the purposes of the Trust and to pledge any securities or
other property for the repayment of any such loan.
(h) To engage any legal counsel, including (except after the
occurrence of a Change in Control) counsel to any Company, any enrolled
actuary, any accountant or any other suitable agents, to consult with
such counsel, enrolled actuary, accountant or agents with respect to
the construction hereof, the duties of the Trustee hereunder, the
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.
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(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.
(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).
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(p) To invest and reinvest all or any specified portion of any
Trust Fund through the medium of any common, collective, or commingled
trust fund that has been or may hereafter be established and maintained
by the Trustee.
(q) To invest in mutual funds registered with the Securities
Exchange Commission under the Investment Company Act of 1940.
The Trustee also shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an asset of any Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor trustee, or to loan to any person the
proceeds of any borrowing against such policy.
Prior to a Change in Control, the Trustee shall exercise the powers
referred to in Section 9.1(h) only as directed by the Applicable Company; and,
with respect to the portion of any Trust Fund for which an investment manager
has been appointed under Section 8.2, the Trustee shall exercise any power
referred to in this Section 9.1, as it relates to the investment management of
such portion of the Trust Fund, only as directed by such investment manager.
After a Change in Control, the Trustee may exercise such powers in its sole and
absolute discretion, except as otherwise provided in Article 8.
Notwithstanding any powers granted to the Trustee pursuant to this
Agreement or under applicable law, the Trustee shall not have any power that
could give any Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
9.2 After a Change in Control, the Trustee shall, subject to Article 6
hereof, discharge its duties under this Agreement solely in the interest of the
beneficiaries of each Trust and (i) for the exclusive purpose of providing
Benefits to such beneficiaries and defraying reasonable expenses of
administering such Trust; (ii) with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and (iii) by diversifying the
investments of the Trust Fund for each Trust so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so.
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9.3 The Trustee shall not be required to give any bond or any other
security for the faithful performance of its duties under this Agreement, except
as required by law.
9.4 Except as otherwise expressly provided herein, the Trustee shall
not be responsible in any respect for administering any Plan; nor shall the
Trustee be responsible for the adequacy of the Trust Fund for any Trust to meet
and discharge all payments and liabilities under any Plan.
9.5 The Trustee shall be under no duties whatsoever except such duties
as are specifically set forth as such in this Agreement, and no implied covenant
or obligation shall be read into this Agreement against the Trustee. Except as
otherwise provided in Article 5, the Trustee shall not be required to take any
action toward the execution or performance of any Trust created hereunder or to
prosecute or defend any suit or claim in respect thereof, unless indemnified to
its satisfaction against loss, liability, and reasonable costs and expenses. The
Trustee shall be under no liability or obligation to anyone with respect to any
failure on the part of any Company to perform any of its obligations under any
Plan or under this Agreement.
9.6 Each Company has represented to the Trustee that each of its Plans
(i) is an excess benefit plan within the meaning of Section 4(b) of ERISA, or
(ii) is a "top-hat" plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees, which is exempt from the provisions of Part 4 of Title I of ERISA, or
(iii) is otherwise not subject to the provisions of Part 4 of Title I of ERISA.
9.7 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 such Company's Trust, or arising from or relating to the transactions
contemplated by this Agreement that pertain to or affect such trust, (including
any such liability the Trustee may incur as a result of any action or failure to
act on its part that would constitute a breach of fiduciary duty under ERISA
with respect to any Plan of such Company that is determined to be subject to the
provisions of Part 4 of Title I of ERISA), except to the extent that any such
loss, liability, action, suit, demand, damage, cost or expense is attributable
to any action or
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failure to act on the Trustee's part (i) that occurs prior to a Change in
Control and that constitutes negligence or willful misconduct on the part of the
Trustee, its officers, directors or trustees, employees or agents, or (ii) that
occurs after a Change in Control and that constitutes a failure on the part of
the Trustee to discharge its duties under this Agreement in accordance with the
standards set forth in Section 9.2.
If the Trustee shall become entitled to indemnification by any Company
pursuant to this Section 9.7 and such Company fails to provide such
indemnification to the Trustee within 30 days of the Company's receipt of a
written request from the Trustee for such indemnification, the Trustee may apply
assets of such Company's Trust in full satisfaction of the Company's obligation
to make such indemnification. Promptly after any assets of any Trust are so
applied, the Trustee shall institute legal proceedings on behalf of the Trust to
recover from the Applicable Company an amount equal to the amount of any Trust
assets so applied.
ARTICLE 10
Taxes, Expenses, and Compensation of Trustee
--------------------------------------------
10.1 Each Company shall pay any federal, state, local or other taxes
imposed or levied with respect to the corpus and/or income of its Trust or any
part thereof under existing or future laws and such Company in its discretion,
or the Trustee in its discretion may contest the validity or amount of any tax,
assessment, claim or demand respecting such Trust or any part thereof.
10.2 Each Company shall pay to the Trustee its allocable share of the
compensation that is payable to the Trustee for its services hereunder pursuant
to the schedule of fees annexed hereto as Exhibit G. Each Company shall also pay
its allocable share of the reasonable and necessary expenses incurred by the
Trustee in the performance of its duties under this Agreement, including
reasonable fees of any counsel, actuary, accountant or other agent engaged by
the Trustee pursuant to this Agreement. Any such compensation or expenses shall
be allocated among the Companies as follows: in the case of any such
compensation that is specifically chargeable to, or any such expenses that were
specifically incurred with respect to, a particular Trust, the amount of such
compensation or expenses shall be allocated solely to the Applicable Company; in
the case of any such compensation that is not specifically chargeable to, or any
such expenses that were not specifically incurred with respect to, a particular
Trust, the amount of such compensation or expenses shall be
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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 preceding the date of payment, in the case of any
amount so charged and paid after a Change in Control.
ARTICLE 11
Accounting by Trustee
---------------------
11.1 For each Trust, the Trustee shall keep accurate and detailed
accounts of all its investments, receipts, and disbursements under this
Agreement. Such person or persons as the Applicable Company shall designate
shall be allowed to inspect the books of account relating to such Company's
Trust upon request at any reasonable time during the business hours of the
Trustee.
11.2 Within 90 days after the close of each calendar year, the Trustee
shall transmit to each Company, and certify the accuracy of, a written statement
of the assets and liabilities of the Trust Fund for such Company's Trust at the
close of that year, showing the current value of each asset at that date, and a
written account of all the Trustee's transactions relating to such Trust Fund
during the period from the last previous accounting to the close of that year.
For the purposes of this Section 11.2, the date of the Trustee's resignation or
removal as provided in Article 13 hereof shall be deemed to be the close of a
calendar year.
11.3 Unless a Company shall have filed with the Trustee written
exceptions or objections to any such statement and account within 90 days after
receipt thereof, such Company shall be deemed to have approved such statement
and account; and in such case or upon the written approval by such Company of
any
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such statement and account, the Trustee shall be forever released and discharged
with respect to all matters and things embraced in such statement and account as
though it had been settled by decree of a court of competent jurisdiction in an
action or proceeding to which the Company and all persons having any beneficial
interest in its Trust were parties.
11.4 Nothing contained in this Agreement or in any Plan shall deprive
the Trustee of the right to have a judicial settlement of its accounts with
respect to any Trust. In any proceeding for a judicial settlement of the
Trustee's accounts or for instructions in connection with any Trust, the only
other necessary party thereto in addition to the Trustee shall be the Applicable
Company. If the Trustee so elects, it may bring in as a party or parties
defendant any other person or persons. No person interested in any Trust, other
than the Applicable Company, shall have a right to compel an accounting,
judicial or otherwise, by the Trustee, and each such person shall be bound by
all accounting by the Trustee to such Company, as herein provided, as if the
account had been settled by decree of a court of competent jurisdiction in an
action or proceeding to which such person was a party.
ARTICLE 12
Communications
--------------
12.1 With respect to any Trust, the Trustee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by an officer of the Applicable Company. Each Company from time to time
shall furnish the Trustee with the names and specimen signatures of the officers
of the Company authorized to act or give directions hereunder and shall promptly
notify the Trustee of the termination of office of any such officer of the
Company and the appointment of a successor thereto. Until notified in writing to
the contrary, the Trustee shall be fully protected in relying upon the most
recent list of the officers of the Company furnished to it by the Company.
12.2 Any action required by any provision of this Agreement to be taken
by the board of directors of a Company shall be evidenced by a resolution of
such board of directors certified to the Trustee by the Secretary or an
Assistant Secretary of the Company under its corporate seal, and the Trustee
shall be fully protected in relying upon any resolution so certified to it.
Unless other evidence with respect thereto has been specifically prescribed in
this Agreement, any other action of a Company under any provision of this
Agreement, including any approval of or
34
<PAGE>
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 114 West 47th Street, New York, New
York 10056-1532, Attention: Otis A. Sinnott, Jr.; and communications to any
Company shall be sent to it c/o GPU Service, Inc., 310 Madison Avenue,
Morristown, New Jersey 07962-1957, 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.
35
<PAGE>
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 such
proceeding shall be allowed as administrative expenses of the Trust and shall be
paid by the Applicable Company.
13.4 Each successor trustee shall have the powers and duties conferred
upon the Trustee in this Agreement, and the term "Trustee" as used in this
Agreement, except where the context otherwise requires, shall be deemed to
include any successor trustee. Upon designation or appointment of a successor
trustee for any Trust, the Trustee shall transfer and deliver the Trust Fund for
such Trust to the successor trustee, reserving such sums as the Trustee shall
deem necessary to defray its expenses in settling its accounts with respect to
such trust, to pay any of its compensation with respect to such Trust that is
due and unpaid, and to discharge any obligation of such Trust for which the
Trustee may be liable. If the sums so reserved are not sufficient for these
purposes, the Trustee shall be entitled to recover the amount of any deficiency
from either the Applicable Company or the successor trustee, or both. When the
Trust Fund for such Trust shall have been transferred and delivered to the
successor trustee and the accounts of the Trustee for such Trust have been
settled as provided in Article 11 hereof, the Trustee shall be released and
discharged from all further accountability or liability for the Trust Fund for
such Trust and shall not be responsible in any way for the further disposition
of such Trust Fund or any part thereof.
ARTICLE 14
Amendments and Termination
--------------------------
14.1 Subject to Section 14.2, any or all of the provisions of this
Agreement and any Exhibits annexed hereto, as they relate to any Company's
Trust, may be amended at any time, without the
36
<PAGE>
consent of any Participant or Beneficiary, by a written instrument of amendment
duly executed by the Applicable Company (or, in the case of an amendment to any
Exhibit attached hereto, as it relates to any Company's Trust, by either the
Executive Vice President, Corporate Affairs of GPU Service, Inc. or the
Executive Vice President and General Counsel of GPU Service, Inc.) and by 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 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.
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,
37
<PAGE>
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
15.3 This Agreement shall be governed by, and shall be construed in
accordance with, and each Trust hereby created shall be administered in
accordance with the laws of the State of New Jersey.
15.4 The titles to Articles of this Agreement are placed herein for
convenience of reference only, and this Agreement is not to be construed by
reference thereto.
15.5 This Agreement shall bind and inure to the benefit of the
successors and assigns of each Company and the Trustee, respectively, and all
Participants and Beneficiaries under the Companies' Plans.
15.6 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute but one instrument, which may be sufficiently evidenced by any
counterpart.
38
<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 theday and year first above written.
GPU, INC.
GPU SERVICE, INC.
By:-----------------------------------
F.D. Hafer, Chairman, President and
Chief Executive Officer
ATTEST:
GPU NUCLEAR, INC.
By:-----------------------------------
T.G. Broughton, President and
Chief Executive Officer
ATTEST:
JERSEY CENTRAL POWER & LIGHT COMPANY
By:-----------------------------------
F.D. Hafer, Chairman of the Board and
Chief Executive Officer
ATTEST:
U. S. TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:___________________________________
[Add Name and Title]
ATTEST:
39
<PAGE>
EXHIBIT A
LIST OF PARTICIPANTS
Company Participants
------- ------------
Jersey Central Power & Light Company James R. Leva (Retired)
GPU Service, Inc. Robert C. Arnold (Retired)
Dennis P. Baldassari
Verner M. Condon (Retired)
Herman Dieckamp (Retired)
F. Allen Donofrio (Retired)
John G. Graham (Retired)
Fred D. Hafer
Terrence G. Howson
Ira H. Jolles
William G. Kuhns (Retired)
James R. Leva (Retired)
Bruce L. Levy
James B. Liberman (Retired)
Peter E. Maricondo
Philip C. Mezey (Retired)
Mary A. Nalewako
Hazel R. O'Leary (Retired)
Carole B. Snyder
Robert L. Wise
GPU Nuclear, Inc. Philip R. Clark (Retired)
Thomas G. Broughton
1
<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 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.
GPU Service, Inc.
-----------------
1. The severance payment benefit provided under the GPU Service, Inc.
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 Companies Supplemental
Executive Retirement Plan.
7. All benefit amounts payable under the GPU Companies Deferred
Compensation Plan.
8. Awards for Performance Periods preceding and including Change in
Control payable under the Incentive Compensation Plan for Elected Officers of
GPU Service, Inc.
9. Cash payments for deferred Restricted Units, Performance Units,
and stock options, payable under the 1990 Stock Plan for Employees of GPU, Inc.
and Subsidiaries.
1
<PAGE>
10. Premiums on life insurance policies issued under Senior Executive
Life Insurance Program, payable by GPU Service, Inc. pursuant to Split Dollar
Agreements with Robert C. Arnold, Dennis P. Baldassari, Fred D. Hafer, Ira H.
Jolles, James R. Leva, Bruce L. Levy, Philip C. Mezey, Carole B. Snyder and
Robert L. Wise.
11. Supplemental pension payable to William G. Kuhns pursuant to the
Agreement among GPU, Inc., GPU Service, Inc. and Mr. Kuhns.
12. The retirement annuity payable to James B. Liberman pursuant to
the Agreement between GPU Service, Inc. and Mr. Liberman.
13. The supplemental pension payable to Herman Dieckamp pursuant to
the Agreement among GPU, Inc., GPU Service, Inc. and Mr. Dieckamp.
14. Annuities payable to William G. Kuhns, Herman Dieckamp and to
Verner M. Condon under the Deferred Compensation Plan for Senior Officers of
GPU Service, Inc.
15. The supplemental pensions payable to Robert C. Arnold and
Robert L. Wise pursuant to Agreements between GPU Service, Inc. and
Messrs. Arnold and Wise, and the supplemental pension payable to James R. Leva
pursuant to an Agreement between GPU, Inc. and Mr. Leva.
16. The severance payment benefit payable to Dennis P. Baldassari,
Fred D. Hafer, Ira H. Jolles, Bruce L. Levy, Robert L. Wise and Carole B. Snyder
under the Severance Protection Agreements between GPU, Inc., GPU Service, Inc.
and each of Messrs. Baldassari, Hafer, Jolles, Levy, Wise and Ms. Snyder.
GPU Nuclear, Inc.
-----------------
1. All benefit amounts payable under the GPU Nuclear, Inc.
Supplemental and Excess Benefits Plan.
2. All benefit amounts payable under the GPU Companies Deferred
Compensation Plan.
3. Awards for Performance Periods preceding and including Change in
Control payable under the Incentive Compensation Plan for Elected Officers of
GPU Nuclear, Inc.
2
<PAGE>
4. Cash payments for deferred Restricted Units, Performance Units
Awards, and stock options, 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 Nuclear, Inc. pursuant to Split Dollar
Agreements with Philip R. Clark and Thomas G. Broughton.
6. The supplemental pension payable to Philip R. Clark pursuant to the
Agreement between GPU Nuclear, Inc. and Mr. Clark.
7. The severance payment benefit payable to Thomas G. Broughton under
the Severance Protection Agreement between Mr. Broughton, GPU Nuclear, Inc. and
GPU, Inc.
3
<PAGE>
EXHIBIT C-1
GPU RABBI TRUST
PARTICIPANT INFORMATION
Name Address Social
Security Number
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
1
<PAGE>
Name Address Social
Security Number
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
2
<PAGE>
EXHIBIT C-2
GPU RABBI TRUST
SEVERANCE PLAN - --------
TERMS OF PAYMENT:
- ----------------
AMOUNT OF PAYMENT:
- -----------------
Weeks Base Pay Payment
----- -------- -------
FORM/TIMING OF PAYMENT: Lump sum.
- ----------------------
3
<PAGE>
EXHIBIT C-3
GPU RABBI TRUST
INCENTIVE COMPENSATION PLAN
TERMS OF PAYMENT:
- ----------------
AMOUNT OF PAYMENT:
- -----------------
Payment
-------
FORM/TIMING OF PAYMENT: Lump sum.
- ----------------------
4
<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.
5
<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.
6
<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 ------------.
- ----------------------
7
<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.
8
<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.
9
<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:
- -----------------
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.
10
<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 4/20/95, signed 4/20/95).
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.
11
<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 11/1/96).
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.
12
<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.
AMOUNT OF PAYMENT:
- -----------------
FORM/TIMING OF PAYMENT: On or before ---------- the amount indicated above
- ----------------------
shall be paid to the participant or his beneficiary.
13
<PAGE>
EXHIBIT D
PARTICIPANT'S PAYMENT REQUEST FORM
I, -----------------------------------------------------------------,
a Participant [or Beneficiary] in the GPU Companies Master Executives' Benefits
Protection Trust (the "Trust"), adopted September 1, 1995 and most recently
amended as of [June] 1, 1999, 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 ad 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.]
14
<PAGE>
EXHIBIT E
REQUEST AND AUTHORIZATION FOR LITIGATION
I, -----------------------------------------------------------------,
a Participant in the GPU Companies Master Executives' Benefits Protection Trust
(the "Trust"), adopted September 1, 1995 and most recently amended as of [June]
1, 1999, pursuant to Section 5.3(b) thereof, hereby request and authorize [Name
of Bank], as Trustee hereunder, to institute and prosecute legal proceedings
(the "Litigation"), on my behalf, against [Name of GPU 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.]
15
<PAGE>
EXHIBIT F
REVOCATION OF AUTHORITY TO CONTINUE LITIGATION
I,-------------------------------------------------------------------,
a Participant in the GPU Companies Master Executives' Benefits Protection Trust
(the "Trust"), adopted September 1, 1995 most recently amended as of [June] 1,
1999, 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 Company] for unpaid Benefits under [Name of Plan under which claim is
asserted].
I hereby notify the Trustee that I have appointed and retain [Name of
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.]
16
<PAGE>
EXHIBIT G
TRUSTEE'S FEE SCHEDULE
[MATERIAL TO BE ADDED]
17
Exhibit 10-V
GPU, INC.
1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC. AND SUBSIDIARIES
AS AMENDED AND RESTATED
TO REFLECT AMENDMENTS
THROUGH JUNE 3, 1999
<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 Section 10 ("restricted shares"); or
(iii) rights to acquire shares of Common Stock which are
restricted as provided in Section 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
- ----------------
(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>
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, 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 March 4,
2008.
(d) The total number of shares of Common Stock with respect to which
options may be granted under the Plan to any employee during any calendar year
shall not exceed 400,000 shares.
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 "nonemployee directors" 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
"non-employee directors," 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
<PAGE>
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 Section 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, 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 and any person who may from time to time be designated an executive
officer of the Corporation by its Board of Directors (the "Board"). 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 the Board 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
Section 4(a) hereof) of the
<PAGE>
Corporation. (The Committee and the Board are sometimes hereinafter referred to
as the "Grantors.")
(c) The Grantors 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
Grantors 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 Grantors or such person may have under the Plan; provided, that the Grantors
may not delegate any duties to a member of the Board of Directors who would not
qualify as a "non-employee director" to administer the Plan as contemplated by
Rule 16b-3, as amended, or other applicable rules under the Exchange Act. The
Grantors may employ attorneys, consultants, accountants or other persons and the
Grantors, 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 Grantors in good
faith shall be final and binding upon all employees who have received awards,
the Corporation and all other interested persons. Notwithstanding the foregoing,
any action taken or any interpretation or determination made by the Grantors
after the occurrence of a "Change in Control" (as defined in Section 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 Grantors
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 Grantors shall be fully protected by the Corporation
in respect of any such action, determination or interpretation.
(d) Notwithstanding any other provision in this Section 3 to the
contrary, the Committee may delegate to the Chief Executive Officer of the
Corporation (the "CEO") authority to grant options to employees of the
Corporation or its subsidiaries who are not officers of the Corporation or any
of its subsidiaries, subject to such limitations and upon such terms and
conditions as the Committee may specify in such delegation.
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
<PAGE>
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 (or, in
the case of options granted pursuant to Section 3(d), the CEO) 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 Section 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 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
<PAGE>
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 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 Section 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 purchase price may be paid in whole or in part by
delivering a properly executed exercise notice in a form approved by the
Committee together with irrevocable instructions to a broker to promptly deliver
to the Corporation the applicable amount of the proceeds from the sale or loan
securities. The purchase price may also be paid in such other form or manner as
the Committee may from time to time approve.
(c) At the time of any exercise of an option granted to an employee
hereunder, the employee shall pay any amount determined by the Committee to be
necessary to satisfy all applicable federal, state or local tax requirements
relating to such exercise. The Committee may permit such amount to be paid in
other shares of Common Stock owned by the employee, or a portion of the shares
of Common Stock that otherwise would be issued to the employee upon such
exercise of the option, or a combination of cash and shares of such Common
Stock.
<PAGE>
6. Term of Options
---------------
The term of each 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. Unless sooner forfeited pursuant to the terms of the applicable option
agreement or cancelled pursuant to Section 7(c) hereof, each option granted
under the Plan shall expire at the end of its term. Notwithstanding any other
provision in this Plan to the contrary, no option granted hereunder may be
exercised after the expiration of its term.
7. Exercise of Options
-------------------
(a) Each option granted under the Plan shall become exercisable, in
whole or in part, at such time or times during its term as the agreement
evidencing the grant of such option shall specify; 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) Each option granted under the Plan that has become exercisable
pursuant to Section 7(a) hereof shall remain exercisable thereafter for such
period of time prior to the expiration of its term (including any period
subsequent to the employee's termination of employment with the Corporation and
all of its subsidiaries for any reason) as the option agreement evidencing the
grant of such option shall provide.
(c) Subject to subsection (e) below but notwithstanding any other
provision of the Plan, upon the occurrence of 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"), all options granted under the
Plan prior to June 3, 1999 and still outstanding on the Acceleration Date shall
be cancelled, and the Corporation's obligation in respect of each option so
cancelled shall be discharged by payment to the holder of such option of a
single cash lump sum, in an amount determined under subsection (d) below. Such
amount shall be payable as soon as practicable after the Acceleration Date. For
purposes of the Plan, a "Change in Control" shall mean the occurrence during the
term of the Plan of:
<PAGE>
(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
"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
<PAGE>
(3) The consummation of:
(A) A merger, consolidation or reorganization with
or into the Corporation or in which securities of the Corporation are issued,
unless such merger, consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or
reorganization with or into the Corporation or in which securities of the
Corporation are issued 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, 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
<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.
(d) The lump sum payment to be made pursuant to subsection (c) above in
respect of any option granted prior to June 3, 1999 shall be an amount equal to
(i) the excess, if any, of the Determined Value of all shares that are still
subject to the option as of the Acceleration Date (including any shares as to
which the option had not otherwise become exercisable prior to such date) over
the aggregate purchase price of such shares, less (ii) the amount of all
federal, state and local taxes required by law to be withheld with respect to
such payment. The "Determined Value" of the shares still subject to an option as
of the Acceleration Date shall mean the amount determined by multiplying the
number of such shares by the "Multiplication Factor," as defined in Section
10(f)(i) hereof.
(e) Any incentive stock option granted under the Plan prior to June 3,
1999, and any option granted under the Plan after that date, which is still
outstanding immediately prior to the occurrence of a Change in Control shall,
upon the occurrence of the Change in Control, become immediately exercisable as
to all shares of Common Stock that are then still subject to the option. The
holder of any such option shall be provided an opportunity to exercise such
option at such time prior to the time as of which the Change in Control becomes
effective, and in accordance with such procedures, as the Committee shall
determine. To the extent
<PAGE>
an incentive stock option granted under the Plan prior to June 3, 1999 is so
exercised, the option shall not be cancelled as provided in subsection (c)
above.
(f) An option may be exercised, at any time or from time to time during
its term (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 and remains 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).
(g) 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. 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 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
<PAGE>
made in the form of all cash, all shares of Common Stock, or a combination
thereof, as elected by the employee.
(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.
(g) Upon exercise of a tandem fight, 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.
<PAGE>
(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
--------------------------------
Except as may otherwise be provided in the agreement evidencing the
grant of any option, right or unit hereunder, any option, right, or unit 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.
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. 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 restricted units.
Notwithstanding the foregoing, all restrictions shall lapse, and the Restricted
Period shall terminate, with respect to all restricted shares or restricted
units upon the occurrence of an Acceleration Date or at such earlier time as
provided for in Section 11 or Section 12.
(b) (1) Unless such shares are issued as uncertificated shares pursuant
to paragraph (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.
<PAGE>
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 Section 11 and Section 12, 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,
(x) 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 (y) 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 (i) 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 (ii)
in accordance with such alternative procedure as is 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
<PAGE>
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 Section 13.
(3) Notwithstanding 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 Section 11 or Section 12, 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.
<PAGE>
(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.
(e) Subject to subsection (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 Section 11 or Section 12, 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 Section 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 after
such Acceleration Date in cash, in shares
<PAGE>
of Common Stock, or part in cash and part in Common Stock, as the Committee, in
its sole discretion, shall determine.
(i) Subject to subsection (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 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 subsection (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
<PAGE>
the Restricted Period meets such criteria as the Committee shall have
prescribed.
(i) Notwithstanding any other provision in this Section 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 subsection (h) above, may be
deferred, at the employee's election, either under this Plan or under the GPU
Companies Deferred Compensation Plan, 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.
11. Termination of Employment
-------------------------
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 of its subsidiaries prior to the end of the
Restricted Period applicable to the shares or units so granted and prior to the
satisfaction of' any other conditions prescribed by the Committee at the time of
grant for any reason other than as set forth in Section 12, the employee shall
immediately forfeit all restricted shares and restricted units so granted,
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 or 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.
<PAGE>
12. Eligible Retirement, Death or Total Disability of Employee
----------------------------------------------------------
(a) If the Committee so determines, the agreement evidencing the grant
of any restricted shares or restricted units to any employee may permit the
restricted shares or restricted units so granted, or any portion of such
restricted shares or restricted units, to become vested upon the employee's
death, Total Disability or Eligible Retirement.
(b) For purposes of this Plan, (i) "Total Disability" shall mean 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, and (ii) "Eligible Retirement" shall mean
the date upon which an employee, having attained an age of not less than
fifty-five, terminates his or her 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
thereto.
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
<PAGE>
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 initially adopted became effective as of June 1, 1990. 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.
15. Termination and Amendment
-------------------------
The Board of Directors of the Corporation may suspend, terminate,
modify or amend the Plan, provided 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.
<PAGE>
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.
Exhibit 10-W
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of this ------------ day of --------------,
1999, by and between GPU, Inc. (the "Corporation") and ------------------------
(the "Recipient"):
WHEREAS, the Corporation maintains the 1990 Stock Plan for Employees of
GPU, Inc. and Subsidiaries (the "Plan") under which the Personnel, Compensation
and Nominating Committee of the Corporation's Board of Directors (the
"Committee") may, among other things, grant options to purchase shares of the
Corporation's common stock to such employees of the Corporation and its
Subsidiaries as the Committee may determine, subject to such terms, conditions
or restrictions as it may deem appropriate;
WHEREAS, pursuant to the Plan, the Committee has granted a stock option
to the Recipient subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Plan requires that the grant of a stock option be
evidenced by a written agreement between the Corporation and the Recipient which
contains such restrictions, terms and conditions as the Committee may require;
NOW, THEREFORE, the parties hereto agree as follows:
1. Date of Grant. This Agreement evidences the grant by the Committee
to the Recipient, on ------------------, 1999 (the "Date of Grant") of an option
(the "Option") to purchase ---------- shares of common stock of the Corporation
("Shares").
2. Purchase Price. The price at which any Shares may be purchased
pursuant to any exercise of this Option shall be $ ---------(1) per Share.
3. Exercisability. This Option shall become exercisable in three equal
annual installments, beginning on the first anniversary of the Date of Grant and
continuing each year through the third anniversary of the Date of Grant. Each
annual installment shall include a number of Shares equal to 33-1/3% of the
total number of Shares specified in Section 1 above. As of any date, the portion
of this Option that is then exercisable,
- ----------------
(1) Insert amount equal to 100% of per share closing price of GPU shares on
the Date of Grant.
<PAGE>
and the portion of this Option that is not yet exercisable as of such date, are
referred to herein, respectively, as the "Exercisable Portion", and the
"Non-Exercisable Portion", of this Option.
4. Option Term. The term of this Option ("Option Term") shall be the
period beginning on the Date of Grant and ending on the 10th anniversary
thereof. Subject to the provisions of Sections 5, 8 and 11 hereof and the
applicable provisions of the Plan, this Option may be exercised at any time
during the Option Term to purchase any part or all of the Shares included in the
Exercisable Portion of the Option at the time of exercise. Unless sooner
terminated, cancelled or forfeited pursuant to Section 5, 8 or 11 hereof and the
applicable provisions of the Plan, this Option shall expire at, and shall cease
to be exercisable after, the end of the Option Term.
5. Exercise in the Event of Termination of Employment. In the event the
Recipient's employment with the Corporation and its subsidiaries should
terminate, this Option may be exercised in accordance with the following
provisions:
(a) If the Recipient's employment terminates as a result of death, the
Non-Exercisable Portion of this Option at the date of the Recipient's death
shall become immediately and fully exercisable, and this Option (including the
portion thereof that becomes exercisable upon the Recipient's death) may be
exercised by the Recipient's Beneficiary (as defined in Section 13 below) at any
time or from time to time during the Recipient's Post-Termination Exercise
Period (as defined in Section 5(f) below).
(b) If the Recipient's employment terminates as a result of Total
Disability (as defined in the Plan), the Non-Exercisable Portion of this Option
at the date of the Recipient's termination of employment shall become
immediately and fully exercisable, and this Option (including the portion
thereof that becomes exercisable upon such termination of the Recipient's
employment) may be exercised by the Recipient at any time and from time to time
during the Recipient's Post-Termination Exercise Period. If the Recipient's
employment has terminated as a result of Total Disability and the Recipient
should thereafter die before the end of the Recipient's Post-Termination
Exercise Period, the Exercisable Portion of this Option at the date of the
Recipient's death shall continue to be exercisable by the Recipient's
Beneficiary at any time or from time to time after the date of the Recipient's
death until the earlier of the second anniversary of such date of death or the
date on which the Option Term expires.
2
<PAGE>
(c) If the Recipient's employment terminates as a result of Eligible
Retirement (as defined in the Plan), this Option may be exercised (i) with
respect to the Exercisable Portion of the Option, at any time or from time to
time during the Recipient's Post-Termination Exercise Period and (ii) with
respect to the Non-Exercisable Portion of the Option, at any time or from time
to time on or after the date or dates during the Recipient's Post-Termination
Exercise Period on which such portion of the Option becomes exercisable, but
only during such Period. If the Recipient should die prior to the end of the
Recipient's Post-Termination Exercise Period, the Non-Exercisable Portion, if
any, of this Option at the date of the Recipient's death shall become
immediately and fully exercisable, and this Option (including the portion
thereof that becomes exercisable upon the Recipient's death) may be exercised by
the Recipient's Beneficiary at any time or from time to time after the
Recipient's death until the earlier of the second anniversary of such date of
death or the date on which the Option Term expires.
(d) If the Recipient's employment terminates for any reason other than
death, Total Disability or Eligible Retirement, this Option (including the
Exercisable Portion of this Option, to the extent it has not been exercised
prior to the date of such termination of the Recipient's employment) shall be
forfeited and cancelled as of the date of the Recipient's termination of
employment.
(e) Notwithstanding the foregoing, the Committee may, in its sole
discretion, determine that any part or all of the Non-Exercisable Portion of
this Option at the date of the Recipient's termination of employment (and any
part or all of the Exercisable Portion at such date, if the Recipient's
employment terminates for any reason other than death, Total Disability or
Eligible Retirement) shall not be forfeited and cancelled, and may be exercised
by the Recipient (or in the event of the Recipient's death by the Recipient's
Beneficiary) for such period after such date of termination of employment and
prior to the expiration of the Option Term, as the Committee shall specify in
such determination.
(f) For purposes of the foregoing, the Recipient's "Post-Termination
Exercise Period" shall mean the period beginning on the date of the Recipient's
termination of employment and ending (i) on the second anniversary of such date,
if the Recipient's employment has terminated as a result of the Recipient's
death, or (ii) on the first anniversary of such date, if the Recipient's
employment has terminated as a result of Total Disability, or (iii) on the fifth
anniversary of such date, if the Recipient's employment has terminated as a
result of Eligible Retirement.
3
<PAGE>
Notwithstanding the foregoing, the Recipient's Post-Termination Exercise Period
shall end no later than the date on which the Option Term expires.
(g) For purposes of this Agreement, the Recipient's employment shall
not be treated as having terminated unless the Recipient is no longer employed
with the Corporation or any "subsidiary" as defined in the Plan.
6. Manner of Exercise. This Option may be exercised by delivery to the
Corporation of a written notice specifying the number of Shares as to which the
Option is being exercised, accompanied by payment in full of the aggregate
purchase price for such Shares. The Option may be exercised only with respect to
a whole number of Shares, and may not be exercised, at any single time, as to
less than 100 Shares or, if less, the total number of Shares as to which the
Option is then exercisable. Any notice hereunder to the Corporation shall be
addressed to it at its office at 300 Madison Avenue, Morristown, New Jersey
07960, Attention: Senior Vice President - Corporate Affairs.
7. Manner of Payment. Payment of the purchase price for Shares
purchased pursuant to any exercise of this Option may be made (a) in cash, (b)
by delivery of certificates, duly endorsed or accompanied by appropriate stock
powers, representing Shares previously owned by the Recipient having an
aggregate fair market value equal to the purchase price, or (c) by a combination
of payment in cash and delivery of certificates for Shares, as provided in (a)
and (b) above, having a combined sum and value equal to the purchase price. For
purposes of the foregoing, the fair market value of any Shares included in the
payment of the purchase price shall be determined on the basis of the per share
closing price of the Corporation's 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, for the next preceding day on which there were sales. In
addition, the purchase price may be paid in whole or in part by delivering a
properly executed exercise notice in a form approved by the Committee together
with irrevocable instructions to a broker to promptly deliver to the Corporation
the applicable amount of the proceeds from the sale or loan of securities. The
purchase price may also be paid in such other form or manner as the Committee
may from time to time approve.
8. Change in Control. Notwithstanding any other provision herein to
the contrary, if a Change in Control (as defined in the Plan) occurs at any time
during the Option Term, this Option
4
<PAGE>
shall, upon the occurrence of the Change in Control, become immediately
exercisable as to all Shares that are then still subject to this Option. The
Recipient shall be provided an opportunity to exercise this Option at such time
prior to the time as of which the Change in Control becomes effective, and in
accordance with such procedures, as the Committee shall determine.
9. Tax Status of Option. This Option shall be treated as a
"non-qualified option", as defined in the Plan.
10. Nontransferability. This Option shall be nontransferable and may
be exercised during the Recipient's lifetime only by the Recipient.
Notwithstanding the foregoing, the Recipient may transfer this Option (or any
portion thereof) by gift to a "Permitted Transferee" as defined below, subject
to the following:
(i) such transfer shall be permitted only if the
Recipient does not receive any consideration for the transfer;
(ii) such transfer shall not be effective unless and until
the Recipient has furnished the Committee with written notice of the
transfer and copies of all documents evidencing the transfer;
(iii) any portion of this Option that is transferred by the
Recipient to a Permitted Transferee may be exercised by the Permitted
Transferee to the same extent as the Recipient would have been entitled
to exercise it, and shall remain subject to all of the terms and
conditions that would have applied to this Option or portion thereof
under the provisions of this Agreement and the Plan if the Recipient
had not transferred the Option or portion thereof to the Permitted
Transferee;
(iv) any portion of this Option that is transferred by the
Recipient to a Permitted Transferee may not be further transferred by
the Permitted Transferee other than by will or the laws of descent and
distribution.
For purposes of the foregoing, a Permitted Transferee shall mean (i) one or more
members of the Recipient's Immediate Family (as hereinafter defined), (ii) a
trust solely for the benefit of the Recipient and/or one or more members of his
[her] Immediate Family, or (iii) a partnership or limited liability company
whose only partners or members are the Recipient and/or one or more members of
his [her] Immediate Family. For this purpose, members
5
<PAGE>
of the Recipient's "Immediate Family" shall include his [her] parents, spouse,
children or grandchildren (including adopted children and grandchildren and
step-children and step-grandchildren).
11. Other Terms and Conditions. This Option is subject to the
following additional terms and conditions:
(a) Notwithstanding any other provisions herein to the contrary, this
Option (including both the Exercisable Portion and the Non-Exercisable Portion
thereof) may be cancelled by the Committee at any time, and upon such
cancellation the Recipient shall cease to have any further right to exercise
this Option, if the Committee determines that the Recipient has been discharged
from employment with the Corporation or any of its subsidiaries for cause.
(b) The Recipient shall not have any rights as a shareholder with
respect to any Shares that are subject to this Option prior to the date as of
which such Shares are issued to the Recipient pursuant to his exercise of this
Option.
(c) The Recipient's rights under this Option shall be subject to all
applicable provisions of the Plan, as in effect from time to time at and after
the Date of Grant.
12. Taxes. The Corporation or any of its subsidiaries may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to this Option and the exercise thereof including, but not limited
to, (a) deducting the amount so required to be withheld from any other amount
then or thereafter payable to the Recipient, and/or (b) requiring the Recipient
or the Recipient's Permitted Transferee or Beneficiary to pay to the Corporation
or any of its subsidiaries the amount so required to be withheld as a condition
of the issuance, delivery, distribution or release of any Shares. Such payment
shall be made in cash unless, and except to the extent that, the Corporation
permits such payment to be made in Shares.
13. Designation of Beneficiary. The Recipient shall file with the
Committee a written designation of one or more persons (the "Beneficiary") who
shall be entitled to exercise this Option after the Recipient's death, to the
extent such exercise is otherwise permitted hereunder. The Recipient may, from
time to time, revoke or change the Recipient's Beneficiary designation without
the consent of any previously designated Beneficiary by filing a new designation
with the Committee. The last such
6
<PAGE>
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Recipient's death, and in no event shall
it be effective as of a date prior to such receipt. If at the date of the
Recipient's death there is no designation of a Beneficiary in effect for the
Recipient pursuant to the provisions of this Section 13, or if no Beneficiary
designated by the Recipient in accordance with the provisions hereof survives to
exercise this Option, the Recipient's estate shall be treated as the Recipient's
Beneficiary for all purposes. Notwithstanding any other provision herein to the
contrary, if any portion of this Option is transferred to a Permitted Transferee
pursuant to Section 10, the Permitted Transferee shall be treated, at all times
after such transfer, as the Recipient's Beneficiary with respect to the portion
so transferred.
14. Governing Laws. This Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania applicable to contracts made, and to be
enforced, within the Commonwealth of Pennsylvania.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Corporation and its successors and assigns, and the
Recipient, the Recipient's Beneficiary and the Recipient's estate.
16. Entire Agreement. This Agreement contains the entire
understanding of the parties and shall not be modified or amended except in
writing and duly signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date set forth above.
GPU, INC.
By: --------------------------------
Fred D. Hafer
Chairman, President and Chief
Executive Officer
----------------------------------
[Print Name of Recipient]
7
Exhibit 10-X
PERFORMANCE UNITS AGREEMENT UNDER
THE 1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC.
AND SUBSIDIARIES
(1999 AGREEMENT)
<PAGE>
AGREEMENT made as of ------------------------------, by and between GPU, Inc.
(the "Corporation") and ----------------------------- (the "Recipient"):
WHEREAS, the Corporation maintains the 1990 Stock Plan for Employees of GPU,
Inc. and Subsidiaries (the "Plan") under which the Personnel, Compensation and
Nominating Committee of the Corporation's Board of Directors (the "Committee")
may, among other things, award units ("Performance Units") representing rights
to acquire shares of the Corporation's Common Stock, $2.50 par value ("Common
Stock") to such employees of the Corporation and its subsidiaries as the
Committee may determine, subject to such terms, conditions or restrictions as it
may deem appropriate;
WHEREAS, pursuant to the Plan, the Committee has granted to the Recipient an
award of Performance Units subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Plan requires that an award of Performance Units be evidenced by a
written agreement between the Corporation and the Recipient that contains such
restrictions, terms and conditions as the Committee may require;
NOW, THEREFORE, the parties hereto agree as follows:
1. AWARD OF PERFORMANCE UNITS; NATURE OF RIGHTS
(a) In accordance with the provisions of the Plan, the
Committee awarded to the Recipient on ----------------- (the
"Award Date") ---------- Performance Units. Each unit so
awarded, and each additional Performance Unit credited to the
Recipient pursuant to Section 2 (the Performance Units so
awarded and the additional Performance Units so credited are
hereinafter referred to collectively as the Recipient's
"Units"), shall entitle the Recipient, upon the vesting of
such units as provided in Section 3 hereof, to receive one
share of Common Stock, or a cash payment in lieu of such
share, subject to the terms, conditions, and restrictions set
forth herein.
(b) Prior to the issuance, as provided in Section 4 hereof, of
shares of Common Stock with respect to the Recipient's Units,
or with respect to the Recipient's "Deferred Vested Units" as
defined in Section 4(f)(ii) hereof, the Recipient shall not be
entitled to any of the rights of a stockholder of the
Corporation by reason of such Units or Deferred Vested Units.
1
<PAGE>
(c) Notwithstanding anything in this Agreement to the
contrary, the Recipient shall have the status of a
mere unsecured creditor of the Corporation with
respect to his or her right to receive any payment
hereunder; and this Agreement shall constitute a mere
promise by the Corporation to make payments in the
future in accordance with the terms hereof. It is the
intention of the parties hereto that the arrangements
set forth in this Agreement 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.
2. ADDITIONAL PERFORMANCE UNITS
(a) As of each date prior to the Vesting Date (as defined in
Section 3(a) below) on which a dividend is paid on the Common
Stock ("Dividend Payment Date"), there shall be credited to
the Recipient hereunder a number of additional Performance
Units determined by multiplying (i) the aggregate number of
Units standing to the Recipient's credit immediately prior to
such Dividend Payment Date, by (ii) the quotient resulting
from dividing (A) the per share amount of the dividend so paid
by (B) the price per share used for the reinvestment of
dividends paid on such Dividend Payment Date under the
provisions of the Corporation's Dividend Reinvestment and
Stock Purchase Plan.
(b) Any additional Performance Units credited to the Recipient
pursuant to this Section 2 shall be subject to the same terms,
conditions and restrictions as are applicable with respect to
the Recipient's initially awarded Performance Units.
3. ADJUSTMENT AND VESTING OF UNITS
(a) For purposes of this Agreement, the Recipient's "Vesting
Date" shall mean the earliest to occur of the following dates:
(i) the fifth anniversary of the Award Date;
2
<PAGE>
(ii) the date as of which the Recipient's employment
with the Corporation or any subsidiary terminates
as a result of the Recipient's death; or
(iii) an "Acceleration Date," as defined in the Plan.
(b) As of the Recipient's Vesting Date, the aggregate number
of Units then standing to the Recipient's credit shall be
adjusted in accordance with the following provisions:
(i) The aggregate number of the Recipient's Units
shall be adjusted by multiplying such aggregate
number by the Performance Percentage determined
pursuant to the following table:
If the Corporation's TSR The Performance
Percentile Ranking is in the: Percentage shall be:
---------------------------- -------------------
90th percentile - or above 200%
85th to 89th 175
80th to 84th 160
75th to 79th 145
70th to 74th 130
65th to 69th 120
60th to 64th 110
55th to 59th 100
50th to 54th 90
45th to 49th 75
40th to 44th 50
below 40th 0
For purposes of the foregoing, the Corporation's TSR
Percentile Ranking shall be determined by (A)
ascertaining, for each company (including the
Corporation) included in the Standard & Poor's
Electric Utility Companies Index (the "Index") on the
last day of the Performance Period (as defined
below), such company's average quarterly total
shareholder return ("TSR") for all calendar quarters
in the Performance Period, as reported in the Index;
(B) ascertaining the number of such companies whose
average quarterly TSR for the Performance Period is
lower than the Corporation's; and (C) dividing such
number by the total number of companies included in
the Index
3
<PAGE>
on such last day. The "Performance Period" shall mean
the period from January 1, 1998 through December 31,
2002.
(ii) Notwithstanding the foregoing, (A) if the
Recipient's Vesting Date occurs by reason of the
Recipient's death prior to the first day of the
calendar year which includes the fifth anniversary of
the Award Date, the Recipient's Units shall not be
adjusted in the manner described in subparagraph (i)
above; and (B) if the Recipient's Vesting Date occurs
by reason of an Acceleration Date occurring prior to
such first day, the adjustment with respect to the
Recipient's Units required under subparagraph (i)
above shall be made using as the applicable
Performance Percentage 100% or, if greater, the
Performance Percentage that would apply under the
table set forth in subparagraph (i) above if the
Performance Period had ended on December 31 of the
calendar year immediately preceding such Acceleration
Date.
(iii) If the Recipient's employment with the
Corporation or any subsidiary terminates prior to the
fifth anniversary of the Award Date as a result of
the Recipient's death, Eligible Retirement or Total
Disability, the number of Units standing to the
Recipient's credit as of the Recipient's Vesting Date
(after taking into account any adjustment required
under subparagraph (i) above) shall be adjusted (or
further adjusted) by multiplying such number of Units
by the Recipient's Service Percentage. The
Recipient's "Service Percentage" shall mean the
percentage determined by dividing by 60 the number of
months in the period beginning on the Award Date and
ending on the date of such termination of the
Recipient's employment; and for this purpose, any
fraction of a month included in such period shall be
treated as a full month. This subparagraph (iii)
shall not apply if the Recipient's Vesting Date
occurs by reason of the occurrence of an Acceleration
Date.
(c) As of the Recipient's Vesting Date, all Units then
standing to the Recipient's credit (after taking
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<PAGE>
into account any adjustments required under subparagraphs (i),
(ii) and (iii) of paragraph (b) above) shall become vested. If
the number of Units standing to the Recipient's credit
immediately prior to any adjustments made pursuant to
subparagraphs (i), (ii) and (iii) of paragraph (b) above
exceed the number of Units standing to the Recipient's credit
after giving effect to such adjustments, all of the
Recipient's rights with respect to such excess number of Units
shall be forfeited as of the Vesting Date. If the Recipient's
employment with the Corporation or any subsidiary should
terminate before the Recipient's Vesting Date for any reason
other than as a result of the Recipient's Eligible Retirement
or Total Disability, all of the Recipient's rights with
respect to any Units credited to the Recipient hereunder shall
be forfeited as of the date of such termination.
(d) For purposes of this Agreement, (i) the term "subsidiary"
shall have the same meaning as in paragraph 4(a) of the Plan
and (ii) the transfer of a Recipient's employment from one
subsidiary to another shall not be treated as a termination of
the Recipient's employment.
4. PAYMENT FOR VESTED UNITS
(a) Upon the Vesting Date, the Recipient shall become entitled
to receive payment with respect to the Units which have become
vested on such date (such Units are hereafter referred to as
the Recipient's "Vested Units"). Payment shall be made as soon
as practicable after the Vesting Date, in the manner
hereinafter set forth in this Section 4.
(b) Except as otherwise provided in paragraph (c) below,
payment with respect to the Recipient's Vested Units shall be
made by the issuance to the Recipient of shares of Common
Stock. Except as otherwise provided in paragraph (d) (ii)
below, one share of Common Stock shall be issued for each of
the Recipient's Vested Units. The Recipient shall own any
shares of Common Stock so issued (or issued with respect to
the Recipient's Deferred Vested Units) free and clear of any
restrictions and shall be free to hold or dispose of such
shares at will, subject,
5
<PAGE>
however, to any restrictions that may be imposed by law.
(c) The Committee, in its sole discretion, may determine that
payment with respect to any or all of the Recipient's Vested
Units shall be made in cash instead of in shares of Common
Stock, and payment with respect to any fractional part of a
Vested Unit shall be made in cash. Except as otherwise
provided in paragraph (d) (i) below, the amount of the cash
payment to be made with respect to any Vested Unit shall be
equal to (and the amount of the cash payment to be made with
respect to any fractional part of a Vested Unit shall be based
upon) the per share closing price of one share of Common Stock
as reported on the New York Stock Exchange Composite Tape for
the Vesting Date, or if there are no sales of Common Stock on
such date, for the next preceding day on which there were
sales of Common Stock.
(d) Upon the occurrence of an Acceleration Date, the amount
payable with respect to the Recipient's Vested Units
(including any Units that became vested prior to such date but
for which payment hereunder has not been made as of such date,
but not including any Deferred Vested Units as defined in
Section 4(f)(ii) hereof standing to the Recipient's credit on
such date except as otherwise provided in Section 4(g)(iv)
hereof) shall be determined as follows:
(i) To the extent that the payment for any of the
Recipient's Vested Units is to be made in cash, the
amount of cash to be paid for such Vested Units shall
be equal to the product of (A) the number of such
Vested Units, multiplied by (B) the highest closing
price per share of the Common Stock, as reported on
the New York Stock Exchange Composite Tape, occurring
during the 90-day period preceding and the 90-day
period following the Acceleration Date (the
"Multiplication Factor").
(ii) To the extent that payment for any of the
Recipient's Vested Units is to be made in shares of
Common Stock, the number of shares of Common Stock to
be issued with respect to such Vested Units shall be
determined by dividing (A) the
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<PAGE>
product of (y) the number of such Vested Units
multiplied by (z) the Multiplication Factor, by (B)
the per share closing price of the Common Stock as
reported on the New York Stock Exchange Composite
Tape for the day preceding the payment date, or if
there are no sales of Common Stock on such date, for
the next preceding day on which there were sales of
Common Stock.
(e) If the Recipient has died prior to the date on which any
payment is to be made hereunder with respect to the
Recipient's Vested Units or Deferred Vested Units, the payment
otherwise required to be made to the Recipient shall be made
to the Recipient's beneficiary or estate, as the case may be.
(f) Subject to the provisions of paragraph (g) below but
notwithstanding any other provisions of this Section 4 to the
contrary, payment with respect to part or all of the
Recipient's Vested Units shall be deferred, and shall be made
at the time and in the manner hereinafter set forth, if the
Recipient so elects in accordance with the following
provisions:
(i) An election by the Recipient hereunder shall be
made in writing, on a form furnished to the Recipient
for such purpose by the Committee. The form shall be
filed with the Committee at least one year prior to
the Vesting Date.
(ii) In the Recipient's election form, the Recipient
shall specify the number of Vested Units payment with
respect to which the Recipient wishes to defer (the
number of Vested Units payment with respect to which
is deferred pursuant to the Recipient's election
hereunder, and the number of additional units
credited to the Recipient pursuant to subparagraph
(vi) below are hereinafter collectively referred to
as the Recipient's "Deferred Vested Units"); the date
on which payment with respect to the Recipient's
Deferred Vested Units shall be made or commence (the
"Payment Commencement Date") in accordance with
subparagraph (iii) below; and the method by which
payment with respect to the Recipient's Deferred
Vested Units shall be made (the "Payment
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<PAGE>
Method") in accordance with subparagraph (iv) below.
(iii) The Recipient may select, as the Payment
Commencement Date, the first business day of any of
the following: (A) the third calendar year following
the calendar year in which the Vesting Date occurs,
or any later calendar year; (B) the earlier of (x)
any calendar year which the Recipient is permitted to
select under clause (A), or (y) the calendar year
following the later of the Vesting Date or the date
of the termination of the Recipient's employment with
the Corporation or any subsidiary or the Recipient's
Total Disability; or (C) the calendar year following
the later of the Vesting Date or the date of the
termination of the Recipient's employment with the
Corporation or any subsidiary or the Recipient's
Total Disability, or any later calendar year.
(iv) The Recipient may select, as the Payment Method,
either (A) a single lump sum payment, or (B) payment
in annual installments, over a period of at least
five years, or such greater number of years as the
Recipient specifies in the Recipient's election form.
With each such annual installment, payment shall be
made with respect to a number of the Recipient's
Deferred Vested Units equal to the quotient resulting
from dividing (C) the total number of Deferred Vested
Units standing to the Recipient's credit hereunder on
the applicable payment date, by (D) the number of
installment payments remaining to be made on such
date. Immediately after each annual installment
payment has been made, the number of Deferred Vested
Units standing to the Recipient's credit hereunder
shall be reduced by the number of Deferred Vested
Units with respect to which such payment was made.
(v) Any election made hereunder by the Recipient
shall be irrevocable.
(vi) Until payment has been made with respect to all
of the Recipient's Deferred Vested Units
(including those credited to the Recipient under
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<PAGE>
this subparagraph), there shall be credited to the
Recipient hereunder, as of each Dividend Payment
Date, a number of additional Deferred Vested Units
determined by multiplying (A) the number of Deferred
Vested Units (including any additional Deferred
Vested Units previously credited to the Recipient
under this subparagraph) standing to the Recipient's
credit hereunder on the day immediately preceding
such Dividend Payment Date, by (B) the quotient
referred to in Section 2(a)(ii) hereof.
(vii) Payment with respect to the Recipient's
Deferred Vested Units shall be made in cash, or in
shares of Common Stock, or in any combination of cash
or such shares, as the Committee shall determine in
its sole discretion. To the extent that payment with
respect to any of the Recipient's Deferred Vested
Units is to be made in shares of Common Stock, one
share of Common Stock shall be issued for each such
Deferred Vested Unit. The amount of the cash payment
to be made with respect to any Deferred Vested Units
shall be equal to (and with respect to any fractional
part of a Deferred Vested Unit, shall be based upon)
the per share closing price of one share of Common
Stock as reported on the New York Stock Exchange
Composite Tape for the last business day immediately
preceding the date on which such cash payment is to
be made.
(viii) A deferral election otherwise permitted to be
made hereunder shall be subject to the following
limitations:
(A) If the Recipient's Vesting Date should
occur within one year following the date on
which the Recipient's election form is filed
with the Committee, or if the Vesting Date
occurs more than one year from such date but
occurs as a result of the occurrence of an
Acceleration Date, the Recipient's deferral
election shall not be given effect, and
payment with respect to the Recipient's
Vested Units shall be made in accordance
with the other applicable provisions of this
Section 4.
9
<PAGE>
(B) No deferral election shall be effective
hereunder if at any time during the 12-month
period ending on the Vesting Date, the
Recipient received a hardship withdrawal
under Section 7.2(e) of the GPU Companies
Employee Savings Plan for Nonbargaining
Employees.
(C) No amount may be deferred with respect
to the Recipient's Vested Units pursuant to
the Recipient's deferral election hereunder
to the extent that any tax is required to be
withheld with respect to such amount
pursuant to applicable federal, state or
local law.
(ix) Notwithstanding any other provision in this
paragraph (f) to the contrary, to the extent the
Committee in its sole discretion so determines,
payment with respect to any part or all of the
Recipient's Deferred Vested Units may be made to the
Recipient or to the Recipient's beneficiary or
estate, on any date earlier than the date on which
such payment is to be made pursuant to the
Recipient's election hereunder, in the following
circumstances: (A) in the event of the Recipient's
death prior to the Payment Commencement Date
specified in the Recipient's election hereunder; (B)
in the event the Recipient becomes entitled to
receive payments under the Long-Term Disability Plan
or Employee Pension Plan of any GPU Company as a
result of incurring a Total Disability; and (C) in
the event the Recipient requests such early payment
and the Committee, in its sole discretion, determines
that such early payment is necessary to help the
Recipient meet some severe financial need arising
from circumstances which were beyond the Recipient's
control and which were not foreseen by the Recipient
at the time of the Recipient's election hereunder.
(g) Notwithstanding any provision in paragraph (f) above to
the contrary or any other election made by the Recipient under
paragraph (f), the Recipient may make a special election under
this paragraph (g) regarding payment with respect to his or
her Deferred
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<PAGE>
Vested Units in the event a "Change in Control", as defined in
the Plan, should occur.
(i) The Recipient may elect under this subparagraph
(i) to have payment with respect to all of his or her
Deferred Vested Units made in the form of a single
lump sum payment upon the occurrence of a Change in
Control prior to the Recipient's termination of
employment. Such payment shall be made as soon as
practicable after the date on which such Change in
Control occurs.
(ii) The Recipient may elect under this subparagraph
(ii) to have payment with respect to all of his or
her Deferred Vested Units made in the form of a
single lump sum payment in the event of the
Recipient's termination of employment for any reason
within the two-year period following a Change in
Control. Such payment shall be made by no later than
30 days after the date of the Participant's
termination of employment.
(iii) Under this subparagraph (iii) a Recipient may
elect, in the event a Change in Control occurs after
the Participant's termination of employment but
before all payments with respect to his or her
Deferred Vested Units have been made pursuant to the
Participant's election under Section 4(f), to have
payment with respect to all of the Deferred Vested
Units that are still standing to the Recipient's
credit hereunder at the time of such Change in
Control made in the form of a single lump sum
payment. Such payment shall be made as soon as
practicable after the date on which such Change of
Control occurs. (iv) Payment with respect to the
Recipient's Deferred Vested Units pursuant to an
election made by the Recipient under subparagraph
(i), (ii) or (iii) above shall be made in the manner
provided in Section 4(f)(vii); provided, however,
that if payment is to be made pursuant to the
Recipient's election under subparagraph (i) or
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<PAGE>
(iii), the second and third sentences of Section
4(f)(vii) shall not apply, and the amount of cash
payable and/or the number of shares of Common Stock
to be issued with respect to the Recipient's Deferred
Vested Units shall be determined in accordance with
the provisions of Section 4(d)(i) and (ii).
(v) An election under subparagraph (i) shall be
effective only if it is made at least one year prior
to the Change in Control referred to in subparagraph
(i). An election under subparagraph (ii) shall be
effective only if it is made either (A) at least
twenty-four (24) months prior to the Recipient's
termination of employment, or (B) if such termination
of employment constitutes an "Involuntary
Termination", as defined in subparagraph (vi) below,
at least one year prior to the Change in Control
referred to in subparagraph (ii). An election under
subparagraph (iii) shall be effective only if it is
made prior to the Recipient's termination of
employment and at least one year prior to the
occurrence of the Change in Control referred to in
subparagraph (iii). Any special election made under
subparagraphs (i), (ii) or (iii) may be revoked, and
a new special election may be made thereunder, at any
time; provided, however, that any such revocation or
new election shall be effective only if it is made
within the applicable election period specified
herein. Any special election, or revocation of a
special election, that may be made under
subparagraphs (i), (ii) or (iii) shall be made in the
manner set forth in the first sentence of Section
4(f)(i). Any special election made by the Recipient
under subparagraph (i), (ii) or (iii) shall be
effective only if, at the date as of which payment is
to be made pursuant to such election, there is in
effect for the Recipient a special election under the
comparable provision of each other Performance Units
Agreement and Restricted Units Agreement between the
Recipient and GPU, Inc. in effect on such date.
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<PAGE>
(vi) For purposes of this paragraph (g), "Involuntary
Termination" shall mean the termination of
Recipient's employment (A) as a result of the
Recipient's death, (B) by the Corporation or any
subsidiary, for any reason, or (C) by the Recipient
for "Good Reason". For purposes of the foregoing,
"Good Reason" shall mean the occurrence after a
Change in Control of any of the following events or
conditions:
(1) change in the Recipient's status, title,
position or responsibilities (including
reporting responsibilities) which, in the
Recipient's reasonable judgment, represents
an adverse change from his or her status,
title, position or responsibilities as in
effect immediately prior thereto; the
assignment to the Recipient of any duties or
responsibilities which, in the Recipient's
reasonable judgment, are inconsistent with
his or her status, title, position or
responsibilities; or any removal of the
Recipient 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 Recipient
other than for Good Reason;
(2) a reduction in the rate of the
Recipient's annual base salary;
(3) the relocation of the offices at which
the Recipient is principally employed to a
location more than twenty-five (25) miles
from the location of such offices
immediately prior to such relocation, or the
Recipient being required to be based
anywhere other than at such offices, except
to the extent the Recipient was not
previously assigned to a principal place of
duty and except for required travel on
business of the Corporation or any
subsidiary to an extent substantially
consistent with the Recipient's previous
business travel obligations;
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<PAGE>
(4) the failure by the Corporation or any
subsidiary to pay to the Recipient any
amount of the Recipient's current
compensation, or any amount payable under
this Agreement, within seven (7) days of the
date on which payment of such amount is due;
or
(5) the failure by the Corporation or any
subsidiary (x) to continue in effect
(without reduction in benefit level, and/or
reward opportunities) any material
compensation or employee benefit plan in
which the Recipient was participating
immediately prior to such failure by the
Corporation or any subsidiary unless a
substitute or replacement plan has been
implemented which provides substantially
identical compensation or benefits to the
Recipient or (y) to continue to provide the
Recipient 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
Recipient was participating immediately
prior to such failure by the Corporation or
any subsidiary.
Any event or condition described in clauses (1) through (5)
above which occurs (A) within twelve (12) months prior to a
Change in Control or (B) prior to a Change in Control but
which you reasonably demonstrate (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, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred prior to a Change in Control.
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<PAGE>
5. WITHHOLDING TAXES
In connection with the issuance of any Common Stock or the
making of any cash payment in accordance with the provisions
of this Agreement, the Corporation shall withhold the taxes
then required by applicable federal, state and local law to be
so withheld. In lieu thereof, the Corporation may require the
Recipient (or, in the event of the Recipient's death, the
Recipient's beneficiary or estate) to pay to the Corporation
an amount equal to the amount of taxes so required to be
withheld. Such payment to the Corporation shall be made in
cash, in shares of Common Stock with a market value equal to
such withholding obligation, or in any combination thereof, as
determined by the Committee.
6. ADMINISTRATION
(a) The Committee shall have full authority and sole
discretion (subject only to the express provisions of the
Plan) to decide all matters relating to the administration and
interpretation of the Plan and this Agreement. All such
Committee determinations shall be final, conclusive, and
binding upon the Corporation, the Recipient, the Recipient's
estate and any and all other interested parties.
Notwithstanding the foregoing, any determination made by the
Committee after the occurrence of a "Change in Control" (as
defined in the Plan) shall be subject to judicial review under
a "de novo" rather than a deferential standard.
(b) This Agreement shall be subject to the terms of the Plan,
and in the case of any inconsistency between the Plan and
this Agreement, the provisions of the Plan shall govern.
The Recipient hereby acknowledges receipt of the Corporation's
Prospectus which includes the text of the Plan.
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<PAGE>
7. NONASSIGNABILITY
The Recipient's rights to payments under this Agreement 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), assignment, pledge, encumbrance,
attachment or garnishment by the Recipient's creditors or the
creditors of the Recipient's spouse or any other beneficiary.
8. RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or this Agreement shall confer on the
Recipient any right to continue as an employee of the
Corporation or any subsidiary or in any way affect the
Corporation or any subsidiary's right to terminate the
Recipient's employment at any time.
9. FORCE AND EFFECT
The various provisions of this Agreement are severable in
their entirety. Any determination of invalidity or
unenforceability of any one provision shall have no effect on
the continuing force and effect of the remaining provisions.
10. PREVAILING LAWS
This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania applicable to contracts made, and
to be enforced, within the Commonwealth of Pennsylvania.
11. SUCCESSORS
This Agreement shall be binding upon and inure to the benefit
of the successors, assigns and heirs of the respective
parties.
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<PAGE>
12. NOTICE
Any notice to the Corporation hereunder shall be in writing
addressed to:
Executive Vice President, Corporate Affairs
GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962-1957
Any notice to the Recipient hereunder shall be in writing
addressed to:
------------------------------------------------------
------------------------------------------------------
or such other address as the Recipient shall specify to the
Corporation in writing.
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the
parties and shall not be modified or amended except in writing
and duly signed by each of the parties hereto. No waiver by
either party of any default under this agreement shall be
deemed a waiver of any later default set forth above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date set forth above.
GPU, INC.
By:__________________________________
Fred D. Hafer
Chairman, President and Chief
Executive Officer
-------------------------------------
17
Exhibit 10-Y:
February 23, 2000
Robert L. Wise
701 Tioga Street
Johnstown, Pennsylvania 15905
Dear Robert:
The purpose of this letter is to set forth the terms and conditions of
the supplemental pension that GPU Service, Inc. ("GPUS") has agreed to provide
to you upon your retirement.
1. Upon your retirement from employment with GPUS and all other
subsidiaries of GPU, Inc. (GPU, Inc. and its subsidiaries are referred to herein
as the "GPU Companies") 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 the GPU Companies Employee Pension Plan (the "EPP") and GPUS's
Supplemental and Excess Benefits Plan (together, the "GPU Retirement Plans"),
and in addition to the pension payment to you under the GPU Companies
Supplemental Executive Retirement Plan.
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) $19,885.91 for each month beginning after your
Retirement Date and before the month beginning after your 62nd birthday, or (b)
$19,385.91 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 the GPU Retirement Plans, determined for this purpose without
taking into account (i) any Additional Pension amount payable to you under the
EPP and (ii) the 20% increase in the pension amounts payable to you under the
GPU Retirement Plans during the first 12 months following your retirement. The
amounts specified in (a) and (b) of the preceding sentence shall be adjusted to
reflect any awards
<PAGE>
made to you after the date of this Agreement under the GPUS Incentive
Compensation Plan for Elected Officers, to the extent such awards are treated
under Section 1.11 of the EPP as "Earnings" for calendar months ending on or
prior to February 29, 2000.
For purposes of the foregoing, if any part of the aggregate pension
amount payable to you under the GPU 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) of the preceding
paragraph shall be determined as if such part were so payable.
3. The Supplemental Pension shall be paid to you in the form of a
single life annuity unless you are married on your Retirement Date, in which
case it shall be paid in the form described as option 2 in Section 10.1 of the
EPP, 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. 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.
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 the EPP, the month
in which your death or your spouse's death occurs whichever is the later.
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.
2
<PAGE>
7. Notwithstanding any other provision of this Agreement to the
contrary, you may elect to have the Supplemental Pension that becomes payable to
you or your surviving spouse under Section 1 or 4 hereof paid in the form of a
single lump sum payment. The amount of such lump sum payment shall be determined
in the same manner as the amount of the lump sum payment payable pursuant to an
election by you under clause (a) of the first paragraph of Section 8 would be
determined, as provided in the third paragraph of Section 8.
Any election under this Section 7 shall be effective only if it is made
at least twenty-four (24) months prior to the termination of your employment
with the GPU Companies. Any election so made may be revoked, and a new election
may be made under this Section 7, at any time; provided, however, that any such
revocation or new election shall be effective only if it is made within the
period specified in the preceding sentence. Any election, or revocation of an
election, that may be made by you under this Section 7 shall be made in writing,
on a form that is furnished to you for such purpose by the Administrative
Committee for the EPP (the "Administrative Committee") and that is signed by you
and delivered to the Administrative Committee.
8. Notwithstanding any other provision of this Agreement or the GPU
Retirement Plans to the contrary, or any other form of distribution or payment
provided for or optional form of distribution or payment otherwise elected under
this Agreement or the GPU Retirement Plans, you shall be permitted to make
either one, or both, of the following special distribution elections: (a) to
have the Supplemental Pension payable to you hereunder, or the Survivor's
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 with the
GPU Companies for any reason within the two (2) year period following the
occurrence of a "Change in Control" (as defined in Appendix A hereto), or (b) if
a Change in Control occurs after the termination of your employment with the GPU
Companies but before all payments required to be made hereunder with respect to
your Supplemental Pension have been made, to have the Supplemental Pension
payments that otherwise would be made hereunder after the date of such Change in
Control paid in the form of a single lump sum payment.
An election under clause (a) of the preceding paragraph shall be
effective only if it is made either at least twenty-four (24) months prior to
such termination of your employment, or 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. An election under clause (b)
of the preceding paragraph shall be effective
3
<PAGE>
only if it is made at least one year prior to the Change in Control, and prior
to the termination of your employment. Any special election made under clause
(a) or (b) of the preceding paragraph may be revoked, and a new special election
may be made thereunder, 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 this paragraph. Any special election, or revocation of a special
election, that may be made hereunder shall be made in the same manner as
provided in the last sentence of the second paragraph of Section 7.
The lump sum payment to be made to you pursuant to your election under
clause (a) of the second preceding paragraph shall be in an amount that is
"Actuarially Equivalent" (as defined below and determined as of the first day of
the month following the date of your termination of employment) to the
Supplemental Pension that otherwise would be payable to you pursuant to Section
2 hereof if payment of your Supplemental Pension and the pension payable to you
under the GPU 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 to your surviving spouse pursuant to your election under clause (a)
of the second preceding paragraph shall be in an amount that is Actuarially
Equivalent (as defined below and determined as of the first day of the month
following the date of your death) to the Survivor's Annuity that otherwise would
be payable to your surviving spouse pursuant to Section 4 hereof.
The lump sum payment to be made to you or your surviving spouse
pursuant to your election under clause (a) of the second preceding paragraph
shall be made by no later than thirty (30) days following the date of your
termination of employment.
The lump sum payment to be made pursuant to your election under clause
(b) of the third preceding paragraph shall be in an amount that is Actuarially
Equivalent (as defined below and determined as of the first day of the month
coincident with or next following the date on which the Change in Control
occurs) to the payments that otherwise would be made hereunder with respect to
your Supplemental Pension after the date of such Change in Control. Such lump
sum payment shall be made by no later than thirty (30) days following the date
on which such Change in Control occurs.
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
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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.
9. 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 amendment to your Split-Dollar Agreement that will permit you
to receive the maximum level of benefits with respect to your Senior Executive
Life Insurance policy provided for under GPUS's Senior Executive Life Insurance
Program.
10. 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.
11. 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.
12. The Supplemental Pension and other benefits provided to you
hereunder are in lieu of any and all benefits to which you would have been
entitled under the 1998 Voluntary Enhanced Retirement Program (the "VERP") if
you had retired under the VERP in accordance with its terms. It is understood
and agreed that the VERP Agreement between you and GPU Generation, Inc.
("Genco") dated September 17, 1998 ("your VERP Agreement") is no longer of any
force and effect, and that neither you nor Genco nor any other of the GPU
Companies has any further rights, obligations or liabilities thereunder.
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If the foregoing correctly reflects your understanding of the agreement
between you and GPUS as 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: ----------------------------------
Fred D. Hafer, Chairman, President
& Chief Executive Officer
The foregoing correctly reflects my understanding and is agreed to by me as of
the date of this letter
- --------------------------
Robert L. Wise
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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
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(3) The consummation of:
(A) A merger, consolidation or reorganization with or
into GPU or in which securities of GPU are issued, unless such
merger, consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a merger,
consolidation or reorganization with or into GPU or in which
securities of GPU are issued 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
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(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
with the GPU Companies (A) as a result of your death, (B) by any GPU Company,
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 the rate of your annual base salary;
(3) any change in location of your place of employment to
a location other than Reading, Pennsylvania without your consent;
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(4) the failure by the GPU Companies 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 any GPU Company
in which you participated, within seven (7) days of the date such compensation
is due;
(5) the failure by the GPU Companies (A) to 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 such failure by the GPU Companies, unless a substitute or
replacement plan has been implemented which provides substantially identical
compensation or benefits to you or (B) to continue to 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 such failure by the GPU Companies;
(6) the failure of GPUS to obtain a satisfactory agreement
from any successors or assigns to assume and agree to honor and perform GPUS's
obligations under this Agreement; or
(7) any purported termination of your employment which is not
effected pursuant to a Notice of Termination as that term is defined in your
Severance Agreement dated February 23, 2000.
Any event or condition described in clauses (1) through (7)
above which occurs (A) within twelve (12) months prior to a Change in Control or
(B) prior to a Change in Control but which you reasonably demonstrate (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, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it occurred prior to
a Change in Control.
A-4
Exhibit 10-EE
SEVERANCE PROTECTION AGREEMENT
Severance Protection Agreement, as amended and restated
effective as of February 23, 2000 by and among GPU, Inc. (the "Corporation"),
GPU Service, Inc. (the "Company") and Robert L. Wise (the "Executive"). WHEREAS,
the Corporation and GPU Generation,Inc. ("Genco") entered into a Severance
Protection Agreement with the Executive dated February 6, 1997, which agreement
was subsequently amended and restated effective as of June 5, 1997 (the "Prior
Agreement");
WHEREAS, subsequent to the execution of the Prior Agreement, the
Executive's employment has been transferred from Genco to the Company, Genco has
transferred to the Company all of its rights, interests, obligations and
liabilities with respect to the Prior Agreement, and the Company has accepted
such transfer and has agreed to assume and be solely responsible for all of
Genco's obligations and liabilities with respect to the Prior Agreement; and
WHEREAS, THE Corporation, the Company and the Executive wish to
amend the Prior Agreement in order to reflect the aforesaid transfer of the
Executive's employment from Genco to the Company and the aforesaid transfer by
Genco to the Company of all of Genco's rights, interests, duties and
obligations, as well as to make certain other changes in the terms of the Prior
Agreement.
NOW, THEREFORE, in consideration of the respective agreements of
the parties contained herein, the parties hereto agree that the Prior Agreement
is hereby amended and restated effective as of February 23, 2000 to read in its
entirety as follows:
1. Term of Agreement. This Agreement shall commence as of
November 1, 1996, and shall continue in effect until October 31, 1998 (the
"Term"); provided, however, that on November 1, 1997, and on each November 1
thereafter, the Term shall automatically be extended for one (1) year unless
either the Executive or the Company shall have given written notice to the other
at least ninety (90) days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four (24)
months after such occurrence.
2. Termination of Employment. If the Executive's
employment with the Company and with all other Affiliates of the Corporation
shall be terminated within twenty-four (24) months following a Change in
Control, the Executive shall be entitled to the following compensation and
benefits:
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(a) If the Executive's employment with the
Company and with all other Affiliates of the Corporation shall be terminated for
any reason, the Company shall pay to the Executive his Accrued Compensation. In
addition to the foregoing, if the Executive's employment is terminated by the
Company for Disability or by reason of the Executive's death, the Company shall
pay to the Executive or his beneficiaries a Pro Rata Bonus.
(b) If the Executive's employment with the
Company and with all other Affiliates of the Corporation shall be terminated (i)
by the Company without Cause (other than by reason of the Executive's
Disability), or (ii) by the Executive for Good Reason, the Executive shall be
entitled to the following:
(1) the Company shall pay the Executive
all Accrued Compensation and a Pro Rata Bonus;
(2) the Company shall pay the Executive
as severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date, an amount determined by multiplying (A) three (3) times
the sum of (i) the Executive's Base Amount and (ii) the Executive's Bonus
Amount, by (B) a fraction, the numerator of which is the number of months, not
to exceed thirty-six (36), in the period beginning on the Termination Date and
ending on the Executive's Normal Retirement Date (as defined in the GPU
Companies Employee Pension Plan), and the denominator of which is thirty-six
(36).
(3) for a number of months equal to
thirty-six (36), or if earlier, until the Executive's Normal Retirement Date (as
defined in the GPU Companies Employee Pension Plan) (the "Continuation Period"),
the Company shall at its expense continue on behalf of the Executive and his
dependents and beneficiaries the life insurance, disability, medical, dental and
hospitalization coverages and benefits provided to the Executive immediately
prior to the Change in Control or, if greater, the coverages and benefits
provided at any time thereafter. The coverages and benefits (including
deductibles and costs) provided in this Section 2(b)(3) during the Continuation
Period shall be no less favorable to the Executive and his dependents and
beneficiaries, than the most favorable of such coverages and benefits referred
to above. The Company's obligation hereunder with respect to the foregoing
coverages and benefits shall be reduced to the extent that the Executive obtains
any such coverages and benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce any of the coverages or benefits it
is required to provide the Executive hereunder so long as the aggregate
coverages and benefits of the combined benefit plans is no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee
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benefit plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits;
(4) the Company shall pay or reimburse
the Executive for the costs, fees and expenses of outplacement assistance
services (not to exceed twenty percent (20%) of the sum of (A) the Executive's
Base Amount and (B) the Executive's Bonus Amount) provided by any outplacement
agency selected by the Executive; and
(5) the Company shall provide to the
Executive the use of a Company-leased vehicle, at no cost to the Executive,
until the earlier of (A) the date occurring six (6) months after the Termination
Date or (B) the Executive's sixty-fifth (65th) birthday, after which date the
Executive shall have the option to purchase the vehicle at its "blue book"
value.
(c) If the Executive's employment is terminated
by the Company without Cause (other than by reason of the Executive's
Disability) (1) within twelve (12) months prior to a Change in Control or (2)
any time prior to the date of a Change in Control but the Executive reasonably
demonstrates that such 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 (a "Third Party") and who effectuates 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 such termination shall be deemed
to have occurred within twenty-four (24) months following a Change in Control,
provided a Change in Control shall actually have occurred.
(d) (1) Gross-Up Payment. In the event it
shall be determined that any payment or distribution of any type to or for the
benefit of the Executive, by the Company, the Corporation, any Affiliate, any
Person (as defined in Section 15.6(a) hereof) who acquires ownership or
effective control of the Corporation or ownership of a substantial portion of
the Corporation's assets (within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder)
or any affiliate of such Person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments"), is or will be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Total Payments.
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(2) Determination By Accountant. All
mathematical determinations, and all determinations as to whether any of the
Total Payments are "parachute payments" (within the meaning of Section 280G of
the Code), that are required to be made under this Section 2(d), including
determinations as to whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment and amounts relevant to the last sentence of this Section
2(d)(2), shall be made by an independent accounting firm selected by the
Executive from among the six (6) largest accounting firms in the United States
(the "Accounting Firm"), which shall provide its determination (the
"Determination"), together with detailed supporting calculations regarding the
amount of any Gross-Up Payment and any other relevant matter, both to the
Company and the Executive by no later than ten (10) days following the
Termination Date, if applicable, or such earlier time as is requested by the
Company or the Executive (if the Executive reasonably believes that any of the
Total Payments may be subject to the Excise Tax). If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive and the Company with a written statement that such Accounting Firm has
concluded that no Excise Tax is payable (including the reasons therefor) and
that the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. If a Gross-Up Payment is determined to be payable, it
shall be paid to the Executive within twenty (20) days after the Determination
(and all accompanying calculations and other material supporting the
Determination) is delivered to the Company by the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive, absent manifest error. As a result of uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the
Company should have been made ("Underpayment"), or that Gross-Up Payments will
have been made by the Company which should not have been made ("Overpayments").
In either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an Underpayment,
the amount of such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive. In the case of an Overpayment, the Executive
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company,
and otherwise reasonably cooperate with the Company to correct such Overpayment,
provided, however, that (i) the Executive shall not in any event be obligated to
return to the Company an amount greater than the net after-tax portion of the
Overpayment that he has retained or has recovered as a refund from the
applicable taxing authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of Section 2(d)(1), which is to make the
Executive whole, on an after-tax basis, from the application of the Excise Tax,
it being
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understood that the correction of an Overpayment may result in the Executive
repaying to the Company an amount which is less than the Overpayment.
(e) The amounts provided for in Sections 2(a)
and 2(b)(1), (2) and (4) shall be paid in a single lump
sum cash payment within thirty (30) days after the Executive's Termination Date
(or earlier, if required by applicable law).
(f) The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 2(b)(3).
(g) The severance pay and benefits provided for
in this Section 2 shall be in lieu of any other severance pay to which the
Executive may be entitled under the GPU System Severance Procedure or any other
plan, agreement or arrangement of the Company or any other Affiliate of the
Corporation.
(h) The Executive's entitlement to other
compensation or benefits, pursuant to the Company's employee benefit plans and
other applicable programs and practices shall be determined in accordance with
the terms of those plans, programs and practices as in effect from time to time.
(i) Notwithstanding any other provisions of this
Agreement, any amounts to which the Executive may be entitled pursuant to
Section 2(b)(2) shall be offset and reduced by the "actuarially equivalent"
value of the Supplemental Pension, if any, paid or payable to the Executive (or,
if the Executive has died, by the Survivor's Annuity, if any, paid or payable to
his surviving spouse) pursuant to the Letter Agreement between the Executive and
the Company dated February 23, 2000 (the "Letter Agreement"). For purposes of
this Section 2(i), the term "actuarially equivalent" shall have the same meaning
as assigned to that term in Section 8 of the Letter Agreement; and the actuarial
equivalent value of any amount paid or payable with respect to the Executive
under the Letter Agreement shall be determined (a) as of the first day of the
month following the Executive's Termination Date, or (b), if the Executive has
become entitled to payment under Section 2(b)(2) by reason of Section 2(c), as
of the first day of the month in which such payment is made to the Executive.
3. Notice of Termination. Following a Change in
Control, (i) any intended termination of the Executive's employment by the
Company shall be communicated by a Notice of Termination from the Company to the
Executive, and (ii) any intended termination of the Executive's employment by
the Executive for Good Reason shall be communicated by a Notice of Termination
from the Executive to the Company within six (6)
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months of the Executive becoming aware of the event or action constituting Good
Reason or, if later, within six (6) months after the date of the Change in
Control.
4. Fees and Expenses. The Company shall pay all legal fees and
related expenses (including the costs of experts, evidence and counsel) incurred
in good faith by the Executive as they become due as a result of (a) the
termination of the Executive's employment by the Company or by the Executive for
Good Reason (including all such fees and expenses, if any, incurred in
contesting, defending or disputing the basis for any such termination of
employment), (b) the Executive's hearing before the Board of Directors of the
Corporation as contemplated in Section 15.5 of this Agreement or (c) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits; provided,
however, that the payment of fees and expenses pursuant to this Section 4(c)
shall be made only after, and only to the extent that, the Executive is
unsuccessful in his attempt to obtain or enforce such right or benefit through
the procedures established under the Legal Defense Fund maintained by the
Company under the GPU System Companies Master Executives' Benefits Protection
Trust (or any similar fund under a successor trust).
5. Transfer of Employment. Notwithstanding any other provision
herein to the contrary, the Company shall cease to have any further obligation
or liability to the Executive under this Agreement if (a) the Executive's
employment with the Company terminates as a result of the transfer of his
employment to any other Affiliate of the Corporation, (b) this Agreement is
assigned to such other Affiliate, and (c) such other Affiliate expressly assumes
and agrees to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no assignment had taken
place. Any Affiliate to which this Agreement is so assigned shall be treated as
the "Company" for all purposes of this Agreement on or after the date as of
which such assignment to the Affiliate, and the Affiliate's assumption and
agreement to so perform this Agreement, becomes effective.
6. Corporation's Obligation. The Corporation agrees that
it will take such steps as may be necessary to cause the Company (or any
Affiliate that has become the "Company" pursuant to Section 5 hereof) to meet
each of its obligations to the Executive under this Agreement.
7. Notice. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement (including any Notice
of Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered
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or sent by certified mail, return receipt requested, postage prepaid, addressed
to the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the Board with
a copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon receipt.
8. Nature of Rights. The Executive shall have the status of a
mere unsecured creditor of the Company and the Corporation with respect to his
right to receive any payment under this Agreement. This Agreement shall
constitute a mere promise by the Company and the Corporation to make payments in
the future of the benefits provided for herein. It is the intention of the
parties hereto that the arrangements reflected in this Agreement shall be
treated as unfunded for tax purposes and, if it should be determined that Title
I of ERISA is applicable to this Agreement, for purposes of Title I of ERISA.
Except as provided in Section 2(g), nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company, the Corporation or
any other Affiliate of the Corporation and for which the Executive may qualify,
nor shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company, the Corporation or any other
Affiliate of the Corporation. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company, the Corporation or any other Affiliate of the Corporation shall be
payable in accordance with such plan or program, except as explicitly modified
by this Agreement.
9. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other right which
the Company may have against the Executive or others.
10. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive, the Corporation and the
Company. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by any party
which are not expressly set forth in this Agreement
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11. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and
shall inure to the benefit of the Company, the Corporation and their respective
Successors and Assigns. The Company and the Corporation shall require their
respective Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company and/or the
Corporation would be required to perform it if no such succession or assignment
had taken place.
(b) Neither this Agreement nor any right or
interest hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey
without giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in Morris County in the State of New Jersey.
13. Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto, and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto, with respect to the subject matter hereof, including the Former
Agreement and the Executive agrees that the Former Agreement is terminated and
shall have no further force or effect.
15. Definitions.
15.1. Accrued Compensation. For purposes of
this Agreement, "Accrued Compensation" shall mean all amounts of compensation
for services rendered to the Company or any other Affiliate that have been
earned or accrued through the Termination Date but that have not been paid as of
the Termination Date including (a) base salary, (b) reimbursement for reasonable
and necessary business expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (c) vacation pay and
(d) bonuses and incentive compensation; provided, however, that Accrued
Compensation shall not include any amounts described in clause (a) or clause (d)
that have been deferred pursuant to any salary reduction or deferred
compensation elections made by the Executive.
8
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15.2. Affiliate. For purposes of this Agreement,
"Affiliate" means any entity, directly or indirectly, controlled by, controlling
or under common control with the Corporation or any corporation or other entity
acquiring, directly or indirectly, all or substantially all the assets and
business of the Corporation, whether by operation of law or otherwise.
15.3. Base Amount. For purposes of this
Agreement, "Base Amount" shall mean the Executive's annual base salary at the
rate in effect as of the date of a Change in Control or, if greater, at any time
thereafter, determined without regard to any salary reduction or deferred
compensation elections made by the Executive.
15.4. Bonus Amount. For purposes of this
Agreement, "Bonus Amount" shall mean the greater of (a) the target annual bonus
payable to the Executive under the Incentive Plan in respect of the fiscal year
during which the Termination Date occurs or (b) the highest annual bonus paid or
payable under the Incentive Plan in respect of any of the three full fiscal
years ended prior to the Termination Date or, if greater, the three (3) full
fiscal years ended prior to the Change in Control.
15.5. Cause. For purposes of this Agreement,
a termination of employment is for "Cause" if the Executive has been convicted
of a felony or the termination is evidenced by a resolution adopted in good
faith by two-thirds of the Board of Directors of the Corporation that the
Executive:
(a) intentionally and continually failed
substantially to perform his reasonably assigned duties with the Company or the
Corporation (other than a failure resulting from the Executive's incapacity due
to physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) 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 the Company or the
Corporation, has been delivered to the Executive specifying the manner in which
the Executive has failed substantially to perform, or
(b) intentionally engaged in conduct
which is demonstrably and materially injurious to the Corporation or the
Company; provided, however, that no termination of the Executive's employment
shall be for Cause as set forth in this Section 15.5(b) until (1) there shall
have been delivered to the Executive a copy of a written notice, signed by a
duly authorized officer of the Company or the Corporation, setting forth that
the Executive was guilty of the conduct set forth in this Section 15.5(b) and
specifying the particulars thereof in detail, and (2) the Executive shall have
been provided an opportunity to be heard in person by the Board of Directors of
the Corporation (with the assistance of the Executive's counsel if the Executive
so desires).
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No act, nor failure to act, on the Executive's
part, shall be considered "intentional" unless the Executive has acted, or
failed to act, with a lack of good faith and with a lack of reasonable belief
that the Executive's action or failure to act was in the best interest of the
Corporation and the Company. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Executive after a Notice
of Termination is given to the Company by the Executive shall constitute Cause
for purposes of this Agreement.
15.6. Change in Control. A "Change in Control"
shall mean the occurrence during the term of the Agreement of:
(a) 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 (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Corporation or (B) 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 (a
"Subsidiary") (ii) the Corporation or its Subsidiaries, or (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined);
(b) 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 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
10
<PAGE>
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
(c) The consummation of:
(1) A merger, consolidation or
reorganization with or into the Corporation or in which securities of the
Corporation are issued, unless such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control Transaction" shall mean a merger,
consolidation or reorganization with or into the Corporation or in which
securities of the Corporation are issued where:
(A) 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,
(B) 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 beneficially directly
or indirectly owning a majority of the Voting Securities of the Surviving
Corporation, and
(C) no Person other
than (i) the Corporation, (ii) any Subsidiary, (iii) 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, the
Surviving Corporation, or any Subsidiary, or (iv) 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.
(2) A complete liquidation or
dissolution of the Corporation; or
(3) 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).
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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.
15.7. Company and Corporation. For purposes of
this Agreement, all references to the Company and the Corporation shall include
their respective Successors and Assigns.
15.8. Disability. For purposes of this Agreement,
"Disability" shall mean a physical or mental infirmity which impairs the
Executive's ability to substantially perform his duties with the Company for six
(6) consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty (30) days), the Executive shall not have returned to full-time
performance of his duties; provided, however, that if the Company's Voluntary
Employees Beneficiary Association Long Term Disability Income Plan, or any
successor plan (the "Disability Plan"), is then in effect, the Executive shall
not be deemed disabled for purposes of this Agreement unless the Executive is
also eligible for "Total Disability" (as defined in the Disability Plan)
benefits (or similar benefits in the event of a successor plan) under the
Disability Plan.
15.9. 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 the Executive's status,
title, position or responsibilities (including reporting responsibilities)
which, in the Executive's reasonable judgment, represents an adverse change from
his status, title, position or responsibilities as in effect immediately prior
thereto; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with his status,
title, position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect him to any of such offices or positions, except
in connection with the termination of his employment for Disability, Cause, as a
result of his death or by the Executive other than for Good Reason;
12
<PAGE>
(2) a reduction in the Executive's
annual base salary below the Base Amount;
(3) the relocation of the offices of the
Company at which the Executive is principally employed to a location more than
twenty-five (25) miles from the location of such offices immediately prior to
such Change in Control, or the Company's or the Corporation's requiring the
Executive to be based anywhere other than such offices, except to the extent the
Executive was not previously assigned to a principal location and except for
required travel on the Company's or the Corporation's business to an extent
substantially consistent with the Executive's business travel obligations at the
time of the Change in Control;
(4) the failure by the Company or the
Corporation to pay to the Executive any portion of the Executive's current
compensation or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the Company or
the Corporation in which the Executive participated, within seven (7) days of
the date such compensation is due;
(5) the failure by the Company or the
Corporation to (A) continue in effect (without reduction in benefit level,
and/or reward opportunities) any material compensation or employee benefit plan
in which the Executive was participating immediately prior to the Change in
Control, including, but not limited to, any of the plans listed in Appendix A
hereto, unless a substitute or replacement plan has been implemented which
provides substantially identical compensation or benefits to the Executive or
(B) provide the Executive 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 the Executive was participating immediately prior to the
Change in Control;
(6) the failure of the Company or the
Corporation to obtain from its Successors or Assigns the express assumption and
agreements required under Section 11 hereof; or
(7) any purported termination of the
Executive's employment by the Company which is not effected pursuant to a Notice
of Termination satisfying the terms set forth in the definition of Notice of
Termination (and, if applicable, the terms set forth in the definition of
Cause).
(b) Any event or condition (1) described
in Section 15.9(a)(1), (2), (3), (4), (6) or (7) which occurs within twelve (12)
months prior to a Change in Control or (2) described in Section 15.9(a)(1)
through (7) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A)
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<PAGE>
was at the request of a Third Party who effectuates 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, shall
constitute Good Reason for purposes of this Agreement notwithstanding that it
occurred prior to a Change in Control.
15.10. Incentive Plan. For purposes of this
Agreement, "Incentive Plan" shall mean the Incentive Compensation Plan for
Elected Officers, or any successor annual incentive plan, maintained by the
Company or any other Affiliate.
15.11. Notice of Termination. For purposes of
this Agreement, following a Change in Control, "Notice of Termination" shall
mean a written notice of termination of the Executive's employment, signed by
the Executive if to the Company or by a duly authorized officer of the Company
if to the Executive, which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
15.12. Pro Rata Bonus. For purposes of this
Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of days in such
fiscal year through the Termination Date and the denominator of which is 365;
provided, however, that the Pro Rata Bonus shall be reduced, but not below zero,
to the extent of any bonus the Executive is entitled to receive pursuant to the
Incentive Plan in respect of the fiscal year (denoted a "Performance Period"
under the Incentive Plan) in which the Termination Date occurs.
15.13. Successors and Assigns. For purposes of
this Agreement, "Successors and Assigns" shall mean, with respect to the Company
or the Corporation, a corporation or other entity acquiring all or substantially
all the assets and business of the Company or the Corporation, as the case may
be (including this Agreement) whether by operation of law or otherwise.
15.14. Termination Date (a) For purposes of this
Agreement, "Termination Date" shall mean (i) in the case of the Executive's
death, his date of death, (ii) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period) and (iii) if the Executive's
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination for Cause shall not be less
than thirty (30) days, and in the case of a termination for Good Reason shall
not be more than sixty (60) days, from the date such Notice of Termination is
given); provided, however, that
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if within thirty (30) days after a Notice of Termination by the Company for
Cause or a Notice of Termination by the Executive for Good Reason is given the
party receiving such Notice of Termination in good faith notifies the other
party that a dispute exists concerning the basis for the termination, the
provisions of paragraph (b) shall apply.
(b)(i) If the Executive gives the
Company Notice of Termination for Good Reason and the Company disputes the basis
for the termination, the Termination Date shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, or by
the final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been taken) and
the Company shall continue to pay the Executive his Base Amount and continue the
Executive as a participant in all compensation, incentive, bonus, pension,
profit sharing, medical, hospitalization, dental, life insurance and disability
benefit plans in which he was participating when the notice giving rise to the
dispute was given, until such Termination Date, provided that if the Executive
continues to perform his duties with the Company during the pendency of such
dispute, the Executive shall not be obligated to repay to the Company any
amounts paid or benefits provided pursuant to this Section 15.14(b), and further
provided that if the Executive ceased performing his duties with the Company
during the pendency of such dispute, and the dispute is resolved in favor of the
Executive, any amount owed to the Executive pursuant to Section 2 of this
Agreement shall be reduced to the extent of any amount the Executive received
pursuant to this Section 15.14(b) during the pendency of such dispute; and (ii)
if the Company gives the Executive Notice of Termination for Cause and the
Executive disputes the basis for the termination, the Termination Date shall be
as determined pursuant to Section 15.14(a) and during the pendency of such
dispute the Executive shall not be entitled to payment of his Base Amount from
the Company and, except as required by law, the Executive's participation in the
Company's benefit plans and programs shall be discontinued.
15
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IN WITNESS WHEREOF, the Corporation and the Company have caused
this Agreement to be executed by their duly authorized officers and the
Executive has executed this Agreement as of the day and year first above
written.
GPU, Inc.
By:-----------------------
ATTEST: Fred D. Hafer
Chairman, President and
Chief Executive Officer
Secretary
GPU Service, Inc.
By:-----------------------
ATTEST: Fred D. Hafer
Chairman, President and
Chief Executive officer
Secretary
By:-----------------------
Robert L. Wise
16
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APPENDIX A
1. 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries
2 The Company's Incentive Plan
3. The GPU Companies Deferred Compensation Plan
4. The GPU Companies Employee Pension Plan
5. The Company's Supplemental and Excess Benefits Plan
6. The GPU Companies Supplemental Executive Retirement Plan
7. The Company's Employee Life Insurance Plan
8. Senior Executive Split-Dollar Life Insurance Program
9. The GPU Companies Accident Insurance Plan
10. The GPU Companies Health Care Plan for Non-Bargaining Employees
and the Company's Health Care Plan for Non-bargaining Retirees, if
applicable
11. The GPU Companies Supplemental Medical Expense Plan for elected
Officers
12. The GPU Companies Flexible Benefits Plan for Non-bargaining
Employees
13. The GPU Companies Group Specified Disease Insurance Plan
14. The GPU Companies Long Term Disability Income Plan
15. The GPU Companies Employee Savings Plan
16. The Company's Vacation Policy for Non-Bargaining Unit Employees
Exhibit 10-FF
GPU COMPANIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
GPU COMPANIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------
1. Purpose
This document sets forth the GPU Companies Supplemental Executive
Retirement Plan, as adopted effective July 1, 1999.
The purpose of the Plan is to provide certain senior executives of the
GPU Companies with a supplemental pension benefit to the extent necessary for
the executives' total annual retirement income from all pension sources to be at
least equal to the executive's Target Pension Amount, as defined herein.
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 payable to
Participants who are its own employees; and the right to receive any amount
payable hereunder with respect to any Participant shall be enforceable only
against the Company with which such Participant is or was last employed.
2. Definitions
As used herein, the following terms shall have the following meanings:
"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
<PAGE>
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 with or
into the Corporation or in which securities of the Corporation
are issued, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or
reorganization with or into the Corporation or in which
securities of the Corporation are issued where:
<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 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.
"Committee" shall mean the Personnel, Compensation and Nominating
Committee of the Board of Directors of GPU, Inc.
"Company" shall mean GPU Service, Inc., GPU Nuclear, Inc., GPU
International, Inc. and any other direct or indirect subsidiary of GPU, Inc.
that has adopted this 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.
"GPU Companies" shall mean GPU, Inc. and each of its direct and
indirect subsidiaries.
"Incentive Compensation Plan" shall mean the Incentive Compensation
Plan for Elected Officers maintained by any of the GPU Companies, or the Annual
Performance Award Plan maintained by GPU International, Inc.
Other Retirement Plan" shall mean, with respect to any Participant, (i)
any defined benefit pension plan, whether or not tax qualified, (including
without limitation any such plan that is a "cash balance" plan) maintained by
any employer other than one of the GPU Companies with which the Participant was
employed at any time prior to his or her Retirement, and (ii) any individual
contract between the Participant and any of the GPU Companies, or between the
Participant and any such other former employer, under which the Participant is
entitled to receive, upon his or her retirement or other termination of
employment, a benefit that is defined as, or as the actuarial equivalent of, a
fixed amount of annual income payable for the Participant's lifetime.
<PAGE>
"Participant" shall mean any individual who has been elected to an
office with a Company that is specified in Section 3.
"Payment Starting Date" shall mean the date as of which payment of a
Participant's Supplemental Pension Benefit is to be made, or is to commence,
pursuant to the provisions of Section 4(e) hereof.
"Pension Plan" shall mean the GPU Companies Employee Pension Plan.
"Plan"- refers to the GPU Companies Supplemental Executive Retirement
Plan as set forth in this document and as it may be amended from time to time in
the future.
"Retirement" shall mean, with respect to any Participant, the
termination of the Participant's employment with all of the GPU Companies at any
time after July 1, 1999, for any reason other than death, if (but only if) (i)
at the time of such termination the Participant has attained age 62, or (ii) at
the time of such termination the Participant has attained age 55 and has
completed at least 15 Years of Service, or (iii) such termination of the
Participant's employment occurs upon, or at any time after, the occurrence of a
Change in Control.
"Supplemental and Excess Benefits Plan" shall mean the GPU Companies
Supplemental and Excess Benefits Plan.
"Years of Service" shall mean, with respect to any Participant, the sum
of (a) his years of "Creditable Service" as determined under Section 5 of the
Pension Plan without taking into account any additional years of "Creditable
Service" otherwise credited to the Participant under Section 5.9 of the Pension
Plan, plus (b) such number of additional years of service, if any, as provided
in any individual contract of employment between the Participant and any of the
GPU Companies that has been approved by the Committee. Notwithstanding the
foregoing, a Participant's Years of Service shall not include any period of the
Participant's employment with any of the GPU Companies after the date as of
which he or she has ceased to hold any corporate office specified in Section 3
hereof.
3. Eligibility
Any person who is elected to serve in one of the corporate offices
listed below shall become eligible for participation in the Plan effective as of
the later of July 1, 1999 or the date as of which his or her election to such
office becomes effective.
<PAGE>
Company Office
GPU Service, Inc. Chief Executive Officer
Each Executive Vice President
President of Operations Division
President of Fossil Generation
GPU Nuclear, Inc. President
4. Supplemental Pension Benefit
Upon a Participant's Retirement, he or she shall become entitled to
receive from his or her Company a supplemental pension benefit (the
"Supplemental Pension Benefit") in accordance with the following provisions:
(a) The Supplemental Pension Benefit payable to a Participant
hereunder, when expressed as a single life annuity, shall be an annual amount of
income payable to the Participant for his or her life equal to the Participant's
Target Pension Amount, as defined in (b) below, reduced by the sum of the
following:
(i) The sum of (A) the Basic Pension, if any, payable to the
Participant under the Pension Plan and (B) the aggregate annual benefit
amount payable to the Participant in the form of a single life annuity
under the Supplemental and Excess Benefits Plan, in each case
determined for this purpose without taking into account the 20%
increase in the amounts payable to the Participant under such plans
during the first 12 months for which such amounts are payable.
(ii) The annual amount (exclusive of any portion thereof
attributable to the Participant's own contributions) that is payable to
the Participant under each of the Participant's Other Retirement Plans
(hereinafter referred to as a "Pension Amount"), provided, however,
that in the case of any Pension Amount payable to a Participant under
any Other Retirement Plan maintained by an Employer other than one of
the GPU Companies, there shall be taken into account for purposes of
this Section 4(a)(ii) only the portion of such Pension Amount that is
attributable to the same number of the Participant's years of service
with such employer as the number of additional years of service
credited to the Participant under clause (b) of the definition of
"Years of Service" contained in Section 1; and
<PAGE>
(iii) An amount equal to the product resulting from
multiplying by 12 the Participant's Social Security Primary Insurance
Amount, determined as of the date of his or her Retirement (hereinafter
referred to as the Participant's "Social Security Benefit").
(b) A Participant's Target Pension Amount shall be an annual amount of
income payable to the Participant for his or her life equal to 2% of the
Participant's Average Annual Compensation, as defined in (c) below, for each
Year of Service (but not more than 30 Years of Service) completed by the
Participant as of the date of his or her Retirement.
(c) A Participant's Average Annual Compensation shall mean the quotient
resulting from dividing by three the aggregate amount of the Participant's
Earnings, as defined below, during his or her highest paid 36 calendar months
(whether or not consecutive) within the Participant's most recent period of
employment with the GPU Companies (not exceeding 10 years) ending on the date of
his or her Retirement. In the case of any Participant who has been employed with
the GPU Companies for less than 36 calendar months at the time of his or her
Retirement, such Participant's Average Annual Compensation shall be determined
by first dividing the aggregate amount of the Participant's Earnings during his
or her entire period of employment by the number of calendar months in such
period, and then, multiplying the resulting quotient by 12, or if less, the
number of calendar months in such period. For purposes of the foregoing, a
Participant's "Earnings" for any month shall mean his Earnings for such month as
determined for purposes of the Pension Plan, except that for purposes of this
Plan the following provisions shall apply:
(i) the limitation on the amount of the Participant's Earnings
that can be taken into account for purposes of the Pension Plan a
result of Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended, shall not apply;
(ii) all amounts of base salary or Incentive Compensation Plan
awards that are deferred pursuant to the Participant's election under
the GPU Companies Deferred Compensation Plan shall be included in the
Participant's Earnings for purposes of this Plan. Any amount of base
salary so deferred shall be treated as Earnings for the month in which
such amount would have been paid to the Participant in cash if he or
she had not elected to defer such amount; and a pro rata portion of the
amount of any Incentive Compensation Plan award for any "Performance
Period", as defined in such Plan, that is so deferred shall
<PAGE>
be treated as Earnings for each of the calendar months within such
"Performance Period" or, in the case of any Participant who has
received an award for the Performance Period in which his Retirement
occurs, for each of the calendar months in the portion of such
Performance Period ending on or prior to the date of his or her
Retirement. No amount of base salary or Incentive Compensation Plan
award so deferred shall be treated as Earnings for any months other
than the months determined under the preceding sentence; and
(iii) a Participant's Earnings during any period of employment
with any of the GPU Companies after the date as of which he or she has
ceased to hold any corporate office specified in Section 3 shall not be
taken into account.
(d) The reduction in the amount of a Participant's Supplemental Pension
Benefit required under Section 4(a) shall be made in accordance with the
following rules:
(i) If the Basic Pension payable to the Participant under the
Pension Plan is not payable in the form of a single life annuity
commencing on the Participant's Payment Starting Date, the amount of
the reduction for the Participant's Basic Pension shall be equal to the
Basic Pension that would be payable to the Participant under the terms
of the Pension Plan if his or her Basic Pension were payable in the
form of a single life annuity commencing on the Participant's Payment
Starting Date.
(ii) If the Pension Amount payable to the Participant under
any Other Retirement Plan is not payable in the form of a single life
annuity commencing on the Participant's Payment Starting Date, the
reduction for such Pension Amount shall be equal to the Pension Amount
that would be payable to the Participant under the terms of such Other
Retirement Plan if such Pension Amount were payable in the form of a
single life annuity commencing on the Participant's Payment Starting
Date; provided, however, that if the Participant's Payment Starting
Date is prior to the earliest date as of which payment of such Pension
Amount could commence under the terms of such Other Retirement Plan,
then
(A) the amount of the reduction for such Pension
Amount shall be equal to the Pension Amount that would be
payable to the Participant under the terms of such Other
Retirement Plan if such Pension Amount were payable in the
form of a single life annuity commencing on such earliest
date, and
<PAGE>
(B) the amount of such reduction shall not be applied
to any monthly payment of the Participant's Supplemental
Pension Benefit hereunder that is payable to the Participant
before such earliest date.
(iii) If the Participant's Payment Starting Date is prior to the
earliest date as of which payment of his or her Social Security Benefit
could commence, then
(A) the amount of the reduction for the Participant's
Social Security Benefit shall be equal to the amount of the
Social Security Benefit that would be payable to the
Participant if his or her Social Security Benefit were payable
commencing on such earliest date, and
(B) the amount of such reduction shall not be applied
to any monthly payment of the Participant's Supplemental
Pension Benefit hereunder that is payable to the Participant
before such earliest date.
(e) A Participant's Supplemental Pension Benefit shall be paid to the
Participant in the same form, and payment shall be made or shall commence at the
same time, as the Participant's benefits under the Supplemental and Excess
Benefits Plan are paid to the Participant. For this purpose, any election in
effect for a Participant at the time of his or her Retirement as to the form
and/or time of payment of his or her benefits under the Supplemental and Excess
Benefits Plan shall also govern the form and time of payment of his or her
Supplemental Pension Benefit under this Plan; and the amount of any lump-sum
payment that is payable with respect to a Participant's Supplemental Pension
Benefit hereunder by virtue of any such election shall be determined in the same
manner as the amount of the lump-sum payment payable to the Participant under
the Supplemental and Excess Benefits Plan is determined.
(f) The amount of the Supplemental Pension Benefit otherwise payable to
a Participant in accordance with the previous provisions of this Section 4 shall
be subject to the following adjustments:
(i) Except as otherwise provided in (ii) below, if a
Participant's Payment Starting Date occurs prior to the first date
(hereinafter referred to as a Participant's "Early Retirement Date") as
of which the Participant has either attained age 62 or has attained age
60 and has completed at least 25 Years of Service, the amount of his or
her Supplemental Pension Benefit shall be reduced so as to
<PAGE>
be equal to the Applicable Percentage, as defined below, of the
Supplemental Pension Benefit that would be payable to the Participant
if payment thereof commenced on the first day of the month following
the Participant's 62nd birthday. The "Applicable Percentage" shall mean
the percentage determined pursuant to the following table, based on the
number of months by which the Participant's Payment Starting Date
precedes the first day of the month following his or her 62nd birthday.
Number of months
Before First of
Month After 62nd Applicable
Birthday Percentage
0 100%
12 89
24 79
36 70
48 63
60 56
72 51
84 46
(ii) If a Participant's Payment Starting Date occurs prior to
his or her Early Retirement Date, the amount of the Participant's
Supplemental Pension Benefit shall be reduced by 1/12th of 4% for each
full month by which his or her Payment Starting Date precedes the end
of the month in which the Participant's 62nd birthday occurs, if either
of the following conditions apply:
(A) the Committee has consented to such reduction,
or
(B) the Participant's Retirement occurs after a
Change in Control.
(iii) If a Participant continues in employment with any of the
GPU Companies after attaining age 65, the Supplemental Pension Benefit
payable to the Participant upon his subsequent Retirement shall be
adjusted so as to be "actuarially equivalent" of the Supplemental
Pension Benefit that would have been payable to the Participant (based
on his Average Annual Compensation and Years of Service to the date of
his Retirement) if payment thereof commenced on the first day of the
month following the Participant's 65th birthday.
<PAGE>
(iv) With each monthly payment of the Supplemental Pension
Benefit payable to a Participant during the first 12-month period
beginning on his or her Payment Starting Date, the Participant shall be
entitled to receive from his or her Company an additional amount equal
to 20% of the amount of such monthly payment.
5. Supplemental Death Benefit
If a Participant dies prior to his or her Retirement but after the
Participant has attained age 55 and has completed at least 15 Years of Service,
the Participant's surviving spouse, if any, shall be entitled to receive from
the Participant's Company an annuity for such spouse's lifetime, in an amount
equal to 50% of the Supplemental Pension Benefit that would have been payable to
the Participant hereunder (including the 20% increase in the monthly payments
thereof that would have been payable pursuant to Section 4(f)(iii) above) if he
or she had not died, if the Participant's Retirement had occurred on the last
day of the month in which his or her death occurs, and if the Participant's
Supplemental Pension Benefit were payable in the form of a single life annuity
commencing on the first day of the month following the date of the Participant's
death.
6. Administration
(a) The Plan shall be administered by the Committee. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, 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 Participants
or other persons to benefits under the Plan. Any determination made by the
Committee prior to a Change in Control as to the interpretation, construction or
application of the Plan, or as to the rights of any Participant or other person
to benefits under the Plan, shall be conclusive and binding on all parties. Any
such 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 hereunder shall be subject to judicial review, under a "de novo",
rather than a deferential, standard.
(b) The Committee may delegate any administerial or non-discretionary
function pertaining to the administration of the Plan to any one or more
officers or employees of any of the GPU Companies, as the Committee may
determine in its discretion.
<PAGE>
7. Amendment and Termination
(a) Subject to Section 7(c), the Plan may be amended or terminated at
any time by GPU Service, Inc. ("GPUS"), with the concurrence of the Committee.
Any such amendment may be made with retroactive effect to the extent not
prohibited by law.
(b) Action to amend the Plan may be taken by GPUS either by resolution
duly adopted by its Board of Directors, or by an instrument in writing executed
by an officer of GPUS to whom authority to adopt or approve amendments to the
Plan has been delegated pursuant to a resolution duly adopted by the Board of
Directors of GPUS. Action to terminate the Plan shall be taken by GPUS by
resolution of its Board of Directors.
(c) Notwithstanding the provisions of Sections 7(a) and 7(b),
(i) no amendment to or termination of the Plan shall
impair any rights to benefits which have accrued hereunder, and
(ii) no amendment to Section 6(a) or to this Section 7(c), nor
any termination of the Plan, effectuated (A) at the request of a third
party who had indicated an intention or taken steps to effect a Change
in Control and who effectuates a Change in Control, (B) within six
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 (C) following a Change in Control, shall be
effective if the amendment or termination adversely affects the rights
of any Participant under the Plan.
8. Rights of Participants
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of his or her Company with respect to his or her right to receive any payment
under the Plan. The Plan shall constitute a mere promise by the Participant's
Company to make payments in the future of the benefits provided for herein. It
is intended that the arrangements reflected in the Plan be treated as unfunded
for tax purposes, as well as for purposes of any applicable provisions of Title
I of ERISA.
<PAGE>
(b) A Participant'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 Participant
or his or her beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employment of any of
the GPU Companies.
(d) Notwithstanding any other provision herein to the contrary, there
shall be deducted from any payment otherwise required to be made hereunder any
federal, state or local taxes required by law to be withheld with respect to
such payment.
EXHIBIT 10-GG
OYSTER CREEK NUCLEAR GENERATING STATION
PURCHASE AND SALE AGREEMENT
BY AND AMONG
GPU NUCLEAR, INC.,
JERSEY CENTRAL POWER & LIGHT COMPANY, as SELLERS,
and
AMERGEN ENERGY COMPANY, L.L.C., as BUYER
Dated as of October 15, 1999
PORTIONS OF THE TEXT IN THIS
DOCUMENT HAVE BEEN REDACTED
BECAUSE THEY CONTAIN CONFIDENTIAL
INFORMATION WITHHELD FROM PUBLIC
DISCLOSURE PURSUANT TO 10 CFR
SECTIONS 2.790 AND 9.17(a)(4)
<PAGE>
REDACTED TEXT CONTAINS CONFIDENTIAL INFORMATION WITHHELD FROM PUBLIC DISCLOSURE
- -------------------------------------------------------------------------------
PURSUANT TO 10 CFR SECTIONS 2.790 AND 9.17(a)(4)
- -------------------------------------------------
PURCHASE AND SALE AGREEMENT
---------------------------
PURCHASE AND SALE AGREEMENT, dated as of October 15, 1999, by and among
GPU Nuclear, Inc. a New Jersey corporation ("GPUN"), Jersey Central Power &
Light Company, a New Jersey corporation ("JCP&L") (GPUN and JCP&L are each
referred to as a "Seller" collectively referred to as "Sellers"), and AmerGen
Energy Company, L.L.C., a Delaware limited liability company ("Buyer"). Sellers
and Buyer are referred to individually as a "Party," and collectively as the
"Parties."
W I T N E S S E T H
-------------------
WHEREAS, JCP&L owns the Plant (as defined herein), Purchased Assets (as
defined herein) and certain facilities and other assets associated therewith and
ancillary thereto;
WHEREAS, GPUN is responsible for the daily operations of the Plant for
JCP&L ; and
WHEREAS, Buyer desires to purchase, and JCP&L desires to sell, the
Purchased Assets upon the terms and conditions hereinafter set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms have the meanings specified in this Section 1.1.
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.
<PAGE>
(2) "Agreement" means this Purchase and Sale Agreement together with
the Schedules and Exhibits hereto, as the same may be from time to time amended.
(3) "Ancillary Agreements" means the Interconnection Agreement, the
Reciprocal Services Agreement, the Power Purchase Agreement, the EOF Lease, the
Remote Assembly Area Access Agreement and the SBO Service Agreement, as the same
may be from time to time amended.
(4) "Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement between Sellers and Buyer substantially in the form of
Exhibit A hereto, by which Sellers shall, subject to the terms and conditions
hereof, assign Sellers' Agreements, the Real Property Leases, Transferable
Permits, certain intangible assets and other Purchased Assets to Buyer and
whereby Buyer shall assume the Assumed Liabilities.
(5) "Assumed Liabilities" has the meaning set forth in Section 2.3.
(6) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended.
(7) "Benefit Plans" has the meaning set forth in Section 4.9.
(8) "Bill of Sale" means the Bill of Sale, substantially in the form of
Exhibit B hereto, to be delivered at the Closing, with respect to the Tangible
Personal Property included in the Purchased Assets transferred to Buyer at the
Closing.
(9) "Business Day" shall mean any day other than Saturday, Sunday and
any day on which banking institutions in the State of New York are authorized by
law or other governmental action to close.
(10) "Buyer Benefit Plans" has the meaning set forth in
Section 6.10(f).
(11) "Buyer NQF" means the external trust fund not meeting the
requirements of section 468A of the Code and Treas. Reg. Section 1.468A-5, that
will be maintained by Buyer with respect to the Plant after the Closing pursuant
to the Post-Closing Decommissioning Trust Agreement.
2
<PAGE>
(12) "Buyer Indemnitee" has the meaning set forth in Section 8.1(b).
(13) "Buyer Material Adverse Effect" has the meaning set forth in
Section 5.3(a).
(14) "Buyer Required Regulatory Approvals" has the meaning set forth
in Section 5.3(b).
(15) "Buyer QF" means the external trust fund meeting the
requirements of section 468A of the Code and Treas. Reg.
Section 1.468A-5, that will be maintained by Buyer with respect to the Plant
after the Closing pursuant to the Post-Closing Decommissioning Trust Agreement.
(16) "Buyer's Environmental Inspection" has the meaning set forth in
Section 6.2(i).
(17) "Capital Expenditures" has the meaning set forth in
Section 3.3(a)(ii).
(18) [Intentionally Omitted)
(19) "CERCLA" means the Federal Comprehensive Environmental
Response, Compensation, and Liability Act, as amended.
(20) "Class I Assets" shall have the meaning set forth in Temp.
Treas. Reg. Section 1.1060-IT(d)(1).
(21) "Closing" has the meaning set forth in Section 3.1.
(22) "Closing Adjustment" has the meaning set forth in
Section 3.3(b).
(23) "Closing Date" has the meaning set forth in Section 3.1.
(24) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
(25) "Code" means the Internal Revenue Code of 1986, as amended.
(26) "Collective Bargaining Agreement" has the meaning set forth in
Section 6.10(d).
3
<PAGE>
(27) "Commercially Reasonable Efforts" means efforts which are
reasonably necessary to cause, or assist in, the consummation of the
transactions contemplated by, this Agreement and which do not require the
performing Party to expend funds, incur expenses or assume liabilities other
than those which are reasonable in nature and amount in the context of the
transactions contemplated by this Agreement in order for the performing Party to
satisfy its obligations hereunder.
(28) "Confidentiality Agreement" means the Confidentiality Agreement,
dated March 29, 1999, by and between Sellers and Buyer.
(29) "Decommissioning" means the complete retirement and removal of the
Plant from service and the restoration of the Site, as well as any planning and
administrative activities incidental thereto, including but not limited to (a)
the dismantlement, decontamination, storage, and/or entombment of the Plant, in
whole or in part, and any reduction or removal, whether before or after
termination of the NRC license for the Plant, of radioactivity at the Site, and
(b) all activities necessary for the retirement, dismantlement and
decontamination of the Plant to comply with all applicable requirements of the
Atomic Energy Act and the NRC's rules, regulations, orders and pronouncements
thereunder, the NRC Operating License for the Plant and any related
decommissioning plan.
(30) "Decommissioning Trust Funds" means the Seller Qualified
Decommissioning Trust Fund and the Seller Nonqualified Decommissioning Trust
Fund, collectively.
(31) "Decommissioning Indenture" means the Indenture and Second
Amendment to Indenture dated October 25, 1990 regarding the Seller Qualified
Decommissioning Trust Fund and the Seller Nonqualified Decommissioning Trust
Fund between JCP&L and Bank of New York, as amended.
(32) "Department of Energy" or "DOE" means the United States
Department of Energy and any successor agency thereto.
(33) "Department of Energy Decommissioning and Decontamination Fees"
means all fees related to the Department of Energy's Special Assessment of
utilities for the Uranium Enrichment Decontamination and Decommissioning Trust
Fund pursuant to Sections 1801, 1802 and 1803 of the Atomic Energy Act and the
Department of Energy's implementing regulations at 10 CFR Part 766, or any
similar fees assessed under amended or
4
<PAGE>
superseding statutes or regulations applicable to separative work units
purchased from the Department of Energy in order to decontaminate and
decommission the Department's gaseous diffusion enrichment facilities.
(34) "Direct Claim" has the meaning set forth in Section 8.2(c).
(35) "Easements" means, with respect to the Purchased Assets, the
easements and access rights to be granted pursuant to the Easement Agreement and
the Interconnection Agreement, including, without limitation, easements
authorizing access, use, maintenance, construction, repair, replacement and
other activities, as further described in the Easement Agreement and the
Interconnection Agreement.
(36) "Easement Agreement" means the Easement Agreement between JCP&L
and Sithe, whereby Buyer will be provided with certain Easements with respect to
the Real Property being transferred to Buyer and the adjacent Forked River site
sufficient to operate the Plant substantially as currently operated.
(37) "18R Outage" has the meaning set forth in Section 6.17(a).
(38) "Emission Allowance" means all present and future authorizations
to emit specified units of pollutants or Hazardous Substances, which units are
established by the Governmental Authority with jurisdiction over the Plant under
(i) an air pollution control and emission reduction program designed to mitigate
global warming, interstate or intra-state transport of air pollutants; (ii) a
program designed to mitigate impairment of surface waters, watersheds, or
groundwater; or (iii) any pollution reduction program with a similar purpose.
Emission Allowances include allowances, as described above, regardless as to
whether the Governmental Authority establishing such Emission Allowances
designates such allowances by a name other than "allowances."
(39) "Emission Reduction Credits" means credits, in units that are
established by the Governmental Authority with jurisdiction over the Plant that
have obtained the credits, resulting from reductions in the emissions of air
pollutants from an emitting source or facility (including, without limitation,
and to the extent allowable under applicable law, reductions from shut-downs or
control of emissions beyond that
5
<PAGE>
required by applicable law) that: (i) have been identified by the NJDEP as
complying with applicable New Jersey law governing the establishment of such
credits (including, without limitation, that such emissions reductions are
enforceable, permanent, quantifiable and surplus) and listed in the Emissions
Reduction Credit Registry maintained by the NJDEP or with respect to which such
identification and listing are pending; or (ii) have been certified by any other
applicable Governmental Authority as complying with the law and regulations
governing the establishment of such credits (including, without limitation,
certification that such emissions reductions are enforceable, permanent,
quantifiable and surplus). The term includes Emission Reduction Credits that
have been approved by the NJDEP and are awaiting USEPA approval. The term also
includes certified air emissions reductions, as described above, regardless as
to whether the Governmental Authority certifying such reductions designates such
certified air emissions reductions by a name other than "emission reduction
credits."
(40) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, conservation or other easements, deed restrictions, encumbrances
and charges of any kind.
(41) "Energy Reorganization Act" means the Energy Reorganization Act of
1974, as amended.
(42) "Environmental Claim" means any and all pending and/or threatened
administrative or judicial actions, suits, orders, claims, liens, notices,
notices of violations, investigations, complaints, requests for information,
proceedings, or other written communication, whether criminal or civil, pursuant
to or relating to any applicable Environmental Law by any person (including, but
not limited to, any Governmental Authority, private person and citizens' group)
based upon, alleging, asserting, or claiming any actual or potential (a)
violation of, or liability under any Environmental Law, (b) violation of any
Environmental Permit, or (c) liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, Release, or threatened Release into
the environment of any Hazardous Substances at any location related to the
Purchased Assets, including, but not limited to, any off-Site location to which
Hazardous Substances, or materials containing Hazardous
6
<PAGE>
Substances, were sent for handling, storage, treatment, or disposal.
(43) "Environmental Condition" means the presence or Release to the
environment, whether at the Site or at an off-Site location, of Hazardous
Substances, including any migration of those Hazardous Substances through air,
soil or groundwater to or from the Site or any off-Site location regardless of
when such presence or Release occurred or is discovered.
(44) "Environmental Laws" means all applicable Federal, state
and local, provincial and foreign, civil and criminal laws, regulations, rules,
ordinances, codes, decrees, judgments, directives, or judicial or administrative
orders relating to pollution or protection of the environment, natural resources
or human health and safety, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Substances (including, without
limitation, Releases to ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport, disposal or handling
of Hazardous Substances. "Environmental Laws" include, without limitation,
CERCLA, the Hazardous Materials Transportation Act (49 U.S.C.ss.ss.1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Sections 2601 et seq.), the Oil Pollution Act (33 U.S.C.
Sections 2701 et seq.), the Emergency Planning and Community Right-to-Know Act
(42 U.S.C. Sections 11001 et seq.), the Occupational Safety and Health Act (29
U.S.C. Sections 651 et seq.), the New Jersey Water Pollution Control Act,
(N.J.S.A. 58:10-23.11 et seq.), the Spill Compensation and Control Act (N.J.S.A.
13:1E-1 et seq.), the Solid Waste Management Act (N.J.S.A. 58:4A-4.1 et seq.),
the Subsurface and Percolating Waters Act (N.J.S.A. 13:1K-6 et seq.), the
Industrial Site Recovery Act (N.J.S.A. 13:1k-6 et seq.), the Brownfield and
Contaminated Site Remediation Act (N.J.S.A. 58:10 B-1) and all applicable other
state laws analogous to any of the above. Notwithstanding the foregoing,
Environmental Laws do not include the Atomic Energy Act, NRC rules, regulations
and orders promulgated or issued thereunder, or the Energy Reorganization Act
and applicable regulations thereunder.
(45) "Environmental Permits" has the meaning set forth in
Section 4.7(a).
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(46) "Environmental Reports" has the meaning set forth in Section 4.7.
(47) "EOF Facility" means the Emergency Operations Facility used in
connection with the Plant and located at JCP&L's premises in Lakewood, New
Jersey.
(48) "EOF Lease" means the agreement pursuant to which JCP&L will lease
the EOF Facility to Buyer for use in connection with Plant emergencies
consistent with the general terms and conditions set forth in Schedule 1.1(48).
(49) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(50) "ERISA Affiliate" has the meaning set forth in Section 2.4(n).
(51) "ERISA Affiliate Plans" has the meaning set forth in
Section 2.4(n).
(52) "Estimated Adjustment" has the meaning set forth in
Section 3.3(b).
(53) "Estimated Closing Statement" has the meaning set forth in
Section 3.3(b).
(54) "Excluded Assets" has the meaning set forth in Section 2.2.
(55) "Excluded Liabilities" has the meaning set forth in Section 2.4.
(56) "FERC" means the Federal Energy Regulatory Commission or any
successor agency thereto.
(57) "FIRPTA Affidavit" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit, substantially in the form of Exhibit C
hereto.
(58) "Good Utility Practices" mean any of the practices, methods and
acts engaged in or approved by a significant portion of the electric utility
industry as good practices applicable to nuclear generating facilities of
similar design, size and capacity or any of the practices, methods or activities
which, in the exercise of reasonable judgment by a prudent nuclear operator in
light of the facts known at the time the decision
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was made, could have been expected to accomplish the desired result at a
reasonable cost consistent with good business practices, reliability, safety,
expedition and applicable law. Good Utility Practices are not intended to be
limited to the optimum practices, methods or acts to the exclusion of all
others, but rather to be acceptable practices, methods or acts generally
accepted in the electric utility industry.
(59) "Governmental Authority" means any federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitrating body or
other governmental authority.
(60) "GPU" means GPU, Inc., a Pennsylvania corporation and parent
company of Sellers.
(61) "GPUN" means GPU Nuclear, Inc., a New Jersey corporation and a
wholly-owned subsidiary of GPU.
(62) "Hazardous Substances" means (a) any petrochemical or petroleum
products, coal ash, oil, radioactive materials, radon gas, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
levels of polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law; excluding, however, any "source",
"special nuclear" and "by product" material, as such terms are defined in and to
the extent regulated under the Atomic Energy Act.
(63) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
(64) "Income Tax" means any federal, state, local or foreign Tax (a)
based upon, measured by or calculated with respect to net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple bases
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(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (a), in each case together with any interest, penalties,
or additions to such Tax.
(65) "Indemnifiable Loss" has the meaning set forth in Section 8.1(a).
(66) "Indemnifying Party" has the meaning set forth in Section 8.1(d).
(67) "Indemnitee" has the meaning set forth in Section 8.1(c)(i).
(68) "Independent Accounting Firm" means such independent accounting
firm of national reputation as is mutually appointed by Sellers and Buyer.
(69) "Inspection" means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by
Buyer or its agents or Representatives with respect to the Purchased Assets.
(70) "Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, copyrights and copyright rights owned by
Sellers and necessary for the operation and maintenance of the Purchased Assets,
and all pending applications for registrations of patents, trademarks, and
copyrights, as set forth on Schedule 2.1(l).
(71) "Interconnection Agreement" means the Interconnection Agreement,
between JCP&L and Buyer, the form of which is attached as Exhibit D hereto,
under which JCP&L will provide Buyer with interconnection service to JCP&L's
transmission facilities and whereby Buyer will provide Sellers with continuing
access to certain of the Purchased Assets after the Closing Date.
(72) "Inventories" means nuclear fuel or alternative fuel inventories,
materials, spare parts, consumable supplies and chemical and gas inventories
relating to the operation of the Plant located at, or in transit to, the Plant.
(73) "IRS" means the United States Internal Revenue Service or any
successor agency thereto.
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(74) "ISFSI" means the Independent Spent Fuel Storage Installation
currently installed at the Plant.
(75) "ISRA" means the New Jersey Industrial Site Recovery Act,
as amended.
(76) "ISRA Termination Date" has the meaning as set forth in
Section 9.1(j).
(77) "Knowledge" means the actual knowledge of the corporate officers
or managerial representatives of the specified Person charged with
responsibility for the particular function, after reasonable inquiry by them of
selected employees of such Person whom they believe, in good faith, to be the
persons responsible for the subject matter of the inquiry.
(78) "Material Adverse Effect" means any change (or changes taken
together) in, or effect on, the Purchased Assets that is materially adverse to
the operations or condition (financial or otherwise) of the Purchased Assets,
taken as a whole, other than any change (or changes taken together) generally
affecting the international, national, regional or local electric industry as a
whole and not affecting the Purchased Assets or the Parties in any manner or
degree significantly different than the industry as a whole, including changes
in local wholesale or retail markets for electric power; national, regional or
local electric transmission systems or operations thereof, and any change or
effect resulting from action or inaction by a Governmental Authority with
respect to an independent system operator or retail access in New Jersey.
(79) "Mortgage Indenture" means the mortgage originally granted to City
Bank Farmer's Trust Company by JCP&L, dated as of March 1, 1946, as amended and
supplemented.
(80) "NJBPU" means the New Jersey Board of Public Utilities and any
successor agency thereto.
(81) "NJDEP" means the New Jersey Department of Environmental
Protection and any successor agency thereto.
(82) "Non-Union Employees" has the meaning as set forth in
Sections 6.10(b) and (l).
(83) "NYPSC" means the New York Public Service Commission and any
successor agency thereto.
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(84) "Nonqualified Decommissioning Trust Fund" means an external trust
fund that does not meet the requirements of Code section 468A and Treas. Reg.
Section 1.468A-5.
(85) "NRC" means the United States Nuclear Regulatory Commission and
any successor agency thereto.
(86) "Nuclear Laws" means all Federal, state, and local civil and
criminal laws, regulations, rules, ordinances, codes, decrees, judgments,
directives, or judicial or administrative orders, to the extent enforceable
against Sellers and applicable to the Purchased Assets, relating to the
regulation of commercial nuclear power plants, Source Material, Byproduct
Material and Special Nuclear Materials; the regulation of Low--Level Radioactive
Waste and High-Level Radioactive Waste; the transportation and storage of such
Nuclear Materials; the regulation of the Safeguards Information; the regulation
of nuclear fuel; the enrichment of uranium; and the disposal and storage of
High-Level Radioactive Waste and Spent Nuclear Fuel, including contracts
therefor and payments into the Nuclear Waste Fund; but shall not include
Environmental Laws. "Nuclear Material" means Source Material, Special Nuclear
Material, Byproduct Material, Low-Level Radioactive Waste, High-Level
Radioactive Waste, and Spent Nuclear Fuel. As used herein, the terms "Source
Material," "Special Nuclear Material," "Byproduct Material," "Low-Level
Radioactive Waste," "High-Level Radioactive Waste," "Spent Nuclear Fuel" and
"Safeguards Information" have the meanings ascribed to them in the regulations
of the NRC. To the extent that they govern this subject matter, "Nuclear Laws"
include the Atomic Energy Act of 1954, as amended (42 U.S.C. Section 2011 et
seq.), the Price-Anderson Act (Section 170 of the Atomic Energy Act of 1954, as
amended); the Energy Reorganization Act of 1974 (42 U.S.C. Section 5801 et
seq.); Convention on the Physical Protection of Nuclear Material Implementation
Act of 1982 (Public Law 97 - 351; 96 Stat. 1663); the Nuclear Non-Proliferation
Act of 1978 (22 U.S.C. Section 3201) the Low-Level Radioactive Waste Policy Act
(42 U.S.C. Section 2021b et seq.); the Nuclear Waste Policy Act, (42 U.S.C.
Section 10101 et seq., as amended); the Low-Level Radioactive Waste Policy
Amendments Act of 1985 (42 U.S.C. Section 2021d, 471); and the Energy Policy Act
of 1992 (4 U.S.C. Section 13201 et seq.) and any applicable and enforceable
state or local laws analogous to the foregoing.
(87) "Nuclear Waste Policy Act" means the Nuclear Waste Policy Act of
1982, as amended.
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(88) "Operational Recovery Work" has the meaning set forth in
Section 7.1(p).
(89) "Outage Plan" has the meaning set forth in Section 6.17(a).
(90) "Outage Cost Cap" has the meaning set forth in the Outage Plan.
(91) "Outage Costs" means the costs, including additional nuclear fuel
costs, associated with the 18R Outage and as set forth in the Outage Plan, as
the same may be amended from time to time in accordance with the Outage Plan.
(92) "PaPUC" means the Pennsylvania Public Utility Commission and any
successor agency thereto.
(93) "Parent Guaranty" means the agreement in the form of which is
attached as Exhibit G hereto, separately executed by each of PECO Energy Company
and British Energy, plc, severally guarantying the full and timely performance
by Buyer of its obligations under this Agreement, including, but not limited to
Buyer's obligations under Section 6.17.
(94) "PBGC" means the Pension Benefit Guaranty Corporation.
(95) "Permits" has the meaning set forth in Section 4.14.
(96) "Permitted Encumbrances" means: (i) the Easements; (ii) those
Encumbrances set forth in Schedule 1.1(96); (iii) statutory liens for Taxes or
other governmental charges or assessments not yet due or delinquent or the
validity of which is being contested in good faith by appropriate proceedings
provided that the aggregate amount for all Purchased Assets being so contested
does not exceed $250,000; (iv) mechanics', carriers', workers', repairers' and
other similar liens arising or incurred in the ordinary course of business
relating to obligations as to which there is no default on the part of Sellers
or the validity of which are being contested in good faith, and which do not,
individually or in the aggregate with respect to all Purchased Assets exceed
$250,000; (v) zoning, entitlement, conservation restriction and other land use
and environmental regulations by Governmental Authorities; and (vi) such other
imperfections in title and restrictions which do not materially, individually or
in the aggregate, detract from the value of the Purchased Assets as currently
used or unreasonably interfere with the present use of the Purchased Assets and
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neither secure indebtedness, nor individually or in the aggregate create a
Material Adverse Effect.
(97) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, or
governmental entity or any department or agency thereof.
(98) "PJM" means the Pennsylvania-New Jersey-Maryland Interconnection,
LLC.
(99) "Plant" means the Oyster Creek 619 megawatt boiling water nuclear
generating station located in Lacey Township, New Jersey and identified in NRC
Operating License No. DPR-16, Docket No. 50-219 and related assets as described
in Section 2.1.
(100) "Pollution Control Revenue Bonds" means the outstanding bonds
listed on Schedule 6.15, but excluding any bonds issued in connection with the
refinancing or refunding thereof.
(101) "Post-Closing Decommissioning Trust Agreement" means the trust
agreement between Buyer and a trust company to be designated by Buyer, as
Trustee, establishing the Buyer QF and the Buyer NQF.
(102) "Post-Closing Adjustment" has the meaning set forth in
Section 3.3(c).
(103) "Post-Closing Statement" has the meaning set forth in
Section 3.3(c).
(104) "Power Purchase Agreement" means the agreement between JCP&L and
Buyer, a copy of which is attached as Exhibit E hereto, executed on the date
hereof, relating to the sale of installed capacity and associated energy to
JCP&L for a specified period of time following the Closing Date.
(105) "Proprietary Information" of a Party means all information about
the Party or its Affiliates, including their respective properties or
operations, furnished to the other Party or its Representatives by the Party or
its Representatives, after the date hereof, regardless of the manner or medium
in which it is furnished, including information provided to a Party pursuant to
the Confidentiality Agreement. In addition, after the Closing Date, Proprietary
Information
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includes any non-public information regarding the Purchased Assets or the
transactions contemplated by this Agreement. Proprietary Information does not
include information that: (a) is or becomes generally available to the public
(other than as a result of a disclosure by the other Party or its
Representatives in violation of a confidentiality agreement); (b) was available
to the other Party on a nonconfidential basis prior to its disclosure by the
Party or its Representatives; (c) becomes available to the other Party on a
nonconfidential basis from a person, other than the Party or its
Representatives, who is not otherwise bound by a confidentiality agreement with
the Party or its Representatives, or is not under any obligation to the Party or
any of its Representatives not to transmit the information to the other Party or
its Representatives; or (d) is independently developed by the other Party.
(106) "Purchased Assets" has the meaning set forth in Section 2.1.
(107) "Purchase Price" has the meaning set forth in Section 3.2.
(108) "Qualified Decommissioning Trust Fund" means an external trust
fund that meets the requirements of section 468A of the Code and Treas. Reg.
Section 1.468A-5.
(109) "Real Property" has the meaning set forth in Section 2.1(a).
(110) "Real Property Leases" has the meaning set forth in Section 4.6.
(111) "Reciprocal Services Agreement" means the agreement between
Sellers and Buyer, a copy of which is attached as Exhibit F hereto, executed on
the date hereof, relating to Buyer's performance of certain management and
consulting services relating to the 18R Outage and Sellers' performance of
certain administrative and other services after the Closing.
(112) "Release" means release, spill, leak, discharge, dispose of,
pump, pour, emit, empty, inject, leach, dump or allow to escape into or through
the environment.
(113) "Remediation" means action of any kind to address a Release,
threatened Release or the presence of Hazardous Substances at a Site or an
off-Site location including, without
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limitation, any or all of the following activities to the extent they relate to
or arise from the presence of a Hazardous Substance at a Site or an off-Site
location: (a) monitoring, investigation, assessment, treatment, cleanup,
containment, removal, mitigation, response or restoration work; (b) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such activity; (c) preparing and implementing any plans
or studies for any such activity; (d) obtaining a written notice from a
Governmental Authority with jurisdiction over a Site or an off-Site location
under Environmental Laws that no material additional work is required by such
Governmental Authority; (e) the use, implementation, application, installation,
operation or maintenance of removal actions on a Site or an off-Site location,
remedial technologies applied to the surface or subsurface soils, excavation and
off-Site treatment or disposal of soils, systems for long term treatment of
surface water or ground water, engineering controls or institutional controls;
and (f) any other activities reasonably determined by a Party to be necessary or
appropriate or required under Environmental Laws to address the presence or
Release of Hazardous Substances at a Site or an off-Site location.
(114) "Remediation Agreement" means an agreement between a Party and
the NJDEP providing for the Remediation of all or a portion of the Purchased
Assets in a manner necessary to comply with ISRA.
(115) "Remote Assembly Area" means the Site Evacuation and Personnel
Mustering facility used in connection with the Plant and located at the GPU
Energy, Berkley Operations Headquarters on Route 530 in Berkeley Township, New
Jersey.
(116) "Remote Assembly Area Access Agreement" means the agreement to be
executed by the Parties giving Buyer access and use rights to the Remote
Assembly Area in connection with Plant emergencies consistent with the general
terms and conditions set forth in Schedule 1.1(116).
(117) "Replacement Welfare Plans" has the meaning set forth in
Section 6.10(e).
(118) "Representatives" of a Party means the Party's Affiliates and
their directors, officers, employees, agents, partners, advisors (including,
without limitation, accountants, counsel, environmental consultants, financial
advisors and other
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authorized representatives) and parents and other controlling persons.
(119) "SEC" means the Securities and Exchange Commission and any
successor agency thereto.
(120) "Seller Nonqualified Decommissioning Trust Fund" means the
external trust fund maintained by JCP&L and designated as a Nonqualified
Decommissioning Trust Fund with respect to the Plant prior to Closing pursuant
to the Decommissioning Indenture.
(121) "Seller Qualified Decommissioning Trust Fund" means the external
trust fund maintained by JCP&L and designated as a Qualified Decommissioning
Trust Fund with respect to the Plant prior to Closing pursuant to the
Decommissioning Indenture.
(122) "Sellers' Agreements" means those contracts, agreements, licenses
and leases relating to the ownership, operation and maintenance of the Plant and
being assigned to Buyer as part of the Purchased Assets, as more particularly
described in Section 4.12.
(123) "Sellers' Indemnitee" has the meaning set forth in
Section 8.1(a).
(124) "Sellers' Required Regulatory Approvals" has the meaning set
forth in Section 4.3(b).
(125) "Settlement Agreement" means the Settlement Agreement effective
as of September 1, 1994 between Sellers and GPU, on the one hand, and General
Electric Company, on the other hand.
(126) "Site" means, with respect to the Plant, the Real Property
(including improvements) forming a part of, or used or usable in connection with
the operation of, the Plant, including any disposal sites included in the Real
Property. Any reference to the Site shall include, by definition, the surface
and subsurface elements, including the soils and groundwater present at the
Site, and any reference to items "at the Site" shall include all items "at, on,
in, upon, over, across, under and within" the Site.
(127) "Sithe" means Sithe Energies, Inc., a Delaware corporation, or
any Affiliate thereof or successor thereto.
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(128) "Spent Fuel Fees" means those fees assessed on electricity
generated at the Plant and sold pursuant to the Standard Contract for Disposal
of Spent Nuclear Fuel and/or High Level Waste, as provided in Section 302 of the
Nuclear Waste Policy Act and 10 CFR Part 961, as the same may be amended from
time to time.
(129) "SBO Service" means the provision of station blackout service to
the Plant in order to comply with applicable NRC requirements.
(130) "SBO Service Agreement" means the agreement pursuant to which
JCP&L will provide or cause to be provided SBO Service to the Plant.
(131) "Subsidiary" when used in reference to any Person means any
entity of which outstanding securities having ordinary voting power to elect a
majority of the Board of Directors or other Persons performing similar functions
of such entity are owned directly or indirectly by such Person.
(132) "System Council" means System Council U-3 of the International
Brotherhood of Electrical Workers.
(133) "Tangible Personal Property" has the meaning set forth in
Section 2.1(c).
(134) "Tax Basis" means the adjusted tax basis determined for federal
income tax purposes under Code section 1011(a).
(135) "Taxes" means all taxes, charges, fees, levies, penalties or
other assessments imposed by any federal, state or local or foreign taxing
authority, including, but not limited to, income, excise, real or personal
property, sales, transfer, franchise, payroll, withholding, social security,
gross receipts, license, stamp, occupation, employment or other taxes, including
any interest, penalties or additions attributable thereto.
(136) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any schedule or
related or supporting information) required to be supplied to any taxing
authority with respect to Taxes including amendments thereto.
(137) "Termination Date" has the meaning set forth in Section 9.1(b).
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(138) "Third Party Claim" has the meaning set forth in Section 8.2(a).
(139) "Transferable Permits" means those Permits and Environmental
Permits which may be lawfully transferred to or assumed by Buyer without a
filing with, notice to, consent or approval of any Governmental Authority, and
are set forth in Schedule 1.1 (139).
(140) "Transferred Employees" means Transferred Non-Union Employees and
Transferred Union Employees.
(141) "Transferred Non-Union Employees" has the meaning set forth in
Section 6.10(b).
(142) "Transferred Union Employees" has the meaning set forth in
Section 6.10(b).
(143) "Transferring Employee Records" means all records related to
Transferred Employees, including records pertaining to: (i) skill and
development training and biographies, (ii) seniority histories, (iii) salary and
benefit information, including benefit census and valuation data, (iv)
Occupational, Safety and Health Administration reports, (v) active medical
restriction forms, (vi) fitness for duty and (vii) disciplinary actions, but
excluding prior medical histories except to the extent related to specific job
qualification.
(144) "Transmission Assets" has the meaning set forth in
Section 2.2(a).
(145) "Trustee" means the trustee of the Decommissioning Trust Funds
appointed by Sellers pursuant to the Decommissioning Indenture.
(146) "Union Employees" has the meaning set forth in Sections 6.10(a)
and (l).
(147) "USEPA" means the United States Environmental Protection Agency
and any successor agency thereto.
(148) "Year 2000 Qualified" means computer software applications that
have been qualified in accordance with a program based on NEI/NUSMG 97-07
Nuclear Utility Year 2000 Readiness to accurately process date/time data
(including but not limited to calculating, comparing and sequencing) from, into
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and between the twentieth and twenty-first centuries, the years 1999 and 2000,
and leap-year calculations.
(149) "WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.
1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made.
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. Upon the terms and subject to the satisfaction
of the conditions contained in this Agreement, at the Closing Sellers will sell,
assign, convey, transfer and deliver to Buyer, and Buyer will purchase, assume
and acquire from Sellers, free and clear of all Encumbrances (except for
Permitted Encumbrances), and subject to Sections 2.2 and the other terms and
conditions of this Agreement, all of Sellers' right, title and interest in and
to all assets constituting, or used in and necessary for the operation of, the
Plant as more fully identified in Schedules 2.1(h), 2.1(l) and 4.10(b),
including, without limitation, those assets described below (but excluding the
Excluded Assets), each as in existence on the Closing Date (collectively,
"Purchased Assets"):
(a) Those certain parcels of real property (including all
buildings, facilities and other improvements thereon and all appurtenances
thereto) described in Schedule 4.10(a) (the "Real Property"), except as
otherwise constituting part of the Excluded Assets;
(b) All Inventories;
(c) All machinery, mobile or otherwise, equipment (including
computer hardware and software and communications equipment), vehicles, tools,
spare parts, fixtures, furniture
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and furnishings and other personal property relating to or used in the operation
of the Plant, including, without limitation, the items of personal property
included in Schedule 4.10(b), other than property used or primarily usable as
part of the Transmission Assets or otherwise constituting part of the Excluded
Assets (collectively, "Tangible Personal Property");
(d) Subject to the provisions of Section 6.5(d), all Sellers'
Agreements;
(e) Subject to the provisions of Section 6.5(d), all Real
Property Leases;
(f) All Transferable Permits;
(g) All books, operating records, Transferring Employee
Records, operating, safety and maintenance manuals, inspection reports,
engineering design plans, documents, blueprints and as built plans,
specifications, procedures and similar items of Sellers, wherever located,
relating to the Plant and other Purchased Assets (subject to the right of
Sellers to retain copies of same for their use) other than general ledger
accounting records;
(h) Subject to Section 6.1, all Emission Reduction Credits
associated with the Plant and identified in Schedule 2.1(h), and all Emission
Allowances that have accrued prior to, or that accrue on or after, the date of
this Agreement but prior to the Closing Date;
(i) All unexpired, transferable warranties and guarantees from
third parties with respect to any item of Real Property or personal property
constituting part of the Purchased Assets as of the Closing Date and all claims
against third parties relating to Assumed Liabilities;
(j) The name "Oyster Creek Nuclear Generating Station". It is
expressly understood that Sellers are not assigning or transferring to Buyer any
right to use the names "Jersey Central Power & Light Company", "JCP&L", "GPU",
"GPU Energy", "GPU Nuclear" or "GPU Service" or any related or similar trade
names, trademarks, service marks, corporate names and logos or any part,
derivative or combination thereof; provided, however, that Sellers will grant to
Buyer a non-assignable (except to Affiliates), royalty-free, non-exclusive
license to use "GPU Nuclear" and any related or similar trade names, trademarks,
service marks, corporate names and logos on
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signs and displays affixed to the Purchased Assets on the Closing Date for a
period of three (3) months thereafter in order to allow Buyer adequate time to
change the signage to the name of Buyer;
(k) All drafts, memoranda, reports, information, technology,
and specifications relating to Sellers' plans for Year 2000 Qualification with
respect to the Purchased Assets;
(l) A non-assignable (except to Affiliates), royalty-free
non-exclusive license to the Intellectual Property described on Schedule 2.1(l);
(m) The substation equipment set forth in Schedule A to the
Interconnection Agreement and designated therein as being transferred to Buyer;
(n) The assets comprising the Decommissioning Trust Funds; and
(o) All spent fuel canisters now installed or subsequently
acquired by Sellers after the date hereof (or the net proceeds from Sellers'
sale or return thereof) as part of the ISFSI.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement will constitute or be construed as
conferring on Buyer, and Buyer is not acquiring, any right, title or interest in
or to the following specific assets which are associated with the Purchased
Assets, but which are hereby specifically excluded from the sale and the
definition of Purchased Assets herein (the "Excluded Assets"):
(a) Except as set forth in Schedule A to the Interconnection
Agreement, the electrical transmission or distribution facilities (as opposed to
generation facilities) of Sellers or any of their Affiliates located at the Site
or forming part of the Plant (whether or not regarded as a "transmission" or
"generation" asset for regulatory or accounting purposes), including all
switchyard facilities, substation facilities and support equipment, as well as
all permits, contracts and warranties, to the extent they relate to such
transmission and distribution assets (collectively, the "Transmission Assets"),
all as identified on Schedule 2.2(a);
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(b) Certain revenue meters and remote testing units, drainage
pipes and systems, as identified in the Easement Agreement;
(c) Certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities except the assets
comprising the Decommissioning Trust Funds;
(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables except the assets comprising the Decommissioning Trust Funds;
(e) Subject to the license referred to in Section 2.1(j), the
rights of Sellers and their Affiliates to the names "Jersey "Central Power &
Light Company", "JCP&L", "GPU", "GPU Energy", "GPU Nuclear" and "GPU Service" or
any related or similar trade names, trademarks, service marks, corporate names
or logos, or any part, derivative or combination thereof;
(f) All tariffs, agreements and arrangements to which either
of Sellers is a party for the purchase or sale of electric capacity and/or
energy or for the purchase of transmission or ancillary services;
(g) The rights of Sellers in and to any causes of action
against third parties (including indemnification and contribution), other than
to the extent relating to any Assumed Liability, relating to any Real Property
or personal property, Permits, Environmental Permits, Taxes, Real Property
Leases or Sellers' Agreements, if any, including any claims for refunds,
prepayments, offsets, recoupment, insurance proceeds, condemnation awards,
judgments and the like, whether received as payment or credit against future
liabilities, relating specifically to the Plant or the Site and relating to any
period prior to the Closing Date;
(h) All personnel records of Sellers or their Affiliates
relating to the Transferred Employees, the disclosure of which is prohibited by
law, or legal or regulatory process or subpoena;
(i) Any and all of Sellers' rights in any contract
representing an intercompany transaction between Sellers and an Affiliate of
Sellers, whether or not such transaction relates to
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the provision of goods and services, payment arrangements, intercompany charges
or balances, or the like, except for any contracts listed on Schedule 4.12(a);
(j) Sellers' account balances for the Plant with Nuclear
Electric Insurance Limited and insurance premium refunds from American Nuclear
Insurance relating to periods prior to the Closing Date;
(k) Sellers' pension plan and other employee benefit plan
assets relating to their employees; and
(l) All claims, rights and causes of action which Sellers have
or may have against the DOE arising prior to the Closing in connection with or
in any way related to Sellers' ownership, operation, maintenance or
Decommissioning of the Plant, including any and all proceeds thereof.
2.3 Assumed Liabilities. On the Closing Date, Buyer shall deliver to
Sellers the Assignment and Assumption Agreement pursuant to which Buyer shall
assume and agree to discharge when due, all of the following liabilities and
obligations of Sellers, direct or indirect, known or unknown, absolute or
contingent, which relate to the Purchased Assets, other than Excluded
Liabilities, in accordance with the respective terms and subject to the
respective conditions thereof (collectively, "Assumed Liabilities"):
(a) All liabilities and obligations of Sellers arising on or
after the Closing Date under Sellers' Agreements, the Real Property Leases, and
the Transferable Permits in accordance with the terms thereof, including,
without limitation, (i) the contracts, licenses, agreements and personal
property leases entered into by Sellers with respect to the Purchased Assets,
which are disclosed on Schedule 4.12(a) or not required by Section 4.12(a) to be
so disclosed, and (ii) the contracts, licenses, agreements and personal property
leases entered into by Sellers with respect to the Purchased Assets after the
date hereof consistent with the terms of this Agreement, except in each case to
the extent such liabilities and obligations, but for a breach or default by
Sellers, would have been paid, performed or otherwise discharged on or prior to
the Closing Date or to the extent the same arise out of any such breach or
default or out of any event which after the giving of notice would constitute a
default by Sellers;
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(b) All liabilities and obligations associated with the
Purchased Assets in respect of Taxes for which Buyer is liable pursuant to
Sections 3.5 or 6.8(a) hereof;
(c) All liabilities and obligations with respect to the
Transferred Employees arising on or after the Closing Date (i) for which Buyer
is responsible pursuant to Section 6.10 and (ii) relating to the grievance and
arbitration proceedings arising out of or under the Collective Bargaining
Agreement on or after the Closing Date;
(d) Subject to the exceptions set forth in this Section
2.3(d), any liability, obligation or responsibility under or related to
Environmental Laws or the common law, whether such liability or obligation or
responsibility is contingent or accrued, arising as a result of or in connection
with (i) any violation or alleged violation of Environmental Laws, whether prior
to, on or after the Closing Date, with respect to the ownership or operation of
any of the Purchased Assets; (ii) loss of life, injury to persons or property or
damage to natural resources (whether or not such loss, injury or damage arose or
was made manifest before the Closing Date or arises or becomes manifest on or
after the Closing Date) caused (or allegedly caused) by the presence or Release
of Hazardous Substances at, on, in, under, adjacent to or migrating from the
Purchased Assets prior to, on or after the Closing Date, including, but not
limited to, Hazardous Substances contained in building materials at or adjacent
to the Purchased Assets or in the soil, surface water, sediments, groundwater,
landfill cells, or in other environmental media at or near the Purchased Assets;
and (iii) the Remediation (whether or not such Remediation commenced before the
Closing Date or commences on or after the Closing Date) of Hazardous Substances
that are present or have been Released prior to, on or after the Closing Date
at, on, in, under, adjacent to or migrating from, the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or adjacent to the Purchased Assets; provided, however,
that Buyer shall not assume any such liability, responsibility or obligation in
respect of the foregoing items (i) through (iii) inclusive to the extent (x)
disclosed in the Environmental Reports or (y) disclosed on Schedule 4.7 hereof;
and provided further, that nothing set forth in this subsection 2.3(d) shall
require Buyer to assume any liabilities or obligations that are expressly
excluded in Section 2.4 including, without limitation, liability for off-Site
disposal of Hazardous Substances or for toxic torts as set forth in Sections
2.4(h), (i) and (j);
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(e) All liabilities and obligations of Sellers with respect to
the Purchased Assets arising on or after the Closing Date under the agreements
or consent orders set forth on Schedule 2.3(e);
(f) With respect to the Purchased Assets, any Tax that may be
imposed by any federal, state or local government on the ownership, sale,
operation or use of the Purchased Assets on or after the Closing Date, except
for any Income Taxes attributable to income received by Sellers; and
(g) All liabilities and obligations of Sellers for the
Decommissioning of the Plant.
2.4 Excluded Liabilities. Buyer shall not assume or be obligated
to pay, perform or otherwise discharge the following liabilities or obligations
(the "Excluded Liabilities"):
(a) Any liabilities or obligations of Sellers that are not
expressly set forth as liabilities or obligations being assumed by Buyer in
Section 2.3 and any liabilities or obligations in respect of any Excluded Assets
or other assets of Sellers which are not Purchased Assets;
(b) Any liabilities or obligations in respect of Taxes
attributable to the ownership, operation or use of Purchased Assets for taxable
periods, or portions thereof, ending before the Closing Date, except for Taxes
for which Buyer is liable pursuant to Sections 3.5 or 6.8(a) hereof;
(c) Any liabilities or obligations of Sellers accruing under
any of Sellers' Agreements , the Real Property Leases and the Transferable
Permits prior to the Closing Date;
(d) Any fines, penalties or costs imposed by a Governmental
Authority resulting from (i) an investigation, proceeding, request for
information or inspection before or by a Governmental Authority either pending
prior to or arising after the Closing Date but only regarding acts which
occurred prior to the Closing Date, or (ii) illegal acts, willful misconduct or
gross negligence of Sellers prior to the Closing Date, other than, any such
fines, penalties or costs which have been assumed by Buyer in Section 2.3;
(e) Any payment obligations of Sellers for goods delivered or
services rendered prior to the Closing Date, including, but not limited to,
rental payments pursuant to the
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Real Property Leases and any leases relating to Tangible Personal Property;
(f) Any liability, obligation or responsibility in respect of
environmental matters disclosed in the Environmental Reports or disclosed on
Schedule 4.7;
(g) Any liability, obligation or responsibility under or
related to Environmental Laws or the common law, whether such liability or
obligation or responsibility is known or unknown, contingent or accrued, arising
as a result of or in connection with loss of life, injury to persons or property
or damage to natural resources (whether or not such loss, injury or damage arose
or was made manifest before the Closing Date or arises or becomes manifest on or
after the Closing Date) to the extent caused (or allegedly caused) by the
off-Site disposal, storage, transportation, discharge, Release, or recycling of
Hazardous Substances, or the arrangement for such activities, of Hazardous
Substances, prior to the Closing Date, in connection with the ownership or
operation of the Purchased Assets, provided that for purposes of this Section
"off-Site" does not include any location to which Hazardous Substances disposed
of or Released at the Purchased Assets have migrated;
(h) Any liability, obligation or responsibility under or
related to Environmental Laws or the common law, whether such liability or
obligation or responsibility is known or unknown, contingent or accrued, arising
as a result of or in connection with the investigation and/or Remediation
(whether or not such investigation or Remediation commenced before the Closing
Date or commences on or after the Closing Date) of Hazardous Substances that are
disposed, stored, transported, discharged, Released, recycled, or the
arrangement of such activities, prior to the Closing Date, in connection with
the ownership or operation of the Purchased Assets, at any off-Site location,
provided that for purposes of this Section "off-Site" does not include any
location to which Hazardous Substances disposed of or Released at the Purchased
Assets have migrated;
(i) Third party liability for toxic torts arising as a result
of or in connection with loss of life or injury to persons (whether or not such
loss or injury arose or was made manifest on or after the Closing Date) caused
(or allegedly caused) by the presence or Release of Hazardous Substances at, on,
in, under, adjacent to or migrating from the Purchased Assets prior to the
Closing Date;
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(j) Any liability, obligation or responsibility relating to
(a) the property, equipment or machinery within the switchyards for which
Sellers will retain an Easement, (b) the disposal, discharge or Release of
Hazardous Substances, whether such liability, obligation or responsibility arose
from the ownership or operation of said property, equipment or machinery prior
to or after the Closing Date unless caused by Buyer's operations or equipment,
(c) the transmission lines delineated in the Easements or (d) any Sellers'
operations on, or usage of, the Easements, including, without limitation,
liabilities, obligations or responsibilities arising as a result of or in
connection with (1) any violation or alleged violation of Environmental Law and
(2) loss of life, injury to persons or property or damage to natural resources,
except to the extent caused by Buyer or its Representatives;
(k) Any liability or obligation relating to personal injury,
discrimination, wrongful discharge, unfair labor practice or similar claim or
cause of action filed with or pending before any court or administrative agency
on the Closing Date with respect to the Purchased Assets or the Transferred
Employees or where the material facts of such claim or cause of action occurred
prior to the Closing Date except to the extent such liability or obligation
directly results from Buyer's unlawful acts or omissions;
(l) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising out of the ownership or operation of the
Purchased Assets prior to the Closing Date, including liabilities or obligations
arising out of or resulting from a "nuclear incident" or "precautionary
evacuation" (as such terms are defined in the Atomic Energy Act) at the Site, or
any other licensed nuclear reactor site in the United States, or in the course
of the transportation of radioactive materials to or from the Site or any other
site prior to the Closing Date, including, without limitation, liability for any
deferred premiums assessed in connection with such a nuclear incident or
precautionary evacuation under any applicable NRC or industry retrospective
rating plan or insurance policy, including any mutual insurance pools
established in compliance with the requirements imposed under Section 170 of the
Atomic Energy Act and 10 C.F.R. Part 140, 10 C.F.R. Section50.54(w), other than
any liabilities or obligations which have been expressly assumed by Buyer under
Section 2.3;
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(m) Civil or criminal fines or penalties wherever assessed or
incurred for violations of Environmental Laws arising from the operation of the
Purchased Assets prior to the Closing Date;
(n) Subject to Section 6.10, any liabilities or obligations
relating to any Benefit Plan maintained by Sellers or any trade or business
(whether or not incorporated) which is or ever has been under common control, or
which is or ever has been treated as a single employer, with Sellers under
section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") or to which a
Seller or any ERISA Affiliate contributed (the "ERISA Affiliate Plans"),
including but not limited to any liability with respect to any such plan (i) for
benefits payable under such plan; (ii) to the PBGC under Title IV of ERISA;
(iii) relating to any such plan that is a multi-employer plan within the meaning
of Section 3(37) of ERISA; (iv) for non-compliance with the notice and benefit
continuation requirements of COBRA; (v) for noncompliance with ERISA or any
other applicable laws; or (vi) arising out of or in connection with any suit,
proceeding or claim which is brought against Buyer, any Benefit Plan, ERISA
Affiliate Plan, or any fiduciary or former fiduciary of any such Benefit Plan or
ERISA Affiliate Plan;
(o) Subject to Section 6.10, any liabilities or obligations
relating to the employment or termination of employment, by Sellers, or any
Affiliate of Sellers, of any individual, that is attributable to any actions or
inactions (including discrimination, wrongful discharge, unfair labor practices
or constructive termination) by Sellers prior to the Closing Date other than
such actions or inactions taken at the written direction of Buyer;
(p) Subject to Section 6.10, any obligations for wages,
overtime, employment taxes, severance pay, transition payments, accumulated
vacation and holiday leave time in respect of compensation or similar benefits
accruing or arising prior to the Closing under any term or provision of any
contract, plan, instrument or agreement relating to any of the Purchased Assets;
(q) Any liability of Sellers arising out of a breach by
Sellers or any of their Affiliates of any of their respective obligations under
this Agreement or the Ancillary Agreements;
(r) Any liability relating to the Pollution Control Revenue
Bonds except as provided in Section 6.15; and
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(s) Any liability for Spent Fuel Fees accruing prior to the
Closing in accordance with Section 6.13.
2.5 Control of. The Parties agree and acknowledge that Sellers
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or Remediation
activities (including without limitation any environmental mitigation or
Remediation activities), arising out of or related to any Excluded Liabilities,
and Buyer agrees to cooperate fully in connection therewith; provided, however,
that (i) such defense, settlement or other activities do not unreasonably
interfere with Buyer's operation of the Plant and (ii) without Buyer's written
consent, Sellers shall not settle any such litigation, administrative or
regulatory proceeding which would result in a Material Adverse Effect on the
related Purchased Assets.
ARTICLE III
THE CLOSING
3.1 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VII of this Agreement, the sale, assignment,
conveyance, transfer and delivery of the Purchased Assets to Buyer, the payment
of the Purchase Price to Sellers, and the consummation of the other respective
obligations of the Parties contemplated by this Agreement shall take place at a
closing (the "Closing"), to be held at the offices of Berlack, Israels &
Liberman LLP, 120 West 45th Street, New York, New York at 10:00 a.m. local time,
or another mutually acceptable time and location, on the date that is fifteen
(15) Business Days following the date on which the last of the conditions
precedent to Closing set forth in Article VII of this Agreement have been either
satisfied or waived by the Party for whose benefit such conditions precedent
exist or such other date as the Parties may mutually agree. The date of Closing
is hereinafter called the "Closing Date." The Closing shall be effective for all
purposes as of 12:01 a.m. on the Closing Date.
3.2 Payment of Purchase Price. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, in consideration of
the aforesaid sale, assignment, conveyance, transfer and delivery of the
Purchased Assets, Buyer will pay or cause to be paid to Sellers at the Closing
an aggregate amount of Ten Million United States Dollars (U.S.
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$10,000,000) (the "Purchase Price") plus or minus any adjustments pursuant to
the provisions of this Agreement, by wire transfer of immediately available
funds denominated in U.S. dollars or by such other means as are agreed upon by
Sellers and Buyer.
3.3 Adjustment to Purchase Price. (a) Subject to Section 3.3(b),
at the Closing, the Purchase Price shall be adjusted, without duplication, to
account for the items set forth in this Section 3.3(a):
(i) The Purchase Price shall be adjusted to account
for the items prorated as of the Closing Date pursuant to Section 3.5.
(ii) The Purchase Price shall be increased by the
amount expended, or for which liabilities are incurred, by Sellers
between the date hereof and the Closing Date for capital additions to
or replacements of property, plant and equipment included in the
Purchased Assets and other expenditures or repairs on property, plant
and equipment included in the Purchased Assets that would be
capitalized by Sellers in accordance with normal accounting policies,
provided, that such expenditures: (A) are not described in the capital
budgets listed on Schedule 6.1; (B) are not required (1) for the
customary operation and maintenance of the Plant, (2) to replace
equipment which has failed for any other reason, or (3) to comply with
applicable laws, rules and regulations; and (C) Buyer has specifically
requested or approved such expenditures in writing (collectively,
"Capital Expenditures"). Nothing in this paragraph shall be construed
to limit Sellers' rights and obligations to make all capital
expenditures necessary to comply with NRC licenses and other Permits.
(ii) The Purchase Price shall be decreased by the
cost of Buyer's payment obligation with respect to Transferred Union
Employees Carried-Over Sick Days, as determined under Section 6.10(k).
(b) At least ten (10) Business Days prior to the Closing Date,
Sellers shall prepare and deliver to Buyer an estimated closing statement (the
"Estimated Closing Statement") that shall set forth Sellers' best estimate of
the adjustments to the Purchase Price required by Section 3.3(a) (the "Estimated
Adjustment"). Within five (5) Business Days following the delivery of the
Estimated Closing Statement by Sellers to Buyer,
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Buyer may object in good faith to the Estimated Adjustment in writing. If Buyer
objects to the Estimated Adjustment, the Parties shall attempt to resolve their
differences by negotiation. If the Parties are unable to do so within three (3)
Business Days prior to the Closing Date (or if Buyer does not object to the
Estimated Adjustment), the Purchase Price shall be adjusted (the "Closing
Adjustment") for the Closing by the amount of the Estimated Adjustment not in
dispute. The disputed portion shall be paid as a Post-Closing Adjustment to the
extent required by Section 3.3(c).
(c) Within sixty (60) days following the Closing Date, Sellers
shall prepare and deliver to Buyer a final closing statement (the "Post-Closing
Statement") that shall set forth all adjustments to the Purchase Price required
by Section 3.3(a) (the "Post-Closing Adjustment"). The Post-Closing Statement
shall be prepared using the same accounting principles, policies and methods as
Sellers have historically used in connection with the calculation of the items
reflected on such Post-Closing Statement. Within thirty (30) days following the
delivery of the Post-Closing Statement by Sellers to Buyer, Buyer may object to
the Post-Closing Adjustment in writing. Sellers agree to cooperate with Buyer to
provide Buyer and Buyer's Representatives information used to prepare the
Post-Closing Statement and information relating thereto. If Buyer objects to the
Post-Closing Adjustment, the Parties shall attempt to resolve such dispute by
negotiation. If the Parties are unable to resolve such dispute within thirty
(30) days of any objection by Buyer, the Parties shall appoint the Independent
Accounting Firm, which shall, at Sellers' and Buyer's joint expense, review the
Post-Closing Adjustment and determine the appropriate adjustment to the Purchase
Price, if any, within thirty (30) days of such appointment. The Parties agree to
cooperate with the Independent Accounting Firm and provide it with such
information as it reasonably requests to enable it to make such determination.
The finding of such Independent Accounting Firm shall be binding on the Parties
hereto. Upon determination of the appropriate adjustment by agreement of the
Parties or by binding determination of the Independent Accounting Firm, if the
Post-Closing Adjustment is more or less than the Closing Adjustment, the Party
owing the difference shall deliver such difference to the other Party no later
than two (2) Business Days after such determination, in immediately available
funds or in any other manner as reasonably requested by the payee.
(d) The Purchase Price shall be increased following the
Closing Date (i) to the extent required under Section
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6.12(e) and (ii) as and to the extent Buyer obtains discounts from time to time
for goods and services under the Settlement Agreement. Buyer hereby agrees to
accept assignment of the Settlement Agreement (subject to Seller's obtaining any
requisite consent thereto) unless it would have an adverse economic impact on
Buyer and shall advise Sellers of the amount of any such discounts received by
Buyer and shall make acceptance payment to Sellers of such amounts within ten
(10) Business Days following any such receipt.
3.4 Allocation of Purchase Price. Buyer and Sellers shall endeavor to
agree upon an allocation among the Purchased Assets of the sum of the Purchase
Price and the Assumed Liabilities in a manner consistent with the provisions of
section 1060 of the Code and the Treasury Regulations thereunder within sixty
(60) days of the Closing Date. Buyer and Sellers shall treat the transactions
contemplated by Article II as the acquisition by Buyer of a trade or business
for United States federal income tax purposes and agree that no portion of those
transactions shall be treated in whole or in part as a payment by Buyer for
services (or future services) for United States federal income tax purposes.
Each of Buyer and Sellers agrees to file IRS Form 8594, and all federal, state,
local and foreign Tax Returns, in accordance with any such agreed upon
allocation. Each of Buyer and Sellers shall report the transactions contemplated
by this Agreement for federal Tax and all other Tax purposes in a manner
consistent with any such agreed upon allocation determined pursuant to this
Section 3.4. Each of Buyer and Sellers agrees to provide the other promptly with
any information required to complete IRS Form 8594. Buyer and Sellers shall
notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding any allocation of the Purchase
Price agreed upon pursuant to this Section 3.4. Buyer and Sellers shall not take
any position in any tax return, tax proceeding or audit that is inconsistent
with such allocation.
3.5 Prorations. (a) Buyer and Sellers agree that all of the items
normally prorated, including those listed below (but not including Income
Taxes), relating to the business and operation of the Purchased Assets shall be
prorated as of the Closing Date, with Sellers liable to the extent such items
relate to any time period prior to the Closing Date, and Buyer liable to the
extent such items relate to periods commencing with the Closing Date (measured
in the same units used to compute the item in question, otherwise measured by
calendar days):
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(i) Personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to the
business and operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including
prepaid services or goods not included in Inventory) payable by or
to Sellers under any of Sellers' Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities;
(v) Rent and Taxes and other items payable by
Sellers under the Real Property Leases assigned to Buyer; and
(vi) Dues and fees payable to the Institute of
Nuclear Power Operations, the Nuclear Energy Institute, the Electric
Power Research Institute (to the extent allocable to the Plant's
operations) and the Boiling Water Reactor Owners Group to the extent
proration is permitted by such organizations and periodic fees charged
by the NRC.
(b) In connection with the prorations referred to in (a)
above, in the event that actual figures are not available at the Closing Date,
the proration shall be based upon the actual Taxes or other amounts accrued
through the Closing Date or paid for the most recent year (or other appropriate
period) for which actual Taxes or other amounts paid are available. Such
prorated Taxes or other amounts shall be re-prorated and paid to the appropriate
Party within sixty (60) days of the date that the previously unavailable actual
figures become available. The prorations shall be based on the number of days in
a year or other appropriate period (i) before the Closing Date and (ii)
including and after the Closing Date. Sellers and Buyer agree to furnish each
other with such documents and other records as may be reasonably requested in
order to confirm all adjustment and proration calculations made pursuant to this
Section 3.5.
3.6 Deliveries by Sellers. At the Closing, Sellers will deliver,
or cause to be delivered, the following to Buyer:
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(a) The Bill of Sale, duly executed by Sellers, as
appropriate;
(b) Copies of any and all governmental and other third party
consents, waivers or approvals required with respect to the transfer of the
Purchased Assets, or the consummation of the transactions contemplated by this
Agreement;
(c) The opinions of counsel and officer's certificates
contemplated by Section 7.1;
(d) One or more bargain and sale deeds with covenants against
grantors acts, conveying the Real Property to Buyer, in a form reasonably
satisfactory to the Parties (including environmental disclosure required by law
and any provisions regarding grantors covenants necessary to conform them to the
terms hereof), duly executed and acknowledged by Sellers, as appropriate, and in
recordable form;
(e) The Assignment and Assumption Agreement and any Ancillary
Agreements which are not executed on the date hereof, duly executed by Sellers,
as appropriate;
(f) A FIRPTA Affidavit, duly executed by JCP&L ;
(g) Copies, certified by the Secretary or Assistant Secretary
of Sellers, of corporate resolutions authorizing the execution and delivery of
this Agreement and all of the agreements and instruments to be executed and
delivered by Sellers in connection herewith, and the consummation of the
transactions contemplated hereby;
(h) A certificate of the Secretary or Assistant Secretary of
each Seller identifying the name and title and bearing the signatures of the
officers of such Seller authorized to execute and deliver this Agreement and the
other agreements and instruments contemplated hereby;
(i) Certificates of Good Standing with respect to Sellers,
issued by the Secretary of the State of Sellers' state of incorporation;
(j) Tax clearance certificates for each jurisdiction
identified on Schedule 4.16;
(k) To the extent available, originals of all Sellers'
Agreements, Real Property Leases, Permits,
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Environmental Permits, and Transferable Permits and, if not available, true and
correct copies thereof, together with the items referred to in Section 2.1(g);
(l) All such other instruments of assignment, transfer or
conveyance as shall, in the reasonable opinion of Buyer and its counsel, be
necessary or desirable to transfer to Buyer the Purchased Assets, in accordance
with this Agreement and where necessary or desirable in recordable form;
(m) Notices, signed by Sellers, to all other parties to the
Sellers' Agreements listed under Schedule 4.12(a) where notice to such parties
is required under the terms of such Sellers' Agreements or pursuant to Section
6.5(d) hereof;
(n) Reliance letters from Woodward & Clyde with respect to the
Environmental Reports prepared by Woodward & Clyde concerning the Purchased
Assets and made available for review by Buyer;
(o) The assets of the Decommissioning Trust Funds to be
transferred pursuant to Section 6.12(b), shall be delivered to Buyer (or to the
Trustee of any trust specified by Buyer); and
(p) Such other agreements, documents, instruments and
writings, including without limitation the Transferring Employee Records, as are
required to be delivered by Sellers at or prior to the Closing Date pursuant to
this Agreement or otherwise reasonably required in connection herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer will deliver, or
cause to be delivered, the following to Sellers:
(a) The Purchase Price, as adjusted pursuant to Section 3.3,
by wire transfer of immediately available funds in accordance with Sellers'
instructions or by such other means as may be agreed to by Sellers and Buyer;
(b) The opinions of counsel and officer's certificates
contemplated by Section 7.2;
(c) The Assignment and Assumption Agreement and any Ancillary
Agreements which are not executed on the date hereof, duly executed by Buyer;
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(d) Copies, certified by the Secretary or Assistant Secretary
of Buyer, of resolutions authorizing the execution and delivery of this
Agreement, and all of the agreements and instruments to be executed and
delivered by Buyer in connection herewith, and the consummation of the
transactions contemplated hereby;
(e) A certificate of the Secretary or Assistant Secretary of
Buyer, identifying the name and title and bearing the signatures of the officers
of Buyer authorized to execute and deliver this Agreement, and the other
agreements contemplated hereby;
(f) All such other instruments of assumption as shall, in the
reasonable opinion of Sellers and their counsel, be necessary for Buyer to
assume the Assumed Liabilities in accordance with this Agreement;
(g) Copies of any and all governmental and other third party
consents, waivers or approvals obtained by Buyer with respect to the transfer of
the Purchased Assets, or the consummation of the transactions contemplated by
this Agreement and where necessary or desirable in recordable form;
(h) Certificates of Insurance relating to the insurance
policies required pursuant to Article 10 of the Interconnection Agreement;
(i) A certificate of an appropriate officer of each of PECO
Energy Company and British Energy, plc certifying the due authorization,
execution and delivery of the Parent Guaranty; and
(j) Such other agreements, documents, instruments and writings
as are required to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.8 Ancillary Agreements. The Parties acknowledge that the Ancillary
Agreements, other than the EOF Lease, the Remote Assembly Area Access Agreement
and the SBO Service Agreement, have been executed on the date hereof.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLERS
Sellers represent and warrant to Buyer as follows:
4.1 Incorporation;. Each Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own, lease,
and operate its material properties and assets and to carry on its business as
is now being conducted. Each Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which its business as now being conducted requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect. Sellers have heretofore delivered to Buyer true, complete and correct
copies of their Certificates of Incorporation and Bylaws as currently in effect.
4.2 Authority Relative to this Agreement. Sellers have full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by it hereby. The execution and delivery of this
Agreement by Sellers and the consummation by Sellers of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action required on the part of Sellers and this Agreement has been
duly and validly executed and delivered by Sellers. Subject to the receipt of
Sellers' Required Regulatory Approvals, this Agreement constitutes the legal,
valid and binding agreement of Sellers, enforceable against Sellers in
accordance with its terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation. (a) Except as set forth in
Schedule 4.3(a), and other than obtaining Sellers' Required Regulatory
Approvals, neither the execution and delivery of this Agreement by Sellers nor
the consummation by Sellers of the transactions contemplated hereby will (i)
conflict with or result in any breach or violation of any provision of the
respective Certificate of Incorporation or Bylaws of Sellers, or (ii) require
any consent, approval,
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authorization or permit of, or filing with or notification to, any Governmental
Authority, or (iii) result in a default (or give rise to any right of
termination, consent, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which Sellers are a party or by
which it, or any of the Purchased Assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or which, would not, individually or in
the aggregate, create a Material Adverse Effect; or (iv) constitute violations
of any law, regulation, order, judgment or decree applicable to Sellers, which
violations, individually or in the aggregate, would create a Material Adverse
Effect, or create any Encumbrance other than a Permitted Encumbrance.
(b) Except as set forth in Schedule 4.3(b), (the filings and
approvals referred to in Schedule 4.3(b) are collectively referred to as the
"Sellers' Required Regulatory Approvals"), no consent or approval of, filing
with, or notice to, any Governmental Authority by or for Sellers is necessary
for the execution and delivery of this Agreement by Sellers, or the consummation
by Sellers of the transactions contemplated hereby, other than (i) such
consents, approvals, filings or notices which, if not obtained or made, will
neither prevent Sellers from performing their material obligations hereunder
nor, individually or in the aggregate, create a Material Adverse Effect and (ii)
such consents, approvals, filings or notices which become applicable to Sellers
or the Purchased Assets as a result of the specific regulatory status of Buyer
(or any of its Affiliates) or as a result of any other facts that specifically
relate to the business or activities in which Buyer (or any of its Affiliates)
is or proposes to be engaged.
4.4 Insurance. Except as set forth in Schedule 4.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
owned or held by, or on behalf of, Sellers with respect to the business,
operations or employees at the Plant or the Purchased Assets are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date hereof have been paid (other than retroactive premiums which
may be payable with respect to comprehensive general liability and workers'
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy which was not replaced on
substantially similar terms prior to the date of such cancellation. Except as
described in Schedule 4.4, within the
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thirty-six (36) months preceding the date of this Agreement, Sellers have not
been refused any insurance with respect to the Purchased Assets nor has coverage
been limited by any insurance carrier to which Sellers have applied for any such
insurance or with which Sellers have carried insurance during the last twelve
(12) months.
4.5 Title and Related. Other than set forth in Schedule 4.5 and except
for Permitted Encumbrances, JCP&L has good and marketable title to the Real
Property to be conveyed to Buyer hereunder free and clear of all Encumbrances.
The Real Property constitutes all of the real property necessary to operate the
Plant as currently operated. Other than as set forth in Schedule 4.5 and except
for Permitted Encumbrances, Sellers have good and marketable title to each of
the Purchased Assets not constituting Real Property free and clear of all
Encumbrances. JCP&L possesses all such rights in and to the EOF Facility and the
Remote Assembly Area in order to lease the EOF Facility and provide access to
the Remote Assembly Area to Buyer.
4.6 Real Property Leases. Schedule 4.6 lists, as of the date of this
Agreement, all real property leases, easements, licenses and other rights in
real property (collectively, the "Real Property Leases") to which either Seller
is a party and which (i) are to be transferred and assigned to Buyer on the
Closing Date, (ii) affect all or any part of any Real Property and (iii)(A)
provide for annual payments of more than $100,000 or (B) are material to the
ownership or operation of the Purchased Assets. Except as set forth in Schedule
4.6, all such Real Property Leases are valid, binding and enforceable in
accordance with their terms, and are in full force and effect; there are no
existing material defaults by Sellers or any other party thereunder; and no
event has occurred which (whether with or without notice, lapse of time or both)
would constitute a material default by Sellers or any other party thereunder.
4.7 Environmental. Except as disclosed in (x) Schedule 4.7, (y)
Schedule 2.3(e) or (z) in the "Phase I" and "Phase II" environmental site
assessments prepared by Sellers' outside environmental consultants or in Buyer's
Environmental Inspection (collectively the "Environmental Reports") and made
available for inspection by Buyer:
(a) Sellers hold, and are in compliance with, all permits,
certificates, certifications, licenses and governmental authorizations under
applicable Environmental Laws ("Environmental Permits") that are required for
Sellers to own
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and conduct the business and operations of the Purchased Assets, and Sellers are
otherwise in compliance with applicable Environmental Laws with respect to the
business and operations of such Purchased Assets except for such failures to
hold or comply with required Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, as would not, individually or in
the aggregate, create a Material Adverse Effect;
(b) Sellers have not received any written request for
information, or been notified that either of them is a potentially responsible
party, under CERCLA or any similar state law with respect to the Real Property
or any other Purchased Assets, except for such liability under such laws as
would not create, individually or in the aggregate, a Material Adverse Effect;
(c) Sellers have neither entered into or agreed to any consent
decree or order relating to the Purchased Assets, nor are subject to any
outstanding judgment, decree, or judicial order relating to compliance with any
Environmental Law or to investigation or cleanup of Hazardous Substances under
any Environmental Law relating to the Purchased Assets, except for such consent
decree or order, judgment decree or judicial order that would not create,
individually or in the aggregate a Material Adverse Effect;
(d) There are no underground storage tanks on the Real
Property; and
(e) There is no Environmental Condition in violation of
applicable Environmental Laws (other than ISRA and the regulations of the NJDEP
thereunder) which requires Remediation.The representations and warranties made
in this Section 4.7 are Sellers' exclusive representations and warranties
relating to environmental matters.
4.8 Labor Matters. Sellers have previously delivered to Buyer a true
and correct copy of the Collective Bargaining Agreement, as currently in effect,
which is the only collective bargaining agreement to which they are a party or
is subject and which relates to the business and operations of the Purchased
Assets. With respect to the business or operations of such Purchased Assets,
except to the extent set forth in Schedule 4.8 and except for such matters as
will not, individually or in the aggregate, create a Material Adverse Effect,
(a) Sellers are in compliance with all applicable laws respecting employment and
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employment practices, terms and conditions of employment and wages and hours;
(b) Sellers have not received written notice of any unfair labor practice
complaint against them pending before the National Labor Relations Board; (c) no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending against Sellers; (d) no labor strike, slow down or stoppage
is actually pending or to Sellers' Knowledge threatened by any representative of
any union or other representation of employees against or affecting Sellers; and
(e) Sellers have not experienced any work stoppage within the three-year period
prior to the date hereof and to Sellers' Knowledge none is currently threatened.
4.9 Benefit Plans; ERISA. (a) Schedule 4.9(a) lists all deferred
compensation, profit-sharing, retirement and pension plans, including
multi-employer plans, and all material bonus, fringe benefit and other employee
benefit plans maintained or with respect to which contributions are made by
Sellers in respect of the current employees of Sellers connected with the
Purchased Assets ("Benefit Plans"). True and complete copies of all Benefit
Plans have been made available to Buyer.
(b) Except as set forth in Schedule 4.9(b), Sellers and their
ERISA Affiliates have fulfilled their respective obligations under the minimum
funding requirements of Section 302 of ERISA and section 412 of the Code, with
respect to each Benefit Plan which is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA and to which section 412 of the Code or Section
302 of ERISA applies, and each such plan is in compliance in all material
respects with the currently applicable provisions of ERISA and the Code and has
been administered in all material respects in accordance with its terms as set
forth in the documents governing such Benefit Plan. Except as set forth in
Schedule 4.9(b), neither Sellers nor any ERISA Affiliate has incurred any
liability under Section 4062(b) of ERISA to the PBGC in connection with any
Benefit Plan which is subject to Title IV of ERISA or any withdrawal liability,
within the meaning of Section 4201 of ERISA with respect to any Benefit Plan,
nor has there been any reportable event (as defined in Section 4043 of ERISA),
the reporting of which has not been waived by the PBGC, in respect of any
Benefit Plan. Except as set forth in Schedule 4.9(b), the IRS has issued for
each Benefit Plan which is intended to be qualified under section 401(a) of the
Code, a letter which determines that such plan is qualified and exempt from
United States Federal Income Tax under sections 401(a) and 501(a) of the Code,
and Sellers are not aware of any occurrence since the date of any such
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determination letter which would affect adversely such qualification or tax
exemption.
(c) Neither Sellers nor any ERISA Affiliate has engaged in any
transaction described in Section 4069(a) or Section 4212(c) of ERISA. No Benefit
Plan is a multi-employer plan.
(d) Sellers and Sellers' Affiliates have materially complied
in good faith with any notice and continuation requirements of Title X of COBRA
with respect to any Benefit Plan subject to such requirements. Sellers and each
ERISA Affiliate have complied in all material respects with any applicable
requirements of Part 7 of Title I of ERISA.
4.10 Real Property; Plant and Equipment. (a) Schedule 4.10(a) contains
a description of the Real Property included in the Purchased Assets. Copies of
any current surveys, abstracts or title opinions in Sellers' possession and any
policies of title insurance in force and in the possession of Sellers with
respect to the Real Property have heretofore been made available to Buyer
(without making any representation or warranty as to the accuracy or
completeness thereof). Except as set forth in Schedule 4.10(a)-1, no real
property other than the Real Property is necessary for Buyer to own, maintain
and operate the Purchased Assets as they are currently used.
(b) Schedule 4.10(b) contains a description of the major
equipment components and personal property (other than Inventories) comprising
the Purchased Assets as of the date hereof.
(c) Other than the exceptions listed in Schedule 4.10(c), the
Purchased Assets conform in all material respects to the Technical
Specifications and the Updated Final Safety Analysis Report ("UFSAR") to the
extent required and are being operated and are in material conformance with all
applicable requirements under Nuclear Laws.
4.11 Condemnation. Except as set forth in Schedule 4.11, neither the
whole nor any part of the Real Property or any other real property or rights
leased, used or occupied by Sellers in connection with the ownership or
operation of the Purchased Assets is subject to any pending suit for
condemnation or other taking by any Governmental Authority, and no such
condemnation or other taking has been threatened.
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4.12 Contracts and Leases (a) Schedule 4.12(a) lists each written
contract, license, agreement, or personal property lease which is material to
the business or operations of the Purchased Assets, other than any contract,
license, agreement or personal property lease which is listed or described on
another Schedule, or which is expected to expire or terminate prior to the
Closing Date, or which provides for annual payments by Sellers after the date
hereof of less than $100,000 or payments by Sellers after the date hereof of
less than $500,000 in the aggregate.
(b) Except as disclosed in Schedule 4.12(b), each Sellers'
Agreement listed on such Schedule (i) constitutes a legal, valid and binding
obligation of the Seller party thereto and, to such Seller's Knowledge,
constitutes a valid and binding obligation of the other parties thereto, (ii) is
in full force and effect and (iii) may be transferred to Buyer at Closing
pursuant to this Agreement without the consent of the other parties thereto and
will continue in full force and effect thereafter, in each case without
breaching the terms thereof or resulting in the forfeiture or impairment of any
material rights thereunder.
(c) Except as set forth in Schedule 4.12(c), there is not,
under Sellers' Agreements, any default or event which, with notice or lapse of
time or both, would constitute a default on the part of Sellers or to Sellers'
Knowledge, any of the other parties thereto, except such events of default and
other events which would not, individually or in the aggregate, create a
Material Adverse Effect.
4.13 Legal Proceedings, etc. Except as set forth in Schedule 4.13,
there are no actions or proceedings pending (or to Sellers' Knowledge overtly
threatened) against Sellers before any court, arbitrator or Governmental
Authority, which could, individually or in the aggregate, reasonably be expected
to create a Material Adverse Effect. Except as set forth in Schedule 4.13,
Sellers are not subject to any outstanding judgments, rules, orders, writs,
injunctions or decrees of any court, arbitrator or Governmental Authority which
would, individually or in the aggregate, create a Material Adverse Effect.
4.14 Permits. (a) Sellers have all permits, licenses, franchises and
other governmental authorizations, consents and approvals (other than
Environmental Permits, which are addressed in Section 4.7 hereof) (collectively,
"Permits") necessary to permit Sellers to own and operate the Purchased Assets
as
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presently conducted except where the failure to have such Permits would not,
individually or in the aggregate, have a material adverse effect on the
ownership, operation or maintenance of the Purchased Assets. Except as disclosed
on Schedule 4.14(a), Sellers have not received any notification that either of
them is in violation of any such Permits, except notifications of violations
which would not, individually or in the aggregate, create a Material Adverse
Effect. Sellers are in compliance with all such Permits except where
non-compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
(b) Schedule 4.14(b) sets forth all material Permits and
Environmental Permits, other than Transferable Permits (which are set forth on
Schedule 1.1(139)) related to the Purchased Assets.
4.15 NRC Licenses.
(a) Sellers have all permits, licenses, and other consents and
approvals issued by the NRC necessary to own and operate the Purchased Assets as
presently operated, pursuant to the requirements of Nuclear Laws. Except as set
forth in Schedule 4.15(a), Sellers have not received any written notification
that either of them is in violation of any of such license, or any order, rule,
regulation, or decision of the NRC with respect to the Purchased Assets, except
for notifications of violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Sellers are in compliance with all
Nuclear Laws applicable to them with respect to the Purchased Assets, except for
violations which, individually or in the aggregate, could not have a Material
Adverse Effect.
(b) Schedule 4.15(b) sets forth all material permits,
licenses, and other consents and approvals issued by the NRC applicable to the
Purchased Assets.
4.16 Taxes. Sellers have filed all returns required to be filed by them
with respect to any Tax relating to the Purchased Assets, and Sellers have paid
all Taxes that have become due as indicated thereon, except where such Tax is
being contested in good faith by appropriate proceedings, or where the failure
to so file or pay would not reasonably be expected to create a Material Adverse
Effect. Sellers have complied in all material respects with all applicable laws,
rules and regulations relating to withholding Taxes relating to Transferred
Employees. All Tax Returns filed with respect to the Purchased Assets are
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true and complete in all material respects. Except as set forth in Schedule
4.16, no notice of deficiency or assessment has been received from any taxing
authority with respect to liabilities for Taxes of Sellers in respect of the
Purchased Assets, which have not been fully paid or finally settled, and any
such deficiency shown in Schedule 4.16 is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 4.16, there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitation for Taxes associated with the Purchased Assets that will be binding
upon Buyer after the Closing. Schedule 4.16 sets forth the taxing jurisdictions
in which Sellers own assets or conducts business that require a notification to
a taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearance certificates in
connection therewith, would either require Buyer to withhold any portion of the
Purchase Price or subject Buyer to any liability for any Taxes of Sellers.
4.17 Intellectual Property. Schedule 2.1(l) sets forth all Intellectual
Property used in and, individually or in the aggregate with other Intellectual
Property, material to the operation or business of the Purchased Assets, each of
which is owned by Seller.
4.18 Compliance With Laws. Sellers are in compliance with all
applicable laws, rules and regulations with respect to the ownership or
operation of the Purchased Assets except where the failure to be in compliance
would not, individually or in the aggregate, create a Material Adverse Effect.
4.19 PUHCA. Sellers are wholly owned subsidiaries of GPU, which is a
holding company registered under the Public Utility Holding Company Act of 1935.
4.20 Qualified Decommissioning Trust Fund.
(a)The Seller Qualified Decommissioning Trust Fund is a trust,
validly existing and in good standing under the laws of the State of New York
with all requisite authority to conduct its affairs as it now does. Sellers have
heretofore delivered to Buyer a copy of the Decommissioning Indenture as in
effect on the date of this Agreement. Sellers agree to furnish Buyer with copies
of all amendments of the Decommissioning Indenture adopted after the date of
this Agreement promptly after each such amendment has been adopted. The Seller
Qualified Decommissioning Trust Fund satisfies the requirements necessary
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for such Fund to be treated as a "Nuclear Decommissioning Reserve Fund" within
the meaning of Code section 468A(a) and as a "Nuclear Decommissioning Fund" and
a "Qualified Nuclear Decommissioning Fund" within the meaning of Treas. Reg.
Section 1.468A-1(b)(3). Such Fund is in compliance in all material respects with
all applicable rules and regulations of the NRC, the NJBPU and the IRS. The
Seller Qualified Decommissioning Trust Fund has not engaged in any acts of
"self-dealing" as defined in Treas. Reg. Section 1.468A-5(b)(2). No "excess
contribution," as defined in Treas. Reg. Section 1.468A-5(c)(2)(ii), has been
made to the Seller Qualified Decommissioning Trust Fund which has not been
withdrawn within the period provided under Treas. Reg. Section 1.468A-5(c)(2)(i)
for withdrawals of excess contributions to be made without resulting in a
disqualification of the Fund under Treas. Reg Section 1.468A-5(c)(1). JCP&L has
made timely and valid elections to make annual contributions to the Seller
Qualified Decommissioning Trust Fund since its establishment. Sellers have
heretofore delivered copies of such elections to Buyer.
(b) Subject only to Sellers' Required Regulatory Approvals,
Sellers have all requisite authority to cause the assets of the Seller Qualified
Decommissioning Trust Fund to be transferred to Buyer in accordance with the
provisions of this Agreement.
(c Sellers and/or the Trustee of the Seller Qualified
Decommissioning Trust Fund have filed or caused to be filed with the NRC, the
IRS and any state or local authority all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by either of them. Sellers have delivered to Buyer a copy of the
schedule of ruling amounts most recently issued by the IRS for the Seller
Qualified Decommissioning Trust Fund, a copy of the request that was filed to
obtain such schedule of ruling amounts and a copy of any pending requests for
revised ruling amounts, in each case together with all exhibits, amendments and
supplements thereto. As of the Closing, Sellers will have timely filed all
requests for revised schedules of ruling amounts for the Seller Qualified
Decommissioning Trust Fund in accordance with Treas. Reg. Section 1.468A-3(i).
Sellers shall furnish Buyer with copies of such requests for revised schedules
of ruling amounts, together with all exhibits, amendments and supplements
thereto, promptly after they have been filed with the IRS. Any amounts
contributed to the Seller Qualified Decommissioning Trust Fund while such
requests are pending before the IRS and which turn out to be in excess of the
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applicable amounts provided in the schedule of ruling amounts issued by the IRS
will be withdrawn from the Seller Qualified Decommissioning Trust Fund within
the period provided under Treas. Reg. Section 1.468A-5(c)(2)(i) for withdrawals
of excess contributions to be made without resulting in a disqualification of
the Funds under Treas. Reg. Section 1.468A-5(c)(1). There are no interim rate
orders that may be retroactively adjusted or retroactive adjustments to interim
rate orders that may affect amounts that JCP&L may contribute to the Seller
Qualified Decommissioning Trust Fund or may require distributions to be made
from the Seller Qualified Decommissioning Trust Fund.
(d) Sellers have made available to Buyer the balance sheets
for the Seller Qualified Decommissioning Trust Fund as of December 31, 1998 and
as of the last Business Day before the Closing, and they present fairly as of
December 31, 1998 and as of the last Business Day before Closing, the financial
position of the Seller Qualified Decommissioning Trust Fund in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein. Sellers have made available to Buyer information
from which Buyer can determine the Tax Basis of all assets in the Seller
Qualified Decommissioning Trust Fund as of the last Business Day before Closing.
There are no liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due), including, but not limited to, any acts of
"self-dealing" as defined in Treas. Reg. Section1.468A-5(b)(2) or agency or
other legal proceedings that may materially affect the financial position of the
Seller Qualified Decommissioning Trust Fund other than those, if any, that are
disclosed on Schedule 4.20.
(e) Sellers have made available to Buyer all contracts and
agreements to which the Trustee of the Seller Qualified Decommissioning Trust
Fund, in its capacity as such, is a party.
(f) The Seller Qualified Decommissioning Trust Fund has filed
all Tax Returns required to be filed and all material Taxes shown to be due on
such Tax Returns have been paid in full. Except as shown in Schedule 4.20, no
notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes of the Seller Qualified Decommissioning
Trust Fund which have not been fully paid or finally settled, and any such
deficiency shown in such Schedule 4.20 is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 4.20, there are no
outstanding agreements or waivers extending the applicable
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statutory periods of limitations for Taxes associated with the Seller Qualified
Decommissioning Trust Fund for any period.
(g) To the extent Sellers have pooled the assets of the Seller
Qualified Decommissioning Trust Fund for investment purposes in periods prior to
Closing, such pooling arrangement is a partnership for federal income tax
purposes and Sellers have filed all Tax Returns required to be filed with
respect to such pooling arrangement for such periods.
4.21 Nonqualified Decommissioning Trust Fund.
(a) The Seller Nonqualified Decommissioning Trust Fund is a
trust validly existing and in good standing under the laws of the State of New
York with all requisite authority to conduct its affairs as it now does. The
Seller Nonqualified Decommissioning Trust Fund is in full compliance with all
applicable rules and regulations of the NRC and the NJBPU.
(b) Subject only to Sellers' Required Regulatory Approvals,
Sellers have all requisite authority to cause the assets of the Seller
Nonqualified Decommissioning Trust Fund to be transferred to Buyer in accordance
with the provisions of this Agreement.
(c) Sellers and/or the Trustee of the Seller Nonqualified
Decommissioning Trust Fund have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
(d) Sellers have made available to Buyer the balance sheet for
the Seller Nonqualified Decommissioning Trust Fund as of December 31, 1998 and
as of the last Business Day before the Closing, and they present fairly as of
December 31, 1998 and as of the last Business Day before Closing, the financial
position of the Seller Nonqualified Decommissioning Trust Fund in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein. There are no liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become due) including,
but not limited to, agency or other legal proceedings, that may materially
affect the financial position of the Seller Nonqualified Decommissioning Trust
Fund other than those, if any, that are disclosed on Schedule 4.21.
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(e) Sellers have made available to Buyer all contracts and
agreements to which the Trustee of the Seller Nonqualified Decommissioning Trust
Fund, in its capacity as such, is a party.
(f) To the extent Sellers have pooled the assets of the Seller
Nonqualified Decommissioning Trust Fund for investment purposes in periods prior
to the Closing, such pooling arrangement is not a corporation for federal income
tax purposes and Sellers have filed all Tax Returns required to be filed with
respect to such pooling arrangement for such periods.
4.22 Undisclosed Liabilities. Except as set forth in Schedule 4.22, the
Purchased Assets are not subject to any material liability or obligation
(whether absolute, contingent or otherwise) that has not been accrued or
reserved against in Sellers' financial statements as of the end of the most
recent fiscal quarter for which such statements are available or disclosed in
the notes thereto in accordance with generally accepted accounting principles
consistently applied.
4.23 Year 2000 Qualified. Sellers have taken, and will continue to
take, all reasonable steps necessary to address the computer software and
application issues raised by Year 2000 and as of the Closing Date all of
Sellers' computer software and applications affecting the Purchased Assets will
be Year 2000 Qualified, except to the extent that any non-qualification does not
create a Material Adverse Effect.
4.24 DISCLAIMERS REGARDING PURCHASED ASSETS. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV OR AS MAY BE
EXPRESSLY SET FORTH IN THE ANCILLARY AGREEMENTS, THE PURCHASED ASSETS ARE BEING
SOLD AND TRANSFERRED "AS IS, WHERE IS", AND EXCEPT FOR SUCH REPRESENTATIONS AND
WARRANTIES SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE PLANT,
THE TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS
(FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND
SELLERS SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE
PURCHASED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH
ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL
REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS, OR WHETHER
SELLERS POSSESS SUFFICIENT REAL
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PROPERTY OR PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLERS FURTHER SPECIFICALLY DISCLAIM ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLERS EXPRESSLY DISCLAIM ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE PURCHASED
ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION AS A POWER PLANT
AND NO MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLERS OR
THEIR REPRESENTATIVES, OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR
CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR
QUALITY OF THE PURCHASED ASSETS.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 Organization. Buyer is a Delaware limited liability company, duly
organized, validly existing and in good standing under the laws of the state of
its organization and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as is now being
conducted. Buyer is, or by the Closing will be, qualified to do business in the
State of New Jersey. Buyer has heretofore delivered to Sellers complete and
correct copies of its Certificate of Formation and Operating Agreement (or other
similar governing documents) as currently in effect.
5.2 Authority Relative to this Agreement. Buyer has full organizational
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action required
on the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer. Subject to the receipt of Buyer Required Regulatory
Approvals, this Agreement constitutes a legal, valid and binding agreement of
Buyer, enforceable against Buyer in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and
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general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 5.3(a), and other than
obtaining Buyer Required Regulatory Approvals, neither the execution and
delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby will (i) conflict with or result in any breach
or violation of any provision of the Certificate of Formation or Operating
Agreement (or other similar governing documents) of Buyer, or (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, or (iii) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which Buyer or any of its
Subsidiaries is a party or by which any of their respective assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which would not, individually or in the aggregate, have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of Buyer ("Buyer Material Adverse Effect") or (iv) violate any law, regulation,
order, judgment or decree applicable to Buyer, which violations, individually or
in the aggregate, would create a Buyer Material Adverse Effect.
(b) Except as set forth in Schedule 5.3(b) (the filings and
approvals referred to in such Schedule are collectively referred to as the
"Buyer Required Regulatory Approvals"), no consent or approval of, filing with,
or notice to, any Governmental Authority is necessary for Buyer's execution and
delivery of this Agreement, or the consummation by Buyer of the transactions
contemplated hereby, other than such consents, approvals, filings or notices,
which, if not obtained or made, will not prevent Buyer from performing its
obligations under this Agreement.
5.4 Legal Proceedings. There are no actions or proceedings pending
against Buyer before any court or arbitrator or Governmental Authority, which,
individually or in the aggregate, could reasonably be expected to create a Buyer
Material Adverse Effect. Buyer is not subject to any outstanding judgments,
rules, orders, writs, injunctions or
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decrees of any court, arbitrator or Governmental Authority which would,
individually or in the aggregate, create a Buyer Material Adverse Effect.
5.5 Inspections. Buyer acknowledges and agrees that it has, prior to
its execution of this Agreement, (i) reviewed the Environmental Reports (other
than Buyer's Environmental Inspection), and (ii) except as contemplated by
Section 6.2, has had full opportunity to conduct and has completed to its
satisfaction Inspections of the Purchased Assets. Subject to Sections 6.2(a),
(h) and (i) , Buyer acknowledges that it is satisfied through such review and
Inspections that no further investigation and study on or of the Site is
necessary for the purposes of acquiring the Purchased Assets for Buyer's
intended use. Buyer acknowledges and agrees that subject to Sellers'
representations, warranties and covenants contained in this Agreement and the
Ancillary Agreements and the terms, conditions, limitations and indemnities
provided herein, it will assume at the Closing the risk that adverse past,
present, and future physical characteristics and Environmental Conditions may
not have been revealed by the Inspections and the investigations of the
Purchased Assets contained in the Environmental Reports.
5.6 WARN Act. Buyer does not intend to engage in a Plant Closing or
Mass Layoff as such terms are defined in the WARN Act within sixty (60) days of
the Closing Date.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets
(a) Except as described in Schedule 6.1 or as expressly
contemplated by this Agreement or to the extent Buyer otherwise consents in
writing, during the period from the date of this Agreement to the Closing Date,
Sellers (i) will operate the Purchased Assets in the ordinary course of business
consistent with Good Utility Practices, (ii) shall use all Commercially
Reasonable Efforts to preserve intact such Purchased Assets, and endeavor to
preserve the goodwill and relationships with customers, suppliers and others
having business dealings with them, (iii) shall maintain the insurance coverage
described in Section 4.4, (iv) shall comply in all material respects with all
applicable laws relating to the Purchased Assets, including without limitation,
all Nuclear Laws
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and Environmental Laws, and (v) shall continue with Sellers' program, or (at
Buyer's expense) as Buyer may direct, to install such equipment or software with
respect to Year 2000 Qualification in accordance with Sellers' plans referred to
in Section 2.1(k). Without limiting the generality of the foregoing, and, except
as (x) contemplated in this Agreement, (y) described in Schedule 6.1, or (z)
required under applicable law or by any Governmental Authority, prior to the
Closing Date, without the prior written consent of Buyer, Sellers shall not with
respect to the Purchased Assets:
(i) Make any material change in the levels of
Inventories customarily maintained by Sellers or their Affiliates with
respect to the Purchased Assets, other than changes which are
consistent with Good Utility Practices;
(ii) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any material Purchased Assets
individually or in the aggregate (except for Purchased Assets used,
consumed or replaced in the ordinary course of business consistent with
past practices of Sellers or their Affiliates or with Good Utility
Practices) other than to encumber Purchased Assets with Permitted
Encumbrances;
(iii) Modify, amend or voluntarily terminate prior to
the expiration date any of Sellers' Agreements or Real Property Leases
or any of the Permits or Environmental Permits or waive any default by,
or release, settle or compromise and claim against, any other party
thereto, in any material respect, other than (a) in the ordinary course
of business, to the extent consistent with Good Utility Practices, (b)
with cause, to the extent consistent with Good Utility Practices, or
(c) as may be required in connection with transferring Sellers' rights
or obligations thereunder to Buyer pursuant to this Agreement;
(iv) Sell, lease or otherwise dispose of Emission
Allowances, or Emission Reduction Credits identified in Schedule
2.1(h), except to the extent necessary to operate the Purchased Assets
in accordance with this Section 6.1;
(v) Except as otherwise provided herein or in
connection with the 18R Outage and consistent with the Outage Plan,
enter into any commitment for the purchase or sale of nuclear fuel
having a term that extends beyond
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March 31, 2000 or such other date that the Parties mutually agree;
(vi) Enter into any power sales agreement having a
term that extends beyond March 31, 2000 or such other date that the
Parties mutually agree to be the date on which the Closing is expected
to occur;
(vii) Except as otherwise provided herein or in
connection with the 18R Outage and consistent with the Outage Plan,
enter into any contract, agreement, commitment or arrangement relating
to the Purchased Assets for goods or services not addressed in clauses
(i) through (vi) that individually requires the payment for or delivery
of goods or services with a value exceeding $100,000 per annum and
extends beyond March 31, 2000, unless it is terminable by Sellers (or,
after the Closing, by Buyer) without penalty or premium upon no more
than sixty (60) days notice;
(viii) Except as otherwise required by the terms of
the Collective Bargaining Agreement, (a) hire at, or transfer to the
Purchased Assets, any new employees prior to the Closing, other than to
fill vacancies in existing positions in the reasonable discretion of
Sellers, (b) increase salaries or wages of employees employed in
connection with the Purchased Assets prior to the Closing other than in
the ordinary course of business and in accordance with Sellers' past
practices, (c) take any action prior to the Closing to effect a change
in the Collective Bargaining Agreement or any other Employee agreement
being assumed by Buyer, or (d) take any action prior to the Closing to
increase the aggregate benefits payable to the employees employed in
connection with the Purchased Assets other than increases for Non-Union
Employees in the ordinary course of business and in accordance with
Sellers' past practices or (e) enter into any employment contracts with
employees at the Purchased Assets or any collective bargaining
agreements with labor organizations representing such employees;
(ix) Make any Capital Expenditures except as
permitted by Section 3.3(a)(ii) or for Sellers' account; and
(x) Except as otherwise provided herein, enter
into any written or oral contract, agreement, commitment or arrangement
with respect to any of the proscribed
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transactions set forth in the foregoing paragraphs (i) through (ix).
(b) Subject to applicable NRC rules and regulations, a
committee comprised of one or more senior representatives designated by Sellers
and one or more senior representatives designated by Buyer (the "Transition
Committee") will be established as soon as practicable after the execution of
this Agreement to permit Buyer to observe and advise Sellers regarding the
operation of the Purchased Assets and to facilitate the transfer of the
Purchased Assets to Buyer at the Closing. The Transition Committee will be kept
fully apprised by GPUN of all the Plant's management and operating developments.
The Transition Committee shall arrange for Buyer to assess the Plant's
management and employees and shall have access to the management and board of
directors of GPUN. The Transition Committee shall be accountable directly to the
respective chief executive officers of Buyer and GPUN and shall from time to
time report its findings to the senior management of each of Sellers and Buyer.
(c) Sellers shall advise Buyer regarding implementation or
changes in PJM rules or procedures which are reasonably likely to have a
Material Adverse Effect on the Plant. Sellers agree that they will not take or
cause to be taken any action to reduce the current installed capacity credit PJM
has assigned to the Plant under PJM rules, regulations or policies in effect on
the date hereof; provided, however, that the foregoing shall in no way restrict
or prohibit Sellers from taking or causing to take any such action which
generally affects Sellers' generating facilities.
6.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Sellers will, at reasonable times and upon reasonable notice and subject to
compliance with all applicable NRC rules and regulations: (i) give Buyer and its
Representatives reasonable access to its managerial personnel and to all books,
records, plans, equipment, offices and other facilities and properties
constituting the Purchased Assets; (ii) furnish Buyer with such financial and
operating data and other information with respect to the Purchased Assets as
Buyer may from time to time reasonably request, and permit Buyer to make such
reasonable Inspections thereof as Buyer may request; (iii) furnish Buyer at its
request a copy of each material report, schedule or other document filed by
Sellers or any of
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their Affiliates with respect to the Purchased Assets with the NRC, SEC, FERC,
NJDEP, NJBPU or any other Governmental Authority; and (iv) furnish Buyer with
all such other information as shall be reasonably necessary to enable Buyer to
verify the accuracy of the representations and warranties of Sellers contained
in this Agreement; provided, however, that (A) any such inspections and
investigations shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Purchased Assets, (B) Sellers shall not
be required to take any action which would constitute a waiver of the
attorney-client privilege, and (C) Sellers need not supply Buyer with any
information which Sellers are under a legal or contractual obligation not to
supply. Notwithstanding anything in this Section 6.2 to the contrary, Sellers
will furnish or provide such access to Transferring Employee Records or access
to other employee personnel records or medical information only to the extent
not prohibited by law, regulatory process or subpoena unless specifically
authorized by the affected employee, and Buyer shall not have the right to
administer to any of Sellers' employees any skills, aptitudes, psychological
profile, or other employment related test except that Buyer may administer such
tests to Sellers' Non-Union Employees if specifically authorized by the affected
employee.
(b) Each Party shall, and shall use its best efforts to cause
its Representatives to, (i) keep all Proprietary Information of the other Party
confidential and not to disclose or reveal any such Proprietary Information to
any person other than such Party's Representatives and (ii) not use such
Proprietary Information other than in connection with the consummation of the
transactions contemplated hereby. After the Closing Date, any Proprietary
Information to the extent related to the Purchased Assets shall no longer be
subject to the restrictions set forth herein. The obligations of the Parties
under this Section 6.2(b) shall be in full force and effect for three (3) years
from the date hereof and will survive the termination of this Agreement, the
discharge of all other obligations owed by the Parties to each other and the
closing of the transactions contemplated by this Agreement.
(c) For a period of seven (7) years after the Closing Date (or
such longer period as may be required by applicable law or Section 6.8(f)), each
Party and its Representatives shall have reasonable access to all of the books
and records of the Purchased Assets, including all Transferring Employee Records
in the possession of the other Party to the extent that such access may
reasonably be required by such Party in connection with the
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Assumed Liabilities or the Excluded Liabilities, or other matters relating to or
affected by the operation of the Purchased Assets. Such access shall be afforded
by the Party in possession of any such books and records upon receipt of
reasonable advance written notice and during normal business hours. The Party
exercising this right of access shall be solely responsible for any costs or
expenses incurred by it or the other Party with respect to such access pursuant
to this Section 6.2(c). If the Party in possession of such books and records
shall desire to dispose of any books and records upon or prior to the expiration
of such seven-year period (or any such longer period), such Party shall, prior
to such disposition, give the other Party a reasonable opportunity at such other
Party's reasonable expense, to segregate and remove such books and records as
such other Party may select.
(d) Notwithstanding the terms of Section 6.2(b) above, the
Parties agree that prior to the Closing Buyer may reveal or disclose Proprietary
Information to any other Persons in connection with Buyer's financing of its
purchase of the Purchased Assets or any equity participation in Buyer's purchase
of the Purchased Assets (provided that such Persons agree in writing to maintain
the confidentiality of the Proprietary Information in accordance with this
Agreement).
(e) Upon the other Party's prior written approval (which will
not be unreasonably withheld or delayed), either Party may provide Proprietary
Information of the other Party to the NJBPU, NYPSC, PaPUC, SEC, NRC, FERC or any
other Governmental Authority with jurisdiction or any stock exchange, as may be
necessary to obtain Sellers' Required Regulatory Approvals, or Buyer Required
Regulatory Approvals, respectively, or to comply generally with any relevant law
or regulation. The disclosing Party will seek confidential treatment for the
Proprietary Information provided to any Governmental Authority and the
disclosing Party will notify the other Party as far in advance as is practicable
of its intention to release to any Governmental Authority any Proprietary
Information.
(f) Except as specifically provided herein or in the
Confidentiality Agreement, nothing in this Section shall impair or modify any of
the rights or obligations of Buyer or its Affiliates under the Confidentiality
Agreement, all of which remain in effect until termination of such agreement in
accordance with its terms.
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(g) Except as may be permitted in the Confidentiality
Agreement, Buyer agrees that, prior to the Closing Date, it will not contact any
vendors, suppliers, employees, or other contracting parties of Sellers or their
Affiliates with respect to any aspect of the Purchased Assets or the
transactions contemplated hereby, without the prior written consent of Sellers,
which consent shall not be unreasonably withheld.
(h) (i) Buyer shall be entitled to inspect, in accordance with
this Section 6.2(h), all of the Purchased Assets located adjacent to any Point
of Interconnection (as defined in the Interconnection Agreement), as shown in
Schedule A to the Interconnection Agreement, to verify and/or determine the
accuracy of the data, drawings, and records described in such Schedule. The
Parties shall cooperate to schedule Buyer's Inspection at the Plant so that any
interference with the operation of the Plant is minimized, to the extent
reasonably feasible, and so that Buyer may complete its Inspections of the Plant
within thirty (30) working days of commencement of Inspections and within two
(2) months after the execution of this Agreement.
(ii) Sellers shall provide, or shall cause to be provided,
to Buyer, access to the Plant at the times scheduled for the Inspections
referred to in clause (i) above. Sellers shall provide qualified engineering,
operations, and maintenance personnel to escort Buyer's personnel and to assist
Buyer's personnel in conducting the Inspections. Sellers and Buyer shall each
bear their own costs of participating in the Inspections. At a mutually
convenient time not more than one (1) month after Buyer has completed its
Inspections, the Parties shall meet to discuss whether, as a result of the
Inspections, it is appropriate to modify Schedule A to the Interconnection
Agreement to portray more accurately the Points of Interconnection. Any
modification to any portion of Schedule A of the Interconnection Agreement to
which the Parties agree shall thereafter be deemed part of Schedule A of the
Interconnection Agreement for all purposes under the Interconnection Agreement.
(i) Between the date hereof and the Closing Date, Sellers
shall, permit Buyer or Buyer's Representatives upon Buyer's request and at
Buyer's sole cost and expense to perform additional environmental testing on the
Site ("Buyer's Environmental Inspection") at reasonable times and upon
reasonable notice to Sellers. The general nature and scope of the initial
Buyer's Environmental Inspection is set forth on
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Schedule 6.2(i). Buyer may, subject to Sellers' consent, which consent shall not
be unreasonably withheld, conduct further Inspections if, based on the results
of the initial Buyer's Environmental Inspection, such further Inspection is
reasonably warranted. Buyer agrees to comply, and cause its Representatives to
comply, with all safety and security policies adopted by Sellers relating to the
Purchased Assets. All environmental testing performed by Buyer or Buyer's
Representatives on the Site shall be performed in accordance with all applicable
NRC and other legal or regulatory requirements of Governmental Authorities and
in any event shall not unreasonably interfere with the operation of the Plant or
the Purchased Assets.
6.3 Public Statements. Subject to the requirements imposed by any
applicable law or any Governmental Authority or stock exchange, prior to the
Closing Date, no press release or other public announcement or public statement
or comment in response to any inquiry relating to the transactions contemplated
by this Agreement shall be issued or made by any Party without the prior
approval of the other Parties (which approval shall not be unreasonably
withheld). The Parties agree to cooperate in preparing such announcements.
6.4 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses. Notwithstanding anything to the contrary herein, Buyer will be
responsible for (a) all costs and expenses associated with the obtaining of any
title insurance policy and all endorsements thereto that Buyer elects to obtain
and (b) all filing fees under the HSR Act.
6.5 Further Assurances
(a) Subject to the terms and conditions of this Agreement,
each of the Parties hereto shall use its Commercially Reasonable Efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the purchase and sale of the Purchased Assets
pursuant to this Agreement and the assumption of the Assumed Liabilities,
including without limitation using its best efforts to ensure satisfaction of
the conditions precedent to each Party's obligations hereunder, including
obtaining all necessary
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consents, approvals, and authorizations of third parties and Governmental
Authorities required to be obtained in order to consummate the transactions
hereunder, and to effectuate a transfer of the Transferable Permits to Buyer.
Buyer agrees to perform all conditions required of Buyer in connection with
Sellers' Required Regulatory Approvals, other than those conditions which would
create a Buyer Material Adverse Effect. None of the Parties hereto shall,
without prior written consent of the other Party, take or fail to take any
action, which might reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement.
(b) Buyer agrees that prior to the Closing Date, neither Buyer
nor any of its Affiliates will enter into any other contract to acquire, nor
acquire, electric generation facilities located in the control area recognized
by the North American Reliability Council as the PJM Control Area if the
proposed acquisition of such additional electric generation facilities might
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement; provided, however, that the
foregoing shall not prohibit Buyer or any of its Affiliates either from
acquiring or agreeing to acquire an ownership interest in the Peach Bottom
Nuclear Generating Station from Conectiv, Inc. or adding generating capacity to
their present generating facilities. Buyer shall give Sellers reasonable advance
notice (and in any event not less than ten (10) days) before Buyer enters into
any contract to acquire or acquires any electric generation facility located in
said PJM Control Area.
(c) In the event that any Purchased Asset shall not have been
conveyed to Buyer at the Closing, Sellers shall, subject to Section 6.5(d) and
(e), use Commercially Reasonable Efforts to convey such asset to Buyer as
promptly as is practicable after the Closing. In the event that any Easement
shall not have been granted by Buyer to Sellers at the Closing, Buyer shall use
Commercially Reasonable Efforts to grant such Easement to Sellers as promptly as
is practicable after the Closing.
(d) To the extent that Sellers' rights under any Sellers'
Agreement or Real Property Lease may not be assigned without the consent of
another Person which consent has not been obtained by the Closing Date, this
Agreement shall not constitute an agreement to assign the same, if an attempted
assignment would constitute a breach thereof or be unlawful.
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Sellers and Buyer agree that if any consent to an assignment of any material
Sellers' Agreement or Real Property Lease shall not be obtained or if any
attempted assignment would be ineffective or would impair Buyer's rights and
obligations under the material Sellers' Agreement or Real Property Lease in
question, so that Buyer would not in effect acquire the benefit of all such
rights and obligations, Sellers, at Buyer's option and to the maximum extent
permitted by law and such material Sellers' Agreement or Real Property Lease,
shall, after the Closing Date, appoint Buyer to be Sellers' agent with respect
to such material Sellers' Agreement or Real Property Lease, or, to the maximum
extent permitted by law and such material Sellers' Agreement or Real Property
Lease, enter into such reasonable arrangements with Buyer or take such other
actions as are necessary to provide Buyer with the same or substantially similar
rights and obligations of such material Sellers' Agreement or Real Property
Lease as Buyer may reasonably request. Sellers and Buyer shall cooperate and
shall each use Commercially Reasonable Efforts prior to and after the Closing
Date to obtain an assignment of such material Sellers' Agreement or Real
Property Lease to Buyer.
(e) To the extent that Sellers' rights under any warranty or
guaranty described in Section 2.1(i) may not be assigned without the consent of
another Person, which consent has not been obtained by the Closing Date, this
Agreement shall not constitute an agreement to assign same, if an attempted
assignment would constitute a breach thereof, or be unlawful. Sellers and Buyer
agree that if any consent to an assignment of any such warranty or guaranty
shall not be obtained, or if any attempted assignment would be ineffective or
would impair Buyer's rights and obligations under the warranty or guaranty in
question, so that Buyer would not in effect acquire the benefit of all such
rights and obligations, Sellers, at Buyer's expense, shall use Commercially
Reasonable Efforts, to the extent permitted by law and such warranty or
guaranty, to enforce such warranty or guaranty for the benefit of Buyer so as to
provide Buyer to the maximum extent possible with the benefits and obligations
of such warranty or guaranty.
6.6 Consents and Approvals.
(a) As promptly as practicable after the date of this
Agreement, Sellers and Buyer, as applicable, shall each file or cause to be
filed with the Federal Trade Commission and the United States Department of
Justice any notifications required to be filed under the HSR Act and the rules
and regulations
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promulgated thereunder with respect to the transactions contemplated hereby. The
Parties shall use their respective best efforts to respond promptly to any
requests for additional information made by either of such agencies, and to
cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Buyer will pay all filing fees
under the HSR Act but each Party will bear its own costs of the preparation of
any filing.
(b) As promptly as practicable after the date of this
Agreement and following receipt of any requisite determinations by other
Governmental Authorities which are a precondition thereto, Buyer shall file with
the FERC an application requesting Exempt Wholesale Generator status for Buyer,
which filing may be made individually or in conjunction with other filings to be
made with the FERC under this Agreement, as reasonably determined by the
Parties. Prior to Buyer's submission of that application with the FERC, Buyer
shall submit such application to Sellers for review and comment and Buyer shall
incorporate into the application any revisions reasonably requested by Sellers.
Buyer shall be solely responsible for the cost of preparing and filing this
application, any petition(s) for rehearing, or any re-application. If Buyer's
initial application for Exempt Wholesale Generator status is rejected by the
FERC, Buyer agrees to petition the FERC for rehearing and/or to re-submit an
application with the FERC, as reasonably required by Sellers, provided that in
either case the action directed by Sellers does not create a Buyer Material
Adverse Effect.
(c) As promptly as practicable after the date of this
Agreement, Buyer shall file with the FERC pursuant to Section 205 of the Federal
Power Act a notification of change in status concerning its market-based rate
authority by which Buyer shall notify the FERC of the change in status
associated with its purchase of the Plant's additional generating capacity and
request the FERC to confirm that such change in status will not affect Buyer's
authority to engage in market-based rate wholesale power sale transactions,
which filing may be made individually by Buyer or jointly with Sellers in
conjunction with other filings to be made with the FERC under this Agreement, as
reasonably determined by the Parties. Prior to the filing of that application
with the FERC, Buyer shall submit such application to Sellers for review and
comment and Buyer shall incorporate into the application any revisions
reasonably requested by Sellers. Buyer shall be solely responsible for the cost
of preparing and filing this application, any petition(s)
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for rehearing, or any reapplication. If Buyer's filing results in a FERC request
for additional information or is rejected by the FERC, Buyer shall provide that
information promptly, petition the FERC for rehearing and/or to re-submit the
filing with the FERC, as reasonably required by Sellers, provided that Sellers
shall have a reasonable opportunity to make changes to such a filing or
re-submission and, provided further, that the action directed by Sellers does
not create a Buyer Material Adverse Effect.
(d) As promptly as practicable, and in any case within sixty
(60) days after the date of this Agreement, Sellers and Buyer, as applicable,
shall file with the NJBPU, the NYPSC, the FERC and any other Governmental
Authority, and any other filings required to be made with respect to the
transactions contemplated hereby. The Parties shall respond promptly to any
requests for additional information made by such agencies, and use their
respective best efforts to cause regulatory approval to be obtained at the
earliest possible date after the date of filing. Each Party will bear its own
costs of the preparation of any such filing.
(e) Without limitation of Section 10.11, Sellers and Buyer
shall cooperate with each other and promptly prepare and file notifications
with, and request Tax clearances from, state and local taxing authorities in
jurisdictions in which a portion of the Purchase Price may be required to be
withheld or in which Buyer would otherwise be liable for any Tax liabilities of
Sellers pursuant to such state and local Tax law.
(f) Buyer shall have the primary responsibility for securing
the transfer, reissuance or procurement of the Permits and Environmental Permits
(other than Transferable Permits) effective as of the Closing Date. Sellers
shall cooperate with Buyer's efforts in this regard and assist in any transfer
or reissuance of a Permit or Environmental Permit held by Sellers or the
procurement of any other Permit or Environmental Permit when so requested by
Buyer.
(g) As promptly as practicable after the date of this
Agreement, Buyer and Sellers shall file with the NRC an application requesting
consent under Section 184 of the Atomic Energy Act and 10 CFR ss.50.80 for the
transfer of the Plant license from Sellers to Buyer, and any associated
licenses, amendments or approvals. The Parties shall respond promptly to any
requests for additional information made by the NRC and use their respective
best efforts to cause regulatory approval to be
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obtained at the earliest possible date after the date of filing. Each Party will
bear its own costs of the preparation of any such filing.
(h) As promptly as practicable after the date of this
Agreement, Sellers and Buyer, as applicable, shall file with the IRS the
requests for private letter rulings described in Sections 7.1(m) and 7.2(j). The
Parties shall respond promptly to any requests for additional information made
by the IRS, and use their respective Commercially Reasonable Efforts to cause
the private letter rulings to be obtained at the earliest possible date after
the date of filing. Each of Sellers and Buyer shall cooperate with one another
to secure the private letter rulings described in Sections 7.1(m) and 7.2(j) and
each shall have the right to review in advance all information included in the
requests for private letter rulings and supplemental submissions to the IRS.
Each Party will bear its own costs of the preparation of such requests.
6.7 Fees and Commissions. Sellers, on the one hand, and Buyer, on the
other hand, represent and warrant to the other that, no broker, finder or other
Person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transaction contemplated hereby by reason of any action
taken by the Party making such representation. Sellers, on the one hand, and
Buyer, on the other hand, will pay to the other or otherwise discharge, and will
indemnify and hold the other harmless from and against, any and all claims or
liabilities for all brokerage fees, commissions and finder's fees incurred by
reason of any action taken by the indemnifying party.
6.8 Tax Matters.
(a) All transfer and sales taxes incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, (a) New Jersey sales tax; and (b) the New Jersey realty transfer
taxes on conveyances of interests in real property, shall be borne equally by
Buyer and Sellers. Sellers shall file, to the extent required by, or permissible
under, applicable law, all necessary Tax Returns and other documentation with
respect to all such transfer and sales taxes, and, if required by applicable
law, Buyer shall join in the execution of any such Tax Returns and other
documentation. Prior to the Closing Date, to the extent applicable, Buyer shall
provide to Sellers appropriate certificates of Tax exemption from each
applicable taxing authority.
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(b) With respect to Taxes to be prorated in accordance with
Section 3.5 of this Agreement, Buyer shall prepare and timely file all Tax
Returns required to be filed after the Closing Date with respect to the
Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to
be due on such Tax Returns. Buyer's preparation of any such Tax Returns shall be
subject to Sellers' approval, which approval shall not be unreasonably withheld.
Buyer shall make such Tax Returns available for Sellers' review and approval no
later than fifteen (15) Business Days prior to the due date for filing each such
Tax Return.
(c) Within fifteen (15) Business Days after receipt of a Tax
Return referred to in Section 6.8(b), Sellers shall pay to Buyer Sellers' share
of the amount shown on such Tax Return, less payments on account of such Taxes
previously made by Sellers. To the extent that Sellers' previous payments exceed
Sellers' share, the Buyer shall pay such excess to Sellers. With respect to real
estate taxes, evidence of payment shall be delivered by Sellers to Buyer at the
Closing.
(d) Buyer and Sellers shall provide the other with such
assistance as may reasonably be requested by the other Party in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each shall retain and provide the requesting party with any
records or information which may be relevant to such return, audit, examination
or proceedings. Any information obtained pursuant to this Section 6.8(d) or
pursuant to any other Section hereof providing for the sharing of information or
review of any Tax Return or other instrument relating to Taxes shall be kept
confidential by the Parties hereto. Schedule 6.8 sets forth procedures to be
followed with respect to the tax appeals and audits referred to therein.
(e) In the event that a dispute arises between Sellers and
Buyer as to the amount of Taxes, or indemnification, or the amount of any
allocation of Purchase Price under Section 3.4 hereof, the Parties shall attempt
in good faith to resolve such dispute, and any agreed upon amount shall be paid
to the appropriate Party. If such dispute is not resolved thirty (30) days
thereafter, the Parties shall submit the dispute to the Independent Accounting
Firm for resolution, which resolution shall be final, conclusive and binding on
the Parties. Notwithstanding anything in this Agreement to the contrary, the
fees and expenses of the Independent Accounting Firm in
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resolving the dispute shall be borne equally by Sellers and Buyer. Any payment
required to be made as a result of the resolution of the dispute by the
Independent Accounting Firm shall be made within ten days after such resolution,
together with any interest determined by the Independent Accounting Firm to be
appropriate.
(f) Buyer and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other Party, in connection with the filing of
Tax Returns pursuant to this Agreement and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other Party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees (to the extent such employees were responsible for the
preparation, maintenance or interpretation of information and documents relevant
to Tax matters or to the extent required as witnesses in any Tax proceedings),
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Parties agree to give the
other Party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so requests, Buyer
or Sellers, as the case may be, shall allow the other Party to take possession
of such books and records.
Buyer and Sellers further agree, upon request, to use Commercially
Reasonable Efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
6.9 Advice of Changes. Prior to the Closing, each Party will promptly
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth in this Agreement, including any of the Schedules hereto, or of any breach
of any representation or warranty or of any other condition or circumstance that
would excuse a Party of timely performance of its obligations hereunder. Sellers
may at any time notify Buyer of any development causing a breach of any of their
representations and warranties in Article IV. Unless Buyer has the right to
terminate this Agreement pursuant to Section 9.1(e) below by reason of the
developments and exercises
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that right within the period of fifteen (15) days after such right accrues, the
written notice pursuant to this Section 6.9 will be deemed to have amended this
Agreement, including the appropriate Schedule, to have qualified the
representations and warranties contained in Article IV above; provided, however,
that no such change in Schedule 2.3(e) may be made without Buyer's consent.
Sellers shall be entitled to amend, substitute or otherwise modify any Sellers'
Agreement to the extent that such Sellers' Agreement expires by its terms prior
to the Closing Date or is terminable without liability to Buyer on or after the
Closing Date, or if the terms and conditions of such modified Sellers' Agreement
constituting the Assumed Liabilities are on terms and conditions not less
favorable to Buyer than the original Sellers' Agreement. Nothing contained
herein shall relieve Sellers or Buyer of any breach of representation, warranty
or covenant under this Agreement existing as of the date hereof or any
subsequent date as of which such representation, warranty or covenant shall have
been made.
6.10 Employees.
(a) At least ninety (90) days prior to the Closing Date, Buyer
shall provide Sellers with notice of its Union Employee staffing level
requirements (which Buyer may determine in its sole discretion), listed by
classification and operation, and shall offer employment to that number of Union
Employees necessary to satisfy such staffing level requirements. As used herein,
"Union Employees" means such employees of Sellers who are covered by the
Collective Bargaining Agreement as defined in Section 6.10(d) below, and who are
listed in, or whose employment responsibilities are listed in, Schedule
6.10(a)(i) as "Plant Employees" or as "Dedicated Support Staff" as associated
with the Plant.
(b) As used herein, "Non-Union Employees" means such salaried
employees of Sellers who are listed in, or whose employment responsibilities are
listed in, Schedule 6.10(b) as "Plant Employees" or "GPUN Parsippany Support
Staff". At least ninety (90) days prior to the Closing Date, Buyer shall provide
Sellers with notice of their staffing level requirements (which Buyer may
determine in its sole discretion), listed by classification and operation, for
those employees who are listed in, or whose employment responsibilities are
listed in, Schedule 6.10(b) as Plant Employees, and Buyer shall offer employment
to that number of such employees necessary to satisfy such staffing level
requirements. Buyer shall also have the opportunity to interview and make offers
of employment to such
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of the employees listed in, or whose employment responsibilities are listed in,
Schedule 6.10(b) as GPUN Parsippany Support Staff, as Buyer determines in its
discretion. Each person who becomes employed by Buyer or any of its Affiliates
as a result of an offer of employment made pursuant to Section 6.10(a) or this
Section 6.10(b) shall be referred to herein as a "Transferred Union Employee" or
"Transferred Non-Union Employee", respectively.
(c) All offers of employment made pursuant to Sections 6.10(a)
or (b) shall be made in accordance with all applicable laws and regulations, and
in addition, for Union Employees, in accordance with seniority and all other
applicable provisions of the Collective Bargaining Agreement. Each of Sellers
agrees that it will not, during the period from January 1, 2000 to the Closing
Date, terminate the employment of any Union Employee, or any Non-Union Employee
who is listed in, or whose employment responsibilities are listed in, Schedule
6.10(b), for any reason except for cause, without the prior written consent of
Buyer.
(d) Schedule 6.10(d) sets forth the collective bargaining
agreement, the Agreement Resulting from the Sale of Oyster Creek Nuclear
Generating Station dated July 13, 1999, and amendments thereto, to which Sellers
are a party with the System Council and/or with IBEW Local 1289 in connection
with the Purchased Assets ("Collective Bargaining Agreement"). Transferred Union
Employees shall retain their seniority and receive full credit for service with
Sellers in connection with entitlement to vacation and all other benefits and
rights under the Collective Bargaining Agreement and under each compensation,
retirement or other employee benefit plan or program Buyer is required to
maintain for Transferred Union Employees pursuant to the Collective Bargaining
Agreement. For purposes of Buyer's pension plan, the service credit so given
shall be for purposes of eligibility and vesting, but shall not be for purposes
of level of benefits and benefit accrual except to the extent Buyer Benefit Plan
provides otherwise. With respect to Transferred Union Employees, effective as of
the Closing Date, Buyer shall assume the Collective Bargaining Agreement for the
duration of its term as it relates to Transferred Union Employees to be employed
at the Plant in positions covered by the Collective Bargaining Agreement and
shall thereafter comply with all applicable obligations under the Collective
Bargaining Agreement. Consistent with its obligations under the Collective
Bargaining Agreement and applicable laws, Buyer shall be required to establish
and maintain a pension plan and other
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employee benefit programs for the Transferred Union Employees for the duration
of the term of the Collective Bargaining Agreement which are substantially
equivalent to Sellers' plans and programs in effect for the Transferred Union
Employees immediately prior to the Closing Date (the "Sellers' Plans"), and
which provide at least the same level of benefits or coverage as do Sellers'
Plans for the duration of the Collective Bargaining Agreement. Buyer further
agrees to recognize IBEW Local 1289 as the collective bargaining agent for the
Transferred Union Employees.
(e) In connection with the welfare benefit plans that Buyer or
its Affiliates will provide for the Transferred Non-Union Employees pursuant to
Sections 6.10(d) and 6.10(f) (the "Replacement Welfare Plans"), Buyer shall (i)
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to the Transferred Employees under the Replacement Welfare
Plans, other than, but only to the extent of, limitations or waiting periods
that were in effect with respect to such employees under the welfare plans
maintained by Sellers or their Affiliates and that have not been satisfied as of
the Closing Date, and (ii) provide each Transferred Employee with credit for any
co-payments and deductibles paid prior to the Closing Date in satisfying any
deductible or out-of-pocket requirements under the Replacement Welfare Plans (on
a pro-rata basis in the event of a difference in plan years).
(f) As of the Closing Date, Buyer shall adopt employee benefit
plans that will provide the Transferred Non-Union Employees with benefits or
coverage substantially similar to the benefits or coverage provided under
Sellers' plans and programs in effect for the Transferred Non-Union Employees
immediately prior to the Closing Date ("Buyer's Benefit Plans"). Under each of
the Buyer's Benefit Plans, the Transferred Non-Union Employees shall be given
credit for all of their service with GPUN and its Affiliates. The service credit
so given shall be for purposes of eligibility and vesting, but shall not be for
purposes of level of benefits and benefit accrual except to the extent that the
Buyer Benefit Plans otherwise provide.
(g) To the extent allowable by law, Buyer shall take any and
all necessary action to cause the trustee of any defined contribution plan of
Buyer or its Affiliates in which any Transferred Employee becomes a participant
to accept a direct "rollover" of all or a portion of said employee's "eligible
rollover distribution" within the meaning of section 402 of the
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Code from the GPU Companies Employee Savings Plan for Non-Bargaining Employees
or from the GPU Companies Employee Savings Plan for Employees represented by the
System Council or by IBEW Local 1289 if requested to do so by the Transferred
Employee.
(h) (1) Buyer shall provide the severance benefits described
in Section 1 of Schedule 6.10(h) to (x) each Transferred Employee whose
employment with Buyer is "Involuntarily Terminated" (as that term is defined
below) at any time within 24 months after the Closing Date, and (y) each
Transferred Non-Union Employee who has attained age 50 and completed at least 10
years of "Creditable Service" (as that term is defined below) prior to the
Closing Date and whose employment with Buyer is Involuntarily Terminated on or
at any time prior to December 31, 2004. Subject to the limitations and
conditions described below, Seller will reimburse Buyer for all of the costs it
incurs in providing such severance benefits.
(2) Sellers shall cause the "bridged" pension benefits and the
"bridged" and retiree welfare benefits described in Sections 2(c) and (d) of
Schedule 6.10(h) to be provided under the appropriate plans maintained by
Sellers and/or their Affiliates to each Transferred Non-Union Employee who (i)
has attained age 50 and completed at least 10 years of Creditable Service before
the Closing Date, and is Involuntarily Terminated by Buyer on or prior to
December 31, 2004 and before he or she has attained age 55, or (ii) is
Involuntarily Terminated by Buyer at any time within 24 months after the Closing
Date and before he or she has attained age 55, and has attained age 50 and
completed at least 10 years of Total Creditable Service (as defined below) as of
the date on which he or she is Involuntarily Terminated, and (iii) has executed
a release as described in Section 1(g) of Schedule 6.10(h).
(3) Sellers shall cause the severance and other benefits described in
Section 2(a) or 2(b) of Schedule 6.10(h), as applicable, to be provided to each
Union Employee and Non-Union Employee (i) who does not receive an offer of
employment from Buyer and (ii) whose employment with JCP&L or GPUN is
Involuntarily Terminated at any time prior to the end of the third calendar
month following the Closing Date.
(4) Sellers shall not be obligated to reimburse Buyer for any amount
pursuant to paragraph (1) above, to the extent that such amount, when added to
the sum of (i) all reimbursement payments previously made by Sellers to Buyer
under Section
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6.10(h), plus (ii) the aggregate estimated cost that Sellers have incurred or
may incur in the future in providing the benefits described in paragraphs (2)
and (3) above to the Union Employees and Non-Union Employees therein referred
to, as determined in accordance with paragraph (6) below, does not exceed $30
million.
(5) The following will not be included in determining the amount to be
applied against the $30 million limitation on Sellers' reimbursement obligation
provided for in paragraph (4) above: (i) any benefits provided by Buyer or by
GPUN to any Non-Union Employees who are listed in, or whose employment
responsibilities are listed in, Schedule 6.10(b) as "GPUN Parsippany Support
Staff"; (ii) any benefits provided by Buyer or Sellers to any Union Employee or
Non-Union Employee whose employment is Involuntarily Terminated at any time
after the second anniversary of the Closing Date; (iii) any "bridged" pension
benefits and any "bridged" and retiree welfare benefits provided by Sellers to
any Transferred Non-Union Employee at any time after the second anniversary of
the Closing Date; and (iv) any benefits provided by Sellers to any Union
Employee or Non-Union Employee whose employment with JCP&L or GPUN is
Involuntarily Terminated at any time prior to January 1, 2000.
(6) As of the date of any reimbursement request made by Buyer pursuant
to paragraph (9) below, the aggregate estimated cost that Sellers and their
Affiliates have incurred, or may incur in the future, in providing the benefits
described in paragraphs (2) and (3) above to the Union Employees and Non-Union
Employees described therein whose employment with Buyer or Sellers has been
Involuntarily Terminated on or prior to the date of such reimbursement request,
shall be determined as of the date of each such employee's termination of
employment, and shall be calculated by the actuarial factors regularly engaged
to provide actuarial services to the GPU Companies with respect to their
pension, health care and severance plans. Such cost shall be determined using
the same assumptions as to mortality, turnover, interest rate and other
actuarial assumption as used by such actuarial firm in determining the cost of
benefits under the GPU Companies' pension, health care and severance plans for
purposes of their most recently issued financial statements prior to the Closing
Date. In the case of the "bridged" pension benefits described in Section 2(c) of
Schedule 6.10(h), the estimated cost of providing such benefits shall be the
amount equal to the excess of (A) the actuarial present value of the pension
payable to the employee under the applicable Sellers' pension plan starting at
age 55, using the plan's early
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(7) retirement reduction factors to determine the employee's pension
amount, over (B) the actuarial present value of the pension that otherwise would
be so payable to the employee, using the plan's full actuarial reduction factors
to determine the employee's pension amount; and in each such case, the
employee's pension amount shall be determined by taking into account only the
employee's periods of service and pay with Sellers and their Affiliates. Sellers
shall furnish Buyer with copies of all cost estimates made by Seller's actuarial
firm pursuant to this paragraph (6)
(8) For purposes of this Section 6.10(h) and Schedule 6.10(h), an
employee shall be treated as being "Involuntarily Terminated" from Buyer, JCP&L,
or GPUN, if his or her employment with Buyer and all of its Affiliates, or with
JCP&L or GPUN and all of their Affiliates, is terminated by Buyer or any of its
Affiliates, or by JCP&L or GPUN or any of their Affiliates, for any reason other
than for cause or disability. A Union Employee or Non-Union Employee who
receives an offer of employment from Buyer prior to the Closing Date and who
fails to accept such offer and who is thereafter terminated by JCP&L or GPUN
shall not be treated as "Involuntarily Terminated".
(9) For purposes of this Section 6.10(h) and Schedule 6.10(h), (i) an
employee's years of "Creditable Service" shall be determined in accordance with
the definition of such term contained in the GPU Companies Employee Pension Plan
in the case of any Non-Union Employee, or contained in the GPU Companies Plan
for Retirement Annuities for Employees Represented by IBEW System Council U-3 in
the case of any Union Employee, and (ii) an employee's "Total Creditable
Service" shall mean the sum of his Creditable Service, plus all periods of his
or her employment with Buyer and its Affiliates.
(10) From time to time after the Closing Date (but no more frequently
than at 3-month intervals) Buyer may request reimbursement hereunder by
furnishing Sellers with a written statement setting forth the following
information:
(i) the name of each Transferred Employee whose employment
with Buyer has been Involuntarily Terminated,
(ii) the date of such employee's termination of employment
with Buyer,
(iii) the total amount of costs actually incurred by Buyer in
providing each of the benefits described in
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Sections 1(a) through (f) of Schedule 6.10(h) to such employee
since the date of his or her termination of employment, and
(iv) the portion of the costs so incurred remaining
unreimbursed as of the date of Buyer's reimbursement request.
The Buyer's reimbursement request with respect to any Transferred Employee shall
be accompanied by a copy of the release executed by such employee as required
under Section 1(g) of Schedule 6.10(h), if one has not previously been furnished
to Sellers. Within 30 days after receipt of a request for reimbursement from
Buyer, Sellers shall pay to Buyer the total amount of the unreimbursed costs
shown on the written statement furnished by Buyer in connection with such
request, subject to the limitation set forth in paragraph (4).
(10) Notwithstanding any other provision herein, Sellers' obligation to
make payments with respect to any cost reimbursements requested by Buyer
hereunder shall be subject to Sellers' receipt of such substantiation of the
costs incurred by Buyer as Sellers may reasonably request in writing.
(i) Sellers shall be responsible, with respect to the
Purchased Assets, for performing and discharging all requirements under the WARN
Act and under applicable state and local laws and regulations for the
notification of their employees of any "employment loss" within the meaning of
the WARN Act which occurs prior to the Closing Date.
(j) Sellers shall be responsible for extending COBRA
continuation coverage to any employees and former employees of JCP&L or GPUN, or
to any qualified beneficiaries of such employees and former employees, who
become or became entitled to COBRA continuation coverage before the Closing,
including those for whom the Closing occurs during their COBRA election period.
Buyer shall be responsible for providing COBRA continuation coverage to all
Transferred Employees and qualified beneficiaries of such employees who become
entitled to such COBRA continuation coverage on or after the Closing Date.
(k) (i) Sellers or their Affiliates shall pay to all
Transferred Employees all compensation, bonus, vacation and holiday
compensation, pension, profit sharing and other deferred compensation benefits,
workers' compensation, or other
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employment benefits to which they are entitled under the terms of the applicable
compensation or benefit programs at such times as are provided therein.
(ii) Under the sick leave program Buyer will maintain
for Transferred Union Employees pursuant to its obligations under Section
6.10(d), (A) each Transferred Union Employee who was hired by JCP&L before
December 31, 1994 shall be credited with the number of accumulated unused sick
leave days standing to the employee's credit under JCP&L's sick leave program
for Union Employees as of the Closing Date (the employee's "Carried-Over Sick
Days"), and (B) each such employee who has completed at least 15 "Years of
Service" as defined in Section 1(b) of Schedule 6.10(h) shall be entitled to
receive from Buyer, upon his or her termination of employment with Buyer and its
Affiliates for any reason other than for cause, a lump-sum payment in an amount
determined by multiplying the number of the employee's Carried-Over Sick Days
remaining unused at the date of such termination of his or her employment, by
75% of the daily rate of base pay in effect for the employee immediately prior
to such termination of his or her employment.
(iii) The Purchase Price shall be decreased by an
amount equal to the estimated cost of the payments Buyer is required to make
hereunder with respect to the Transferred Union Employees' Carried-Over Sick
Days. In the case of each such Transferred Union Employee who has not completed
at least 15 Years of Service as of the Closing Date, such estimated cost shall
be calculated by the actuarial firm regularly engaged to provide actuarial
services to the GPU Companies with respect to their pension, health care and
life insurance plans, and shall be determined as of the Closing Date using the
same assumptions as to interest rate and as to mortality, turnover, and other
actuarial factors as used by such firm in determining the cost of benefits under
the GPU Companies' plans for purposes of their most recently issued financial
statements prior to the Closing Date; provided, however, that base pay rates in
effect for the Transferred Union Employees immediately prior to the Closing Date
shall be used to value the Buyer's payment obligation hereunder. In the case of
each such Transferred Union Employee who has completed at least 15 Years of
Service as of the Closing Date, such estimated cost shall be the amount
determined by multiplying (A) the number of the employee's Carried-Over Sick
Days by (B) 75% of the daily rate of base pay in effect for the employee
immediately prior to the Closing Date.
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(l) Individuals who are otherwise "Union Employees" as defined
in Section 6.10(a) or "Non-Union Employees" as defined in Section 6.10(b) but
who on any date are not actively at work due to a leave of absence covered by
the Family and Medical Leave Act ("FMLA"), or due to any other authorized leave
of absence, shall nevertheless be treated as "Union Employees" or as "Non-Union
Employees", as the case may be, on such date if they are able (i) to return to
work within the protected period under the FMLA or such other leave (which in
any event shall not extend more than twelve (12) weeks after the Closing Date),
whichever is applicable, and (ii) to perform the essential functions of their
jobs, with or without a reasonable accommodation.
(m) To the extent permitted by applicable law, all Transferred
Employee Records shall be delivered promptly after the Closing Date to Buyer.
(n) Sellers shall provide documentation, affidavits and any
other information reasonably requested in support of Buyer's application for
"successor employer" status for purposes of the New Jersey Unemployment, New
Jersey Disability Insurance and FICA and FUTA taxes.
6.11 Risk of Loss.
(a) From the date hereof through the Closing Date, all risk of
loss or damage to the property included in the Purchased Assets shall be borne
by Sellers; provided, however, that except for services provided by the
Reciprocal Services Agreement, any such loss or damage directly caused by the
negligence or willful misconduct of Buyer or any Buyer Representative shall be
the responsibility of Buyer.
(b) If, before the Closing Date, all or any portion of the
Purchased Assets is (i) taken by eminent domain or is the subject of a pending
or (to the Knowledge of Sellers) contemplated taking which has not been
consummated, or (ii) damaged or destroyed by fire or other casualty, Sellers
shall notify Buyer promptly in writing of such fact, and (x) in the case of a
condemnation, Sellers shall assign or pay, as the case may be, any proceeds
thereof to Buyer at the Closing and (y) in the case of a casualty, Sellers shall
either restore the damage or assign the insurance proceeds therefor (and pay the
amount of any deductible and/or self-insured amount in respect of such casualty)
to Buyer at the Closing. Notwithstanding the above, if such casualty or loss
results in a Material Adverse Effect, Buyer and Sellers shall negotiate to
settle the loss resulting
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from such taking (and such negotiation shall include, without limitation, the
negotiation of a fair and equitable adjustment to the Purchase Price). If no
such settlement is reached within sixty (60) days after Sellers have notified
Buyer of such casualty or loss, then Buyer or Sellers may terminate this
Agreement pursuant to Section 9.1(h). In the event of damage or destruction
which Sellers elect to restore, Sellers will have the right to postpone the
Closing for up to ninety (90) days. Buyer will have the right to inspect and
observe, or have its Representatives inspect or observe, all repairs
necessitated by any such damage or destruction.
6.12 Decommissioning Trust Funds.
[Intentionally Omitted]
6.13 Spent Fuel Fees. Between the date hereof and the Closing Date, and
at all times thereafter, Sellers will pay all Spent Fuel Fees and any other fees
associated with electricity generated at the Plant sold prior to the Closing
Date, and Buyer shall have no liability or responsibility therefor. Buyer shall
pay and discharge all fees and expenses associated with the nuclear fuel
consumed in the Plant and associated with electricity generated and sold from
and after the Closing Date, and Sellers shall have no liability or
responsibility therefor. Buyer shall assume title to, and responsibility for the
storage and disposal of, the spent nuclear fuel in the Plant as of the Closing
Date. Sellers shall assign to Buyer the DOE Standard Spent Fuel Disposal
Contract and shall provide the required notice to DOE within ninety (90) days of
transfer of title to spent fuel.
6.14 Department of Energy Decontamination and Decommissioning Fees.
Sellers will continue to pay all Department of Energy Decontamination and
Decommissioning Fees relating to nuclear fuel purchased and consumed at the
Plant prior to the Closing Date, including but not limited to all annual Special
Assessment invoices to be issued after the Closing Date by the Department of
Energy, as contemplated by its regulations at 10 CFR Part 766 implementing
Sections 1801, 1802, and 1803 of the Atomic Energy Act.
6.15 Additional Covenants of Buyer. Notwithstanding any other provision
hereof, Buyer covenants and agrees that, after the Closing Date, Buyer will not
make any modifications to the facilities financed by the Pollution Control
Revenue Bonds (the "Pollution Control Facilities") or take any action which, in
and
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of itself, results in a loss of the exclusion of interest on the Pollution
Control Revenue Bonds issued on behalf of JCP&L in connection with the Purchased
Assets from gross income for federal income purposes under section 103 of the
Code. Actions with respect to the Pollution Control Facilities shall not
constitute a breach by the Buyer of this Section 6.15 in the following
circumstances: (i) Buyer ceases to use or decommissions any of the Purchased
Assets or subsequently repowers such Purchased Assets that are no longer used or
decommissioned (but does not hold such Purchased Assets for sale); (ii) Buyer
acts with respect to the Purchased Assets in order to comply with requirements
under applicable federal, state or local environmental or other laws or
regulations; (iii) Buyer transfers an ownership interest in the Purchased
Assets; or (iv) Buyer acts in a manner the Sellers (i.e. a reasonable private
provider of electricity of similar stature as JCP&L) would have acted during the
term of the Pollution Control Revenue Bonds (including, but not limited to,
applying new technology). In the event Buyer acts or anticipates acting in a
manner that will cause a loss of the exclusion of interest on the Pollution
Control Revenue Bonds from gross income for federal income tax purposes, at the
request of Buyer, Sellers shall take any remedial actions permitted under the
federal income tax law that would prevent a loss of such inclusion of interest
from gross income on the Pollution Control Revenue Bonds. Buyer further
covenants and agrees that, in the event that Buyer transfers any of the
Purchased Assets or an ownership interest therein, Buyer shall obtain from its
transferee a covenant and agreement that is analogous to Buyer's covenant and
agreement pursuant to the immediately preceding sentence, as well as a covenant
and agreement that is analogous to that of this sentence. In addition, Buyer
shall not, without 60 days advance written notice to Sellers (to the extent
practicable under the circumstances), take any action which would result in (x)
a change in the use of the assets financed with the Pollution Revenue Control
Bonds from the use in which such assets were originally intended, or (y) a sale
of such assets separate from the generating assets to which they relate provided
that no notice is required of the events set forth in clauses (i),(ii), or (iii)
above. This covenant shall survive the Closing and shall continue in effect so
long as the Pollution Control Revenue Bonds remain outstanding.
6.16 Cooperation Relating to Insurance and Price-Anderson Act.
Sellers shall cooperate with Buyer's efforts to ensure continuity of insurance
coverage and to obtain or, to the extent practicable, effect (but subject to the
provisions of Section
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2.2(j)) the transfer of insurance, including, insurance required under the
Price-Anderson Act with respect to the Purchased Assets. In addition, Sellers
agree to use reasonable efforts to assist Buyer in making any claims against
pre-Closing insurance policies of Sellers that may provide coverage related to
Assumed Liabilities. Buyer agrees that it will indemnify Sellers for their
reasonable out of pocket expenses incurred in providing such assistance and
cooperation.
6.17 Refueling.
(a) Schedule 6.17 sets forth the plan, scope, milestones and
budget (the "Outage Plan") for the Plant's 18R Refueling Outage (the "18R
Outage"). The Parties agree that any proposed change in the Outage Plan may only
be made in accordance with the procedures set forth in the Outage Plan.
Notwithstanding the foregoing, however, except as otherwise expressly provided
in the Outage Plan, no such change shall be made in the Outage Plan if such
change would be a "Material Change" as defined in the Outage Plan.
(b) Irrespective of when the Closing Date occurs, Sellers
shall be solely responsible for the funding of the Outage Costs as incurred from
time to time and Buyer hereby agrees to reimburse Sellers for payment of the
"Relevant Percentage" of any Outage Costs (whether incurred prior to or after
the Closing Date); provided, however, that Sellers shall have no liability or
obligation to fund, and Buyer have no liability or obligation to reimburse
Sellers for, any Outage Costs incurred in excess of the amount of the Outage
Cost Cap. Buyer and Sellers agree that the Party which is the owner of the Plant
at the start of the 18R Outage shall be solely responsible for the payment of
any Outage Costs incurred in excess of the Outage Cost Cap, and that the other
Party shall have no responsibility or obligation therefor. For purposes hereof,
the "Relevant Percentage" shall mean (i) if the Closing occurs prior to the
commencement of the 18R Outage, one hundred percent (100%), and (ii) if the
Closing occurs after completion of the 18R Outage, sixty percent (60%);
provided, however, that if the Closing occurs after the completion of the 18R
Outage, then the Total CV required for the Decommissioning Trust Funds and the
aggregate Cash Value required for the assets of the Seller Nonqualified
Decommissioning Trust Fund as of the Closing Date pursuant to Section 6.12
hereof shall be decreased by the product of (a) the Outage Costs and (b) forty
percent (40%).
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(c) All Outage Costs shall be budgeted, tracked and reported
in accordance with procedures established by the Parties and set forth in the
Outage Plan.
(d) Buyer hereby agrees to reimburse Sellers for all Outage
Costs funded by Sellers (but in no event in excess of Outage Cost Cap) in nine
equal annual installments (but without interest) beginning on the first
anniversary date of the Closing Date.
(e) The Reciprocal Services Agreement will provide, among
other things, for Buyer's direct participation in the planning, organization,
support and coordination of the 18R Outage and for the costs thereof to be
included in the Outage Costs to be reimbursed by Buyer, but only if the Closing
occurs.
6.18 ISRA Compliance.
(a) As promptly as practicable following the date hereof, the Parties
shall jointly prepare and submit to the NJDEP an application for a Letter of
Non-Applicability ("LNA") or other appropriate exemption or limitation on the
scope of ISRA review by the NJDEP with respect to the transactions contemplated
hereby. The Parties shall cooperate and consult with each other in the
preparation and submission of such application and shall jointly participate in
any meetings with NJDEP representatives.
(b) Pending action by the NJDEP on any such LNA or similar exemption
request, Seller may prepare and file with the NJDEP a General Information Notice
(as such term is defined in ISRA). In the event the NJDEP denies such
application or issues a LNA or other exemption from ISRA not reasonably
satisfactory to each of the Parties, then the Parties shall as promptly as
practicable prepare and file with the NJDEP all such other information, forms
and other documents and filings as may be necessary or appropriate to comply
with ISRA and the requests of the NJDEP. During the period prior to the Closing,
the Parties shall cooperate and consult with each other regarding requests made
by the NJDEP and compliance with ISRA, including with respect to the negotiation
of the terms and conditions of any required Remediation Agreement with the
NJDEP.
(c) The Parties acknowledge and agree that if the NJDEP does not issue
a LNA or other ISRA exemption which is reasonably acceptable to each of the
Parties, it will be necessary to enter
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into one or more Remediation Agreements with the NJDEP in order to consummate
the transactions contemplated hereby and comply with ISRA. Accordingly, each
Party hereby agrees to negotiate in good faith and use Commercially Reasonable
Efforts to enter into a Remediation Agreement with the NJDEP in order to comply
with ISRA, including the provision of such financial assurance in support of
such Party's obligations under any such Remediation Agreement; provided,
however, that it is understood and agreed that neither Party shall be required
to enter into any such Remediation Agreement unless the terms and conditions
thereof, together with any related Site Investigation Report (as defined under
ISRA and the regulations thereunder) and Remedial Action Work Plan (as defined
under ISRA and the regulations thereunder), in each case as finally approved by
the NJDEP (collectively, the "ISRA Remediation Program") are reasonably
satisfactory to such Party.
(d) The Parties hereby acknowledge and agree that their respective
obligations and liabilities for Remediation required to comply with ISRA and the
requirements of the NJDEP thereunder pursuant to any Remediation Agreements
shall be as follows:
(1) Ssellers shall be liable for the Remediation of any
Environmental Condition arising out of the matters disclosed in the
Environmental Reports and for the matters set forth on Schedule 4.7, all of
which are Excluded Liabilities hereunder, and with respect to their
indemnification liability to Buyer as set forth in Article VIII hereof (subject,
however, to the limitation on such indemnification as provided in Section 8.1(g)
hereof), and Sellers shall be responsible for and shall indemnify Buyer pursuant
to said Article VIII from and against any loss, claim, action, cost, damage and
expense or liability resulting therefrom including any failure by Sellers to
comply with their obligations under any Remediation Agreement or ISRA
Remediation Program.
(2) Buyer shall be liable for the Remediation of the other
Environmental Condition, all of which are Assumed Liabilities, and Buyer shall
be responsible for and shall indemnify Sellers pursuant to Article VIII hereof,
from and against any loss, claim, action, cost, damage and expense or liability
resulting therefrom including any failure by Buyer to comply with its
obligations under any Remediation Agreement or ISRA Remediation Program.
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(a) If the NJDEP determines that ISRA is applicable to the transactions
contemplated by this Agreement, the Parties shall as promptly as practicable
conduct, and shall equally share the cost and expense of, a Preliminary
Assessment and submit a Preliminary Assessment Report to the NJDEP.
(b) Each Party shall bear its own costs and expenses incurred in
connection with the actions (including without limitation the cost of Buyer's
Environmental Inspection) they are required to take to comply with ISRA prior to
Closing; provided, however, that the Parties shall equally share all costs and
expenses of attorneys, environmental consultants, engineers and other
consultants they may jointly retain to comply with ISRA. Any such third party
consultants, counsel or engineers shall only be retained upon mutual agreement
of the Parties.
(c) In the event Sellers enter into a Remediation Agreement with the
NJDEP, Buyer agrees to provide Sellers and their Representatives with such
access to the Site (but consistent with Buyer's safety and security requirements
and in a manner that does not unreasonably interfere with Plant operations), to
related records and documents and further agrees to cooperate with Sellers and
their Representatives from time to time following the Closing as may be
necessary or appropriate in order for Sellers to fully and timely discharge
their obligations to the NJDEP under the Remediation Agreement; provided,
however, that Sellers shall reimburse Buyer for any significant expenses or
costs which Buyer may be obligated to incur in connection with the foregoing.
(d) Buyer and Sellers hereby agree that no environmental condition at
the Site need be remediated to residential or unrestricted remediation standards
(or other more stringent standard), but only to non-residential or restricted
standards, or such other standards as NJDEP or other Governmental Authority
approves (including the use of institutional and/or engineering controls, deed
notices, natural remediation and biodegradation and classification exception
areas), provided in all events that the use of any such standard, and the
receipt of any no further action letter conditioned on such standard, does not
actually materially interfere with Buyer's ability to operate on the Site as a
nuclear power generation station.
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6.19 Future Interconnection Access. Buyer hereby acknowledges and
confirms that JCP&L has advised Buyer that under a certain Purchase and Sale
Agreement dated October 29, 1998 between JCP&L and Sithe, JCP&L has agreed to
use commercially reasonable efforts as therein defined (consistent with the PJM
Regional Transmission Expansion Protocol) to allow new generation capacity which
Sithe may install at the Forked River Combustion Turbine site JCP&L is selling
to Sithe to replace (by assignment or otherwise) Plant generation capacity (for
PJM interconnection purposes) which JCP&L may decommission from time to time in
order to minimize Sithe's interconnection costs for such new Forked River
generation capacity. Buyer hereby undertakes and agrees that at such time as
Buyer determines to decommission all or a portion of the Plant's capacity, at
JCP&L's written request Buyer will enter into good faith negotiations with JCP&L
if and to the extent it may be necessary or appropriate in order to enable JCP&L
to discharge any such continuing obligation it may have to Sithe. It is
understood and agreed, however, that the foregoing shall not impose any
obligation or commitment on Buyer to sell, transfer, assign or otherwise dispose
of any such interconnection rights to JCP&L or to any third party.
6.20 SBO Service. JCP&L agrees that from and after the Closing Date it
will provide or cause to be provided to Buyer SBO Service for the Plant as
currently provided by the Forked River combustion turbines located on the
adjacent Forked River site as and to the extent necessary to satisfy all
applicable NRC requirements for the Plant and on such commercially reasonable
terms and conditions as the Parties shall mutually agree.
6.21 Easement Agreement JCP&L agree that it shall not consummate, or
permit the consummation of, the sale, transfer or conveyance of the real
property constituting the Forked River site adjacent to the Plant unless and
until (i) the Easement Agreement is properly recorded in the land records of any
relevant jurisdiction, and (ii) such Easement Agreement is in a form sufficient
to operate the Plant substantially as currently operated and otherwise with
terms and conditions reasonably satisfactory to Buyer, including, among others,
the following:
(a) a term continuing through Decommissioning;
(b) Buyer shall enjoy the easements and access rights granted
pursuant thereto at no additional cost other than for
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its portion of shared maintenance expenses related to its use of access roads
and similar facilities that would customarily be shared;
Buyer's authority to control activities within the "exclusion area"
relating to the Plant, including the exclusion of personnel and property, to the
extent necessary to comply with applicable NRC requirements; and
Such other terms as are consistent with Good Utility Practice.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Buyer. The obligation of Buyer to
effect the purchase of the Purchased Assets and the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver by Buyer) of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall have
expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any federal or state court or Governmental Authority which prevents
the consummation of the sale of the Purchased Assets contemplated herein shall
have been issued and remain in effect (each Party agreeing to use its reasonable
best efforts to have any such injunction, order or decree lifted) and no
statute, rule or regulation shall have been enacted by any state or federal
government or Governmental Authority which prohibits the consummation of the
sale of the Purchased Assets;
(c) Buyer shall have received all of Buyer's Required
Regulatory Approvals, and such approvals shall be in form and substance
reasonably satisfactory (including no materially adverse conditions) to Buyer
and either (i) final and not subject to further rights of review or appeal or
(ii) if not final and non-appealable, shall not be subject to any pending or
overtly threatened appeal or request for review or reconsideration which, if
adversely determined, would be reasonably expected to have (x) a Material
Adverse Effect or (y) a material adverse effect on the Buyer or its members;
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(d) Sellers shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Sellers on or prior to the Closing
Date;
(e) The representations and warranties of Sellers set forth in
this Agreement that are qualified by materiality shall be true and correct as of
the Closing Date and all other representations and warranties shall be true and
correct in all material respects as of the Closing Date, in each case as though
made at and as of the Closing Date unless otherwise specified herein to the
contrary;
(f) Buyer shall have received certificates from an authorized
officer of Sellers, dated the Closing Date, to the effect that, to such
officer's Knowledge, the conditions set forth in Section 7.1(d) and (e) have
been satisfied by Sellers;
(g) Buyer shall have received an opinion from Sellers' counsel
reasonably acceptable to Buyer, dated the Closing Date and reasonably
satisfactory in form and substance to Buyer and its counsel, substantially to
the effect that:
(i) Each of Sellers is a corporation duly incorporated,
validly existing and in good standing under the laws of its state of
incorporation and has the corporate power and authority to own, lease
and operate its material assets and properties and to carry on its
business as is now conducted, and to execute and deliver the Agreement
and each Ancillary Agreement and to consummate the transactions
contemplated thereby; and the execution and delivery of the Agreement
by Sellers and the consummation of the sale of the Purchased Assets and
the other transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action required on the part of
Sellers;
(ii) The Agreement and each Ancillary Agreement have been duly
and validly executed and delivered by Sellers and constitute legal,
valid and binding agreements of Sellers enforceable in accordance with
their terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and general principles of
equity (regardless of whether
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enforcement is considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the Agreement
and each Ancillary Agreement by Sellers do not (A) conflict with the
Certificate of Incorporation or Bylaws of Sellers or (B) to the
knowledge of such counsel, constitute a violation of or default under
those agreements or instruments set forth on a Schedule attached to the
opinion and which have been identified to such counsel as all the
agreements and instruments which are material to the business or
financial condition of Sellers;
(iv) The Bill of Sale, the deed, the Assignment and
Assumption Agreement and other transfer instruments described in
Section 3.6 have been duly executed and delivered and are in proper
form to transfer to Buyer such title as was held by Sellers to the
Purchased Assets; and
(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Sellers, or the consummation by Sellers
of the transactions contemplated hereby, other than (i) such consents,
approvals, filings or notices set forth in Schedule 4.3(b) each of
which have been obtained or made or which, if not obtained or made,
will not prevent Sellers from performing their material obligations
hereunder and (ii) such consents, approvals, filings or notices which
become applicable to Sellers or the Purchased Assets as a result of the
specific regulatory status of Buyer (or any of its Affiliates) or as a
result of any other facts that specifically relate to the business or
activities in which Buyer (or any of its Affiliates) is or proposes to
be engaged.
In rendering the foregoing opinion, Sellers' counsel may rely on
opinions of counsel as to local laws reasonably acceptable to Buyer.
(h) Sellers shall have delivered, or caused to be delivered,
to Buyer at the Closing, Sellers' closing deliveries described in Section 3.6;
(i) Since the date of this Agreement, no Material Adverse
Effect shall have occurred and be continuing;
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(j) Buyer shall have received (at Buyer's cost) from a title
insurance company and surveyor reasonably acceptable to Buyer an ALTA owner's
title policy, and ALTA survey together with all endorsements reasonably
requested by Buyer as are available, insuring good and marketable title to all
of the Real Property included in the Purchased Assets, subject only to Permitted
Encumbrances. Sellers shall provide Buyer with a copy of a preliminary title
report and survey for the Real Property as soon as available;
(k) Buyer shall have received all Permits and Environmental
Permits, to the extent necessary, to own and operate the Plant in accordance
with current operating practices, except for those Permits and Environmental
Permits, the absence of which would not in the aggregate have a Material Adverse
Effect;
(l) Sellers' Required Regulatory Approvals shall contain
no conditions or terms which would result in a Material Adverse Effect;
(m) [Intentionally omitted]
(n) The Total CV of the Decommissioning Trust Funds shall
be $430 million, adjusted pursuant to Section 6.12(b) and 6.17(b) hereof;
(o) Sellers shall have completed in all material respects and
in accordance with Good Utility Practices the work required to be accomplished
as of the milestone dates set forth in the Outage Plan occurring prior to the
Closing Date;
(p) Sellers shall have completed in accordance with Good
Utility Practices the work required to be accomplished as of the milestone dates
occurring prior to the Closing the operational recovery work set forth on
Schedule 7.1(p) (the "Operational Recovery Work");
(q) All low-level radioactive waste, as defined in NRC
regulations, and mixed radioactive waste that has been generated in the
operations of the Plant and has been removed from service more than ninety (90)
days prior to the Closing Date shall have been properly inventoried and shipped
off-Site by Sellers for permanent disposal in accordance with all applicable
legal requirements;
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(r) Buyer shall have received regulatory approval of the
Post-Closing Decommissioning Trust Agreement reasonably satisfactory to Buyer;
(s) The lien of the Mortgage Indenture on the Purchased
Assets shall have been released;
(t) JCP&L and Sithe shall have entered into the Easement
Agreement in form and substance satisfactory to Buyer and such agreement shall
be in full force and effect;
(u) JCP&L shall have entered into the EOF Lease and the
Remote Assembly Area Access Agreement each in a form reasonably satisfactory to
Buyer and such agreements shall be in full force and effect;
(v) JCP&L shall have entered into an agreement in form and
substance reasonably satisfactory to Buyer to provide SBO Service to the Plant
and such agreement shall be in full force and effect;
(w) Sellers shall have obtained all necessary Governmental
Approvals to subdivide, convey and operate the Real Property separately from the
parcel pertaining to the Forked River site and such approvals shall be final and
non-appealable; and
(x) In the event the NJDEP determines that ISRA applies to
the transactions contemplated hereby, (1) Buyer and Sellers shall have entered
into one or more Remediation Agreements with the NJDEP and (2) there shall be an
ISRA Remediation Program, in each case in form and substance reasonably
satisfactory to Buyer on or before the ISRA Termination Date.
7.2 Conditions to Obligations of Sellers. The obligation of Sellers to
effect the sale of the Purchased Assets and the other transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
Date (or the waiver by Sellers) of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall have
expired or been terminated;
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(b) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the sale
of the Purchased Assets contemplated herein shall have been issued and remain in
effect (each Party agreeing to use its reasonable best efforts to have any such
injunction, order or decree lifted) and no statute, rule or regulation shall
have been enacted by any state or federal government or Governmental Authority
in the United States which prohibits the consummation of the sale of the
Purchased Assets;
(c) Sellers shall have received all of Sellers' Required
Regulatory Approvals applicable to them, in form and substance reasonably
satisfactory (including no materially adverse conditions) to Sellers and either
(i) final and not subject to further rights of review or appeal, or (ii) if not
final and non-appealable, shall not be subject to any pending or overtly
threatened appeal or request for review or reconsideration which, if adversely
determined, would be reasonably expected to have a material adverse effect on
Sellers;
(d) All consents and approvals for the consummation of the
sale of the Purchased Assets contemplated hereby required under the terms of any
note, bond, mortgage, indenture, material agreement or other instrument or
obligation to which Sellers are party or by which Sellers, or any of the
Purchased Assets, may be bound, shall have been obtained, other than those which
if not obtained, would not, individually and in the aggregate, create a Material
Adverse Effect;
(e) Buyer shall have performed and complied with in all
material respects the covenants and agreements contained in this Agreement which
are required to be performed and complied with by Buyer on or prior to the
Closing Date;
(f) The representations and warranties of Buyer that are
qualified by materiality shall be true and correct as of the Closing Date and
all other representations and warranties shall be true and correct in all
material respects as of the Closing Date, in each case as though made at and as
of the Closing Date unless otherwise specified herein to the contrary;
(g) Sellers shall have received a certificate from an
authorized officer of Buyer, dated the Closing Date, to the effect that, to such
officer's Knowledge, the conditions set forth in Sections 7.2(e) and (f) have
been satisfied by Buyer;
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(h) Effective upon Closing, Buyer shall have assumed, as set
forth in Section 6.10, all of the applicable obligations under the Collective
Bargaining Agreement as they relate to Transferred Union Employees;
(i) Sellers shall have received an opinion from Buyer's
counsel reasonably acceptable to Sellers, dated the Closing Date and
satisfactory in form and substance to Sellers and their counsel, substantially
to the effect that:
(i) Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the
state of its organization and is qualified to do business in the State
of New Jersey and has the full organizational power and authority to
own, lease and operate its material assets and properties and to carry
on its business as is now conducted, and to execute and deliver the
Agreement and the Ancillary Agreements and to consummate the
transactions contemplated thereby; and the execution and delivery of
the Agreement and the Ancillary Agreements by Buyer and the
consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action required on the part of
Buyer;
(ii) The Agreement and the Ancillary Agreements have
been duly and validly executed and delivered by Buyer, and constitute
legal, valid and binding agreements of Buyer, enforceable against
Buyer, in accordance with their terms, except that such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting or
relating to enforcement of creditor's rights generally and general
principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and the Ancillary Agreements by Buyer do not (A) conflict
with the Certificate of Formation or Operating Agreement (or other
organizational documents), as currently in effect, of Buyer or (B) to
the knowledge of such counsel, constitute a violation of or default
under those agreements or instruments set forth on a Schedule attached
to the opinion and which have been identified to such counsel as all
the agreements and instruments which
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are material to the business or financial condition of Buyer;
(iv) The Assignment and Assumption Agreement and
other transfer instruments described in Section 3.7 are in proper form
for Buyer to assume the Assumed Liabilities; and
(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for Buyer's execution and
delivery of the Agreement and the Ancillary Agreements, or the
consummation by Buyer of the transactions contemplated hereby and
thereby, other than (a) Buyer's Required Regulatory Approvals each of
which has been obtained or made and (b) such consents, approvals,
filings or notices, which, if not obtained or made, will not prevent
Buyer, PECO Energy Company or British Energy Company, plc from
performing their respective obligations under the Agreement, the
Ancillary Agreements or the Parent Guaranties, as the case may be.
(j) [Intentionally omitted]
(k) Buyer shall have delivered, or caused to be
delivered, to Sellers at the Closing, Buyer's closing deliveries described in
Section 3.7; and
(l) In the event the NJDEP determines that ISRA applies to the
transactions contemplated hereby, (1) Buyer and Sellers shall have entered into
one or more Remediation Agreements with the NJDEP and (2) there shall be an ISRA
Remediation Program, in each case in form and substance reasonably satisfactory
to Sellers on or before the ISRA Termination Date.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(a) Buyer shall indemnify, defend and hold harmless Sellers,
their officers, directors, employees, shareholders, Affiliates and agents (each,
a "Sellers' Indemnitee") from and against any and all claims, demands, suits,
losses, liabilities, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) (each, an "Indemnifiable Loss"), asserted against or
suffered by any Sellers' Indemnitee relating to, resulting from or arising out
of (i) any breach by Buyer of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement, (ii) the Assumed Liabilities,
(iii) any loss or damages directly resulting from or arising out of any
negligent act or omission or willful misconduct of Buyer or Buyer's
Representatives in connection with Buyer's Inspections, or (iv) any Third Party
Claims against Sellers' Indemnitee arising out of or in connection with Buyer's
ownership or operation of the Plant and other Purchased Assets on or after the
Closing Date (other than Third Party Claims which arise out of acts by Buyer
permitted by Section 6.12 hereof).
(b) Sellers shall jointly and severally indemnify, defend and
hold harmless Buyer, its officers, directors, employees, shareholders,
Affiliates and agents (each, a "Buyer Indemnitee") from and against any and all
Indemnifiable Losses asserted against or suffered by any Buyer Indemnitee
relating to, resulting from or arising out of (i) any breach by Sellers of any
representation, warranty, covenant or agreement of Sellers contained in this
Agreement, (ii) the Excluded Liabilities, (iii) noncompliance by Sellers with
any bulk sales or transfer laws as provided in Section 10.11, or (iv) any Third
Party Claims against a Buyer Indemnitee arising out of or in connection with
Sellers' ownership or operation of the Purchased Assets prior to the Closing
Date or the Excluded Assets on or after the Closing Date.
(c) Notwithstanding anything to the contrary contained herein:
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(i) Any Person entitled to receive indemnification
under this Agreement (an "Indemnitee") shall use Commercially
Reasonable Efforts to mitigate all losses, damages and the like
relating to a claim under these indemnification provisions, including
availing itself of any defenses, limitations, rights of contribution,
claims against third Persons and other rights at law or equity. The
Indemnitee's Commercially Reasonable Efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expenses for which indemnification would
otherwise be due, and the Indemnitor shall reimburse the Indemnitee for
the Indemnitee's reasonable expenditures in undertaking the mitigation
(together with interest thereon from the date of payment thereof to the
date of repayment at the "prime rate" as published in The Wall Street
Journal); and
(ii) Any Indemnifiable Loss shall be net of (A) the
dollar amount of any insurance or other proceeds actually received by
the Indemnitee or any of its Affiliates with respect to the
Indemnifiable Loss, and (B) income tax benefits to the Indemnitee , to
the extent realized by the Indemnitee, but such net amount shall be
increased to give effect to the Income Taxes attributable to the
receipt of any indemnification payments hereunder. Any Party seeking
indemnity hereunder shall use Commercially Reasonable Efforts to seek
coverage (including both costs of defense and indemnity) under
applicable insurance policies with respect to any such Indemnifiable
Loss.
(d) The expiration or termination of any covenant or agreement
shall not affect the Parties' obligations under this Section 8.1 if the
Indemnitee provided the Person required to provide indemnification under this
Agreement (the "Indemnifying Party") with proper notice of the claim or event
for which indemnification is sought prior to such expiration, termination or
extinguishment.
(e) Except to the extent otherwise provided in Article IX, the
rights and remedies of Sellers and Buyer under this Article VIII are exclusive
and in lieu of any and all other rights and remedies which Sellers and Buyer may
have under this Agreement or otherwise for monetary relief, with respect to (i)
any breach of or failure to perform any covenant, agreement, or representation
or warranty set forth in this Agreement, after the occurrence of the Closing, or
(ii) the Assumed Liabilities
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or the Excluded Liabilities, as the case may be. The indemnification obligations
of the Parties set forth in this Article VIII apply only to matters arising out
of this Agreement, excluding the Ancillary Agreements. Any Indemnifiable Loss
arising under or pursuant to an Ancillary Agreement shall be governed by the
indemnification obligations, if any, contained in the Ancillary Agreement under
which the Indemnifiable Loss arises.
(f) Notwithstanding anything to the contrary herein, no Party
(including an Indemnitee) shall be entitled to recover from any other Party
(including an Indemnifying Party) for any liabilities, damages, obligations,
payments losses, costs, or expenses under this Agreement any amount in excess of
the actual compensatory damages, court costs and reasonable attorney's and other
advisor fees suffered by such Party. Buyer and Sellers waive any right to
recover punitive, incidental, special, exemplary and consequential damages
arising in connection with or with respect to this Agreement. The provisions of
this Section 8.1(f) shall not apply to indemnification for a Third Party Claim.
(g) Notwithstanding anything to the contrary herein, (i)
except as provided in (ii) below, each Party's liability and obligation to the
other Party for an Indemnifiable Loss relating to, resulting from or arising out
of a breach of representation or warranty shall be [intentionally omitted] and
must be asserted by the other Party on or before the [intentionally omitted] of
the Closing Date, and (ii) Sellers' liability and obligation to Buyer for an
Indemnifiable Loss relating to, resulting from or arising out of a breach of
representation or warranty with respect to [intentionally omitted] shall not be
limited in amount but must be asserted by Buyer on or before the termination of
the related survival period set forth in Section 10.4. Nothing in this
subparagraph (g) is intended to modify or limit Sellers' liability or obligation
hereunder for any other Indemnifiable Loss or to constitute an assumption by
Buyer of any Excluded Liability.
8.2 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any claim, action, or proceeding made or brought
by any Person who is not a party to this Agreement or any Affiliate of a Party
to this Agreement (a "Third Party Claim") with respect to which indemnification
is to be sought from an Indemnifying Party, the Indemnitee shall give
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such Indemnifying Party reasonably prompt written notice thereof, but in any
event such notice shall not be given later than ten (10) calendar days after the
Indemnitee's receipt of notice of such Third Party Claim. Such notice shall
describe the nature of the Third Party Claim in reasonable detail and shall
indicate the estimated amount, if practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee. The Indemnifying Party will have
the right to participate in or, by giving written notice to the Indemnitee, to
elect to assume the defense of any Third Party Claim at such Indemnifying
Party's expense and by such Indemnifying Party's own counsel, provided that the
counsel for the Indemnifying Party who shall conduct the defense of such Third
Party Claim shall be reasonably satisfactory to the Indemnitee. The Indemnitee
shall cooperate in good faith in such defense at such Indemnitee's own expense.
If an Indemnifying Party elects not to assume the defense of any Third Party
Claim, the Indemnitee may compromise or settle such Third Party Claim over the
objection of the Indemnifying Party, which settlement or compromise shall
conclusively establish the Indemnifying Party's liability pursuant to this
Agreement.
(b) (i) If, within ten (10) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claims, the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.2(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, however, that if the Indemnifying Party shall fail to
take reasonable steps necessary to defend diligently such Third Party Claim
within twenty (20) calendar days after receiving notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps,
the Indemnitee may assume its own defense and the Indemnifying Party shall be
liable for all reasonable expenses thereof. (ii) Without the prior written
consent of the Indemnitee, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim which would lead to liability or create any
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder. If a firm offer is made
to settle a Third Party Claim without leading to liability or the creation of a
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying
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Party shall give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within ten (10) calendar days
after its receipt of such notice, the Indemnifying Party shall be relieved of
its obligations to defend such Third Party Claim and the Indemnitee may contest
or defend such Third Party Claim. In such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will be the amount of such
settlement offer plus reasonable costs and expenses paid or incurred by
Indemnitee up to the date of said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not be
given later than ten (10) calendar days after the Indemnitee becomes aware of
such Direct Claim, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by, from or
against any other entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with interest thereon
from the date of payment thereof at the publicly announced prime rate then in
effect of Chase Manhattan Bank) shall promptly be repaid by the Indemnitee to
the Indemnifying Party.
(e) A failure to give timely notice as provided in this
Section 8.2 shall not affect the rights or obligations of any Party hereunder
except if, and only to the extent that, as a result of such failure, the Party
which was entitled to receive such notice was actually prejudiced as a result of
such failure.
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ARTICLE IX
TERMINATION
9.1 Termination.(a) This Agreement may be terminated at any time prior
to the Closing Date by mutual written consent of Sellers and Buyer.
(b) This Agreement may be terminated by Sellers or Buyer if
(i) any Federal or state court of competent jurisdiction shall have issued an
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Closing, and such order, judgment or decree shall have become
final and nonappeallable or (ii) any statute, rule, order or regulation shall
have been enacted or issued by any Governmental Authority which, directly or
indirectly, prohibits the consummation of the Closing; or (iii) the Closing
contemplated hereby shall have not occurred on or before the day which is
eighteen (18) months from the date of this Agreement (the "Termination Date");
provided that the right to terminate this Agreement under this Section 9.1(b)
(iii) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
(c) Except as otherwise provided in this Agreement, this
Agreement may be terminated by Buyer if any of Buyer Required Regulatory
Approvals, the receipt of which is a condition to the obligation of Buyer to
consummate the Closing as set forth in Section 7.1(c), shall have been denied
(and a petition for rehearing or refiling of an application initially denied
without prejudice shall also have been denied) or shall have been granted but
contains terms or conditions which do not satisfy the closing condition in
Section 7.1(c).
(d) This Agreement may be terminated by Sellers, if any of
Sellers' Required Regulatory Approvals, the receipt of which is a condition to
the obligation of Sellers to consummate the Closing as set forth in Section
7.2(c), shall have been denied (and a petition for rehearing or refiling of an
application initially denied without prejudice shall also have been denied) or
shall have been granted but contains terms or conditions which do not satisfy
the closing condition in Section 7.2(c).
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(e) This Agreement may be terminated by Buyer if there has
been a violation or breach by Sellers of any covenant, representation or
warranty contained in this Agreement which has resulted in a Material Adverse
Effect and such violation or breach is not cured by the earlier of the Closing
Date or the date thirty (30) days after receipt by Sellers of notice specifying
particularly such violation or breach, and such violation or breach has not been
waived by Buyer.
(f) This Agreement may be terminated by Sellers, if there has
been a material violation or breach by Buyer of any covenant, representation or
warranty contained in this Agreement and such violation or breach is not cured
by the earlier of the Closing Date or the date thirty (30) days after receipt by
Buyer of notice specifying particularly such violation or breach, and such
violation or breach has not been waived by Sellers.
(g) This Agreement may be terminated by Sellers if there shall
have occurred any change that is materially adverse to the business, operations
or conditions (financial or otherwise) of Buyer.
(h) This Agreement may be terminated by either of Sellers or
Buyer in accordance with the provisions of Section 6.11(b).
(i) This Agreement may be terminated by Sellers in the event
that Buyer's Environmental Inspection requires Sellers to assume liability for
Remediation which in Sellers' judgment is materially in excess of Sellers'
liability for Remediation of those environmental conditions disclosed in the
Environmental Reports (other than Buyer's Environmental Inspection) or in
Schedule 4.7 on the date hereof.
(j) This Agreement may be terminated by either Sellers or
Buyer if the NJDEP determines that ISRA applies to the transactions contemplated
hereby and such Party has not entered into a Remediation Agreement with the
NJDEP and there is not in place an ISRA Remediation Program, in each case in
form and substance reasonably satisfactory to such Party, on or before (A) the
first anniversary date hereof or (B) fifteen (15) Business Days following the
date on which the last of the conditions precedent to Closing set forth in
Sections 7.1(a), (c), (j), (k), (l), (m), (q), (r) and (w) and Section 7.2 (a),
(c), (d) and (j), of this Agreement have been either satisfied or waived,
whichever shall first occur (the "ISRA Termination Date").
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9.2 Procedure and Effect of No-Default Termination. In the event of
termination of this Agreement by either or both of the Parties pursuant to
Section 9.1, written notice thereof shall forthwith be given by the terminating
Party to the other Party, whereupon, if this Agreement is terminated pursuant to
any of Sections 9.1(a) through (d) and 9.1(g) and (h), the liabilities of the
Parties hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other by reason of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Sellers and Buyer.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
10.3 Environmental Waiver; Release.
Each Party, for itself and on behalf of its Representatives
and Affiliates, agrees effective as of the Closing Date to release and forever
discharge the other Party, its Representatives and Affiliates, from any and all
Indemnifiable Losses of any kind or character, whether known or unknown, hidden
or concealed, resulting from or arising out of any Environmental Condition or
violation of Environmental Law relating to the Purchased Assets; provided, that
Sellers' release of Buyer shall not extend to any of Buyer's Assumed Liabilities
set forth in Section 2.3, and provided further, that Buyer's release of Sellers
shall not extend to any of Sellers' Excluded Liabilities set forth in Section
2.4 or to any breach by Sellers of their representations, warranties and
covenants under this Agreement. Subject to the foregoing proviso, each Party
hereby agrees to waive any and all rights and benefits
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with respect to such Indemnifiable Losses that it now has, or in the future may
have conferred upon it by virtue of any statute or common law principle which
provides that a general release does not extend to claims which a Party does not
know or suspect to exist in its favor at the time of executing the release, if
knowledge of such claims would have materially affected such Party's settlement
with the obligor. In this connection, each Party hereby acknowledges that it is
aware that factual matters, now unknown to it, may have given or may hereafter
give rise to Indemnifiable Losses that are presently unknown, unanticipated and
unsuspected, including, without limitation, due to solid wastes or landfilling
on the Site which may be subject to regulation under the New Jersey Solid Waste
Management Act and the regulations thereunder, and each Party further agrees
that this release has been negotiated and agreed upon in light of that awareness
and it nevertheless hereby intends to release the other Party and its
Representatives and Affiliates subject to the proviso in the first sentence of
this paragraph.
10.4 Survival. The representations and warranties given or made by any
Party to this Agreement or in any certificate or other writing furnished in
connection herewith shall survive the Closing for a period of [intentionally
omitted] after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (a) all representations and warranties
relating to Taxes and Tax Returns shall survive the Closing for the period of
the applicable statutes of limitation plus any extensions or waivers thereof,
[intentionally omitted] (b) all representations and warranties relating to the
Decommissioning Trust Funds shall survive indefinitely.
The covenants and obligations of Sellers and Buyer set
forth in this Agreement, including without limitation the indemnification
obligations of the parties under Article VIII hereof, shall survive the Closing
indefinitely, and the Parties shall be entitled to the full performance thereof
by the other Parties hereto without limitation as to time or amount (except as
otherwise specifically set forth herein).
10.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided, however,
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that notices of a change of address shall be effective only upon receipt
thereof):
(a) If to Sellers, to:
c/o GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
Attention: Mr. David C. Brauer, Vice President
Facsimile: (973) 455-8532
with a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Douglas E. Davidson, Esq.
Facsimile: (212) 704-0196
(b) if to Buyer, to:
AmerGen Energy Company, L.L.C.
965 Chesterbrook Boulevard, 63C-3
Wayne, Pennsylvania 19087
Attention: Mr. Charles P. Lewis, Vice President
Facsimile: (610) 640-6611
with copies to:
AmerGen Energy Company, L.L.C.
2301 Market Street
Philadelphia, PA 19103
Attention: John C. Halderman,
Assistant General Counsel
Facsimile: (215) 841-4474
and
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Howard L. Meyers, Esq.
Facsimile: (215) 963-5299
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10.6 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of each
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties hereto any rights, interests, obligations or remedies
hereunder. No provision of this Agreement shall create any third party
beneficiary rights in any employee or former employee of Sellers (including any
beneficiary or dependent thereof) in respect of continued employment or resumed
employment, and no provision of this Agreement shall create any rights in any
such Persons in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement except as expressly
provided for thereunder. Notwithstanding the foregoing, without the prior
written consent of Sellers, (i) Buyer may assign all of its rights and
obligations hereunder to any majority owned Subsidiary (direct or indirect) and
upon Sellers' receipt of notice from Buyer of any such assignment, such assignee
will be deemed to have assumed, ratified, agreed to be bound by and perform all
such obligations, and all references herein to "Buyer" shall thereafter be
deemed to be references to such assignee, in each case without the necessity for
further act or evidence by the Parties hereto or such assignee, and (ii) Buyer
or its permitted assignee may assign, transfer, pledge or otherwise dispose of
(absolutely or as security) its rights and interests hereunder to a trustee,
lending institutions or other party for the purposes of leasing, financing or
refinancing the Purchased Assets, including such an assignment, transfer or
other disposition upon or pursuant to the exercise of remedies with respect to
such leasing, financing or refinancing, or by way of assignments, transfers,
pledges, or other dispositions in lieu thereof (and any such assignee may fully
exercise its rights hereunder or under any other agreement and pursuant to such
assignment without any further prior consent of any party hereto); provided,
however, that no such assignment in clause (i) or (ii) shall relieve or
discharge the assignor from any of its obligations hereunder. Sellers agree, at
Buyer's expense, to execute and deliver such documents as may be reasonably
necessary to accomplish any such assignment, transfer, pledge or other
disposition of rights and interests hereunder so long as Sellers' rights under
this Agreement are not thereby altered, amended, diminished or otherwise
impaired.
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10.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies. THE PARTIES
HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE
SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN AND
FOR NEW YORK COUNTY, NEW YORK, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION
FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS
MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.10 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
10.11 Entire Agreement. This Agreement, the Confidentiality Agreement,
and the Ancillary Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein, embody the entire
agreement and understanding of the Parties hereto in respect of the transactions
contemplated by this Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein or therein. It is expressly
acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in any material
made available to Buyer pursuant to the terms of the Confidentiality Agreement
(including the Offering Memorandum
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dated March 29, 1999, previously delivered to Buyer by Sellers). This Agreement
supersedes all prior agreements and understandings between the Parties
(including, without limitation, the Letter of Intent between the Parties dated
September 10, 1999) other than the Confidentiality Agreement with respect to
such transactions.
10.12 Bulk Sales Laws. Buyer acknowledges that, notwithstanding
anything in this Agreement to the contrary, Sellers may, in their sole
discretion, not comply with the provision of the bulk sales laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
Buyer hereby waives compliance by Sellers with the provisions of the bulk sales
laws of all applicable jurisdictions.
10.13 U.S. Dollars. Unless otherwise stated, all dollar amounts set
forth herein are United States (U.S.) dollars.
10.14 Zoning Classification. Buyer acknowledges that the Real
Properties are zoned as set forth in Schedule 10.14.
10.15 Sewage Facilities. Except as set forth in Schedule 10.15, Buyer
acknowledges that there is no community (municipal) sewage system available to
serve the Real Property.
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IN WITNESS WHEREOF, Sellers and Buyer have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
AMERGEN ENERGY COMPANY, L.L.C. JERSEY CENTRAL POWER &
LIGHT COMPANY
By:_---------------------------- By: ---------------------
Name: Name:
Title: Title:
GPU NUCLEAR, INC.
By: ----------------------
Name:
Title:
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LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of FIRPTA Affidavit
Exhibit D Form of Interconnection Agreement
Exhibit E Form of Power Purchase Agreement
Exhibit F Form of Reciprocal Services Agreement
Exhibit G Form of Parent Guaranty
SCHEDULES
1.1(48) Terms of EOF Lease
1.1(96) Permitted Encumbrances
1.1(116) Access Terms for Remote Assembly Area
1.1(139) Transferable Permits (both environmental and non-environmental)
2.1(h) Schedule of Emission Reduction Credits
2.1(l) Intellectual Property
2.2(a) Description of Transmission and other Assets Not Included in
Conveyance
2.3(e) Consent Decrees Assumed by Buyer
4.3(a) Third Party Consents
4.3(b) Sellers' Required Regulatory Approvals
4.4 Insurance Exceptions
4.5 Exceptions to Title
4.6 Real Property Leases
4.7 Schedule of Environmental Matters
4.8 Schedule of Noncompliance with Employment Laws
4.9(a) Schedule of Benefit Plans
4.9(b) Benefit Plan Exceptions
4.l0(a) Description of Real Property
4.10(a)-1 Real Property Matters
4.10(b) Major Equipment Components and Personal Property
4.10(c) Technical Specifications and FSAR
4.11 Notices of Condemnation
4.12(a) List of Contracts
4.12(b) List of Non-assignable Contracts
4.12(c) List of Defaults under the Contracts
4.13 List of Litigation
4.14(a) List of Permit Violations
4.14(b) List of Material Permits (other than Transferable Permits)
4.15(a) NRC Violations
4.15(b) NRC Licenses
<PAGE>
4.16 Tax Matters
4.20 Qualified Decommissioning Trust Fund
4.21 Non-Qualified Decommissioning Trust Fund
4.22 Undisclosed Liabilities
5.3(a) Third Party Consents
5.3(b) Buyer's Required Regulatory Approvals
6.1 Schedule of Permitted Activities prior to Closing
6.2(i) Initial Buyer's Environmental Inspection
6.8 Tax Appeals
6.10(a)(i) Schedule of Union Employees
6.10(b) Schedule of Non-Union Employees
6.10(d) Collective Bargaining Agreements
6.10(h) Schedule of Severance Benefits
6.15 Pollution Control Revenue Bonds
6.17 Outage Plan
7.1(p) Operational Recovery Work
10.14 Zoning
10.15 Sewage Matters
<PAGE>
TABLE OF CONTENTS
ARTICLE I..................................................................1
1.1 Definitions.......................................................1
1.2 Certain Interpretive Matters.....................................20
ARTICLE II................................................................20
2.1 Transfer of Assets...............................................20
2.2 Excluded Assets..................................................22
2.3 Assumed Liabilities..............................................24
2.4 Excluded Liabilities.............................................26
2.5 Control of Litigation............................................30
ARTICLE III...............................................................30
3.1 Closing..........................................................30
3.2 Payment of Purchase Price........................................30
3.3 Adjustment to Purchase Price.....................................31
3.4 Allocation of Purchase Price.....................................33
3.5 Prorations.......................................................33
3.6 Deliveries by Sellers............................................34
3.7 Deliveries by Buyer..............................................36
3.8 Ancillary Agreements.............................................37
ARTICLE IV................................................................38
4.1 Incorporation; Qualification.....................................38
4.2 Authority Relative to this Agreement.............................38
4.3 Consents and Approvals; No Violation.............................38
4.4 Insurance........................................................39
4.5 Title and Related Matters........................................40
4.6 Real Property Leases.............................................40
4.7 Environmental Matters............................................40
4.8 Labor Matters....................................................41
4.9 Benefit Plans; ERISA.............................................42
4.10 Real Property; Plant and Equipment..............................43
4.11 Condemnation....................................................43
4.12 Contracts and Leases............................................44
4.13 Legal Proceedings, etc..........................................44
4.14 Permits.........................................................44
4.15 NRC Licenses....................................................45
4.16 Taxes...........................................................45
4.17 Intellectual Property...........................................46
4.18 Compliance With Laws............................................46
4.19 PUHCA...........................................................46
4.20 Qualified Decommissioning Trust Funds...........................46
4.21 Nonqualified Decommissioning Trust Funds........................49
4.22 Undisclosed Liabilities.........................................50
<PAGE>
4.23 Year 2000 Qualification.........................................50
4.24 DISCLAIMERS REGARDING PURCHASED ASSETS..........................50
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER.......................51
5.1 Organization.....................................................51
5.2 Authority Relative to this Agreement.............................51
5.3 Consents and Approvals; No Violation.............................52
5.4 Legal Proceedings................................................52
5.6 Inspections......................................................53
5.7 WARN Act........................................................53
ARTICLE VI................................................................53
6.1 Conduct of Business Relating to the Purchased Assets.............53
6.2 Access to Information............................................56
6.3 Public Statements................................................60
6.4 Expenses.........................................................60
6.5 Further Assurances...............................................60
6.6 Consents and Approvals...........................................62
6.7 Fees and Commissions.............................................65
6.8 Tax Matters......................................................65
6.9 Advice of Changes................................................67
6.10 Employees.......................................................68
6.11 Risk of Loss....................................................76
6.12 Decommissioning Trust Funds.....................................77
6.13 Spent Fuel Fees.................................................77
6.14 Department of Energy Decontamination and Decommissioning Fees...77
6.15 Additional Covenants of Buyer...................................77
6.16 Cooperation Relating to Insurance and Price-Anderson Act .......78
6.17 Refueling Outage................................................79
6.18 ISRA Compliance.................................................80
6.19 Future Interconnection Access...................................83
6.20 SBO Service.....................................................83
6.21 Easement Agreement..............................................83
ARTICLE VII...............................................................84
7.1 Conditions to Obligations of Buyer...............................84
7.2 Conditions to Obligations of Sellers.............................88
ARTICLE VIII..............................................................92
894.1 Indemnification................................................92
8.297 Defense of Claims..............................................94
ARTICLE IX................................................................97
9.1 Termination......................................................97
9.2 Procedure and Effect of No-Default Termination..................99
<PAGE>
ARTICLE X.................................................................99
10.1 Amendment and Modification......................................99
10.2 Waiver of Compliance; Consents................................99
10.3 Environmental Waiver; Release...................................99
10.4 Survival.......................................................100
10.5 Notices........................................................100
10.6 Assignment.....................................................102
10.7 Governing Law..................................................103
10.8 Counterparts...................................................103
10.9 Interpretation.................................................103
10.10 Schedules and Exhibits........................................106
10.11 Entire Agreement..............................................103
10.12 Bulk Sales Laws...............................................104
10.13 U.S. Dollars..................................................104
10.14 Zoning Classification.........................................104
10.15 Sewage Facilities.............................................104
ESTATE ENHANCEMENT PROGRAM AGREEMENTS Exhibit 10-JJ
GPU, Inc.
Split Dollar Insurance for Non-Employee Directors
Summary
Background
Deferral plans provide a means for you to accumulate retirement assets and
income. However, if you accumulate assets which exceed your income needs, income
and estate taxes may significantly diminish the estate value of your
accumulations; combined income and estate taxes can consume 75% of the ultimate
benefits.
The Board of Directors of the Company has authorized the Personnel, Compensation
and Nominating Committee to consider a request from a non-employee Director to
forego the right to his or her existing deferred compensation, and to receive
instead an insurance benefit under a split dollar insurance arrangement with the
Company. The insurance arrangement would be structured so that there may be
favorable financial and P&L results to the Company. In addition, the financial
results to your family (or other heirs) are potentially substantially better
than the results of the current arrangement. Summary of Concept
- - Participation is voluntary, and is subject to the review and approval of
the Personnel, Compensation and Nominating Committee. To participate, you
would submit a request for participation to the Committee. The decision of
whether an individual Director will be approved for participation is in the
sole discretion of the Committee. Among other factors, the Committee will
consider the financial and P&L consequences to the Company.
- - If your participation is approved by the Committee, you would irrevocably
relinquish your rights to specified amounts of compensation under the
Deferred Remuneration Plan for Outside Directors of GPU, Inc.
1
<PAGE>
- - In lieu of the deferred compensation benefit, the Company would provide an
insurance benefit with coverage on the joint lives of you and your spouse.
The death benefit would be payable at the death of the last survivor of
you and your spouse. (You could participate with a single life policy on
your life alone, but the benefits would not be nearly as substantial.)
- - The insurance benefit would be provided in the form of a "split dollar"
life insurance program. GPU will pay premiums equal to the amount of
deferred compensation you forego. A premium attributable to a relinquished
balance in the Deferred Remuneration Plan would be paid when the policy is
issued.
- - The policy would be a "face plus cash" policy, which means that the policy
death benefit will equal the initial policy face amount plus the policy
cash value at the time the death benefit is paid. In general, when the
death benefit is paid, GPU will receive the cash value portion of the death
benefit and your beneficiary will receive the policy face amount. However,
if the cash value is less than the amount of premium paid by GPU, then GPU
will receive a portion of the death benefit equal to premium paid.
- - During the term of the insurance arrangement, you will recognize imputed
income each year. The income amount will be based on your insurance
coverage amount, your age and the age of your spouse. Under survivorship
coverage, the imputed income will be lower during the years in which you
and your spouse are living, and higher in the years when only the survivor
of you and your spouse is living.
- - You can structure the insurance benefit so that it will not be subject to
federal estate taxes when the death benefit is paid. This is generally
accomplished by having the ownership of your rights to the policy owned by
a trust you would create for the benefit of your family. You should consult
with your estate planning attorney or financial advisor as it may be
necessary to take certain steps at the time the insurance is applied for in
order to achieve the most favorable estate planning results.
2
<PAGE>
- - If your participation is approved, depending on the consequences to the
Company, the Committee may determine that, in addition to the insurance
benefit, if GPU's share of the policy death benefit exceeds the premium it
has paid, it will pay any such excess to your designated beneficiary (which
may be the same or a different beneficiary as your beneficiary for the
insurance benefit). Unlike the insurance benefit, this payment would be
subject to income taxes and, possibly, estate taxes when paid. Many
participants in these types of plans designate a charitable beneficiary to
receive this payment so that the income and estate taxes can be avoided.
- - If you (or your spouse) have serious health problems, this insurance
arrangement may not be as attractive as if you were healthy. Following the
insurance underwriting process, if the available benefits are reduced due
to health issues you will not be obligated to proceed with the insurance
arrangement.
- - This insurance arrangement is a sophisticated estate planning technique
that involves a number of tax and financial issues. You are encouraged to
review the program with your estate planning attorney or other advisors
before you make a final decision to request to participate.
3
<PAGE>
GPU, Inc.
Split Dollar Life Insurance for Non-Employee Directors
Information Request Form
Please provide me with information and personalized financial illustrations for
a split dollar life insurance arrangement with GPU, Inc.
Amount Relinquished
For illustration purposes, assume that I elect to relinquish $-------------- of
my account balance under the Deferred Remuneration Plan for Outside Directors of
GPU, Inc.
Type of Insurance Coverage
- --- I would like the insurance to be illustrated on my life only. My date of
birth is -------------.
- --- I would like the insurance to be illustrated on my life and the life of my
spouse (Survivorship Policy). My date of birth is -------------. My
spouse's date of birth is -------------.
I understand that this is a request for information only, and that this does not
constitute a request to participate in the life insurance program. Also, I
understand that if I subsequently decide to request participation in the
insurance program, my participation is in the sole discretion of the Personnel,
Compensation and Nominating Committee of the Board of Directors. I hereby
authorize GPU to release to Ayco any information as may be needed to provide the
requested information.
- ------------------------------- -----------------------------
Signature Date
- ------------------------------- Address:
Print Name -----------------------------
-----------------------------
-----------------------------
Telephone:-------------------
Mail or fax this Form to:
The Ayco Company, L.P.
PO Box 8009
MBS
Clifton Park, NY 12065-8009
Fax: (518) 373-1407
<PAGE>
If you have any questions about this form, call Carole B. Snyder at GPU at (973)
455-8726, or you can call Mr. Kim Oster at Ayco at (800) 342-2779.
<PAGE>
Life Insurance Agreement
An Agreement is hereby entered into between GPU, Inc. ("the Company") and
- ----------------- (the "Director"), and [Irrevocable Trust] dated -----------,
2000, -------------------, Trustee (the "Owner"), to be effective -----------,
2000.
WHEREAS, the Director is and has been a valued member of the Board of Directors
of the Company (the "Board");
WHEREAS, the Director has requested that the Company enter into this Agreement
providing life insurance benefits and has agreed to relinquish his rights to
certain other compensation otherwise payable to the Director in the future as a
condition of entering into this Agreement;
WHEREAS, the Company expects to realize certain financial and accounting
benefits and advantages as a result of entering into this Agreement;
WHEREAS, in order to provide the life insurance benefits, the Company intends to
pay a single premium on a policy owned by the Owner insuring the lives of the
Director and the Director's spouse (the "Policy"); and
WHEREAS, in exchange for the payment of a Policy premium by the Company, the
Owner shall grant the Company certain interests in the Policy cash values and
death benefits. NOW, THEREFORE, in consideration of the aforementioned promises,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Director, the Company and the Owner hereby
agree as follows, intending to be legally bound.
1. Deferred Compensation Relinquished. As a condition of entering into this
-----------------------------------
Agreement, the Director hereby relinquishes his rights to total
compensation of $------------- of the Director's account balance under the
Deferred Remuneration Plan for Outside Directors of GPU, Inc. (the "DRP").
2. Insurance Policy. Owner has purchased or will subsequently purchase the
----------------
Policy, as described in Exhibit A to this Agreement, to be issued by the
---------------- Life Insurance Company (the "Insurer"). The parties
hereto have taken or will take all necessary action to cause the
1
<PAGE>
Insurer to issue the Policy, and shall take any further action which may
be necessary to cause the Policy to conform to the provisions of this
Agreement. The parties hereto agree that the Policy shall be subject to
the terms and conditions of this Agreement and the Collateral Assignment
filed with the Insurer relating to the Policy as provided in Section 3 of
this Agreement.
3. Collateral Assignment. As security to the Company for the payment to it of
---------------------
amounts due it under this Agreement, Owner shall execute a collateral
assignment (the "Collateral Assignment") of the Policy to the Company,
which Collateral Assignment will specifically limit the rights of the
Company in the Policy to payment of the amounts due it under this
Agreement. The Collateral Assignment shall not be terminated, altered, or
amended by Owner without the express written consent of the Company.
4. Ownership of Policy.
-------------------
(a) The Owner shall be the sole and exclusive owner of the Policy.
However, except as otherwise provided in this Agreement, the Owner
shall not borrow from, hypothecate, withdraw cash value from,
surrender in whole or in part, cancel, or in any other manner
encumber the Policy without the prior written consent of the
Company. Unless the Company becomes the owner of the Policy pursuant
to Section 8, the Owner shall maintain possession of the Policy. The
Owner may elect to reduce the Policy face amount, except that the
Policy face amount shall not be reduced to an amount less than the
total of the Policy premiums paid or to be paid by the Company
pursuant to this Agreement. If the Company has become the owner of
the Policy pursuant to Section 8, then, subject to the limitations
imposed by the preceding sentence, within sixty (60) days of receipt
of a written request from the Owner, the Company shall complete and
submit the necessary forms to the Insurer to reduce the Policy face
amount in accordance with the Owner's request.
(b) Except as provided in Section 8, the Company shall not have any
ownership rights in the Policy. The Company's rights with respect to
the Policy shall be limited to: (1) the right to receive a portion
of the Policy death benefit in the event the Policy death benefit
becomes payable while the Collateral
2
<PAGE>
Assignment is in effect with respect to the Policy; and (2) the
right to receive all of the proceeds of any Policy cancellation,
surrender, loan or withdrawal processed while the Collateral
Assignment is in effect.
5. Payment of Insurance Premium by the Company. Within thirty (30) days after
------------------------------------------
the issue of the Policy, the Company shall pay a Policy premium equal to
the deferred compensation amount relinquished by the Director pursuant to
Section 1 of this Agreement.
6. Payment of Insurance Premiums by the Director or Owner. Neither the
-----------------------------------------------------------
Director nor the Owner shall be obligated to pay any Policy premiums.
However, either may decide to pay Policy premiums in addition to the
premium to be paid by the Company.
7. Death Benefit. The Owner agrees to maintain the Policy in a form such that
-------------
the Policy death benefit payable will be equal to the Policy face amount
plus the cash accumulation account value when the death benefit becomes
payable. Upon the death of the last survivor of the Director or the
Director's spouse (the "Insureds"), the Company and Owner shall promptly
take all action necessary to obtain in a lump sum the death benefit
provided under the Policy. The Company shall have the unqualified right to
receive a portion of such death benefit equal to the greater of: (1) the
Policy cash account value calculated immediately prior to the death of the
last survivor of the Insureds, calculated without regard to any surrender
charges; or (2) the Policy premium paid by the Company. The balance of the
death benefit provided under the Policy, if any, shall be paid to Owner.
In no event shall the amount payable to the Company hereunder exceed the
proceeds of the Policy payable at such death. No amount shall be paid to
the Owner until the amounts payable to the Company have been paid to the
Company. The parties hereto agree that the beneficiary designation
provision of the Policy shall conform to the provisions hereof.
8. Alternative Death Benefit Election. The person or entity designated as
------------------------------------
Elector in this Section may elect a death benefit payment from the Company
in lieu of the insurance benefit provided under this Agreement. The
Elector can make such an election (the "Election") in writing in a form
acceptable to the Company. At the time the Election is
3
<PAGE>
made, the Owner shall transfer the ownership of the Policy to the Company.
Thereafter, notwithstanding any provisions of Section 7 to the contrary,
the entire Policy death benefit shall be payable to the Company, and no
portion of such Policy death benefit shall be payable to the Owner's
beneficiary(ies).
Within thirty (30) days after it receives the Policy death benefit while
the Election is in effect, the Company shall pay an amount (the "Payment
Amount") to the Owner such that (1) and (2) below are equal amounts:
(1) The additional Policy death benefit amount received by the Company
(the amount in excess of the amount that would have been received by
the Company if the Election was not in effect for the Policy),
reduced by any taxes payable by the Company as a result of receiving
the additional Policy death benefit amount.
(2) The Payment Amount, reduced by any tax savings recognized by the
Company (as determined by the Company) as a result of paying the
Payment Amount.
The Owner shall designate the beneficiary(ies) to receive the payment
provided under this Section using a form provided by the Company. Any
payment made by the Company to the Owner's beneficiary(ies) pursuant to
this Section shall be paid from the general funds of the Company, and
shall not be considered to be a payment of a life insurance benefit. The
Company's obligation to pay the Payment Amount is in the nature of an
unsecured and unfunded promise to pay.
The Election under this Section shall be effective when any necessary
documentation is submitted to and accepted by the Insurer. The Owner and
the Company will promptly submit any required forms or documents to the
Insurer when the Election is made.
If the Company becomes the owner of the Policy pursuant to this Section,
the Company shall not thereafter surrender in whole or in part, reduce the
face amount of, withdraw cash value from, borrow from, or otherwise
encumber the Policy without the written consent of the Owner.
The Elector may revoke an Election, and may thereafter again make (or
revoke) an Election. The Elector shall be
4
<PAGE>
--------------------; if --------------- is unable or unwilling to serve,
the Owner shall be the Elector.
If the Company becomes the owner of the Policy pursuant to this Section,
the Company shall thereafter invest the Policy cash values in the Policy
funds selected by and in the proportions specified by the Owner. The
Company agrees to submit an investment election to the Insurer within
thirty (30) days after a written investment request is submitted to the
Company by the Owner.
9. Company Default. A Company Default shall be deemed to have occurred with
---------------
respect to the Policy if the Company fails to pay a premium on the Policy
as required under the terms of this Agreement within sixty (60) days after
the due date for such premium, or if the Company processes or attempts to
process a policy loan, or a complete or partial surrender, a face amount
reduction, or a cash value withdrawal without prior written approval from
the Owner.
In the event of a Company Default, the Owner shall have the right to
require the Company to cure the Company Default by notifying the Company
in writing within sixty (60) days after the Company Default occurs, or if
later, within thirty (30) days after the Owner becomes aware of the
Company Default. If the Company fails to cure the Company Default within
sixty (60) days after being notified by the Owner of the Company Default,
the Owner shall have the right to require the Company to transfer its
interest in the Policy to the Owner. The Owner may exercise this right by
notifying the Company, in writing, within sixty (60) days after the end of
the period given to the Company to cure the Company Default pursuant to
the preceding sentence. Upon receipt of such notice, the Company shall
immediately transfer its rights in the Policy to the Owner, either by a
release of the Collateral Assignment, or by a transfer of ownership if the
Company is the owner of the Policy, and the Company shall thereafter have
no rights with respect to such Policy. The Owner's failure to exercise its
rights under this Section shall not be deemed to release the Company from
any of its obligations under the Plan, and shall not preclude the Owner
from seeking other remedies with respect to the Company Default. Also, the
Owner's failure to exercise its rights under this Section will not
preclude the Owner from exercising such rights upon a later Company
Default.
5
<PAGE>
10. Death Benefit Claims Review and Procedure. At the death of the last
----------------------------------------------
surviving Insured, the Company and Owner shall execute such forms and
furnish such other documents as are required to receive payment under the
Policy. The Company shall also furnish to Owner an affidavit specifying
the amount of the death benefit due the Company. All death benefits under
this Agreement shall be paid in accordance with the Policy and pursuant to
the claims and review procedure of the Insurer.
11. Determinations Concerning Benefits. The Company shall make all
--------------------------------------
determinations concerning its rights to benefits under this Agreement. Any
decision by the Company denying a claim by the Owner or the beneficiary
for benefits under the Policy shall be stated in writing and delivered or
mailed to the Owner and such beneficiaries under the Policy. Such
decisions shall set forth the specific reasons for the denial, written to
the best of the Company's ability in a manner that may be understood
without legal or actuarial counsel. In addition, the Company shall afford
a reasonable opportunity to the Owner or such beneficiary for a full and
fair review of the decision denying such claim.
12. Obligations of the Company. The Company shall have no other obligations
--------------------------
than those specifically enumerated in this Agreement. The payment of any
Policy death benefit shall be the sole responsibility of the Insurer and
nothing contained herein shall be construed as imposing upon the Company
any responsibility for such payment, the economic viability of the
Insurer, or to acquire or maintain additional coverage if the Insurer
becomes insolvent, bankrupt, or engages in rehabilitation.
13. Amendment; Assignment. This Agreement may not be amended, altered, or
----------------------
modified, except by a written instrument signed by the Company and Owner.
Any party may assign its rights under this Agreement, provided that any
such assignee shall be subject to the terms of this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the
---------------
benefit of the Company and its successors and assigns, the Owner and its
successors and assigns, and the Director and his or her successors and
assigns.
6
<PAGE>
15. Notice. Any notice, consent, or demand required or permitted to be given
-------
under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent, or
demand is mailed to a party hereto, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known
address. The date of such mailing shall be deemed the date of notice,
consent, or demand.
16. Governing Law. This Agreement, and the rights of the parties hereunder,
---------------
shall be governed by and construed in accordance with the laws of the
state of New Jersey.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
day and year first above written.
- -----------------------------,Trustee GPU, Inc.
By: By:
-------------------------- --------------------------
- ----------------------------- ------------------------------
Name and Title Name and Title
- -----------------------------
Signature of Director
8
<PAGE>
EXHIBIT A
DESCRIPTION OF INSURANCE POLICY
The following life insurance policy is subject or will become subject to the
attached Agreement:
Insured(s):
Insurer Policy Number Face Amount
- ----------------------------- ------------- -----------
9
<PAGE>
Collateral Assignment
THIS ASSIGNMENT is made and entered into this ------ day of ---------, 2000, by
and between [Irrevocable Trust] the undersigned owner (the "Policy Owner") of a
Life Insurance Policy No. ---------- (the "Policy") issued by ----------------
(the "Insurer"), on the lives of ------------ and ------------ (the "Insureds"),
and GPU, Inc. (the "Assignee").
WHEREAS, the Policy Owner has entered into a Life Insurance Agreement with the
Assignee (the "Agreement"), and
WHEREAS, in consideration of the Assignee agreeing to make premium payments, the
Policy Owner agrees to grant the Assignee a security interest in the Policy as
collateral security for the payment of amounts due Assignee under the Agreement,
NOW, THEREFORE, the undersigned Policy Owner hereby assigns, transfers and sets
over to the Assignee the following specific rights in the Policy subject to the
following terms and conditions:
1. This Assignment is made as collateral security for all liabilities of the
Policy Owner to the Assignee, either now existing or that may hereafter
arise, pursuant to the Agreement between Policy Owner and Assignee.
2. The Assignee's interest in the Policy shall be strictly limited to:
a. In the event the Policy is canceled or surrendered, the right to
receive directly from the Insurer an amount equal to all of the cash
proceeds of such surrender or cancellation.
b. In the event a Policy loan or cash value withdrawal is taken, the
right to receive directly from the Insurer an amount equal to the
loan or withdrawal proceeds.
1
<PAGE>
c. Upon the death of the last survivor of the Insureds, the right to
receive directly from the Insurer and before any death proceeds are
paid to the beneficiary of the Policy Owner, that portion of the
death proceeds equal to the greater of: (i) the Policy cash account
value calculated immediately prior to the death of the last survivor
of the Insureds calculated without regard to any surrender charges;
or (ii) the cumulative policy premiums paid by Assignee under the
Policy.
3. The Insurer is hereby authorized to recognize [the Assignee's claims to
rights for any action taken by the Assignee,] the validity or the amount
of any of the liabilities of the Policy Owner to the Assignee under the
Agreement, the existence of any default therein, the giving of any notice
required herein, or the application to be made by the Assignee of any
amounts to be paid to the Assignee. The receipt of the Assignee for any
sums received by it shall be a full discharge and release therefore to the
Insurer.
4. The Insurer shall be fully protected in recognizing a request made by the
Policy Owner for surrender or cancellation of the Policy, in whole or in
part, or in recognizing a request made by the Policy Owner for any loans
against the Policy permitted by the terms of the Policy. In the event of
any such request, the Insurer must pay the proceeds of any surrender,
cancellation or loan to the Assignee, or as the Assignee shall direct.
5. Upon the full payment of the liabilities of the Policy Owner to the
Assignee pursuant to the Agreement, the Assignee shall execute an
appropriate release of this Assignment.
6. This Assignment shall not be terminated, altered, or amended by the Policy
Owner without receipt by the Insurer of the express written consent of the
Assignee.
2
<PAGE>
IN WITNESS WHEREOF, the Policy Owner has executed this Assignment effective the
day and year first above written.
- -------------------------------
Policy Owner Signature
Consent of Assignee
By:
----------------------------------
This assignment was acknowledged and recorded by
- ------------------------ on ------------, 2000.
By:
---------------------------------
3
<PAGE>
Death Benefit Agreement
WHEREAS, GPU, Inc. (the "Company") is designated as beneficiary to receive a
portion of an insurance policy death benefit from a policy insuring the [life]
[lives] of --------------- (the "Director") [and the Director's spouse]; and
WHEREAS, the Director has been and continues to be a valued Director of the
Company; and
WHEREAS, the Company desires to provide a death benefit to the beneficiaries
designated by the Director; and
WHEREAS, the Director [and the Director's spouse] has [have] agreed to provide
any medical history information to the insurance company or to submit to any
medical exams or tests as required by the insurance company for the coverage to
be issued.
NOW THEREFORE, in consideration of the promises and representations of the
parties as herein recited, and in recognition of other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
hereby agree as follows, effective -----------------.
The Company is designated as a beneficiary to receive a portion of the death
benefit in accordance with a collateral assignment executed in connection with
policy number ---------- issued by [Carrier] insuring the [life] [lives] of the
Director [and the Director's spouse] (the "Policy"). If the amount received by
the Company (the "Company Death Benefit") exceeds the premium paid by the
Company for such Policy, then the Company shall pay to the Director's
beneficiary an amount equal to the excess of the Company Death Benefit, if any,
over the premium paid by the Company for such Policy. However, the amount paid
shall not exceed the excess of the portion of the Policy death benefit equal to
the Policy cash account value when the policy death benefit is paid, reduced by
the amount of Policy premium paid by the Company. Any amount payable shall be
paid in a single sum as soon as is practicable following the Company's receipt
of its portion of the Policy death benefit.
Any amount payable under this Agreement shall be paid from the general funds of
the Company, and neither the Director nor the Director's beneficiary shall have,
as a result of this Agreement, any rights or interest in the Policy referred to
in this Agreement or any other assets of the Company.
1
<PAGE>
The Director's beneficiary shall be -------------------------------------------
- -------------------------------------------------------------------------------
This designation of beneficiary shall be irrevocable. This designation of
beneficiary may be changed by the Director completing and submitting to the
Company a Change of Beneficiary on a form provided by the Company. [After the
Director's death, this designation of beneficiary [shall be irrevocable] [may be
changed by the Director's spouse completing and submitting to the Company a
Change of Beneficiary on a form provided by the Company, except that any
beneficiary so designated by the Director's spouse after the Director's death
must be a charitable organization or educational institution eligible to receive
tax deductible donations under the Internal Revenue Code if the designated
beneficiary at the time of the Director's death is an organization eligible to
receive tax deductible donations.]
GPU, Inc.
By:
- ----------------------- -----------------------------------
Director's Signature Signature of Company Representative
2
<TABLE>
<CAPTION>
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)
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $4,757,124 $4,248,792 $4,143,379 $3,970,711 $3,822,459
--------- --------- --------- --------- ---------
OPERATING EXPENSES 3,748,294 3,352,713 3,272,644 3,292,796 3,080,614
Interest portion
of rentals (A) 34,171 30,594 26,108 26,093 27,362
Fixed charges of
service company
subsidiaries (B) 5,323 2,424 3,121 3,695 3,666
--------- --------- --------- --------- ---------
Net expense 3,708,800 3,319,695 3,243,415 3,263,008 3,049,586
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 4,329 5,264 5,583 10,672 14,671
Equity in undistributed
earnings/(losses) of
affiliates, net 89,746 72,012 (27,100) 33,981 (3,597)
Other income,
net 85,616 48,366 5,585 23,490 215,007
Minority interest
net income (3,490) (2,171) (1,337) (2,701) (922)
--------- --------- --------- --------- ---------
Total other income
and deductions 176,201 123,471 (17,269) 65,442 225,159
--------- --------- --------- --------- ---------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $1,224,525 $1,052,568 $ 882,695 $ 773,145 $ 998,032
========= ========= ========= ========= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 436,391 $ 346,513 $ 277,387 $ 216,352 $ 192,488
Other interest (C) 44,320 38,248 38,039 59,398 56,396
Preferred stock dividends
of subsidiaries on a
pretax basis (E) 16,619 18,045 19,500 24,008 26,756
Interest portion
of rentals (A) 34,171 30,594 26,108 26,093 27,362
--------- --------- --------- --------- ---------
Total fixed
charges $ 531,501 $ 433,400 $ 361,034 $ 325,851 $ 303,002
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO FIXED CHARGES 2.30 2.43 2.44 2.37 3.29
==== ==== ==== ==== ====
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS (D) 2.30 2.43 2.44 2.37 3.29
==== ==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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) GPU 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 consolidated income
statement. GPU 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) Includes amount for subsidiary-obligated mandatorily redeemable preferred
securities of $24,627, $28,888, $28,888, $28,888 and $24,816 for the
years 1999, 1998, 1997, 1996 and 1995, respectively and amount for trust
preferred securities of $8,345 for the year ended 1999.
(D) 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.
(E) Calculation of preferred stock dividends of subsidiaries on a pretax
basis is as follows:
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
Income before provision
for income taxes and
preferred stock dividends
of subsidiaries and
gain on preferred
<S> <C> <C> <C> <C> <C>
stock reacquisition $709,643 $637,213 $541,161 $471,302 $721,786
Income before extraordinary
item in 1998 and preferred
stock dividends of
subsidiaries and gain
on preferred stock
reacquisition 470,020 397,124 347,625 304,583 457,080
Pretax earnings ratio 151.0% 160.5% 155.7% 154.7% 157.9%
Preferred stock dividends
of subsidiaries 11,006 11,243 12,524 15,519 16,945
Preferred stock dividends
of subsidiaries on
a pretax basis 16,619 18,045 19,500 24,008 26,756
</TABLE>
<TABLE>
<CAPTION>
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)
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $2,018,209 $2,069,648 $2,093,972 $2,057,918 $2,035,928
--------- --------- --------- --------- ---------
OPERATING EXPENSES 1,652,420 1,607,589 1,658,382 1,729,532 1,653,387
Interest portion
of rentals (A) 14,920 11,838 10,614 10,666 12,354
--------- --------- --------- --------- ---------
Net expense 1,637,500 1,595,751 1,647,768 1,718,866 1,641,033
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 1,775 2,424 2,319 6,647 7,824
Other income, net 12,461 13,227 1,919 7,202 14,889
--------- --------- --------- --------- ---------
Total other income
and deductions 14,236 15,651 4,238 13,849 22,713
--------- --------- --------- --------- ---------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 394,945 $ 489,548 $ 450,442 $ 352,901 $ 417,608
========= ========= ========= ========= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 95,325 $ 95,361 $ 100,706 $ 89,648 $ 92,602
Other interest (B) 11,350 14,829 14,992 21,847 16,337
Interest portion
of rentals (A) 14,920 11,838 10,614 10,666 12,354
--------- --------- --------- --------- ---------
Total fixed
charges $ 121,595 $ 122,028 $ 126,312 $ 122,161 $ 121,293
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO FIXED CHARGES 3.25 4.01 3.57 2.89 3.44
==== ==== ==== ==== ====
Preferred stock
dividend requirement 8,670 10,065 11,376 13,072 14,457
Ratio of income before
provision for
income taxes to
net income (C) 158.6% 165.2% 152.9% 147.6% 148.8%
Preferred stock
dividend requirement
on a pretax basis 13,751 16,627 17,394 19,294 21,512
Fixed charges, as above 121,595 122,028 126,312 122,161 121,293
--------- --------- --------- --------- ---------
Total fixed charges
and preferred
stock dividends $ 135,346 $ 138,655 $ 143,706 $ 141,455 $ 142,805
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 2.92 3.53 3.13 2.50 2.92
==== ==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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) JCP&L 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 amount for company-obligated mandatorily redeemable preferred
securities of $10,700, $10,700, $10,700 and $10,700 for the years 1999,
1998, 1997 and 1996, respectively.
(C) Represents income before provision for income taxes divided by net income as
follows:
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
Income before provision
<S> <C> <C> <C> <C> <C>
for income taxes $273,350 $367,520 $324,130 $230,740 $296,315
Net Income 172,380 222,442 212,014 156,303 199,089
</TABLE>
<TABLE>
<CAPTION>
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)
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $902,827 $919,594 $943,109 $910,408 $854,674
------- ------- ------- ------- -------
OPERATING EXPENSES 689,579 752,168 728,644 733,664 686,183
Interest portion
of rentals (A) 4,381 9,784 6,151 5,367 5,186
------- ------- ------- ------- -------
Net expense 685,198 742,384 722,493 728,297 680,997
------- ------- ------- ------- -------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 1,212 943 1,100 1,245 2,430
Other income/
(expense), net 3,901 (13,539) 3,371 1,220 129,660
----- ------- ------- ------ -------
Total other income
and deductions 5,113 (12,596) 4,471 2,465 132,090
----- ------- ------- ------ -------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $222,742 $164,614 $225,087 $184,576 $305,767
======= ======= ======= ======= =======
FIXED CHARGES:
Interest on funded
indebtedness $ 45,996 $ 47,557 $ 48,789 $ 45,373 $ 45,844
Other interest (B) 15,846 12,130 10,861 14,436 14,147
Interest portion
of rentals (A) 4,381 9,784 6,151 5,367 5,186
------- ------- ------- ------- -------
Total fixed
charges $ 66,223 $ 69,471 $ 65,801 $ 65,176 $ 65,177
======= ======= ======= ======= =======
RATIO OF EARNINGS
TO FIXED CHARGES 3.36 2.37 3.42 2.83 4.69
==== ==== ==== ==== ====
Preferred stock
dividend requirement 66 483 483 944 944
Ratio of income before
provision for
income taxes to
net income (C) 164.5% 164.8% 170.3% 172.9% 162.0%
Preferred stock
dividend requirement
on a pretax basis 109 796 823 1,632 1,529
Fixed charges, as above 66,223 69,471 65,801 65,176 65,177
------- ------- ------- ------- -------
Total fixed charges
and preferred
stock dividends $ 66,332 $ 70,267 $ 66,624 $ 66,808 $ 66,706
======= ======= ======= ======= =======
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 3.36 2.34 3.38 2.76 4.58
==== ==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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) Met-Ed 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 amount for company-obligated mandatorily redeemable preferred
securities of $8,950, $9,000, $9,000, $9,000 and $9,000 for the years
1999, 1998, 1997, 1996 and 1995, respectively, and amount for trust
preferred securities of $4,369 for the year ended 1999.
(C) Represents income before provision for income taxes divided by income
before extraordinary item/net income as follows:
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
Income before provision
<S> <C> <C> <C> <C> <C>
for income taxes $156,519 $ 95,143 $159,286 $119,400 $240,590
Income before extraordinary
item/Net Income 95,123 57,720 93,517 69,067 148,540
</TABLE>
<TABLE>
<CAPTION>
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)
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 921,965 $1,032,226 $1,052,936 $1,019,645 $ 981,329
--------- --------- --------- --------- ---------
OPERATING EXPENSES 730,365 861,453 824,596 840,288 793,320
Interest portion
of rentals (A) 4,306 4,970 4,236 4,490 4,911
--------- --------- --------- --------- ---------
Net expense 726,059 856,483 820,360 835,798 788,409
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 1,342 1,897 2,164 2,780 4,417
Other income/
(expense), net 59,081 (6,429) 2,469 (825) 56,454
--------- --------- --------- --------- ---------
Total other income
and deductions 60,423 (4,532) 4,633 1,955 60,871
--------- --------- --------- --------- ---------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 256,329 $ 171,211 $ 237,209 $ 185,802 $ 253,791
========= ========= ========= ========= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 34,588 $ 54,907 $ 56,095 $ 49,654 $ 49,875
Other interest (B) 10,561 10,207 10,556 16,300 17,616
Interest portion
of rentals (A) 4,306 4,970 4,236 4,490 4,911
--------- --------- --------- --------- ---------
Total fixed
charges $ 49,455 $ 70,084 $ 70,887 $ 70,444 $ 72,402
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO FIXED CHARGES 5.18 2.44 3.35 2.64 3.51
==== ==== ==== ==== ====
Preferred stock
dividend requirement 154 695 665 1,503 1,544
Ratio of income before
provision for
income taxes to
net income (C) 135.7% 172.6% 175.0% 165.2% 163.4%
Preferred stock
dividend requirement
on a pretax basis 209 1,200 1,164 2,483 2,523
Fixed charges, as above 49,455 70,084 70,887 70,444 72,402
--------- --------- --------- --------- ---------
Total fixed charges
and preferred
stock dividends $ 49,664 $ 71,284 $ 72,051 $ 72,927 $ 74,925
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 5.16 2.40 3.29 2.55 3.39
==== ==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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) Penelec 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 amount for company-obligated mandatorily redeemable preferred
securities of $4,977, $9,188, $9,188, $9,188 and $9,188 for the years
1999, 1998, 1997, 1996 and 1995, respectively,
(C) and amount for trust preferred securities of $3,976 for the year ended 1999.
(C) Represents income before provision for income taxes divided by income
before extraordinary item/net income as follows:
Twelve Months Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- -------
Income before provision
<S> <C> <C> <C> <C> <C>
for income taxes $206,874 $101,127 $166,322 $115,358 $181,389
Income before extraordinary
item/Net Income 152,491 58,590 95,023 69,809 111,010
</TABLE>
Exhibit 21-A
JERSEY CENTRAL POWER & LIGHT COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
- ------------------ -------- ------------
JCP&L PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION HOLDINGS, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION FUNDING LLC SPECIAL-PURPOSE FINANCE DELAWARE
Note: JCP&L, along with its affiliates Met-Ed and Penelec, collectively own
all of the common stock of Saxton Nuclear Experimental Corporation, a
Pennsylvania nonprofit corporation organized for nuclear experimental
purposes which is now inactive. The carrying value of the owners'
investment has been written down to a nominal value.
Exhibit 21-B
METROPOLITAN EDISON COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
- ------------------ -------- ------------
YORK HAVEN POWER COMPANY HYDROELECTRIC GENERATION NEW YORK
MET-ED PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED PREFERRED CAPITAL II, INC. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL II, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL TRUST SPECIAL-PURPOSE FINANCE DELAWARE
Note: Met-Ed, along with its affiliates JCP&L and Penelec, collectively own
all of the common stock of Saxton Nuclear Experimental Corporation, a
Pennsylvania nonprofit corporation organized for nuclear experimental
purposes which is now inactive. The carrying value of the owners'
investment has been written down to a nominal value.
Exhibit 21-C
PENNSYLVANIA ELECTRIC COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
- ------------------ -------- ------------
NINEVEH WATER COMPANY WATER SERVICE PENNSYLVANIA
THE WAVERLY ELECTRIC LIGHT ELECTRIC DISTRIBUTION PENNSYLVANIA
AND POWER COMPANY
PENELEC PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC PREFERRED CAPITAL II, INC. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL II, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL TRUST SPECIAL-PURPOSE FINANCE DELAWARE
Note: Penelec, along with its affiliates JCP&L and Met-Ed, collectively own
all of the common stock of Saxton Nuclear Experimental Corporation, a
Pennsylvania nonprofit corporation organized for nuclear experimental
purposes which is now inactive. The carrying value of the owners'
investment has been written down to a nominal value.
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
GPU, Inc. on Form S-8 (File Nos. 33-32325, 33-32326, 33-34661, 33-32327,
33-51037, 33-32328 and 33-51035), and Form S-3 (File No. 33-30765) of our report
dated February 10, 2000, on our audits of the consolidated financial statements
and financial statement schedule of GPU, Inc. and Subsidiaries as of December
31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999, which report is included in this Annual Report on Form 10-K, for the
year ended December 31, 1999.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2000
EXHIBIT 23-B
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Jersey Central Power & Light Company on Form S-3 (File Nos. 33-57905,
33-57905-01 and 33-88783) of our report dated February 10, 2000, on our audits
of the consolidated financial statements and financial statement schedule of
Jersey Central Power & Light Company and Subsidiary as of December 31, 1999 and
1998, and for each of the three years in the period ended December 31, 1999,
which report is included in this Annual Report on Form 10-K, for the year ended
December 31, 1999.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2000
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. 33-62967, 33-62967-01 and
33-62967-02) of our report dated February 10, 2000, on our audits of the
consolidated financial statements and financial statement schedule of
Metropolitan Edison Company and Subsidiaries as of December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999, which
report is included in this Annual Report on Form 10-K, for the year ended
December 31, 1999.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2000
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. 33-62295, 33-62295-01 and
33-62295-02) of our report dated February 10, 2000, on our audits of the
consolidated financial statements and financial statement schedule of
Pennsylvania Electric Company and Subsidiaries as of December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999, which
report is included in this Annual Report on Form 10-K, for the year ended
December 31, 1999.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2000
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,024,928
<OTHER-PROPERTY-AND-INVEST> 4,294,049
<TOTAL-CURRENT-ASSETS> 1,712,895
<TOTAL-DEFERRED-CHARGES> 7,686,210
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 21,718,082
<COMMON> 331,958
<CAPITAL-SURPLUS-PAID-IN> 1,011,721
<RETAINED-EARNINGS> 2,420,009 <F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,464,953 <F2>
398,167 <F3>
12,649
<LONG-TERM-DEBT-NET> 5,850,596
<SHORT-TERM-NOTES> 1,118,269
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 53,600
<LONG-TERM-DEBT-CURRENT-PORT> 581,147
0
<CAPITAL-LEASE-OBLIGATIONS> 2,154
<LEASES-CURRENT> 48,165
<OTHER-ITEMS-CAPITAL-AND-LIAB> 10,188,382
<TOT-CAPITALIZATION-AND-LIAB> 21,718,082
<GROSS-OPERATING-REVENUE> 4,757,124
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 3,748,294
<TOTAL-OPERATING-EXPENSES> 3,748,294
<OPERATING-INCOME-LOSS> 1,008,830
<OTHER-INCOME-NET> 175,794
<INCOME-BEFORE-INTEREST-EXPEN> 1,184,624
<TOTAL-INTEREST-EXPENSE> 482,497 <F4>
<NET-INCOME> 459,014 <F5>
0
<EARNINGS-AVAILABLE-FOR-COMM> 459,014
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 175,909
<CASH-FLOW-OPERATIONS> 151,252
<EPS-BASIC> 3.66
<EPS-DILUTED> 3.66
<FN>
<F1> INCLUDES ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS) OF
<F1> ($6,341).
<F2> INCLUDES REACQUIRED COMMON STOCK OF $298,735.
<F3> INCLUDES AMOUNTS FOR SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $125,000 AND TRUST PREFERRED
<F3> SECURITIES OF $200,000.
<F4> INCLUDES AMOUNT FOR SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F4> PREFERRED SECURITIES OF $24,627, PREFERRED STOCK DIVIDENDS OF
<F4> SUBSIDIARIES OF $8,890, LOSS ON PREFERRED STOCK REACQUISITION
<F4> OF $2,116, AND TRUST PREFERRED SECURITIES OF $8,345.
<F5> INCLUDES MINORITY INTEREST NET (INCOME)/LOSS OF ($3,490) AND
<F5> INCOME TAX EXPENSE OF $239,623.
</FN>
</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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,824,725
<OTHER-PROPERTY-AND-INVEST> 515,486
<TOTAL-CURRENT-ASSETS> 419,807
<TOTAL-DEFERRED-CHARGES> 3,050,979
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,810,997
<COMMON> 153,713
<CAPITAL-SURPLUS-PAID-IN> 510,769
<RETAINED-EARNINGS> 720,885 <F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,385,367
198,167 <F2>
12,649
<LONG-TERM-DEBT-NET> 1,133,760
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 50,846
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 48,165
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,982,043
<TOT-CAPITALIZATION-AND-LIAB> 5,810,997
<GROSS-OPERATING-REVENUE> 2,018,209
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 1,652,420
<TOTAL-OPERATING-EXPENSES> 1,652,420
<OPERATING-INCOME-LOSS> 365,789
<OTHER-INCOME-NET> 12,461
<INCOME-BEFORE-INTEREST-EXPEN> 378,250
<TOTAL-INTEREST-EXPENSE> 104,900 <F3>
<NET-INCOME> 172,380 <F4>
8,670
<EARNINGS-AVAILABLE-FOR-COMM> 162,862
<COMMON-STOCK-DIVIDENDS> 335,000 <F5>
<TOTAL-INTEREST-ON-BONDS> 95,325
<CASH-FLOW-OPERATIONS> 378,444
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES ACCUMULATED OTHER COMPREHENSIVE LOSS OF $7.
<F2> INCLUDES AMOUNT FOR COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $125,000.
<F3> INCLUDES AMOUNT FOR COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $10,700.
<F4> AMOUNT IS NET OF INCOME TAX EXPENSE OF $100,970.
<F5> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
</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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,085,363
<OTHER-PROPERTY-AND-INVEST> 147,271
<TOTAL-CURRENT-ASSETS> 269,623
<TOTAL-DEFERRED-CHARGES> 1,985,936
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,488,193
<COMMON> 66,273
<CAPITAL-SURPLUS-PAID-IN> 400,200
<RETAINED-EARNINGS> 34,944 <F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 501,417
100,000 <F2>
0
<LONG-TERM-DEBT-NET> 496,883
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 50,025
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,339,868
<TOT-CAPITALIZATION-AND-LIAB> 3,488,193
<GROSS-OPERATING-REVENUE> 902,827
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 689,579
<TOTAL-OPERATING-EXPENSES> 689,579
<OPERATING-INCOME-LOSS> 213,248
<OTHER-INCOME-NET> 4,065
<INCOME-BEFORE-INTEREST-EXPEN> 217,313
<TOTAL-INTEREST-EXPENSE> 60,794 <F3>
<NET-INCOME> 95,123 <F4>
66
<EARNINGS-AVAILABLE-FOR-COMM> 94,515 <F5>
<COMMON-STOCK-DIVIDENDS> 315,000 <F6>
<TOTAL-INTEREST-ON-BONDS> 45,996
<CASH-FLOW-OPERATIONS> (104,348)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES ACCUMULATED OTHER COMPREHENSIVE INCOME OF $21,363.
<F2> REPRESENTS TRUST PREFERRED SECURITIES OF $100,000.
<F3> INCLUDES AMOUNT FOR COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $8,950 AND TRUST PREFERRED SECURITIES
<F3> OF $4,369.
<F4> AMOUNT IS NET OF INCOME TAX EXPENSE OF $61,396.
<F5> INCLUDES LOSS ON PREFERRED STOCK REACQUISITION OF $542.
<F6> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
</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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,212,970
<OTHER-PROPERTY-AND-INVEST> 365,015
<TOTAL-CURRENT-ASSETS> 209,550
<TOTAL-DEFERRED-CHARGES> 1,908,256
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,695,791
<COMMON> 105,812
<CAPITAL-SURPLUS-PAID-IN> 285,486
<RETAINED-EARNINGS> 69,884 <F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 461,182
100,000 <F2>
0
<LONG-TERM-DEBT-NET> 424,641
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 53,600
<LONG-TERM-DEBT-CURRENT-PORT> 13
0
<CAPITAL-LEASE-OBLIGATIONS> 2,154
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,654,201
<TOT-CAPITALIZATION-AND-LIAB> 3,695,791
<GROSS-OPERATING-REVENUE> 921,965
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 730,365
<TOTAL-OPERATING-EXPENSES> 730,365
<OPERATING-INCOME-LOSS> 191,600
<OTHER-INCOME-NET> 59,349
<INCOME-BEFORE-INTEREST-EXPEN> 250,949
<TOTAL-INTEREST-EXPENSE> 44,075 <F3>
<NET-INCOME> 152,491 <F4>
154
<EARNINGS-AVAILABLE-FOR-COMM> 151,611 <F5>
<COMMON-STOCK-DIVIDENDS> 460,000 <F6>
<TOTAL-INTEREST-ON-BONDS> 34,588
<CASH-FLOW-OPERATIONS> (265,457)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES ACCUMULATED OTHER COMPREHENSIVE INCOME OF $10,619.
<F2> REPRESENTS TRUST PREFERRED SECURITIES OF $100,000.
<F3> INCLUDES AMOUNT FOR COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $4,977 AND TRUST PREFERRED SECURITIES
<F3> OF $3,976.
<F4> AMOUNT IS NET OF INCOME TAX EXPENSE OF $54,383.
<F5> INCLUDES LOSS ON PREFERRED STOCK REACQUISITION OF $726.
<F6> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
</TABLE>
