PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 30, 1999)
$100,000,000
JERSEY CENTRAL POWER & LIGHT COMPANY
MEDIUM-TERM NOTES
---------------
Due From One Year to 35 Years From Date of Issue
---------------
Jersey Central Power & Light Company may offer from time to time its medium-term
notes. The specific terms of any notes offered will be included in a pricing
supplement. Unless the pricing supplement provides otherwise, the notes offered
will have the following general terms:
o The notes will mature from one to 35 years from the date of issue.
o The notes will bear interest at either a fixed or a floating rate.
Floating rate interest will be based on:
o LIBOR
o Any other rate specified in the applicable pricing supplement.
o Interest will be paid on the notes on the dates specified in the
applicable pricing supplement.
o The notes will be held in global form by The Depository Trust Company,
unless otherwise specified.
o The notes may be subject to redemption and repurchase as specified in
this prospectus supplement and the accompanying prospectus or in the
applicable pricing supplement.
o The notes will be in minimum denominations of $1,000, increased in
multiples of $1,000.
The notes will be issued under a Senior Note Indenture between Jersey Central
Power & Light Company and United States Trust Company of New York, as senior
note trustee. Initially, the notes will be secured by one or more series of our
first mortgage bonds which will be issued and delivered to the senior note
trustee under our Indenture dated as of March 1, 1946, as amended and
supplemented. However, on the date that the senior note trustee holds 80% or
more of all of our outstanding first mortgage bonds, the notes will no longer be
secured by any first mortgage bonds. At that time, the notes will be unsecured
obligations of Jersey Central Power & Light Company and will rank equally with
all of our other unsecured and unsubordinated indebtedness.
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<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public Commissions Company
------------ ----------------- -----------------------
<S> <C> <C> <C>
Per Note................... 100% .125% - .750% 99.875%-99.250%
Total...................... $100,000,000 $125,000-$750,000 $99,875,000-$99,250,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc. will solicit
offers to purchase the notes as agents for Jersey Central Power & Light Company.
The agents have agreed to use their reasonable efforts to sell the notes.
---------------
MORGAN STANLEY DEAN WITTER J.P. MORGAN & CO.
July 30, 1999
<PAGE>
You should read and rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. Neither we
nor the Agents are making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus supplement or the accompanying prospectus, or incorporated by
reference, is accurate as of any date other than the date such information is
given.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Introductory Statement ................................................. S-3
Jersey Central Power & Light Company ................................... S-3
Use of Proceeds ........................................................ S-3
Description of the Notes ............................................... S-4
Plan of Distribution ................................................... S-11
PROSPECTUS
About This Prospectus .................................................. 2
Jersey Central Power & Light Company ................................... 2
Where You Can Find More Information .................................... 3
Use of Proceeds ........................................................ 3
Ratios of Earnings to Fixed Charges .................................... 4
Description of Senior Notes ............................................ 4
Description of Senior Note Mortgage Bonds............................... 19
Plan of Distribution ................................................... 24
Legal Matters .......................................................... 26
Experts ................................................................ 26
<PAGE>
INTRODUCTORY STATEMENT
Jersey Central Power & Light Company (the "Company") is offering medium
term notes (the "Notes"), in the principal amount of $100,000,000. If the
Company sells other Senior Notes as described in the accompanying prospectus,
the aggregate principal amount of Notes that the Company may offer and sell
under this prospectus supplement would be reduced.
The Company intends to use this prospectus supplement, the accompanying
prospectus and a related pricing supplement to offer the Notes from time to
time. This prospectus supplement provides you with certain terms of the Notes
and supplements the description of Senior Notes contained in the accompanying
prospectus. If any information in this prospectus supplement is inconsistent
with the prospectus, this prospectus supplement replaces the inconsistent
information. Each time the Company issues Notes, it will prepare a pricing
supplement that will contain additional terms of the offering and the
description of the specific Notes offered. The pricing supplement also may add,
update or change information in this prospectus supplement or the accompanying
prospectus, including provisions describing the calculation of interest and the
method of making payments under the terms of a Note. Any information in the
pricing supplement that is inconsistent with this prospectus supplement or the
accompanying prospectus will replace the inconsistent information in this
prospectus supplement or the accompanying prospectus.
JERSEY CENTRAL POWER & LIGHT COMPANY
The Company, a public utility furnishing electric service within New
Jersey, is a wholly owned subsidiary of GPU, Inc., a holding company registered
under the Public Utility Holding Company Act of 1935. The Company, which does
business under the name "GPU Energy", provides electric service within a
territory located in northern, western and east central New Jersey having a
population of about 2.6 million. The Company's principal executive offices are
located at 2800 Pottsville Pike, Reading, Pennsylvania 19605, and its telephone
number is (610) 929-3601.
USE OF PROCEEDS
The Company will use the net proceeds from the sale of the Notes (1) to
redeem or repurchase other outstanding securities of the Company, (2) to reduce
the Company's short-term borrowings, (3) for construction purposes and (4) for
other corporate purposes, including to reimburse the Company's treasury for
funds previously expended for the purposes described above.
S-3
<PAGE>
DESCRIPTION OF THE NOTES
The following is a summary of certain terms of the Notes, does not
purport to be complete, and is subject to, and qualified in its entirety by, the
description of Senior Notes in the accompanying prospectus, the form of the
Senior Note Indenture (as defined below), which is on file with the Securities
and Exchange Commission, and the Trust Indenture Act of 1939. Certain
capitalized terms used in this prospectus supplement are defined in the Senior
Note Indenture. The following description of certain terms of the Notes
supplements and, to the extent inconsistent therewith, replaces the description
of the general terms and provisions of the Senior Notes set forth in the
accompanying prospectus, to which reference is hereby made. The following
description will apply unless otherwise specified in an applicable pricing
supplement.
GENERAL
Each series of the Notes will be issued as a series of Senior Notes
under the Senior Note Indenture, as it may be amended or supplemented from time
to time (the "Senior Note Indenture") between the Company and United States
Trust Company of New York (the "Senior Note Trustee"). Until the Release Date
(as defined below), all of the Senior Notes, including the Notes, outstanding
under the Senior Note Indenture will be secured by one or more series of the
Company's Senior Note Mortgage Bonds issued and delivered by the Company to the
Senior Note Trustee. The Senior Note Mortgage Bonds are first mortgage bonds
("First Mortgage Bonds") to be issued under and secured by the Company's
Indenture dated as of March 1, 1946 (the "Mortgage") between the Company and
United States Trust Company of New York, as successor trustee, as heretofore
amended and supplemented. See "Description of Senior Notes -- Security; Release
Date" in the accompanying prospectus. The Release Date is the earlier of (1) the
date that all First Mortgage Bonds, other than the Senior Note Mortgage Bonds,
have been retired (whether at, before or after the maturity thereof) through
payment, redemption, purchase, defeasance or otherwise and (2) the date upon
which the Senior Note Trustee holds Senior Note Mortgage Bonds constituting 80%
or more of all of our outstanding First Mortgage Bonds. ON THE RELEASE DATE, THE
SENIOR NOTE TRUSTEE WILL SURRENDER THE SENIOR NOTE MORTGAGE BONDS FOR
CANCELLATION AND THE NOTES WILL CEASE TO BE SECURED BY THE SENIOR NOTE MORTGAGE
BONDS, WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY AND WILL RANK ON
A PARITY WITH OTHER UNSECURED AND UNSUBORDINATED INDEBTEDNESS OF THE COMPANY. As
of the date of this prospectus supplement, approximately $1,174 million of First
Mortgage Bonds remain outstanding, none of which are Senior Note Mortgage Bonds.
The Senior Note Indenture provides that prior to the Release Date, the principal
amount of Senior Notes (including the Notes) that may be issued and outstanding
cannot exceed the principal amount of the Senior Note Mortgage Bonds then held
by the Senior Note Trustee. After the issuance of the first series of the Senior
Notes, no additional First Mortgage Bonds will be issued under the Mortgage
other than as collateral security for the Senior Notes. See "Description of
Senior Note Mortgage Bonds" in the accompanying prospectus.
For further information concerning the Notes, see "Description of
Senior Notes" in the accompanying prospectus.
S-4
<PAGE>
The Notes will be offered on a continuous basis and will mature on any
Business Day (as defined below) from one year to 35 years from the date of
issue, as selected by the purchaser and agreed to by the Company. Prior to
maturity, the Notes may be subject to optional redemption by the Company as set
forth under "Interest and Interest Rates -- Fixed Rate Notes" below and under
"Description of Senior Notes -- Redemption Provisions" in the accompanying
prospectus, or as set forth in the applicable pricing supplement. Each Note will
bear interest at a fixed or floating rate as specified in the applicable pricing
supplement.
The pricing supplement relating to each Note will describe the
following terms: (1) the title of such Notes; (2) the aggregate principal amount
of such Notes; (3) the date on which such Notes will be issued (the "Original
Issue Date"); (4) the price (expressed as a percentage of principal amount) at
which such Notes will be issued; (5) the date or dates on which the principal of
such Notes is payable; (6) the rate or rates at which such Notes will bear
interest (or the basis or formula with reference to which such rate or rates
will be determined), the date or dates from which such interest will accrue, the
dates on which such interest will be payable ("Interest Payment Dates"), and the
regular record dates for the interest payable on such Interest Payment Dates;
(7) the option, if any, of the Company to redeem such Notes and the period or
periods within which, or the date or dates on which, the prices at which and the
terms and conditions upon which, such Notes may be redeemed, in whole or in
part, upon the exercise of such option; (8) the obligation, if any, of the
Company to redeem or purchase such Notes at the option of the registered holder
or pursuant to any sinking fund or analogous provisions and the period or
periods within which, or the date or dates on which, the price or prices at
which and the terms and conditions upon which, such Notes will be redeemed or
purchased, in whole or in part, pursuant to such obligation; (9) the
denominations in which such Notes will be issuable, if other than $1,000 and
integral multiples thereof; and (10) any other terms of such Notes, including
with respect to any series, if applicable.
With respect to Notes for which interest is based on the LIBOR index,
"Business Day" shall mean a Business Day as defined in the accompanying
prospectus that is also a London Business Day. "London Business Day" means a day
on which commercial banks are open for business (including dealings in United
States dollars) in London. Unless the Company otherwise specifies in the
applicable pricing supplement, the "regular record date" with respect to any
Interest Payment Date will be the fifteenth day of the calendar month
immediately preceding such Interest Payment Date (whether or not a Business
Day). See "Description of Senior Notes -- Payment of Principal and Interest" in
the accompanying prospectus.
Except under certain circumstances, the Company will issue the Notes in
book-entry form only. See "Description of Senior Notes -- Book-Entry Senior
Notes" in the accompanying prospectus.
S-5
<PAGE>
INTEREST AND INTEREST RATES
GENERAL
In the related pricing supplement, the Company will designate each Note
as a Fixed Rate Note or a Floating Rate Note and describe the method of
determining the interest rate, including any Spread and/or Spread Multiplier.
The Company may also specify a maximum and a minimum interest rate in the
related pricing supplement.
Interest rates on the Notes that the Company offers may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. The Company may offer Notes with similar
variable terms but different interest rates, as well as Notes with different
variable terms concurrently to different investors. The Company may, from time
to time, change the interest rates or formulas and other terms of Notes, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted.
FIXED RATE NOTES
In the pricing supplement for Fixed Rate Notes, the Company will
specify a fixed interest rate payable per annum in arrears on the Interest
Payment Dates. The Interest Payment Dates for Fixed Rate Notes will be August 1
and February 1 of each year or on such other date(s) specified in the applicable
pricing supplement. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months. If the maturity date or an Interest
Payment Date for any Fixed Rate Note is not a Business Day, the Company will pay
principal, any premium, and any interest for that Note on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue from and after the maturity date or Interest Payment Date.
Unless the Company otherwise specifies in the applicable pricing
supplement, the Fixed Rate Notes may be redeemable as set forth under
"Description of Senior Notes -- Redemption Provisions" in the accompanying
prospectus. For purposes of such discussion in the accompanying prospectus,
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated and
J.P. Morgan Securities Inc. and their respective successors. If either of the
foregoing shall cease to be a primary U.S. Government securities dealer (a
"Primary Treasury Dealer"), the Company shall substitute another nationally
recognized investment banking firm that is a Primary Treasury Dealer.
FLOATING RATE NOTES
Unless otherwise specified in a pricing supplement, each Floating Rate
Note will have an interest rate basis or formula based on LIBOR.
In the pricing supplement, the Company will indicate the Index Maturity
as well as any Spread and/or Spread Multiplier which would be applied to the
interest rate formula to determine the interest rate. Any Floating Rate Note may
have a maximum or minimum interest rate limitation. In addition to any maximum
interest rate limitation, the interest rate on the
S-6
<PAGE>
Floating Rate Notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application.
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related basis or bases
applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage
of the related basis or bases applicable to such Floating Rate Note and by which
such basis or bases will be multiplied to determine the applicable interest rate
on such Floating Rate Note. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related basis or bases
will be calculated.
The Company will appoint a calculation agent to calculate interest
rates on the Floating Rate Notes. Unless the Company identifies a different
party in the pricing supplement, the paying agent appointed by the Company
(initially, United States Trust Company of New York) will be the calculation
agent for each Note. Each Floating Rate Note will have a specified "Interest
Reset Date", "Interest Determination Date" and, where applicable, "Calculation
Date" associated with it. An "Interest Reset Date" is the date on which the
interest rate on the Note is subject to change and, unless otherwise specified
in a pricing supplement, will be the second London Business Day immediately
following the applicable Interest Determination Date. An "Interest Determination
Date" is the date as of which the new interest rate is determined for a
particular Interest Reset Date, based on the applicable interest rate basis or
formula as of that Interest Determination Date. The "Calculation Date" is the
date by which the calculation agent will determine the new interest rate that
became effective on a particular Interest Reset Date based on the applicable
interest rate basis or formula on the Interest Determination Date. The interest
rate determined by the calculation agent, absent manifest error, shall be
binding and conclusive upon beneficial owners and holders of Floating Rate Notes
and on the Company. Promptly on such determination, the calculation agent will
notify the Senior Note Trustee and the paying agent (if the calculation agent is
not the paying agent) of the new interest rate.
Change Of Interest Rate. The Company may reset the interest rate on
each Floating Rate Note daily, weekly, monthly, quarterly, semi-annually,
annually or on some other basis that the Company specifies. The Interest Reset
Date will be specified in the pricing supplement.
The related pricing supplement will describe the initial interest rate
or interest rate formula on each Note. That rate is effective until the
following Interest Reset Date. Thereafter, the interest rate will be the rate
determined on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. Unless
otherwise specified in a pricing supplement, if any Interest Reset Date is not a
Business Day, then the Interest Reset Date will be postponed to the next
Business Day, except if the next Business Day is in the next calendar month, the
Interest Reset Date will be the immediately preceding Business Day.
S-7
<PAGE>
Date Interest Rate Is Determined. Unless otherwise specified in a
pricing supplement, the Interest Determination Date will be the second London
Business Day immediately preceding the applicable Interest Reset Date.
Calculation Date. Unless the Company specifies a different date in a
pricing supplement, the "Calculation Date", where applicable, relating to an
Interest Determination Date will be the earlier of
(1) the tenth calendar day after such Interest Determination Date or,
if such day is not a Business Day, the next succeeding Business Day, or
(2) the Business Day immediately preceding the relevant Interest
Payment Date or the maturity date, as the case may be.
Upon the request of the beneficial holder of any Floating Rate Note,
the calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
Payment Of Interest. The Company will pay installments of interest on
Floating Rate Notes on the Interest Payment Dates specified in the applicable
pricing supplement.
The Company will also pay interest at maturity, redemption or
repurchase.
If an Interest Payment Date is not a Business Day, such Interest
Payment Date will be postponed to the next succeeding Business Day, except that
in the case of a Floating Rate Note as to which LIBOR is the applicable interest
rate basis and such Business Day falls in the next succeeding calendar month,
such Interest Payment Date will be the immediately preceding Business Day. If
the maturity date, date of redemption or repurchase of any Floating Rate Note is
not a Business Day, principal, premium, if any, and interest for that Note will
be paid on the next Business Day, and no interest will accrue from and after the
maturity date, date of redemption or repurchase.
The Company will calculate accrued interest on a Floating Rate Note by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is the sum of the interest factors calculated for each
day in the period for which accrued interest is being calculated. The interest
factor for each day is computed by dividing the interest rate in effect on that
day by 360. All percentages resulting from any calculation are rounded to the
nearest one hundredth of a percentage point, with five one-thousandths of a
percentage point rounded upward. For example, 9.875% (or .09875) will be rounded
to 9.88% (or .0988). Dollar amounts used in the calculation are rounded to the
nearest cent (with one-half cent being rounded upward).
S-8
<PAGE>
CALCULATION OF INTEREST
On each Interest Determination Date, the calculation agent will
determine LIBOR as follows:
- If the pricing supplement specifies "LIBOR Telerate", LIBOR on
any Interest Determination Date will be the rate for deposits in
United States dollars having the Index Maturity described in the
related pricing supplement on the applicable Interest Reset Date, as
such rate appears on the Designated LIBOR Page as of 11:00 A.M.,
London time, on that Interest Determination Date.
- If the pricing supplement specifies "LIBOR Reuters", LIBOR on
any Interest Determination Date will be the arithmetic mean of the
offered rates (unless the Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used)
for deposits in United States dollars having the Index Maturity
described in the related pricing supplement on the applicable Interest
Reset Date, as such rates appear on the Designated LIBOR Page as of
11:00 A.M., London time, on that Interest Determination Date, if at
least two such offered rates appear (unless, as aforesaid, only a
single rate is required) on the Designated LIBOR Page.
- If the pricing supplement does not specify "LIBOR Telerate" or
"LIBOR Reuters", the LIBOR Rate will be LIBOR Telerate. In addition,
if the Designated LIBOR Page by its terms provides only for a single
rate, that single rate will be used regardless of the foregoing
provisions requiring more than one rate.
On any Interest Determination Date on which fewer than the required
number of applicable rates appear or no rate appears on the applicable
Designated LIBOR Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at
which deposits in United States dollars having the Index Maturity
described in the related pricing supplement on the Interest
Determination Date and in a principal amount that is representative of
a single transaction in that market at that time are offered by four
major banks in the London interbank market at approximately 11:00
A.M., London time, on the Interest Determination Date to prime banks
in the London interbank market. The calculation agent will select the
four banks and request the principal London office of each of those
banks to provide a quotation of its rate for deposits in United States
dollars. If at least two quotations are provided, LIBOR for that
Interest Determination Date will be the average of those quotations.
- If fewer than two quotations are provided as mentioned above,
LIBOR will be the average of the rates quoted by three major banks in
The City of New York
S-9
<PAGE>
selected by the calculation agent at approximately 11:00 A.M. in The
City of New York, on the Interest Determination Date for loans to
leading European banks in United States dollars having the Index
Maturity designated in the pricing supplement and in a principal
amount that is representative for a single transaction in United
States dollars in that market at that time. The calculation agent will
select the three banks referred to above.
- If fewer than three banks selected by the calculation agent are
quoting as mentioned above, LIBOR will remain LIBOR then in effect on
that Interest Determination Date.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is
designated in the applicable pricing supplement, the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
rates of major banks for United States dollars, or (b) if "LIBOR Telerate" is
designated in the applicable pricing supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for United States dollars. If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable pricing supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. For United States dollars,
LIBOR will be determined as if Page 3750 had been specified. "Page 3750" means
the display designated as page "3750" on the Bridge Telerate, Inc. (or such
other page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purposes of displaying London interbank offered rates for United States dollar
deposits).
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
The Senior Note Mortgage Bonds will be issued under the Mortgage
against property additions and/or previously retired First Mortgage Bonds. At
March 31, 1999, the Company had available property additions sufficient to
permit it to issue a maximum of approximately $361 million aggregate principal
amount of additional Senior Note Mortgage Bonds. In addition, the Company could
issue approximately $361 million aggregate principal amount of Senior Note
Mortgage Bonds on the basis of previously retired First Mortgage Bonds. See
"Description of Senior Note Mortgage Bonds -- Issuance of Additional First
Mortgage Bonds" in the accompanying prospectus.
At March 31, 1999, the Company had approximately $912 million of
retained earnings available for the declaration of payment of dividends on the
Company's common stock pursuant to the restrictions contained in the Mortgage,
as described under "Description of Senior Note Mortgage Bonds -- Dividend
Restrictions" in the accompanying prospectus.
S-10
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement between the Company and the Agents, the Notes are being offered on a
continuous basis by the Company through Morgan Stanley & Co. Incorporated and
J.P. Morgan Securities Inc. (individually, an "Agent" and collectively, the
"Agents"), who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited by
it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The company will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an order to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold; provided, however, that
commissions with respect to Notes maturing more than thirty years from the date
of issue will be negotiated.
The Company may sell Notes directly to investors. In this case, no
underwriters or agents would be involved. No commission will be payable on Notes
the Company sells directly to investors.
The Company may accept offers to purchase Notes through other agents
and may appoint additional agents for the purpose of soliciting offers to
purchase Notes, in either case on terms substantially identical to the terms
contained in the Distribution Agreement with the Agents. Any other additional
agents will be named in the applicable pricing supplement.
If the Company sells Notes to an Agent as principal, it will purchase
the Notes for its own account at a discount to be agreed upon by the Company and
the Agent at the time of sale. Unless otherwise stated in the applicable pricing
supplement, the discount will be within the range of .125% to .750% of the
principal amount per Note. The Agents may resell the Notes in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. In addition, the
Agents may offer Notes they have acquired as principal to other dealers. The
Agents may sell Notes to any dealer at a discount and that discount will not be
in excess of the discount received by the Agent from the Company, unless
specified in the applicable pricing supplement. The obligations of the Agents to
purchase the Notes as principal will be subject to certain conditions. After the
initial public offering of Notes to be resold to investors and other purchasers,
the public offering price and any discounts or concessions allowed or re-allowed
or paid to dealers may be changed from time to time.
The Agents may engage in transactions that stabilize, maintain or
otherwise affect the price of the Notes. Specifically, the Agents may overallot
in connection with the offering, creating a short position in the Notes for
their own account. In addition, to cover overallotments or to stabilize the
price of the Notes, the Agents may bid for, and purchase, the Notes, in the open
market. Finally, the Agents may reclaim selling concessions allowed to any agent
or a dealer for distributing the Notes in the offering, if the Agents repurchase
previously distributed Notes in transactions to cover syndicate short positions,
in stabilization.
S-11
<PAGE>
Underwriters, dealers and agents that participate in the distribution
of the Notes may be underwriters as defined in the Securities Act of 1933, as
amended (the "Act"), and any discounts or commissions received by them from the
Company and any profit on the resale of the Notes by them may be treated as
underwriting discounts and commissions under the Act. The Company has agreements
with the Agents to indemnify them against certain civil liabilities, including
liabilities under the Act, or to contribute with respect to payments which the
Agents may be required to make. The Agents may engage in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
their business.
The Company does not intend to apply for listing of the Notes on a
national securities exchange. The Agents have advised the Company that they
intend to make a market in the Notes, as permitted by applicable laws and
regulations. However, the Agents are not obligated to do so and may discontinue
making a market at any time. The Company cannot assure you as to the liquidity
of the trading market for the Notes.
S-12
<PAGE>
PROSPECTUS
$100,000,000
JERSEY CENTRAL POWER & LIGHT COMPANY
SENIOR NOTES
--------------------
Jersey Central Power & Light Company will be selling Senior Notes from
time to time in an amount not to exceed $100,000,000 pursuant to this prospectus
and supplements to this prospectus.
Each series of Senior Notes will be issued under a Senior Note
Indenture between us and United States Trust Company of New York, as senior note
trustee. Initially, the Senior Notes will be secured by one or more series of
our First Mortgage Bonds which will be issued and delivered to the senior note
trustee under our First Mortgage Bond Indenture dated as of March 1, 1946, as
amended and supplemented. However, on the date that the senior note trustee
holds 80% or more of all of our outstanding First Mortgage Bonds, the Senior
Notes will no longer be secured by any First Mortgage Bonds. At that time, the
Senior Notes will be unsecured obligations of Jersey Central Power & Light
Company and will rank equally with all of our other unsecured and unsubordinated
indebtedness.
We will provide the specific terms of each series of Senior Notes,
their offering prices and how they will be offered in supplements to this
prospectus. You should read this prospectus and any applicable supplement
carefully before you invest.
Our principal executive offices are located at 2800 Pottsville Pike,
Reading, Pennsylvania 19605 and our telephone number is (610) 929-3601.
--------------------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor have these
organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
--------------------
July 30, 1999
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may, from time to time through December 31, 2000,
sell the Senior Notes described in this prospectus in one or more offerings up
to a total dollar amount of $100,000,000. This prospectus provides you with a
general description of the Senior Notes. Each time we sell a series of Senior
Notes, we will provide you with a supplement to this prospectus that will
contain specific information about the terms of that series. Any supplement may
also add, update or change information contained in this prospectus. Before you
invest, you should read both this prospectus and any supplement to this
prospectus together with the additional information about us described under
"Where You Can Find More Information."
For more detailed information about the Senior Notes, you can read the
exhibits filed with the registration statement.
JERSEY CENTRAL POWER & LIGHT COMPANY
Jersey Central Power & Light Company (the "Company"), a public utility
furnishing electric service wholly within the State of New Jersey, is a
subsidiary of GPU, Inc., a holding company registered under the Public Utility
Holding Company Act of 1935. The Company provides retail electric service within
a territory located in northern, western and east central New Jersey having a
population of approximately 2.6 million. The Company's principal executive
offices are located at 2800 Pottsville Pike, Reading, Pennsylvania 19605, and
its telephone number is (610) 929-3601.
During 1998, residential sales accounted for about 45% of the Company's
operating revenues from customers and 41% of kilowatt-hour sales to customers;
commercial sales accounted for about 39% of the Company's operating revenues
from customers and 40% of kilowatt-hour sales to customers; industrial sales
accounted for about 15% of the Company's operating revenues from customers and
19% of kilowatt-hour sales to customers; and sales to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 1% of the Company's operating revenues from customers
and less than 1% of kilowatt-hour sales to customers. The revenues derived from
the 25 largest customers in the aggregate accounted for approximately 9% of
operating revenues from customers for the year 1998. The Company also makes
interchange and spot market sales of electricity to other utilities.
The electric generating and transmission facilities of the Company and
its affiliates, Pennsylvania Electric Company and Metropolitan Edison Company
(collectively doing business as "GPU Energy"), are physically interconnected and
are operated as a single integrated and coordinated system. The transmission
facilities of the integrated system are physically interconnected with
neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New
York and Ohio. The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection ("PJM") and the Mid-Atlantic Council, an organization providing
coordinated review of the planning by utilities in the PJM area. The
interconnection facilities are used for substantial capacity and energy
interchange and purchased power transactions as well as emergency assistance.
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WHERE YOU CAN FIND MORE INFORMATION
The Company, a New Jersey corporation, files annual, quarterly and
current reports and other information with the Securities and Exchange
Commission under File No. 1-3141. These Securities and Exchange Commission
filings are available to the public over the Internet at the Securities and
Exchange Commission's web site at http://www.sec.gov. You may also read and copy
any of these Securities and Exchange Commission filings at the Securities and
Exchange Commission's public reference room in Washington, D.C. located at 450
Fifth Street, N.W. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information about the operation of the public
reference room. Some of our securities are listed on the New York Stock Exchange
and such reports and other information can also be inspected and copied at the
offices of such exchange on the 7th Floor, 20 Broad Street, New York, New York.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus
and should be read with the same care. Information that we file later with the
Securities and Exchange Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Securities and Exchange Commission under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell
all of the Senior Notes described in this prospectus.
o Our Annual Report on Form 10-K for the year ended December 31, 1998.
o Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
o Our Current Reports on Form 8-K dated April 16, 1999 and May 26, 1999.
You may request a free copy of these filings by writing or telephoning
us at the following address: Jersey Central Power & Light Company, 2800
Pottsville Pike, Reading, Pennsylvania 19605, attention: Secretary. Our
telephone number is (610) 929-3601.
USE OF PROCEEDS
Except as shall otherwise be provided in a supplement to this
prospectus, the Company intends to use the net proceeds from the sale of the
Senior Notes offered from time to time:
o to redeem other outstanding securities of the Company, including first
mortgage bonds, preferred stock and preferred securities,
o to repay outstanding short-term bank loans or other unsecured indebtedness,
o for construction purposes and
o for other corporate purposes, including to reimburse the Company's treasury
for funds previously expended for the above purposes.
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The use of proceeds with respect to a particular series of Senior Notes will be
set forth in the related supplement to this prospectus.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's Ratio of Earnings to Fixed Charges for each of the
periods indicated was as follows:
YEARS ENDED DECEMBER 31, TWELVE MONTHS ENDED
- ---------------------------------------------- MARCH 31, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
- ---- ---- ---- ---- ---- -------------
3.09 3.44 2.89 3.57 4.01 4.08
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis,
the number of times earnings cover fixed charges. Earnings consist of net income
to which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and the interest portion of all rentals charged to income.
DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the
Senior Notes and the Senior Note Indenture (as defined below). Reference is made
to the Senior Note Indenture which is an exhibit to the registration statement
of which this prospectus forms a part.
GENERAL
The Senior Notes may be issued from time to time in one or more series
in amounts and on terms to be determined at or prior to the time or times of
sale, under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture"), between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Senior Note Indenture will be secured by one or more
series of the Company's Senior Note Mortgage Bonds (as defined below) issued and
delivered by the Company to the Senior Note Trustee. See "-- Security; Release
Date." ON THE RELEASE DATE, THE SENIOR NOTES WILL CEASE TO BE SECURED BY THE
SENIOR NOTE MORTGAGE BONDS, WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE
COMPANY AND WILL RANK ON A PARITY WITH OTHER UNSECURED AND UNSUBORDINATED
INDEBTEDNESS OF THE COMPANY. The Senior Note Indenture provides that prior to
the Release Date, the principal amount of the Senior Notes that may be issued
and outstanding cannot exceed the principal amount of the Senior Note Mortgage
Bonds then held by the Senior Note Trustee. See "Description of Senior Note
Mortgage Bonds -- Issuance of Additional First Mortgage Bonds."
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There is no requirement under the Senior Note Indenture that future
issues of debt securities of the Company be issued exclusively under the Senior
Note Indenture; accordingly, the Company will be free to employ other indentures
or documentation, containing provisions different from those included in the
Senior Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities.
There is no limitation on the amount of Senior Notes that may be issued
under the Senior Note Indenture. However, the Senior Note Indenture contains
certain restrictive covenants prohibiting the Company from (1) issuing,
assuming, guaranteeing or permitting to exist after the Release Date, so long as
any Senior Notes are outstanding, any secured debt without effectively securing
the Senior Notes equally and ratably with such secured debt, or (2) entering
into or permitting to exist certain sale/leaseback transactions, subject, in
each case, to certain exceptions described under "-- Certain Covenants of the
Company."
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that otherwise protects the holders in the event that
the Company incurs substantial additional indebtedness, whether or not in
connection with a change in control of the Company.
Reference is made to a supplement to this prospectus for a description
of the following terms of the series of Senior Notes in respect of which this
prospectus is being delivered, to the extent such terms supplement or differ
from the description of the Senior Notes contained in this prospectus: (1) the
designation of such Senior Notes; (2) the aggregate principal amount of such
Senior Notes; (3) the price (expressed as a percentage of principal amount) at
which such Senior Notes will be issued; (4) the date or dates on which the
principal of such Senior Notes is payable; (5) the rate or rates at which such
Senior Notes will bear interest, or method of calculation of such rate or rates,
the date or dates from which such interest will accrue, the dates on which such
interest will be payable ("Interest Payment Dates"), and the regular record
dates for the interest payable on such Interest Payment Dates ("Regular Record
Dates"); (6) the option, if any, of the Company to redeem such Senior Notes and
the period or periods within which, or the date or dates on which, the prices at
which and the terms and conditions upon which, such Senior Notes may be
redeemed, in whole or in part, upon the exercise of such option; (7) the
obligation, if any, of the Company to redeem or purchase such Senior Notes at
the option of the registered holder or pursuant to any sinking fund or analogous
provisions and the period or periods within which, or the date or dates on
which, the price or prices at which and the terms and conditions upon which,
such Senior Notes will be redeemed or purchased, in whole or in part, pursuant
to such obligation; (8) if prior to the Release Date, the designation of the
related series of Senior Note Mortgage Bonds being delivered to the Senior Note
Trustee in connection with the issuance of such Senior Notes; and (9) any other
terms of such Senior Notes not inconsistent with the Senior Note Indenture.
Unless otherwise indicated in a supplement to this prospectus, the
Senior Notes will be issued (1) in denominations of $1,000 and integral
multiples thereof, and (2) in book-entry only form and represented by one or
more Global Securities, as described under "-- Book-Entry Senior Notes."
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PAYMENT OF PRINCIPAL AND INTEREST
Until the Senior Notes are paid or payment thereof is provided for, the
Company will, at all times, maintain a paying agent (the "Paying Agent") in The
City of New York capable of performing the duties described herein to be
performed by the Paying Agent. The Company has initially appointed United States
Trust Company of New York, 114 West 47th Street, New York, New York 10036 as
Paying Agent. Any change in the Paying Agent or its address effected prior to
the issuance of any series of Senior Notes will be set forth in a supplement to
this prospectus. Thereafter, the Company will notify the holders of the Senior
Notes in accordance with the Senior Note Indenture of any change in the Paying
Agent or its address.
Each series of Senior Notes will bear interest from the later of (1)
the date such series is issued and authenticated (the "Original Issue Date") or
the date specified in such series or (2) the most recent date to which interest
has been paid or duly provided for with respect to such series, in each case at
the rate set forth in a supplement to this prospectus, until the principal
amount thereof is paid or made available for payment. Interest on each series of
Senior Notes will be payable on such Interest Payment Dates as are set forth in
a supplement to this prospectus and at maturity or upon earlier redemption;
provided, however, that the first Interest Payment Date for any series of Senior
Notes with an Original Issue Date between a Regular Record Date set forth in a
supplement to this prospectus and an Interest Payment Date will be the Interest
Payment Date following the next Regular Record Date. Each payment of interest in
respect of an Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date. Interest will be computed on the basis of
a 360-day year of twelve 30-day months (and for any partial periods shall be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months).
Interest payable on any Interest Payment Date will be paid to the
person in whose name a Senior Note is registered at the close of business on the
Record Date next preceding such Interest Payment Date; provided, however, that
interest payable at maturity or upon earlier redemption will be payable to the
person to whom principal shall be payable.
Any payment required to be made in respect of a Senior Note on a date
that is not a Business Day 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 such
date, and no additional interest shall accrue as a result of such delayed
payment.
"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 Senior Note
Trustee is located, are obligated or authorized by law or executive order to
close.
Principal of, premium, if any, and interest on any series of Senior
Notes represented by Global Securities will be paid in the manner described
under "--Book-Entry Senior Notes."
REDEMPTION PROVISIONS
Except as shall otherwise be provided in a supplement to this
prospectus, each series of Senior Notes will be redeemable, as a whole or in
part, at the Company's option, at any time or from time to time, prior to the
maturity of such series, on at least 30 days, but not more than 60
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days, prior notice mailed to the registered address of each holder of the such
series. The redemption prices will be equal to the greater of (1) 100% of the
principal amount of the series of Senior Notes to be redeemed or (2) as
determined by an Independent Investment Banker (as defined below), the sum of
the present values of the Remaining Scheduled Payments (as defined below)
discounted (for purposes of determining such present value), on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months), at a
discount rate equal to the sum of the Treasury Rate (as defined below) and a
number of basis points to be set forth in a supplement to this prospectus.
In each case, accrued interest on such series of Senior Notes to be
redeemed will be payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the series of Senior Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such series. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Senior Note Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations. "Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date, the average, as
determined by the Senior Note Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Senior Note Trustee by such Reference
Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day
preceding such redemption date.
"Reference Treasury Dealer" means such nationally recognized investment
banking firms that are primary U.S. Government securities dealers as are set
forth in a supplement to this prospectus.
"Remaining Scheduled Payments" means, with respect to each series of
Senior Note to be redeemed, the remaining scheduled payments of principal of and
interest on such series that would be due after the related redemption date but
for such redemption. If such redemption date is not an Interest Payment Date
with respect to such series, the amount of the next succeeding scheduled
interest payment on such series will be reduced by the amount of interest
accrued on such series to such redemption date.
On and after the redemption date, interest will cease to accrue on the
series of Senior Notes or any portion of thereof called for redemption (unless
the Company does not deposit the money for the payment of the redemption price
and accrued interest pursuant to the next succeeding
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paragraph). If less than all the Senior Notes of any series are to be redeemed,
the Senior Notes of such series to be redeemed shall be selected by the Senior
Note Trustee by such method as it shall deem fair and appropriate.
Any notice of redemption at the option of the Company shall state that
such redemption will be conditional upon receipt by the Senior Note Trustee (or
a Paying Agent), on or prior to the date fixed for such redemption, of money
sufficient to pay the principal of and premium, if any, and interest on such
series of Senior Notes and that if such money has not been so received, such
notice will be of no force and effect and the Company will not be required to
redeem such series of Senior Notes.
Except as shall otherwise be provided in a supplement to this
prospectus, the Senior Notes will not be subject to a sinking fund.
The Company may at any time purchase Senior Notes at any price in the
open market or otherwise. Senior Notes so purchased by the Company may be
surrendered to the Senior Note Trustee for cancellation.
SECURITY; RELEASE DATE
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds (the "Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see "Description
of Senior Note Mortgage Bonds"). Upon the issuance of a series of Senior Notes
prior to the Release Date, the Company will simultaneously issue and deliver to
the Senior Note Trustee, as security for all the Senior Notes, a series of
Senior Note Mortgage Bonds that will have the same stated maturity date and
corresponding redemption provisions, and will be in the same aggregate principal
amount and have the same interest rate as the corresponding series of Senior
Notes being issued. Any payment by the Company to the Senior Note Trustee of
principal of, premium, if any, and interest on, a series of Senior Note Mortgage
Bonds will be applied by the Senior Note Trustee to satisfy the Company's
obligations with respect to principal of, premium, if any, and interest on, the
related series of Senior Notes. Under certain circumstances, the First Mortgage
Bonds are mandatorily redeemable by the Company in the event of the sale of all
or substantially all of the Company's properties. In such event, the Release
Date will occur and the Senior Notes will remain outstanding as unsecured
obligations of the Company. See "Description of Senior Note Mortgage Bonds--
Kind and Priority of Lien."
THE RELEASE DATE WILL BE THE EARLIER OF (1) THE DATE THAT ALL FIRST
MORTGAGE BONDS (AS DEFINED HEREIN), OTHER THAN THE SENIOR NOTE MORTGAGE BONDS,
HAVE BEEN RETIRED (WHETHER AT, BEFORE OR AFTER THE MATURITY THEREOF) THROUGH
PAYMENT, REDEMPTION, PURCHASE, DEFEASANCE OR OTHERWISE, AND (2) THE DATE UPON
WHICH THE SENIOR NOTE TRUSTEE HOLDS SENIOR NOTE MORTGAGE BONDS CONSTITUTING NOT
LESS THAN 80% IN AGGREGATE PRINCIPAL AMOUNT OF ALL OUTSTANDING FIRST MORTGAGE
BONDS. ON THE RELEASE DATE, THE SENIOR NOTE TRUSTEE WILL DELIVER TO THE COMPANY
FOR CANCELLATION ALL SENIOR NOTE MORTGAGE BONDS AND, NOT LATER THAN 30 DAYS
THEREAFTER, WILL PROVIDE NOTICE TO ALL HOLDERS OF THE SENIOR NOTES OF THE
OCCURRENCE OF THE RELEASE DATE. AS A RESULT, ON THE RELEASE DATE, THE SENIOR
NOTE MORTGAGE BONDS SHALL CEASE TO SECURE THE SENIOR NOTES AND THE SENIOR NOTES
WILL BECOME UNSECURED AND UNSUBORDINATED GENERAL OBLIGATIONS OF THE COMPANY.
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Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of the Company, all of which are secured by a first lien on
substantially all of the Company's property. See "Description of Senior Note
Mortgage Bonds - Kind and Priority of Lien." Upon the payment or cancellation of
any outstanding Senior Notes, the Senior Note Trustee shall surrender to the
Company for cancellation an equal principal amount of the related series of
Senior Note Mortgage Bonds. The Company shall not permit, at any time prior to
the Release Date, the aggregate principal amount of Senior Note Mortgage Bonds
held by the Senior Note Trustee to be less than the aggregate principal amount
of the Senior Notes then outstanding. After the issuance of the first series of
Senior Notes under the Senior Note Indenture, no additional First Mortgage Bonds
will be issued by the Company under the Mortgage (as defined herein) other than
as collateral security for the Senior Notes.
EVENTS OF DEFAULT
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due and payable which continues for 60 days; (c) default in the
performance or breach of any other covenant or agreement of the Company in the
Senior Notes or in the Senior Note Indenture and the continuation thereof for 90
days after written notice thereof to the Company by the Senior Note Trustee or
the holders of at least 33% in aggregate principal amount of the outstanding
Senior Notes; (d) prior to the Release Date, the occurrence of a "completed
default" as defined under the Mortgage; provided, however, that the waiver or
cure of such default and the recision and annulment of the consequences thereof
under the Mortgage shall constitute a waiver of the corresponding event of
default under the Senior Note Indenture and a recision and annulment of the
consequences thereof under the Senior Note Indenture; and (e) certain events of
bankruptcy, insolvency, reorganization, assignment or receivership of the
Company.
If an event of default under the Senior Note Indenture occurs and is
continuing, either the Senior Note Trustee or the holders of a majority in
aggregate principal amount of the outstanding Senior Notes may declare, by
notice in writing, the principal of and interest on all Senior Notes to be due
and payable immediately. Upon such acceleration of the Senior Notes, the Senior
Note Mortgage Bonds shall be immediately redeemable upon demand of the Senior
Note Trustee (and surrender thereof to the Mortgage Trustee, as herein defined)
at a redemption price of 100% of the principal amount thereof, together with
interest to the redemption date. See "Description of Senior Note Mortgage Bonds
- - Redemption Provisions of Senior Note Mortgage Bonds." At any time after an
acceleration of the Senior Notes has been declared (and provided the
acceleration of all Senior Note Mortgage Bonds has not occurred), if the Company
pays or deposits with the Senior Note Trustee a sum sufficient to pay all
matured installments of interest and the principal and any premium which has
become due on the Senior Notes otherwise than by acceleration and all defaults
shall have been cured or waived, then such payment or deposit will cause an
automatic rescission and annulment of the acceleration of the Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee
generally will be under no obligation to exercise any of its rights or powers
under the Senior Note Indenture at the request or direction of any of the
holders of the Senior Notes unless such holders have offered to the Senior Note
Trustee reasonable security or indemnity. Subject to such provisions for
indemnity and certain other limitations contained in the Senior Note Indenture,
the holders of a
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majority in aggregate principal amount of the outstanding Senior Notes generally
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Note Trustee, or of exercising
any trust or power conferred on the Senior Note Trustee. The holders of a
majority in aggregate principal amount of the outstanding Senior Notes generally
will have the right to waive any past default or event of default (other than a
payment default) on behalf of all holders of the Senior Notes. The Senior Note
Indenture provides that no holder of the Senior Notes may institute any action
against the Company under the Senior Note Indenture unless such holder
previously shall have given to the Senior Note Trustee written notice of an
event of default and continuance thereof and unless the holders of a majority in
aggregate principal amount of the Senior Notes then outstanding affected by such
event of default shall have requested the Senior Note Trustee to institute such
action and shall have offered the Senior Note Trustee reasonable indemnity, and
the Senior Note Trustee shall not have instituted such action within 60 days of
such request. Furthermore, no holder of the Senior Notes will be entitled to
institute any such action if and to the extent that such action would disturb or
prejudice the rights of other holders of the Senior Notes. Notwithstanding that
the right of a holder of the Senior Notes to institute a proceeding with respect
to the Senior Note Indenture is subject to certain conditions precedent, each
holder of a Senior Note has the right, which is absolute and unconditional, to
receive payment of the principal of, and premium, if any, and interest on such
Senior Note when due and to institute suit for the enforcement of any such
payment, and such rights may not be impaired without the consent of such holders
of Senior Notes. The Senior Note Indenture provides that the Senior Note
Trustee, within 90 days after the occurrence of a default with respect to the
Senior Notes, is required to give holders of the Senior Notes notice of any
default known to the Senior Note Trustee, unless cured or waived, but, except in
the case of default in the payment of principal of, or premium, if any, or
interest on, any Senior Notes, the Senior Note Trustee may withhold such notice
if it determines in good faith that it is in the interest of such holders to do
so. The Company is required to deliver to the Senior Note Trustee each year an
officer's certificate as to whether or not the Company is in compliance with the
conditions and covenants under the Senior Note Indenture.
BOOK-ENTRY SENIOR NOTES
Except as shall otherwise be provided in a supplement to this
prospectus, the Senior Notes will be issued in book-entry only form (each Senior
Note so issued, a "Book-Entry Senior Note"), and will be represented by one or
more registered Global Securities (each, a "Global Security") that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") or such other Depository which may replace DTC as Depository for
the Book-Entry Senior Notes (the "Depository"), and registered in the name of a
nominee of the Depository.
Upon issuance, all Book-Entry Senior Notes of the same series will be
represented by one Global Security. Except under the circumstances described
below, Book-Entry Senior Notes will not be exchangeable for Senior Notes in
certificated form and will not otherwise be issuable in certificated form.
If the Depository notifies the Company that it is at any time unwilling
or unable to continue as Depository and a successor Depository is not appointed
within 90 days after receipt of such notice, the Company will cause to be issued
Senior Notes in certificated form ("Certificated Senior Notes") in exchange for
the Global Security or Global Securities representing the corresponding
Book-Entry Senior Notes. In addition, the Company may at any time and in its
sole discretion
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determine not to have any Book-Entry Senior Notes represented by one or more
Global Securities and, in such event, will cause to be issued individual
Certificated Senior Notes in exchange for the Global Security or Global
Securities representing the corresponding Book-Entry Senior Notes. Lastly,
within seven days of the occurrence of an event of default under the Senior Note
Indenture, the Company will cause to be issued Certificated Senior Notes in
exchange for the Global Security or Securities representing the corresponding
Book-Entry Senior Notes. In any such instance, a beneficial owner of a
Book-Entry Senior Note represented by a Global Security will be entitled to
physical delivery of Certificated Senior Notes equal in principal amount to such
Book-Entry Senior Note and to have such Certificated Senior Notes registered in
its name.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934 (the
"Exchange Act"). DTC holds securities that its participants ("Direct
Participants") deposit with DTC. DTC also facilitates the settlement
among Direct Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the
need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC
is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants" and, together with Direct
Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Senior Notes represented by Global
Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for such purchases of
Book-Entry Senior Notes on DTC's records. The ownership interest of
each actual purchaser of each Book-Entry Senior Note represented by a
Global Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in
the Book-Entry Senior Notes represented by Global Securities are to be
accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Book-Entry
Senior Notes represented by Global Securities, except in the event that
use of the book-entry system for such Book-Entry Senior Notes is
discontinued.
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To facilitate subsequent transfers, all Global Securities
deposited with, or on behalf of, DTC are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of Global Securities
with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Book-Entry Senior Notes represented by Global
Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Book-Entry Senior Notes are
credited which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to
time.
Redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Senior Notes having the same Original Issue Date
and other terms are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant to be so
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect
to the Book-Entry Senior Notes represented by Global Securities. Under
its usual procedures, DTC mails an Omnibus Proxy to the Company as soon
as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Senior Notes represented by Global Securities
are credited on the applicable record date (identified in a listing
attached to the Omnibus Proxy).
Principal and any premium and/or interest payments on the
Book-Entry Senior Notes represented by Global Securities will be made
to DTC in immediately available funds. DTC's practice is to credit
Direct Participants' accounts on the date on which interest is payable
in accordance with the respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form
or registered in "street name", and will be the responsibility of such
Participant and not of DTC, the underwriters, dealers or agents or the
Company, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and any premium
and/or interest to DTC is the responsibility of the Company and the
Senior Note Trustee. Disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities
Depository with respect to the Book-Entry Senior Notes at any time by
giving reasonable notice to the Company and the Senior Note Trustee.
Under such circumstances, in the event that a successor securities
Depository is not obtained, Senior Notes in certificated form are
required to be printed and delivered in exchange for Book-Entry Senior
Notes held by DTC.
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The Company may decide to discontinue use of the system and
book-entry transfers through DTC (or a successor securities
Depository). In that event, Senior Notes in certificated form will be
printed and delivered in exchange for Book-Entry Senior Notes held by
DTC.
So long as Cede & Co. is the registered owner of any series of
Book-Entry Senior Notes, as nominee of DTC, reference herein to holders
of such series of Book-Entry Senior Notes shall mean Cede & Co. or DTC
and shall not mean the Beneficial Owners of the Book-Entry Senior
Notes.
Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are dependent
upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed Direct
Participants and Indirect Participants and other members of the
financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement of
trades within DTC, continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which
is complete. Additionally, DTC's plan includes a testing phase, which
is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is
also dependent upon other parties, including, but not limited to,
issuers and their agents, as well as DTC's Direct Participants and
Indirect Participants, third party vendors from whom DTC licenses
software and hardware, and third party vendors on whom DTC relies for
information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has
informed the Industry that it is contacting (and will continue to
contact) third party vendors from whom DTC acquires services to: (1)
impress upon them the importance of such services being Year 2000
compliant; and (2) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as
it deems appropriate.
According to DTC, the information in the preceding two
paragraphs with respect to DTC has been provided to the Industry for
informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources (including DTC) that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
The underwriters, dealers or agents of any Senior Notes may be Direct
Participants of DTC.
NONE OF THE COMPANY, THE SENIOR NOTE TRUSTEE, ANY UNDERWRITERS, AGENTS
OR DEALERS OR ANY AGENT FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE
OF ANY GLOBAL SECURITY WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT
OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS
IN SUCH GLOBAL SECURITY OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS
RELATING TO SUCH BENEFICIAL INTERESTS.
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MODIFICATION WITH CONSENT OF HOLDERS
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change the coin or currency of any payment of principal of, or
premium, if any, or interest on, any Senior Note; (e) change the date on which
any Senior Note may be redeemed or repaid at the option of the holder thereof or
adversely affect the rights of a holder to institute suit for the enforcement of
any payment on or with respect to any Senior Note; (f) impair the interest of
the Senior Note Trustee in the Senior Note Mortgage Bonds held by it or, prior
to the Release Date, reduce the principal amount of any series of Senior Note
Mortgage Bonds securing the Senior Notes to an amount less than the principal
amount of the related series of Senior Notes or alter the payment provisions of
such Senior Note Mortgage Bonds in a manner adverse to the holders of the Senior
Notes; or (g) modify the foregoing requirements or reduce the percentage of
outstanding Senior Notes necessary to modify or amend the Senior Note Indenture
or to waive any past default to less than a majority.
MODIFICATION WITHOUT CONSENT OF HOLDERS
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee without the consent of the holders
(a) to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add further security for the Senior Notes; (c) to supply omissions, cure
ambiguities or correct defects, which actions, in each case, are not prejudicial
to the interest of the holders in any material respect; or (d) to make any other
change that is not prejudicial to the holders of the Senior Notes in any
material respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
DEFEASANCE AND DISCHARGE
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for the benefit of
the holders of Senior Notes, money or certain United States government
obligations, or any combination thereof, which will provide money in an amount
sufficient, without reinvestment, to make all
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payments of principal of, premium, if any, and interest on, the Senior Notes on
the dates such payments are due in accordance with the terms of the Senior Note
Indenture and the Senior Notes; provided that unless all of the Senior Notes
mature within 90 days of such deposit by redemption or otherwise, the Company
shall also have delivered to the Senior Note Trustee an opinion of counsel to
the effect that the Company has received from, or there has been published 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 Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or discharge of the
Senior Note Indenture. Thereafter, the holders of the Senior Notes may look only
to such deposit for payment of the principal of, and interest and any premium
on, the Senior Notes.
If the Company makes the deposit of cash or certain United States
government obligations referred to above with respect to one or more series of
Senior Notes, and otherwise complies with the requirements of the Senior Note
Indenture (except that the opinion of counsel referred to above need not be
based upon an External Tax Pronouncement), then the Company shall be released
with respect to such series of Senior Notes from its obligations described under
"-- Certain Covenants of the Company -- Limitation on Liens" and "-- Limitation
of Sale and Lease-Back Transactions" and "-- Consolidation, Merger and Sale or
Disposition of Assets."
CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company may not consolidate with or merge into any other
corporation or sell or otherwise dispose of its properties as or substantially
as an entirety to any person unless (1) the successor or transferee corporation
or the person that receives such properties pursuant to such sale, transfer or
other disposition shall be a corporation or other entity organized and existing
under the laws of the United States or any state thereof or the District of
Columbia, (2) the successor or transferee entity assumes by supplemental
indenture the due and punctual payment of the principal of and premium, if any,
and interest on all the Senior Notes and the performance of every covenant of
the Senior Note Indenture to be performed or observed by the Company; and (3) if
prior to the Release Date, the successor or transferee corporation or the person
that receives such properties pursuant to such sale, transfer or other
disposition assumes the Company's obligations under the Mortgage with respect to
the Senior Note Mortgage Bonds. Upon any such consolidation, merger, sale,
transfer or other disposition of the properties of the Company substantially as
an entirety, the successor corporation formed by such consolidation or into
which the Company is merged or the person 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 the Senior Note Indenture with the
same effect as if such successor corporation or person had been named as the
Company therein, and the Company will be released from all obligations under the
Senior Note Indenture. For purposes of the Senior Note Indenture, the conveyance
or other transfer by the Company of (1) all or any portion of its facilities for
the generation of electric energy or (2) all of its facilities for the
transmission of electric energy, in each case considered alone or in any
combination with properties described in the 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.
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CERTAIN COVENANTS OF THE COMPANY
Limitation on Liens
The Senior Note Indenture provides that, so long as any such Senior
Notes are outstanding, the Company may not issue, assume, guarantee or permit to
exist after the Release Date any Debt (as defined below) that is secured by any
mortgage, security interest, pledge or lien ("Lien") of or upon any Operating
Property (as defined below) of the Company, whether owned at the date of the
Senior Note Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking equally with the Senior
Notes) equally and ratably with such Debt (but only so long as such Debt is so
secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the cost of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure any Debt 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 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) 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 substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Mortgage permitted by the Senior Note Indenture; (6) Liens to secure payment of
compensation to the Senior Note Trustee as provided in the Senior Note
Indenture; (7) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
clauses (1) through (6), provided, however, that the principal amount of Debt
secured thereby and not otherwise authorized by said clauses (1) to (6),
inclusive, shall not exceed the principal amount of 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. However, the
foregoing restrictions will not apply to the issuance, assumption or guarantee
by the Company of Debt secured by a Lien which would otherwise be subject to the
foregoing restrictions up to an aggregate amount which, together with all other
secured Debt of the Company (not including secured Debt permitted under any of
the foregoing exceptions) and the Value (as defined below) of Sale and
Lease-Back Transactions (as defined below) existing at such time (other than
Sale and Lease-Back Transactions the proceeds of which have been applied to the
retirement of certain indebtedness, Sale and Lease-Back Transactions in which
the property involved would have been permitted to be subjected to a Lien under
any of the foregoing exceptions in clauses (1) to (7) and Sale and Lease-Back
Transactions that are permitted by the first sentence of "--Limitations on Sale
and Lease-Back Transactions"
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below), does not exceed the greater of 15% of Tangible Assets and 15% of
Capitalization (as such terms are defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist after the Release
Date any Sale and Lease-Back Transaction with respect to any Operating Property
(except for transactions involving leases for a term, including renewals, of not
more than 48 months), if the purchasers' commitment is obtained more than 18
months after the later of the completion of the acquisition, construction or
development of such Operating Property or the placing in operation of such
Operating Property or of such Operating Property as constructed or developed or
substantially repaired, altered or improved. This restriction will not apply if
(a) the Company would be entitled pursuant to any of the provisions described in
clauses (1) to (7) of the first sentence of the second paragraph under
"--Limitation on Liens" above to issue, assume, guarantee or permit to exist
Debt secured by a Lien on such Operating Property without equally and ratably
securing the Senior Notes, (b) after giving effect to such Sale and Lease-Back
Transaction, the Company could incur pursuant to the provisions described in the
second sentence of the second paragraph under "--Limitation on Liens", at least
$1.00 of additional Debt secured by Liens (other than Liens permitted by clause
(a)), or (c) the Company applies within 180 days an amount equal to, in the case
of a sale or transfer for cash, the net proceeds (not exceeding the net book
value), and, otherwise, an amount equal to the fair value (as determined by its
Board of Directors) of the Operating Property so leased, to the retirement of
Senior Notes or other Debt of the Company ranking equally with the Senior Notes,
subject to reduction for Senior Notes and such Debt retired during such 180-day
period otherwise than pursuant to mandatory sinking fund or prepayment
provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing
on, or included in, the consolidated balance sheet of the Company: (1)
liabilities for Debt maturing more than 12 months from the date of
determination; and (2) common stock, preferred stock, Hybrid Preferred
Securities (as defined in the Senior Note Indenture), 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 reacquired by the Company. Subject to the
foregoing, "Capitalization" shall be determined in accordance with generally
accepted accounting principles ("GAAP") and practices applicable to the type of
business in which the Company is engaged and that are approved by independent
accountants regularly retained by the Company, and may be determined as of a
date not more than 60 days prior to the happening of an event for which such
determination is being made.
"Debt" means any outstanding debt of the Company for money borrowed
evidenced by notes, debentures, bonds or other securities, or guarantees of any
thereof.
"Operating Property" means (1) any interest in real property owned by
the Company and (2) 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 any lease (except for a lease that results
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from a Sale and Lease-Back Transaction) which has been or would be capitalized
on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 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-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (1) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense, and (2)
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 that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (1) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, and (2) the net book value of such property, as
determined by the Company in accordance with GAAP, 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.
VOTING OF SENIOR NOTE MORTGAGE BONDS HELD BY SENIOR NOTE TRUSTEE
The Senior Note Trustee, as the holder of Senior Note Mortgage Bonds,
will attend any meeting of bondholders under the Mortgage, or, at its option,
will deliver its proxy in connection therewith relating to matters with respect
to which it is entitled to vote or consent.
The Senior Note Trustee shall vote all Senior Note Mortgage Bonds then
held by it or consent with respect thereto, proportionately with the vote or
consent of the holders of all other First Mortgage Bonds outstanding under the
Mortgage, the holders of which are eligible to vote or consent; provided,
however, that the Senior Note Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were an
amendment or modification of the Senior Note Indenture, would require the
consent of the holders of Senior Notes as described under "-- Modification With
Consent of Holders," without the prior consent of holders of Senior Notes which
would be required for such an amendment or modification of the Senior Note
Indenture.
RESIGNATION OR REMOVAL OF SENIOR NOTE TRUSTEE
The Senior Note Trustee may resign at any time upon written notice to
the Company specifying the day upon which the resignation is to take effect and
such resignation will take
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effect immediately upon the later of the appointment of a successor Senior Note
Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
CONCERNING THE SENIOR NOTE TRUSTEE
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture and the Mortgage Trustee under the Mortgage. The
Senior Note Indenture provides that the Company's obligations to compensate the
Senior Note Trustee and reimburse the Senior Note Trustee for expenses,
disbursements and advances will constitute indebtedness which will be secured by
a lien generally prior to that of the Senior Notes upon all property and funds
held or collected by the Senior Note Trustee as such. The Senior Note Indenture
provides that the Senior Note Trustee shall be subject to and shall comply with
the provisions of Section 310(b) of the Trust Indenture Act of 1939, as amended,
and that nothing in the Senior Note Indenture shall be deemed to prohibit the
Senior Note Trustee or the Company from making any application permitted
pursuant to such section.
GOVERNING LAW
The Senior Note Indenture and each Senior Note will be governed by New
York law.
DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
GENERAL
Each series of Senior Note Mortgage Bonds will be a series of first
mortgage bonds (the "First Mortgage Bonds") to be issued under and secured by
the Company's Indenture dated as of March 1, 1946 between the Company and United
States Trust Company of New York, as successor trustee (the "Mortgage Trustee"),
as heretofore amended and supplemented, and to be further amended and
supplemented by one or more Supplemental Indentures with respect to the Senior
Note Mortgage Bonds (collectively, the "Mortgage"). The statements herein
concerning the First Mortgage Bonds and the Mortgage are summaries and do not
purport to be complete. They may make use of defined terms and are subject to,
and qualified in their entirety by, all of the provisions of the Mortgage, which
is incorporated herein by reference.
The Senior Note Mortgage Bonds will be issued as security for the
Company's obligations under the Senior Note Indenture and will be immediately
delivered to, and registered in the name of, the Senior Note Trustee. The Senior
Note Indenture provides that the Senior Note Trustee shall not transfer any
Senior Note Mortgage Bonds except (1) to a successor trustee, (2)
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to the Company (as provided in the Senior Note Indenture) or (3) in compliance
with a court order in connection with a bankruptcy or reorganization proceeding
of the Company. The Senior Note Trustee shall generally vote the Senior Note
Mortgage Bonds proportionately with what it believes to be the vote of the
holders of all other First Mortgage Bonds then outstanding, as described under
"Description of Senior Notes - Voting of Senior Note Mortgage Bonds Held by
Senior Note Trustee."
The Senior Note Mortgage Bonds will correspond to the corresponding
series of Senior Notes in respect of principal amount, interest rate, maturity
date and redemption provisions. Upon payment of the principal of or premium, if
any, or interest on the Senior Notes, Senior Note Mortgage Bonds of the
corresponding series in a principal amount equal to the principal amount of such
Senior Notes will, to the extent of such payment of principal, premium or
interest, be deemed fully paid and the obligation of the Company to make such
payment shall be discharged.
At March 31, 1999, the Company had outstanding $1,173.5 million in
principal amount of First Mortgage Bonds issued under the Mortgage.
REDEMPTION PROVISIONS OF SENIOR NOTE MORTGAGE BONDS
The Senior Note Mortgage Bonds are not redeemable by operation of the
improvement fund or the maintenance provisions of the Mortgage or with the
proceeds of released property.
In the event of an event of default under the Senior Note Indenture and
acceleration of the Senior Notes, the Senior Note Mortgage Bonds will be
immediately redeemable in whole, upon demand of the Senior Note Trustee (and
surrender thereof to the Mortgage Trustee), at a redemption price of 100% of the
principal amount thereof, together with accrued interest to the redemption date.
See "Description of Senior Notes - Events of Default." If all of the Company's
common stock is acquired by a governmental body or instrumentality or
substantially all of the Company's property is released from the lien of the
Mortgage, and all First Mortgage Bonds (other than Senior Note Mortgage Bonds)
are redeemed in accordance with Section 8.08 of the Mortgage, the Senior Note
Mortgage Bonds shall be redeemed by the surrender thereof by the Senior Note
Trustee to the Mortgage Trustee for cancellation. Upon such surrender and
redemption, the Release Date will occur and the Senior Notes will remain
outstanding as unsecured obligations of the Company.
KIND AND PRIORITY OF LIEN
The Senior Note Mortgage Bonds and all First Mortgage Bonds outstanding
under the Mortgage will be equally and ratably secured by a direct first lien on
substantially all of the Company's property (except certain real estate not
necessary or appropriate for the Company's business; cash, contracts, choses in
action and securities not specifically subjected to the lien of the Mortgage;
certain equipment not installed as fixed property; merchandise and supplies
acquired, and electricity or products generated or purchased for resale; and
materials and supplies held for consumption), subject to excepted encumbrances,
matters of minor nature and the lien of the Trustee for compensation,
indemnified losses and expenses. The Mortgage provides for subjecting similar
after-acquired property to the lien thereof subject to certain restrictions upon
the acquisition
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of property subject to outstanding prior lien bonds which are effective so long
as the First Mortgage Bonds are outstanding.
In the event of a redemption of First Mortgage Bonds for cash under
Section 8.08 of the Mortgage (see "--Redemption Provisions of Senior Note
Mortgage Bonds"), the Senior Note Mortgage Bonds will be redeemed by the
surrender thereof by the Senior Note Trustee to the Mortgage Trustee for
cancellation and will not be redeemable for cash.
RELEASE AND SUBSTITUTION OF PROPERTY
Machinery, equipment, fixtures, appliances and other similar property
which is worn-out, obsolete or unnecessary for the operations of the Company may
be disposed of by the Company without a release by the Mortgage Trustee provided
that the Company replaces it with other property (not necessarily of the same
character) which is equal in value to the property so disposed of. Leases,
rights-of-way, franchises, licenses and permits may be abandoned, surrendered or
modified without a release by the Mortgage Trustee provided any changed or
substituted lease, right-of-way, franchise, license or permit is subject to the
lien of the Mortgage and any consideration received by the Company in connection
therewith must be deposited with the Mortgage Trustee. Such provisions do not
have a material effect on the Company's property. Mortgaged property, subject to
certain conditions, may be released upon substitution of cash or certain other
property of equivalent value and in certain other circumstances. Money received
by the Mortgage Trustee as the result of any release of property may be
withdrawn against, among other things, bondable value of property additions and
bonds previously issued and retired.
The Mortgage Trustee is required to report to bondholders within 90
days after the release of property of a value of 10% or more of the principal
amount of then outstanding First Mortgage Bonds, and annually as to all other
released property.
DIVIDEND RESTRICTIONS
The Mortgage restricts common stock dividends payable by the Company to
the amount of the Company's accumulated earned surplus less $1,729,154. The
amount available for declaration and payment of dividends on the Company's
common stock pursuant to this restriction will be contained in a supplement to
this prospectus.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
So long as the Company is not in default in the performance of any
covenant to be performed by it under the Mortgage and obtains all requisite
authorizations of governmental bodies, it may issue additional First Mortgage
Bonds to the extent of any one or more of the following: (1) 60% of the bondable
value of property additions; (2) the amount of refundable prior lien bonds
theretofore or then retired or deposited with the Mortgage Trustee, as provided
in the Mortgage; (3) the aggregate principal amount of certain bonds theretofore
or then retired; or (4) the amount of cash deposited with the Mortgage Trustee
against the issuance of First Mortgage Bonds.
First Mortgage Bonds may be issued pursuant to (1) and (4) above (and
pursuant to (2) and (3) above unless the interest charges on the retired
refundable prior lien bonds or retired First Mortgage Bonds to be the basis of
such issuance were included in a net earnings certificate
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previously furnished to the Mortgage Trustee) only if, for any period of twelve
consecutive months out of the fifteen calendar months preceding the first day of
the month involving the issuance of additional First Mortgage Bonds, net
earnings available for interest shall be at least two times the annual interest
requirements on the First Mortgage Bonds and all prior lien bonds then and to be
outstanding. Net earnings available for interest generally consists of the
excess of gross operating revenues over operating expenses (other than income
taxes), including provision for depreciation equal to the greater of (1) the
book provision for depreciation or (2) the "minimum provision for depreciation"
as outlined below under "Maintenance Fund", plus or minus net non-operating
income or loss with non-operating income limited to 5% of operating income.
Moreover, the Company's charter contains provisions limiting the ratio of
securities evidencing funded indebtedness and unsecured indebtedness to total
capitalization.
The principal amount of additional First Mortgage Bonds issuable
pursuant to these provisions will be contained in a supplement to this
prospectus.
SINKING AND IMPROVEMENT FUND
The supplemental indenture creating each series of First Mortgage Bonds
requires that, so long as any such First Mortgage Bonds are outstanding, the
Company will make annual sinking and improvement fund deposits equal to 1% of
the principal amount of First Mortgage Bonds (except First Mortgage Bonds issued
against retired First Mortgage Bonds) delivered by the Trustee prior to January
1 of the year of deposit. Deposits are to be made in cash, reduced by credits
elected by the Company for (1) 60% of bondable value of property additions and
(2) the principal amount of refundable prior lien bonds and certain bonds
previously issued and retired. Cash so deposited may be withdrawn upon the same
basis that a credit may be taken as set forth in the preceding sentence, or may
be applied to the payment, purchase or redemption of First Mortgage Bonds. The
Company met the 1998 sinking fund requirement through the application of
property additions. "Bondable value of property additions" means essentially (a)
the net difference between (1) the lesser of the cost or fair value to the
Company of property additions since January 1, 1946 and (2) all retirements of
property then or thereafter owned, taken at the lesser of original cost or fair
value, as certified to the Mortgage Trustee as property additions, or the
"minimum provision for depreciation", whichever is greater, after credit for
cash substituted for any such retired property, less (b) 10/6ths of the amount
of prior lien bonds having become refundable prior lien bonds and less (c) the
amount of the bondable value of property additions previously used for the
withdrawal of cash, the issuance of bonds or sinking fund credit.
Sinking fund cash amounting to $100,000 or more held by the Mortgage
Trustee on December 31 of any year must be applied to the retirement of First
Mortgage Bonds. The Company may direct the Mortgage Trustee to use sinking fund
cash held by it to purchase First Mortgage Bonds in the open market or to invite
tenders of First Mortgage Bonds to it. If cash held by the Mortgage Trustee is
applied to the purchase of First Mortgage Bonds at less than par, an amount
equal to such discount must be paid to the Company.
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MAINTENANCE FUND
The Company is required to make expenditures for property additions
and/or to deposit with the Mortgage Trustee, cash (less, at the option of the
Company, credit for refundable prior lien bonds and First Mortgage Bonds
theretofore or then retired) annually beginning in 1946, in an amount not less
than the "minimum provision for depreciation." All cash so deposited with the
Mortgage Trustee may, during the next succeeding three years, be withdrawn by
the Company to the extent that the amount not less than that expended for
property additions exceeds the "minimum provision for depreciation."
So long as any First Mortgage Bonds are outstanding, the term "minimum
provision for depreciation" with reference to any period after 1952 means an
amount equal to the greater of (i) 15% of the gross operating revenues derived
from bondable property during such period after deducting the aggregate cost of
electric energy and manufactured or natural gas purchased during such period for
resale in connection with the operation of bondable property, less the charges
to operating expense during such period for current repairs and maintenance of
bondable property, and (ii) an amount computed at the rate of 2.25% per annum as
applied to depreciable electric utility property for each year or portion
thereof embraced within such period.
MODIFICATION OR AMENDMENT OF MORTGAGE
Except as set forth in the next sentence, the rights of the bondholders
may be modified with the consent of the holders of 75% of the principal amount
of the First Mortgage Bonds of all series affected provided that no waiver of a
past default or the consequences thereof shall be effective unless approved by
the holders of not less than a majority of the principal amount of all the First
Mortgage Bonds at the time outstanding. However, no modification of the terms of
payment of principal, premium or interest and no modification permitting the
creation of additional prior or parity liens, reducing the percentage of the
principal amount of First Mortgage Bonds required for modification or depriving
the bondholders of the lien of the Mortgage, is effective against any bondholder
without such bondholder's consent.
DEFAULTS AND NOTICE THEREOF
Events of default include default in the payment of principal and
premium, if any, of any of the First Mortgage Bonds; default for 60 days in
payment of interest on any of the First Mortgage Bonds; default in the payment
of principal or interest continued beyond the period of grace on any prior lien
bonds; default, for 60 days after notice, in the performance of any covenant in
the Mortgage; and bankruptcy, insolvency or reorganization (under certain
circumstances) of the Company. The Mortgage Trustee may withhold notice to
bondholders of default (except default in payment of principal, premium,
interest or sinking and improvement fund installments) if its responsible
officers determine that it is in the interest of the bondholders to do so.
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CONCERNING THE MORTGAGE TRUSTEE
The Mortgage Trustee is permitted to engage in other transactions with
the Company, except that if it acquires any conflicting interest, as defined in
the Mortgage, it must eliminate it or resign and is required in certain cases to
share with the bondholders the benefits of payments received within four months
prior to default. The Mortgage Trustee is the Company's office or agency for the
payment and exchange of First Mortgage Bonds.
Direction by the holders of a majority in principal amount of the First
Mortgage Bonds then outstanding is necessary to require the Mortgage Trustee to
take action. The Mortgage Trustee may require reasonable indemnification before
being required to enforce the lien of the Mortgage. Holders of not less than 25%
in principal amount of outstanding First Mortgage Bonds or the Mortgage Trustee
may declare the principal and interest of all outstanding First Mortgage Bonds
due upon the occurrence of a completed default, but the holders of a majority in
principal amount of the outstanding First Mortgage Bonds may, under certain
circumstances including the curing of such default, annul any such declaration.
SATISFACTION AND DISCHARGE OF MORTGAGE
Upon the Company's making due provision for the payment of all of the
First Mortgage Bonds and paying all other sums due under the Mortgage, the
Mortgage shall cease to be of further effect and may be satisfied and discharged
of record.
EVIDENCE AS TO COMPLIANCE WITH MORTGAGE PROVISIONS
Compliance with the provisions of the Mortgage is evidenced by written
statements of Company officers or persons selected and paid by the Company. In
certain cases, opinions of counsel and certificates of an engineer, accountant,
appraiser or other expert (who in some instances must be independent) must be
furnished. The Mortgage requires that the Company furnish annually to the
Mortgage Trustee a certificate that the Company has complied with, and is not in
default under, the provisions of the Mortgage.
PLAN OF DISTRIBUTION
The Company may sell the Senior Notes: (1) directly to purchasers; (2)
to or through underwriters; or (3) through agents or dealers. The supplement to
this prospectus relating to each series of Senior Notes will set forth the terms
of the offering thereof, including the name or names of any such underwriters,
agents or dealers; the purchase price of and the net proceeds to the Company
from such sale; any underwriting discounts and commissions or agency fees and
other items constituting underwriters' or agents' compensation; the initial
public offering price; and any discounts or concessions allowed or reallowed or
paid to dealers. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in an offering, the Senior Notes will be
acquired by such underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Senior Notes may be offered to the public either
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through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering will be named in
a supplement to this prospectus relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such supplement. Unless otherwise set forth in a
supplement to this prospectus relating thereto, the obligations of the
underwriters to purchase the particular Senior Notes will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Senior Notes if any are purchased.
If dealers are utilized in a sale of Senior Notes, the Company will
sell such securities to the dealers as principal. The dealers may then resell
such Senior Notes to the public at varying prices to be determined by such
dealers at the time of resale. The names of the dealers and the terms of the
transaction will be set forth in a supplement to this prospectus relating
thereto.
The Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Senior Notes with respect to which this prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in a supplement to this prospectus relating thereto. Unless otherwise
indicated in a supplement to this prospectus, any such agent will be acting on a
best efforts basis for the period of its appointment.
Any underwriters utilized may engage in stabilizing transactions and
syndicate covering transactions in accordance with Rule 104 under the Exchange
Act. Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Senior Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Such stabilizing transactions and syndicate covering transactions may
cause the price of the Senior Notes to be higher than it would otherwise be in
the absence of such transactions.
Agents, dealers and underwriters may be entitled, under agreements
entered into with the Company, to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
Unless otherwise specified in a supplement to this prospectus, the
Senior Notes will not be listed on a national securities exchange. No assurance
can be given that any broker-dealer will make a market in any series of Senior
Notes, and, in any event, no assurance can be given as to the liquidity of the
trading market for any of the Senior Notes. A supplement to this prospectus will
state, if known, whether or not any broker-dealer intends to make a market in
the Senior Notes. If no such determination has been made, such supplement will
so state.
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LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Berlack,
Israels & Liberman LLP, New York, New York and for any underwriters, agents or
dealers by Winthrop, Stimson, Putnam & Roberts, New York, New York. Winthrop,
Stimson, Putnam & Roberts may rely on the opinion of Berlack, Israels & Liberman
LLP as to matters of New Jersey law. Attorneys of Berlack, Israels & Liberman
LLP own an aggregate of 14,560 shares of the Common Stock of the Company's
parent, GPU, Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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