Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
PENNSYLVANIA ELECTRIC COMPANY PENELEC CAPITAL, L.P.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
PENNSYLVANIA PENNSYLVANIA
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
25-071808 51-0355043
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
1001 Broad Street Mellon Bank Center
Johnstown, Pennsylvania 15907 Tenth and Market Streets
(814) 533-8111 Wilmington, Delaware 19801
(302) 654-5893
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
DON W. MYERS
Vice President and Treasurer
GPU Service Corporation
100 Interpace Parkway
Parsippany, New Jersey 07054-1149
(201) 263-6500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
WILLIAM C. MATTHEWS, ESQ. ROBERT C. GERLACH, ESQ.
Secretary and Corporate Counsel Ballard Spahr Andrews &
Pennsylvania Electric Company Ingersoll
1001 Broad Street 1735 Market Street
Johnstown, Pennsylvania 15907 Philadelphia, Pennsylvania
(610) 564-1800 19103
(814) 533-8111
DOUGLAS E. DAVIDSON, ESQ. CLIVE D. CONLEY, ESQ.
Berlack, Israels & Liberman Reid & Priest
120 West 45th Street 40 West 57th Street
New York, New York 10036-4003 New York, New York 10019
(212) 704-0100 (212) 603-2000
____________________
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Approximate date of commencement of proposed sale to the
public; to be determined by market conditions after the effective
date of this Registration Statement.
____________________
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box: / /
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
please check the following box: /X/
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate
Class of To Be Price Per Offering Amount Of
Securities To Registered Unit Price Registration
Be Registered (1) (1)(2)(3)(4) (1)(2)(3)(4) Fee(1)
Penelec
Capital, L.P.
limited
partner
interests
Pennsylvania
Electric
Company
Subordinated
Debentures
Pennsylvania
Electric
Company
Guarantee
with respect
to Penelec
Capital, L.P.
limited
partner
interests
Total $125,000,000 100% $125,000,000 $43,104
1) There are being registered hereunder limited partner interests
of Penelec Capital, L.P. with an aggregate initial offering
price not to exceed $125,000,000, plus up to $125,000,000
aggregate principal amount of Subordinated Debentures of
Pennsylvania Electric Company which may be distributed upon a
dissolution of Penelec Capital, L.P., for which no separate
consideration will be received. Pursuant to Rule 457(o) under
the Securities Act of 1933 which permits the registration fee
to be calculated on the basis of the maximum offering price of
all the securities listed, the table does not specify by each
class information as to the amount to be registered, proposed
<PAGE>
maximum offering price per unit or proposed maximum aggregate
offering price.
(2) Estimated solely for the purpose of determining the
registration fee.
(3) Exclusive of accrued interest and distributions, if any.
(4) No separate consideration will be received for Pennsylvania
Electric Company's Guarantee.
The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
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SUBJECT TO COMPLETION, DATED MAY , 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY , 1994
_________ Preferred Securities
Penelec Capital
__% Cumulative Monthly Income Preferred Securities ("MIPS"*),
Series A
(liquidation preference $25 per Preferred Security)
guaranteed to the extent set forth herein by
PENNSYLVANIA ELECTRIC COMPANY
__________________
The __% Cumulative Monthly Income Preferred Securities, Series
A (the "Series A Preferred Securities"), representing the limited
partner interests offered hereby, are being issued by Penelec
Capital, L.P., a limited partnership formed under the laws of the
State of Delaware ("Penelec Capital"). All of the general partner
interests in Penelec Capital are owned by Penelec Preferred
Capital, Inc. (the "General Partner"), a Delaware corporation and a
wholly owned subsidiary of Pennsylvania Electric Company, a
Pennsylvania corporation (the "Company"). Penelec Capital exists
for the sole purpose of issuing its partner interests and using the
proceeds thereof to purchase the Company's subordinated debentures.
The limited partner interests represented by the Series A Preferred
Securities will have a preference with respect to cash
distributions (hereinafter called "Dividends") and amounts payable
on liquidation over the general partner interests in Penelec
Capital. See "Description of Preferred Securities" in the
accompanying Prospectus.
Holders of the Series A Preferred Securities will be entitled
to receive cumulative preferential cash Dividends at an annual rate
of __% of the liquidation preference of $25 per Series A Preferred
Security, accruing from the date of original issuance and payable
monthly in arrears on the last day of each calendar month of each
year, commencing ___________, 1994. The payment of Dividends, to
the extent that Penelec Capital has sufficient cash on hand to
permit such payments and funds legally available therefor, and
payments on liquidation or redemption with respect to the Series A
Preferred Securities are guaranteed by the Company to the extent
set forth herein and in the accompanying Prospectus (the
"Guarantee"). See "Description of the Guarantee" in the
accompanying Prospectus. If the Company fails to make interest
payments on the ___% Subordinated Debentures, Series A ("Series A
Subordinated Debentures") purchased by Penelec Capital with the
proceeds of this offering, Penelec Capital will have insufficient
funds to pay Dividends on the Series A Preferred Securities, and
the Guarantee does not provide for payment by the Company directly
of Dividends for which Penelec Capital does not have sufficient
funds available. In such event, the remedy of a holder of Series A
Preferred Securities is to enforce Penelec Capital's rights under
the Series A Subordinated Debentures.
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The Series A Preferred Securities are redeemable at the option
of Penelec Capital, in whole or in part, from time to time, on or
after ___________, 1999, at $25 per Series A Preferred Security
plus any accumulated, unpaid and additional Dividends accrued
thereon to the date fixed for redemption (the "Redemption Price"),
and will be redeemed at such price from the proceeds of any
repayment or redemption of the Series A Subordinated Debentures.
See "Description of Preferred Securities-Mandatory Redemption;
Optional Redemption" in the accompanying Prospectus.
If at any time Penelec Capital or the Company, due to a change
in law or a pronouncement or decision interpreting or applying such
law, is or would be required to pay certain additional amounts or
to withhold or deduct certain amounts, the Series A Preferred
Securities are redeemable in whole or in part at the Redemption
Price at the option of Penelec Capital. In addition, upon the
occurrence of certain special events arising from a change in law
or a pronouncement or decision interpreting or applying such law,
the Series A Preferred Securities are redeemable in whole at the
Redemption Price at the option of Penelec Capital. Upon the
occurrence of such a special event, Penelec Capital may dissolve
and cause Series A Subordinated Debentures to be distributed to the
holders of the Series A Preferred Securities in liquidation of
their interests in Penelec Capital. See "Description of Preferred
Securities-Optional Redemption; Special Event Redemption or
Distribution" and "Description of Subordinated Debentures" in the
accompanying Prospectus. If the Series A Subordinated Debentures
are so distributed, the Company will use its best efforts to have
them listed on the same exchange on which the Series A Preferred
Securities are then listed.
In the event of the dissolution of Penelec Capital, the
holders of Series A Preferred Securities will be entitled to a
liquidation preference for each Series A Preferred Security of $25
plus any accumulated, unpaid and additional Dividends accrued
thereon to the date of payment, unless, in connection with such
dissolution, Series A Subordinated Debentures are distributed to
the holders of the Series A Preferred Securities. See "Description
of Preferred Securities-Liquidation Distribution" in the
accompanying Prospectus.
___________________
See "Certain Investment Considerations" for certain
considerations relevant to an investment in the Series A Preferred
Securities, including circumstances under which payment of
Dividends on the Series A Preferred Securities may be deferred.
___________________
Application will be made to list the Series A Preferred
Securities on the New York Stock Exchange.
___________________
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
____________________
Proceeds to
Initial Public Underwriting Penelec
Offering Price Commission(1) Capital (2)(3)
Per Series A
Preferred
Security..........$ (2) $
Total..............$ (2) $
________
(1) Penelec Capital and the Company have agreed to indemnify the
several Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting".
(2) In view of the fact that the proceeds of the sale of the
Series A Preferred Securities will ultimately be used to purchase
the Company's Series A Subordinated Debentures, the Company will
pay the Underwriters for their services the amount of $____ per
Series A Preferred Security (or $____ in the aggregate). See
"Underwriting".
(3) Expenses of the offering which are payable by the Company are
estimated to be $______.
The Series A Preferred Securities offered hereby are offered
severally by the Underwriters, as specified herein, subject to
receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of
certificates for the Series A Preferred Securities will be made
only in book-entry form through the facilities of The Depository
Trust Company on or about , 1994.
________
* An application has been filed by Goldman, Sachs & Co. with the
United States Patent and Trademark Office for the registration of
the MIPS servicemark.
Goldman, Sachs & Co.
__________________
The date of this Prospectus Supplement is , 1994.
<PAGE>
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
prospectus supplement shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such state.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
___________________
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<PAGE>
The following information concerning the Series A Preferred
Securities, the Guarantee and the Series A Subordinated Debentures
supplements and should be read in conjunction with the information
contained in the accompanying Prospectus. Capitalized terms used
in this Prospectus Supplement have the same meanings as in the
accompanying Prospectus.
PENELEC CAPITAL
Penelec Capital is a limited partnership formed under the laws
of the State of Delaware, all of the general partner interests in
which are owned by the General Partner, a wholly owned special
purpose subsidiary of the Company. Penelec Capital exists solely
for the purpose of issuing its partner interests and utilizing the
proceeds thereof to acquire the Company's Subordinated Debentures.
All of the business and affairs of Penelec Capital will be managed
by the General Partner, subject to Penelec Capital's Amended and
Restated Limited Partnership Agreement, which will be substantially
in the form filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus
form a part.
PENNSYLVANIA ELECTRIC COMPANY
The Company, a public utility furnishing electric service
wholly within the Commonwealth of Pennsylvania, is a subsidiary of
General Public Utilities Corporation ("GPU"), a holding company
registered under the Public Utility Holding Company Act of 1935.
The Company provides electric services within a territory located
in western, northern and south central Pennsylvania having a
population of about 1,500,000. The Company, as lessee of the
property of The Waverly Electric Light and Power Company, a
subsidiary, also serves a population of about 13,700 in Waverly,
New York. The Company is affiliated with Jersey Central Power &
Light Company and Metropolitan Edison Company, which are also
wholly owned subsidiaries of GPU.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Securities
should carefully review the information contained elsewhere in this
Prospectus Supplement and in the accompanying Prospectus and should
particularly consider the following matters:
Subordinate Obligations Under the Guarantee and the
Series A Subordinated Debentures. The Company's obligations
under the Guarantee and the Series A Subordinated Debentures
are subordinate and junior in right of payment to all present
and future Senior Indebtedness of the Company. At March 31,
1994, Senior Indebtedness of the Company aggregated
approximately $760,000,000. There are no terms in the Series
A Preferred Securities, the Series A Subordinated Debentures
or the Guarantee that limit the Company's ability to incur
additional indebtedness, including indebtedness that ranks
senior to the Series A Subordinated Debentures and the
Guarantee. See "Description of the Guarantee-Status of the
Guarantee" and "Description of the Subordinated Debentures-
Subordination" in the accompanying Prospectus.
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Option to Extend Interest Payment Period. The Company
has the right under the Indenture to extend the interest
payment period on the Series A Subordinated Debentures at any
time and from time to time to up to 60 consecutive months,
and, as a consequence, monthly Dividends on the Series A
Preferred Securities can be deferred by Penelec Capital during
any such extended interest payment period (but will continue
to accumulate, with Dividends accruing thereon at the rate
applicable to the Series A Preferred Securities). In the
event that the Company exercises its right to extend, the
Company may not declare or pay dividends on any shares of its
preferred or common stock until deferred interest on the
Series A Subordinated Debentures is paid in full. Penelec
Capital and the Company currently believe that the extension
of an interest payment period on the Series A Subordinated
Debentures is unlikely. See "Description of Preferred
Securities-Dividends" and "Description of the Subordinated
Debentures-Option to Extend Interest Payment Period" in the
accompanying Prospectus.
Should an extended interest payment period occur, Penelec
Capital will continue to accrue income for United States
federal income tax purposes with respect to such deferred
interest which income will be allocated, but not distributed,
to holders of Series A Preferred Securities. As a result,
such a holder will include such interest in gross income for
United States federal income tax purposes in advance of the
receipt of cash, and will not receive the cash related to such
income from Penelec Capital if such a holder disposes of the
Series A Preferred Securities prior to the record date for
payment of Dividends. See "United States Taxation-Potential
Extension of Interest Payment Period" in the accompanying
Prospectus.
Special Event Redemption or Distribution. Upon the
occurrence and continuation of a Tax Event arising from a
change in law or a pronouncement or decision interpreting or
applying such law (see "Description of Preferred Securities -
Special Event Redemption or Distribution" in the accompanying
Prospectus), the General Partner may elect to either (i)
redeem the Series A Preferred Securities in whole (and not in
part) or (ii) dissolve Penelec Capital and cause the Series A
Subordinated Debentures to be distributed to the holders of
the Series A Preferred Securities in liquidation of such
holders' interests in Penelec Capital; provided that Penelec
Capital shall have received an opinion of counsel (which may
be regular tax counsel to the Company or an affiliate but not
an employee thereof) to the effect that the holders of the
Series A Preferred Securities will not recognize any gain or
loss for federal income tax purposes as a result of such
dissolution and distribution. Alternatively, Penelec Capital
may elect to cause the Series A Preferred Securities to remain
outstanding. If an Investment Company Act Event (see
"Description of Preferred Securities - Special Event
Redemption or Distribution" in the accompanying Prospectus)
shall occur and be continuing, Penelec Capital must elect
either option (i) or (ii) above.
4
<PAGE>
In April 1994, the Internal Revenue Service ("IRS")
issued certain notices generally addressing the
characteristics which distinguish debt from equity for various
purposes under the federal income tax laws. In these notices,
the IRS indicated that transactions involving securities that,
like the securities offered hereunder, have both debt and
equity characteristics would be reviewed with scrutiny to
determine how they would be treated for tax purposes. Based
upon advice from Carter, Ledyard & Milburn, the Company's
special tax counsel, the Company believes that interest on the
Series A Subordinated Debentures will be deductible under the
tests referred to in these notices. If, however, the IRS
should subsequently issue a further official pronouncement, or
should there be a judicial decision, pursuant to which
interest on the Series A Subordinated Debentures would not be
deductible, Penelec Capital would have the option to redeem
the Series A Preferred Securities or to dissolve and cause
Series A Subordinated Debentures to be distributed to the
holders of the Series A Preferred Securities, as described
under "Description of Preferred Securities-Special Event
Redemption or Distribution" in the accompanying Prospectus.
USE OF PROCEEDS
The proceeds to be received by Penelec Capital from the sale
of the Series A Preferred Securities will be used to purchase
Series A Subordinated Debentures of the Company and will be applied
by the Company to the repayment of outstanding short-term debt, for
construction purposes and for other general corporate purposes,
including the redemption of outstanding senior securities pursuant
to the optional redemption provisions thereof, if economical.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
The following information should be read in conjunction with
the statements under "Description of Preferred Securities" in the
accompanying Prospectus.
Amount, Dividends, Redemption
An aggregate of _____________ Series A Preferred Securities,
having an aggregate stated liquidation preference of $____________,
are being offered hereby. Dividends on the Series A Preferred
Securities will be cumulative, will accrue from ____________, 1994
and will be payable monthly in arrears on the last day of each
calendar month of each year, commencing ______________, 1994,
except as otherwise described in the accompanying Prospectus.
The Dividends payable on each Series A Preferred Security will
be fixed at a rate per annum of __% of the $25 stated liquidation
preference thereof.
The Series A Preferred Securities will be redeemable at the
option of Penelec Capital, in whole or in part from time to time,
on or after _________________, 1999 at the Redemption Price. In
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addition, the Series A Preferred Securities are subject to
redemption at the Redemption Price under circumstances described
under "Description of Preferred Securities-Mandatory
Redemption;Optional Redemption; Special Event Redemption or
Distribution" in the accompanying Prospectus.
CERTAIN TERMS OF THE SERIES A SUBORDINATED DEBENTURES
The following information should be read in conjunction with
the statements under "Description of the Subordinated Debentures"
in the accompanying Prospectus.
General
The Series A Subordinated Debentures will be issued under the
Indenture dated as of ______________, 1994 between the Company and
United States Trust Company of New York, as Trustee, and may be
distributed to the holders of Series A Preferred Securities upon a
dissolution of Penelec Capital under circumstances described under
"Description of Preferred Securities-Special Event Redemption or
Distribution" in the accompanying Prospectus.
Principal Amount, Interest, Maturity, Redemption
An aggregate of $_________ principal amount of Series A
Subordinated Debentures will be issued, such amount being the sum
of the aggregate stated liquidation preference of the Series A
Preferred Securities and the General Partner's related capital
contribution.
Each Series A Subordinated Debenture will bear interest at the
rate of __% per annum from the original date of issuance, payable
monthly in arrears on the last day of each calendar month of each
year, except as otherwise provided in the accompanying Prospectus.
The Series A Subordinated Debentures will mature on
__________, 2043 and will be redeemable at the option of the
Company at any time on or after _________________, 1999 at a
Debenture Redemption Price equal to 100% of their principal amount
plus accrued and unpaid interest to the Redemption Date, together
with any additional interest accrued thereon. The Series A
Subordinated Debentures are also redeemable upon the occurrence of
certain events which cause the Series A Preferred Securities to
become redeemable. Proceeds from the repayment or redemption of
Series A Subordinated Debentures will be applied to redeem the
Series A Preferred Securities.
UNDERWRITING
Subject to the terms and conditions of the Underwriting
Agreement, Penelec Capital has agreed to sell to each of the
several Underwriters named below, and each of the Underwriters, for
whom Goldman, Sachs & Co. and _________________ are acting as
Representatives, has severally agreed to purchase from Penelec
Capital the respective number of Series A Preferred Securities set
forth opposite its name below:
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Number of
Series A
Preferred
Underwriter Securities
Goldman, Sachs & Co.....................
__________
Total................................. ==========
Under the terms and conditions of the Underwriting Agreement,
the Underwriters are committed to take and pay for all such Series
A Preferred Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred
Securities in part directly to the public at the initial public
offering price set forth on the cover page of this Prospectus
Supplement, and in part to certain securities dealers at such price
less a concession of $____ per Series A Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession
not in excess of $____ per Series A Preferred Security to certain
brokers and dealers. After the Series A Preferred Securities are
released for sale to the public, the offering price and other
selling terms may from time to time be varied by the
Representatives.
In view of the fact that the proceeds of the sale of the
Series A Preferred Securities will ultimately be used to purchase
the Company's Series A Subordinated Debentures, the Company will
pay to the Underwriters for their services the amount of $____ per
Series A Preferred Security for the accounts of the several
Underwriters.
The Company and Penelec Capital have agreed, during the period
beginning from the date of the Underwriting Agreement and
continuing to and including the earlier of (i) the date, after the
closing date, on which the distribution of the Series A Preferred
Securities and the Guarantee ceases, as determined by the
Underwriters, or (ii) 90 days after the closing date, not to offer,
sell, contract to sell, or otherwise dispose of any Series A
Preferred Securities, any limited partner interests of Penelec
Capital, or any preferred stock or any other securities of Penelec
Capital or the Company which are substantially similar to the
Series A Preferred Securities or the Guarantee, or any securities
convertible into or exchangeable for Series A Preferred Securities,
limited partner interests, preferred stock or such substantially
similar securities of either Penelec Capital or the Company without
the prior written consent of the Underwriters.
Prior to this offering, there has been no public market for
the Series A Preferred Securities. In order to meet one of the
requirements for listing the Series A Preferred Securities on the
New York Stock Exchange, the Underwriters will undertake to sell
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lots of 100 or more Series A Preferred Securities to a minimum of
400 beneficial holders.
Penelec Capital and the Company have agreed to indemnify the
Underwriters against certain civil liabilities, including
liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and
from time to time have performed services for, the Company and its
affiliates in the ordinary course of business.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company and
Penelec Capital by Berlack, Israels & Liberman, New York, New York,
and Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania,
and for any underwriters by Reid & Priest, New York, New York.
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to
Penelec Capital. Berlack, Israels & Liberman and Reid & Priest may
rely on the opinion of Ballard Spahr Andrews & Ingersoll as to
matters of Pennsylvania law, and Berlack, Israels & Liberman,
Ballard Spahr Andrews & Ingersoll and Reid & Priest may rely on the
opinion of Richards, Layton & Finger, P.A., as to matters of
Delaware law. Members and attorneys of Berlack, Israels & Liberman
own an aggregate of 11,931 shares of the Common Stock of the
Company's parent, GPU. In addition, one such member holds 986 such
shares as custodian for his children.
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SUBJECT TO COMPLETION, DATED MAY , 1994
PROSPECTUS
$125,000,000
PENELEC CAPITAL
Preferred Securities
guaranteed to the extent set forth herein by
PENNSYLVANIA ELECTRIC COMPANY
Penelec Capital, L.P. ("Penelec Capital"), a Delaware limited
partnership, all of the general partner interests in which are
owned by a wholly owned subsidiary of Pennsylvania Electric Company
(the "Company"), may offer, from time to time, its preferred
securities, representing limited partner interests ("Preferred
Securities"), in one or more series. The payment of periodic cash
distributions (hereinafter called "Dividends") with respect to
Preferred Securities of any series, out of funds held by Penelec
Capital and legally available therefor, and payments on liquidation
or redemption with respect to the Preferred Securities are
guaranteed by the Company to the extent described herein (the
"Guarantee"). The Company's obligations under the Guarantee are
subordinate and junior in right of payment to all present and
future Senior Indebtedness (as defined herein) of the Company but
senior in right of payment to the Company's preferred and common
stock. Subordinated Debentures of the Company ("Subordinated
Debentures") will also be issued and sold from time to time in one
or more series by the Company to Penelec Capital in connection with
the investment of the proceeds from the offering of Preferred
Securities. Subordinated Debentures subsequently may be
distributed to holders of Preferred Securities in connection with a
dissolution of Penelec Capital upon the occurrence of certain
events as described under "Description of Preferred Securities -
Special Event Redemption or Distribution". The Subordinated
Debentures will be unsecured and subordinate and junior in right of
payment to all present and future Senior Indebtedness of the
Company. The Preferred Securities may be offered in amounts, at
prices and on terms to be determined at the time of offering;
provided, however, that the aggregate initial public offering price
of all Preferred Securities offered hereby shall not exceed
$125,000,000.
The specific designation, Dividend rate (or method of
determination thereof), and any other rights, preferences,
privileges, limitations and restrictions relating to the Preferred
Securities of the particular series in respect of which this
Prospectus is being delivered will be set forth in a Prospectus
Supplement pertaining to such series (a "Prospectus Supplement").
_________________________
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_________________________
The Preferred Securities may be sold to or through
underwriters or dealers as designated from time to time. See "Plan
of Distribution". The names of any such underwriters or dealers
involved in the sale of the Preferred Securities of the particular
series in respect of which this Prospectus is being delivered, the
number of Preferred Securities to be purchased by any such
underwriters or dealers and any applicable commissions or discounts
will be set forth in the Prospectus Supplement. The net proceeds
to the Company will also be set forth in the Prospectus Supplement.
The date of this Prospectus is ___________, 1994.
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Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such state.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by the
Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Seven World Trade Center, New York, New York
10048; and 500 West Madison Street, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain of the
Company's securities are listed on, and reports and other
information concerning the Company may also be inspected at the
offices of, the Philadelphia Stock Exchange, Inc.
This Prospectus does not contain all the information set forth
in the Registration Statement on Form S-3 (herein, together with
all amendments and exhibits thereto, referred to as the
"Registration Statement"), which the Company and Penelec Capital
have filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Statements contained or
incorporated by reference herein concerning the provisions of
documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the
Registration Statement.
No separate financial statements of Penelec Capital have been
included herein. The Company and Penelec Capital do not consider
that such financial statements would be material to holders of
Preferred Securities because Penelec Capital is a newly formed
special purpose entity, has no operating history and no independent
operations and is not engaged in, and does not propose to engage
in, any activity other than as set forth below. See "Penelec
Capital".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with
the Commission pursuant to the Exchange Act are incorporated herein
by reference:
1. The Company's Annual Report on Form 10-K for
the year ended December 31, 1993;
2. The Company's Current Reports on Form 8-K dated
February 16, 1994 and February 28, 1994; and
3. The Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the securities offered hereby shall
be deemed to be incorporated by reference herein and to be a part
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hereof from the date of filing of such documents. Any statement
contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to
be incorporated by reference herein or in a Prospectus Supplement
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus or any
Prospectus Supplement may obtain, without charge, upon written or
oral request, a copy of any or all of the documents incorporated
herein or therein by reference (not including the exhibits to such
documents, unless such exhibits are specifically incorporated by
reference in such documents). Requests for such copies should be
directed to Pennsylvania Electric Company, 1001 Broad Street,
Johnstown, Pennsylvania 15907, Attention: Secretary. The
Company's telephone number is (814) 533-8111.
PENNSYLVANIA ELECTRIC COMPANY
The Company, a public utility furnishing electric service
within the Commonwealth of Pennsylvania and a small portion of New
York State, is a subsidiary of General Public Utilities Corporation
("GPU"), a holding company registered under the Public Utility
Holding Company Act of 1935 (the "Holding Company Act"). The
Company provides electric service within a territory located in
western, northern and south central Pennsylvania having a
population of about 1,500,000. The Company, as lessee of the
property of The Waverly Electric Light and Power Company, a
subsidiary, also serves a population of about 13,700 in Waverly,
New York. The Company's principal executive offices are located at
1001 Broad Street, Johnstown, Pennsylvania 15907, and its telephone
number is (814) 533-8111.
For the year 1993, residential sales accounted for about 37%
of the Company's operating revenues from customers and 30% of
kilowatt-hour sales to customers; commercial sales accounted for
about 32% of operating revenues from customers and 30% of kilowatt-
hour sales to customers; industrial sales accounted for about 27%
of operating revenues from customers and 35% of kilowatt-hour sales
to customers; and sales to rural electric cooperatives,
municipalities (primarily for street and highway lighting) and
others accounted for about 4% of total operating revenues from
customers and 5% of kilowatt-hour sales to customers. The revenues
derived from the 25 largest customers in the aggregate accounted
for approximately 12% of operating revenues from customers for the
year 1993.
The electric generating and transmission facilities of the
Company and its affiliates, Metropolitan Edison Company and Jersey
Central Power & Light Company, 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
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is a member of the Pennsylvania-New Jersey-Maryland Interconnection
("PJM") and the Mid-Atlantic Area Council, an organization
providing coordinated review of the planning by utilities in the
PJM area. The interconnection facilities are used for substantial
capacity and energy interchange and purchased power transactions as
well as emergency assistance.
The Company owns 25% undivided interests in Unit No. 1 and the
inactive Unit No. 2 of the Three Mile Island nuclear generating
station near Middletown, Pennsylvania. The Company's nuclear
generating facilities are operated by GPU Nuclear Corporation, a
subsidiary of GPU. The Company and its affiliates are seeking
regulatory approvals for GPU Generation Corporation, a newly formed
subsidiary of GPU, to operate and maintain their fossil-fueled and
hydroelectric generating facilities.
During 1993, the Company successfully negotiated power supply
agreements with several existing GPU System wholesale customers in
response to offers made by other utilities seeking to provide
electric service at rates lower than those of Met-Ed or JCP&L. The
Company has made similar offers to certain wholesale customers now
being served by other utilities. Although wholesale customers
represent a relatively small portion of Company sales, the Company
will continue its efforts to retain and add customers.
FINANCING PROGRAM
Depending upon market conditions, during 1994 and 1995 Penelec
Capital expects to offer up to $125,000,000 stated liquidation
preference of Preferred Securities, the proceeds of which would be
used to purchase the Company's Subordinated Debentures. Pursuant
to one or more separate offerings, the Company expects to offer
during such period up to a maximum aggregate principal amount and
stated value of $330,000,000 of first mortgage bonds, which may be
in the form of secured medium-term notes, and cumulative preferred
stock. The Company also expects to have short-term borrowings
outstanding from time to time during such period.
CERTAIN COMPANY CONSOLIDATED FINANCIAL INFORMATION (1)
(Dollars In Thousands)
Twelve
Months Ended
March 31, 1994
Years Ended December 31, (unaudited)
1991 1992 1993
Income Summary:
Operating
Revenues $865,552 $896,337 $908,280 $924,312
Net Income $106,595 $ 99,744 $ 95,728 $101,481
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March 31, 1994
(unaudited)
Actual Pro Forma (2)
Amount % Amount %
Capital Structure:
Long-term debt
(including unamortized
net discount)(3) $ 646,482 44.9% $ 646,482 41.6%
Preferred Stock
(including premium) 61,842 4.3 61,842 4.0
Preferred Stock of
Subsidiary - - 125,000 8.0
Common Equity 732,337 50.8 721,761 46.4
Total $1,440,661 100.0 $1,555,085 100.0%
____________________
(1) This information should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
(2) Gives effect to the issuance of $125,000,000 aggregate stated
liquidation preference of Preferred Securities and the use of
the proceeds thereof to purchase the Company's Subordinated
Debentures.
(3) Includes obligations due within one year.
COMPANY COVERAGE RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of
the periods indicated was as follows:
Twelve
Months Ended
March 31, 1994
Years Ended December 31, (unaudited)
1989 1990 1991 1992 1993 Actual ProForma(1)
4.03 3.92 3.47 4.21 4.09 4.05 3.38
The Ratio of Earnings to Fixed Charges represents, on a pre-
tax basis, the number of times earnings cover fixed charges.
Earnings consist of Income Before Cumulative Effect of Accounting
Change, to which has been added fixed charges and taxes based on
income. Fixed charges consist of interest on funded indebtedness,
other interest, amortization of net discount on debt and the
interest portion of all rentals charged to income.
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The Company's Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends for each of the periods indicated was as
follows:
Twelve
Months Ended
March 31, 1994
Years Ended December 31, (unaudited)
1989 1990 1991 1992 1993 Actual Pro Forma(1)
3.21 3.17 2.97 3.56 3.52 3.57 3.04
________________________
(1) Gives effect to the issuance of $125,000,000 aggregate
principal amount of Subordinated Debentures at an assumed
interest rate of 8 7/8% per annum.
The Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends represents, on a pre-tax basis, the number of times
earnings cover fixed charges and preferred stock dividends.
Earnings consist of Income Before Cumulative Effect of Accounting
Change, to which has been added fixed charges and taxes based on
income of the Company. Combined fixed charges and preferred stock
dividends consist of interest on funded indebtedness, other
interest, amortization of net discount on debt, preferred stock
dividends (increased to reflect the pre-tax earnings required to
cover such dividend requirements) and the interest portion of all
rentals charged to income.
USE OF PROCEEDS
The proceeds to be received by Penelec Capital from the sale
of the Preferred Securities will be used to purchase Subordinated
Debentures of the Company and, unless otherwise specified in any
Prospectus Supplement, will be applied by the Company to the
repayment of outstanding short-term debt, for construction purposes
and for other general corporate purposes, including the redemption
of outstanding senior securities pursuant to the optional
redemption provisions thereof, if economical.
PENELEC CAPITAL
Penelec Capital is a limited partnership formed under the laws
of the State of Delaware. All of its general partner interests,
which are non-transferable, are owned by Penelec Preferred Capital,
Inc. (the "General Partner"), a Delaware corporation and a wholly
owned special purpose subsidiary of the Company, which will be the
sole general partner of Penelec Capital. Penelec Capital's
principal executive offices are located at Mellon Bank Center,
Tenth and Market Streets, Wilmington, Delaware 19801, and its
telephone number is (302) __________. As a limited partnership,
all of the business and affairs of Penelec Capital will be managed
by the General Partner. Penelec Capital exists solely for the
purpose of issuing its partner interests and utilizing the proceeds
thereof to acquire the Company's Subordinated Debentures, which
will be issued under and pursuant to the Indenture (the
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"Indenture") dated as of ___________________, 1994 between the
Company and United States Trust Company of New York, as Trustee
(the "Trustee").
Penelec Capital has been advised by its special Delaware
counsel that, assuming that a holder of Preferred Securities acts
in conformity with the provisions of Penelec Capital's Amended and
Restated Limited Partnership Agreement, which will be substantially
in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part (the "Limited Partnership
Agreement), a holder of Preferred Securities (other than the
General Partner) will not be liable for the debts, obligations and
liabilities of Penelec Capital, whether arising in contract, tort
or otherwise, solely by reason of being a limited partner of
Penelec Capital (subject to the obligation of a limited partner to
repay any funds wrongfully distributed to it).
Pursuant to the Limited Partnership Agreement, each holder of
Preferred Securities, upon acquisition thereof, will be deemed to
have appointed the General Partner as such holder's attorney-in-
fact to execute, in the name, place and stead of such holder,
certain instruments, documents and certificates as may be required
from time to time for the purposes contemplated in the Limited
Partnership Agreement.
DESCRIPTION OF PREFERRED SECURITIES
General
All of the general partner interests of Penelec Capital will
be owned by the General Partner. The Limited Partnership Agreement
will authorize the General Partner to establish series of Preferred
Securities having such designations, rights, privileges,
restrictions, and other terms and provisions, whether in regard to
distributions, return of capital or otherwise, as the General
Partner may determine. Penelec Capital will therefore be
authorized to issue and sell additional Preferred Securities from
time to time, pursuant to the Registration Statement of which this
Prospectus forms a part or otherwise; provided, however, that all
Preferred Securities shall be of equal rank with regard to
participation in the profits and the assets of Penelec Capital.
The summary of certain terms and provisions of the Preferred
Securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the
Limited Partnership Agreement.
Dividends
Dividends on each series of Preferred Securities will be
cumulative, will accrue from the date of issuance thereof and will
be payable monthly in arrears on the last day of each calendar
month of each year, except as otherwise described below.
The Dividend rate applicable to a series of Preferred
Securities shall be specified in a Prospectus Supplement.
The Company has the right under the Indenture to extend the
interest payment period on the Subordinated Debentures at any time
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and from time to time to up to 60 consecutive months and, as a
consequence, monthly Dividends on the Preferred Securities can be
deferred (but will continue to accumulate) by Penelec Capital
during any such extended interest payment period. Accrued and
unpaid Dividends on the Preferred Securities will accrue additional
Dividends in respect thereof at the Dividend rate per annum
applicable to the Preferred Securities. In the event that the
Company exercises its right to extend the interest payment period,
the Company may not declare or pay dividends on, or redeem,
purchase or acquire, any of its preferred or common stock. Penelec
Capital and the Company currently believe that an extension of an
interest payment period on the Subordinated Debentures and thus on
the Preferred Securities is unlikely. See "Voting Rights" and
"Description of the Subordinated Debentures-Option to Extend
Interest Payment Period".
The amount of the Dividends payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year
and, for any period shorter than a full monthly Dividend period,
will be computed on the basis of the actual number of days elapsed
in such period.
Penelec Capital may not pay a Dividend or make a distribution
to a partner to the extent that at the time of the Dividend or
distribution, after giving effect thereto, all liabilities of
Penelec Capital, other than liabilities to partners on account of
their partner interests and liabilities for which the recourse of
creditors is limited to specified property of Penelec Capital,
exceed the fair value of the assets of Penelec Capital, except that
the fair value of property that is subject to a liability for which
the recourse of creditors is limited shall be included in the
assets of Penelec Capital only to the extent that the fair value of
that property exceeds that liability.
Dividends on the Preferred Securities must be paid by Penelec
Capital in any calendar year or portion thereof to the extent that
Penelec Capital has cash on hand sufficient to permit such payments
and funds legally available therefor. It is anticipated that
Penelec Capital's earnings will consist only of interest payable by
the Company under the Subordinated Debentures. See "Description of
the Subordinated Debentures-Interest".
Dividends on the Preferred Securities will be payable to the
holders thereof as they appear on the books and records of Penelec
Capital on the relevant record dates, which, so long as the
Preferred Securities remain in book-entry-only form, will be one
Business Day prior to the relevant payment dates. Subject to any
applicable laws and regulations and the provisions of the Limited
Partnership Agreement, each such payment will be made as described
under "Book-Entry-Only Issuance-The Depository Trust Company". In
the event that the Preferred Securities do not remain in book-
entry-only form, the record dates will be the fifteenth day of each
month. In the event that any date on which Dividends are payable
on the Preferred Securities is not a Business Day, then payment of
the Dividend payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment
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shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking
institutions in The City of New York are authorized or required by
law to close.
Certain Restrictions on Penelec Capital
If Dividends have not been paid in full on any series of
Preferred Securities, Penelec Capital may not:
(i) pay or declare any Dividends on any other series
of Preferred Securities unless the amount of any
Dividends declared on any Preferred Securities is paid on
all Preferred Securities then outstanding on a pro rata
basis on the date such Dividends are paid, so that
(x) (a) the aggregate amount of Dividends paid
on such series of Preferred Securities bears to (b)
the aggregate amount of Dividends paid on all such
Preferred Securities outstanding the same ratio as
(y) (a) the aggregate of all accumulated
arrears of unpaid Dividends in respect of such
series of Preferred Securities bears to (b) the
aggregate of all accumulated arrears of unpaid
Dividends in respect of all such Preferred
Securities outstanding;
(ii) pay or declare any distributions on any of its
general partner interests; or
(iii) redeem, purchase or otherwise acquire any
Preferred Securities or its general partner interests;
until, in each case, such time as all accumulated and unpaid
Dividends on all series of Preferred Securities shall have been
paid in full for all prior Dividend periods. As of the date of
this Prospectus, there are no Preferred Securities outstanding.
Mandatory Redemption
If the Company pays when due the Subordinated Debentures
purchased by Penelec Capital with the proceeds of the sale of a
series of Preferred Securities or redeems such Subordinated
Debentures at any time as described under "Description of the
Subordinated Debentures-Optional Redemption", the proceeds will be
applied to redeem the related series of Preferred Securities at a
redemption price equal to the stated liquidation preference
thereof, plus any accumulated, unpaid and additional Dividends
accrued thereon to the date fixed for redemption (the "Redemption
Price").
Optional Redemption
The Preferred Securities of each series will be redeemable, at
the option of Penelec Capital, in whole or in part, at such time or
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times as shall be specified in a Prospectus Supplement, at the
Redemption Price.
If at any time after the issuance of any Preferred Securities,
Penelec Capital is or would be required to pay Additional Amounts
or the Company is or would be required to withhold or deduct
certain amounts as described under "Additional Amounts" and
"Description of the Guarantee-Additional Amounts", then Penelec
Capital may, at its option, redeem the Preferred Securities in
whole or, if such requirement relates only to certain of the
Preferred Securities, the Preferred Securities subject to such
requirement, in each case at the Redemption Price.
Special Event Redemption or Distribution
If a Tax Event (as defined below) shall occur and be
continuing, Penelec Capital may either (i) redeem the Preferred
Securities in whole (but not in part) at the Redemption Price
within 90 days following the occurrence of such Special Event (as
defined below); provided that, if at the time there is available to
the General Partner the opportunity to eliminate, within such 90
day period, the Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other
similar reasonable measure, which has no adverse effect on Penelec
Capital or the Company, the General Partner will pursue such
measure in lieu of redemption, or (ii) dissolve Penelec Capital and
cause Subordinated Debentures with an aggregate principal amount
equal to the aggregate stated liquidation preference thereof to be
distributed to the holders of Preferred Securities in liquidation
of such holders' interests in Penelec Capital, within 90 days
following the occurrence of such Special Event; provided, however,
that Penelec Capital shall have received an opinion of counsel
(which may be regular tax counsel to the Company or an affiliate
but not an employee thereof) to the effect that the holders of the
Preferred Securities will not recognize any gain or loss for
federal income tax purposes as a result of such dissolution and
distribution. Alternatively, Penelec Capital may elect to have the
Preferred Securities remain outstanding. If an Investment Company
Act Event (as defined below and, collectively with a Tax Event, a
"Special Event") shall occur and be continuing, Penelec Capital
must elect either option (i) or (ii) above.
"Tax Event" means that Penelec Capital shall have received an
opinion of counsel (which may be regular tax counsel to the Company
or an affiliate but not an employee thereof) to the effect that, as
a result of any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting
taxation, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective, or
which pronouncement or decision has been issued or rendered, on or
after the date of issuance of any series of Preferred Securities,
there is more than an insubstantial risk that (i) Penelec Capital
will be subject to federal income tax with respect to interest
received on the Subordinated Debentures or Penelec Capital will
otherwise not be taxed as a partnership, (ii) interest payable on
the Subordinated Debentures will not be deductible for federal
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income tax purposes or (iii) Penelec Capital is subject to more
than a de minimis amount of other taxes, duties or other
governmental charges.
"Investment Company Act Event" means the occurrence of a
change in law or regulation or a change in an official
interpretation of law or regulation by any legislative body, court,
governmental agency or regulatory authority (a "Change in 40 Act
Law") to the effect that Penelec Capital is or will be considered
an "investment company" required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 40 Act Law becomes effective on or after the date of
issuance of any series of Preferred Securities; provided that no
Investment Company Act Event shall be deemed to have occurred if
Penelec Capital shall have received an opinion of counsel (which
may be regular counsel to the Company or an affiliate but not an
employee thereof) to the effect that the Company and/or Penelec
Capital have taken reasonable measures, in their discretion, to
avoid such Change in 40 Act Law so that in the opinion of such
counsel, notwithstanding such Change in 40 Act Law, Penelec Capital
is not required to be registered as an "investment company" within
the meaning of the 1940 Act.
After the date fixed for any such dissolution of Penelec
Capital and distribution of Subordinated Debentures, (i) the
Preferred Securities will no longer be deemed to be outstanding,
(ii) The Depository Trust Company or its nominee, as the record
holder of the Preferred Securities, will exchange the global
certificate or certificates representing the Preferred Securities
for a registered global certificate or certificates representing
the Subordinated Debentures to be so delivered and (iii) any
certificates representing Preferred Securities not held by The
Depository Trust Company or its nominee will be deemed to represent
Subordinated Debentures having a principal amount equal to the
stated liquidation preference of such Preferred Securities until
such certificates are presented to the Company or its agent for
replacement.
Redemption Procedures
Penelec Capital may not redeem any outstanding Preferred
Securities unless all accumulated and unpaid Dividends have been
paid on all Preferred Securities for all monthly Dividend periods
terminating on or prior to the date of redemption.
If Penelec Capital gives a notice of redemption in respect of
a series of Preferred Securities (which notice will be given not
less than 30 nor more than 90 days prior to the redemption date and
will be irrevocable), then, on the redemption date, Penelec Capital
will irrevocably deposit with The Depository Trust Company or its
successor securities depository funds sufficient to pay the
applicable Redemption Price and will give The Depository Trust
Company or its successor securities depository irrevocable
instructions and authority to pay the Redemption Price to the
Beneficial Owners (as defined under "Book-Entry-Only Issuance-The
Depository Trust Company"). If notice of redemption shall have
been given and funds deposited as required, then on the date of
such deposit, all rights of holders of such series of Preferred
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Securities so called for redemption will cease, except the right of
the holders of such series of Preferred Securities to receive the
Redemption Price, but without interest. In the event that any date
fixed for redemption of such series of Preferred Securities is not
a Business Day, then payment of the Redemption Price payable on
such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect
of any such delay), except that if such Business Day falls in the
next succeeding calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of
the Redemption Price in respect of any Preferred Securities is not
made either by Penelec Capital or by the Company pursuant to the
Guarantee described under "Description of the Guarantee", Dividends
on such Preferred Securities will continue to accrue at the then
applicable rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that less than all of a series of outstanding
Preferred Securities are to be so redeemed, the Preferred
Securities to be redeemed will be selected as described under
"Book-Entry-Only Issuance-The Depository Trust Company". In the
case of a partial redemption of a series of Preferred Securities
resulting from a requirement that Penelec Capital pay Additional
Amounts or the Company withhold or deduct certain amounts (see
"Optional Redemption"), Penelec Capital will (i) cause the global
certificates representing all of such series of Preferred
Securities to be withdrawn from The Depository Trust Company or its
successor securities depository (see "Book-Entry-Only Issuance-The
Depository Trust Company"), (ii) issue certificates in definitive
form representing such series of Preferred Securities, and (iii)
redeem the Preferred Securities subject to such requirement to
withhold or deduct Additional Amounts.
Subject to applicable law, the Company or its subsidiaries may
at any time and from time to time purchase outstanding Preferred
Securities by tender, in the open market or by private agreement.
If a partial redemption or a purchase of outstanding Preferred
Securities by tender, in the open market or by private agreement
would result in a delisting of such series of Preferred Securities
from any national securities exchange on which such series of
Preferred Securities is then listed, Penelec Capital may then only
redeem or purchase such series of Preferred Securities in whole.
Liquidation Distribution
In the event of any voluntary or involuntary dissolution and
winding up of Penelec Capital, other than in connection with the
distribution of Subordinated Debentures in liquidation of all of
the interests of the holders of Preferred Securities, as described
under "Special Event Redemption or Distribution" ("Distribution
Event"), the holders of a series of Preferred Securities at the
time outstanding will be entitled to receive out of the assets of
Penelec Capital, after satisfaction of liabilities to creditors as
required by Delaware law, before any distribution of assets is made
to holders of its general partner interests, but together with the
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holders of every other series of Preferred Securities outstanding,
an amount equal to the aggregate of the stated liquidation
preference thereof and any accumulated, unpaid and additional
Dividends accrued thereon to the date of payment and any accrued
and unpaid Additional Amounts (the "Liquidation Distribution").
If, upon such liquidation, the Liquidation Distribution can be
paid only in part because Penelec Capital has insufficient assets
available to pay in full the aggregate Liquidation Distribution and
the aggregate liquidation distributions on all other Preferred
Securities then outstanding, then the amounts payable directly by
Penelec Capital on such series of Preferred Securities and on all
other Preferred Securities then outstanding shall be paid on a pro
rata basis, so that
(i) (x) the aggregate amount paid in respect of the
Liquidation Distribution bears to (y) the aggregate
amount paid as liquidation distributions on all other
Preferred Securities then outstanding the same ratio as
(ii) (x) the aggregate Liquidation Distribution
bears to (y) the aggregate liquidation distributions on
all other Preferred Securities then outstanding.
Pursuant to the Limited Partnership Agreement, Penelec Capital
shall be dissolved and its affairs shall be wound up: (i) upon the
expiration of the term of Penelec Capital, (ii) upon the
bankruptcy, liquidation, dissolution or winding up of the Company,
(iii) upon the occurrence of an event that causes the General
Partner to cease being the general partner of Penelec Capital
(provided that Penelec Capital will not be so dissolved under
certain circumstances, including, without limitation, a transfer of
the general partner interest to a permitted successor of the
General Partner as set forth in the Limited Partnership Agreement),
(iv) upon the entry of a decree of judicial dissolution, (v) in
connection with a Distribution Event, or (vi) upon the written
consent of the General Partner and all of the holders of the
Preferred Securities.
Merger, Consolidation, Amalgamation, etc. of Penelec Capital
Penelec Capital may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any corpor-
ation or other entity, except with the prior approval of the
holders of not less than 66-2/3% of the aggregate stated liquida-
tion preference of the outstanding Preferred Securities or except
as described below. The General Partner may, without the consent
of the holders of the Preferred Securities, cause Penelec Capital
to consolidate, amalgamate, merge with or into, or be replaced by,
or convey, transfer or lease its properties and assets
substantially as an entirety to, a corporation, a limited liability
company, a limited partnership, a trust or other entity organized
as such under the laws of the United States or any state thereof or
the District of Columbia, provided that (i) such successor entity
either (x) expressly assumes all of the terms and provisions of the
Preferred Securities by which Penelec Capital is bound and the
other obligations of Penelec Capital or (y) substitutes for the
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Preferred Securities other securities having substantially the same
terms as the Preferred Securities (the "Successor Securities") so
long as the Successor Securities rank, with regard to participation
in the profits or the assets of the successor entity, at least as
high as the Preferred Securities rank, with regard to participation
in the profits or the assets of Penelec Capital, (ii) the Company
confirms its obligation under the Guarantee with regard to the
Preferred Securities or Successor Securities, if any, (iii) such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease does not cause any series of Preferred Securities
or Successor Securities, if any, to be delisted by any national
securities exchange on which such series of Preferred Securities or
Successor Securities, if any, is then listed, (iv) such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease does not cause the Preferred Securities or
Successor Securities, if any, to be downgraded by any "nationally
recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act, (v) such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease does not adversely
affect the powers, preferences and other special rights of holders
of Preferred Securities or Successor Securities, if any, in any
material respect, (vi) such successor entity has a purpose
substantially identical to that of Penelec Capital and (vii) prior
to such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease, Penelec Capital shall have received
an opinion of counsel (which may be regular tax or other counsel to
the Company or an affiliate but not an employee thereof) to the
effect that (w) the holders of outstanding Preferred Securities
will not recognize any gain or loss for federal income tax purposes
as a result of the consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease, (x) such successor
entity will be treated as a partnership for federal income tax
purposes, (y) following such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease, the Company and such
successor entity will be in compliance with the 1940 Act without
registering thereunder as an investment company, and (z) such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease will not adversely affect the limited liability
of the holders of Preferred Securities.
Voting Rights
Except as provided below and under "Merger, Consolidation,
Amalgamation, etc. of Penelec Capital", "Description of the
Guarantee-Amendments and Assignment" and "Description of the
Subordinated Debentures-Modification of the Indenture" and as
otherwise required by law and the Limited Partnership Agreement,
the holders of the Preferred Securities will have no voting rights.
If (i) Penelec Capital fails to pay Dividends in full on the
Preferred Securities for 18 consecutive monthly Dividend periods,
or (ii) an Event of Default (as defined in the Indenture) occurs
and is continuing, or (iii) the Company is in default on any of its
payment or other obligations under the Guarantee (as described
under "Description of the Guarantee-Certain Covenants of the
Company"), then the holders of all Preferred Securities, acting as
a single class, will be entitled, by a vote of the holders of a
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majority of the aggregate stated liquidation preference thereof, to
appoint and authorize a special representative of Penelec Capital
and the holders of Preferred Securities (a "Special
Representative") to enforce Penelec Capital's rights against the
Company under the Indenture, including, after failure to pay
interest for 60 consecutive monthly interest periods, the payment
of interest on the Subordinated Debentures, and to enforce the
obligations of the Company under the Guarantee. The Special
Representative shall not be admitted as a partner in Penelec
Capital or otherwise be deemed to be a partner in Penelec Capital
and shall have no liability for the debts, obligations or
liabilities of Penelec Capital.
For purposes of determining whether Penelec Capital has failed
to pay Dividends in full for 18 consecutive monthly Dividend
periods, Dividends shall be deemed to remain in arrears,
notwithstanding any payments in respect thereof, until full
cumulative Dividends have been or contemporaneously are paid with
respect to all monthly Dividend periods terminating on or prior to
the date of payment of such full cumulative Dividends. Subject to
requirements of applicable law, not later than 30 days after such
right to appoint a Special Representative arises, the General
Partner will convene a general meeting for the above purpose. If
the General Partner fails to convene such meeting within such 30-
day period, the holders of 10% of the aggregate stated liquidation
preference of such series of Preferred Securities will be entitled
to convene such meeting. The provisions of the Limited Partnership
Agreement relating to the convening and conduct of the general
meetings of partners will apply with respect to any such meeting.
Any Special Representative so appointed shall cease to act in such
capacity immediately if Penelec Capital (or the Company pursuant to
the Guarantee) shall have paid in full all accumulated and unpaid
Dividends on the Preferred Securities or such default or breach, as
the case may be, shall have been cured. Notwithstanding the
appointment of any such Special Representative, the Company shall
retain all rights under the Indenture, including the right to
extend the interest payment period on the Subordinated Debentures
as provided under "Description of the Subordinated Debentures-
Option to Extend Interest Payment Period".
If any proposed amendment to the Limited Partnership Agreement
provides for, or the General Partner otherwise proposes to effect,
any action which would materially adversely affect the powers,
preferences or special rights of any series of Preferred
Securities, then the holders of such series of Preferred Securities
will be entitled to vote on such amendment or action of the General
Partner (but not on any other amendment or action) and, in the case
of an amendment or action which would equally materially adversely
affect the powers, preferences or special rights of any other
series of Preferred Securities outstanding, all such series of
Preferred Securities will be entitled to vote together as a class
on such amendment or action of the General Partner (but not on any
other amendment or action), and such amendment or action shall not
be effective except with the approval of the holders of not less
than 66-2/3% of the aggregate stated liquidation preference of such
Preferred Securities. Except in certain circumstances described
under "Liquidation Distribution", which include a dissolution in
connection with a Distribution Event, Penelec Capital will be
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dissolved and wound up only with the consent of the holders of all
Preferred Securities then outstanding.
The rights attached to any Preferred Securities will be deemed
not to be adversely affected by the creation or issue of, and no
vote will be required for the creation or issue of, any further
series of Preferred Securities, any other securities which are pari
passu with the Preferred Securities or any general partner
interests of Penelec Capital. Holders of Preferred Securities have
no preemptive rights.
The Limited Partnership Agreement provides that the General
Partner will not permit or cause Penelec Capital to file a
voluntary petition in bankruptcy without the approval of the
holders of not less than 66-2/3% of the aggregate stated
liquidation preference of the outstanding Preferred Securities.
So long as any Subordinated Debentures are held by Penelec
Capital, the General Partner shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to
the Trustee, or executing any trust or power conferred on the
Trustee with respect to such series, (ii) waive any past default
which is available under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the
Subordinated Debentures shall be due and payable, or (iv) consent
to any amendment, modification or termination of the Indenture,
where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of not less than
66-2/3% of the aggregate stated liquidation preference of all
Preferred Securities affected thereby, acting as a single class;
provided, however, that where a consent under the Indenture would
require the consent of each holder affected thereby, no such
consent shall be given by the General Partner without the prior
consent of each holder of Preferred Securities affected thereby.
The General Partner shall not revoke any action previously
authorized or approved by a vote of any holders of Preferred
Securities. The General Partner shall notify all holders of
Preferred Securities of any notice of default received from the
Trustee with respect to the Subordinated Debentures.
Any required approval of holders of Preferred Securities may
be given at a separate meeting of such holders convened for such
purposes, at a general meeting of holders of Penelec Capital's
partner interests or pursuant to written consent. Penelec Capital
will cause a notice of any meeting at which holders of any series
of Preferred Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to
be mailed to each holder of record of such series of Preferred
Securities. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such action
is to be taken, (ii) a description of any matter to be voted on at
such meeting or upon which written consent is sought, and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the holders of the Preferred Securities
will be required for Penelec Capital to redeem and cancel Preferred
Securities in accordance with the Limited Partnership Agreement.
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Notwithstanding that holders of Preferred Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are owned by
the Company or any entity owned more than 50% by the Company,
either directly or indirectly, shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be
treated as if they were not outstanding.
Holders of Preferred Securities will have no rights to remove
or replace the General Partner.
Additional Amounts
All payments in respect of the Preferred Securities by Penelec
Capital will be made without withholding or deduction for or on
account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or
as a result of such payment by or on behalf of the United States,
any state thereof or any other jurisdiction through which or from
which such payment is made, or any authority therein or thereof
having power to tax, unless the withholding or deduction of such
taxes, duties, assessments or governmental charges is required by
law. In the event that any such withholding or deduction is
required as a consequence of (i) the Subordinated Debentures not
being treated as indebtedness for United States federal income tax
purposes or (ii) Penelec Capital not being treated as a partnership
for United States federal income tax purposes, Penelec Capital will
pay as a Dividend such additional amounts as may be necessary in
order that the net amounts received by the holders of the Preferred
Securities after such withholding or deduction will equal the
amounts which would have been receivable in respect of such
Preferred Securities in the absence of such withholding or
deduction ("Additional Amounts"), except that no such Additional
Amounts will be payable to a holder of Preferred Securities (or a
third party on such holder's behalf) with respect to Preferred
Securities if:
(a) such holder is liable for such taxes, duties,
assessments or governmental charges in respect of such
Preferred Securities by reason of such holder's having a
connection with the United States, any state thereof or
any other jurisdiction through which or from which such
payment is made, or in which such holder resides,
conducts business or has other contacts, other than being
a holder of Preferred Securities, or
(b) Penelec Capital has notified such holder of the
obligation to withhold or deduct taxes and requested but
not received from such holder a declaration of non-
residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or
deduction would not have been required had such
declaration, taxpayer identification number or claim been
received.
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Book-Entry-Only Issuance-The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities
depository for the Preferred Securities. Each series of Preferred
Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Preferred Security certificates will be
issued, representing in the aggregate the total number of Preferred
Securities of each series, and will be deposited with 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 Exchange Act. DTC holds
securities that its participants ("Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, 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"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Preferred Securities under the DTC system must be
made by or through Direct Participants, which will receive a credit
for the Preferred Securities on DTC's records. The ownership
interest of each actual purchaser of each Preferred 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 purchases, but Beneficial
Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of
their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to
be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Preferred
Securities, except in the event that use of the book-entry system
for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the
Preferred Securities; DTC's records reflect only the identity of
the Direct Participants to whose accounts such Preferred Securities
are credited, which may or may not be the Beneficial Owners.
Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
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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 will be sent to Cede & Co. If less than
all of a series of Preferred Securities are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each
Direct Participant in such series to be redeemed.
Although voting with respect to the Preferred Securities
is limited, in those cases where a vote is required, neither DTC
nor Cede & Co. will consent or vote with respect to Preferred
Securities. Under its usual procedure, DTC would mail an Omnibus
Proxy to Penelec Capital as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights
to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Dividend payments on the Preferred Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on
the relevant payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payable date. Payments
by Participants to Beneficial Owners will be governed by standing
instructions and customer practices and will be the responsibility
of such Participants and not of DTC, Penelec Capital, the General
Partner or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of
Dividends to DTC is the responsibility of Penelec Capital,
disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect
Participants.
The information in this section concerning DTC and DTC's book-
entry system has been obtained from sources that Penelec Capital
and the Company believe to be reliable, but neither Penelec Capital
nor the Company takes any responsibility for the accuracy thereof.
DTC may discontinue providing its services as securities
depository with respect to the Preferred Securities at any time by
giving reasonable notice to Penelec Capital. Under such
circumstances, in the event that a successor securities depository
is not obtained, Preferred Security certificates are required to be
printed and delivered. Additionally, Penelec Capital (with the
consent of the General Partner) may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor
depository). In that event, certificates for the Preferred
Securities will be printed and delivered. Additionally, in the
event that Penelec Capital exercises its option to redeem only a
portion of a series of Preferred Securities because Penelec Capital
or the Company is or would be required to withhold or deduct
Additional Amounts in regard to such Preferred Securities to be
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redeemed, Penelec Capital will cause the global certificates
representing all of such series of Preferred Securities to be
withdrawn from DTC (or a successor depository) and will issue
certificates in definitive form representing such series of
Preferred Securities. Thereafter, the Preferred Securities subject
to such requirement to withhold or deduct Additional Amounts will
be redeemed.
Registrar, Transfer Agent and Paying Agent
In the event that the Preferred Securities do not remain in
book-entry-only form, the following provisions would apply:
Mellon Bank, N.A. will act as registrar, transfer agent and
paying agent for the Preferred Securities, but the Company may
designate an additional or substitute registrar, transfer agent and
paying agent at any time.
Registration of transfers of Preferred Securities will be
effected without charge by or on behalf of Penelec Capital, but
upon payment (with the giving of such indemnity as Penelec Capital
or the transfer agent may require) in respect of any tax or other
governmental charges which may be imposed in relation to it.
Penelec Capital will not be required to register or cause to
be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
Miscellaneous
The General Partner is authorized and directed to use its best
efforts to conduct the affairs of, and to operate, Penelec Capital
in such a way that Penelec Capital would not be deemed to be an
"investment company" required to be registered under the 1940 Act
or taxed as a corporation for federal income tax purposes and so
that the Subordinated Debentures will be treated as indebtedness of
the Company for federal income tax purposes. In this connection,
the General Partner is authorized to take any action not
inconsistent with applicable law, the Certificate of Limited
Partnership of Penelec Capital or the Limited Partnership
Agreement, that does not materially adversely affect the interests
of holders of Preferred Securities, that the General Partner
determines in its discretion to be necessary or desirable for such
purposes.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the
Guarantee which will be executed and delivered by the Company in
connection with each series of Preferred Securities for the benefit
of the holders from time to time of the series of Preferred
Securities to which it relates. This summary describes certain
terms and provisions of the Guarantee, but does not purport to be
complete. References to provisions of the Guarantee are qualified
in their entirety by reference to the text of the Guarantee, which
will be substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
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General
The Company will irrevocably and unconditionally agree, to the
extent set forth therein, to pay in full, to the holders of the
Preferred Securities, the Guarantee Payments (as defined below)
(except to the extent paid by Penelec Capital), as and when due,
regardless of any defense, right of set-off or counterclaim which
the Company or Penelec Capital may have or assert. The following
payments to the extent not paid by Penelec Capital (the "Guarantee
Payments") will be subject to the Guarantee (without duplication):
(i) any accumulated and unpaid monthly Dividends on the Preferred
Securities (except for monthly Dividends which are not paid during
an Extension Period (as defined under "Description of the
Subordinated Debentures-Option to Extend Interest Payment Period"))
to the extent that Penelec Capital has sufficient cash on hand to
permit such payments and funds legally available therefor, (ii) the
Redemption Price with respect to any Preferred Securities called
for redemption by Penelec Capital to the extent that Penelec
Capital has sufficient cash on hand to permit such payments and
funds legally available therefor, (iii) upon a liquidation of
Penelec Capital other than in connection with a Distribution Event,
the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of Penelec Capital available for distribution to holders
of Preferred Securities in liquidation of Penelec Capital, and (iv)
any Additional Amounts payable by Penelec Capital in respect of the
Preferred Securities. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of Preferred Securities or by payment
of such amounts by Penelec Capital to such holders.
Certain Covenants of the Company
So long as any Preferred Securities remain outstanding,
neither the Company, nor any majority owned subsidiary of the
Company, will declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its
preferred or common stock (other than dividends to the Company by a
wholly owned subsidiary of the Company) (i) during an Extension
Period (as defined under "Description of the Subordinated
Debentures-Option to Extend Interest Payment Period") or (ii) if at
such time the Company shall be in default with respect to its
payment or other obligations under the Guarantee or there shall
have occurred any event that, with the giving of notice or the
lapse of time or both, would constitute an Event of Default under
the Indenture.
In addition, so long as any Preferred Securities remain
outstanding, the Company will (i) maintain direct or indirect 100%
ownership of the general partner interests in Penelec Capital; (ii)
cause at least 3% of the total value of Penelec Capital and at
least 3% of all interests in the capital, income, gain, loss,
deduction and credit of Penelec Capital to be represented by
general partner interests; (iii) not cause Penelec Capital to be
voluntarily dissolved and wound-up except upon the entry of a
decree of judicial dissolution, in connection with a Distribution
Event or certain mergers, consolidations or similar transactions
permitted by the Limited Partnership Agreement or as otherwise
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described under "Description of Preferred Securities-Liquidation
Distribution"; (iv) cause the General Partner to remain the general
partner of Penelec Capital and timely perform all of its duties as
general partner of Penelec Capital (including the duty to pay
Dividends on the Preferred Securities out of cash on hand and funds
legally available therefor) in all material respects, provided that
any permitted successor of the Company under the Indenture may
directly or indirectly succeed to the duties as general partner of
Penelec Capital; and (v) use its reasonable efforts to cause
Penelec Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for United States federal
income tax purposes.
Additional Amounts
All Guarantee Payments will be made without withholding or
deduction for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed or
levied upon or as a result of such payment by or on behalf of the
United States, any state thereof or any other jurisdiction through
which or from which such payment is made, or any authority therein
or thereof having power to tax, unless the withholding or deduction
of such taxes, duties, assessments or governmental charges is
required by law. In the event that any such withholding or
deduction is required as a consequence of (i) the Subordinated
Debentures not being treated as indebtedness for United States
federal income tax purposes or (ii) Penelec Capital not being
treated as a partnership for United States federal income tax
purposes, the Company will pay such additional amounts as may be
necessary in order that the net amounts received by the holders of
the Preferred Securities after such withholding or deduction will
equal the amount which would have been receivable in respect of the
Preferred Securities in the absence of such withholding or
deduction, except that no such additional amounts will be payable
to a holder of Preferred Securities (or a third party on such
holder's behalf) if:
(a) such holder is liable for such taxes, duties,
assessments or governmental charges in respect of the
Preferred Securities by reason of such holder's having a
connection with the United States, any state thereof or
any other jurisdiction through which or from which such
payment is made, or in which such holder resides,
conducts business or has other contacts, other than being
a holder of Preferred Securities, or
(b) Penelec Capital or the Company has notified such
holder of the obligation to withhold or deduct taxes and
requested but not received from such holder a declaration
of non-residence, a valid taxpayer identification number
or other claim for exemption, and such withholding or
deduction would not have been required had such
declaration, taxpayer identification number or claim been
received.
Amendments and Assignment
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The Guarantee may only be amended by a written instrument
executed by the Company; provided that, so long as any of the
Preferred Securities remain outstanding, any such amendment that
materially adversely affects the holders of the related series of
Preferred Securities, any termination of the Guarantee and any
waiver of compliance with any covenant thereunder shall be effected
only with the prior approval of the holders of not less than
66-2/3% of the aggregate stated liquidation preference of the
affected series of Preferred Securities. Except in connection with
an assignment, merger, sale, transfer or lease involving the
Company as may be permitted under the Indenture (see "Description
of the Subordinated Debentures-Consolidation, Merger, Sale or
Conveyance; Assignment"), the Company may not assign its
obligations under the Guarantee without the approval of the holders
of not less than 66-2/3% of the aggregate stated liquidation
preference of the related series of Preferred Securities. See
"Description of Preferred Securities-Voting Rights". All
guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the
Preferred Securities.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of all of the
related series of Preferred Securities or upon full payment of the
amounts payable upon liquidation of Penelec Capital or upon
consummation of a Distribution Event. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at
any time any holder of such series of Preferred Securities must
restore payment of any sums paid under such Preferred Securities or
the Guarantee.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of
payment to all present and future Senior Indebtedness of the
Company, and (ii) senior in right of payment to the Company's
preferred and common stock. The Limited Partnership Agreement
provides that each holder of Preferred Securities by acceptance
thereof agrees to the subordination provisions and other terms of
the Guarantee.
The Guarantee will constitute a guarantee of payment and not
of collection. The Guarantee will be held for the benefit of the
holders of the related series of Preferred Securities. If
appointed, a Special Representative may enforce the Guarantee. If
no Special Representative has been appointed to enforce the
Guarantee, the General Partner has the right to enforce the
Guarantee on behalf of the holders of the Preferred Securities. If
the General Partner or the Special Representative fails to enforce
the Guarantee, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce its rights
under the Guarantee, without first instituting a legal proceeding
against Penelec Capital or any other person or entity.
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DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the Subordinated
Debentures which will be purchased by Penelec Capital with the
proceeds of the sale of the Preferred Securities and the General
Partner's related capital contribution. This description is a
brief summary of certain provisions contained in the Indenture,
does not purport to be complete and is qualified in its entirety by
reference to the text of the Indenture, including the definition
therein of certain capitalized terms, a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus
forms a part.
Under certain circumstances following the occurrence of a
Special Event, Penelec Capital may dissolve and cause Subordinated
Debentures to be distributed to the holders of the Preferred
Securities in liquidation of their interests in Penelec Capital.
See "Description of Preferred Securities-Special Event Redemption
or Distribution".
General
Subordinated Debentures will be issued in series under the
Indenture. Each series of Subordinated Debentures will be limited
in aggregate principal amount to the amount of the aggregate stated
liquidation preference of the related series of Preferred
Securities together with any related capital contribution from the
General Partner.
So long as any Preferred Securities remain outstanding, any
Special Representative appointed by the holders of Preferred
Securities, as described under "Description of Preferred
Securities-Voting Rights", will be entitled to enforce the
Company's obligations under the Indenture and the Subordinated
Debentures directly against the Company.
The Subordinated Debentures will become due and payable,
together with (i) all accrued and unpaid interest to the date of
payment, including Additional Interest (as defined under
"Additional Interest"), if any, and (ii) any accrued interest
thereon, on the 49th anniversary of the date of issuance thereof.
Mandatory Prepayment
If Penelec Capital redeems Preferred Securities in accordance
with their terms, the related Subordinated Debentures will become
due and payable in a principal amount equal to the aggregate stated
liquidation preference of the Preferred Securities so redeemed,
together with (i) all accrued and unpaid interest to the date of
payment, including Additional Interest, if any, and (ii) any
accrued interest thereon.
Optional Redemption
The Company will have the right to redeem the Subordinated
Debentures, without premium or penalty, at a price equal to 100% of
their principal amount, together with (i) all accrued and unpaid
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interest on the Subordinated Debentures being redeemed to the
Redemption Date, including Additional Interest, if any, and (ii)
any accrued interest thereon (collectively, the "Debenture
Redemption Price")
(x) in whole or in part at such time or times as
shall be specified in a Prospectus Supplement; and
(y) in whole at any time if the Company is or would
be required to pay Additional Interest on the
Subordinated Debentures or in part at any time if the
Company is or would be required to pay Additional
Interest with respect to only a portion of the
Subordinated Debentures, provided that if a partial
redemption would, through the corresponding partial
redemption required under the terms of the related series
of Preferred Securities, result in a delisting of the
related series of Preferred Securities from any national
securities exchange on which such series of Preferred
Securities is then listed, the Company may only redeem
the Subordinated Debentures in whole. In no event,
however, shall the Company have the right to redeem the
Subordinated Debentures, or a portion thereof, under this
clause (ii) based on a de minimis obligation to pay
Additional Interest. For purposes of the foregoing, in
the event that the Company is advised by counsel (which
may be regular tax counsel to the Company or an affiliate
but not an employee thereof) that more than an
insubstantial risk exists that Penelec Capital will incur
penalties, interest or tax under the Internal Revenue
Code of 1986, as amended, or other applicable law if it
does not withhold or deduct certain amounts as may be
required in connection with monthly Dividends or other
payments made by it with respect to the Preferred
Securities, or that the Company will incur such
penalties, interest or tax if it does not withhold or
deduct in connection with payments made by it under the
Subordinated Debentures, the Company shall have the right
to redeem the Subordinated Debentures, or a portion
thereof, under this clause (ii) unless the obligation to
pay Additional Interest, if Penelec Capital or the
Company does so withhold, is a de minimis obligation.
Redemption Procedures
If the Company gives a notice of redemption in respect of a
series of Subordinated Debentures (which notice will be given not
less than 30 nor more than 90 days prior to the redemption date and
will be irrevocable), then, on the redemption date, the Company
will irrevocably deposit with the Trustee funds sufficient to pay
the applicable Debenture Redemption Price. If notice of redemption
shall have been given and funds deposited as required, then on the
date of such deposit, all rights of holders of such Subordinated
Debentures so called for redemption will cease, except the right of
the holders of such Subordinated Debentures to receive the
Debenture Redemption Price, but without interest. In the event
that any date fixed for redemption of Subordinated Debentures is
not a Business Day, then payment of the Debenture Redemption Price
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payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in
respect of any such delay), except that if such Business Day falls
in the next succeeding calendar year, such payment will be made on
the immediately preceding Business Day.
In the event that less than all of a series of outstanding
Subordinated Debentures are to be so redeemed following a
Distribution Event, the Subordinated Debentures to be redeemed will
be selected as described under "Description of Preferred
Securities-Book-Entry-Only Issuance-The Depository Trust Company."
Subject to applicable law, after a Distribution Event the
Company or its subsidiaries may at any time and from time to time
purchase outstanding Subordinated Debentures by tender, in the open
market or by private agreement.
If a partial redemption or a purchase of outstanding
Subordinated Debentures by tender, in the open market or by private
agreement would result in a delisting of such series of
Subordinated Debentures from any national securities exchange on
which such series of Subordinated Debentures is then listed, the
Company may then only redeem or purchase such series of
Subordinated Debentures in whole.
Interest
Each Subordinated Debenture will bear interest at a rate per
annum equal to the Dividend rate on the related series of Preferred
Securities, payable monthly in arrears on the last day of each
calendar month of each year (each an "Interest Payment Date"), to
the person in whose name such Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date (the
"Regular Record Date"). In the event that the Subordinated
Debentures do not remain in book-entry-only form, the record dates
will be the fifteenth day of each month.
The amount of interest payable for any period will be computed
on the basis of twelve 30-day months and a 360-day year and, for
any period shorter than a full monthly interest period, on the
basis of the actual number of days elapsed. In the event that any
date on which interest is payable on the Subordinated Debentures is
not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
Option to Extend Interest Payment Period
The Company will have the right at any time and from time to
time during the term of the Subordinated Debentures, so long as the
Company is not in default in the payment of interest on the
Subordinated Debentures, to extend the interest payment period on
the Subordinated Debentures to up to 60 consecutive months,
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<PAGE>
provided that at the end of each such period (an "Extension
Period") the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the
Subordinated Debentures to the extent permitted by applicable law).
During any such Extension Period, neither the Company, nor any
majority owned subsidiary of the Company, may declare or pay any
dividends on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than
dividends to the Company by a wholly owned subsidiary of the
Company). No interest shall be due and payable during an Extension
Period, except at the end thereof. If Penelec Capital shall be the
sole holder of the Subordinated Debentures, the Company shall give
Penelec Capital notice of its selection of such extended interest
payment period one Business Day prior to the earlier of (i) the
date the Dividends on Preferred Securities are payable or (ii) the
date Penelec Capital is required to give notice to any national
securities exchange on which the Preferred Securities are listed or
other applicable self-regulatory organization or to the holders of
the Preferred Securities of the record date or the date such
Dividend is payable, but in any event not less than one Business
Day prior to such record date. The Company shall cause Penelec
Capital to give notice of the Company's selection of such extended
interest payment period to the holders of the Preferred Securities.
If Penelec Capital shall not be the sole holder of the Subordinated
Debentures, the Company will give the holders of the Subordinated
Debentures notice of its selection of such extended interest
payment period ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date the Company is required to
give notice of the record or payment date of such related interest
payment to any national securities exchange on which the
Subordinated Debentures are then listed or other applicable self-
regulatory organization or to holders of the Subordinated
Debentures, but in any event not less than two Business Days prior
to such record date.
Additional Interest
If at any time Penelec Capital is required to pay any
Additional Amounts in respect of the Preferred Securities pursuant
to the terms thereof, then the Company will pay as interest
("Additional Interest") on the Subordinated Debentures an amount
equal to such Additional Amounts. In addition, if Penelec Capital
would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company will also pay as Additional
Interest such amounts as shall be required so that the net amounts
received and retained by Penelec Capital after paying any such
taxes, duties, assessments or governmental charges will be not less
than the amounts Penelec Capital would have received had no such
taxes, duties, assessments or governmental charges been imposed.
Credit
Prior to a Distribution Event, the Company shall receive a
credit against any payment it is otherwise required to make under
the Subordinated Debentures to the extent it has theretofore made,
or is concurrently making, a payment under the Guarantee.
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Subordination
All payments by the Company in respect of the Subordinated
Debentures shall be subordinated to the prior payment in full of
all amounts payable on Senior Indebtedness. "Senior Indebtedness"
consists of (i) the principal of and premium (if any) in respect of
(A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by securities, debentures, bonds or other
similar instruments (including purchase money obligations) for
payment of which the Company is responsible or liable; (ii) all
capital lease obligations of the Company; (iii) all obligations of
the Company issued or assumed as the deferred purchase price of
property or services, all conditional sale obligations of the
Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts payable arising
in the ordinary course of business); (iv) certain obligations of
the Company for the reimbursement of any obligor on any letter of
credit, banker's acceptance, security purchase facility or similar
credit transaction; (v) all obligations of the type referred to in
clauses (i) through (iv) of other persons for the payment of which
the Company is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other persons secured by any lien on any
property or asset of the Company (whether or not such obligation is
assumed by the Company), except for any such indebtedness that is
by its terms subordinated to or pari passu with the Subordinated
Debentures.
Upon any payment or distribution of assets or securities of
the Company or upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company, whether
voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts payable on Senior
Indebtedness (including any interest accruing on such Senior
Indebtedness subsequent to the commencement of a bankruptcy,
insolvency or similar proceeding) shall first be paid in full
before the Trustee or the holders of Preferred Securities or
Subordinated Debentures (or the Special Representative) will be
entitled to receive from the Company any payment of principal of,
or interest on, or any other amounts in respect of, the
Subordinated Debentures.
No direct or indirect payment by or on behalf of the Company
of principal of or interest on the Subordinated Debentures whether
pursuant to the terms of the Subordinated Debentures or upon
acceleration or otherwise may be made if, at the time of such
payment, there exists, (i) a default in the payment of all or any
portion of any Senior Indebtedness or (ii) any other default (other
than a default of the nature described in clause (i) above)
affecting Senior Indebtedness permitting its acceleration, as the
result of which the maturity of Senior Indebtedness has been
accelerated, and in either case requisite notice has been given to
the Company and the Trustee and such default shall not have been
cured or waived by or on behalf of the holders of such Senior
Indebtedness.
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If the Trustee or any holder of Preferred Securities or
Subordinated Debentures (or the Special Representative) has
received any payment on account of the principal of or interest on
the Subordinated Debentures when such payment is prohibited and
before all amounts payable on Senior Indebtedness are paid in full,
then and in such event such payment or distribution shall be
received and held in trust for the holders of Senior Indebtedness
and shall be paid over or delivered first to the holders of the
Senior Indebtedness remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full.
Upon the payment in full of all Senior Indebtedness, the
Trustee and the holders of Preferred Securities or Subordinated
Debentures (and the Special Representative) shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive
payments or distributions of assets of the Company made on such
Senior Indebtedness until the Subordinated Debentures are paid in
full.
Certain Covenants of the Company
Neither the Company nor any majority owned subsidiary shall
declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its preferred or
common stock (other than dividends to the Company by a wholly owned
subsidiary of the Company) (i) during an Extension Period, (ii) if
there shall have occurred and is continuing any event that, with
the giving of notice or the lapse of time or both, would constitute
an Event of Default under the Indenture or (iii) so long as any
Preferred Securities remain outstanding, if the Company shall be in
default with respect to its payment or other obligations under the
Guarantee.
Book-Entry and Settlement
If Subordinated Debentures are distributed to holders of
Preferred Securities, the Subordinated Debentures will be issued in
book-entry-only form to DTC. For a description of DTC and the
specific terms of the depository arrangements, see "Description of
Preferred Securities-Book-Entry-Only Issuance-The Depository Trust
Company", which would also apply to the Subordinated Debentures in
book-entry-only form.
Neither the Company, the Trustee, any paying agent nor any
other agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in
a global security for such Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Discontinuance of the Depository's Services. A global
security will be exchangeable for Subordinated Debentures
registered in the names of persons other than the depository or its
nominee only if (i) the depository notifies the Company that it is
unwilling or unable to continue as depository for such global
security or if at any time the depository ceases to be a clearing
agency registered under the Exchange Act at a time when the
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<PAGE>
depository is required to be so registered to act as such
depository, (ii) the Company in its sole discretion determines that
such global security shall be so exchangeable or (iii) there shall
have occurred and be continuing a default in the payment of
principal of, or interest on, such Subordinated Debentures or an
Event of Default or an event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default
with respect to such Subordinated Debentures. Any global security
that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Subordinated Debentures registered in such names
as the depository shall direct. It is expected that such
instructions will be based upon directions received by the
depository from its Participants with respect to ownership of
beneficial interests in such global security.
Payment; Registration and Transfer
In the event that the Subordinated Debentures do not remain in
book-entry-only form, the following provisions would apply:
Payment of principal of any Subordinated Debenture will be
made only against surrender to the Trustee or the Paying Agent
appointed by the Company, if not the Trustee, of such Subordinated
Debenture. Principal of, and interest on, Subordinated Debentures
will be payable, subject to any applicable laws and regulations, at
the office of the Trustee or such Paying Agent as the Company may
designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the
address of the person entitled thereto as such address shall appear
in the security Register with respect to such Subordinated
Debentures. Payment of interest on a Subordinated Debenture on any
Interest Payment Date will be made to the person in whose name such
Subordinated Debenture is registered at the close of business on
the Regular Record Date for such interest, with certain exceptions.
The Corporate Trust Office of the Trustee in The City of New
York shall initially be designated as the Company's sole Paying
Agent for payments with respect to Subordinated Debentures of each
series. The Company may at any time designate other or additional
Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts.
Subordinated Debentures may be presented for registration of
transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Registrar appointed by the Company
without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. The Company
has initially appointed the Trustee as Registrar with respect to
the Subordinated Debentures. The Company shall not be required to
make, and the Registrar need not register, the transfer or exchange
of (i) any Subordinated Debenture during a period beginning at the
opening of business five days before the mailing of a notice of
redemption of Subordinated Debentures, and ending at the close of
business on the day of such mailing, (ii) any Subordinated
Debenture selected, called or being called for redemption, in whole
or in part, except in the case of any Subordinated Debenture to be
redeemed in part, the portion thereof not to be redeemed or (iii)
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<PAGE>
any Subordinated Debenture between a Regular Record Date and the
next succeeding Interest Payment Date.
Amendment of the Indenture
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in principal amount of the Subordinated Debentures which
are affected by the amendment or waiver, to amend the Indenture or
the Subordinated Debentures or to waive compliance by the Company
with any provision of the Indenture or the Subordinated Debentures;
provided that no such amendment or waiver may, without the consent
of the holder of each outstanding Subordinated Debenture affected
thereby, (a) reduce the principal amount of the Subordinated
Debentures, (b) reduce the percentage of principal amount of
outstanding Subordinated Debentures of any series, the consent of
holders of which is required for amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults, (c) change the stated maturity date
of the principal of, or the interest or the rate of interest on,
the Subordinated Debentures, (d) change the redemption provisions
applicable to the Subordinated Debentures adversely to the holders
thereof, (e) impair the right to institute suit for the enforcement
of any payment with respect to the Subordinated Debentures, (f)
change the currency in which payments with respect to the
Subordinated Debentures are to be made, (g) change the
subordination provisions applicable to the Subordinated Debentures
adversely to the holders thereof, or (h) waive a default in the
payment of the principal of, or interest on, any Subordinated
Debenture. The Indenture or the Subordinated Debentures may be
amended, without the consent of the holders of the Subordinated
Debentures, to cure any ambiguity, defect or inconsistency or to
make other changes that do not adversely affect the rights of such
holders.
Events of Default
The following are Events of Default under the Indenture: (i)
default for 15 days in payment of any interest (including
Additional Interest, if any) on Subordinated Debentures (whether by
virtue of the provisions described above under "Subordination" or
otherwise); provided that an extension of the interest payment
period by the Company as described under "Option to Extend Interest
Payment Period" shall not constitute a default in the payment of
interest for this purpose; (ii) default in payment of principal of
Subordinated Debentures when due (whether by virtue of the
provisions described above under "Subordination" or otherwise);
(iii) default for 30 days after notice in the performance of any
other covenant in the Indenture; or (iv) certain events of
bankruptcy, insolvency or reorganization of the Company. If an
Event of Default shall occur and be continuing, the Trustee or the
holders of not less than a majority in principal amount of the
Subordinated Debentures then outstanding may declare the principal
of, and all accrued and unpaid interest (including Additional
Interest, if any, and any interest accrued but not paid during an
Extension Period) on, the Subordinated Debentures to be due and
payable; provided that, upon certain events of bankruptcy,
insolvency or reorganization of the Company, such amounts shall
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<PAGE>
immediately become due and payable without any declaration or other
action by the Trustee or such holders. The Company is required to
furnish to the Trustee annually a statement as to the performance
by the Company of its obligations under the Indenture and as to any
default in such performance. Under certain circumstances, any
declaration of acceleration with respect to the Subordinated
Debentures may be rescinded and past defaults (except, unless
theretofore cured, a default in the payment of principal of, or
interest on, the Subordinated Debentures) may be waived by the
holders of a majority in principal amount of the Subordinated
Debentures then outstanding. The Indenture provides that the
Trustee may withhold notice to the holders of the Subordinated
Debentures of any continuing default (except in the payment of the
principal of, or interest on, the Subordinated Debentures) if the
Trustee considers it in the interests of holders of Subordinated
Debentures to do so. So long as any Subordinated Debentures are
held by Penelec Capital, the holders of any outstanding Preferred
Securities will have the rights referred to under "Description of
Preferred Securities-Voting Rights", including the right to appoint
a Special Representative authorized to exercise Penelec Capital's
right, as the holder of Subordinated Debentures, to accelerate the
principal amount of the Subordinated Debentures and to enforce
Penelec Capital's other rights under the Indenture.
Consolidation, Merger, Sale or Conveyance
The Indenture provides that the Company may not consolidate
with or merge into any other Person or sell, convey, transfer or
lease all or substantially all of its properties and assets to any
Person, unless (i) the successor Person shall be organized and
existing under the laws of the United States or any state thereof
or the District of Columbia; (ii) the successor Person shall
expressly assume (x) by a supplemental indenture, all of the
Company's obligations under the Subordinated Debentures and the
Indenture and (y) so long as any Preferred Securities remain
outstanding, the Company's obligations under the Guarantee; (iii)
so long as any Preferred Securities remain outstanding, the
successor Person becomes or acquires the General Partner; and (iv)
the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, conveyance, transfer or lease and such
supplemental indenture comply with the Indenture. In case of any
such consolidation, merger, sale, conveyance, transfer or lease,
such successor Person will succeed to and be substituted for the
Company as obligor on the Subordinated Debentures, with the same
effect as if it had been named in the Indenture as the issuer in
place of the Company.
The Indenture does not contain any other covenant which
restricts the Company's ability to consolidate or merge with, or
sell, convey, transfer or lease all or substantially all of its
assets to, any Person, firm or corporation or otherwise engage in
restructuring transactions.
Title
The Company, the Trustee and any agent of the Company or the
Trustee may treat the registered owner of any Subordinated
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Debenture as the absolute owner thereof (whether or not such
Subordinated Debenture shall be overdue and notwithstanding any
notice to the contrary) for the purpose of making payment and for
all other purposes.
Defeasance and Discharge
Under the terms of the Indenture, the Company will be
discharged from any and all obligations in respect of the
Subordinated Debentures of any series (except in each case for
certain obligations to register the transfer or exchange of
Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain paying agencies and hold monies
for payment in trust) if the Company deposits with the Trustee, in
trust, (i) money and/or (ii) U. S. Government Obligations (as
defined in the Indenture) sufficient to pay all the principal of,
and interest on, the Subordinated Debentures of such series on the
dates such payments are due; provided that no Event of Default has
occurred and is continuing. In connection with such a defeasance
and discharge, the Company, among other things, will deliver to the
Trustee an Opinion of Counsel to the effect that (i) the deposit
and related defeasance would not cause the holders of the
Subordinated Debentures of such series to recognize income, gain or
loss for federal income tax purposes, or a copy of a ruling or
other formal statement or action to such effect received from or
published by the Internal Revenue Service; and (ii) the trust
resulting from the defeasance is a valid trust and will not
constitute a regulated investment company under the 1940 Act.
Replacement of Subordinated Debentures
Any mutilated Subordinated Debenture will be replaced by the
Company at the expense of the holder upon its surrender to the
Trustee. Subordinated Debentures that become destroyed, lost or
stolen will be replaced by the Company at the expense of the holder
upon delivery to the Trustee of evidence of the destruction, loss
or theft thereof satisfactory to the Company and the Trustee. In
the case of a destroyed, lost or stolen Subordinated Debenture, an
indemnity satisfactory to the Trustee and the Company may be
required at the expense of the holder of such Subordinated
Debenture before a replacement Subordinated Debenture will be
issued.
Governing Law
The Indenture and the Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New
York.
Information Concerning the Trustee
Subject to the provisions of the Indenture relating to its
duties, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request, order or
direction of any of the holders thereunder, unless such holders
shall have offered to the Trustee reasonable indemnity. Subject to
such provision for indemnification, the holders of a majority in
principal amount of the Subordinated Debentures then outstanding
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thereunder will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee thereunder, or exercising any trust or power conferred on
the Trustee.
The Indenture contains limitations on the right of the
Trustee, as a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. In addition,
the Trustee may be deemed to have a conflicting interest and may be
required to resign as Trustee if at the time of default under the
Indenture it is a creditor of the Company.
United States Trust Company of New York, the Trustee under the
Indenture, has from time to time engaged in transactions with, or
performed services for, the Company and its affiliates in the
ordinary course of business.
Miscellaneous
For restrictions on certain actions of the General Partner
with respect to Subordinated Debentures held by Penelec Capital,
see "Description of Preferred Securities-Voting Rights".
UNITED STATES TAXATION
General
This section is a summary of certain United States federal
income tax considerations that may be relevant to prospective
purchasers of Preferred Securities and represents the opinion of
Carter, Ledyard & Milburn, special tax counsel to the Company and
Penelec Capital, insofar as it relates to matters of law and legal
conclusions. This section is based upon current provisions of the
Internal Revenue Code of 1986, as amended ("Code"), existing and
proposed regulations thereunder and current administrative rulings
and court decisions, all of which are subject to change.
Subsequent changes may cause tax consequences to vary substantially
from the consequences described below.
No attempt has been made in the following discussion to
comment on all United States federal income tax matters affecting
purchasers of Preferred Securities. Moreover, the discussion
focuses on holders of Preferred Securities who are individual
citizens or residents of the United States and has only limited
application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Preferred
Securities should consult, and should depend on, his or her own tax
advisor in analyzing the federal, state, local and foreign tax
consequences of the purchase, ownership or disposition of Preferred
Securities.
Income from Preferred Securities
In the opinion of Carter, Ledyard & Milburn, Penelec Capital
will be treated as a partnership for federal income tax purposes.
Accordingly, each holder of Preferred Securities (a "Preferred
Securityholder") will be required to include in gross income such
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<PAGE>
holder's distributive share of the income of Penelec Capital. Such
income will not exceed Dividends received on such Preferred
Securities, except in limited circumstances as described below
under "Potential Extension of Interest Payment Period". No portion
of such income will be eligible for the dividends received
deduction.
Disposition of Preferred Securities
Gain or loss will be recognized on a sale (including a
redemption for cash) of Preferred Securities in an amount equal to
the difference between the amount realized and the Preferred
Securityholder's tax basis for the Preferred Securities sold. Gain
or loss recognized by a Preferred Securityholder on the sale or
exchange of a Preferred Security held for more than one year will
generally be taxable as long-term capital gain or loss.
Receipt of Subordinated Debentures Upon Liquidation of Penelec
Capital
Under certain circumstances described under the caption
"Description of Preferred Securities-Special Event Redemption or
Distribution", Penelec Capital may dissolve and cause Subordinated
Debentures to be distributed to the holders of Preferred Securities
in liquidation of such holders' interests in Penelec Capital. As
described in "Description of Preferred Securities-Special Event
Redemption or Distribution", in the case of a Special Event,
Subordinated Debentures may not be distributed to the holders of
Preferred Securities in connection with a dissolution of Penelec
Capital unless Penelec Capital receives an opinion of counsel to
the effect that the holders of the Preferred Securities will not
recognize any gain or loss for federal income tax purposes as a
result of such dissolution and distribution. Such a tax-free
transaction would result in the holder of Preferred Securities
receiving an aggregate tax basis in the Subordinated Debentures
equal to such holder's aggregate tax basis in the holder's
Preferred Securities. A holder's holding period in such
Subordinated Debentures would include the period for which the
Preferred Securities were held by such holder.
Penelec Capital Information Returns and Audit Procedures
The General Partner will furnish each Preferred Security-
holder with a Schedule K-1 each year setting forth such Preferred
Securityholder's allocable share of income for the prior calendar
year. The General Partner is required to furnish such schedules as
soon as practicable following the end of the year, but in any event
prior to March 31.
Any person who holds Preferred Securities as a nominee for
another person is required to furnish to Penelec Capital (a) the
name, address and taxpayer identification number of the beneficial
owner and the nominee; (b) information as to whether the beneficial
owner is (i) a person that is not a United States person, (ii) a
foreign government, an international organization or any wholly
owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of
Preferred Securities held, acquired or transferred for the
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beneficial owner; and (d) certain information including the dates
of acquisitions and transfers, means of acquisitions and transfers,
and acquisition cost for purchases, as well as the amount of net
proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they
are United States persons and certain information on Preferred
Securities they acquire, hold or transfer for their own accounts.
A penalty of $50 per failure (up to a maximum of $100,000 per
calendar year) is imposed by the Code for failure to report such
information to Penelec Capital. The nominee is required to supply
the beneficial owners of Preferred Securities with the information
furnished to Penelec Capital.
Potential Extension of Interest Payment Period
Under the terms of the Indenture, the Company has the right to
extend from time to time the interest payment period on the
Subordinated Debentures to a period not exceeding 60 consecutive
months. In the event that the Company exercises this right, the
Company may not, among other things, declare dividends on any of
its capital stock. Penelec Capital and the Company currently
believe that the extension of an interest payment period is
unlikely. In the event that the interest payment period is
extended, Penelec Capital will continue to accrue income, on an
economic accrual basis, generally equal to the amount of the
interest payment due at the end of the extended interest payment
period, over the length of the extended interest payment period.
Accrued income will be allocated, but not distributed, to
holders of record on the Business Day preceding the last day of
each calendar month. As a result, holders of record during an
extended interest payment period will include interest in gross
income in advance of the receipt of cash, and any such holders who
dispose of Preferred Securities prior to the record date for the
payment of Dividends following such extended interest payment
period will include interest in gross income but will not receive
any cash related thereto. The tax basis of a Preferred Security
will be increased by the amount of any interest that is included in
income without a receipt of cash, and will be decreased when and if
such cash is subsequently received from Penelec Capital. The
subsequent receipt of such cash will not be includible in gross
income.
United States Alien Holders
For purposes of this discussion, a "United States Alien
Holder" is any holder who or which is (i) a nonresident alien
individual or (ii) a foreign corporation, partnership or estate or
trust, in either case not subject to United States federal income
tax on a net income basis in respect of a Preferred Security.
Under current United States federal income tax law, subject to
the discussion below with respect to backup withholding, and
assuming satisfaction by the Company of its withholding tax
obligations, if any:
(i) payments by Penelec Capital or any of its paying
agents to any holder of a Preferred Security who or which
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<PAGE>
is a United States Alien Holder will not be subject to
United States federal withholding tax provided that (a)
the beneficial owner of the Preferred Security does not
actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the
Company or 10% or more of the Preferred Securities
entitled to vote, (b) the beneficial owner of the
Preferred Security is not a controlled foreign
corporation that is related to the Company or Penelec
Capital through stock ownership, and (c) either: (x) the
beneficial owner of the Preferred Security certifies to
Penelec Capital or its agent, under penalties of perjury,
that it is a United States Alien Holder and provides its
name and address or (y) the holder of the Preferred
Security is a securities clearing organization, bank or
other financial institution that holds customers'
securities in the ordinary course of its trade or
business (a "financial institution"), and such holder
certifies to Penelec Capital or its agent, under
penalties of perjury, that such statement has been
received from the beneficial owner by it or by a
financial institution between it and the beneficial owner
and furnishes Penelec Capital or its agent with a copy
thereof; and
(ii) a United States Alien Holder of a Preferred
Security will generally not be subject to United States
federal withholding tax on any gain realized on the sale
or exchange of a Preferred Security unless such holder is
present in the United States for 183 days or more in the
taxable year of sale and either has a "tax home" in the
United States or certain other requirements are met.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to
payments of the proceeds of the sale of Preferred Securities within
the United States to noncorporate United States holders, and
"backup withholding" at a rate of 31% will apply to such payments
if the United States holder fails to provide an accurate taxpayer
identification number.
Payments of the proceeds from the sale by a United States
Alien Holder of Preferred Securities made to or through a foreign
office of a broker will not be subject to information reporting or
backup withholding, except that, if the broker is a United States
person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a
specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Preferred
Securities to or through the United States office of a broker is
subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption from information
reporting and backup withholding.
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PLAN OF DISTRIBUTION
Penelec Capital may offer or sell Preferred Securities to one
or more underwriters for public offering and sale by them. Penelec
Capital may sell Preferred Securities as soon as practicable after
effectiveness of the Registration Statement, provided that
favorable market conditions exist. Any such underwriter involved
in the offer and sale of the Preferred Securities will be named in
an applicable Prospectus Supplement.
Underwriters may offer and sell the Preferred Securities at a
fixed price or prices, which may be changed, or from time to time
at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. In
connection with the sale of Preferred Securities, underwriters may
be deemed to have received compensation from the Company and/or
Penelec Capital in the form of underwriting discounts or
commissions. Underwriters may sell Preferred Securities to or
through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the
underwriters.
Any underwriting compensation paid by the Company and/or
Penelec Capital to underwriters in connection with the offering of
Preferred Securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth
in an applicable Prospectus Supplement. Underwriters and dealers
participating in the distribution of the Preferred Securities may
be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the
Preferred Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters and dealers
may be entitled, under agreement with the Company and/or Penelec
Capital, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act,
and to reimbursement by the Company and/or Penelec Capital for
certain expenses.
Underwriters and dealers may engage in transactions with, or
perform services for, the Company and/or Penelec Capital and/or any
of their affiliates in the ordinary course of business.
Each series of Preferred Securities will be a new issue of
securities and will have no established trading market. Any
underwriters to whom Preferred Securities are sold by Penelec
Capital for public offering and sale may make a market in such
Preferred Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without
notice. The Preferred Securities may or may not be listed on a
national securities exchange. No assurance can be given as to the
liquidity of or the trading markets for any Preferred Securities.
38
<PAGE>
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company and
Penelec Capital by Berlack, Israels & Liberman, New York, New York,
and Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania,
and for any underwriters by Reid & Priest, New York, New York.
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to
Penelec Capital. Berlack, Israels & Liberman and Reid & Priest may
rely on the opinion of Ballard Spahr Andrews & Ingersoll as to
matters of Pennsylvania law, and Berlack, Israels & Liberman,
Ballard Spahr Andrews & Ingersoll and Reid & Priest may rely on the
opinion of Richards, Layton & Finger, P.A., as to matters of
Delaware law. Members and attorneys of Berlack, Israels & Liberman
own an aggregate of 11,931 shares of the Common Stock of the
Company's parent, GPU. In addition, one such member holds 986 such
shares as custodian for his children.
EXPERTS
The financial statements and financial statement schedules
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 are incorporated herein by reference in
reliance on the report of Coopers & Lybrand, independent
accountants, given on the authority of said firm as experts in
auditing and accounting. The report of Coopers & Lybrand, included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 incorporated herein by reference, contains
explanatory paragraphs related to a contingency which has resulted
from the accident at Unit 2 of the Three Mile Island nuclear
generating station and the change in the method of accounting for
unbilled revenues in 1991.
39
<PAGE>
No person has been authorized to
give any information or to make any _________Preferred
representations other than those Securities
contained in this Prospectus Supplement
or the Prospectus, and, if given or Penelec Capital
made, such information or
representations must not be relied upon guaranteed to the
as having been authorized. Neither extent set forth
the delivery of this Prospectus herein by
Supplement or the Prospectus nor any
sale made hereunder or thereunder
shall, under any circumstances, create PENNSYLVANIA
any implication that the information ELECTRIC
contained herein or therein is correct COMPANY
as of any time subsequent to the date
of such information. This Prospectus
Supplement and the Prospectus do not % Cumulative
constitute an offer to sell or a Monthly Income
solicitation of an offer to buy any Preferred Securities,
securities other than the securities Series A
described in this Prospectus Supplement
or an offer to sell or the solicitation
of an offer to buy such securities in
any circumstances in which such offer
or solicitation is unlawful.
___________________ PROSPECTUS
SUPPLEMENT
TABLE OF CONTENTS
Prospectus Supplement
Page
Penelec Capital . . . . . . . . . . .
Pennsylvania Electric Company . . . .
Certain Investment Considerations . .
Use of Proceeds . . . . . . . . . . .
Certain Terms of the Series A
Preferred Securities . . . . . . .
Certain Terms of the Series A
Subordinated Debentures . . . . .
Underwriting . . . . . . . . . . . .
Legal Opinions . . . . . . . . . . .
Prospectus
Available Information . . . . . . . .
Incorporation of Certain Documents
by Reference . . . . . . . . . . .
Pennsylvania Electric Company . . . .
Financing Program . . . . . . . . . .
Certain Company Consolidated Financial
Information . . . . . . . . . . .
Company Coverage Ratios . . . . . . .
Use of Proceeds . . . . . . . . . . .
Penelec Capital . . . . . . . . . . .
Description of Preferred Securities .
Description of the Guarantee . . . .
Description of the Subordinated
Debentures . . . . . . . . . . . . GOLDMAN, SACHS & CO.
United States Taxation . . . . . . .
Plan of Distribution . . . . . . . . Representatives of the
Legal Opinions . . . . . . . . . . . Underwriters
Experts . . . . . . . . . . . . . . .
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Filing fees - Securities and Exchange
Commission $ 45,104
Printing and engraving 10,000*
New York Stock Exchange listing fee 15,000*
Legal fees:
Berlack, Israels & Liberman 85,000*
Ballard Spahr Andrews & Ingersoll 85,000*
Carter, Ledyard & Milburn 55,000*
Richards, Layton & Finger, P.A. 12,500*
Blue Sky fees and expenses 15,000*
Accounting fees:
Coopers & Lybrand 15,000*
Indenture Trustee fees and expenses 20,000*
Rating agencies fees and expenses 48,125*
Miscellaneous 24,271*
Total $425,000*
_________________
*Estimated
Item 15. Indemnification of Directors and Officers.
The By-Laws of the Company provide, in part, as follows:
"32. (a) A director shall not be personally liable for
monetary damages as such for any action taken, or any failure
to take any action, on or after January 27, 1987 unless the
director has breached or failed to perform the duties of his
office under Section 1721 of the Pennsylvania Business
Corporation Law, and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness.
The provisions of this subsection (a) shall not apply to the
responsibility or liability of a director pursuant to any
criminal statute, or the liability of a director for the
payment of taxes pursuant to local, State or Federal law.
(b) The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative,
whether formal or informal, and whether brought by or in the
right of the corporation or otherwise, by reason of the fact
that he was a director, officer or employee of the corporation
(and may indemnify any person who was an agent of the
corporation), or a person serving at the request of the
corporation as a director, officer, partner, fiduciary or
trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise to the
fullest extent permitted by law, including without limitation
indemnification against expenses (including attorneys' fees
and disbursements), damages, punitive damages, judgments,
penalties, fines and amounts paid in settlement actually and
<PAGE>
reasonably incurred by such person in connection with such
proceeding unless the act or failure to act giving rise to the
claim for indemnification is finally determined by a court to
have constituted willful misconduct or recklessness.
(c) The corporation shall pay the expenses (including
attorneys' fees and disbursements) actually and reasonably
incurred in defending a civil or criminal action, suit or
proceeding on behalf of any person entitled to indemnification
under subsection (b) in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation, and may pay such expenses in advance on behalf of
any agent on receipt of a similar undertaking. The financial
ability of such person to make such repayment shall not be a
prerequisite to the making of an advance.
(d) For purposes of this Section: (i) the corporation
shall be deemed to have requested an officer, director,
employee or agent to serve as fiduciary with respect to an
employee benefit plan where the performance by such person of
duties to the corporation also imposes duties on, or otherwise
involves services by, such person as a fiduciary with respect
to the plan; (ii) excise taxes assessed with respect to any
transaction with an employee benefit plan shall be deemed
"fines"; and (iii) action taken or omitted by such person with
respect to an employee benefit plan in the performance of
duties for a purpose reasonably believed to be in the interest
of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best
interests of the corporation.
(e) To further effect, satisfy or secure the
indemnification obligations provided herein or otherwise, the
corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash
collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security
interest in any assets or properties of the corporation, or
use any other mechanism or arrangement whatsoever in such
amounts, at such costs, and upon such other terms and
conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section
shall be deemed a contract between the corporation and the
person entitled to indemnification under this Section pursuant
to which the corporation and each such person intend to be
legally bound. Any repeal, amendment or modification hereof
shall be prospective only and shall not limit, but may expand,
any rights or obligations in respect of any proceeding whether
commenced prior to or after such change to the extent such
proceeding pertains to actions or failures to act occurring
prior to such change.
(g) The indemnification, as authorized by this Section,
shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may
2
<PAGE>
be entitled under any statute, agreement, vote of shareholders
or disinterested directors or otherwise, both as to action in
any official capacity and as to action in any other capacity
while holding such office. The indemnification and
advancement of expenses provided by, or granted pursuant to,
this Section shall continue as to a person who has ceased to
be an officer, director, employee or agent in respect of
matters arising prior to such time, and shall inure to the
benefit of the heirs, executors and administrators of such
person."
The Limited Partnership Agreement provides, in part, as
follows:
"Section 9.03 Indemnification. To the fullest extent
permitted by applicable law, an Indemnified Person shall be
entitled to indemnification from the Partnership for any loss,
damage or claim incurred by such Indemnified Person by reason of
any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Partnership and in a manner
reasonably believed to be within the scope of authority conferred
on such Indemnified Person by this Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by
reason of willful misconduct, gross negligence or fraud with
respect to such acts or omissions; provided, however, that any
indemnity under this Section 9.03 shall be provided out of and to
the extent of Partnership assets only, and except as otherwise
expressly provided in Section 9.01(a) or by the Delaware Act, no
Covered Person shall have any personal liability on account
thereof. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an undertaking by or on behalf
of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be
indemnified as authorized in this Section 9.03."
In addition, applicable Delaware partnership law provides
authority for limited partnerships to indemnify under certain
circumstances any partner or other person from and against any and
all claims and demands.
Section 1741 of the Pennsylvania Business Corporation Law
authorizes a corporation to provide in its by-laws for
indemnification to be granted under certain circumstances to its
officers, directors and other agents against expenses and
liabilities incurred in connection with proceedings arising out of
such persons having taken action or failed to take action on behalf
of the corporation.
The foregoing rights of indemnification shall apply to any
liability of any director or officer, partner or other person (or
his legal representatives) arising under any of the provisions of
the Securities Act of 1933, as amended, only to the extent that
3
<PAGE>
such rights of indemnification may be determined to be valid by a
court of competent jurisdiction.
Item 16. Exhibits:
Exhibit No. Description
1-A - Form of Underwriting Agreement relating to
Preferred Securities - to be filed by
amendment.
3-A - Restated Articles of Incorporation of the
Company - Incorporated by reference to Exhibit
3A to the Company's Annual Report on Form 10-K
for the year 1991 ("1991 10-K"), SEC File No.
1-3522.
3-B - Amended By-Laws - Incorporated by reference to
Exhibit 3B to the 1991 10-K.
3-C - Certificate of Incorporation of Penelec
Preferred Capital, Inc.
3-D - By-Laws of Penelec Preferred Capital, Inc. - to
be filed by amendment.
3-E - Certificate of Limited Partnership of Penelec
Capital.
3-F - Form of Limited Partnership Agreement of
Penelec Capital.
3-G - Form of Amended and Restated Limited
Partnership Agreement of Penelec Capital.
3-H - Form of Action Creating Series A Preferred
Securities.
4-A - Form of Subordinated Debenture Indenture - to
be filed by amendment.
4-A(1) - Cross-reference sheet showing location in the
Subordinated Debenture Indenture of provisions
of Sections 310(a) through 318(a) of the Trust
Indenture Act of 1939 - to be filed by
amendment.
4-B - Form of Preferred Security Certificate -
Incorporated by reference to Exhibit A to
Exhibit 3-G hereto.
4-C - Form of Subordinated Debenture - Incorporated
by reference to form of Subordinated Debenture
contained in Exhibit 4-A.
4-D - Form of Payment and Guarantee Agreement.
4
<PAGE>
5-A - Opinion of Berlack, Israels & Liberman - to be
filed by amendment.
5-B - Opinion of Ballard Spahr Andrews & Ingersoll -
to be filed by amendment.
5-C - Opinion of Richards, Layton & Finger, P.A. - to
be filed by amendment.
8 - Opinion of Carter, Ledyard & Milburn - to be
filed by amendment.
12-A - Statement Showing Computation of Ratio of
Earnings to Fixed Charges and Statement Showing
Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
23-A - Consent of Berlack, Israels & Liberman (to be
included in their opinion filed as Exhibit 5-
A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll
(to be included in their opinion filed as
Exhibit 5-B).
23-C - Consent of Richards, Layton & Finger, P.A. (to
be included in their opinion filed as Exhibit
5-C).
23-D - Consent of Carter, Ledyard & Milburn (to be
included in their opinion filed as Exhibit 8).
23-E - Consent of Coopers & Lybrand.
24 - Power of Attorney-included in signature page.
25 - Statement of Eligibility of Trustee under the
Trust Indenture Act of 1939.
_________
The Exhibits listed above which have heretofore been filed
with the Securities and Exchange Commission and which are
designated in prior filings as noted above, are hereby incorporated
by reference and made a part hereof with the same effect as if
filed herewith.
Item 17. Undertakings.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement (i) to include any prospectus required
by section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
5
<PAGE>
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and (iii)
to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that clauses (i)
and (ii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is
contained in periodic reports filed by a registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability
under the Securities Act of 1933, each filing of a
registrant's annual report pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions or otherwise, the registrants have been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by a registrant of expenses incurred or
paid by any such persons in the successful defense of any action,
suit or proceeding) is asserted by any such person in connection
with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by them
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Reading, Commonwealth of Pennsylvania, on the 17th day of May,
1994.
PENNSYLVANIA ELECTRIC COMPANY
By:
F.D. Hafer, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Pennsylvania Electric
Company and each of its undersigned officers and directors hereby
constitute and appoint each of John G. Graham, Don W. Myers and Ira
H. Jolles his/its true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution for him/it and in
his/its name, place and stead, in any and all capacities, to sign
all or any amendments (including post-effective amendments) of and
supplements to this Registration Statement on Form S-3 and to file
the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto each such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, to all intents
and purposes and as fully as said corporation itself and each said
officer or director might or could do in person, hereby ratifying
and confirming all that each such attorney-in-fact and agent, or
his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed below by the following
persons in the capacities with respect to Pennsylvania Electric
Company and on the dates indicated.
Signature Title Date
Chairman (Principal May 17, 1994
(J.R. Leva) Executive Officer) and
Director
President and Director May 17, 1994
(F.D. Hafer)
(R.C. Arnold) Director May 17, 1994
7
<PAGE>
Vice President May 17, 1994
(J.G. Graham) (Principal Financial
Officer) and Director
Vice President and May 17, 1994
(J.G. Herbein) Director
Vice President and May 17, 1994
(G.R. Repko) Director
Vice President, May 17, 1994
(W.R. Stinson) Comptroller (Principal
Accounting Officer) and
Director
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the
City of Reading, Commonwealth of Pennsylvania on the 17th day of
May, 1994.
PENELEC CAPITAL, L.P.
By: Penelec Preferred Capital, Inc.
its general partner
By:________________________________
F.D. Hafer, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Penelec Capital,
L.P. and the undersigned director of Penelec Preferred Capital,
Inc. hereby constitute and appoint each of Ira H. Jolles, John G.
Graham and Don W. Myers its/his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution for
it/him and in its/his name, place and stead, in any and all
capacities, to sign all or any amendments (including post-effective
amendments) of and supplements to this registration statement on
Form S-3 and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto each such attorney-in-fact and agent full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, to
all intents and purposes and as fully as said limited partnership
itself and said director might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed below by the
following person in the capacity on behalf of Penelec Preferred
Capital, Inc., as the general partner of Penelec Capital, L.P., and
on the date indicated.
Signature Title Date
Sole Director May 17, 1994
(F.D. Hafer)
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EXHIBIT INDEX
Exhibit No. Description
1-A - Form of Underwriting Agreement relating to
Preferred Securities - to be filed by
amendment.
3-A - Restated Articles of Incorporation of the
Company - Incorporated by reference to Exhibit
3A to the Company's Annual Report on Form 10-K
for the year 1991 ("1991 10-K"), SEC File No.
1-3522.
3-B - Amended By-Laws - Incorporated by reference to
Exhibit 3B to the 1991 10-K.
3-C - Certificate of Incorporation of Penelec
Preferred Capital, Inc.
3-D - By-Laws of Penelec Preferred Capital, Inc. - to
be filed by amendment.
3-E - Certificate of Limited Partnership of Penelec
Capital.
3-F - Form of Limited Partnership Agreement of
Penelec Capital.
3-G - Form of Amended and Restated Limited
Partnership Agreement of Penelec Capital.
3-H - Form of Action Creating Series A Preferred
Securities.
4-A - Form of Subordinated Debenture Indenture - to
be filed by amendment - to be filed by
amendment.
4-A(1) - Cross-reference sheet showing location in the
Subordinated Debenture Indenture of provisions
of Sections 310(a) through 318(a) of the Trust
Indenture Act of 1939.
4-B - Form of Preferred Security Certificate -
Incorporated by reference to Exhibit A to
Exhibit 3-G hereto.
4-C - Form of Subordinated Debenture - Incorporated
by reference to form of Subordinated Debenture
contained in Exhibit 4-A.
4-D - Form of Payment and Guarantee Agreement.
5-A - Opinion of Berlack, Israels & Liberman - to be
filed by amendment.
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5-B - Opinion of Ballard Spahr Andrews & Ingersoll -
to be filed by amendment.
5-C - Opinion of Richards, Layton & Finger, P.A. - to
be filed by amendment.
8 - Opinion of Carter, Ledyard & Milburn - to be
filed by amendment.
12-A - Statement Showing Computation of Ratio of
Earnings to Fixed Charges and Statement Showing
Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
23-A - Consent of Berlack, Israels & Liberman (to be
included in their opinion filed as Exhibit 5-
A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll
(to be included in their opinion filed as
Exhibit 5-B).
23-C - Consent of Richards, Layton & Finger, P.A. (to
be included in their opinion filed as Exhibit
5-C).
23-D - Consent of Carter, Ledyard & Milburn (to be
included in their opinion filed as Exhibit 8).
23-E - Consent of Coopers & Lybrand.
24 - Power of Attorney-included in signature page.
25 - Statement of Eligibility of Trustee under the
Trust Indenture Act of 1939.
_________
The Exhibits listed above which have heretofore been filed
with the Securities and Exchange Commission and which are
designated in prior filings as noted above, are hereby incorporated
by reference and made a part hereof with the same effect as if
filed herewith.
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STATEMENT OF DIFFERENCES
Difference Description
1. The statements on page 2 of A statement that the
each Prospectus will be in registration statement
the left-hand margin on the has been filed and has
cover pages printed not become effective.
vertically.
2. The page numbers in the The printed and distri-
electronic document do buted document will have
not correspond to the pages fewer pages than the filed
in the printed document. document because there is
more material on each page
of the printed document
and Part II is not part of
the printed document.
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(EXHIBITS TO BE FILED BY EDGAR)
Exhibits:
3-C - Certificate of Incorporation of Penelec
Preferred Capital, Inc.
3-E - Certificate of Limited Partnership of
Penelec Capital.
3-F - Form of Limited Partnership Agreement of
Penelec Capital.
3-G - Form of Amended and Restated Limited
Partnership Agreement of Penelec Capital.
3-H - Form of Action Creating Series A Preferred
Securities.
4-D - Form of Payment and Guarantee Agreement.
12-A - Statement Showing Computation of Ratio of
Earnings to Fixed Charges and Statement
Showing Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred
Stock Dividends.
23-E - Consent of Coopers & Lybrand.
25 - Statement of Eligibility of Trustee under
the Trust Indenture Act of 1939.
<PAGE>
EXHIBIT 3-C
CERTIFICATE OF INCORPORATION
OF
PENELEC PREFERRED CAPITAL, INC.
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Penelec Preferred Capital, Inc.
SECOND: The address, including street, number, city and
county, of the registered office of the corporation in the State of
Delaware is 32 Loockerman Square, Suite L-100, City of Dover,
County of Kent; and the name of the registered agent of the
corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business or purposes to be
conducted or promoted by the corporation are as follows:
(1) To subscribe for and be a holder of general partner
interests of Penelec Capital, L.P., a limited partnership
formed under the laws of the State of Delaware ("Penelec
Capital"), to be a general partner of Penelec Capital and to
discharge such duties and take any and all such actions as may
be necessary, appropriate or desirable in such capacity as may
from time to time be provided in Penelec Capital's limited
partnership agreement and applicable provisions of law.
(2) To issue and sell its capital stock in exchange for
cash or other consideration to fund its acquisition of such
general partner interests and to enable it to have sufficient
net worth for Penelec Capital to be treated as a partnership
for federal income tax purposes, and/or to lend such cash or
other consideration to the entity which acquires such capital
stock.
(3) The corporation shall not conduct any other business
except with respect to and incident to the activities provided
for in clauses (1) and (2) of this Article THIRD.
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is one hundred (100)
shares, all of which are without par value. All such shares are of
one class and are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator
are as follows:
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NAME MAILING ADDRESS
Don W. Myers c/o GPU Service Corporation
100 Interpace Parkway
Parsippany, New Jersey 07054
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by
paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be
amended and supplemented.
EIGHTH: Notwithstanding any other provision of law that may
otherwise so empower the corporation, the corporation shall not,
without the prior written consent of Pennsylvania Electric Company,
a Pennsylvania corporation, do any of the following:
(1) dissolve or liquidate, in whole or in part;
(2) merge or consolidate with, or sell all or
substantially all of its assets to, any person, firm,
corporation, partnership or other entity unless, in the case
of a merger or consolidation, the surviving corporation in
such merger or the corporation resulting from such
consolidation shall have a certificate of incorporation
containing provisions substantially identical to the
provisions of Article THIRD and this Article EIGHTH and, in
the case of a sale of assets, the acquiring corporation shall
have assumed all of the liabilities and obligations of this
corporation and shall have a certificate of incorporation
containing provisions substantially identical to the
provisions of Article THIRD and this Article EIGHTH;
(3) to the extent permitted by law, file or consent to
or acquiesce in a petition seeking an order under the Federal
Bankruptcy Code, as amended, make an assignment for the
benefit of creditors or consent to or fail to contest the
appointment of a custodian or receiver of all or any
substantial part of its property, or file a petition or answer
seeking, consenting to or acquiescing in the granting of
relief under any other applicable bankruptcy, insolvency or
similar law or statute of the United States of America or any
state thereof;
(4) amend this Certificate of Incorporation to alter in
any manner or delete Article THIRD or this Article EIGHTH; or
(5) incur any indebtedness.
NINTH: From time to time any of the provisions of this
Certificate of Incorporation may, subject to the provisions of
paragraph (4) of Article EIGHTH, be amended, altered or repealed,
and other provisions authorized by the laws of the State of
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Delaware at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at
any time conferred upon the stockholders of the corporation by this
Certificate of Incorporation are granted subject to the provisions
of this Article NINTH.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day
of May, 1994.
/s/ Don W. Myers
Don W. Myers
Sole Incorporator
3
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EXHIBIT 3-E
CERTIFICATE OF LIMITED PARTNERSHIP
OF
PENELEC CAPITAL, L.P.
This Certificate of Limited Partnership of Penelec
Capital, L.P. (the "Partnership") is being duly executed and filed
by the undersigned general partner of the Partnership for the
purpose of forming a limited partnership pursuant to the Delaware
Revised Uniform Limited Partnership Act.
1. The name of the Partnership is Penelec Capital, L.P.
2. The address of the registered office of the
Partnership in the State of Delaware is 32 Loockerman Square, Suite
L-100, Dover, Kent County, Delaware 19901. The Partnership's
registered agent at that address is The Prentice-Hall Corporation
System, Inc.
3. The name and mailing address of the sole general
partner of the Partnership is:
NAME ADDRESS
Penelec Preferred Mellon Bank Center
Capital, Inc. Tenth and Market Streets
Wilmington, Delaware 19801
IN WITNESS WHEREOF, the undersigned, constituting the
sole general partner of the Partnership, has caused this
Certificate of Limited Partnership to be duly executed as of the
10th day of May, 1994.
PENELEC PREFERRED CAPITAL, INC.,
as General Partner
By: /s/ Fred D. Hafer
Name: Fred D. Hafer
Its President
<PAGE>
EXHIBIT 3-F
LIMITED PARTNERSHIP
AGREEMENT
OF
PENELEC CAPITAL, L.P.
The undersigned General Partner and Initial Limited Partner
(jointly, the "Partners") hereby form a limited partnership
pursuant to and in accordance with the Delaware Revised Uniform
Limited Partnership Act (6 Del. C. Section 17-101, et seq.) (the
"Delaware Act"), and hereby agree as follows:
1. Name. The name of the limited partnership formed hereby
is PENELEC CAPITAL, L.P. (the "Partnership").
2. Purpose. The purpose and business of the Partnership
shall be to engage in any lawful activity for which limited
partnerships may be organized under the Delaware Act.
3. Registered Office. The registered office of the
Partnership in the State of Delaware is 32 Loockerman Square, Suite
L-100, City of Dover, County of Kent.
4. Registered Agent. The name and address of the registered
agent of the Partnership for service of process on the Partnership
in the State of Delaware is The Prentice-Hall Corporation System,
Inc., 32 Loockerman Square, Suite L-100, City of Dover, County of
Kent, Delaware.
5. Partners. The names and mailing addresses of the General
Partner and the Initial Limited Partner are as follows:
1
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General Partner: Penelec Preferred Capital, Inc.
Mellon Bank Center
Tenth and Market Streets
Wilmington, Delaware 19801
Initial Limited Partner: Don W. Myers
c/o GPU Service Corporation
100 Interpace Parkway
Parsippany, New Jersey 07054
6. Powers. The powers of the General Partner include all
powers, statutory and otherwise, possessed by general partners
under the laws of the State of Delaware.
7. Dissolution. The Partnership shall dissolve, and its
affairs shall be wound up, on May 1, 2060 or at such earlier time
as (a) all of the partners of the Partnership approve in writing,
(b) an event of withdrawal of a general partner has occurred under
the Delaware Act, or (c) an entry of a decree of judicial
dissolution has occurred under Section 17-802 of the Delaware Act;
provided, however, the Partnership shall not be dissolved or
required to be wound up upon an event of withdrawal of a general
partner described in Section 7(b) if (i) at the time of such event
of withdrawal, there is at least one (1) other general partner of
the Partnership who carries on the business of the Partnership (any
remaining general partner being hereby authorized to carry on the
business of the Partnership), or (ii) within ninety (90) days after
the occurrence of such event of withdrawal, all remaining partners
agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of the event of
withdrawal, of one (1) or more additional general partners of the
Partnership.
8. Capital Contributions. The Partners have contributed the
following amounts, in cash, property or services rendered, or in a
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<PAGE>
promissory note or other obligation to contribute cash or to
perform services:
General Partner . . . . . . . . . . . . . . . . . $99.00
Initial Limited Partner . . . . . . . . . . . . . $ 1.00
9. Allocations of Profit and Losses. The Partnership's
profits and losses shall be allocated in proportion to the capital
contributions of the Partners which shall be reflected in a capital
account for each of the Partners.
10. Distributions. Distributions to the Partners shall be in
the same proportion as their then capital account balances.
11. Assignments.
(a) The Initial Limited Partner may transfer all or any
part of his or its partnership interest only with the consent of
the General Partner, and any transferee may be admitted as a
substitute limited partner of the Partnership only with the consent
of the General Partner, whose consent in either case may be
withheld in the sole discretion of the General Partner.
(b) The General Partner may transfer all or any part of
his or its partnership interest without the consent of the Initial
Limited Partner, and such transferee shall have all the rights and
powers of the General Partner.
12. Withdrawal. Except as provided in Sections 11 and 13, no
right is given to the Initial Limited Partner to withdraw from the
Partnership. The General Partner may withdraw from the Partnership
without the consent of the Initial Limited Partner, but no such
withdrawal shall be effective until the filing with the Secretary
of State of the State of Delaware of an amendment to the
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<PAGE>
Partnership's Certificate of Limited Partnership naming a successor
general partner of the Partnership.
13. Additional Partners.
(a) The General Partner may admit additional limited
partners of the Partnership. Immediately following the admission
of one or more additional limited partners of the Partnership, the
Initial Limited Partner shall withdraw from the Partnership and
shall be entitled to receive forthwith the return of its capital
contribution, without interest or deduction.
(b) The Partnership shall continue as a limited
partnership under the Delaware Act after the admission of any
additional limited partners of the Partnership pursuant to this
Section 13.
(c) The admission of additional limited partners of the
Partnership pursuant to this Section 13 may be accomplished by the
amendment and restatement of this Limited Partnership Agreement
and, if required by the Delaware Act, the filing of an amendment
and/or restatement to the Partnership's Certificate of Limited
Partnership with the Secretary of State of the State of Delaware.
14. Merger. The approval of the Initial Limited Partner
shall not be required with respect to any merger of an entity into
the Partnership.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Limited Partnership Agreement as of May __, 1994.
GENERAL PARTNER:
PENELEC PREFERRED CAPITAL, INC.,
a Delaware corporation
By:___________________________
President
INITIAL LIMITED PARTNER:
______________________________
DON W. MYERS
5
<PAGE>
Exhibit 3-G
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF PENELEC CAPITAL, L.P.
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT,
dated as of __________, 1994, of Penelec Capital, L.P., a Delaware
limited partnership (the "Partnership") is made by and among
Penelec Preferred Capital, Inc. as General Partner, Don W. Myers,
as Class A Limited Partner and the Persons (as defined below) who
become limited partners of the Partnership in accordance with the
provisions hereof.
WHEREAS, Penelec Preferred Capital, Inc. and Don W. Myers
have heretofore formed a limited partnership pursuant to the
Delaware Act (as defined below), by filing a Certificate of Limited
Partnership (as defined below) with the Secretary of State of the
State of Delaware on May __, 1994, and entering into a Limited
Partnership Agreement of the Partnership dated as of May __, 1994
(the "Limited Partnership Agreement"); and
WHEREAS, the parties hereto desire to continue the
Partnership as a limited partnership under the Delaware Act and to
amend and restate the original Limited Partnership Agreement in its
entirety.
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree to amend and restate the Limited
Partnership Agreement in its entirety as follows:
ARTICLE I - Definitions
For purposes of this Agreement, each of the following
terms shall have the meaning set forth below (such meaning to be
equally applicable to both singular and plural forms of the terms
so defined).
"Action" shall have the meaning set forth in Section
13.01.(b).
"Additional Amounts" shall have the meaning set forth in
Section 13.01(b)(ix).
"Affiliate" shall mean, with respect to the Person to
which it refers, a Person that directly or indirectly through one
or more intermediaries, controls or is controlled by, or is under
common control with, such subject Person.
"Agreement" shall mean this Amended and Restated Limited
Partnership Agreement, as amended, modified, supplemented or
1
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restated from time to time, including, without limitation, by any
Action establishing a series of Preferred Partner Interests.
"Book Entry Interests" shall mean a beneficial interest
in the Certificates, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section
14.04.
"Business Day" shall mean any day other than a day on
which banking institutions in The City of New York are authorized
or required by law to close.
"Capital Account" shall have the meaning set forth in
Section 4.01. For purposes of determining the Capital Accounts as
set forth in Article IV, partnership items shall be computed in the
same manner as the Partnership computes its income for Federal
income tax purposes, rather than generally accepted accounting
principles, except that (1) a distribution in kind of Partnership
property shall be treated as a taxable disposition of such property
for its fair market value (taking into account Section 7701(g) of
the Code) on the date of distribution, and (2) adjustments shall be
made in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv), which adjustments shall include any income which
is exempt from United States Federal income tax, all Partnership
losses and all expenses properly chargeable to the Partnership,
whether deductible or non-deductible and whether described in
Section 705(a)(2)(B) of the Code, treated as so described pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), or otherwise.
"Certificate" shall mean a certificate substantially in
the form attached hereto as Exhibit A, evidencing a Preferred
Partner Interest.
"Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of the Partnership and any and
all amendments thereto and restatements thereof filed with the
Secretary of State of the State of Delaware.
"Class A Limited Partner" shall mean Don Myers in his
capacity as a limited partner of the Partnership.
"Clearing Agency" shall mean an organization registered
as a "Clearing Agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker dealer,
bank, other financial institution or other Person for whom from
time to time a Clearing Agency effects book entry transfers and
pledges of securities deposited with the Clearing Agency.
"Code" shall mean the United States Internal Revenue Code
of 1986 and (unless the context requires otherwise) the rules and
regulations promulgated thereunder, as amended from time to time.
"Commission" shall mean the Securities and Exchange
Commission.
2
<PAGE>
"Covered Person" shall mean any Partner, any Affiliate of
a Partner or any officers, directors, shareholders, partners,
members, employees, representatives or agents of a Partner or their
respective Affiliates, or any employee or agent of the Partnership
or its Affiliates.
"Definitive Certificate" shall have the meaning set forth
in Section 14.04.
"Delaware Act" shall mean the Delaware Revised Uniform
Limited Partnership Act, 6 Del. C. Section 17-101, et seq., as
amended from time to time or any successor statute thereto.
"Economic Risk of Loss" shall mean the "economic risk of
loss" that any Partner is treated as bearing under Treasury
Regulation Section 1.752-2 with respect to any Partnership
liability.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Fiscal Year" shall have the meaning set forth in Section
7.01.
"General Partner" shall mean Penelec Preferred, in its
capacity as general partner of the Partnership, together with any
successor thereto that becomes a general partner of the Partnership
pursuant to the terms of this Agreement.
"Guarantee" shall mean the Payment and Guarantee
Agreement dated as of ______, 1994 of Penelec, as amended or
supplemented from time to time, and any additional Payment and
Guarantee Agreements entered into by Penelec for the benefit of the
Preferred Partners.
"Indenture" shall mean the Indenture dated as of
__________, 1994, as amended or supplemented from time to time,
between Penelec and United States Trust Company of New York as
Trustee and any additional Indentures entered into by Penelec
pursuant to which Subordinated Debentures of Penelec are to be
issued.
"Indemnified Person" shall mean the General Partner, any
Affiliate of the General Partner or any officers, directors,
shareholders, partners, members, employees, representatives or
agents of the General Partner, or any employee or agent of the
Partnership or its Affiliates.
"Interest" shall mean the entire partnership interest of
a Partner in the Partnership at any particular time, including the
right of such Partner to any and all benefits to which a Partner
may be entitled as provided in this Agreement, together with the
obligations of such Partner to comply with all of the terms and
provisions of this Agreement.
3
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"Investment Company Act Event" shall mean the occurrence
of a change in law or regulation or a change in official
interpretation of law or regulation by any legislative body, court,
governmental agency or regulatory authority (a "Change in 40 Act
Law") to the effect that the Partnership is or will be considered
an "investment company" required to be registered under the 1940
Act, which Change in 40 Act Law becomes effective on or after the
date of issuance of any series of Preferred Partner Interests;
provided that no Investment Company Act Event shall be deemed to
have occurred if the Partnership shall have received an opinion of
counsel (which may be regular counsel to Penelec or an Affiliate,
but not an employee thereof), to the effect that Penelec and/or the
Partnership have taken reasonable measures, in their discretion, to
avoid such Change in 40 Act Law so that in the opinion of such
counsel, notwithstanding such Change in 40 Act Law, the Partnership
is not required to be registered as an "investment company" within
the meaning of the 1940 Act.
"Limited Partners" shall mean the Class A Limited
Partner, if any, and the Preferred Partners.
"Liquidating Distributions" shall mean distributions of
Partnership property made upon a liquidation and dissolution of the
Partnership as provided in Article XII.
"Liquidation Distribution" shall mean the liquidation
preference of each series of Preferred Partner Interests as set
forth in the Action for such series.
"Liquidating Trustee" shall have the meaning set forth in
Section 12.01.
"1940 Act" shall mean the Investment Company Act of 1940,
as amended.
"Partners" shall mean the General Partner and the Limited
Partners.
"Partnership" shall mean Penelec Capital, L.P., a limited
partnership formed under the laws of the State of Delaware.
"Penelec" shall mean Pennsylvania Electric Company and
its successors.
"Penelec Preferred" shall mean Penelec Preferred Capital,
Inc. and its successors.
"Person" shall mean any individual, general partnership,
limited partnership, corporation, limited liability company, joint
venture, trust, business trust, cooperative or association and the
heirs, executors, administrators, legal representatives, successors
and assigns of such Person where the context so admits.
4
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"Preferred Partner" shall mean a limited partner of the
Partnership who holds one or more Preferred Partner Interests.
"Preferred Partner Interest Owner" shall mean, with
respect to a Book Entry Interest, a Person who is the beneficial
owner of such Book Entry Interest, as reflected on the books of the
Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Partner Interests" shall mean the Interests
described in Article XIII.
"Purchase Price" shall mean the amount paid for each
Preferred Partner Interest.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Special Event" shall mean a Tax Event or an Investment
Company Act Event.
"Special Representative" shall have the meaning set
forth in Section 13.02(d).
"Subordinated Debentures" shall mean the Subordinated
Debentures of Penelec issued under the Indenture.
"Tax Event" shall mean that the Partnership shall have
obtained an opinion of counsel (which may be regular tax counsel to
Penelec or an Affiliate, but not an employee thereof) to the effect
that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective, or which pronouncement or
decision has been issued or rendered, on or after the date of
issuance of any series of Preferred Partner Interests, there is
more than an insubstantial risk that (i) the Partnership will be
subject to Federal income tax with respect to interest received on
the related Subordinated Debentures or the Partnership will
otherwise not be taxed as a partnership or (ii) interest payable by
Penelec to the Partnership on the related Subordinated Debentures
will not be deductible for Federal income tax purposes, or (iii)
the Partnership is subject to more than a de minimus amount of
other taxes, duties or other governmental charges.
"Tax Matters Partner" shall have the meaning set forth in
Section 7.05.
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"Transfer" shall mean any transfer, sale, assignment,
gift, pledge, hypothecation or other disposition or encumbrance of
an interest in the Partnership.
"Treasury Regulations" shall mean the final and temporary
income tax regulations, as well as the procedural and
administrative regulations, promulgated by the United States
Department of the Treasury under the Code, as amended from time to
time.
"Trustee" shall mean United States Trust Company of New
York or any other trustee under the Indenture.
"Underwriting Agreement" shall mean the Underwriting
Agreement entered into on _____________, 1994 among the
Partnership, Penelec and the underwriters named therein with regard
to the sale of Preferred Partner Interests and related securities,
and any additional Underwriting Agreements entered into by the
Partnership and Penelec with regard to the sale of additional
Preferred Partner Interests and related securities.
ARTICLE II - Continuation; Name; Purposes; Term; Definitions
Section 2.01. Formation. The parties hereto hereby join
together to continue the heretofore formed limited partnership
which shall exist under and be governed by the Delaware Act. The
Partnership shall make any and all filings or disclosures required
under the laws of Delaware or otherwise with respect to its
continuation as a limited partnership, its use of a fictitious name
or otherwise as may be required. The Partnership shall be a
limited partnership among the Partners solely for the purposes
specified in Section 2.03 hereof, and this Agreement shall not be
deemed to create a partnership among the Partners with respect to
any activities whatsoever other than the activities within the
business purposes of the Partnership as specified in Section 2.03.
No Partner shall have any power to bind any other Partner with
respect to any matter except as specifically provided in this
Agreement. No Partner shall be responsible or liable for any
indebtedness or obligation of any other Partner incurred either
before or after the execution of this Agreement. The assets of the
Partnership shall be owned by the Partnership as an entity, and no
Partner individually shall own any direct interest in the assets of
the Partnership.
Section 2.02. Name and Place of Business. The name of
the Partnership is "Penelec Capital, L.P." The Partnership may
operate under the name of "Penelec Capital" and such name shall be
used for no purposes other than those set forth herein. The
principal place of business of the Partnership shall be Mellon Bank
Center, Tenth and Market Streets, Wilmington, Delaware, or at such
other place as may be selected by the General Partner in its sole
and absolute discretion.
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Section 2.03. Purposes. The sole purposes of the
Partnership are to issue and sell Interests in the Partnership,
including, without limitation, Preferred Partner Interests, and to
use the proceeds of all sales of Interests in the Partnership to
purchase Subordinated Debentures issued by Penelec pursuant to the
Indenture and to effect other similar arrangements permitted by
this Agreement, and to engage in any and all activities necessary,
convenient, advisable or incidental thereto. The Partnership shall
not incur debt for borrowed money.
Section 2.04. Term. The Partnership was formed on
__________, 1994 and shall continue without dissolution through
June 30, 2060, unless sooner dissolved as provided in Article XI
hereof.
Section 2.05. Qualification in Other Jurisdictions. The
General Partner shall cause the Partnership to be qualified or
registered under assumed or fictitious name statutes or similar
laws in any jurisdiction in which the Partnership transacts
business. The General Partner shall execute, deliver and file any
certificates (and any amendments and/or restatements thereof)
necessary for the Partnership to qualify to do business in a
jurisdiction in which the Partnership may wish to conduct business.
Section 2.06. Admission of Preferred Partners. Without
execution of this Agreement, upon receipt by a Person of a
Certificate and payment for the Preferred Partner Interest being
acquired by such Person, which shall be deemed to constitute a
request by such Person that the books and records of the
Partnership reflect its admission as a Preferred Partner, such
Person shall be admitted to the Partnership as a Preferred Partner
and shall become bound by this Agreement.
Section 2.07. Records. The name and mailing address of
each Partner and the amount contributed to the capital of the
Partnership shall be listed on the books and records of the
Partnership. The Partnership shall keep such other records as are
required by Section 17-305 of the Delaware Act. The General
Partner shall update the books and records from time to time as
necessary to accurately reflect the information therein.
ARTICLE III - Capital Contributions
Section 3.01. Capital Contributions. As of the date of
this Agreement, the General Partner has contributed the amount of
$___________ to the capital of the Partnership and shall make any
further contributions required to satisfy its obligations under
Section 3.04. Each Preferred Partner, or its predecessor in
interest, will contribute to the capital of the Partnership the
amount of the Purchase Price for the Preferred Partner Interests
held by it.
Section 3.02. Additional Capital Contributions. No
Partner shall be required to make any additional contributions or
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advances to the Partnership except as provided in Section 3.04. or
by law.
Section 3.03. No Interest or Withdrawals. No interest
shall accrue on any capital contribution made by a Partner, and no
Partner shall have the right to withdraw or to be repaid any
portions of its capital contributions so made, except as
specifically provided in this Agreement.
Section 3.04. Minimum Capital Contribution of General
Partner. Whenever any Limited Partner makes a capital
contribution, the General Partner shall immediately make a capital
contribution sufficient to cause the aggregate capital contribution
of the General Partner to equal 3% of the aggregate capital
contributed by all Partners at such time. Any such additional
contributions shall constitute additional capital contributions
made by the General Partner.
Section 3.05. Partnership Interests. Unless otherwise
provided herein, the percentage interests of the Partners shall be
determined in proportion to the capital contributions of the
Partners.
Section 3.06. Interests. Each Preferred Partner's
respective Preferred Partner Interests shall be set forth on the
books and records of the Partnership. Each Partner hereby agrees
that its Interests shall for all purposes be personal property. No
Partner has an interest in specific Partnership property. The
Partnership shall not issue any additional interest in the
Partnership after the date hereof other than General Partner
Interests or Preferred Partner Interests.
ARTICLE IV - Capital Accounts
Section 4.01. Capital Accounts. There shall be
established on the books of the Partnership a capital account
("Capital Account") for each Partner that shall consist of the
initial capital contribution to the Partnership made by such
Partner (or such Partner's predecessor in interest), increased by:
(a) any additional capital contributions made by such Partner, (b)
the agreed value of any property subsequently contributed to the
capital of the Partnership by such Partner; and (c) items of income
and gain allocated to any Partner (or predecessor thereof). A
Partner's Capital Account shall be decreased by: (a) items of loss
and deduction allocated to any Partner (or predecessor thereof);
and (b) any distributions made to such Partner. In addition to and
notwithstanding the foregoing, Capital Accounts shall be otherwise
adjusted in accordance with the tax accounting principles set forth
in Treasury Regulation Section 1.704-1(b)(2)(iv).
Section 4.02. Compliance With Treasury Regulations. The
foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to
comply with Section 704(b) of the Code and Treasury Regulation
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Section 1.704-1(b) and shall be interpreted and applied in a manner
consistent with such regulations. In the event that the General
Partner shall determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto, are
determined in order to comply with such regulations, the General
Partner may make such modification.
ARTICLE V - Allocations
Section 5.01. Profits and Losses. Each fiscal period,
items of income, gain, loss, deduction or credit of the Partnership
shall be allocated (i) first, items of income of the Partnership to
the Preferred Partners, pro rata in proportion to the number of
Preferred Partner Interests held by each Preferred Partner and at
the distribution rate specified in the Action for each series of
Preferred Partner Interests, in an amount equal to the excess of
(a) the distributions accrued on such Preferred Partner Interests
(other than Additional Amounts) since their date of issuance
through and including the close of the current fiscal period
(whether or not paid) over (b) the items of income of the
Partnership allocated to the Preferred Partners pursuant to this
Section 5.01(i) in all prior fiscal periods; (ii) second, items of
income of the Partnership to each Preferred Partner to whom
Additional Amounts were paid during a fiscal period, in an amount
equal to such Additional Amounts; and (iii) thereafter, all
remaining items of income, gain, loss, deduction or credit to the
General Partner; provided however, that the percentage of items of
income, gain, loss, deduction or credit of the Partnership
allocated to the General Partner for any fiscal period shall at
least equal three percent.
Section 5.02. Allocation Rules. For purposes of
determining the profits, losses or any other items allocable to any
period, profits, losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the
General Partner in its sole and absolute discretion using any
method that is permissible under Section 706 of the Code and the
Treasury Regulations thereunder. The Partners are aware of the
income tax consequences of the allocations made by this Article V
and hereby agree to be bound by the provisions of this Article V in
reporting their shares of Partnership income and loss for income
tax purposes.
Section 5.03. Adjustments to Reflect Changes in
Interests. Notwithstanding the foregoing, with respect to any
Fiscal Year during which any Partner's percentage interest in the
Partnership changes, whether by reason of the admission of a
Partner, the withdrawal of a Partner, a non-pro rata contribution
of capital to the Partnership or any other event described in
Section 706(d)(1) of the Code and the Treasury Regulations issued
thereunder, allocations of the items of income, gain, loss,
deduction or credit of the Partnership shall be adjusted
appropriately to take into account the varying interests of the
Partners during such Fiscal Year. The General Partner shall
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consult with the Partnership's accountants and other advisors and
shall select the method of making such adjustments, which method
shall be used consistently thereafter.
Section 5.04. Tax Allocations. For purposes of
Article V and Federal, state and local income tax purposes,
Partnership income, gain, loss, deduction or credit (or any item
thereof) for each Fiscal Year shall be determined in accordance
with Federal tax accounting principles rather than generally
accepted accounting principles and shall be allocated to and among
the Partners in order to reflect the allocations made pursuant to
the provisions of this Article V for such Fiscal Year (other than
allocations of items which are not deductible or are excluded from
taxable income), taking into account any variation between the
adjusted tax basis and book value of Partnership property in
accordance with the principles of Section 704(c) of the Code.
Section 5.05. Qualified Income Offset. Notwithstanding
any other provision hereof, if any Partner unexpectedly receives an
adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6) which
creates or increases a deficit in the Capital Account of such
Partner (and, for this purpose, the existence of a deficit shall be
determined by reducing the Partner's Capital Account by the items
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
(5), and (6)), the next available gross income of the Partnership
shall be allocated to the Partners having such deficit balances, in
proportion to the deficit balances, until such deficit balances are
eliminated as quickly as possible. The provisions of this Section
5.05 are intended to constitute a "qualified income offset" within
the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted and implemented as therein provided.
ARTICLE VI - Distributions
Section 6.01. Distributions. Preferred Partners shall
receive periodic distributions, if any, in accordance with the
applicable terms of the Preferred Partner Interests, as and when
declared by the General Partner. Subject to the rights of the
holders of the Preferred Partner Interests, the General Partner
shall receive such distributions, if any, as may be declared from
time to time by the General Partner.
Section 6.02. Certain Distributions Prohibited.
Notwithstanding anything in this Agreement to the contrary, all
Partnership distributions shall be subject to the following
limitations:
(a) No distribution shall be made to any Partner if, and
to the extent that, such distribution would not be permitted under
Section 17-607 of the Delaware Act or other applicable law.
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(b) No distribution shall be made to any Partner to the
extent that such distribution, if made, would create or increase a
deficit balance in the Capital Account of such Partner.
(c) Other than Liquidating Distributions, no
distribution of Partnership property shall be made in kind.
Notwithstanding anything in the Delaware Act or this Agreement to
the contrary, in the event of a Liquidating Distribution, a Partner
may be compelled in accordance with Section 12.01 to accept a
distribution of Subordinated Debentures, cash or of any other asset
in kind from the Partnership even if the percentage of the asset
distributed to it exceeds a percentage of that asset which is equal
to the percentage in which such Partner shares in distributions
from the Partnership.
ARTICLE VII - Accounting Matters; Banking
Section 7.01. Fiscal Year. The fiscal year ("Fiscal
Year") of the Partnership shall be the calendar year, or such other
year as is required by the Code.
Section 7.02. Certain Accounting Matters. (a) At all
times during the existence of the Partnership, the General Partner
shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail,
each transaction of the Partnership. The books of account shall be
maintained on the accrual method of accounting, in accordance with
generally accepted accounting principles, consistently applied.
The Partnership shall use the accrual method of accounting for
United States Federal income tax purposes. The books of account
and the records of the Partnership shall be examined by and
reported upon as of the end of each Fiscal Year by a firm of
independent certified public accountants selected by the General
Partner.
(b) The General Partner shall cause to be prepared and
delivered to each of the Partners, within 90 days after the end of
each Fiscal Year of the Partnership, annual financial statements of
the Partnership, including a balance sheet of the Partnership as of
the end of such Fiscal Year and the related statements of income or
loss and a statement indicating such Partner's share of each item
of Partnership income, gain, loss, deduction or credit for such
Fiscal Year for income tax purposes.
(c) Notwithstanding anything in this Agreement to the
contrary, the General Partner may, to the maximum extent permitted
by applicable law, keep confidential from the Partners for such
period of time as the General Partner deems reasonable any
information which the General Partner reasonably believes to be in
the nature of trade secrets or other information the disclosure of
which the General Partner in good faith believes is not in the best
interest of the Partnership or could damage the Partnership or its
business or which the Partnership is required by law or by an
agreement with a third party to keep confidential.
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(d) The General Partner may make, or revoke, in its sole
and absolute discretion, any elections for the Partnership that are
permitted under tax or other applicable laws, including elections
under Section 704(c) of the Code, provided that the General Partner
shall not make any elections pursuant to Section 754 of the Code.
Section 7.03. Banking. The Partnership shall maintain
one or more bank accounts in the name and for the sole benefit of
the Partnership. The signatories for such accounts shall be
designated by the General Partner. Reserve cash, cash held pending
the expenditure of funds for the business of the Partnership or
cash held pending a distribution to one or more of the Partners may
be invested in any manner at the sole and absolute discretion of
the General Partner.
Section 7.04. Right to Rely on Authority of General
Partner. No Person that is not a Partner, in dealing with the
General Partner, shall be required to determine such General
Partner's authority to make any commitment or engage in any
undertaking on behalf of the Partnership, or to determine any fact
or circumstance bearing upon the existence of the authority of the
General Partner.
Section 7.05. Tax Matters Partner. The "tax matters
partner," as defined in Section 6231 of the Code, of the
Partnership shall be the General Partner (the "Tax Matters
Partner"). The Tax Matters Partner shall receive no compensation
from the Partnership for its services in that capacity. The Tax
Matters Partner is authorized to employ such accountants, attorneys
and agents as it, in its sole and absolute discretion, deems
necessary or appropriate. Any Person who serves as Tax Matters
Partner shall not be liable to the Partnership or to any Partner
for any action it takes or fails to take as Tax Matters Partner
with respect to any administrative or judicial proceeding involving
"partnership items" (as defined in Section 6231 of the Code) of the
Partnership.
ARTICLE VIII - Management
Section 8.01. Management. (a) The General Partner shall
have full and exclusive authority with respect to all matters
concerning the conduct of the business and affairs of the
Partnership, including (without limitation) the power, without the
consent of the Limited Partners, to make all decisions it deems
necessary, advisable, convenient or appropriate to accomplish the
purposes of the Partnership. The acts of the General Partner
acting alone shall serve to bind the Partnership and shall
constitute the acts of the Partners.
(b) The Limited Partners, in their capacity as such,
shall not take part in the management, operation or control of the
business of the Partnership or transact any business in the name of
the Partnership. In addition, the Limited Partners, in their
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capacity as such, shall not be agents of the Partnership and shall
not have the power to sign or bind the Partnership to any agreement
or document. The Limited Partners shall have the right to vote
only with respect to those matters specifically provided for in
this Agreement. Notwithstanding anything herein to the contrary,
the Preferred Partners may exercise all rights provided to them, if
any, under the Indenture and the Guarantee.
(c) The General Partner is authorized and directed to
use its best efforts to conduct the affairs of, and to operate, the
Partnership in such a way that the Partnership would not be deemed
to be an "investment company" required to be registered under the
1940 Act or taxed as a corporation for Federal income tax purposes
and so that the Subordinated Debentures will be treated as
indebtedness of Penelec for Federal income tax purposes. In this
connection, the General Partner is authorized to take any action
not inconsistent with applicable law, the Certificate of Limited
Partnership or this Agreement that does not materially adversely
affect the interests of holders of Preferred Partner Interests that
the General Partner determines in its sole and absolute discretion
to be necessary, advisable or desirable for such purposes.
Section 8.02. Fiduciary Duty. (a) To the extent that,
at law or in equity, an Indemnified Person has duties (including
fiduciary duties) and liabilities relating thereto to the
Partnership or to any other Covered Person, an Indemnified Person
acting under this Agreement shall not be liable to the Partnership
or to any other Covered Person for its good faith reliance on the
provisions of this Agreement or the advice of counsel selected by
the Indemnified Person in good faith. The provisions of this
Agreement, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or
in equity, are agreed by the parties hereto to replace such other
duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein,
(i) whenever a conflict of interest exists or arises between
Covered Persons, or (ii) whenever this Agreement or any other
agreement contemplated herein or therein provides that an
Indemnified Person shall act in a manner that is, or provides terms
that are, fair and reasonable to the Partnership or any Partner,
the Indemnified Person shall resolve such conflict of interest,
taking such action or providing such terms, considering in each
case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and
the benefits and burdens relating to such interests, any customary
or accepted industry practices, the advice of counsel selected by
the Indemnified Person in good faith, and any applicable generally
accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so
made, taken or provided by the Indemnified Person shall not
constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of the Indemnified
Person at law or in equity or otherwise.
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(c) Whenever in this Agreement an Indemnified Person is
permitted or required to make a decision (i) in its "discretion" or
under a grant of similar authority or latitude, the Indemnified
Person shall be entitled to consider only such interests and
factors as it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of
or factors affecting the Partnership or any other Person, or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Agreement or other applicable law.
Section 8.03. Specific Obligations of the General
Partner. The General Partner hereby undertakes:
(a) to devote to the affairs of the Partnership so much
of its time as shall be necessary to carry on properly the
Partnership's business and its responsibilities hereunder;
(b) to cause the Partnership to do or refrain from doing
such acts as shall be required by Delaware law in order to preserve
the valid existence of the Partnership as a Delaware limited
partnership and to preserve the limited liability of the Limited
Partners; and,
(c) the General Partner shall pay directly all, and the
Partnership shall not be obligated to pay, directly or indirectly,
any, of the costs and expenses of the Partnership (including,
without limitation, costs and expenses relating to the organization
of, and offering of Preferred Partner Interests in, the Partnership
and costs and expenses relating to the operation of the
Partnership, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services and
computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and costs and
expenses incurred in connection with the acquisition, financing,
and disposition of Partnership assets).
Section 8.04. Powers of the General Partner. The
General Partner shall have the right, power and authority, in the
management of the business and affairs of the Partnership, to do or
cause to be done any and all acts deemed by the General Partner to
be necessary or appropriate to effectuate the business, purposes
and objectives of the Partnership. Without limiting the generality
of the foregoing, the General Partner shall have the power and
authority without any further act, approval or vote of any Partner
to:
(a) issue Interests, including Preferred Partner
Interests, and classes and series thereof, in accordance with this
Agreement;
(b) act as, or appoint another Person to act as,
registrar and transfer agent for the Preferred Partner Interests;
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(c) establish a record date with respect to all
actions to be taken hereunder that require a record date to be
established, including with respect to allocations, distributions
and voting rights and declare distributions and make all other
required payments on General Partner, Class A Limited Partner and
Preferred Partner Interests as the Partnership's paying agent;
(d) enter into and perform one or more Underwriting
Agreements and use the proceeds from the issuance of the Interests
to purchase the Subordinated Debentures, in each case on behalf of
the Partnership;
(e) bring and defend on behalf of the Partnership
actions and proceedings at law or in equity before any court or
governmental, administrative or other regulatory agency, body or
commission or otherwise;
(f) employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers,
contractors, advisors and consultants and pay reasonable
compensation for such services;
(g) redeem each series of Preferred Partner
Interests (which shall constitute a return of capital and not a
distribution of income) in accordance with its terms and/or to the
extent that the related series of Subordinated Debentures is
redeemed or reaches maturity; and,
(h) execute all documents or instruments, perform
all duties and powers and do all things for and on behalf of the
Partnership in all matters necessary, convenient, advisable or
incidental to the foregoing.
The expression of any power or authority of the General
Partner in this Agreement shall not in any way limit or exclude any
other power or authority which is not specifically or expressly set
forth in, or precluded by, this Agreement.
Section 8.05. Independent Affairs. Any Partner or
Affiliate thereof may engage in or possess an interest in any other
business venture of whatever nature and description, independently
or with others, wherever located and whether or not comparable to
or in competition with the Partnership or the General Partner, or
any Affiliate thereof, and neither the Partnership nor any of the
Partners shall, by virtue of this Agreement, have any rights with
respect to, or interests in, such independent ventures or the
income, profits or losses derived therefrom. No Partner or
Affiliate thereof shall be obligated to present any particular
investment opportunity to the Partnership even if such opportunity
is of a character that, if presented to the Partnership, could be
taken by the Partnership, and any Partner or Affiliate thereof
shall have the right to take for its own account (individually or
as a partner or fiduciary) or to recommend to others any such
particular investment opportunity.
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Section 8.06. Meetings of the Partners. Meetings of the
Partners of any class or series or of all classes or series of the
Partnership's Interests may be called at any time by the Partners
holding 10% in liquidation preference of such class or series of
Interests, or of all classes or series of Interests, as the case
may be, or as provided in any Action establishing a series of
Preferred Partner Interests. Except to the extent otherwise
provided in any such Action, the following provisions shall apply
to meetings of Partners.
(a) Notice of any meeting shall be given to all
Partners not less than ten (10) business days nor more than sixty
(60) days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting. Whenever a vote, consent or
approval of Partners is permitted or required under this Agreement,
such vote, consent or approval may be given at a meeting of
Partners or by written consent.
(b) Each Partner may authorize any Person to act
for it by proxy on all matters in which a Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the
Partner or its attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Partner executing it.
(c) Each meeting of Partners shall be conducted by
the General Partner or by such other Person that the General
Partner may designate.
(d) Subject to the provisions of this Section 8.06,
the General Partner, in its sole and absolute discretion, shall
establish all other provisions relating to meetings of Partners,
including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Partners, waiver of any
such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy
or any other matter with respect to the exercise of any such right
to vote; provided, however, that unless the General Partner has
established a lower percentage, a majority of the Partners entitled
to vote thereat shall constitute a quorum at all meetings of the
Partners.
Section 8.07. Net Worth of General Partner. By execution
of this Agreement, the General Partner represents and covenants
that (a) as of the date hereof and at all times during the
existence of the Partnership it will maintain a fair market value
net worth (determined in accordance with generally accepted
accounting principles) of at least ten percent (10%) of the total
contributions to the Partnership less any redemptions, throughout
the life of the Partnership, in accordance with Rev. Proc. 89-12,
1989-1 C.B. 798, or such other amount as may be required from time
to time pursuant to any amendment, modification or successor to
Rev. Proc. 89-12 (such net worth being computed excluding any
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interest in, or receivable due from, the Partnership and including
any income tax liabilities that would become due by the General
Partner upon disposition by the General Partner of all assets
included in determining such net worth), and (b) it will not make
any voluntary dispositions of assets which would reduce the net
worth below the amount described in (a).
Section 8.08. Restrictions on General Partner. So long
as any series of Subordinated Debentures are held by the
Partnership, the General Partner shall not (i) direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee, or executing any trust or power conferred
on the Trustee with respect to such series, (ii) waive any past
default which is waivable under the Indenture, (iii) exercise any
right to rescind or annul a declaration that the principal of all
of a series of Subordinated Debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the
Indenture, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of not less than
66 2/3% of the aggregate stated liquidation preference of all
series of Preferred Partner Interests affected thereby, acting as a
single class; provided, however, that where a consent under the
Indenture would require the consent of each holder affected
thereby, no such consent shall be given by the General Partner
without the prior consent of each holder of all series of Preferred
Partner Interests affected thereby. The General Partner shall not
revoke any action previously authorized or approved by a vote of
any series of Preferred Partner Interests. The General Partner
shall notify all holders of such Preferred Partner Interests of any
notice of default received from the Trustee with respect to such
series of Subordinated Debentures. In addition, the General
Partner will not permit or cause the Partnership to file a
voluntary petition in bankruptcy without the approval of the
holders of not less than 66 2/3% of the aggregate stated
liquidation preference of the outstanding Preferred Partner
Interests.
ARTICLE IX - Liability and Indemnification
Section 9.01. Partnership Expenses and Liabilities.
(a) Except as provided in the Delaware Act, the
General Partner shall have the liabilities of a partner in a
partnership without limited partners to Persons other than the
Partnership and the other Partners. Except as provided in the
Delaware Act or this Agreement, the General Partner shall have the
liabilities of a partner in a partnership without limited partners
to the Partnership and to the other Partners.
(b) Except as otherwise expressly required by law,
a Limited Partner, in its capacity as such, shall have no liability
in excess of (i) the amount of its capital contributions to the
Partnership, (ii) its share of any assets and undistributed profits
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of the Partnership, and (iii) the amount of any distributions
wrongfully distributed to it.
Section 9.02. No Liability. Except as otherwise
expressly provided by the Delaware Act or in Section 9.01(a), no
Covered Person shall be liable to the Partnership or to any other
Partner for any act or omission performed or omitted pursuant to
the authority granted to it hereunder or by law, or from a loss
resulting from any mistake or error in judgment on its part or from
the negligence, dishonesty, fraud or bad faith of any employee,
independent contractor, broker or other agent of the Partnership,
provided that such act or omission, such mistake or error in
judgment or the selection of such employee, independent contractor,
broker or other agent, as the case may be, did not result from the
willful misconduct, gross negligence or fraud of such Covered
Person. Any Covered Person shall be fully protected in relying in
good faith upon the records of the Partnership and upon such
information, opinions, reports or statements presented to the
Partnership by any Person as to matters the Covered Person
reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by
or on behalf of the Partnership, including information, opinions,
reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which distributions to Partners
might properly be paid.
Section 9.03. Indemnification. To the fullest extent
permitted by applicable law, except as set forth in Section
8.03(c), an Indemnified Person shall be entitled to indemnification
from the Partnership for any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the
Partnership and in a manner reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this
Agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of willful misconduct, gross
negligence or fraud with respect to such acts or omissions;
provided, however, that any indemnity under this Section 9.03 shall
be provided out of and to the extent of Partnership assets only,
and except as otherwise expressly provided in Section 9.01(a) or by
the Delaware Act, no Covered Person shall have any personal
liability on account thereof. To the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by
or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to
be indemnified as authorized in this Section 9.03.
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ARTICLE X - Withdrawal; Transfer Restrictions
Section 10.01. Transfer by General Partner; Admission of
Substituted General Partner. The General Partner may not Transfer
its Interest (in whole or in part) to any Person without the
consent of all other Partners, provided that the General Partner
may, without the consent of any Partner, Transfer its Interest to
Penelec or any direct or indirect wholly owned subsidiary of
Penelec. Notwithstanding anything else herein, the General Partner
may merge with or into another Person, may permit another Person to
merge with or into the General Partner and may Transfer all or
substantially all of its assets to another Person if the General
Partner is the survivor of such merger or the Person into which the
General Partner is merged or to which the General Partner's assets
are transferred is a Person organized under the laws of the United
States or any state thereof or the District of Columbia. The
General Partner shall have the right to admit the assignee or
transferee of its Interest which is permitted hereunder as a
substituted or additional general partner of the Partnership, with
or without the consent of the Limited Partners. Any such assignee
or transferee of all or a part of the Interest of a General Partner
shall be deemed admitted to the Partnership as a general partner of
the Partnership immediately prior to the effective date of such
Transfer, and such additional or successor general partner of the
Partnership is hereby authorized and shall continue the business of
the Partnership without dissolution.
Section 10.02. Withdrawal of Limited Partners. A
Preferred Partner may not withdraw from the Partnership prior to
the dissolution and winding up of the Partnership except upon the
assignment of its Preferred Partner Interests (including any
redemption, repurchase, exchange or other acquisition by the
Partnership), as the case may be, in accordance with the provisions
of this Agreement. Any Person who has been assigned one or more
Interests shall provide the Partnership with a completed Form W-8
or such other documents or information as are requested by the
Partnership for tax reporting purposes. A withdrawing Preferred
Partner shall not be entitled to receive any distribution and shall
not otherwise be entitled to receive the fair value of its
Preferred Partner Interest except as otherwise expressly provided
in this Agreement. Notwithstanding anything in this Agreement to
the contrary, the Class A Limited Partner may withdraw from the
Partnership upon ten (10) days prior written notice to the General
Partner. Upon such withdrawal, the Partnership shall return to the
Class A Limited Partner the amount of its capital contribution to
the Partnership.
Section 10.03. Withdrawal of Class A Limited Partner.
Upon the admission of at least one Preferred Partner as a Limited
Partner of the Partnership, the Class A Limited Partner shall be
deemed to have withdrawn from the Partnership as a Limited Partner
of the Partnership, and upon such withdrawal, the Class A Limited
Partner shall have its capital contribution returned to it without
any interest or deduction and shall have no further interest in the
Partnership.
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ARTICLE XI - Dissolution of the Partnership
Section 11.01. No Dissolution. The Partnership shall
not be dissolved by the admission of additional or successor
Partners in accordance with the terms of this Agreement. The
death, withdrawal, incompetency, bankruptcy, dissolution or other
cessation to exist as a legal entity of a Limited Partner, or the
occurrence of any other event that terminates the Interest of a
Limited Partner in the Partnership, shall not in and of itself
cause the Partnership to be dissolved and its affairs wound up. To
the fullest extent permitted by applicable law, upon the occurrence
of any such event, the General Partner may, without any further
act, vote or approval of any Partner, subject to the terms of this
Agreement, admit any Person to the Partnership as an additional or
substitute Limited Partner, which admission shall be effective as
of the date of the occurrence of such event, and the business of
the Partnership shall be continued without dissolution.
Section 11.02. Events Causing Dissolution. The
Partnership shall be dissolved and its affairs shall be wound up
upon the occurrence of any of the following events:
(a) The expiration of the term of the Partnership,
as provided in Section 2.04 hereof;
(b) The withdrawal, removal or bankruptcy of the
General Partner or Transfer (other than a grant of a security
interest) by the General Partner of its entire Interest in the
Partnership when the assignee is not admitted to the Partnership as
an additional or successor General Partner in accordance with
Section 10.01 hereof, or the occurrence of any other event that
results in the General Partner ceasing to be a general partner of
the Partnership under the Delaware Act, provided, the Partnership
shall not be dissolved and required to be wound up in connection
with any of the events specified in this clause (b) if (i) at the
time of the occurrence of such event there is at least one
remaining general partner of the Partnership who is hereby
authorized to, and agrees to, and does carry on the business of the
Partnership, or (ii) within ninety days after the occurrence of
such event, a majority in Interest of the remaining Partners (or
such greater percentage in Interest as is required by the Delaware
Act) agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of such event, if
required, of one or more additional general partners of the
Partnership;
(c) The entry of a decree of judicial dissolution
under the Delaware Act;
(d) The bankruptcy, liquidation, dissolution or
winding up of Penelec;
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(e) the written consent of the General Partner and
all of the Preferred Partners; or
(f) in the sole and absolute discretion of the
General Partner upon the happening of a Special Event.
Section 11.03. Notice of Dissolution. Upon the
dissolution of the Partnership, the General Partner shall promptly
notify the Partners of such dissolution.
ARTICLE XII - Liquidation of Partner Interests
Section 12.01. Liquidation. Upon dissolution of the
Partnership, the General Partner, or, in the event that the
dissolution is caused by an event described in Section 11.02(b) and
there is no other General Partner, a Person or Persons who may be
approved by Preferred Partners holding not less than a majority in
liquidation preference of the Preferred Partners Interests, as
liquidating trustee (the "Liquidating Trustee"), shall immediately
commence to wind up the Partnership's affairs; provided, however,
that a reasonable time shall be allowed for the orderly liquidation
of the assets of the Partnership and the satisfaction of
liabilities to creditors so as to enable the Partners to minimize
the normal losses attendant upon a liquidation. The Preferred
Partners shall continue to share profits and losses during
liquidation in the same proportions, as specified in Articles V and
VI hereof, as before liquidation. The proceeds of liquidation
shall be distributed, as realized, in the following order and
priority:
(a) to creditors of the Partnership, including
Preferred Partners who are creditors, to the extent otherwise
permitted by law, in satisfaction of the liabilities of the
Partnership (whether by payment or the making of reasonable
provision for payment thereof), other than liabilities for which
reasonable provision for payment has been made and liabilities for
distributions to Partners;
(b) to the holders of Preferred Partner Interests
of each series then outstanding in accordance with the terms of the
Action or Actions for such Series; and
(c) to all Partners in accordance with their
respective positive Capital Account balances, after giving effect
to all contributions, distributions and allocations for all
periods.
Section 12.02. Termination. The Partnership shall
terminate when all of the assets of the Partnership have been
distributed in the manner provided for in this Article XII, and the
Certificate of Limited Partnership shall have been cancelled in the
manner required by the Delaware Act.
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Section 12.03. Duty of Care. The General Partner or the
Liquidating Trustee, as the case may be, shall not be liable to the
Partnership or any Partner for any loss attributable to any act or
omission of the General Partner or the Liquidating Trustee, as the
case may be, taken in good faith in connection with the liquidation
of the Partnership and distribution of its assets in belief that
such course of conduct was in the best interest of the Partnership.
The General Partner or the Liquidating Trustee, as the case may be,
may consult with counsel and accountants with respect to
liquidating the Partnership and distributing its assets and shall
be justified in acting or omitting to act in accordance with the
written opinion of such counsel or accountants, provided they shall
have been selected with reasonable care.
Section 12.04. No Liability for Return of Capital. The
General Partner and its respective officers, directors, members,
shareholders, employees, representatives, agents, partners and
Affiliates shall not be personally liable for the return of the
capital contributions of any Partner to the Partnership. No
Partner shall be obligated to restore to the Partnership any amount
with respect to a negative Capital Account.
ARTICLE XIII - Preferred Partner Interests
Section 13.01. Preferred Partner Interests.
(a) The aggregate number of Preferred Partner Interests
which the Partnership shall have authority to issue is unlimited.
Each series of Preferred Partner Interests shall rank equally and
all Preferred Partner Interests shall rank senior to all other
Interests in respect of the right to receive distributions and the
right to receive payments out of the assets of the Partnership upon
voluntary or involuntary dissolution and winding up of the
Partnership. The issuance of any Interests ranking senior to the
Preferred Partner Interest shall be deemed to materially adversely
affect the rights of the Preferred Partner Interests under this
Agreement.
(b) The General Partner on behalf of the Partnership is
authorized to issue Preferred Partner Interests, in one or more
series, having such designations, rights, privileges, restrictions
and other terms and provisions, whether in regard to distributions,
return of capital or otherwise, as may from time to time be
established in a written action or actions (each, an "Action") of
the General Partner providing for the issue of such series. In
connection with the foregoing, the General Partner is expressly
authorized, prior to issuance, to set forth in an Action or Actions
providing for the issue of such series, the following:
(i) The distinctive designation of such series
which shall distinguish it from other series;
(ii) The number of Preferred Partner Interests
included in such series, which number may be increased or
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decreased from time to time unless otherwise provided by the
General Partner in creating the series;
(iii) The distribution rate (or method of
determining such rate) for Preferred Partner Interests of such
series and the first date upon which such distribution shall
be payable;
(iv) The amount or amounts which shall be paid out
of the assets of the Partnership to the holders of such series
of Preferred Partner Interests upon voluntary or involuntary
dissolution and winding up of the Partnership;
(v) The price or prices at which, the period or
periods within which and the terms and conditions upon which
the Preferred Partner Interests of such series may be redeemed
or purchased, in whole or in part, at the option of the
Partnership;
(vi) The obligation of the Partnership to purchase
or redeem Preferred Partner Interests of such series pursuant
to a sinking fund or otherwise and the price or prices at
which, the period or periods within which and the terms and
conditions upon which the Preferred Partner Interests of such
series shall be redeemed, in whole or in part, pursuant to
such obligation;
(vii) The period or periods within which and the
terms and conditions, if any, including the price or prices or
the rate or rates of conversion or exchange and the terms and
conditions of any adjustments thereof, upon which the
Preferred Partner Interests of such series shall be
convertible or exchangeable at the option of the Preferred
Partner, or the Partnership, into any other Interests or
securities or other property or cash or into any other series
of Preferred Partner Interests;
(viii) The voting rights, if any, of the Preferred
Partner Interests of such series in addition to those required
by law and set forth in this Agreement, and any requirement
for the approval by the Preferred Partner Interests, or of the
Preferred Partner Interests of one or more series, or of both,
as a condition to specified Actions or amendments to this
Agreement;
(ix) The additional amounts, if any, which the
Partnership will pay as a distribution as necessary in order
that the net amounts received by the Preferred Partners who
hold such series of Preferred Partner Interests after
withholding or deduction on account of certain taxes, duties,
assessments or governmental charges will equal the amount
which would have been receivable in respect of such Preferred
Partner Interests in the absence of such withholding or
deduction ("Additional Amounts"); and
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(x) Any other relative rights, powers, preferences
or limitations of the Preferred Partner Interests of the
series not inconsistent with this Agreement or with applicable
law.
In connection with the foregoing and without limiting the
generality thereof, the General Partner is hereby expressly
authorized, without the vote or approval of any other Partner, to
take any Action to create under the provisions of this Agreement a
series of Preferred Partner Interests that was not previously
outstanding. Without the vote or approval of any other Partner,
the General Partner may execute, swear to, acknowledge, deliver,
file and record whatever documents may be required in connection
with the issue from time to time of Preferred Partner Interests in
one or more series as shall be necessary, convenient or desirable
to reflect the issue of such series. The General Partner shall do
all things it deems to be appropriate or necessary to comply with
the Delaware Act and is authorized and directed to do all things it
deems to be necessary or permissible in connection with any future
issuance, including compliance with any statute, rule, regulation
or guideline of any Federal, state or other governmental agency or
any securities exchange.
Any Action or Actions taken by the General Partner
pursuant to the provisions of this paragraph (b) shall be deemed an
amendment and supplement to and part of this Agreement.
(c) Except as otherwise provided in this Agreement or in
any Action in respect of any series of the Preferred Partner
Interests and as otherwise required by law, all rights to the
management and control of the Partnership shall be vested
exclusively in the General Partner.
(d) No holder of Interests shall be entitled as a matter
of right to subscribe for or purchase, or have any preemptive right
with respect to, any part of any new or additional issue of
Interests of any class or series whatsoever, or of securities
convertible into any Interests of any class or series whatsoever,
whether now or hereafter authorized and whether issued for cash or
other consideration or by way of distribution. Any Person
acquiring Preferred Partner Interests shall be admitted to the
Partnership as a Preferred Partner upon compliance with Section
2.06.
13.02. Terms of Preferred Partner Interests.
Notwithstanding anything else in any Action to the contrary, all
Preferred Partner Interests of the Partnership shall have the
following voting rights, preferences, participating, optional and
other special rights and the qualifications, limitations or
restrictions of, and other matters relating to, the Preferred
Partner Interests as set forth below in this Section 13.02.
(a) Distributions.
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(i) The Preferred Partners shall be entitled to
receive, when, as and if declared by the General
Partner out of funds held by the Partnership to the
extent that the Partnership has cash on hand
sufficient to permit such payments and funds
legally available therefor, cumulative cash
distributions at a rate per annum established by the
General Partner, calculated on the basis of a 360-
day year consisting of twelve (12) months of thirty
(30) days each, and for any period shorter than a
full monthly distribution period, distributions will
be computed on the basis of the actual number of
days elapsed in such period, and payable in United
States dollars monthly in arrears on the last day of
each calendar month of each year. In the event that
any date on which distributions are payable on the
Preferred Partner Interests is not a Business Day,
then payment of the distribution payable on such
date will be made on the next succeeding day which
is a Business Day (and without any interest or other
payment in respect of any such delay) except that,
if such Business Day is in the next succeeding
calendar year, such payment shall be made on the
immediately preceding Business Day, in each case
with the same force and effect as if made on such
date. Such distributions will accrue and be
cumulative from the original date of issue whether
or not they have been declared and whether or not
there are profits, surplus or other funds of the
Partnership legally available for the payment of
distributions, or whether they are deferred.
(ii) If distributions have not been paid in full
on any series of Preferred Partner Interests, the
Partnership may not pay or declare and set aside for
payment, any distributions on any other series of
Preferred Partner Interests unless the amount of any
distributions declared on any Preferred Partner
Interests is paid on all Preferred Partner Interests
then outstanding on a pro rata basis, on the date
such distributions are paid, so that
(1) (x) the aggregate amount of distributions
paid on such series of Preferred Partner
Interests bears to (y) the aggregate amount of
distributions paid on all such Preferred
Partner Interests outstanding the same ratio as
(2) (x) the aggregate of all accumulated
arrears of unpaid distributions in respect of
such series of Preferred Partner Interests
bears to (y) the aggregate of all accumulated
arrears of unpaid distributions in respect of
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all such Preferred Partner Interests
outstanding;
(B) pay or declare any distribution on any
general partner Interest; or
(C) redeem, purchase or otherwise acquire any
Preferred Partner Interests or any general partner
Interests;
until, in each case, such time as all accumulated and unpaid
distributions on all series of Preferred Partner Interests shall
have been paid in full for all distribution periods terminating on
or prior to, in the case of clauses (A) and (B), such payment and,
in the case of clause (C), the date of such redemption, purchase or
acquisition.
(b) Notice of Redemption.
(i) The Partnership may not redeem any outstanding
Preferred Partner Interests unless all accumulated
and unpaid distributions have been paid on all
Preferred Partner Interests for all monthly
distribution periods terminating on or prior to the
date of redemption.
(ii) Notice of any redemption (a "Notice of
Redemption") of a series of Preferred Partner
Interests will be given by the Partnership by mail
to each record holder of such series of Preferred
Partner Interests to be redeemed not fewer than
thirty (30) nor more than ninety (90) days prior to
the date fixed for redemption thereof. For purposes
of the calculation of the date of redemption and the
dates on which notices are given pursuant to this
paragraph (b)(ii), a Notice of Redemption shall be
deemed to be given on the day such notice is first
mailed by first-class mail, postage prepaid, or on
the date it was delivered in person, receipt
acknowledged to the record holders of such series of
Preferred Partner Interests. Each Notice of
Redemption shall be addressed to the record holders
of such series of Preferred Partner Interests at the
address appearing in the books and records of the
Partnership. No defect in the Notice of Redemption
or in the mailing thereof or publication of its
contents shall affect the validity of the redemption
proceedings.
(iii) If the Partnership gives a Notice of
Redemption in respect of a series of Preferred
Partner Interests, then, by 12:00 noon, New York
time, on the redemption date, the Partnership will
irrevocably deposit with The Depository Trust
Company or its successor securities depository funds
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sufficient to pay the applicable Redemption Price
and will give The Depository Trust Company or its
successor securities depository irrevocable
instructions and authority to pay the Redemption
Price to the holders of the Preferred Partner
Interests. If Notice of Redemption shall have been
given and funds deposited as required, then on the
date of such deposit, all rights of the Preferred
Partner Interest Owners and the holders of such
series of Preferred Partner Interests so called for
redemption will cease, except the right to receive
the Redemption Price, but without interest. In the
event that any date fixed for redemption of such
series of Preferred Partner Interests is not a
Business Day, then payment of the Redemption Price
payable on such date will be made on the next
succeeding day which is a Business Day (and without
any interest or other payment in respect of any such
delay), except that, if such Business Day falls in
the next succeeding calendar year, such payment will
be made on the immediately preceding Business Day.
In the event that payment of the Redemption Price in
respect of a series of Preferred Partner Interests
is not made either by the Partnership or by Penelec
pursuant to the Guarantee pertaining to the series
of Preferred Partner Interests, distributions on
such series of Preferred Partner Interests will
continue to accrue at the then applicable rate, from
the original redemption date to the date of payment,
in which case the actual payment date will be
considered the date fixed for redemption for
purposes of calculating the Redemption Price.
(iv) In the event that less than all the
outstanding series of Preferred Partner Interests
are to be redeemed, the series of Preferred Partner
Interests to be redeemed, will be selected according
to a determination by The Depository Trust Company
or its successor securities depository. In the case
of a partial redemption resulting from a requirement
that the Partnership pay Additional Amounts or
withhold or deduct certain amounts, the Partnership
will (A) cause the global certificates representing
all of such series of Preferred Partner Interests to
be withdrawn from The Depository Trust Company or
its successor securities depository, (B) issue
certificates in definitive form representing such
series of Preferred Partner Interests, and (C)
redeem the series of Preferred Partner Interests
subject to such requirement to withhold or deduct
Additional Amounts. Subject to applicable law,
Penelec or its subsidiaries may at any time and from
time to time purchase outstanding Preferred Partner
Interests by tender, in the open market or by
private agreement. If a partial redemption or a
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purchase of outstanding Preferred Partner Interests
by tender, in the open market or by private
agreement would result in a delisting of a series of
Preferred Partner Interests from any national
securities exchange on which the series of Preferred
Partner Interests are then listed, the Partnership
may then only redeem or purchase the series of
Preferred Partner Interests in whole.
(c) Liquidation Distribution. If, upon any liquidation,
the Liquidation Distribution on a series of Preferred Partner
Interests can be paid only in part because the Partnership has
insufficient assets available to pay in full the aggregate
liquidation distributions on all Preferred Partner Interests then
outstanding, then the amounts payable directly by the Partnership
on the such series of Preferred Partner Interests and on all other
Preferred Partner Interests then outstanding shall be paid on a pro
rata basis, so that
(i) (A) the aggregate amount paid in respect of the
Liquidation Distribution bears to (B) the aggregate
amount paid as liquidation distributions on all
other Preferred Partnership Interests then
outstanding the same ratio as
(ii) (A) the aggregate Liquidation Distribution
bears to (B) the aggregate maximum liquidation
distributions on all other Preferred Partner
Interests then outstanding.
(d) Voting Rights. If (i) the Partnership fails to pay
distributions in full on a series of Preferred Partner Interests
for eighteen (18) consecutive monthly distribution periods; (ii) an
event of default as defined in the Indenture occurs and is
continuing; or (iii) Penelec is in default on any of its payment or
other obligations under the Guarantee, then the holders of such
series of Preferred Partner Interests, together with the holders of
all other series of Preferred Partner Interests acting as a single
class, will be entitled, by a vote of the majority of the aggregate
stated liquidation preference of outstanding Preferred Partner
Interests, to appoint and authorize a special representative of the
Partnership and the Preferred Partners (the "Special
Representative") to enforce the Partnership's rights under the
Indenture, including, after failure to pay interest for sixty (60)
consecutive monthly interest periods, the payment of interest on
the Subordinated Debentures, and to enforce the obligations of
Penelec under the Guarantee.
For purposes of determining whether the Partnership
has failed to pay distributions in full for eighteen (18)
consecutive monthly distribution periods, distributions shall be
deemed to remain in arrears, notwithstanding any payments in
respect thereof, until full cumulative distributions have been or
contemporaneously are declared and paid with respect to all monthly
distribution periods terminating on or prior to the date of payment
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of such full cumulative distributions. Subject to requirements of
applicable law, not later than thirty (30) days after such right to
appoint a Special Representative arises, the General Partner will
convene a general meeting for the above purpose. If the General
Partner fails to convene such meeting within such 30-day period,
the Preferred Partners who hold 10% of the aggregate stated
liquidation preference of such outstanding series of Preferred
Partner Interests will be entitled to convene such meeting. The
provisions of this Agreement relating to the convening and conduct
of meetings of Partners will apply with respect to any such
meeting. Any Special Representative so appointed shall cease to
act in such capacity immediately if the Partnership (or Penelec
pursuant to the Guarantee) shall have paid in full all accumulated
and unpaid distributions on the Preferred Partner Interests or such
default or breach by Penelec, as the case may be, shall have been
cured. Notwithstanding the appointment of any such Special
Representative, (i) Penelec shall retain all rights under the
Indenture, including the right to extend the interest payment
period on the Subordinated Debentures as provided in the Indenture,
and (ii) such Special Representative shall not become a Partner of
the Partnership.
If any proposed amendment of this Agreement provides
for, or the General Partner otherwise proposes to effect any action
which would materially adversely affect the powers, preferences or
special rights of such series of Preferred Partner Interests, then
holders of the outstanding series of Preferred Partner Interests
will be entitled to vote on such amendment or action of the General
Partner (but not on any other amendment or action) and, in the case
of an amendment or action which would equally materially adversely
affect the powers, preferences or special rights of any other
series of outstanding Preferred Partner Interests, all holders of
all such series of Preferred Partner Interests, will be entitled to
vote together as a class on such amendment or action of the General
Partner (but not on any other amendment or action), and such
amendment or action shall not be effective except with the approval
of Preferred Partners holding not less than 66 2/3% of the
aggregate stated liquidation preference of such outstanding
series of Preferred Partner Interests. Except as otherwise
provided under Section 11.02 or the Delaware Act, the Partnership
will be dissolved and wound up only with the consent of the holders
of all Preferred Partner Interests outstanding.
The powers, preferences or special rights of a series of
Preferred Partner Interests will be deemed not to be adversely
affected by the creation or issue of, and no vote will be required
for the creation or issue of, any further series of Preferred
Partner Interests or any general partner interests.
Any required approval of a series of Preferred Partner
Interests may be given at a separate meeting of such holders
convened for such purpose, at a meeting of the holders of all
series of Preferred Partner Interests or pursuant to written
consent. The Partnership will cause a notice of any meeting at
which holders of a series of Preferred Partner Interests are
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entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be mailed to each holder
of Preferred Partner Interests. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any matter
to be voted on at such meeting or upon which written consent is
sought, and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the holders of a series of
Preferred Partner Interests will be required for the Partnership to
redeem and cancel such Series of Preferred Partner Interests in
accordance with this Agreement and the related Action.
Notwithstanding that holders of a series of Preferred
Partner Interests are entitled to vote or consent under any of the
circumstances described above, any Preferred Partner Interests that
are owned by Penelec or any Person owned more than 50% by Penelec,
either directly or indirectly, shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be
treated as if they were not outstanding.
(e) Mergers. The Partnership shall not consolidate,
amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets substantially as an
entirety to any corporation or other entity, except with the prior
approval of the Preferred Partners holding not less than 66 2/3%
of the aggregate stated liquidation preference of such outstanding
Preferred Partner Interests or as described below. The General
Partner may without the consent of the holders of any series of
Preferred Partner Interests, cause the Partnership to consolidate,
amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets substantially as an
entirety to, a corporation, a limited liability company, limited
partnership or a trust or other entity organized as such under the
laws of the United States or any state thereof or the District of
Columbia provided that (i) such successor entity either (A)
expressly assumes all of the terms and provisions of the Preferred
Partner Interests by which the Partnership is bound and the other
obligations of the Partnership or (B) substitutes for the Preferred
Partner Interests other securities having substantially the same
terms as the Preferred Partner Interests (the "Successor
Securities") so long as the Successor Securities rank, with regards
to participation in the profits or assets of the successor entity,
at least as high as the Preferred Partner Interests rank, with
regard to participation in the profits or assets of the
Partnership, (ii) Penelec confirms its obligations under the
Guarantee with regard to the Preferred Partner Interests or
Successor Securities, if any are issued, (iii) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause any series of Preferred Partner Interests or
Successor Securities to be delisted by any national securities
exchange or other organization on which those Preferred Partner
Interests or Successor Securities are then listed, (iv) such
merger, consolidation, amalgamation, replacement, conveyance,
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transfer or lease does not cause the Preferred Partner Interests to
be downgraded by any nationally recognized statistical rating
organization, as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act, (v) such
merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the powers, preferences
and special rights of holders of Preferred Partner Interests or
Successor Securities in any material respect, (vi) such successor
entity has a purpose substantially identical to that of the
Partnership and (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease Penelec
has received an opinion of counsel (which may be regular counsel to
the Partnership or an Affiliate, but not an employee thereof)
experienced in such matters to the effect that (A) holders of
outstanding Preferred Partner Interests or Successor Securities
will not recognize any gain or loss for Federal income tax proposes
as a result of the merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, (B) such successor
entity will be treated as a partnership for Federal income tax
purposes, (C) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, Penelec and such
successor entity will be in compliance with the 1940 Act without
registering thereunder as an "investment company," and (D) such
merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease will not adversely affect the limited liability
of holders of Preferred Partner Interests or Successor Securities.
ARTICLE XIV - Transfers
Section 14.01. Transfers of Preferred Partner Interests.
Preferred Partner Interests may be freely transferred by a
Preferred Partner. No Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set
forth in this Agreement. Any transfer or purported transfer of any
Interest not made in accordance with this Agreement shall be null
and void.
Section 14.02. Transfer of Certificates. The General
Partner shall provide for the registration of Certificates. Upon
surrender for registration of transfer of any Certificate, the
General Partner shall cause one or more new Certificates to be
issued in the name of the designated transferee or transferees.
Every Certificate surrendered for registration of transfer shall be
accompanied by a written instrument of transfer and agreement to be
bound by the provisions of this Agreement in form satisfactory to
the General Partner duly executed by the Preferred Partner or his
attorney duly authorized in writing. Each Certificate surrendered
for registration of transfer shall be cancelled by the General
Partner. A transferee of a Certificate shall provide the
Partnership with a completed Form W-8 or such other documents or
information as are requested by the Partnership for tax reporting
purposes and thereafter shall be admitted to the Partnership as a
Preferred Partner and shall be entitled to the rights and subject
to the obligations of a Preferred Partner hereunder upon the
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receipt by such transferee of a Certificate. The transferor of a
Certificate shall cease to be a limited partner of the Partnership
at the time that the transferee of the Certificate is admitted to
the Partnership as a Preferred Partner in accordance with this
Section 14.02.
Section 14.03. Persons Deemed Preferred Partners. The
Partnership may treat the Person in whose name any Certificate
shall be registered on the books and records of the Partnership as
the Preferred Partner and the sole holder of such Certificate for
purposes of receiving distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claims to or interest in such Certificate on the
part of any other Person, whether or not the Partnership shall have
actual or other notice thereof.
Section 14.04. Book Entry Interests. The Certificates,
on original issuance, will be issued in the form of a typewritten
Certificate or Certificates representing the Book Entry Interests,
to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Partnership. Such
Certificates shall initially be registered on the books and records
of the Partnership in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Preferred Partner Interest Owner
will receive a definitive Certificate representing such Preferred
Partner Interest Owner's interests in such Certificate, except as
provided in Section 14.06. Unless and until definitive, fully
registered Certificates (the "Definitive Certificates") have been
issued to the Preferred Partner Interest Owners pursuant to Section
14.06:
(a) The provisions of this Section shall be in full
force and effect;
(b) The Partnership and the General Partner shall
be entitled to deal with the Clearing Agency for all purposes of
this Agreement (including the payment of distributions on the
Certificates and receiving approvals, votes or consents hereunder)
as the Preferred Partner and the sole holder of the Certificates
and shall have no obligations to the Preferred Partner Interest
Owners;
(c) The rights of the Preferred Partner Interest
Owners shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between
such Preferred Partner Interest Owners and the Clearing Agency
and/or the Clearing Agency Participants. Unless or until the
Definitive Certificates are issued pursuant to Section 14.06, the
initial Clearing Agency will make book entry transfers among the
Clearing Agency Participants and receive and transmit payments of
distributions on the Certificates to such Clearing Agency
Participants;
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(d) To the extent that the provisions of this
Section conflict with any other provisions of this Agreement, the
provisions of this Section shall control; and
(e) Whenever this Agreement requires or permits
actions to be taken based upon approvals, votes or consents of a
percentage of the Preferred Partners, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has
received instructions to such effect from the Preferred Partner
Interest Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the
beneficial interests in the Certificates and has delivered such
instructions to the General Partner.
Section 14.05. Notices to Clearing Agency. Whenever a
notice or other communication to the Preferred Partners is required
under this Agreement, unless and until Definitive Certificates
shall have been issued pursuant to Section 14.06, the General
Partner shall give all such notices and communications specified
herein to be given to the Preferred Partners to the Clearing
Agency, and shall have no obligations to the Preferred Partner
Interest Owners.
Section 14.06. Definitive Certificates. If (a) the
Clearing Agency elects to discontinue its services as securities
depository and gives reasonable notice to the Partnership, or
(b) he Partnership elects to terminate the book entry system
through the Clearing Agency, then the Definitive Certificates shall
be prepared by the Partnership. Upon surrender of the typewritten
Certificate or Certificates representing the Book Entry Interests
by the Clearing Agency, accompanied by registration instructions,
the General Partner shall cause the Definitive Certificates to be
delivered to the holders of Preferred Partner Interests in
accordance with the instructions of the Clearing Agency. The
General Partner shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Any Person receiving a
Definitive Certificate in accordance with this Article XIV shall be
admitted to the Partnership as a Preferred Partner upon receipt of
such Definitive Certificate. The Clearing Agency or the nominee of
the Clearing Agency, as the case may be, shall cease to be a
Limited Partner of the Partnership under this Section 14.06 at the
time that at least one additional Person is admitted to the
Partnership as a Preferred Partner in accordance with this Section
14.06. The Definitive Certificates shall be printed, lithographed
or engraved or may be produced in any other manner as is reasonably
acceptable to the General Partner, as evidenced by its execution
thereof.
Additionally, in the event that the Partnership exercises
its option to redeem only a portion of the Preferred Partner
Interests because it is or would be required to withhold or deduct
Additional Amounts in regard to such Preferred Partner Interests to
be redeemed, the Partnership may cause the global Certificate
representing all of the Preferred Partner Interests to be withdrawn
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from the Clearing Agency and issue Definitive Certificates
representing the remaining Preferred Partner Interests.
Thereafter, the Preferred Partner Interests subject to such
requirement to withhold or deduct Additional Amounts will be
redeemed.
ARTICLE XV - General
Section 15.01. Power of Attorney. (a) The Class A
Limited Partner and each Preferred Partner constitutes and appoints
the General Partner and the Liquidating Trustee as its true and
lawful representative and attorney-in-fact, in its name, place and
stead, to make, execute, sign, acknowledge and deliver or file (i)
all instruments, documents and certificates which may from time to
time be required by any law to effectuate, implement and continue
the valid and subsisting existence of the Partnership, (ii) all
instruments, documents and certificates that may be required to
effectuate the dissolution and termination of the Partnership in
accordance with the provisions hereof and Delaware law, (iii) all
other amendments of this Agreement or the Certificate of Limited
Partnership and other filings contemplated by this Agreement
including, without limitation, amendments reflecting the withdrawal
of the General Partner, or the return, in whole or in part, of the
contribution of any Partner, or the addition, substitution or
increased contribution of any Partner, or any action of the
Partners duly taken pursuant to this Agreement whether or not such
Partner voted in favor of or otherwise approved such action, and
(iv) any other instrument, certificate or document required from
time to time to admit a Partner, to effect its substitution as a
Partner, to effect the substitution of the Partner's assignee as a
Partner or to reflect any action of the Partners provided for in
this Agreement.
(b) The powers of attorney granted herein (i) shall
be deemed to be coupled with an interest, shall be irrevocable and
shall survive the death, insanity, incompetency or incapacity (or,
in the case of a Partner that is a corporation, association,
partnership, limited liability company or trust, shall survive the
merger, dissolution or other termination of existence) of the
Partner and (ii) shall survive the assignment by the Partner of the
whole or any portion of his Interest, except that where the
assignee of the whole or any portion thereof has furnished a power
of attorney, this power of attorney shall survive such assignment
for the sole purpose of enabling the General Partner and the
Liquidating Trustee to execute, acknowledge and file any instrument
necessary to effect any permitted substitution of the assignee for
the assignor as a Partner and shall thereafter terminate. In the
event that the appointment conferred in this Section 15.01 would
not constitute a legal and valid appointment by any Partner under
the laws of the jurisdiction in which such Partner is incorporated,
established or resident, upon the request of the General Partner or
the Liquidating Trustee, such Partner shall deliver to the General
Partner or the Liquidating Trustee a properly authenticated and
duly executed document constituting a legal and valid power of
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attorney under the laws of the appropriate jurisdiction covering
the matters set forth in this Section 15.01.
(c) The General Partner may require a power of
attorney to be executed by a transferee of a Partner as a condition
of its admission as a substitute Partner.
Section 15.02. Waiver of Partition. Each Partner hereby
irrevocably waives any and all rights that it may have to maintain
an action for partition of any of the Partnership's property or
assets.
Section 15.03. Notices. Any notice permitted or
required to be given hereunder shall be in writing and shall be
deemed given (i) on the day the notice is first mailed to a Partner
by first class mail, postage prepaid, or (ii) on the date it was
delivered in person to a Partner, receipt acknowledged, at its
address appearing on the books and records of the Partnership.
Another address may be designated by a Partner by such Partner
giving notice of its new address as provided in this Section 15.03.
Section 15.04. Entire Agreement. This Agreement,
including the exhibits annexed hereto and incorporated by reference
herein, contains the entire agreement of the parties hereto and
supersedes all prior agreements and understandings, oral or
otherwise, among the parties hereto with respect to the matters
contained herein.
Section 15.05. Waivers. Except as otherwise expressly
provided herein, no purported waiver by any party of any breach by
another party of any of his obligations, agreements or covenants
hereunder, or any part thereof, shall be effective unless made in a
writing executed by the party or parties sought to be bound
thereby, and no failure to pursue or elect any remedy with respect
to any default under or breach of any provision of this Agreement,
or any part hereof, shall be deemed to be a waiver of any other
subsequent similar or different default or breach, or any election
of remedies available in connection therewith, nor shall the
acceptance or receipt by any party of any money or other
consideration due him under this Agreement, with or without
knowledge of any breach hereunder, constitute a waiver of any
provision of this Agreement with respect to such or any other
breach.
Section 15.06. Headings. The section headings herein
contained have been inserted only as a matter of convenience of
reference and in no way define, limit or describe the scope or
intent of any provisions of this Agreement nor in any way affect
any such provisions.
Section 15.07. Separability. Each provision of this
Agreement shall be considered to be separable, and if, for any
reason, any such provision or provisions, or any part thereof, is
determined to be invalid and contrary to any existing or future
applicable law, such invalidity shall not impair the operation of,
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or affect, those portions of this Agreement which are valid, and
this Agreement shall be construed and enforced in all respects as
if such invalid or unenforceable provision or provisions had been
omitted.
Section 15.08. Contract Construction. Whenever the
content of this Agreement permits, the masculine gender shall
include the feminine and neuter genders, and reference to singular
or plural shall be interchangeable with the other. References in
this Agreement to particular sections of the Code or to provisions
of the Delaware Act shall be deemed to refer to such sections or
provisions as they may be amended after the date of this Agreement.
Section 15.09. Counterparts. This Agreement may be
executed in one or more counterparts and each of such counterparts
for all purposes shall be deemed to be an original, but all of such
counterparts, when taken together, shall constitute but one and the
same instrument, binding upon all parties hereto, notwithstanding
that all of such parties may not have executed the same
counterpart.
Section 15.10. Benefit. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns, but shall not be deemed for the
benefit of creditors or any other Persons, nor shall it be deemed
to permit any assignment by a Partner of any of its rights or
obligations hereunder except as expressly provided herein.
Section 15.11. Further Actions. Each of the Partners
hereby agrees that it shall hereafter execute and deliver such
further instruments and do such further acts and things as may be
required or useful to carry out the intent and purposes of this
Agreement and as are not inconsistent with the terms hereof.
Section 15.12. Governing Law. This Agreement shall be
governed by and construed in accordance with the substantive laws
of the State of Delaware, without regard to conflicts of laws.
Section 15.13. Amendments. Except as otherwise
expressly provided herein or as otherwise required by law, this
Agreement may only be amended by a written instrument executed by
the General Partner provided, however, that any amendment which
would adversely affect the powers, preferences or special rights of
any series of Preferred Partner Interests may be effected only as
permitted by the terms of such series of Preferred Partner
Interests.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
GENERAL PARTNER
______________________________
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CLASS A LIMITED PARTNER, solely
to reflect its withdrawal from
the Partnership
______________________________
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Exhibit A
Certificate Evidencing Preferred Partner Interests
of
Penelec Capital, L.P.
___% Cumulative Monthly Income Preferred Partner
Interests, Series __ (liquidation preference
$25 per Preferred Partner Interest)
Penelec Capital, L.P., a Delaware limited partnership
(the "Partnership"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of ____________ (_______) fully
paid Preferred Partner Interests of the Partnership designated the
___% Cumulative Monthly Income Preferred Partner Interests, Series
__ (liquidation preference $25 per Preferred Partner Interest) (the
"Series __ Preferred Partner Interests") representing preferred
limited partner interests in the Partnership transferable on the
books and records of the Partnership, in person or by a duly
authorized attorney, upon surrender of this Certificate duly
endorsed and in proper form for transfer. The powers, preferences
and special rights and limitations of the Series __ Preferred
Partner Interests are set forth in, and this Certificate and the
Series __ Preferred Partner Interests represented hereby are issued
and shall in all respects be subject to the terms and provisions
of, the Amended and Restated Limited Partnership Agreement dated as
of ___________, 1994 of the Partnership as the same may, from time
to time, be amended (the "Partnership Agreement") authorizing the
issuance of the Series __ Preferred Partner Interests and
determining, along with any Actions of the General Partner of the
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Partnership as authorized under the Partnership Agreement, the
preferred, deferred and other special rights and restrictions,
regarding distributions, voting, redemption and otherwise and other
matters relating to the Series __ Preferred Partner Interests. The
Partnership will furnish a copy of the Partnership Agreement to the
Holder without charge upon written request to the Partnership at
its principal place of business or registered office. Capitalized
terms used herein but not defined shall have the meaning given them
in the Partnership Agreement. The Holder is entitled to the
benefits of the Payment and Guarantee Agreement of Pennsylvania
Electric Company, dated as of _____________, 1994 relating to the
Preferred Partner Interests (the "Guarantee") and of the Indenture
between Pennsylvania Electric Company and United States Trust
Company of New York, dated as of ________, 1994 (the "Indenture"),
under and pursuant to which the related series of Subordinated
Debentures are issued and outstanding, in either case to the extent
provided therein. The Holder is further entitled to enforce such
rights of the Partnership under the Indenture to the extent
provided therein and in the Partnership Agreement. The Partnership
will furnish a copy of the Guarantee and Indenture to the Holder
without charge upon written request to the Partnership at its
principal place of business or registered office.
The Holder, by accepting this Certificate, is deemed to
have (i) agreed that the Subordinated Debentures issued pursuant to
the Indenture are subordinate and junior in right of payment to all
Senior Indebtedness of Pennsylvania Electric Company as and to the
extent provided in the Indenture and (ii) agreed that the Guarantee
is subordinate and junior in right of payment to all Senior
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Indebtedness of Pennsylvania Electric Company. Upon receipt of
this Certificate, the Holder is admitted to the Partnership as a
Preferred Partner, is bound by the Partnership Agreement and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Partnership has executed this
Certificate this ____ day of _____________, 1994.
PENELEC CAPITAL, L.P.
By:
Penelec Preferred Capital,
Inc., its General Partner
By: ______________________________
Name:
Title:
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Exhibit 3-H
Action by the General Partner of Met-Ed Capital, L.P.
Creating the __% Cumulative Monthly Income
Preferred Partner Interests, Series A
Pursuant to Section 13.01 of the Amended and Restated
Limited Partnership Agreement of Met-Ed Capital, L.P. dated as of
__, 1994 (as amended from time to time, the "Partnership
Agreement"), Met-Ed Preferred Capital, Inc., as general partner
(the "General Partner") of Met-Ed Capital, L.P. (the
"Partnership"), desiring to state the designations, distribution
rights, redemption rights, preferences, privileges, limitations
and other rights of a new series of Preferred Partner Interests,
hereby authorizes and establishes such new series of Preferred
Partner Interests according to the following terms and conditions
(each capitalized term used but not defined herein shall have the
meaning set forth in the Partnership Agreement):
(a) Designation. ____________ interests with an
aggregate liquidation preference of $ ______ of the Preferred
Partner Interests of the Partnership, liquidation preference $25
per Preferred Partner Interest, are hereby designated as "__%
Cumulative Monthly Income Preferred Partner Interests, Series A"
(hereinafter the "Series A Preferred Partner Interests.")
(b) Distributions.
(i) The Preferred Partners who hold the Series A
Preferred Partner Interests shall be entitled to
receive, when, as and if declared by the General
Partner to the extent that the Partnership has
cash on hand sufficient to permit such payments
and funds legally available therefor, cumulative
cash distributions at a rate per annum of ___% of
the stated liquidation preference of $25 per
Series A Preferred Partner Interest per annum,
commencing _____, 1994. Distributions on the
Series A Preferred Partner Interests which accrue
from the date of original issue to ___, 1994 shall
be payable on ___, 1994.
(ii) Distributions on the Series A Preferred
Partner Interests must be declared by the General
Partner in any calendar year or portion thereof to
the extent that the General Partner reasonably
anticipates that at the time of payment the
Partnership will have, and must be paid by the
Partnership to the extent that at the time of
proposed payment it has, cash on hand sufficient
to permit such payments and funds legally
available therefor. Distributions on the Series A
Preferred Partner Interests will be deferred if
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and for so long as Met-Ed defers payments to the
Partnership on the Debentures (as defined below).
Accrued and unpaid distributions on the Series A
Preferred Partner Interests will accrue additional
distributions ("Additional Distributions") in
respect thereof, to the extent permitted by law,
at the distribution rate per annum applicable to
Series A Preferred Partner Interests. Such
additional distributions shall be payable at the
time the related deferred distribution is paid,
but in any event by the end of such deferral
period. Distributions declared on the Series A
Preferred Partner Interests will be payable to the
Series A Preferred Partners as they appear on the
books and records of the Partnership on the
relevant record dates, which will be one Business
Day prior to the relevant payment dates, provided
that if the Series A Preferred Partner Interests
are not in book-entry-only form, the record dates
will be the fifteenth day of each month.
(c) Redemption.
(i) The Series A Preferred Partner Interests are
redeemable, at the option of the Partnership in
whole or in part from time to time, on or after
_________, 1999, at the Redemption Price (as
defined below).
(ii) Upon payment when due or redemption at any
time of the ____% Subordinated Debentures, Series
A due 2043 (the "Debentures") issued by Met-Ed
pursuant to an Indenture dated as of _______, 1994
between Met-Ed and United States Trust Company of
New York, as Trustee (the "Indenture"), which
Debentures were purchased by the Partnership from
Met-Ed with the proceeds from the issuance and
sale of the Series A Preferred Partner Interests
and the related capital contribution of the
General Partner, the proceeds from such payment or
redemption of the Debentures shall be applied to
redeem the Series A Preferred Partner Interests at
the redemption price of $25 per Preferred Partner
Interest plus accumulated and unpaid distributions
(whether or not declared) to the date fixed for
redemption, together with any accrued additional
distributions thereon (the "Redemption Price").
(iii) If at any time after the issuance of the
Series A Preferred Partner Interests, the
Partnership is or would be required to pay
Additional Amounts (as defined below) or Met-Ed is
or would be required to withhold or deduct certain
amounts pursuant to paragraph (e) hereof, then,
the Partnership may, at its option, redeem the
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Series A Preferred Partner Interests in whole or,
if such requirement relates only to certain of the
Series A Preferred Partner Interests, the Series A
Preferred Partner Interests subject to such
requirement, in each case at the Redemption Price.
(iv) If an Investment Company Act Event shall
occur and be continuing, the Partnership shall
elect to either (1) redeem the Series A Preferred
Partner Interests in whole but not in part at the
Redemption Price within ninety (90) days following
the occurrence of such Investment Company Act
Event, provided, that, if at the time there is
available to the General Partner the opportunity
to eliminate, within such 90 day period, the
Investment Company Act Event by taking some
ministerial action, such as filing a form or
making an election, or pursuing some other similar
reasonable measure, which has no adverse effect on
the Partnership or Met-Ed, the General Partner
will pursue such measure in lieu of redemption, or
(2) dissolve the Partnership and, after
satisfaction of liabilities to creditors, cause
Debentures with an aggregate principal amount
which shall be equal to the aggregate stated
liquidation preference of the outstanding Series A
Preferred Partner Interests to be distributed to
the holders of the Series A Preferred Partner
Interests in liquidation of such holders'
Interests in the Partnership, within ninety (90)
days following the occurrence of such Investment
Company Act Event, provided that the Partnership
shall have received an opinion of counsel (which
may be regular tax counsel to Met-Ed or an
Affiliate but not an employee thereof) to the
effect that the holders of the Series A Preferred
Partner Interests will not recognize any gain or
loss for federal income tax purposes as a result
of such dissolution and distribution.
(v) If a Tax Event shall occur and be continuing,
the Partnership may elect to (1) redeem the Series
A Preferred Partner Interests in whole (but not in
part) at the Redemption Price within ninety (90)
days following the occurrence of such Tax Event,
provided that, if at the time there is available
to the General Partner the opportunity to
eliminate, within such 90 day period, the Tax
Event by taking some ministerial action, such as
filing a form or making an election, or pursuing
some other similar reasonable measure, which has
no adverse effect on the Partnership or Met-Ed,
the General Partner will pursue such measure in
lieu of redemption, (2) dissolve the Partnership
and, after satisfactions of liabilities to
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creditors, cause Debentures with an aggregate
principal amount which shall be equal to the
aggregate stated liquidation preference of the
outstanding Series A Preferred Partner Interests
to be distributed to the holders of the Series A
Preferred Partner Interests in liquidation of such
holders' Interests in the Partnership, within
ninety (90) days following the occurrence of such
Tax Event, provided that the Partnership shall
have received an opinion of counsel (which may be
regular tax counsel to Met-Ed or an Affiliate but
not an employee thereof) to the effect that the
holders of the Series A Preferred Partner
Interests will not recognize any gain or loss for
federal income tax purposes as a result of such
dissolution and distribution or (3) have the
Series A Preferred Partner Interests remain
outstanding.
(d) Liquidation Distribution. In the event of any
voluntary or involuntary dissolution and winding up of the
Partnership (other than pursuant to paragraphs (c)(iv) or (c)(v)
hereof), holders of the Series A Preferred Partner Interests at
the time outstanding will be entitled to receive out of the
assets of the Partnership available for distribution to holders
of Preferred Partner Interests, after satisfaction of liabilities
to creditors as required by the Delaware Act, before any
distribution of assets is made to holders of the general partner
interests, but together with holders of every other series of
Preferred Partner Interests outstanding, an amount equal to, in
the case of holders of Series A Preferred Partner Interests, the
aggregate of the stated liquidation preference of $25 per Series
A Preferred Partner Interest plus accumulated and unpaid
distributions (whether or not declared) to the date of payment,
together with any additional distributions accrued thereon and
any accrued and unpaid Additional Amounts (the "Liquidation
Distribution").
(e) Additional Amounts. All payments in respect of
the Series A Preferred Partner Interests by the Partnership will
be made without withholding or deduction for or on account of any
present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result
of such payment by or on behalf of the United States, any state
thereof or any other jurisdiction through which or from which
such payment is made, or any authority therein or thereof having
power to tax, unless the withholding or deduction of such taxes,
duties, assessments or governmental charges is required by law.
In the event that any such withholding or deduction is required
as a consequence of (i) the Debentures not being treated as
indebtedness for United States federal income tax purposes or
(ii) the Partnership not being treated as a partnership for
United States federal income tax purposes, the Partnership will
pay as a distribution such additional amounts as may be necessary
in order that the net amounts received by the holders of the
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<PAGE>
Series A Preferred Partner Interests after such withholding or
deduction will equal the amounts which would have been receivable
in respect of such Preferred Partner Interests in the absence of
such withholding or deduction ("Additional Amounts"), except that
no such Additional Amounts will be payable to a holder of Series
A Preferred Partner Interests (or a third party on such holder's
behalf) with respect to Series A Preferred Partner Interests if:
(i) any such holder is liable for such taxes,
duties, assessments or governmental charges in
respect of such Series A Preferred Partner
Interests by reason of such holder's having a
connection with the United States, any state
thereof or any other jurisdiction through which or
from which such payment is made, or in which such
holder resides, conducts business or has other
contacts, other than being a holder of Series A
Preferred Partner Interests, or
(ii) the Partnership has notified such holder of
the obligation to withhold or deduct taxes and
requested but not received from such holder a
declaration of non-residence, a valid taxpayer
identification number or other claim for
exemption, and such withholding or deduction would
not have been required had such declaration,
taxpayer identification number of claim been
received.
(f) Subordination. The holders of Series A Preferred
Partner Interests are deemed, by acceptance of such Interests, to
have (i) agreed that the Debentures issued pursuant to the
Indenture are subordinate and junior in right of payment to all
Senior Indebtedness as and to the extent provided in the
Indenture and (ii) agreed that the Guarantee relating to the
Series A Preferred Partner Interests is subordinate and junior in
right of payment to all Senior Indebtedness of Met-Ed.
(g) The holders of the Series A Preferred Partner
Interests shall have no voting rights except as provided in the
Partnership Agreement or as required under the Delaware Act.
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Exhibit 4-D
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"),
dated as of _______ ___, 1994, is executed and delivered by
Pennsylvania Electric Company, a Pennsylvania corporation (the
"Guarantor"), for the benefit of the Holders (as defined below)
from time to time of the Preferred Securities (as defined below) of
Penelec Capital, L.P., a Delaware limited partnership (the
"Issuer").
WHEREAS, the Issuer is issuing on the date hereof $___________
aggregate stated liquidation preference of preferred limited
partner interests of a series designated the __% Cumulative Monthly
Income Preferred Securities, Series A (the "Preferred Securities"),
and the Guarantor desires to enter into this Guarantee Agreement
for the benefit of the Holders, as provided herein;
WHEREAS, the Issuer will use (i) the proceeds from the
issuance and sale of the Preferred Securities to the Holders and
(ii) the capital contributions relating to the issuance of the
Issuer's general partner interests (the "Common Securities") to
Penelec Preferred Capital, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Guarantor (the "General Partner"),
to purchase ___% Subordinated Debentures issued by the Guarantor
under the Indenture (as defined below); and
WHEREAS, the Guarantor desires irrevocably and unconditionally
to agree to the extent set forth herein to pay to the Holders the
Guarantee Payments (as defined below) and to make certain other
payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other
consideration, receipt of which is hereby acknowledged, the
Guarantor, intending to be legally bound hereby, agrees as follows:
ARTICLE I
As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following
meanings. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Issuer's
Amended and Restated Limited Partnership Agreement dated as of
_______ __, 1994 (the "Limited Partnership Agreement").
"Guarantee Payments" shall mean the following payments,
without duplication, to the extent not paid by the Issuer: (i) any
accumulated and unpaid monthly distributions on the Preferred
Securities (except for monthly distributions which are not paid
during an Extension Period (as defined in the Indenture)) to the
<PAGE>
extent that the Issuer has sufficient cash on hand to permit such
payments and funds legally available therefor, (ii) the Redemption
Price (as defined below) payable with respect to any Preferred
Securities called for redemption by the Issuer to the extent that
the Issuer has sufficient cash on hand to permit such payments and
funds legally available therefor, (iii) upon a liquidation of the
Issuer other than in connection with a distribution of Subordinated
Debentures (a "Distribution Event") following a dissolution of the
Issuer resulting from a Special Event (as defined in the Limited
Partnership Agreement), the lesser of (a) the Liquidation
Distribution (as defined below) and (b) the amount of assets of the
Issuer available for distribution to Holders in liquidation of the
Issuer, and (iv) any Additional Amounts (as defined in the Limited
Partnership Agreement) payable by the Issuer in respect of the
Preferred Securities.
"Holder" shall mean any holder from time to time of any
Preferred Securities of the Issuer; provided, however, that in
determining whether the Holders of the requisite percentage of
Preferred Securities have given any request, notice, consent or
waiver hereunder, "Holder" shall not include the Guarantor or any
entity owned more than 50% by the Guarantor, either directly or
indirectly.
"Indenture shall mean the Indenture dated as of _____________,
1994 between the Guarantor and United States Trust Company of New
York, as Trustee.
"Liquidation Distribution" shall mean the aggregate of the
stated liquidation preference of $25 per Preferred Security and all
accumulated and unpaid distributions to the date of payment,
together with any additional distributions accrued thereon.
"Redemption Price" shall mean the aggregate of $25 per
Preferred Security, plus accumulated and unpaid distributions to
the date fixed for redemption, together with any Additional
Distributions (as defined in the Limited Partnership Agreement)
accrued thereon.
"Subordinated Debentures" shall mean the Guarantor's ___%
Subordinated Debentures, Series A, issued under and pursuant to the
Indenture.
ARTICLE II
SECTION 2.01. (a) The Guarantor hereby irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee
Payments, as and when due (except to the extent paid by the
Issuer), to the fullest extent permitted by law, regardless of any
defense, right of set-off or counterclaim which the Guarantor or
the Issuer may have or assert. The Guarantor's obligation to make
a Guarantee Payment may be satisfied by direct payment by the
Guarantor to the Holders or by payment of such amounts by the
Issuer to the Holders. Notwithstanding anything to the contrary
2
<PAGE>
herein, the Guarantor retains all of its rights under Section
4.01(c) of the Indenture to extend the interest payment period
thereunder and the Guarantor shall not be obligated hereunder to
pay during an Extension Period (as defined in the Indenture) any
monthly distributions on the Preferred Securities which are not
paid by the Issuer during such Extension Period.
(b) All Guarantee Payments shall be made without
withholding or deduction for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever
nature imposed or levied upon or as a result of such payment by or
on behalf of the United States, any state thereof or any other
jurisdiction through which or from which such payment is made, or
any authority therein or thereof having power to tax, unless the
withholding or deduction of such taxes, duties, assessments or
governmental charges is required by law. In the event that any
such withholding or deduction is required as a consequence of (i)
the Subordinated Debentures not being treated as indebtedness for
United States federal income tax purposes or (ii) Penelec Capital
not being treated as a partnership for United States federal income
tax purposes, the Guarantor shall pay such additional amounts
("Additional Amounts") as may be necessary in order that the net
amounts received by the Holders after such withholding or deduction
will equal the amount which would have been receivable in respect
of the Preferred Securities in the absence of such withholding or
deduction, except that no such additional amounts will be payable
to any Holder (or a third party on such Holder's behalf):
i) if such Holder is liable for such taxes,
duties, assessments or governmental charges in respect of
the Preferred Securities by reason of such Holder's
having a connection with the United States, any state
thereof or any other jurisdiction through which or from
which such payment is made, or in which such Holder
resides, conducts business or has other contacts, other
than being a Holder, or
ii) if the Issuer or the Guarantor has notified
such Holder of the obligation to withhold or deduct taxes
and requested but not received from such Holder a
declaration of non-residence, a valid taxpayer
identification number or other claim for exemption, and
such withholding or deduction would not have been
required had such declaration, taxpayer identification
number or claim been received.
SECTION 2.02. The Guarantor hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 2.03. Except as otherwise set forth herein, the
obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall to the fullest extent
3
<PAGE>
permitted by law in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer
of any express or implied agreement, covenant, term or
condition relating to the Preferred Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the
Issuer of all or any portion of the monthly
distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the
Preferred Securities or the extension of time for the
performance of any other obligation under, arising out
of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders to enforce, assert
or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or
other similar proceedings affecting, the Issuer or any of
the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in,
any of the Preferred Securities; or
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred.
The Holders shall have no obligation to give notice to, or obtain
consent of, the Guarantor with respect to the occurrence of any of
the foregoing.
SECTION 2.04. This is a guarantee of payment and not of
collection. A Holder may enforce this Guarantee Agreement directly
against the Guarantor, and the Guarantor will waive any right or
remedy to require that any action be brought against the Issuer or
any other person or entity before proceeding against the Guarantor.
Subject to Section 2.05, all waivers hereunder shall be without
prejudice to the Holders' right at the Holders' option to proceed
against the Issuer, whether by separate action or by joinder. The
Guarantor agrees that this Guarantee Agreement shall not be
discharged except by payment of the Guarantee Payments in full (to
the extent not paid by the Issuer) and by complete performance of
all obligations of the Guarantor contained in this Guarantee
Agreement.
4
<PAGE>
SECTION 2.05. The Guarantor will be subrogated to all rights
of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and
shall have the right to waive payment by the Issuer of any amount
of distributions in respect of which payment has been made to the
Holders by the Guarantor pursuant to Section 2.01; provided,
however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) exercise any rights which
it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of a
payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts remain due and unpaid under this Guarantee
Agreement. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to pay
over such amount to the Holders.
SECTION 2.06. The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be
liable as principal and sole debtor hereunder to make Guarantee
Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in
subsections (a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III
SECTION 3.01. So long as any Preferred Securities remain
outstanding, neither the Guarantor nor any majority-owned
subsidiary of the Guarantor shall declare or pay any dividend on,
or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its preferred or common stock (other than
dividends to the Guarantor by a wholly-owned subsidiary of the
Guarantor) (i) during an Extension Period (as defined in the
Indenture) or (ii) if at such time the Guarantor shall be in
default with respect to its payment or other obligations hereunder
or there shall have occurred any event that, with the giving of
notice or the lapse of time or both, would constitute an Event of
Default under the Indenture. The Guarantor shall take all actions
necessary to ensure the compliance of its subsidiaries with this
Section 3.01.
SECTION 3.02. The Guarantor covenants, so long as any
Preferred Securities remain outstanding: (i) to maintain direct or
indirect 100% ownership of the Common Securities; (ii) to cause at
least 3% of the total value of the Issuer and at least 3% of all
interests in the capital, income, gain, loss, deduction and credit
of the Issuer to be represented by Common Securities; (iii) not to
cause the Issuer to be voluntarily dissolved, wound-up or
terminated, except upon the entry of a decree of judicial
dissolution or in connection with a Distribution Event or certain
mergers, consolidations or other transactions permitted by the
Limited Partnership Agreement; (iv) except as otherwise provided in
the Limited Partnership Agreement, to cause the General Partner to
remain the general partner of the Issuer and timely perform all of
5
<PAGE>
its duties as general partner of the Issuer (including the duty to
pay distributions on the Preferred Securities) in all material
respects, provided that any permitted successor of the Guarantor
under the Indenture may directly or indirectly succeed to the
duties as general partner of the Issuer; and (v) to use its
reasonable efforts to cause the Issuer to remain a limited
partnership and otherwise continue to be treated as a partnership
for United States federal income tax purposes.
SECTION 3.03. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate
and junior in right of payment to all present and future Senior
Indebtedness (as defined in the Indenture) of the Guarantor, and
(ii) senior in right of payment to the Guarantor's preferred and
common stock.
ARTICLE IV
This Guarantee Agreement shall terminate and be of no further
force and effect upon full payment of the Redemption Price of all
Preferred Securities or upon full payment of the amounts payable to
the Holders upon liquidation of the Issuer or upon consummation of
a Distribution Event; provided, however, that this Guarantee
Agreement shall continue to be effective or shall be reinstated, as
the case may be, if at any time any Holder of Preferred Securities
must restore payments of any sums paid under the Preferred
Securities or under this Guarantee Agreement for any reason
whatsoever.
ARTICLE V
SECTION 5.01. All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to
the benefit of the Holders. The Guarantor may not assign its
obligations hereunder without the prior approval of the Holders of
not less than 66-2/3% of the aggregate stated liquidation
preference of all Preferred Securities then outstanding; provided
that nothing herein shall preclude any transaction involving the
Guarantor pursuant to Section 5.01 of the Indenture. No such
permitted transaction shall be deemed an assignment of the
Guarantor's obligations hereunder for purposes hereof.
SECTION 5.02. This Guarantee Agreement may only be amended by
a written instrument executed by the Guarantor; provided that, so
long as any of the Preferred Securities remain outstanding, any
such amendment that materially adversely affects the holders of
Preferred Securities, any termination of this Guarantee Agreement
and any waiver of compliance with any covenant hereunder shall be
effected only with the prior approval of the Holders of not less
than 66-2/3% of the aggregate stated liquidation preference of all
Preferred Securities then outstanding.
6
<PAGE>
SECTION 5.03. All notices, requests or other communications
required or permitted to be given hereunder to the Guarantor shall
be deemed given if in writing and delivered personally or by
recognized overnight courier or express mail service or by
facsimile transmission (confirmed in writing) or by registered or
certified mail (return receipt requested), addressed to the
Guarantor at the following address (or at such other address as
shall be specified by notice to the Holders):
Pennsylvania Electric Company
c/o GPU Service Corporation
100 Interpace Parkway
Parsippany, NJ 07054
Facsimile No.: (201) 263-6397
Attention: Treasurer
All notices, requests or other communications required or
permitted to be given hereunder to the Holders shall be deemed
given if in writing and delivered by the Guarantor in the same
manner as notices sent by the Issuer to the Holders.
SECTION 5.04. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the
Preferred Securities.
SECTION 5.05. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PRINCIPLES.
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
PENNSYLVANIA ELECTRIC COMPANY
By ________________________
Name:
Title:
7
<PAGE>
<TABLE>
Exhibit 12-A
Page 1 of 3
Pennsylvania Electric Company and Subsidiary Companies
SEC Ratio of Earnings to Fixed Charges
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Twelve Months Ended
<CAPTION>
December 31 December 31 December 31
1989 1990 1991
<S> <C> <C> <C>
Operating Revenues $816 627 $817 923 $865 552
Operating Expenses 613 569 615 852 684 709
Interest Portion of Rentals (A) 5 085 5 412 4 149
Net Expense 608 484 610 440 680 560
Other Income
AFUDC 5 738 5 902 3 396
Other Income 11 024 10 029 6 603
Total other income 16 762 15 931 9 999
Earnings Available for Fixed Charges
and Preferred Stock Dividends
(excluding income taxes) $224 905 $223 414 $194 991
Fixed Charges
Interest on Funded indebtedness $ 41 935 $ 44 370 $ 45 289
Other interest 8 738 7 232 6 744
Interest portion of rentals (A) 5 085 5 412 4 149
Total fixed charges $ 55 758 $ 57 014 $ 56 182
Ratio of Earnings to Fixed Charges 4.03 3.92 3.47
Preferred stock dividend requirement $ 8 814 $ 8 814 $ 6 189
Ratio of income before provision for
income taxes to net income (B) 161.9% 153.1% 153.6%
Preferred stock dividend requirement
on a pretax basis $ 14 268 $ 13 491 $ 9 507
Fixed charges, as above 55 758 57 014 56 182
Total fixed charges and preferred
stock dividends $ 70 026 $ 70 505 $ 65 689
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 3.21 3.17 2.97
<PAGE>
Exhibit 12-A
Page 2 of 3
Pennsylvania Electric Company and Subsidiary Companies
SEC Ratio of Earnings to Fixed Charges
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Twelve Months Ended
<CAPTION>
Actual Pro Forma
December 31 December 31 March 31 March 31
1992 1993 1994 1994 (C)
<S> <C> <C> <C> <C>
Operating Revenues $896 337 $908 280 $924 312 $924 312
Operating Expenses 678 478 688 587 708 502 708 502
Interest Portion of Rentals (A) 3 945 3 406 3 392 3 392
Net Expense 674 533 685 181 705 110 705 110
Other Income
AFUDC 1 651 2 261 2 772 2 772
Other Income (179) (7 021) 5 505 5 505
Total other income 1 472 (4 760) 8 277 8 277
Earnings Available for Fixed Charges
and Preferred Stock Dividends
(excluding income taxes) $223 276 $218 339 $227 479 $227 479
Fixed Charges
Interest on Funded indebtedness $ 42 615 $ 44 714 $ 45 371 $ 45 371
Other interest 6 415 5 255 7 426 18 520
Interest portion of rentals (A) 3 945 3 406 3 392 3 392
Total fixed charges $ 52 975 $ 53 375 $ 56 189 $ 67 283
Ratio of Earnings to Fixed Charges 4.21 4.09 4.05 3.38
Preferred stock dividend requirement $ 5 664 $ 4 987 $ 4 479 $ 4 479
Ratio of income before provision for
income taxes to net income (B) 170.7% 172.3% 168.8% 168.4%
Preferred stock dividend requirement
on a pretax basis $ 9 671 $ 8 594 $ 7 560 $ 7 541
Fixed charges, as above 52 975 53 375 56 189 67 283
Total fixed charges and preferred
stock dividends $ 62 646 $ 61 969 $ 63 749 $ 74 824
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 3.56 3.52 3.57 3.04
<PAGE>
Exhibit 12-A
Page 3 of 3
Pennsylvania Electric Company and Subsidiary Companies
SEC Ratio of Earnings to Fixed Charges
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Twelve Months Ended
<FN>
Notes:
(A) The Company has included the equivalent of the interest portion of all rentals
charges to income as fixed charges for this statement and has excluded such
components from Operating Expenses.
(B) Calculated by dividing income before provision for income taxes by income before
cumulative effect of accounting change as follows:
December 31 December 31 December 31
1989 1990 1991
Inc. before prov. for inc. taxes $169 147 $166 400 $138 809
Inc. before cum. effect of
acctg. change $104 488 $108 712 $ 90 361
Actual Pro Forma
December 31 December 31 March 31 March 31
1992 1993 1994 1994
Inc. before prov. for inc. taxes $170 301 $164 964 $171 290 $160 196
Inc. before cum. effect of
acctg. change $ 99 744 $ 95 728 $101 481 $ 95 153
(C) Gives effect to the issuance of $125,000,000 aggregate stated liquidation preference
of Preferred Securities and the use of the proceeds thereof to purchase the
Company's Subordinated Debentures at an assumed rate of 8 7/8%.
</TABLE>
<PAGE>
(LETTERHEAD OF COOPERS & LYBRAND)
EXHIBIT 23-E
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this
Registration Statement of Pennsylvania Electric Company on Form S-3
of our report dated February 2, 1994, on our audits of the
consolidated financial statements and financial statement schedules
of Pennsylvania Electric Company and Subsidiary Companies as of
December 31, 1993 and 1992, and for each of the three years in the
period ended December 31, 1993, which report is included in the
Company's Annual Report on Form 10-K, for the year ended December
31, 1993. Our report on the audits of consolidated financial
statements and financial statement schedules of Pennsylvania
Electric Company and Subsidiary Companies as of December 31, 1993
and 1992, and for each of the three years in the period ended
December 31, 1993 contains explanatory paragraphs related to
certain contingencies which have resulted from the accident at Unit
2 of the Three Mile Island Nuclear Generating Station; the adoption
of the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes," and the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" in 1993; and the change in the method of accounting for
unbilled revenues in 1991.
We also consent to the reference to our Firm under the
caption "Experts".
2400 Eleven Penn Center
Philadelphia, PA
May 17, 1994
<PAGE>
Exhibit 25
===================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM T-1
__________________
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
__________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5459866
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
Pennsylvania Electric Company
(Exact name of obligor as specified in its charter)
Pennsylvania 25-071808
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1001 Broad Street
Johnstown, Pennsylvania 15907
(Address of principal executive offices) (Zip Code)
__________________
% Subordinated Debentures Series due 204
(Title of the indenture securities)
===================================================
<PAGE>
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Federal Reserve Bank of New York (2nd District),
New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
Pennsylvania Electric Company currently is not, and has not
been in default under any of its outstanding securities issued
under indentures for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, 13, 14 and 15 of Form T-1 are not required under
General Instruction B.
16. List of Exhibits.
T-1.1 - "Chapter 204, Laws of 1853, An Act to
Incorporate the United States Trust Company of
New York, as Amended", is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 20, 1991 with the Securities and
Exchange Commission (the "Commission") pursuant
to the Trust Indenture Act of 1939 (Registration
No. 2221291).
T-1.2 - The trustee was organized by a special act of
the New York Legislature in 1853 prior to the
time that the New York Banking Law was revised
to require a Certificate of authority to
<PAGE>
16. List of Exhibits
(Continued)
commence business. Accordingly, under New York
Banking Law, the Charter (Exhibit T-1.1)
constitutes an equivalent of a certificate of
authority to commence business.
T-1.3 - The authorization of the trustee to exercise
corporate trust powers is contained in the
Charter (Exhibit T-1.1).
T-1.4 - The By-laws of the United States Trust Company
of New York, as amended to date, are
incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 20, 1991 with the
Commission pursuant to the Trust Indenture Act
of 1939 (Registration No. 2221291).
T-1.6 - The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
NOTE
As of May 10, 1994, the trustee had 2,999,020 shares of Common
Stock outstanding, all of which are owned by its parent company,
U.S. Trust Corporation. The term "trustee" in Item 2, refers to
each of United States Trust Company of New York and its parent
company, U.S. Trust Corporation.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, United States Trust Company of New York, a
corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State
of New York, on the 11th day of May, 1994.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: ________________________
S/Louis P. Young
Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
March 19, 1992
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust
Indenture Act of 1939, and subject to the limitations set forth
therein, United States Trust Company of New York ("U.S. Trust")
hereby consents that reports of examinations of U.S. Trust by
Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
__________________________
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
Consolidated Report of Condition of
United States Trust Company of New York
and Foreign and Domestic Subsidiaries, a member of the Federal
Reserve System, at the close of business December 31, 1993,
published in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of the Federal
Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository
institutions:
a. Noninterest bearing balances and
currency and coin: $ 176,527
b. Interest bearing balances: 50,000
Securities: 833,859
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and of its Edge and Agreement
subsidiaries, and in IBF's: 1,753
a: Federal funds sold: 205,000
b: Securities purchased under agreements
to resell: 32,000
Loans and lease financing receivables:
a. Loans and leases, net of unearned income: 1,271,077
b. LESS: Allowance for loan and lease losses: 11,928
c. Loans and leases, net of unearned income,
allowance and reserve: 1,259,149
Premises and fixed assets (including
capitalized leases): 98,896
Other real estate owned: 11,543
Investments in unconsolidated subsidiaries
and associated companies: 725
Intangible assets: 856
Other assets: 256,699
TOTAL ASSETS: $ 2,925,254
LIABILITIES
Deposits:
a. In domestic offices: $ 2,345,177
(1) Non interest bearing: 1,228,335
(2) Interest bearing: 1,116,842
b. In foreign offices, Edge and Agreement
subsidiaries, and IBF's: 5,617
(1) Interest bearing: 5,617
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBF's:
a. Federal funds purchased: 211,921
b. Securities sold under agreements
to repurchase: 15,016
Demand notes issued to the U.S. Treasury: 33,824
Other Borrowed Money 10
Mortgage indebtedness and obligations
under capitalized leases: 2,429
Subordinated notes and debentures: 12,453
<PAGE>
Other liabilities: 118,457
TOTAL LIABILITIES: $ 2,744,904
EQUITY CAPITAL
Common Stock: $ 14,995
Surplus: 41,500
Undivided profits and capital reserves: 123,855
TOTAL EQUITY CAPITAL: $ 180,350
TOTAL LIABILITY AND EQUITY CAPITAL: $ 2,925,254
I, Richard E. Brinkman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this report of
condition has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System
and is true to the best of my knowledge and belief.
RICHARD E. BRINKMANN, SVP, Comptroller
January 31, 1994
We, the undersigned trustees, attest the correctness of this
Report of Condition and declare that it has been examined by us
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true and correct.
H. MARSHALL SCHWARZ:
FREDERICK S. WONHAM: Trustees
DONALD M. ROBERTS:
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