Registration Nos. 33-53677
33-53677-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO. 1
TO
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 DELAWARE
(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
(Addresses, including zip codes, and telephone numbers, including
area codes, of registrants' principal executive offices)
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 for each registrant)
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
(814) 533-8111 19103
(215) 864-8500
<PAGE>
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
____________________
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/
____________________
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.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 15, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE , 1994
_________ Preferred Securities
Penelec Capital
__% Cumulative Monthly Income Preferred Securities ("MIPS"*),
Series A
(liquidation preference $25 per Preferred Security)
guaranteed on a limited basis 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
on a limited basis by the Company as set forth herein and in the
accompanying Prospectus (the "Limited Guarantee"). See
"Description of the Limited Guarantee" in the accompanying
Prospectus. If the Company fails to make interest payments on
the ___% Subordinated Debentures, Series A ("Series A Deferrable
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,
since the Limited Guarantee does not cover the payment of
Dividends for which Penelec Capital does not have sufficient
funds available, the Company would not be obligated under the
Limited Guarantee to make such undeclared Dividend payments. In
such event, the remedy of a holder of Series A Preferred
<PAGE>
Securities is to enforce Penelec Capital's rights under the
Series A Deferrable Subordinated Debentures.
The Company's obligations under the Limited Guarantee and
the Series A Deferrable Subordinated Debentures are subordinate
and junior in right of payment to all present and future Senior
Indebtedness of the Company (which aggregated approximately
$760,000,000 at March 31, 1994). In addition, the Company may
defer interest payments on the Series A Deferrable Subordinated
Debentures for up to 60 consecutive months. However, during any
deferral period (which the Company considers remote), the Company
may not declare or pay any dividends on, or redeem or acquire,
any of its preferred or common stock.
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
Deferrable 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 any applicable 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 any applicable 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 Deferrable 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 the Deferrable
Subordinated Debentures" in the accompanying Prospectus. If the
Series A Deferrable 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
$25 plus any accumulated, unpaid and additional Dividends accrued
thereon to the date of payment, unless, in connection with such
dissolution, Series A Deferrable Subordinated Debentures are
distributed to the holders of the Series A Preferred Securities.
See "Description of Preferred Securities-Liquidation
Distribution" in the accompanying Prospectus.
___________________
<PAGE>
See "Certain Investment Considerations" for certain
considerations relevant to an investment in the Series A
Preferred Securities, including circumstances under which payment
of Dividends on the Series A Preferred Securities may be
deferred.
___________________
Application will be made to list the Series A Preferred
Securities on the New York Stock Exchange.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
____________________
Proceeds to
Initial Public Underwriting Penelec
Offering Price Commission(1) Capital (2)(3)
Per Series A
Preferred
Security..........$ (2) $
Total..............$ (2) $
________
(1) Penelec Capital and the Company have agreed to indemnify the
several Underwriters against certain 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 be used to purchase the
Company's Series A Deferrable 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.
<PAGE>
Goldman, Sachs & Co.
Dean Witter Reynolds Inc.
A.G. Edwards & Sons, Inc.
Kidder, Peabody & Co. Incorporated
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
__________________
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.
___________________
2
<PAGE>
The following information concerning the Series A Preferred
Securities, the Limited Guarantee and the Series A Deferrable
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
Deferrable 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
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 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 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 Limited Guarantee and
the Series A Deferrable Subordinated Debentures. The
Company's obligations under the Limited Guarantee and the
Series A Deferrable 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 Deferrable Subordinated Debentures
or the Limited Guarantee that limit the Company's ability to
incur additional indebtedness, including indebtedness that
ranks senior to the Series A Deferrable Subordinated
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<PAGE>
Debentures and the Limited Guarantee. See "Description of
the Limited Guarantee-Status of the Limited Guarantee" and
"Description of the Deferrable Subordinated Debentures-
Subordination" in the accompanying Prospectus.
Option to Extend Interest Payment Period. The Company
has the right under the Indenture to extend the interest
payment period on the Series A Deferrable 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 Deferrable
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 Deferrable
Subordinated Debentures is unlikely. See "Description of
Preferred Securities-Dividends" and "Description of the
Deferrable 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 any applicable 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 Deferrable 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
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<PAGE>
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.
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 Deferrable Subordinated Debentures
will be deductible under the tests referred to in these
notices. If, as a result of a change in law or a
pronouncement or decision interpreting or applying any
applicable law, Penelec Capital receives an opinion of
counsel to the effect that interest on the Series A
Deferrable 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
Deferrable 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 Deferrable 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
$____________ ($25 per Series A Preferred Security), 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
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<PAGE>
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
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 DEFERRABLE SUBORDINATED DEBENTURES
The following information should be read in conjunction with
the statements under "Description of the Deferrable Subordinated
Debentures" in the accompanying Prospectus.
General
The Series A Deferrable 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
Deferrable 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 Deferrable 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 Deferrable 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 Deferrable 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 Deferrable Subordinated
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<PAGE>
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:
Number of
Series A
Preferred
Underwriter Securities
Goldman, Sachs & Co.....................
Dean Witter Reynolds Inc................
A. G. Edwards & Sons, Inc...............
Kidder, Peabody & Co. Incorporated......
Morgan Stanley & Co. Incorporated.......
Prudential Securities Incorporated......
__________
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 be used to purchase the
Company's Series A Deferrable 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
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Preferred Securities and the Limited 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
Limited 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
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 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 the 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 JUNE 15, 1994
PROSPECTUS
$125,000,000
PENELEC CAPITAL
Preferred Securities
guaranteed on a limited basis 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 on a limited basis by the Company as
described herein (the "Limited Guarantee"). The Company's
obligations under the Limited 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.
Deferrable Subordinated Debentures of the Company ("Deferrable
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. Deferrable 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 Deferrable 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"). <PAGE>
_________________________
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 a Prospectus Supplement. The
net proceeds to the Company will also be set forth in a
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.
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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 , February 28, 1994 and June 10, 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
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the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference herein and to be
a part 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 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 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
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coordinated system. The transmission facilities of the
integrated system are physically interconnected with neighboring
nonaffiliated utilities in Pennsylvania, New Jersey, Maryland,
New York and Ohio. The Company is a member of the Pennsylvania-
New Jersey-Maryland Interconnection ("PJM") and the Mid-Atlantic
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.
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 Deferrable
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 Securities 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 Deferrable
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 Deferrable 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 Deferrable
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)
654-5893. 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
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to acquire the Company's Deferrable Subordinated Debentures,
which will be issued under and pursuant to the Indenture (the
"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.
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The Company has the right under the Indenture to extend the
interest payment period on the Deferrable Subordinated Debentures
at any time 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 Deferrable
Subordinated Debentures and thus on the Preferred Securities is
unlikely. See "Voting Rights" and "Description of the Deferrable
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 Deferrable Subordinated
Debentures. See "Description of the Deferrable 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
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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 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 paid or declared on any Preferred Securities
is paid or declared on all Preferred Securities then
outstanding on a pro rata basis on the date such
Dividends are paid or declared, so that
(x) (a) the aggregate amount of Dividends
paid or declared on such series of Preferred
Securities bears to (b) the aggregate amount of
Dividends paid or declared 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 Deferrable Subordinated
Debentures purchased by Penelec Capital with the proceeds of the
sale of a series of Preferred Securities or redeems such
Deferrable Subordinated Debentures at any time as described under
"Description of the Deferrable 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,
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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 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 Limited 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 would not involve
unreasonable cost or expense, 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 Deferrable Subordinated Debentures with an
aggregate principal amount equal to the aggregate stated
liquidation preference of, and with an interest rate identical
to, the Preferred Securities, to be distributed to the holders of
the 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 ) shall occur and be continuing, Penelec
Capital must elect either option (i) or (ii) above. Either a Tax
Event or an Investment Company Act Event shall be deemed a
"Special Event".
"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
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(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 any
applicable 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 Deferrable Subordinated
Debentures or Penelec Capital will otherwise not be taxed as a
partnership, (ii) interest payable on the Deferrable Subordinated
Debentures will not be deductible for federal 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 Deferrable 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 Deferrable 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 Deferrable 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.
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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 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
Limited Guarantee described under "Description of the Limited
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
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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 Deferrable 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 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 on June 30, 2060,
(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
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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 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 and the assets
of the successor entity, at least as high as the Preferred
Securities rank, with regard to participation in the profits
and the assets of Penelec Capital, (ii) the Company confirms its
obligation under the Limited 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
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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
Limited Guarantee-Amendments and Assignment" and "Description of
the Deferrable Subordinated Debentures- Amendment 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 Limited Guarantee (as
described under "Description of the Limited 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 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 under the Indenture, including, after failure
to pay interest for 60 consecutive monthly interest periods, the
payment of interest on the Deferrable Subordinated Debentures,
and to enforce the obligations of the Company under the Limited
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 the 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 Limited
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
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extend the interest payment period on the Deferrable Subordinated
Debentures as provided under "Description of the Deferrable
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 single 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 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 Deferrable 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 Deferrable 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
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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 Deferrable
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.
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 Deferrable
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
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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.
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
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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.
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
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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 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.
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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 Deferrable 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 LIMITED GUARANTEE
Set forth below is a summary of information concerning the
Limited 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 Limited Guarantee, but does
not purport to be complete. References to provisions of the
Limited Guarantee are qualified in their entirety by reference to
the text of the Limited Guarantee, which will be substantially in
the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
General
The Company will agree, on a limited basis as set forth
therein, to pay in full, to the holders of the Preferred
Securities, the Limited 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 "Limited
Guarantee Payments") will be subject to the Limited 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 Deferrable 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
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Capital in respect of the Preferred Securities. The Company's
obligation to make a Limited 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
Deferrable 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 Limited 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 described under "Description of Preferred Securities-
Liquidation Distribution"; (iv) except as otherwise provided in
the Limited Partnership Agreement, 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 Limited 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.
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In the event that any such withholding or deduction is required
as a consequence of (i) the Deferrable 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
The Limited 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
Limited 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 Deferrable
Subordinated Debentures-Consolidation, Merger, Sale or
Conveyance; Assignment"), the Company may not assign its
obligations under the Limited 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 Limited
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 Limited Guarantee
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The Limited 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
Limited 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 Limited Guarantee.
Status of the Limited Guarantee
The Limited 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 Limited Guarantee.
The Limited Guarantee will constitute a limited guarantee of
payment and not of collection. The Limited 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 Limited Guarantee. If no Special Representative has
been appointed to enforce the Limited Guarantee, the General
Partner has the right to enforce the Limited Guarantee on behalf
of the holders of the Preferred Securities. If the General
Partner or the Special Representative fails to enforce the
Limited Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against the Company to
enforce its rights under the Limited Guarantee, without first
instituting a legal proceeding against Penelec Capital or any
other person or entity.
DESCRIPTION OF THE DEFERRABLE SUBORDINATED DEBENTURES
Set forth below is a description of the Deferrable
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 Deferrable
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
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Deferrable Subordinated Debentures will be issued in series
under the Indenture. Each series of Deferrable 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 Deferrable
Subordinated Debentures directly against the Company.
The Deferrable 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 Deferrable 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 Deferrable
Subordinated Debentures, without premium or penalty, at a price
equal to 100% of their principal amount, together with (i) all
accrued and unpaid interest on the Deferrable 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
Deferrable 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 Deferrable 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
Deferrable Subordinated Debentures in whole. In no
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event, however, shall the Company have the right to
redeem the Deferrable Subordinated Debentures, or a
portion thereof, under this clause (y) 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
Deferrable Subordinated Debentures, the Company shall
have the right to redeem the Deferrable Subordinated
Debentures, or a portion thereof, under this clause
(y) 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 Deferrable 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 Deferrable Subordinated Debentures so called for
redemption will cease, except the right of the holders of such
Deferrable Subordinated Debentures to receive the Debenture
Redemption Price, but without interest. In the event that any
date fixed for redemption of Deferrable Subordinated Debentures
is not a Business Day, then payment of the Debenture 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 shall be made on the immediately preceding Business Day.
In the event that less than all of a series of outstanding
Deferrable Subordinated Debentures are to be so redeemed
following a Distribution Event, the Deferrable 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 Deferrable Subordinated Debentures by
tender, in the open market or by private agreement.
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If a partial redemption or a purchase of outstanding
Deferrable Subordinated Debentures by tender, in the open market
or by private agreement would result in a delisting of such
series of Deferrable Subordinated Debentures from any national
securities exchange on which such series of Deferrable
Subordinated Debentures is then listed, the Company may then only
redeem or purchase such series of Deferrable Subordinated
Debentures in whole.
Interest
Each Deferrable 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 Deferrable
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 Deferrable 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 Deferrable
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 Deferrable Subordinated Debentures,
so long as the Company is not in default in the payment of
interest on the Deferrable Subordinated Debentures, to extend the
interest payment period on the Deferrable Subordinated Debentures
to up to 60 consecutive months, 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 Deferrable 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 Deferrable Subordinated Debentures, the Company
shall give Penelec Capital notice of its selection of such
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extended interest payment period one Business Day prior to the
earlier of (i) the date the related Dividend on the Preferred
Securities is 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 Deferrable
Subordinated Debentures, the Company will give the holders of the
Deferrable 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 Deferrable Subordinated Debentures are then
listed or other applicable self-regulatory organization or to
holders of the Deferrable 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 Deferrable 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 Deferrable Subordinated Debentures to the extent it has
theretofore made, or is concurrently making, a payment under the
Limited Guarantee.
Subordination
All payments by the Company in respect of the Deferrable
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,
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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 , 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 Deferrable 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
Deferrable 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 Deferrable Subordinated Debentures.
No direct or indirect payment by or on behalf of the Company
of principal of or interest on the Deferrable Subordinated
Debentures whether pursuant to the terms of the Deferrable
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.
If the Trustee or any holder of Preferred Securities or
Deferrable Subordinated Debentures (or the Special
Representative) has received any payment on account of the
principal of or interest on the Deferrable 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
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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 Deferrable
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 Deferrable
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 Limited Guarantee.
Book-Entry and Settlement
If Deferrable Subordinated Debentures are distributed to
holders of Preferred Securities, the Deferrable Subordinated
Debentures will be issued in book-entry-only form . 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 Deferrable 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 Deferrable 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 Deferrable 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 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 Deferrable
Subordinated Debentures or an Event of Default or an event which,
with the giving of notice or the lapse of time or both, would
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constitute an Event of Default with respect to such Deferrable
Subordinated Debentures. Any global security that is
exchangeable pursuant to the preceding sentence shall be
exchangeable for Deferrable 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 Deferrable Subordinated Debentures do
not remain in book-entry-only form, the following provisions
would apply:
Payment of principal of any Deferrable 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 Deferrable Subordinated Debenture. Principal of, and
interest on, Deferrable 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 Deferrable
Subordinated Debentures. Payment of interest on a Deferrable
Subordinated Debenture on any Interest Payment Date will be made
to the person in whose name such Deferrable 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 Deferrable 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.
Deferrable 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 Deferrable Subordinated Debentures.
The Company shall not be required to make, and the Registrar need
not register, the transfer or exchange of (i) any Deferrable
Subordinated Debenture during a period beginning at the opening
of business five days before the mailing of a notice of
redemption of Deferrable Subordinated Debentures, and ending at
the close of business on the day of such mailing, or (ii) any
Deferrable Subordinated Debenture selected, called or being
called for redemption, in whole or in part, except in the case of
any Deferrable Subordinated Debenture to be redeemed in part, the
portion thereof not to be redeemed.
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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 Deferrable Subordinated
Debentures which are affected by the amendment or waiver, to
amend the Indenture or the Deferrable Subordinated Debentures or
to waive compliance by the Company with any provision of the
Indenture or the Deferrable Subordinated Debentures; provided
that no such amendment or waiver may, without the consent of the
holder of each outstanding Deferrable Subordinated Debenture
affected thereby, (a) reduce the principal amount of the
Deferrable Subordinated Debentures, (b) reduce the percentage of
principal amount of outstanding Deferrable 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
Deferrable Subordinated Debentures, (d) change the redemption
provisions applicable to the Deferrable Subordinated Debentures
adversely to the holders thereof, (e) impair the right to
institute suit for the enforcement of any payment with respect to
the Deferrable Subordinated Debentures, (f) change the currency
in which payments with respect to the Deferrable Subordinated
Debentures are to be made, (g) change the subordination
provisions applicable to the Deferrable Subordinated Debentures
adversely to the holders thereof, or (h) waive a default in the
payment of the principal of, or interest on, any Deferrable
Subordinated Debenture. The Indenture or the Deferrable
Subordinated Debentures may be amended, without the consent of
the holders of the Deferrable 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 Deferrable 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 Deferrable 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 Deferrable
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 Deferrable Subordinated
Debentures to be due and payable; provided that, upon certain
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events of bankruptcy, insolvency or reorganization of the
Company, such amounts shall 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 Deferrable Subordinated
Debentures may be rescinded and past defaults (except, unless
theretofore cured, a default in the payment of principal of, or
interest on, the Deferrable Subordinated Debentures) may be
waived by the holders of a majority in principal amount of the
Deferrable Subordinated Debentures then outstanding. The
Indenture provides that the Trustee may withhold notice to the
holders of the Deferrable Subordinated Debentures of any
continuing default (except in the payment of the principal of, or
interest on, the Deferrable Subordinated Debentures) if the
Trustee considers it in the interests of holders of Deferrable
Subordinated Debentures to do so.
Enforcement of Certain Rights By Holders of Preferred Securities
So long as any Deferrable 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 Deferrable Subordinated
Debentures, to accelerate the principal amount of the Deferrable
Subordinated Debentures and to enforce the Company's obligations
under the Indenture and the Deferrable Subordinated Debentures
directly against the Company, without first proceeding against
Penelec Capital or any other person or entity.
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 Deferrable Subordinated
Debentures and the Indenture and (y) so long as any Preferred
Securities remain outstanding, the Company's obligations under
the Limited 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
Deferrable Subordinated Debentures, with the same effect as if it
had been named in the Indenture as the issuer in place of the
Company.
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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 Deferrable
Subordinated Debenture as the absolute owner thereof (whether or
not such Deferrable 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
Deferrable Subordinated Debentures of any series (except in each
case for certain obligations to register the transfer or exchange
of Deferrable Subordinated Debentures, replace stolen, lost or
mutilated Deferrable 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 Deferrable
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 Deferrable
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 Deferrable Subordinated Debentures
Any mutilated Deferrable Subordinated Debenture will be
replaced by the Company at the expense of the holder upon its
surrender to the Trustee. Deferrable 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 Deferrable Subordinated Debenture, an
indemnity satisfactory to the Trustee and the Company may be
required at the expense of the holder of such Deferrable
Subordinated Debenture before a replacement Deferrable
Subordinated Debenture will be issued.
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Governing Law
The Indenture and the Deferrable 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 Deferrable Subordinated
Debentures then outstanding 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 Deferrable 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
35
<PAGE>
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
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 Deferrable 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 Deferrable
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, Deferrable 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 Deferrable Subordinated Debentures equal to such holder's
aggregate tax basis in the holder's Preferred Securities. A
holder's holding period in such Deferrable Subordinated
Debentures would include the period for which the Preferred
Securities were held by such holder.
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<PAGE>
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 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
Deferrable 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 from the Company or Penelec Capital.
The tax basis of a Preferred Security will be increased by the
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<PAGE>
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 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.
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<PAGE>
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.
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
39
<PAGE>
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.
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.
40
<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 on a
as having been authorized. Neither limited basis by
the delivery of this Prospectus
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
Deferrable Subordinated Debentures
Underwriting . . . . . . . . . . . . GOLDMAN, SACHS & CO.
Legal Opinions . . . . . . . . . . .
Prospectus
Available Information . . . . . . . . DEAN WITTER REYNOLDS,
INC.
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . A. G. EDWARDS & SONS,
INC.
Pennsylvania Electric Company . . . .
Financing Program . . . . . . . . . . KIDDER, PEABODY & CO.
Certain Company Consolidated Financial INCORPORATED
Information . . . . . . . . . . . . .
Company Coverage Ratios . . . . . . . MORGAN STANLEY & CO.
Use of Proceeds . . . . . . . . . . . INCORPORATED
Penelec Capital . . . . . . . . . . .
Description of Preferred Securities . PRUDENTIAL SECURITIES
Description of the Limited Guarantee INCORPORATED
Description of the Deferrable . . . .
Subordinated Debentures . . . . . .
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. 25,000*
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 21,771*
Total $440,000*
_________________
*Estimated
Item 16. Exhibits:
Exhibit No. Description
1-A - Form of Underwriting Agreement relating to
Preferred Securities.
3-D - By-Laws of Penelec Preferred Capital, Inc. -
Incorporated by reference to Exhibit A-2,
Application on Form U-1, SEC File No. 70-
8403.
4-A - Form of Subordinated Debenture Indenture -
Incorporated by reference to Exhibit A-8,
Application on Form U-1, SEC File No. 70-
8403.
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-C - Form of Subordinated Debenture - Incorporated
by reference to form of Deferrable
Subordinated Debenture contained in Exhibit
4-A.
4-D - Revised form of Payment and Guarantee
Agreement.
5-A - Opinion of Berlack, Israels & Liberman.
<PAGE>
5-B - Opinion of Ballard Spahr Andrews & Ingersoll
.
5-C - Opinion of Richards, Layton & Finger, P.A.
8 - Opinion of Carter, Ledyard & Milburn.
23-A - Consent of Berlack, Israels & Liberman (
included in their opinion filed as Exhibit 5-
A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll
(included in their opinion filed as Exhibit
5-B).
23-C - Consent of Richards, Layton & Finger, P.A. (
included in their opinion filed as Exhibit 5-
C).
23-D - Consent of Carter, Ledyard & Milburn (
included in their opinion filed as Exhibit
8).
_________
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:
(5) That for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declare
effective.
(6) That for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus 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.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Reading, Commonwealth of
Pennsylvania, on the 15th day of June, 1994.
PENNSYLVANIA ELECTRIC COMPANY
By: *
F.D. Hafer, President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the 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 June 15, 1994
(J.R. Leva) Executive Officer)
and Director
* President and Director June 15, 1994
(F.D. Hafer)
*
(R.C. Arnold) Director June 15, 1994
* Vice President June 15, 1994
(J.G. Graham) (Principal Financial
Officer) and Director
* Vice President and June 15, 1994
(J.G. Herbein) Director
* Vice President and June 15, 1994
(G.R. Repko) Director
* Vice President, June 15, 1994
(W.R. Stinson) Comptroller (Principal
Accounting Officer) and
Director
*By:
Don W. Myers, attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this amendment to its
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Reading,
Commonwealth of Pennsylvania on the 15th day of June, 1994.
PENELEC CAPITAL, L.P.
By: Penelec Preferred Capital, Inc.
its general partner
By:________________________________
F.D. Hafer, President
Pursuant to the requirements of the Securities Act of
1933, this amendment to the 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 June 15, 1994
(F.D. Hafer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
1-A - Form of Underwriting Agreement relating to
Preferred Securities.
3-D - By-Laws of Penelec Preferred Capital, Inc. -
Incorporated by reference to Exhibit A-2,
Application on Form U-1, SEC File No. 70-8403.
4-A - Form of Subordinated Debenture Indenture -
Incorporated by reference to Exhibit A-8,
Application on Form U-1, SEC File No. 70-8403.
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-C - Form of Subordinated Debenture - Incorporated
by reference to form of Deferrable Subordinated
Debenture contained in Exhibit 4-A.
4-D - Revised form of Payment and Guarantee
Agreement.
5-A - Opinion of Berlack, Israels & Liberman.
5-B - Opinion of Ballard Spahr Andrews & Ingersoll .
5-C - Opinion of Richards, Layton & Finger, P.A.
8 - Opinion of Carter, Ledyard & Milburn.
23-A - Consent of Berlack, Israels & Liberman (
included in their opinion filed as Exhibit 5-
A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll
(included in their opinion filed as Exhibit 5-
B).
23-C - Consent of Richards, Layton & Finger, P.A. (
included in their opinion filed as Exhibit 5-
C).
23-D - Consent of Carter, Ledyard & Milburn ( included
in their opinion filed as Exhibit 8).
_________
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.
<PAGE>
EXHIBIT TO BE FILED BY EDGAR
Exhibit No. Description
1-A - Form of Underwriting Agreement
relating to Preferred Securities.
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-D - Revised form of Payment and Guarantee
Agreement.
5-A - Opinion of Berlack, Israels &
Liberman.
5-B - Opinion of Ballard Spahr Andrews &
Ingersoll .
5-C - Opinion of Richards, Layton & Finger,
P.A.
8 - Opinion of Carter, Ledyard & Milburn.
<PAGE>
Exhibit 1-A
PENELEC CAPITAL, L.P.
__% Cumulative Monthly Income
Preferred Securities, Series A
(liquidation preference $25 per Preferred Security)
guaranteed to the extent set forth in the Prospectus
by Pennsylvania Electric Company
Underwriting Agreement
, 1994
Goldman, Sachs & Co.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
Penelec Capital, L.P. ("Penelec Capital"), a limited
partnership formed under the laws of the State of Delaware, and
Pennsylvania Electric Company, a Pennsylvania corporation, as
guarantor (the "Guarantor"), propose, subject to the terms and
conditions stated herein, that Penelec Capital issue and sell to
the Underwriters named in Schedule I hereto (the "Underwriters")
an aggregate of _____ preferred partner interests of Penelec
Capital of a series designated the ___% Cumulative Monthly Income
Preferred Securities, Series ___ (liquidation preference $25 per
Preferred Security) (the "Preferred Securities"), guaranteed by
the Guarantor as to the payment of distributions, to the extent
Penelec Capital has sufficient cash on hand to permit such
payments and funds legally available therefor, and as to payments
on liquidation or redemption described in any Final Supplemented
Prospectus (as defined in Section 1(a) hereof) (the "Guarantee").
1. Each of Penelec Capital and the Guarantor jointly and
severally represents and warrants to, and agrees with, each of
the Underwriters that:
(a) A registration statement on Form S-3 in respect of
the Preferred Securities, the Guarantee and the __% Subordinated
Debentures due ______ of the Guarantor (the "__% Subordinated
Debentures", and collectively with the Preferred Securities and
the Guarantee, the "Securities") (File Nos. 33-53677 and 33-
53677-01), has been filed by Penelec Capital and the Guarantor
with the Securities and Exchange Commission (the "Commission");
such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to
you for each of the other Underwriters, have been declared
<PAGE>
effective by the Commission in such form; as of the date of this
Agreement, no other document with respect to such registration
statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order
suspending the effectiveness of such registration statement has
been issued and no proceeding for that purpose has been initiated
or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations
of the Commission under the Securities Act of 1933, as amended
(the "Act"), is hereinafter called a "Preliminary Prospectus" or
a "Preliminary Supplemented Prospectus," as the case may be; the
various parts of such registration statement, including all
exhibits thereto and the documents incorporated by reference in
the prospectus contained in the registration statement at the
time such part of the registration statement became effective but
excluding Form T-1, each as amended at the time such part of the
registration statement became effective, are hereinafter
collectively called the "Registration Statement"; the prospectus
relating to the Securities, in the form in which it was included
in the Registration Statement at the time it became effective, is
hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be;
any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment to
the Registration Statement shall be deemed to refer to and
include any annual report of the Guarantor filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective
date of the Registration Statement that is incorporated by
reference in the Registration Statement; and the Prospectus as
amended or supplemented in final form in relation to the
Securities in the form in which it is filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing, being hereinafter called
the "Final Supplemented Prospectus");
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and
each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the
Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material
2
<PAGE>
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to
Penelec Capital or the Guarantor by an Underwriter through you
expressly for use therein;
(c) The documents incorporated by reference in the
Prospectus, when they were filed with the Commission conformed in
all material respects to the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder; and any
further documents so filed and incorporated by reference in the
Prospectus or any further amendment or supplement thereto, when
such documents are filed with the Commission will conform in all
material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of circumstances under which they were made, not
misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in
writing to Penelec Capital or the Guarantor by an Underwriter
through you expressly for use in the Preliminary Supplemented
Prospectus or the Final Supplemented Prospectus;
(d) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act, the Trust
Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with
information furnished in writing to Penelec Capital or the
Guarantor by an Underwriter through you expressly for use
therein, or to any statements in or omissions from the Form T-1
of the Trustee (as defined below), but nothing contained herein
is intended as a waiver of compliance with the Act or the
Exchange Act regulations or any rule or regulation of the
Commission thereunder;
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(e) Penelec Capital has no subsidiaries. Since the
respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
change in the capital stock or material change in the long-term
debt of the Guarantor (including all of its subsidiaries taken as
a whole) (except for such preferred stock and long-term debt
acquired for sinking fund purposes or redeemed pursuant to
sinking fund or optional redemption provisions or changes in
obligations under capital leases incurred in the ordinary course
of the Guarantor's business or for any increase in common stock
as a result of capital contributions or any decrease in capital
stock as a result of the declaration by the Guarantor of either
regular quarterly dividends on the Guarantor's preferred stock or
dividends on its common stock) or in the capital accounts or
long-term debt of Penelec Capital, or any material adverse change
in or affecting (i) the condition (financial or otherwise),
stockholder's equity, business affairs, operating properties,
business prospects or results of operations of the Guarantor and
its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Final Supplemented Prospectus or (ii) the
condition (financial or otherwise), capital accounts, business
affairs, operating properties, business prospects or results of
operations of Penelec Capital, otherwise than as set forth or
contemplated in the Final Supplemented Prospectus;
(f) Penelec Capital has been duly formed and is
validly existing in good standing as a limited partnership under
the laws of the State of Delaware, with power and authority to
own its properties and conduct its business as described in the
Final Supplemented Prospectus, and is duly qualified as a foreign
limited partnership for the transaction of business and is in
good standing under the laws of each other jurisdiction in which
it owns or leases properties, or conducts any business, so as to
require such qualification, or is subject to no material
liability or disability by reason of the failure to be so
qualified in any such jurisdiction; Penelec Preferred Capital,
Inc., a Delaware corporation, is the sole general partner (the
"General Partner") of Penelec Capital; the General Partner is a
wholly owned subsidiary of the Guarantor; and the General Partner
has been duly incorporated and is validly existing in good
standing as a corporation under the laws of the State of
Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Final
Supplemented Prospectus;
(g) The Guarantor is duly incorporated and is validly
existing in good standing as a corporation under the laws of its
jurisdiction of incorporation, with corporate power and authority
to own its properties and conduct its business as described in
the Final Supplemented Prospectus and is duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which
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it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of the failure to be so
qualified in any such jurisdiction;
(h) The Guarantor has an authorized capitalization as
set forth in the Final Supplemented Prospectus; and all of the
issued limited partner interests of Penelec Capital have been
duly and validly authorized and issued, are fully paid and non-
assessable and conform to the descriptions thereof contained in
the Final Supplemented Prospectus;
(i) The Preferred Securities have been duly and
validly authorized by Penelec Capital, and, when issued and
delivered against payment therefor at the Time of Delivery (as
defined herein) will be duly and validly issued and fully paid
and non-assessable and will conform to the descriptions thereof
contained in the Final Supplemented Prospectus;
(j) The indenture (the "Indenture") dated as of
______________, 1994 between the Guarantor and United States
Trust Company as trustee (the "Trustee") and the ___%
Subordinated Debentures to be issued thereunder, have been duly
authorized; the Indenture, which is substantially in the form
filed as an exhibit to the Registration Statement, has been duly
qualified under the Trust Indenture Act, and, at the Time of
Delivery, will have been duly executed and delivered and will
constitute, and the ___% Subordinated Debentures, when duly
executed and authenticated in accordance with the Indenture and
issued and delivered under the circumstances provided in the
Final Supplemented Prospectus, will constitute, valid and legally
binding obligations of the Guarantor enforceable in accordance
with their terms, subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws
of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Indenture
conforms and the ___% Subordinated Debentures when duly executed,
authenticated, issued and delivered, will conform to the
descriptions thereof in the Final Supplemented Prospectus;
(k) The Amended and Restated Limited Partnership
Agreement, dated as of _________, 1994 (the "Limited Partnership
Agreement"), has been duly authorized by the General Partner and
constitutes a valid and legally binding obligation of the General
Partner, in its capacity as general partner of Penelec Capital,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(l) The Guarantee has been duly authorized and when
executed and delivered by the Guarantor will constitute a valid
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and legally binding obligation of the Guarantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws
of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Guarantee will
conform to the description thereof in the Final Supplemented
Prospectus;
(m) All of the issued general and limited partner
interests of Penelec Capital (other than the Preferred
Securities) are owned indirectly by the Guarantor and the Class A
Limited Partner (as defined in the Limited Partnership
Agreement), respectively, and have been duly and validly
authorized and validly issued, free and clear of all liens,
encumbrances, equities or claims; and Penelec Capital is not a
party to or otherwise bound by any agreement other than those
described in the Final Supplemented Prospectus;
(n) The issue and sale of the Preferred Securities by
Penelec Capital, the compliance by Penelec Capital with all of
the provisions of this Agreement, and the consummation of the
transactions herein contemplated have been duly authorized by all
necessary action of Penelec Capital and will not conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to
which Penelec Capital is a party or by which Penelec Capital is
bound or to which any of the property or assets of Penelec
Capital is subject, nor will such action result in any violation
of the provisions of the Certificate of Limited Partnership of
Penelec Capital or the Limited Partnership Agreement or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Penelec
Capital or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the
issue and sale of the Preferred Securities or the consummation by
Penelec Capital of the transactions contemplated by this
Agreement, except such as have been obtained regarding the
registration under the Act of the Securities, the qualification
of the Indenture under the Trust Indenture Act, the approval of
the Commission under the Public Utility Holding Company Act of
1935, as amended (the "1935 Act") and the approvals of the
Pennsylvania Public Utility Commission (the "PaPUC") and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase of the Preferred
Securities and distribution of the Securities by the
Underwriters;
(o) The issue and sale of the Preferred Securities by
Penelec Capital, the compliance by Penelec Capital and the
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Guarantor with all of the provisions of this Agreement, the
execution, delivery and performance by the Guarantor of the
Guarantee, the execution, delivery and performance by the
Guarantor of the Indenture and the issuance and delivery by the
Guarantor of the ___% Subordinated Debentures thereunder and the
consummation of the transactions herein and therein contemplated
have been duly authorized by all necessary action of the
Guarantor, will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Guarantor
is a party or by which the Guarantor is bound or to which any of
the property or assets of the Guarantor is subject except for
such conflicts, breaches or violations which, individually or in
the aggregate, would not have a material adverse effect on the
condition (financial or otherwise), stockholder's equity,
business affairs, operating properties, business prospects or
results of operations of the Guarantor (including all of its
subsidiaries taken as a whole), nor will such action result in
any violation of the provisions of the Restated Articles of
Incorporation or By-laws of the Guarantor or any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Guarantor or any of its
subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required
for the issuance of the Guarantee, the issuance of ___%
Subordinated Debentures, Guarantor of the transactions
contemplated by this Agreement, except such as have been obtained
regarding the registration under the Act of the Securities, the
qualification of the Indenture under the Trust Indenture Act and
the approval of the Commission under the 1935 Act and the
approvals of the PaPUC and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase of the Preferred Securities and distribution of
the Securities by the Underwriters;
(p) Neither Penelec Capital nor the Guarantor is in
violation of its charter, or, in the case of Penelec Capital, its
Certificate of Limited Partnership or the Limited Partnership
Agreement, or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement,
note, lease, or other instrument to which it or any of them is a
party or by which it or any of them or their properties may be
bound;
(q) Other than as set forth in the Final Supplemented
Prospectus, there are no legal or governmental proceedings
pending to which Penelec Capital or the Guarantor is a party or
of which any property of Penelec Capital or the Guarantor is the
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<PAGE>
subject which, if determined adversely to Penelec Capital or the
Guarantor, would individually or in the aggregate have a material
adverse effect on (i) the consolidated financial position,
stockholder's equity or results of operations of the Guarantor
(including all of its subsidiaries taken as a whole) or (ii) the
financial position, capital accounts or results of operations of
Penelec Capital; and, to the best of Penelec Capital's and the
Guarantor's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(r) Neither Penelec Capital nor the Guarantor is and,
after giving effect to the offering and sale of the Securities,
will be an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be
registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"); and neither Penelec Capital nor
the Guarantor is directly or indirectly controlled by or acting
on behalf of any person that is such a company or trust;
(s) Neither Penelec Capital nor the Guarantor nor
their affiliates does business with the government of Cuba or
with any person located in Cuba within the meaning of Section
517.075 of Florida Statutes (chapter 92-198, Laws of Florida);
and
(t) Coopers & Lybrand, who have certified certain
financial statements of the Guarantor and its subsidiaries, are
independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth,
Penelec Capital agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from Penelec Capital, at a purchase
price per Preferred Security of $_____, the number of Preferred
Securities set forth opposite the name of such Underwriter in
Schedule I hereto. The Guarantor agrees to issue the Guarantee
and __% Subordinated Debentures concurrently with the issue and
sale of the Preferred Securities as contemplated herein.
The Guarantor hereby guarantees the timely performance
by Penelec Capital of its obligations under this Section 2,
Section 6 and Section 11. As compensation to the Underwriters
for their commitments hereunder, and in view of the fact that the
proceeds of the sale of the Preferred Securities will be used to
purchase __% Subordinated Debentures of the Guarantor, the
Guarantor hereby agrees to pay at the Time of Delivery (as
defined in Section 4 hereof) to Goldman, Sachs & Co., for the
accounts of the several Underwriters, an amount equal to $_____
per Preferred Security for the Preferred Securities to be
delivered by Penelec Capital hereunder at the Time of Delivery.
8
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3. Upon the authorization by you of the release of the
Preferred Securities, the several Underwriters propose to offer
the Preferred Securities for sale upon the terms and conditions
set forth in the Final Supplemented Prospectus.
4. A certificate in definitive form for the Preferred
Securities to be purchased by each Underwriter hereunder, and in
such denomination and registered in such name as Goldman, Sachs &
Co. may request upon at least forty-eight hours prior notice to
Penelec Capital, shall be delivered by or on behalf of Penelec
Capital to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase
price therefor by certified or official bank check or checks,
payable to the order of Penelec Capital in New York Clearing
House (next day) funds. The time, date and location of such
delivery and payment shall be 9:30 a.m. New York time, on
_____________, 1994, or at such other time and date as you and
Penelec Capital may agree upon in writing at the offices of
Berlack, Israels & Liberman, 120 West 45th Street, New York, New
York 10036. Such time and date for delivery of the Preferred
Securities is herein called the "Time of Delivery." Such
certificate will be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery at the
office of The Depository Trust Company, 55 Water Street, New
York, New York 10004.
At the Time of Delivery, the Guarantor will pay, or cause to
be paid, the commission payable at the Time of Delivery to the
Underwriters under Section 2 hereof by certified or official bank
check or checks, payable to the order of Goldman, Sachs & Co. in
New York Clearing House funds.
5. Each of Penelec Capital and the Guarantor jointly and
severally agrees with each of the Underwriters:
(a) To prepare the Final Supplemented Prospectus in a
form approved by you and to file such Final Supplemented
Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 424(b)
under the Act; to make no further amendment or any supplement to
the Registration Statement or Final Supplemented Prospectus prior
to the Time of Delivery which shall be reasonably disapproved by
you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof;
in the case of the Guarantor, to file promptly all reports and
any definitive proxy or information statements required to be
filed with the Commission pursuant to Section 13(a), 13(c), 14 or
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15(d) of the Exchange Act and for so long as the delivery of a
prospectus is required in connection with the offering or sale of
the Securities, and during such same period to advise you,
promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amendment to
the Prospectus has been filed with the Commission, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any prospectus relating to
the Securities, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose,
or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of
any prospectus relating to the Securities or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to take such action as
you may reasonably request to qualify the Securities for offering
and sale under the securities laws of such jurisdictions as you
may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither
Penelec Capital nor the Guarantor shall be required to qualify as
a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the
Final Supplemented Prospectus in such quantities as you may from
time to time reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Securities and if at
such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act, to notify you and upon
your request to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or
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<PAGE>
effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the
Securities at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as
many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) In the case of the Guarantor, to make generally
available to its security holders as soon as practicable, but in
any event not later than eighteen months after the effective date
of the Registration Statement (as defined in Rule 158(c) under
the Act), an earning statement of the Guarantor and its
subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations thereunder
(including Rule 158);
(e) During the period beginning from the date hereof
and continuing to and including the earlier of (i) the date,
after the Time of Delivery, on which the distribution of the
Securities ceases, as determined by Goldman, Sachs & Co., or (ii)
the date which is 90 days after the Time of Delivery, not to
offer, sell, contract to sell or otherwise dispose of any
Preferred Securities, any limited partner interests of Penelec
Capital, or any preferred stock or any other securities of
Penelec Capital or the Guarantor which are substantially similar
to the Preferred Securities or the Guarantee, or any securities
convertible into or exchangeable for Preferred Securities,
limited partner interests, preferred stock or such substantially
similar securities of either Penelec Capital or the Guarantor
without your prior written consent;
(f) To the extent necessary to comply with New York
Stock Exchange rules and regulations or the rules and regulations
of any other exchange on which the Preferred Securities are
listed, to furnish to the holders of the Preferred Securities as
soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income,
capital stock and cash flows of the Guarantor and its
consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of
the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial
information of the Guarantor and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of three years from the effective
date of the Registration Statement, to furnish to you copies of
all reports or other communications (financial or other)
furnished to the holders of the Preferred Securities generally,
and deliver to you (i) as soon as they are available, copies of
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any reports and financial statements furnished to or filed with
the Commission or any national securities exchange on which any
class of securities of Penelec Capital or Guarantor is listed;
and (ii) such additional information concerning the business and
financial condition of the Guarantor as you may from time to time
reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Guarantor
and its subsidiaries are consolidated in reports furnished to the
holders of the Preferred Securities generally or to the
Commission);
(h) To use its best efforts to list, subject to notice
of issuance, the Preferred Securities on the New York Stock
Exchange; and
(i) To use its best efforts to list the ___%
Subordinated Debentures, upon issuance to the holders of the
Preferred Securities, on the same exchange on which the Preferred
Securities are then listed.
6. Penelec Capital and the Guarantor jointly and severally
covenant and agree with the several Underwriters that Penelec
Capital and the Guarantor will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of Penelec
Capital's and the Guarantor's counsel and accountants in
connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any
Preliminary Prospectus, the Prospectus, the Preliminary
Supplemented Prospectus, the Final Supplemented Prospectus and
any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Blue Sky Memorandum and any
other documents in connection with the offering, purchase, sale
and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof,
including the fees and disbursements of counsel for the
Underwriters not to exceed $15,000 incurred in connection with
such qualification and in connection with the Blue Sky survey;
(iv) any fees charged by securities rating services for rating
the Securities; (v) any filing fees incident to securing any
required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Securities (vi) the
cost of preparing certificates for the Preferred Securities;
(vii) the cost and charges of any transfer agent or registrar;
(viii) the cost of qualifying the Securities with The Depository
Trust Company; (ix) the fees and expenses of any Trustee and any
agent of any Trustee and the fees or disbursements of counsel for
any Trustee in connection with the Indenture and the __%
Subordinated Debentures; and (x) all other costs and expenses
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incident to the performance of its obligations hereunder which
are not otherwise specifically provided for in this Section. It
is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the Preferred
Securities by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of Penelec
Capital and the Guarantor herein are, at and as of the Time of
Delivery, true and correct, the condition that Penelec Capital
and the Guarantor shall have performed all of its obligations
hereunder theretofore to be performed, and the following
additional conditions:
(a) The Final Supplemented Prospectus shall have been
electronically filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order
suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information
on the part of the Commission shall have been complied with
to your reasonable satisfaction;
(b) Reid & Priest, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated the
Time of Delivery, with respect to the matters covered in
paragraphs _________ of section (c) below as well as such
other related matters as you may reasonably request, and
such counsel shall have received such papers and information
as they may reasonably request to enable them to pass upon
such matters; provided, that in rendering such opinion, Reid
& Priest may rely upon the opinion of Ballard Spahr Andrews
& Ingersoll delivered pursuant to subsection (c) hereof as
to all matters of Pennsylvania law and upon the opinion of
Richards, Layton & Finger delivered pursuant to subsection
(e) hereof as to matters of Delaware law relating to Penelec
Capital, the Preferred Securities and the Limited
Partnership Agreement.
(c) Berlack, Israels & Liberman and Ballard Spahr
Andrews & Ingersoll, counsel for Penelec Capital and the
Guarantor, shall have furnished to you their written
opinions, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
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(i) Penelec Capital has been duly formed and
is validly existing as a limited partnership in good
standing under the Delaware Revised Uniform Limited
Partnership Act ("DRULPA"), with, under the Limited
Partnership Agreement and DRULPA, partnership power and
authority to own its properties and conduct its
business as described in the Final Supplemented
Prospectus, and is duly qualified as a foreign limited
partnership for the transaction of business and is in
good standing under the laws of each other jurisdiction
in which it owns or leases properties, or conducts any
business, so as to require such qualification, or is
subject to no material liability or disability by
reason of the failure to be so qualified in any such
jurisdiction;
(ii) The Guarantor is duly incorporated and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation,
with corporate power and authority to own its
properties and conduct its business as described in the
Final Supplemented Prospectus, and is duly qualified as
a foreign corporation for the transaction of business
and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or
conducts any business so as to require such
qualification, or is subject to no material liability
or disability by reason of the failure to be so
qualified in any such jurisdiction;
(iii) The Guarantor has the authorized capital
stock as set forth in the Final Supplemented
Prospectus; and all of the issued general partner
interests of Penelec Capital have been duly and validly
authorized and validly issued and are owned by the
General Partner, free of all liens, encumbrances,
equities or claims;
(iv) The Preferred Securities have been duly
and validly authorized and are validly issued and,
subject to the qualifications set forth in Section
7(e)(iv) hereof, are fully paid and nonassessable
limited partner interests in Penelec Capital;
(v) The Indenture and the __% Subordinated
Debentures to be issued thereunder, have been duly
authorized; the Indenture has been duly qualified under
the Trust Indenture Act, and, at the Time of Delivery,
will have been duly executed and delivered and will
constitute, and the __% Subordinated Debentures, when
duly executed and authenticated in accordance with the
Indenture and issued and delivered under the
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circumstances provided in the Final Supplemented
Prospectus, will constitute, valid and legally binding
obligations of the Guarantor enforceable in accordance
with their terms, subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and
other laws of general applicability relating to or
affecting creditors' rights and to general equity
principles; and the Indenture conforms and the __%
Subordinated Debentures, when duly executed,
authenticated, issued and delivered, will conform to
the descriptions thereof in the Final Supplemented
Prospectus;
(vi) The Limited Partnership Agreement has
been duly authorized by the General Partner and
constitutes a valid and legally binding obligation of
the General Partner, in its capacity as general partner
of Penelec Capital, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and other laws of
general applicability relating to or affecting
creditors' rights and to general equity principles;
(vii) The Guarantee has been duly authorized,
executed and delivered by the Guarantor and constitutes
a valid and legally binding obligation of the
Guarantor, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and other laws of
general applicability relating to or affecting
creditors' rights and to general equity principles; and
the Guarantee conforms to the description thereof in
the Final Supplemented Prospectus;
(viii) The issue and sale of the Preferred
Securities by Penelec Capital, the compliance by
Penelec Capital with the provisions of this Agreement,
and the consummation of the transactions herein and
therein contemplated have been duly authorized by all
necessary action of Penelec Capital and will not
conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which
Penelec Capital is a party or by which Penelec Capital
is bound or to which any of the property or assets of
Penelec Capital is subject, nor will such action result
in any violation of the provisions of the Certificate
of Limited Partnership of Penelec Capital or Limited
Partnership Agreement of Penelec Capital or any statute
or any order, of which such counsel is aware, rule or
regulation of any court or governmental agency or body
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having jurisdiction over Penelec Capital or any of its
properties;
(ix) The issue and sale of the Preferred
Securities by Penelec Capital, the compliance by
Penelec Capital and the Guarantor with the provisions
of this Agreement, the execution, delivery and
performance by the Guarantor of the Guarantee, the
execution, delivery and performance by the Guarantor of
the Indenture and the issuance and delivery by the
Guarantor of the ___% Subordinated Debentures
thereunder and the consummation of the transactions
herein and therein contemplated have been duly
authorized by all necessary action of the Guarantor and
will not conflict with or result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or
instrument to which the Guarantor is a party or by
which the Guarantor is bound or to which any of the
property or assets of the Guarantor is subject of which
such counsel is aware except for such conflicts,
breaches or violations which, individually or in the
aggregate, would not have a material adverse effect on
the condition (financial or otherwise), stockholder's
equity, business affairs, operating properties,
business prospects or results of operations of the
Guarantor (including all of its subsidiaries taken as a
whole), nor will such action result in any violation of
the provisions of the Restated Articles of
Incorporation or By-laws of the Guarantor or any
statute or any order, of which such counsel is aware,
or any rule or regulation of any court or governmental
agency or body having jurisdiction over the Guarantor
or any of its subsidiaries or any of their properties;
(x) No consent, approval, authorization or
order of, or filing with, any court or governmental
agency or body is required for the consummation of the
transactions contemplated by this Agreement in
connection with the issuance and delivery of the
Securities or the consummation by Penelec Capital and
the Guarantor of the transactions contemplated herein
and therein except such as have been made or obtained
under the Act, the 1935 Act, the PaPUC, the Trust
Indenture Act and such as may be required under state
securities laws in connection with the purchase of the
Preferred Securities by the Underwriters and the
distribution of the Securities by the Underwriters and
the filing of certificates pursuant to Rule 24 under
the 1935 Act;
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(xi) This Agreement has been duly authorized,
executed and delivered by each of Penelec Capital and
the Guarantor;
(xii) The statements made in the Prospectus
under the caption Description of Preferred Securities,
insofar as they purport to constitute summaries of the
terms of the Preferred Securities are accurate and fair
summaries;
(xiii) The documents incorporated by reference
in the Final Supplemented Prospectus or any amendment
or supplement thereto (other than the financial
statements and related schedules therein and other
financial or statistical data included or incorporated
by reference therein, as to which such counsel need
express no opinion), when they became effective or were
filed with the Commission, as the case may be, complied
as to form in all material respects with the
requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the
Commission thereunder;
(xiv) The Registration Statement and the
Prospectus and any further amendments and supplements
thereto made by Penelec Capital prior to the Time of
Delivery (other than the financial statements and
related schedules therein and other financial or
statistical data included or incorporated by reference
therein, as to which such counsel need express no
opinion) comply as to form in all material respects
with the requirements of the Act, the Trust Indenture
Act and the rules and regulations thereunder; and they
do not know of any amendment to the Registration
Statement required to be filed or of any contracts or
other documents of a character required to be filed as
an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or
required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated
by reference or described as required;
(xv) Neither Penelec Capital nor the
Guarantor is and, after giving effect to the offering
and sale of the Preferred Securities, will be an open-
end investment company, unit investment trust or face-
amount certificate company that is or is required to be
registered under the Investment Company Act; and
neither Penelec Capital nor the Guarantor is directly
or indirectly controlled by or acting on behalf of any
person that is such a company or trust;
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In addition, each such counsel shall state that to the
best of such counsel's knowledge and other than as set
forth in the Final Supplemented Prospectus, there are
no legal or governmental proceedings pending to which
Penelec Capital, the Guarantor or any of the
Guarantor's subsidiaries is a party or of which any
property of Penelec Capital, the Guarantor or any of
the Guarantor's subsidiaries is the subject which, if
determined adversely to Penelec Capital, the Guarantor
or any of its subsidiaries, would individually or in
the aggregate have a material adverse effect on (i) the
consolidated financial position, stockholder's equity
or results of operations of the Guarantor and the
Guarantor's subsidiaries taken as a whole or (ii) the
financial position, capital accounts or results of
operations of Penelec Capital; and, to the best of such
counsel's knowledge, no such proceedings are overtly
threatened or contemplated by governmental authorities
or overtly threatened by others;
In addition, each such counsel shall state that
although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements
contained in the Registration Statement or the
Prospectus, except for those covered by their opinion
in subsection (xii) of this section 7(c), they have no
reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto
made by Penelec Capital or the Guarantor prior to the
Time of Delivery (other than the financial statements
and related schedules and other financial or
statistical data included or incorporated by reference
therein, as to which such counsel need express no
opinion) contained an untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement
thereto made by Penelec Capital or the Guarantor prior
to the Time of Delivery (other than the financial
statements and related schedules and other financial or
statistical data included or incorporated by reference
therein, as to which such counsel need express no
opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to
make the statements therein, in light of the
circumstances in which they were made, not misleading
or that, as of the Time of Delivery, or the Prospectus
or any further amendment or supplement thereto made by
Penelec Capital or the Guarantor prior to the Time of
Delivery (other than the financial statements and
related schedules and other financial or statistical
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<PAGE>
data included or incorporated by reference therein, as
to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances in which they
were made, not misleading;
In rendering their opinions, (A) Berlack, Israels &
Liberman may rely upon the opinion of Ballard Spahr
Andrews & Ingersoll as to all matters involving laws of
the Commonwealth of Pennsylvania, and (B) such counsel
may rely, as to matters of Delaware Law relating to
Penelec Capital, the Preferred Securities and the
Limited Partnership Agreement, upon the opinion of
Richards, Layton & Finger, delivered pursuant to
subsection (e) hereof;
(d) Carter, Ledyard & Milburn, special tax counsel for
Penelec Capital and the Guarantor, shall have furnished to
you their written opinion, dated the Time of Delivery, in
form and substance satisfactory to you, to the effect that
such counsel confirms its opinion as set forth under "United
States Taxation" in the Final Supplemented Prospectus;
(e) Richards, Layton & Finger, special Delaware
counsel for Penelec Capital and the Guarantor, shall have
furnished to you their written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the
effect that:
(i) Penelec Capital has been duly formed and
is validly existing in good standing as a limited
partnership under DRULPA;
(ii) Under the Limited Partnership Agreement
and DRULPA, Penelec Capital has all necessary
partnership power and authority to own its properties
and conduct its business, all as described in the Final
Supplemented Prospectus;
(iii) The general partner and limited partner
interests in Penelec Capital issued to the General
Partner and the Class A Limited Partner have been duly
and validly authorized and are validly issued;
(iv) The Preferred Securities issued to the
limited partners of Penelec Capital who hold the
Preferred Securities (the "Preferred Security Holders")
have been duly and validly authorized and are validly
issued and, assuming that the Preferred Security
Holders, as limited partners of Penelec Capital, do not
participate in the control of the business of Penelec
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Capital, are fully paid and nonassessable limited
partner interests in Penelec Capital, as to which the
Preferred Security Holders, as limited partners of
Penelec Capital, will have no liability in excess of
their obligations to make payments provided for in the
Limited Partnership Agreement and their share of
Penelec Capital's assets and undistributed profits
(subject to the obligation of a Preferred Security
Holder to repay any funds wrongfully distributed to
it);
(v) There are no provisions in the Limited
Partnership Agreement the inclusion of which, subject
to the terms and conditions therein, or, assuming that
the Preferred Security Holders, as limited partners of
Penelec Capital, take no action other than actions
permitted by the Limited Partnership Agreement, the
exercise of which, in accordance with the terms and
conditions therein, would cause the Preferred Security
Holders, as limited partners of Penelec Capital, to be
deemed to be participating in the control of the
business of Penelec Capital;
(vi) The Limited Partnership Agreement
constitutes a legal, valid and binding agreement of the
General Partner, and is enforceable against the General
Partner, in its capacity as general partner of Penelec
Capital, in accordance with its terms subject to
bankruptcy, insolvency, moratorium, fraudulent
conveyance, receivership, reorganization, liquidation
and other similar laws relating to or affecting the
rights and remedies of creditors generally and to
principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law);
(vii) Under the Limited Partnership Agreement
and DRULPA, Penelec Capital has all necessary
partnership power and authority to execute and deliver,
and to perform its obligations under, this Agreement;
(viii) Under the Limited Partnership Agreement
and DRULPA, the execution and delivery by Penelec
Capital of this Agreement, and the performance by
Penelec Capital of its obligations hereunder, have been
duly authorized by all necessary partnership action on
the part of Penelec Capital;
(ix) The issuance and sale by Penelec Capital
of the Preferred Securities pursuant to this Agreement
and the execution, delivery and performance by Penelec
Capital of this Agreement will not violate (i) any
Delaware statute, rule or regulation, or (ii) the
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Certificate of Limited Partnership of Penelec Capital
or the Limited Partnership Agreement;
(x) No consent, approval, authorization,
order, registration or qualification of or with any
Delaware court or Delaware governmental agency or body
is required solely as a result of the issuance and sale
by Penelec Capital of the Preferred Securities pursuant
to this Agreement, the execution, delivery and
performance by Penelec Capital of this Agreement or the
consummation of the transactions contemplated in this
Agreement; and
(xi) Such counsel has reviewed the statements
in the Final Supplemented Prospectus under the caption
"Penelec Capital" and, insofar as it contains
statements of Delaware law, such statements are fairly
presented.
(xii) Assuming that Penelec Capital is treated
as a partnership for Federal income tax purposes, and
assuming that Penelec Capital derives no income from or
connected with sources within the State of Delaware and
has no assets, activities (other than the maintenance
of a registered office and registered agent in the
State of Delaware and the filing of documents with the
Delaware Secretary of State) or employees in the State
of Delaware, the Preferred Security Holders (other than
those Preferred Security Holders who reside or are
domiciled in the State of Delaware), will have no
liability for Delaware income taxes solely as a result
of their participation in Penelec Capital, and Penelec
Capital will not be liable for any Delaware income tax.
(f) On the date of this Agreement and at the Time of
Delivery, Coopers & Lybrand shall have furnished to you a
letter, dated the date of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in
Annex I hereto;
(g) Since the respective dates as of which information
is given in the Prospectus there shall not have been any
change in the capital stock or material change in the
long-term debt of the Guarantor (including all of its
subsidiaries taken as a whole) (except for such preferred
stock and long-term debt acquired for sinking fund purposes
or redeemed pursuant to sinking fund or optional redemption
provisions or changes in obligations under capital leases
incurred in the ordinary course of the Guarantor's business
or for any increase in common stock as a result of capital
contributions or any decrease in capital stock as a result
of the declaration by the Guarantor either of regular
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quarterly dividends on the Guarantor's preferred stock or
dividends on its common stock) or in the capital accounts or
long-term debt of Penelec Capital, or any change in or
affecting (x) the condition (financial or otherwise),
stockholder's equity, business affairs, operating
properties, business prospects or results of operations of
the Guarantor and its subsidiaries taken as a whole or (y)
the condition (financial or otherwise), capital accounts,
business affairs, operating properties, business prospects
or results of operations of Penelec Capital, otherwise than
as set forth or contemplated in the Final Supplemented
Prospectus, the effect of which is in your judgment so
material and adverse as to make it impracticable or
inadvisable to proceed with the public offering of the
Securities or the delivery of the Preferred Securities on
the terms and in the manner contemplated in the Final
Supplemented Prospectus;
(h) On or after the date hereof (i) no downgrading
shall have occurred in the rating accorded the Guarantor's
debt securities or preferred stock or Penelec Capital's
Preferred Securities by any "nationally recognized
statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act
and (ii) no such organization shall have publicly announced
that it has under surveillance or review, with possible
negative implications, its rating of any of the Guarantor's
debt securities or preferred stock or Penelec Capital's
Preferred Securities;
(i) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New
York Stock Exchange; (ii) a suspension or material
limitation in trading in Penelec Capital s Preferred
Securities on the New York Stock Exchange or the Guarantor's
preferred stock on the Philadelphia Stock Exchange; (iii) a
general moratorium on commercial banking activities in New
York declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration
by the United States, of a national emergency or war if the
effect of any such event specified in this Clause (iv) in
your judgment makes it impracticable or inadvisable to
proceed with the public offering of the Securities or the
delivery of the Preferred Securities on the terms and in the
manner contemplated in the Final Supplemented Prospectus;
(j) Provided the listing requirement concerning the
minimum number of Preferred Security Holders shall have been
satisfied, the Preferred Securities shall have been duly
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<PAGE>
listed, subject to notice of issuance, on the New York Stock
Exchange;
(k) Penelec Capital and the Guarantor shall have
furnished or caused to be furnished to you at the Time of
Delivery, a certificate or certificates of the General
Partner and a certificate or certificates of officers of the
Guarantor, respectively, satisfactory to you as to the
accuracy of the representations and warranties of Penelec
Capital and the Guarantor herein at and as of such Time of
Delivery, as to the performance by each of Penelec Capital
and the Guarantor of all of their obligations hereunder to
be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (g) of this Section
and as to such other matters as you may reasonably request;
and
(l) A Special Event (as defined in the Final
Supplemented Prospectus) shall not have occurred and be
continuing; provided that it shall also be a condition of
the obligations of Penelec Capital and the Guarantor
hereunder, to issue and sell the Preferred Securities, that
a Special Event shall not have occurred and be continuing.
8. (a) Penelec Capital and the Guarantor will jointly and
severally indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement, the Prospectus, the Preliminary Supplemented
Prospectus, the Final Supplemented Prospectus or any other
prospectus relating to the Securities, or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; provided,
however, that neither Penelec Capital nor the Guarantor shall be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration
Statement, the Prospectus, the Preliminary Supplemented
Prospectus, the Final Supplemented Prospectus or any other
prospectus relating to the Securities, or any such amendment or
supplement in reliance upon and in conformity with written
23
<PAGE>
information furnished to Penelec Capital or the Guarantor by any
Underwriter through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless
Penelec Capital and the Guarantor against any losses, claims,
damages or liabilities to which Penelec Capital or the Guarantor
may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement, the
Prospectus, the Preliminary Supplemented Prospectus, the Final
Supplemented Prospectus or any other prospectus relating to the
Securities, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration
Statement, the Prospectus, the Preliminary Supplemented
Prospectus, the Final Supplemented Prospectus or any other
prospectus relating to the Securities, or any such amendment or
supplement in reliance upon and in conformity with written
information furnished to Penelec Capital or the Guarantor by such
Underwriter through you expressly for use therein; and will
reimburse Penelec Capital and the Guarantor for any legal or
other expenses reasonably incurred by Penelec Capital or the
Guarantor in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are
different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have
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the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof unless
(i) the indemnified party shall have employed separate counsel in
connection with the assertion of legal defenses in accordance
with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (plus
any local counsel retained in the indemnified party's reasonable
judgment), approved by you in the case of paragraph (a) of this
Section 8 representing the indemnified parties under such
paragraph (a) who are parties to such action), (ii) the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party; and except that, if clause
(i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii).
(d) If the indemnification provided for in this Section 8
is held unavailable, in whole or on part, to hold harmless an
indemnified party under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by Penelec
Capital and the Guarantor on the one hand and the Underwriters on
the other from the offering of the Securities. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to
give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of Penelec Capital and the Guarantor on the
one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative
benefits received by Penelec Capital and the Guarantor on the one
hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering
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(before deducting expenses) received by Penelec Capital bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover
page of the Final Supplemented Prospectus. The relative fault
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by Penelec Capital and the Guarantor on the
one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Penelec
Capital, the Guarantor and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions
in respect thereof) referred to above in this subsection (d)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Preferred
Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations
in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of Penelec Capital and the Guarantor
under this Section 8 shall be in addition to any liability which
Penelec Capital and the Guarantor may otherwise have and shall
extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act;
and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of Penelec
Capital and the Guarantor and to each person, if any, who
controls Penelec Capital and the Guarantor within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Preferred Securities which it has agreed to
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<PAGE>
purchase hereunder, you may in your discretion arrange for you or
another party or other parties to purchase such Preferred
Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange
for the purchase of such Preferred Securities, then Penelec
Capital and the Guarantor shall be entitled to a further period
of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Preferred
Securities on such terms. In the event that, within the
respective prescribed periods, you notify Penelec Capital and the
Guarantor that you have so arranged for the purchase of such
Preferred Securities, or Penelec Capital or the Guarantor
notifies you that it has so arranged for the purchase of such
Preferred Securities, you or Penelec Capital and the Guarantor
shall have the right to postpone the Time of Delivery for a
period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration
Statement or the Final Supplemented Prospectus, or in any other
documents or arrangements, and Penelec Capital and the Guarantor
agree to file promptly any amendments or supplements to the
Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a
party to this Agreement with respect to such Preferred
Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Preferred Securities of a defaulting Underwriter
or Underwriters by you and Penelec Capital and the Guarantor as
provided in subsection (a) above, the aggregate number of such
Preferred Securities which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Preferred
Securities, then Penelec Capital and the Guarantor shall have the
right to require each non-defaulting Underwriter to purchase the
number of Preferred Securities which such Underwriter agreed to
purchase hereunder and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based
on the number of Preferred Securities which such Underwriter
agreed to purchase hereunder) of the Preferred Securities of such
defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Preferred Securities of a defaulting Underwriter
or Underwriters by you and Penelec Capital and the Guarantor as
provided in subsection (a) above, the aggregate number of such
Preferred Securities which remains unpurchased exceeds
one-eleventh of the aggregate number of all the Preferred
Securities, or if Penelec Capital and the Guarantor shall not
exercise the right described in subsection (b) above to require
27
<PAGE>
non-defaulting Underwriters to purchase Preferred Securities of a
defaulting Underwriter or Underwriters, then this Agreement shall
thereupon terminate, without liability on the part of any non-
defaulting Underwriter, Penelec Capital or the Guarantor except
for the expenses to be borne by Penelec Capital, the Guarantor
and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of Penelec
Capital, the Guarantor and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to
the results thereof) made by or on behalf of any Underwriter or
any controlling person of any Underwriter, or Penelec Capital,
the Guarantor, or any officer or director or controlling person
of Penelec Capital or the Guarantor, and shall survive delivery
of and payment for the Preferred Securities.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, Penelec Capital and the Guarantor shall not
then be under any liability to any Underwriter except as provided
in Section 6 and Section 8 hereof; but, if for any other reason,
Preferred Securities are not delivered by or on behalf of Penelec
Capital (or the related Guarantee and ___% Subordinated
Debentures issuable by the Guarantor are not concurrently issued
by the Guarantor) as provided herein, Penelec Capital and the
Guarantor will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and
delivery of the Preferred Securities (or Guarantee and ___%
Subordinated Debentures not so issued), but Penelec Capital and
the Guarantor shall then be under no further liability to any
Underwriter except as provided in Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by you
jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder
shall be in writing, and if to the Underwriters shall be
delivered or sent by mail, telex or facsimile transmission to you
as the representatives in care of Goldman, Sachs & Co., at 85
Broad Street, New York, N.Y. 10004, Attention: Registration
Department; and if to Penelec Capital or the Guarantor shall be
28
<PAGE>
delivered or sent by mail to the address of the Guarantor set
forth in the Registration Statement, Attention: Treasurer;
provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to Penelec
Capital or the Guarantor by you upon request. Any such
statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, Penelec Capital, the
Guarantor and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Guarantor and each
person who controls Penelec Capital and the Guarantor or any
Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement.
No purchaser of any of the Preferred Securities from any
Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As
used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding,
please sign and return to us ________________ counterparts
hereof, and upon the acceptance hereof by you, on behalf of each
of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters,
on one hand, and Penelec Capital and the Guarantor, on the other
hand. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to Penelec Capital and the Guarantor for
examination upon request, but without warranty on your part as to
the authority of the signers thereof.
29
<PAGE>
Very truly yours,
PENELEC CAPITAL, L. P.
By: Penelec Preferred Capital, Inc.
its General Partner
Name:
Title:
PENNSYLVANIA ELECTRIC COMPANY
__________________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Acting on its own behalf and
as Representative of the
Several Underwriters referred
to in the foregoing Agreement
By:____________________________
(Goldman, Sachs & Co.)
30
<PAGE>
SCHEDULE I
Total Number of
Preferred Securities
Underwriter to be Purchased
Goldman, Sachs & Co. _______________
Total _______________
31
<PAGE>
ANNEX 1
[FORM OF LETTER OF ACCOUNTANTS]
Pursuant to Section 7(f) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the
effect that:
(1) They are independent certified public accountants with
respect to the Guarantor and its subsidiaries within the meaning
of the Act and the applicable published rules and regulations
thereunder;
(2) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if
applicable, prospective financial statements and/or pro forma
financial information) audited by them and included or
incorporated by reference in the Prospectus or the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations thereunder;
(3) On the basis of procedures referred to in such letter,
including a reading of the minutes and the latest available
interim financial statements of the Guarantor and inquiries of
officials of the Guarantor responsible for financial and
accounting matters, nothing caused them to believe that:
(A) Any material modifications should be made to the
unaudited financial statements, if any, included or
incorporated by reference in the Prospectus, for them to be
in conformity with generally accepted accounting principles;
(B) the unaudited financial statements, if any,
included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the
applicable accounting requirements of the Act or the
Exchange Act and the published rules and regulations of the
Commission thereunder;
(C) the unaudited pro forma condensed consolidated
financial statements, if any, included or incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting
requirements of the Act or the Exchange Act and the
published rules and regulations of the Commission thereunder
or the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of those
statements;
(D) at the date of the latest available internal
balance sheet of the Guarantor and at a subsequent specified
1
<PAGE>
date not more than five days prior to the date of such
letter, there was any change in the common stock, preferred
stock without mandatory redemption, preferred stock with
mandatory redemption or long-term debt (other than from
currency fluctuations and normal repurchases of long-term
debt and preferred stock for sinking fund purposes and
scheduled repayments or changes in obligations under capital
leases incurred in the ordinary course of the Guarantor's
business) of the Guarantor and its subsidiaries consolidated
or any decrease in its common stockholder's equity
(excluding any decrease as a result of the declaration by
the Guarantor of regular quarterly dividends on its
preferred stock and dividends on its common stock) as
compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus,
except in all cases for changes, increases or decreases that
the Prospectus discloses have occurred or may occur or as
may be set forth in such letter; or
(4) In addition to their audit referred to in their reports
included or incorporated by reference in the Registration
Statement and Prospectus and the procedures referred to in (3)
above, they have carried out certain other specified procedures,
not constituting an audit, with respect to certain specified
dollar amounts, percentages and other financial information (in
each case to the extent that such dollar amounts, percentages and
other financial information are derived, directly or by analysis
or computation, from the general accounting records of the
Guarantor and its subsidiaries) that are included or incorporated
by reference in the Prospectus and appear in the Prospectus or
incorporated documents and have found such dollar amounts,
percentages and financial information to be in agreement with the
general accounting records of the Guarantor and its subsidiaries.
For purposes of this letter, all references in this Annex I
to the Prospectus shall be deemed to the Final Supplemented
Prospectus in the form in which it is proposed to be filed but
otherwise as defined in the Underwriting Agreement (including all
documents incorporated by reference therein) as of the date of
the letter delivered on the date of the Underwriting Agreement
and to the Final Supplemented Prospectus as defined in the
Underwriting Agreement (including all documents incorporated by
reference therein), or, if the Prospectus has at such time been
further amended or supplemented, to the Prospectus as so further
amended or supplemented, as of the date of the letter delivered
at the Time of Delivery.
2
<PAGE>
Exhibit 4-A(1)
PENNSYLVANIA ELECTRIC COMPANY
CROSS-REFERENCE TABLE
of Provisions of the Indenture
Required by the Trust Indenture Act of 1939
Trust Indenture Provision of
Act Section Indenture
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.08; 7.10; 11.01
(c) Not Applicable
311(a) 7.11
(b) 7.11
(c) Not Applicable
312(a) 2.06
(b) 11.03
(c) 11.03
313(a) 7.06
(b)(1) Not Applicable
(b)(2) 7.06
(c) 7.06; 11.02
(d) 7.06
314(a) 4.03; 11.02
(b) Not Applicable
(c)(1) 2.02; 11.04
(c)(2) 2.02; 11.04
(c)(3) Not Applicable
(d) Not Applicable
(e) 11.05
(f) Not Applicable
315(a) 7.01(2)
(b) 7.05; 11.02
(c) 7.01(1)
(d) 7.01(3)
(e) 6.11
316(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) Not Applicable
(a)(last sentence) 2.09
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.05
318(a) 11.01
________________________
Note: This Cross-Reference Table shall not, for a purpose, be
deemed to be part of the Indenture.
<PAGE>
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
<PAGE>
not paid during an Extension Period (as defined in the
Indenture)) to the 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
2
<PAGE>
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 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.
3
<PAGE>
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 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.
4
<PAGE>
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.
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.
SECTION 2.07. The Guarantor expressly acknowledges
that (i) this Guarantee Agreement will be deposited with the
General Partner to be held for the benefit of the Holders; (ii)
in the event of the appointment of a Special Representative
pursuant to the Limited Partnership Agreement, the Special
Representative may enforce this Guarantee Agreement on behalf of
the Holders and take possession of this Guarantee Agreement for
such purpose; (iii) if no Special Representative has been
appointed, the General Partner has the right to enforce this
5
<PAGE>
Guarantee Agreement on behalf of the Holders: (iv) the Holders of
not less than a majority in aggregate stated liquidation
preference of the Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any
remedy available in respect of this Guarantee Agreement,
including the giving of directions to the General Partner or the
Special Representative, as the case may be; and (v) if the
General Partner or Special Representative fails to enforce this
Guarantee Agreement as above provided, any Holder may institute a
legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting
a legal proceeding against the Issuer or any other person or
entity.
Any such Special Representative may enforce the
Issuer's rights against the Guarantor under the Indenture,
including, after failure to pay interest for 60 consecutive
monthly interest periods, the payment of interest on the
Subordinated Debentures, enforce the obligations of the Guarantor
under this Guarantee Agreement and enforce the Guarantor's
obligations under the Indenture and the Subordinated Debentures
directly against the Guarantor; the Guarantor, upon request of a
Special Representative, agrees to execute and deliver such
documents as may be necessary, appropriate or convenient for such
Special Representative with respect to such enforcement.
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
6
<PAGE>
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 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
7
<PAGE>
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.
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:
8
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EXHIBIT 5-A
[Berlack, Israels & Liberman Letterhead]
June 15, 1994
Pennsylvania Electric Company
1001 Broad Street
Johnstown, Pennsylvania 15907
Penelec Capital, L.P.
Mellon Bank Center
Tenth and Market Streets
Wilmington, Delaware 19801
Re: Registration Statement on Form S-3
Dear Sirs:
Pennsylvania Electric Company (the "Company") and Penelec
Capital, L.P. ("Penelec Capital") have filed with the Securities
and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "1933 Act"), a Registration
Statement on Form S-3 (the "Registration Statement"), dated May
17, 1994, and Amendment No. 1 thereto, dated today's date, of
which this opinion is to be a part. The Registration Statement
relates to the proposed issuance and sale by Penelec Capital of
up to 5,000,000 preferred securities, representing preferred
limited partner interests (the "Preferred Securities"), the
proceeds of which, together with the capital contribution of
Penelec Capital's general partner, Penelec Preferred Capital,
Inc., a wholly owned subsidiary of the Company, will be used to
purchase subordinated debentures issued by the Company (the
"Subordinated Debentures"). The Company will guarantee (the
"Guarantee") the payment by Penelec Capital of distributions on
the Preferred Securities and of amounts due upon liquidation of
Penelec Capital or redemption of the Preferred Securities, all to
the extent set forth in the Guarantee. The Preferred Securities
are to be issued by Penelec Capital pursuant to an Amended and
Restated Limited Partnership Agreement and one or more Actions
thereunder (collectively, the "Limited Partnership Agreement")
and the Subordinated Debentures are to be issued by the Company
pursuant to an indenture between the Company and United States
Trust Company of New York, as Trustee (the "Indenture").
We have been counsel to the Company for many years. In such
capacity, we are familiar with the affairs of the Company and
Penelec Capital and the transactions that are the subject matter
of the Registration Statement. We have examined such records of
the Company and Penelec Capital and such other instruments,
documents, certificates and agreements, including the forms of
Limited Partnership Agreement and Indenture, and made such
further investigation as we have deemed necessary as a basis for
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Pennsylvania Electric Company
June 15, 1994
Page 2
this opinion. With respect to all matters of Pennsylvania law,
we have relied on the opinion of Ballard Spahr Andrews &
Ingersoll, and with respect to all matters of Delaware law, we
have relied on the opinion of Richards, Layton & Finger, P.A.,
which are being filed as Exhibits 5-B and 5-C, respectively, to
the Registration Statement.
For the purposes of this opinion, we have assumed that 1.
the proposed transactions are carried out on the basis set forth
in the Registration Statement and in conformity with the
requisite authorizations, approvals, consents or exemptions under
the securities laws of the various States and other jurisdictions
of the United States, (2) all necessary corporate and partnership
action required on the part of the Company, Penelec Preferred
Capital, Inc. and Penelec Capital shall have been duly taken, (3)
the Commission shall have issued an order declaring effective (a)
the Registration Statement under the 1933 Act and (b) the
Company's related Application, as amended, and as may be further
amended, on Form U-1 under the Public Utility Holding Company Act
of 1935, as amended (the "1935 Act"), (4) the Indenture shall
have been qualified under the Trust Indenture Act of 1939, as
amended, and (5) the issuance and sale of the Preferred
Securities and Subordinated Debentures do not violate Section
12(f) of the 1935 Act or Rule 70 thereunder.
Based upon the foregoing, we are of the opinion that,
subject to the foregoing assumptions and qualifications, (1) the
Preferred Securities to be issued and sold in accordance with the
Registration Statement, when properly issued, delivered and paid
for, will be legally issued, fully paid and non-assessable
limited partner interests, and (2) when properly authenticated
and delivered by the Trustee under the Indenture, the
Subordinated Debentures will be legally issued and will be
binding obligations of the Company and, when properly executed
and delivered, the Guarantee will be legally issued and will be a
binding obligation of the Company, subject, in each case, to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws affecting creditors
rights generally (including, without limitation, the Atomic
Energy Act and applicable regulations of the Nuclear Regulatory
Commission thereunder) and general equitable principles.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and as a part thereof. We
also consent to the reference to our firm under "Legal Opinions"
in the Prospectus which is a part of the Registration Statement.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN
<PAGE>
Exhibit 5-B
(Letterhead of Ballard Spahr Andrews & Ingersoll)
June 15, 1994
Pennsylvania Electric Company
1001 Broad Street
Johnstown, PA 15907
Re: Registration Statement on Form S-3
Ladies and Gentleman:
Pennsylvania Electric Company (the "Company") and
Penelec Capital, L.P. ("Penelec Capital") have filed with the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration
Statement"), dated May 17, 1994, and Amendment No. 1 thereto,
dated today's date, of which this opinion is to be a part. The
Registration Statement relates to the proposed issuance and sale
by Penelec Capital of up to 5,000,000 preferred securities,
representing preferred limited partner interests (the "Preferred
Securities"), the proceeds of which, together with the capital
contribution of Penelec Capital's general partner, Penelec
Preferred Capital, Inc., a wholly owned subsidiary of the
Company, will be used to purchase subordinated debentures issued
by the Company (the "Subordinated Debentures"). The Company will
guarantee (the "Guarantee") the payment by Penelec Capital of
distributions on the Preferred Securities and of amounts due upon
liquidation of Penelec Capital or redemption of the Preferred
Securities, all to the extent set forth in the Guarantee. The
Preferred Securities are to be issued by Penelec Capital pursuant
to an Amended and Restated Limited Partnership Agreement and one
or more Actions thereunder (collectively, the "Limited
Partnership Agreement") and the Subordinated Debentures are to be
issued by the Company pursuant to an indenture between the
Company and United States Trust Company of New York, as Trustee
(the "Indenture").
We have been Pennsylvania counsel to the Company for
many years. In such capacity, we are familiar with the affairs
of the Company and Penelec Capital and the transactions that are
the subject matter of the Registration Statement. We have
examined such records of the Company and Penelec Capital and such
other instruments, documents, certificates and agreements,
including the forms of Limited Partnership Agreement and
Indenture, and made such further investigation as we have deemed
necessary as a basis for this opinion.
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Pennsylvania Electric Company
June 15, 1994
Page 2
The opinions expressed below are based on the following
assumptions:
(a) The proposed transactions are carried out on
the basis set forth in the Registration Statement and in
conformity with the authorizations, approvals, consents or
exemptions under the securities laws of various states and other
jurisdictions of the United States;
(b) Prior to issuance of any series of Preferred
Securities, the Guarantee or the Subordinated Debentures, all
necessary corporate and partnership action required on the part
of the Company, Penelec Preferred Capital, Inc. and Penelec
Capital shall have been duly taken;
(c) The Commission shall have issued an order
declaring effective:
(i) the Registration Statement under the
1933 Act; and
(ii) the Company's related Application, as
amended, and as may be further amended, on Form U-1 under the
Public Utility Holding Company Act of 1935, as amended (the "1935
Act"); and
(d) The issuance and sale of the Preferred
Securities and Subordinated Debentures do not violate Section
12(f) of the 1935 Act or Rule 70 thereunder; and
(e) The Indenture will be qualified in accordance
with the provisions of the Trust Indenture Act of 1939, as
amended.
Based on the foregoing, we are of the opinion, insofar
as the laws of the Commonwealth of Pennsylvania are concerned,
that when properly executed, authenticated, delivered and paid
for as provided in the Indenture, the Subordinated Debentures
will be legally issued and binding obligations of the Company
and, when properly executed and delivered by the Company, the
Guarantee will be legally issued and a binding obligation of the
Company subject, in each case, to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other laws affecting creditors rights generally (including,
without limitation, the Atomic Energy Act and applicable
regulations of the Nuclear Regulatory Commission thereunder) and
general equitable principles.
<PAGE>
Pennsylvania Electric Company
June 15, 1994
Page 3
We consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the references to this firm
under the heading "Legal Opinions" in the Prospectus which is a
part of the Registration Statement. In addition, we consent to
the reliance by Berlack, Israels & Liberman upon this opinion.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL
<PAGE>
Exhibit 5-C
(Letterhead of Richards, Layton & Finger)
June 15, 1994
Penelec Capital, L.P.
Mellon Bank Center
Tenth and Market Streets
Wilmington, Delaware 19801
Re: Penelec Capital, L.P.
Ladies and Gentlemen:
We have acted as special Delaware counsel for Penelec
Capital, L.P. a Delaware limited partnership (the "Partnership"),
in connection with the matters set forth herein. At your
request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth,
our examination of documents has been limited to the examination
of originals or copies of the following:
(a) The Certificate of Limited Partnership of the
Partnership, dated as of May 10, 1994 (the "Partnership
Certificate"), as filed in the office of the Secretary of State
of the State of Delaware (the "Secretary of State") on May 10,
1994;
(b) The Agreement of Limited Partnership of the
Partnership, dated as of May 10, 1994;
(c) Amendment No. 1 to the registration statement (the
"Registration Statement") on Form S-3, including a related
prospectus (the "Prospectus") and a prospectus supplement (the
"Prospectus Supplement"), filed by Pennsylvania Electric Company,
a Pennsylvania corporation, and the Partnership with the
Securities and Exchange Commission on or about June 15, 1994;
(d) A form of Amended and Restated Limited Partnership
Agreement of the Partnership, attached as an exhibit to the
Registration Statement (the "Agreement");
(e) A form of Action of Penelec Preferred Capital, Inc.,
a Delaware corporation (the "General Partner"), relating to the
Preferred Partner Interests (the "Action");
(f) The Certificate of Incorporation of the General
Partner, dated May 6, 1994 (the "Certificate of Incorporation"),
as filed in the office of the Secretary of State on May 6, 1994;
(g) The By-Laws of the General Partner (the "By-Laws");
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Penelec Capital, L.P.
June 15, 1994
Page 2
(h) A certificate of an officer of the General Partner;
(i) A Certificate of Good Standing for the Partnership,
dated June , 1994, obtained from the Secretary of State; and
(j) A Certificate of Good Standing for the General
Partner, dated June , 1994, obtained from the Secretary of
State.
The Agreement as amended and supplemented by the Action is
hereinafter referred to as the "LP Agreement." Initially
capitalized terms used herein and not otherwise defined are used
as defined in the LP Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a)
through (j) above. In particular, we have not reviewed any
document (other than the documents listed in paragraphs (a)
through (j) above) that is referred to in or incorporated by
reference into the LP Agreement or the Registration Statement.
We have assumed that there exists no provision in any document
that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all
of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have
assumed (i) the authenticity of all documents submitted to us as
authentic originals, (ii) the conformity with the originals of
all documents submitted to us as copies or forms, and (iii) the
genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
LP Agreement constitutes the entire agreement among the parties
thereto with respect to the subject matter thereof, including
with respect to the admission of partners to, and the creation,
operation and termination of, the Partnership, and that the LP
Agreement and the Partnership Certificate are in full force and
effect and have not been amended, (ii) that the Board of
Directors of the General Partner has duly adopted resolutions
(collectively, the "Resolutions") authorizing the General
Partner's execution and delivery of, and the performance of its
obligations under, the LP Agreement, (iii) that the Certificate
of Incorporation and the By-Laws are in full force and effect and
have not been amended, (iv) except to the extent provided in
paragraph 1 below, the due organization or due formation, as the
case may be, and valid existence in good standing of each party
to the documents examined by us under the laws of the
jurisdiction governing its organization or formation, (v) the
legal capacity of natural persons who are parties to the
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Penelec Capital, L.P.
June 15, 1994
Page 3
documents examined by us, (vi) except to the extent set forth in
the last sentence of paragraph 2 below, that each of the parties
to the documents examined by us has the power and authority to
execute and deliver, and to perform its obligations under, such
documents, (vii) the due authorization, execution and delivery by
all parties thereto of all documents examined by us, including
the LP Agreement, (viii) the receipt by each Preferred Partner of
a Certificate and the payment for the Preferred Partner Interests
acquired by it, in accordance with the LP Agreement, (ix) that
the books and records of the Partnership set forth all
information required by the LP Agreement and the Delaware Revised
Uniform Limited Partnership Act (6 Del. C. Section 17-101, et
seq.) (the "Act"), including all information with respect to all
Persons to be admitted as Partners and their contributions to the
Partnership, and (x) that the Preferred Partner Interests are
issued and sold to the Preferred Partners in accordance with the
Registration Statement and the LP Agreement. We have not
participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of
Delaware (excluding the securities laws of the State of
Delaware), and we have not considered and express no opinion on
the laws of any other jurisdiction, including federal laws and
rules and regulations relating thereto. Our opinions are
rendered only with respect to Delaware laws and rules,
regulations and orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have
considered necessary or appropriate, and subject to the
assumptions, qualifications, limitations and exceptions set forth
herein, we are of the opinion that:
1. The Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Act.
2. Assuming that the Preferred Partners, as limited
partners of the Partnership, do not participate in the control of
the business of the Partnership, upon issuance and payment as
contemplated by the LP Agreement, the Preferred Partner Interests
will be validly issued and, subject to the qualifications set
forth herein, will be fully paid and nonassessable limited
partner interests in the Partnership, as to which the Preferred
Partners, as limited partners of the Partnership, will have no
liability in excess of their obligations to make payments
provided for in the LP Agreement and their share of the
Partnership's assets and undistributed profits (subject to the
obligation of a Preferred Partner to repay any funds wrongfully
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Penelec Capital, L.P.
June 15, 1994
Page 4
distributed to it.) The General Partner has the requisite
corporate power and authority under the General Corporation Law
of the State of Delaware (8 Del C. Section 101, et seq.), the
Certificate of Incorporation, the By-Laws and the Resolutions to
execute and deliver, and to perform its obligations under, the LP
Agreement.
3. There are no provisions in the LP Agreement the
inclusion of which, subject to the terms and conditions therein,
or, assuming that the Preferred Partners, as limited partners of
the Partnership, take no action other than actions permitted by
the LP Agreement, the exercise of which, in accordance with the
terms and conditions therein, would cause the Preferred Partners,
as limited partners of the Partnership, to be deemed to be
participating in the control of the business of the Partnership.
We consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement. We also consent to Berlack, Israels &
Liberman's and Ryan, Russell, Ogden & Seltzer's relying as to
matters of Delaware law upon this opinion in connection with
opinions to be rendered by them in connection with the
Registration Statement. In addition, we hereby consent to the
use of our name under the heading "Legal Opinions" in the
Prospectus and the Prospectus Supplement. In giving the
foregoing consents, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Except as stated above, without our prior written consent, this
opinion may not be furnished or quoted to, or relied upon by, any
other person or entity for any purpose.
Very truly yours,
RICHARDS, LAYTON & FINGER
<PAGE>
Exhibit 8
(Letterhead of Carter, Ledyard & Milburn)
June 15, 1994
Pennsylvania Electric Company
1001 Broad Street
Johnstown, Pennsylvania 15907
Penelec Capital, L.P.
Mellon Bank Center
Tenth and Market Streets
Wilmington, Delaware 19801
Re: Pennsylvania Electric Company and
Penelec Capital, L.P. -
Registration Statement on Form S-3
Gentlemen:
We have acted as special tax counsel to Pennsylvania
Electric Company, a Pennsylvania corporation (the "Company"), and
Penelec Capital, L.P., a Delaware limited partnership ("Penelec
Capital"), in connection with the proposed issuance and sale of
up to a maximum of $125,000,000 aggregate initial offering price
of limited partner interests of Penelec Capital (the "Preferred
Securities") the proceeds of which together with the capital
contribution of Penelec Preferred Capital, Inc., the general
partner of Penelec Capital, will be used to purchase Subordinated
Debentures of the Company pursuant to a prospectus (the
"Prospectus") which constitutes a part of a registration
statement on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), which was initially filed on May
17, 1994, with the Securities and Exchange Commission (the
"Registration Statement").
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of those agreements,
certificates and other statements of corporate officers and other
representatives of the Company and of Penelec Preferred Capital,
Inc., the general partner of Penelec Capital, as we have deemed
necessary as a basis for this opinion. In such examination we
have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and
the conformity with the originals of all documents submitted to
us as copies.
Based on and subject to the foregoing, we are of the
opinion that the section entitled "United States Taxation" in the
Prospectus contains an accurate general description, under
currently applicable law, of the material United States federal
income tax considerations that apply to holders of the Preferred
Securities.
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Pennsylvania Electric Company
June 15, 1994
Page 2
We consent to the filing of this opinion as an
Exhibit to the Registration Statement and to the references to
our firm under the caption "United States Taxation" in the
Prospectus. In giving this consent we do not hereby agree that
we come within the category of persons whose consent is required
by the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
CARTER, LEDYARD & MILBURN
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