As filed with the Securities and Exchange Commission on January 11, 1999
Registration Nos. 333-62295
333-62295-01
333-62295-02
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PENNSYLVANIA ELECTRIC PENELEC CAPITAL II, L.P. PENELEC CAPITAL TRUST
COMPANY (Exact name of (Exact name of
(Exact name of registrant registrant as specified registrant as specified
as specified in its charter) in its charter)
in its charter) DELAWARE DELAWARE
PENNSYLVANIA (State or other (State or other
(State or other jurisdiction of jurisdiction of
jurisdiction of incorporation or incorporation or
incorporation or organization) organization)
organization) 22-3605258 22-3605261
25-0718085 (I.R.S. Employer (I.R.S. Employer
(I.R.S. Employer Identification No.) Identification No.)
Identification No.) c/o GPU Service, Inc. c/o GPU Service, Inc.
2800 Pottsville Pike 310 Madison Avenue 310 Madison Avenue
Reading, Pennsylvania Morristown, New Jersey Morristown, New Jersey
19605 07962 07962
(610) 929-3601 (973) 455-8200 (973) 455-8200
(Addresses, including zip codes, and telephone numbers, including
area codes, of registrants' principal executive
offices)
Terrance G. Howson
Vice President and Treasurer
GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
(973) 455-8200
(Name, address, including zip code, and telephone
number, including area code, of agent for
service for each registrant)
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Please send copies of all communications to:
DOUGLAS E. DAVIDSON, ESQ. ROBERT C. GERLACH, ESQ.
Berlack, Israels & Liberman LLP Ballard Spahr Andrews & Ingersoll, LLP
120 West 45th Street 1735 Market Street
New York, New York 10036 Philadelphia, Pennsylvania 19103
(212) 704-0100 (215) 665-8500
SCOTT L. GUIBORD, ESQ. JOHN T. HOOD, ESQ.
Secretary Thelen Reid & Priest LLP
Pennsylvania Electric Company 40 West 57th Street
2800 Pottsville Pike New York, New York 10019
Reading, Pennsylvania 19605 (212) 603-2000
(610) 929-3601
Approximate date of commencement of proposed sale to the public: At such
time or times after the effective date of this Registration Statement as the
registrants shall determine based on market conditions and other factors.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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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 any 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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SUBJECT TO COMPLETION, DATED ----------, 1999
PROSPECTUS $725,000,000
PENNSYLVANIA ELECTRIC COMPANY
SENIOR NOTES
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PENELEC CAPITAL TRUST
TRUST SECURITIES
each representing a Cumulative Preferred Security of Penelec Capital II, L.P.
fully and unconditionally guaranteed to the extent Penelec Capital II, L.P.
has funds,
as set forth herein, by
Pennsylvania Electric Company
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Pennsylvania Electric Company, a Pennsylvania corporation (the "Company"),
may offer, from time to time in one or more series, up to $725,000,000 aggregate
principal amount of Senior Notes (the "Senior Notes") secured by its Senior Note
Mortgage Bonds (as defined herein) until the Release Date (as defined herein),
and in amounts, at prices and on terms to be determined at or prior to the time
or times of sale. Until the Release Date, the Senior Notes will be secured by
Senior Note Mortgage Bonds issued and delivered by the Company to the Senior
Note Trustee (as defined herein). See "Description of Senior Notes Security;
Release Date". On the Release Date, the Senior Notes will cease to be secured,
will become unsecured general obligations of the Company and will rank on a
parity with other unsecured and unsubordinated indebtedness of the Company
(unless otherwise secured under the limited circumstances described under the
caption "Description of Senior Notes Certain Covenants of the Company
Limitations on Liens").
Penelec Capital Trust (the "Trust"), a statutory business trust created
under the laws of the State of Delaware, may offer up to $125,000,000 aggregate
liquidation value of preferred beneficial interests, in the form of Trust
Securities (the "Trust Securities"), in amounts, at prices and on terms to be
determined at or prior to the time of sale. Each Trust Security represents a
cumulative preferred limited partner interest (the "Preferred Securities") of
Penelec Capital II, L.P., a limited partnership formed under the laws of the
State of Delaware ("Penelec Capital"), which will be a special purpose indirect
subsidiary of the Company.
The Trust will use the proceeds from the sale of its Trust Securities to
purchase Preferred Securities from Penelec Capital, which will be the sole
assets of the Trust. Penelec Capital will lend the proceeds from the sale of its
Preferred Securities, plus the capital contribution made by Penelec Preferred
Capital II, Inc., a Delaware special purpose corporation and the sole general
partner of Penelec Capital (the "General Partner"), to the Company, which loan
will be evidenced by Subordinated Debentures (the "Subordinated Debentures")
issued by the Company. The Company's Subordinated Debentures may be issued to
Penelec Capital in exchange for Penelec Capital's payment to the Company of an
amount representing the proceeds from the sale of the Preferred Securities to
the Trust and the capital contributions of the General Partner. Subordinated
Debentures purchased by Penelec Capital may subsequently be distributed pro rata
to the holders of the Preferred Securities and the Trust Securities in
connection with the dissolution of Penelec Capital and the Trust.
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The Company will also unconditionally guarantee the payment by Penelec
Capital of (i) any accumulated and unpaid distributions on the Preferred
Securities to the extent Penelec Capital has funds on hand legally available
therefor, (ii) the applicable redemption price payable with respect to any
Preferred Securities called for redemption by Penelec Capital to the extent
Penelec Capital has funds on hand legally available therefor, and (iii) upon the
liquidation of Penelec Capital (other than in connection with a Distribution
Event (as defined herein)), the lesser of (a) the portion of the partnership
liquidation distribution applicable to the Preferred Securities and (b) the
amount of assets of Penelec Capital legally available for distribution to
holders of Preferred Securities in liquidation of Penelec Capital (the
"Guarantee").
The Trust Securities will be subject to mandatory redemption upon any
redemption of the of Preferred Securities, which will be subject to mandatory
redemption upon the maturity or prior redemption of the of Subordinated
Debentures, but will not be subject to any mandatory sinking fund. Preferred
Securities may also be subject to optional redemption upon the occurrence of
certain special events at the Special Event Redemption Price (as defined in
"Description of the Preferred Securities - Special Event Redemptions or
Distributions"). See "Description of the Preferred Securities - Mandatory
Redemption" and "--Special Event Redemptions or Distributions" and "Description
of the Subordinated Debentures and the Debenture Indenture."
The Senior Notes, Trust Securities, Preferred Securities, together with
the related Guarantee, and Subordinated Debentures are collectively referred to
as the "Offered Securities". The aggregate principal amount and liquidation
value of all Offered Securities to be offered hereunder will not exceed
$725,000,000. Risk Factors regarding the Offered Securities will be set forth in
the Prospectus Supplement or Supplements.
Certain specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement or Supplements, together with the terms of the particular Offered
Securities, the initial price thereof and the net proceeds from the sale
thereof. The Prospectus Supplement will set forth, with regard to the particular
Offered Securities, without limitation and where applicable, the following: (i)
in the case of the Senior Notes, the designation, aggregate principal amount,
maturity date or dates, interest rate or rates (or method of calculation
thereof) and times of payment of interest, the terms of any redemption, exchange
or sinking fund provisions, the purchase price and any other specific terms of
the offering, (ii) in the case of the Trust Securities, the specific title,
aggregate liquidation value, number of securities, purchase price, any listing
on a securities exchange, distribution rate (or method of calculation thereof)
on the related Preferred Securities, dates on which distributions shall be
payable and dates from which distributions shall accumulate on the related
Preferred Securities, any voting rights, any redemption, exchange or sinking
fund provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Trust Securities and the terms upon which the
proceeds of the Trust Securities shall be used to purchase a specific series of
Preferred Securities of Penelec Capital.
The Offered Securities may be sold to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
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methods. See "Plan of Distribution". The names of any underwriters, dealers or
agents involved in the sale of the Offered Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them, will be set forth in the related Prospectus Supplement.
See "Plan of Distribution" for possible indemnification and contribution
arrangements for dealers, underwriters and agents.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1999.
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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 "SEC") and the New York Stock Exchange. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C., and at the following regional offices of the SEC: New York
Regional Office, 13th Floor, Seven World Trade Center, New York, New York and
Chicago Regional Office, 14th Floor, 500 West Madison Street, Chicago, Illinois.
Copies of such materials can also be obtained at prescribed rates from the
Public Reference Section of the SEC at its principal office at Judiciary Plaza,
450 Fifth Street, NW, Washington, D.C. 20549. Such material is also available
from the SEC's Web site at "http//www.sec.gov". Certain of the Company's
securities are listed on the New York Stock Exchange and such reports and other
information can also be inspected and copied at the office of such exchange on
the 7th Floor, 20 Broad Street, New York, New York.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company, Penelec Capital and the Trust with the SEC
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Offered Securities. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Reference is
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company, Penelec Capital, the Trust and
the Offered Securities. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
No separate financial statements of the Trust or Penelec Capital have been
included or incorporated by reference herein. The Company does not consider that
such financial statements would be material to holders of the Trust Securities
because (i) the Trust and Penelec Capital are special purpose entities, have no
independent operations and exist for the sole purpose of issuing the securities
described herein and (ii) the Company's obligations described herein and in any
accompanying Prospectus Supplement under the Guarantee, the Subordinated
Debentures purchased by Penelec Capital and the related Debenture Indenture (as
defined herein), and the General Partner's obligations under the Amended and
Restated Trust Agreement of the Trust and the Amended and Restated Limited
Partnership Agreement of Penelec Capital, taken together, constitute a full and
unconditional guarantee of payments due on the Preferred Securities which are
represented by the Trust Securities. See "Description of the Trust Securities,"
"Description of the Preferred Securities" and "Description of the Subordinated
Debentures and Debenture Indenture" and "Description of the Guarantee".
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates herein by reference the following
documents which have been filed by the Company with the SEC pursuant to the
Exchange Act:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1998.
3. The Company's Current Reports on Form 8-K, dated May 22, May 27,
June 5, July 17, July 21, August 3, October 2, October 22 and
November 12, 1998.
All documents subsequently filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated herein by
reference and to be a part hereof from the respective dates of filing thereof.
The documents incorporated or deemed to be incorporated herein by reference are
sometimes hereinafter called the "Incorporated Documents". Any statement
contained herein or in an Incorporated Document shall be deemed to be modified
or superseded for all purposes to the extent that a statement contained herein
or in any Prospectus Supplement or in any subsequently filed Incorporated
Document modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the Incorporated Documents, excluding the exhibits thereto
unless such exhibits are specifically incorporated by reference into such
documents. Requests for such documents should be directed to Pennsylvania
Electric Company, 2800 Pottsville Pike, Reading, Pennsylvania 19605, attention:
Secretary. The Company's telephone number is (610) 929-3601.
In addition to the historical information contained or incorporated by
reference herein, this Prospectus contains or incorporates by reference a number
of "forward-looking statements" within the meaning of the Exchange Act. Such
statements address future events and conditions concerning capital expenditures,
resolution and impact of litigation, regulatory matters, liquidity and capital
resources and accounting matters. Actual results in each case could differ
materially from those projected in such statements due to a variety of factors
including, without limitation, restructuring of the utility industry; future
economic conditions; earnings retention and dividend payout policies;
developments in the legislative, regulatory and competitive environments in
which the Company operates; and other circumstances that could affect
anticipated revenues and costs, such as compliance with laws and regulations.
These and other factors are discussed in the Company's filings with the SEC.
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PENNSYLVANIA ELECTRIC COMPANY
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 GPU, Inc. ("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 2800 Pottsville Pike,
Reading, Pennsylvania 19605, and its telephone number is (610) 929-3601.
For the year 1997, residential sales accounted for about 35% of the
Company's operating revenues from customers and 28% of kilowatt-hour sales to
customers; commercial sales accounted for about 33% of the Company's operating
revenues from customers and 30% of kilowatt-hour sales to customers; industrial
sales accounted for about 28% of the Company's operating revenues from customers
and 36% of kilowatt-hour sales to customers; and sale to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 4% of the Company's operating revenues from customers
and 6% of kilowatt-hour sales to customers. The revenues derived from the 25
largest customers in the aggregate accounted for approximately 13% of operating
revenues from customers for the year 1997. The Company also makes interchange
and spot market sales of electricity to other utilities.
The electric generating and transmission facilities of the Company and its
affiliates, Metropolitan Edison Company and Jersey Central Power & Light Company
(collectively doing business as "GPU Energy"), are physically interconnected and
are operated as a single integrated and coordinated system. The transmission
facilities of the integrated system are physically interconnected with
neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New
York and Ohio. The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection ("PJM") and the Mid-Atlantic Council, an organization providing
coordinated review of the planning by utilities in the PJM area. The
interconnection facilities are used for substantial capacity and energy
interchange and purchased power transactions as well as emergency assistance.
PENELEC CAPITAL TRUST
Penelec Capital Trust (the "Trust") is a statutory business trust created
in August 1998 under the laws of the State of Delaware. The Trust exists for the
sole purpose of issuing the Trust Securities representing the Preferred
Securities to be held by the Trust and performing functions directly related
thereto. The Trust cannot issue any other securities. The Preferred Securities
will be the only assets of the Trust and the only revenues of the Trust will be
distributions it receives on the Preferred Securities. All expenses and
liabilities of the Trust will be paid by the General Partner. The Trust's
mailing address is c/o GPU Service, Inc., 310 Madison Avenue, Morristown, New
Jersey 07962 and its telephone number is (973) 455-8200.
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PENELEC CAPITAL II, L.P.
Penelec Capital II, L.P. ("Penelec Capital") is a limited partnership
formed in August 1998 under the laws of the State of Delaware. All of its
general partner interests are owned by Penelec Preferred Capital II, Inc., which
will be a wholly owned subsidiary of the Company, as the general partner (the
"General Partner"). As a limited partnership, all of the business and affairs of
Penelec Capital are managed by the General Partner. Penelec Capital was created
solely for the purpose of issuing the Preferred Securities and lending the
proceeds thereof to the Company. Such loans are evidenced by the Subordinated
Debentures issued by the Company in series under the Debenture Indenture (as
hereinafter defined). The Subordinated Debentures will be the only assets of
Penelec Capital and the only revenues of Penelec Capital will be interest its
receives on the Subordinated Debentures. The General Partner pays all of Penelec
Capital's operating expenses and has general liability for all of Penelec
Capital's obligations. Penelec Capital's mailing address is c/o GPU Service,
Inc. 310 Madison Avenue, Morristown, New Jersey 07962 and its telephone number
is (973) 455-8200.
FINANCING PROGRAM
Depending upon market conditions, during the next two years the Company
and/or the Trust, as the case may be, expect to offer pursuant to one or more
separate offerings, up to $725,000,000 aggregate principal amount and
liquidation value of Offered Securities, including up to $125,000,000
liquidation value of Trust Securities. The net proceeds from the sale of the
Trust Securities will be used to purchase Preferred Securities from Penelec
Capital. Penelec Capital will, in turn, lend the proceeds from the sale of its
Preferred Securities to the Company, which loan will be evidenced by the
Company's Subordinated Debentures. The Company also expects to have short-term
borrowings outstanding from time to time during such period.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
offered hereby (i) to redeem other outstanding securities of the Company,
including first mortgage bonds, preferred stock and preferred securities, (ii)
to repay outstanding short-term bank loans or other unsecured indebtedness,
(iii) for construction purposes and (iv) for other corporate purposes, including
to reimburse the Company's treasury for funds previously expended therefrom for
the above purposes. The Trust will use the proceeds from the sale of its Trust
Securities to purchase the Preferred Securities. Penelec Capital will use the
proceeds from the sale of the Preferred Securities to purchase the Subordinated
Debentures. Any specific allocation of the proceeds to a particular purpose that
has been made at the date of any Prospectus Supplement will be described
therein.
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COMPANY COVERAGE RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
Years ended December 31, Twelve Months ended
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1993 1994 1995 1996 1997 September 30, 1998
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4.09 1.69 3.51 2.64 3.35 2.34
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income to
which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and interest portion of all rentals charged to income.
The Company's Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends for each of the periods indicated was as follows:
Years ended December 31, Twelve Months ended
------------------------
1993 1994 1995 1996 1997 September 30, 1998
---- ---- ---- ---- ---- ------------------
3.52 1.59 3.39 2.55 3.29 2.30
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 net income 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 (including distribution on Company Obligated
Mandatorily Redeemable Preferred Securities), amortization of net gain on
reacquired debt and 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.
ACCOUNTING TREATMENT
The financial statements of Penelec Capital will be consolidated with the
Company's financial statements, with the Preferred Securities shown on the
Company's consolidated financial statements as "Company Obligated Mandatorily
Redeemable Preferred Securities of a partnership". The Company's financial
statements will include a footnote that discloses, among other things, that the
sole asset of Penelec Capital consists of the Subordinated Debentures and will
specify the principal amount, interest rate and maturity date of each series of
Subordinated Debentures.
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DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the Senior
Notes and the Senior Note Indenture (as defined below). Reference is made to the
Senior Note Indenture which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
General
The Senior Notes may be issued from time to time in one or more series in
amounts and on terms to be determined at or prior to the time or times of sale,
under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture") between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Senior Note Indenture will be secured by one or more
series of the Company's Senior Note Mortgage Bonds (as defined below) issued and
delivered by the Company to the Senior Note Trustee. See "-- Security; Release
Date". On the Release Date, the Senior Notes will cease to be secured by the
Senior Note Mortgage Bonds, will become unsecured general obligations of the
Company and will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company. The Senior Note Indenture provides that prior to
the Release Date, the principal amount of the Senior Notes that may be issued
and outstanding cannot exceed the principal amount of the Senior Note Mortgage
Bonds then held by the Senior Note Trustee. See "Description of Senior Note
Mortgage Bonds".
There is no requirement under the Senior Note Indenture that future issues
of debt securities of the Company be issued exclusively under the Senior Note
Indenture; accordingly, the Company will be free to employ other indentures or
documentation, containing provisions different from those included in the Senior
Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities. There is no limitation
on the amount of Senior Notes that may be issued under the Senior Note
Indenture. Notwithstanding the foregoing, the Senior Note Indenture contains
certain restrictive covenants, including a restriction that the Company may not
issue, assume, guarantee or permit to exist, so long as any Senior Notes are
outstanding and after the Release Date, any debt that ranks senior to the Senior
Notes, subject to certain exceptions. In addition, the Senior Note Indenture
also provides that so long as any Senior Notes are outstanding, certain
sale/leaseback arrangements are restricted.
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that otherwise protects the holders in the event that
the Company incurs substantial additional indebtedness, whether or not in
connection with a change in control of the Company.
Reference is made to the Prospectus Supplement for a description of the
following terms of the series of Senior Notes in respect of which this
Prospectus is being delivered: (i) the title of such Senior Notes; (ii) the
aggregate principal amount of such Senior Notes; (iii) the price (expressed as a
percentage of principal amount) at which such Senior Notes will be issued; (iv)
the date or dates on which the principal of such Senior Notes is payable;
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(v) the rate or rates at which such Senior Notes will bear interest, the date or
dates from which such interest will accrue, the dates on which such interest
will be payable ("Interest Payment Dates"), and the regular record dates for the
interest payable on such Interest Payment Dates; (vi) the option, if any, of the
Company to redeem such Senior Notes and the period or periods within which, or
the date or dates on which, the prices at which and the terms and conditions
upon which, such Senior Notes may be redeemed, in whole or in part, upon the
exercise of such option; (vii) the obligation, if any, of the Company to redeem
or purchase such Senior Notes at the option of the registered holder or pursuant
to any sinking fund or analogous provisions and the period or periods within
which, or the date or dates on which, the price or prices at which and the terms
and conditions upon which, such Senior Notes will be redeemed or purchased, in
whole or in part, pursuant to such obligation; (viii) the denominations in which
such Senior Notes will be issuable, if other than $1,000 and integral multiples
thereof; (ix) whether such Senior Notes are to be issued in whole or in part in
book-entry form and represented by one or more global Senior Notes and, if so,
the identity of the depository for such global Senior Notes and the specific
terms of the depository arrangements therefor; and (x) any other terms of such
Senior Notes, including with respect to any series, if applicable.
Redemption Provisions
Any terms for the optional or mandatory redemption of the Senior Notes
will be set forth in the Prospectus Supplement or Supplements. Except as shall
otherwise be provided in the applicable Prospectus Supplement or Supplements,
the Senior Notes will be redeemable only upon notice by mail not less than 30
nor more than 60 days prior to the date fixed for redemption, and, if less than
all the Senior Notes of a series, or any tranche thereof, are to be redeemed,
the particular Senior Notes to be redeemed will be selected by the Senior Note
Trustee in such a manner as it shall deem appropriate and fair.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Senior Note Trustee, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest on such Senior Notes and that if
such money has not been so received, such notice will be of no force and effect
and the Company will not be required to redeem such Senior Notes.
Security; Release Date
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds ("Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see "Description
of Senior Note Mortgage Bonds"). Upon the issuance of a series of Senior Notes
prior to the Release Date, the Company will simultaneously issue and deliver to
the Senior Note Trustee, as security for all the Senior Notes being issued, a
series of Senior Note Mortgage Bonds that will have the same stated maturity
date and corresponding redemption provisions, and will be in the same aggregate
principal amount and have the same interest rate as the corresponding series of
Senior Notes being issued. Any payment by the Company to the Senior Note Trustee
of principal of, premium, if any, and interest on, a series of Senior Note
Mortgage Bonds will be applied by the Senior Note Trustee to satisfy the
Company's obligations with respect to principal of, premium, if any, and
interest on, the respective corresponding series of Senior Notes.
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The Release Date will be the earlier of (i) the date that all First
Mortgage Bonds (as defined herein) other than the Senior Note Mortgage Bonds,
have been retired (whether at, before or after the maturity thereof) through
payment, redemption, purchase, defeasance or otherwise and (ii) the date upon
which the Senior Note Trustee holds Senior Note Mortgage Bonds constituting not
less than 80% in aggregate principal amount of all outstanding First Mortgage
Bonds. On the Release Date, the Senior Note Trustee will deliver to the Company
for cancellation all Senior Note Mortgage Bonds and, not later than 30 days
thereafter, will provide notice to all holders of the Senior Notes of the
occurrence of the Release Date. As a result, on the Release Date, the Senior
Note Mortgage Bonds shall cease to secure the Senior Notes and the Senior Notes
will become unsecured and unsubordinated general obligations of the Company.
Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of the Company. See "Description of Senior Note Mortgage Bonds
Kind and Priority of Lien". Upon the payment or cancellation of any outstanding
Senior Notes, the Senior Note Trustee shall surrender to the Company for
cancellation an equal principal amount of the related series of Senior Note
Mortgage Bonds. The Company shall not permit, at any time prior to the Release
Date, the aggregate principal amount of Senior Note Mortgage Bonds held by the
Senior Note Trustee to be less than the aggregate principal amount of the Senior
Notes outstanding. The Senior Note Indenture includes a restriction that the
Company may not issue, guarantee or permit to exist, so long as any of the
Senior Notes are outstanding and after the Release Date, any debt that ranks
senior to the Senior Notes, subject to certain exceptions. After the issuance of
the first series of the Senior Notes, no additional First Mortgage Bonds will be
issued under the Mortgage (as defined herein) other than as collateral security
for the Senior Notes.
Events of Default
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due which continues for 60 days; (c) default in the performance
or breach of any other covenant or agreement of the Company in the Senior Notes
or in the Senior Note Indenture and the continuation thereof for 90 days after
written notice thereof to the Company by the Senior Note Trustee or the holders
of at least 33% in aggregate principal amount of the outstanding Senior Notes;
(d) prior to the Release Date, the occurrence of a "completed default" (as
defined under the Mortgage); provided, however, that the waiver or cure of such
default and the recision and annulment of the consequences thereof under the
Mortgage shall constitute a waiver of the corresponding event of default under
the Senior Note Indenture and a recision and annulment of the consequences
thereof under the Senior Note Indenture; and (e) certain events of bankruptcy,
insolvency, reorganization, assignment or receivership of the Company.
If an event of default occurs and is continuing, either the Senior Note
Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes may declare the principal amount of all of the Senior
Notes to be due and payable immediately. Upon such acceleration of the Senior
Notes, the Senior Note Mortgage Bonds shall be immediately redeemable upon
demand of the Senior Note Trustee (and surrender thereof to the Mortgage
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Trustee, as defined) at a redemption price of 100% of the principal amount
thereof, together with interest to the redemption date. See "Description of
Senior Note Mortgage Bonds - Redemption Provisions of Senior Note Mortgage
Bonds". At any time after an acceleration of the Senior Notes has been obtained
(and provided the acceleration of all Senior Note Mortgage Bonds has not
occurred), if the Company pays or deposits with the Senior Note Trustee a sum
sufficient to pay all matured installments of interest and the principal and any
premium which has become due on the Senior Notes otherwise than by acceleration
and all defaults shall have been cured or waived, then such payment or deposit
will cause an automatic rescission and annulment of the acceleration of the
Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee generally
will be under no obligation to exercise any of its rights or powers under the
Senior Note Indenture at the request or direction of any of the holders of the
Senior Notes unless such holders have offered to the Senior Note Trustee
reasonable security or indemnity. Subject to such provisions for indemnity and
certain other limitations contained in the Senior Note Indenture, the holders of
a majority in aggregate principal amount of the outstanding Senior Notes
generally will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Senior Note Trustee, or of
exercising any trust or power conferred on the Senior Note Trustee. The holders
of a majority in aggregate principal amount of the outstanding Senior Notes
generally will have the right to waive any past default or event of default
(other than a payment default) on behalf of all holders of the Senior Notes. The
Senior Note Indenture provides that no holder of the Senior Notes may institute
any action against the Company under the Senior Note Indenture unless such
holder previously shall have given to the Senior Note Trustee written notice of
an event of default and continuance thereof and unless the holders of not less
than a majority in aggregate principal amount of the Senior Notes then
outstanding affected by such event of default shall have requested the Senior
Note Trustee to institute such action and shall have offered the Senior Note
Trustee reasonable indemnity, and the Senior Note Trustee shall not have
instituted such action within 60 days of such request. Furthermore, no holder of
the Senior Notes will be entitled to institute any such action if and to the
extent that such action would disturb or prejudice the rights of other holders
of the Senior Notes. Notwithstanding that the right of a holder of the Senior
Notes to institute a proceeding with respect to the Senior Note Indenture is
subject to certain conditions precedent, each holder of a Senior Note has the
right, which is absolute and unconditional, to receive payment of the principal
of, and premium, if any, and interest on such Senior Note when due and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such holders of Senior Notes. The Senior Note
Indenture provides that the Senior Note Trustee, within 90 days after the
occurrence of a default with respect to the Senior Notes, is required to give
holders of the Senior Notes notice of any default known to the Senior Note
Trustee, unless cured or waived, but, except in the case of default in the
payment of principal of, or premium, if any, or interest on, any Senior Notes,
the Senior Note Trustee may withhold such notice if it determines in good faith
that it is in the interest of such holders to do so. The Company is required to
deliver to the Senior Note Trustee each year an officer's certificate as to
whether or not the Company is in compliance with the conditions and covenants
under the Senior Note Indenture.
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Modification with Approval
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change the coin or currency of any payment of principal of, or
premium, if any, or interest on, any Senior Note; (e) change the date on which
any Senior Note may be redeemed or repaid at the option of the holder thereof or
adversely affect the rights of a holder to institute suit for the enforcement of
any payment on or with respect to any Senior Note; (f) impair the interest of
the Senior Note Trustee in the Senior Note Mortgage Bonds held by it or, prior
to the Release Date, reduce the principal amount of any series of Senior Note
Mortgage Bonds securing the Senior Notes to an amount less than the principal
amount of the related series of Senior Notes or alter the payment provisions of
such Senior Note Mortgage Bonds in a manner adverse to the holders of the Senior
Notes; or (g) modify the foregoing requirements or reduce the percentage of
outstanding Senior Notes necessary to modify or amend the Senior Note Indenture
or to waive any past default to less than a majority.
Modification without Approval
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee without the consent of the holders (a)
to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add further security for the Senior Notes; (c) to supply omissions, cure
ambiguities or correct defects, which actions, in each case, are not prejudicial
to the interest of the holders in any material respect; or (d) to make any other
change that is not prejudicial to the holders of the Senior Notes in any
material respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
Defeasance and Discharge
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for
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the benefit of the holders of Senior Notes, money or certain United States
government obligations, or any combination thereof, which will provide money in
an amount sufficient, without reinvestment, to make all payments of principal
of, premium, if any, and interest on, the Senior Notes on the dates such
payments are due in accordance with the terms of the Senior Note Indenture and
the Senior Notes; provided that unless all of the Senior Notes mature within 90
days of such deposit by redemption or otherwise, the Company shall also have
delivered to the Senior Note Trustee an opinion of counsel to the effect that
the holders of the Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or discharge of the
Senior Note Indenture. Thereafter, the holders of the Senior Notes may look only
to such deposit for payment of the principal of, and interest and any premium
on, the Senior Notes.
Consolidation, Merger and Sale or Disposition of Assets
The Company may not consolidate with or merge into any other corporation
or sell or otherwise dispose of its properties as or substantially as an
entirety unless (i) the successor or transferee corporation shall be a
corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia, (ii) the successor or transferee
corporation assumes by supplemental indenture the due and punctual payment of
the principal of and premium, if any, and interest on all the Senior Notes and
the performance of every covenant of the Senior Note Indenture to be performed
or observed by the Company; and (iii) if prior to the Release Date, the
successor or transferee corporation assumes the Company's obligations under the
Mortgage with respect to the Senior Note Mortgage Bonds. Upon any such
consolidation, merger, sale, transfer or other disposition of the properties of
the Company substantially as an entirety, the successor corporation formed by
such consolidation or into which the Company is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Senior Note Indenture with the same effect
as if such successor corporation had been named as the Company therein, and the
Company will be released from all obligations under the Senior Note Indenture.
For purposes of the Senior Note Indenture, the conveyance or other transfer by
the Company of (a) all or any portion of its facilities for the generation of
electric energy or (b) all of its facilities for the transmission of electric
energy, in each case considered alone or in any combination with properties
described in the other clause, shall in no event be deemed to constitute a
conveyance or other transfer of all the properties of the Company, as or
substantially as an entirety.
Certain Covenants of the Company
Limitation on Liens
The Senior Note Indenture provides that, so long as any such Senior Notes
are outstanding, the Company may not issue, assume, guarantee or permit to exist
after the Release Date any Debt (as defined below) that is secured by any
mortgage, security interest, pledge or lien ("Lien") of or upon any Operating
Property of the Company (as defined below), whether owned at the date of the
Senior Note Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking equally with the Senior
Notes) equally and ratably with such Debt (but only so long as such Debt is so
secured).
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<PAGE>
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the costs of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure indebtedness incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose, provided such
Liens are created or assumed contemporaneously with, or within 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) Liens in favor of any
state or any department, agency or instrumentality or political subdivision of
any state, or for the benefit of holders of securities issued by any such entity
(or providers of credit enhancement with respect to such securities), to secure
any Debt (including, without limitation, obligations of the Company with respect
to industrial development, pollution control or similar revenue bonds) incurred
for the purpose of financing all or any part of the purchase price or the cost
of substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Mortgage, except as provided in the Senior Note Indenture; (6) liens to
compensate the Senior Note Trustee as provided in the Senior Note Indenture; (7)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in clauses (1)
through (7), provided, however, that the principal amount of Debt secured
thereby and not otherwise authorized by said clauses (1) to (7), inclusive,
shall not exceed the principal amount of Debt, plus any premium or fee payable
in connection with any such extension, renewal or replacement, so secured at the
time of such extension, renewal or replacement. However, the foregoing
restriction will not apply to the issuance, assumption or guarantee by the
Company of Debt secured by a Lien which would otherwise be subject to the
foregoing restriction up to an aggregate amount which, together with all other
secured Debt of the Company (not including secured Debt permitted under any of
the foregoing exceptions) and the Value (as defined below) of Sale and
Lease-Back Transactions (as defined below) existing at such time (other than
Sale and Lease-Back Transactions the proceeds of which have been applied to the
retirement of certain indebtedness, Sale and Lease-Back Transactions in which
the property involved would have been permitted to be subjected to a Lien under
any of the foregoing exceptions in clauses (1) to (6) and Sale and Lease-Back
Transactions that are permitted by the first sentence of "Limitations on Sale
and Lease-Back Transactions" below), does not exceed the greater of 15% of
Tangible Assets or 15% of Capitalization (as such terms are defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist after the Release
Date any Sale and Lease-Back Transaction with respect to any Operating Property
(except for transactions involving leases for a term, including renewals, of not
more than 48 months), if the purchasers' commitment is obtained more than 18
months after the later of the completion of the acquisition, construction or
development of such Operating Property or the
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placing in operation of such Operating Property or of such Operating Property as
constructed or developed or substantially repaired, altered or improved. This
restriction will not apply if (a) the Company would be entitled pursuant to any
of the provisions described in clauses (1) to (5) of the first sentence of the
second paragraph under "Limitation on Liens" above to issue, assume, guarantee
or permit to exist Debt secured by a Lien on such Operating Property without
equally and ratably securing the Senior Notes, (b) after giving effect to such
Sale and Lease-Back Transaction, the Company could incur pursuant to the
provisions described in the second sentence of the second paragraph under
"Limitation on Liens", at least $1.00 of additional Debt secured by Liens (other
than Liens permitted by clause (a)), or (c) the Company applies within 180 days
an amount equal to, in the case of a sale or transfer for cash, the net proceeds
(not exceeding the net book value), and, otherwise, an amount equal to the fair
value (as determined by its Board of Directors) of the Operating Property so
leased, to the retirement of Senior Notes or other Debt of the Company ranking
equally with the Senior Notes, subject to reduction for Senior Notes and such
Debt retired during such 180-day period otherwise than pursuant to mandatory
sinking fund or prepayment provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing on,
or included in, the consolidated balance sheet of the Company: (i) liabilities
for indebtedness maturing more than 12 months from the date of determination;
and (ii) common stock, preferred stock, Hybrid Preferred Securities (as defined
in the Senior Note Indenture), premium on capital stock, capital surplus,
capital in excess of par value and retained earnings (however the foregoing may
be designated), less, to the extent not otherwise deducted, the cost of shares
of capital stock reacquired by the Company.
"Debt" means any outstanding debt for money borrowed evidenced by notes,
debentures, bonds or other securities, or guarantees of any thereof.
"Operating Property" means (i) any interest in real property owned by the
Company and (ii) any asset owned by the Company that is depreciable in
accordance with generally accepted accounting principles ("GAAP") excluding, in
either case, any interest of the Company as lessee under any lease (except for a
lease that results from a Sale and Lease-Back Transaction) which has been or
would be capitalized on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (i)
intangible assets including, but without limitation, such items as
goodwill, trademarks, trade names, patents, and unamortized debt discount
and expense, and (ii) appropriate adjustments, if any, on account of
minority interests. Tangible
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Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (i) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, or (ii) the net book value of such property, as
determined by the Company in accordance with GAAP, in either case multiplied by
a fraction, the numerator of which shall be equal to the number of full years of
the term of the lease that is part of such Sale and Lease-Back Transaction
remaining at the time of determination and the denominator of which shall be
equal to the number of full years of such term, without regard, in any case, to
any renewal or extension options contained in such lease.
Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee
The Senior Note Trustee, as the holder of Senior Note Mortgage Bonds, will
attend any meeting of bondholders under the Mortgage, or, at its option, will
deliver its proxy in connection therewith relating to matters with respect to
which it is entitled to vote or consent.
The Senior Note Trustee shall vote all Senior Note Mortgage Bonds then
held by it or consent with respect thereto, proportionately with the vote or
consent of the holders of all other First Mortgage Bonds outstanding under the
Mortgage, the holders of which are eligible to vote or consent; provided,
however, that the Senior Note Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were an
amendment or modification of the Senior Note Indenture, would require the
consent of the holders of Senior Notes as described under "- Modification",
without the prior consent of holders of Senior Notes which would be required for
such an amendment or modification of the Senior Note Indenture.
Resignation or Removal of Senior Note Trustee
The Senior Note Trustee may resign at any time upon written notice to the
Company specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Senior Note Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
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Concerning the Senior Note Trustee
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture, the Mortgage Trustee under the Mortgage and, as
described in "Description of the Subordinated Debentures and the Debenture
Indenture", the Debenture Trustee under the Debenture Indenture. The Senior Note
Indenture provides that the Company's obligations to compensate the Senior Note
Trustee and reimburse the Senior Note Trustee for expenses, disbursements and
advances will constitute indebtedness which will be secured by a lien generally
prior to that of the Senior Notes upon all property and funds held or collected
by the Senior Note Trustee as such. The Senior Note Indenture provides that the
Senior Note Trustee shall be subject to and shall comply with the provisions of
Section 310(b) of the Trust Indenture Act of 1939, as amended, and that nothing
in the Senior Note Indenture shall be deemed to prohibit the Senior Note Trustee
or the Company from making any application permitted pursuant to such section.
Governing Law
The Senior Note Indenture and each Senior Note will be governed by New
York law.
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DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
General
The Senior Note Mortgage Bonds are first mortgage bonds ("First Mortgage
Bonds") to be issued under and secured by the Company's Mortgage and Deed of
Trust dated as of January 1, 1942 between the Company and United States Trust
Company of New York, as successor trustee (the "Mortgage Trustee"), as
heretofore amended and supplemented, and to be further amended and supplemented
by one or more Supplemental Indentures with respect to the Senior Note Mortgage
Bonds (collectively, the "Mortgage"). The statements herein concerning the First
Mortgage Bonds and the Mortgage are summaries and do not purport to be complete.
They may make use of defined terms and are subject to, and qualified in their
entirety by, all of the provisions of the Mortgage, which is incorporated herein
by reference.
The Senior Note Mortgage Bonds will be issued as security for the
Company's obligations under the Senior Note Indenture and will be immediately
delivered to and registered in the name of the Senior Note Trustee. The Senior
Note Indenture provides that the Senior Note Trustee shall not transfer any
Senior Note Mortgage Bonds except to a successor trustee, to the Company (as
provided in the Senior Note Indenture) or in compliance with a court order in
connection with a bankruptcy or reorganization proceeding of the Company. The
Senior Note Trustee shall generally vote the Senior Note Mortgage Bonds
proportionately with what it believes to be the vote of the holders of all other
First Mortgage Bonds then outstanding, as described under "Description of Senior
Notes - Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee".
The Senior Note Mortgage Bonds will correspond to the corresponding series
of Senior Notes in respect of principal amount, interest rate, maturity date and
redemption provisions. Upon payment of the principal or premium, if any, or
interest on the Senior Notes, Senior Note Mortgage Bonds of the corresponding
series in a principal amount equal to the principal amount of such Senior Notes
will, to the extent of such payment of principal, premium or interest, be deemed
fully paid and the obligation of the Company to make such payment shall be
discharged.
Redemption Provisions of Senior Note Mortgage Bonds
The Senior Note Mortgage Bonds will be redeemed on the respective dates
and in the respective principal amounts which correspond to the redemption dates
for and the principal amounts to be redeemed of the corresponding series of
Senior Notes. The Senior Note Mortgage Bonds are not redeemable by operation of
the improvement fund or the maintenance provisions of the Mortgage, or with the
proceeds of released property.
In the event of an event of default under the Senior Note Indenture and
acceleration of the Senior Notes, the Senior Note Mortgage Bonds will be
immediately redeemable in whole, upon demand of the Senior Note Trustee, at a
redemption price of 100% of the principal amount thereof, together with accrued
interest to the redemption date. See "Description of Senior Notes - Events of
Default".
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Kind and Priority of Lien
The Senior Note Mortgage Bonds will rank equally as to security with all
First Mortgage Bonds outstanding under the Mortgage, which is a direct first
lien on substantially all of the Company's property and franchises (except cash,
securities, judgments, contracts, accounts and chooses in action not
specifically subjected to its lien, certain personal property, including
merchandise, materials or supplies held or acquired for sale or consumption,
automobiles and trucks), and subject only to (1) the Mortgage Trustee's prior
lien for its compensation and reimbursement and (2) excepted encumbrances
specified in the Mortgage. The Mortgage contains provisions for subjecting to
its lien, subject to existing liens, property and franchises (except such as are
excluded as above-mentioned from the lien of the Mortgage) which may be
hereafter acquired by the Company, and contains certain restrictions upon the
acquisition of property with respect to which certain prior lien bonds are
outstanding. No prior lien bonds are presently outstanding.
Release and Substitution of Property
The Company, without notice to or action by the Mortgage Trustee, may,
with limitation, change or substitute contracts, leases and rights-of-way,
surrender or assent to the modification of any right, license, franchise or
permit, or dispose of property of a limited nature; and may obtain a release of
certain mortgaged property from the lien of the Mortgage upon depositing not
less than the fair value thereof or, in certain cases, the consideration
received therefor, with the Mortgage Trustee or a prior lien holder. Such
deposited cash may (1) be withdrawn against an equal amount of bondable value of
property additions, or equal principal amounts of refundable prior lien bonds
and First Mortgage Bonds previously issued and theretofore or then retired; or
(2) be used for the purchase, payment or redemption of First Mortgage Bonds. If
any such deposited cash is not so withdrawn, used or applied within three years
after deposit with the Mortgage Trustee, it shall be used or applied by the
Mortgage Trustee to purchase, pay at maturity or redeem First Mortgage Bonds.
Dividend Restrictions
The Mortgage restricts cash dividends payable by the Company on its common
stock to the amount of the Company's accumulated earned surplus less
$10,084,106. The amount available for the declaration and payment of dividends
on the Company's common stock pursuant to this restriction will be contained in
a Prospectus Supplement.
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Issuance of Additional First Mortgage Bonds
So long as the Company is not in default in the performance of any
covenant to be performed by it under the Mortgage and obtains all requisite
authority of governmental bodies, it may issue additional First Mortgage Bonds
to the extent of (1) 60% of bondable value of property additions; (2) the
principal amount of refundable prior lien bonds deposited, retired or to be
retired; (3) the principal amount of First Mortgage Bonds then or theretofore
retired; and (4) the amount of cash deposited with the Mortgage Trustee against
the issuance of First Mortgage Bonds. First Mortgage Bonds may be issued
pursuant to (1) and (4), and in certain cases pursuant to (2) and (3), above,
only if net earnings (calculated before income taxes but after deduction of an
amount equal to the greater of the actual book provision for depreciation or the
"minimum provision for depreciation") shall be at least two times the annual
interest requirements on First Mortgage Bonds and prior lien bonds to be
outstanding. Cash deposited against the issuance of First Mortgage Bonds may be
withdrawn by the Company in an amount equal to the principal amount of First
Mortgage Bonds which it would otherwise be entitled to have authenticated and
delivered; and such cash may be applied to the purchase, payment at maturity or
redemption of First Mortgage Bonds.
The principal amount of additional First Mortgage Bonds issuable pursuant
to these provisions will be contained in a Prospectus Supplement.
Improvement Fund
The Company is required to deposit with the Mortgage Trustee by April 30
of each year cash equal to 1% of the aggregate principal amount of First
Mortgage Bonds issued prior to January 1 of such year (certain First Mortgage
Bonds excepted) less (1) 60% of the amount of bondable value of property
additions and/or (2) the principal amount of refundable prior lien bonds and
First Mortgage Bonds previously issued and theretofore or then retired, which
the Company then elects to take as a credit. Cash so deposited may be (a)
withdrawn within three years upon the same basis as such a credit may be taken,
or (b) used by the Mortgage Trustee for the purchase, payment at maturity or
redemption of First Mortgage Bonds. The Company has heretofore utilized bondable
value of property additions to satisfy this requirement and expects to continue
to do so in the future.
Maintenance Fund
The Company is required to make expenditures for property additions and/or
to deposit with the Mortgage Trustee, cash (less, at the option of the Company,
credit for refundable prior lien bonds and First Mortgage Bonds theretofore or
then retired) in amounts equal to the minimum provision for depreciation,
computed cumulatively at the end of each year. Cash so deposited with the
Mortgage Trustee may, during the next succeeding three years, be withdrawn by
the Company to the extent that the amount theretofore expended for property
additions, as aforesaid, exceeds the minimum provision for depreciation. The
Company has, in the past, made sufficient expenditures for property additions to
meet its obligations with respect to the minimum provision for depreciation, and
no deposits with the Mortgage Trustee have been required in this connection. The
Company expects that this pattern will continue in the future.
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So long as any of the First Mortgage Bonds shall be outstanding, the term
"minimum provision for depreciation" with reference to any period after 1948
means an amount equal to the greater of (1) 15% of gross operating revenues
during such period from the operation of bondable property after deducting the
aggregate cost of electric energy purchased for resale during such period in
connection with the operation of such property, less an amount equal to charges
for current repairs and maintenance of such property, or (2) an amount computed
at the rate of 2.4% per annum of the depreciable utility property of the Company
as of January 1 of each year or portion thereof embraced within such period.
Modification of Mortgage
With the consent of the holders of not less than 75% in principal amount
of the First Mortgage Bonds affected, the Company and the Mortgage Trustee are
empowered to change the Mortgage in any way except (a) to reduce the amount or
extend the due dates of the principal of or interest on the First Mortgage
Bonds, or (b) to reduce the percentage of bondholders required to effect changes
in the Mortgage.
Defaults and Notice Thereof
"Completed defaults" under the Mortgage include default in the payment of
principal and premium, if any, of any of the First Mortgage Bonds or any prior
lien bonds; default, for 60 days, in payment of interest on any of the First
Mortgage Bonds or beyond the period of grace on any prior lien bonds; default,
for 60 days after notice, in the performance of any covenant in the Mortgage;
and bankruptcy, insolvency or reorganization (under certain circumstances) of
the Company. The Mortgage Trustee may withhold notice to bondholders of default
(except default in payment of principal, premium, interest or sinking and
improvement fund installments) if its responsible officers think it is in the
interest of the bondholders to do so.
A majority in aggregate principal amount of the First Mortgage Bonds is
necessary to require the Mortgage Trustee to take action to enforce the lien of
the Mortgage. The Mortgage Trustee may require reasonable indemnification before
being required to enforce the lien of the Mortgage. Holders of not less than 25%
in aggregate principal amount of outstanding First Mortgage Bonds or the
Mortgage Trustee may declare the principal and interest of all outstanding First
Mortgage Bonds due upon the occurrence of a completed default, but the holders
of a majority in principal amount of the outstanding First Mortgage Bonds may,
under certain circumstances, including the curing of such default, annul any
such declaration. No holder shall have the right to institute action, unless
holders of 25% in aggregate principal amount of First Mortgage Bonds shall have
made written request to the Mortgage Trustee to institute such action.
Concerning the Mortgage Trustee
The Mortgage Trustee, United States Trust Company of New York, is
permitted to engage in other transactions with the Company, except that if the
Mortgage Trustee acquires any conflicting interest, as defined, it must
eliminate it or resign and is required in certain cases to share with the
bondholders the benefits of payments received within four months prior to
default. United States Trust Company of New York is also the Senior Note Trustee
under the Senior Note Indenture and the Debenture Trustee under the Debenture
Indenture and a
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depository of the Company and certain of the Company's affiliates and has in the
past made, and may in the future make, loans to the Company and certain of the
Company's affiliates.
Satisfaction and Discharge of Mortgage
Upon the Company's making due provision for the payment of all of the
First Mortgage Bonds and paying all other sums due under the Mortgage, the
Mortgage shall cease to be of further effect and may be satisfied and discharged
of record. Holders of First Mortgage Bonds may wish to consult with their own
tax advisers regarding possible tax effects in the event of a defeasance of the
Mortgage.
Evidence as to Compliance with Mortgage Provisions
While the Mortgage does not require that evidence be furnished at stated
intervals to the Mortgage Trustee as to the absence of a default or as to
compliance with each of the terms of the Mortgage, the Company furnishes the
Mortgage Trustee annually with a compliance certificate required by the Trust
Indenture Act of 1939, as amended. The Mortgage does require that the Company
furnish a certificate to the Mortgage Trustee that the Company is not in default
under the Mortgage only in connection with certain applications under the
Mortgage made to the Mortgage Trustee, such as for the authentication of
additional First Mortgage Bonds, certain withdrawals of cash and certain
releases of property. In addition, the improvement fund, maintenance fund and
recording provisions of the Mortgage require that the Company furnish an annual
filing to the Mortgage Trustee that the Company is in compliance with these
provisions. The Mortgage also requires that each certificate or opinion
furnished under the Mortgage contain a statement as to compliance with the
condition or covenant of the Mortgage to which the certificate or opinion
relates.
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DESCRIPTION OF THE TRUST SECURITIES
The following is a summary of certain terms and provisions of the Trust
Securities and the Amended and Restated Trust Agreement of the Trust (the "Trust
Agreement"). Reference is made to the Trust Agreement, which is an exhibit to
the Registration Statement of which this Prospectus forms a part.
General
The Trust Securities may be issued in amounts, at prices and on terms to
be determined at or prior to the time of sale. Reference is made to the
Prospectus Supplement relating the Trust Securities for specific terms,
including (i) the distinctive designation of such Trust Securities; (ii) the
number of Trust Securities issued; (iii) the annual distribution rate or rates
(or method of calculation thereof) for the Preferred Securities, which are
represented by the Trust Securities and the date or dates upon which such
distributions shall be payable; (iv) the date or dates (or method of determining
the date or dates) from which distributions on the Preferred Securities, which
are represented by the Trust Securities, shall be cumulative; (v) the obligation
or option, if any, of the Trust to purchase or redeem Trust Securities and the
price or prices at which, the period or periods within which, and the terms and
conditions upon which, the Preferred Securities, which are represented by the
Trust Securities shall be purchased or redeemed, in whole or in part, pursuant
to such obligation or option; (vi) the terms and conditions, if any, upon which
the Subordinated Debentures may be distributed to holders of Trust Securities
("Distribution Event"); (vii) if applicable, any securities exchange upon which
the Trust Securities shall be listed; (viii) whether the Trust Securities are to
be issued in whole or in part in book-entry form and represented by one or more
global certificates, and if so, the identity of the depository for such global
certificates and the specific terms of the depository arrangements therefor; and
(ix) any other relevant rights, preferences, privileges, limitations or
restrictions of Trust Securities, including any rights to defer distributions on
the Trust Securities, not inconsistent with the Trust Agreement or with
applicable law.
The Trust Securities will be issued by the Trust pursuant to the Trust
Agreement. Each Trust Security will represent a Preferred Security of Penelec
Capital. The Preferred Securities will be guaranteed by the Company to the
extent set forth below under "Description of the Guarantee". The Guarantee of
the Company, when taken together with the Company's obligations under the
Subordinated Debentures and the Debenture Indenture, and the General Partner's
obligations under the Trust Agreement and the Partnership Agreement (as defined
below"), including obligations to pay costs, expenses, debts and liabilities of
the Trust and Penelec Capital (other than with respect to the Trust Securities),
would provide a full and unconditional guarantee of amounts due on the Preferred
Securities, which are represented by Trust Securities.
The Trust is a statutory business trust created under the Delaware
Business Trust Act. A trustee of the Trust will hold the Preferred Securities
deposited in the Trust for the benefit of the holders of the Trust Securities.
The Trust Agreement provides that, to the fullest extent permitted by law,
without the need for any other action of any person, including any trustee of
the Trust and any other holder of Trust Securities, each holder of Trust
Securities shall be entitled to enforce in the name of the Trust the Trust's
rights under the Preferred Securities represented by the Trust Securities held
by such holder.
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It is anticipated that the assets of the Trust available for distribution
to the holders of the Trust Securities will be limited to payments from Penelec
Capital under the Preferred Securities, the source of which payments by Penelec
Capital will be limited to payments from the Company on the Subordinated
Debentures. See "Description of the Subordinated Debentures and the Debenture
Indenture". If the Company fails to make a payment on the Subordinated
Debentures or if Penelec Capital fails to make a distribution on the Preferred
Securities, the Trust will not have sufficient funds to make related payments on
the Trust Securities.
Certain United States federal income tax considerations applicable to any
offering of Trust Securities will be described in the Prospectus Supplement
relating thereto.
Distributions
Each Trust Security will represent a Preferred Security of Penelec Capital
issued to and held by the Trust, and distributions on the Trust Securities will
be made concurrently with distributions on the Preferred Securities.
Distributions on the Preferred Securities will be cumulative and will accumulate
from the date and at the annual rate or rates described in the Prospectus
Supplement.
Redemption of Trust Securities
The Trust Securities will be subject to mandatory redemption upon
redemption of the Preferred Securities at the redemption price set forth in the
Prospectus Supplement.
Payments on Liquidation of Penelec Capital
Upon receipt by the Trust of any distribution, in cash or in kind, from
Penelec Capital upon liquidation of Penelec Capital (or payment by the Company
under the Guarantee in respect thereof), after satisfaction of creditors of the
Trust as required by applicable law, a trustee of the Trust shall distribute to
the holders of the Trust Securities such distributions, in cash or in kind, in
proportion to the respective number of Preferred Securities represented by such
Trust Securities.
Withdrawal of Preferred Securities
Any beneficial owner of Trust Securities may withdraw all, but not less
than all, of the Preferred Securities represented by such Trust Securities by
providing a written notice and agreement to be bound by the terms of the
Partnership Agreement to a trustee of the Trust, with evidence of beneficial
ownership in form satisfactory to such trustee. The Preferred Securities will
only be issued in certificated form.
Any holder of Preferred Securities may redeposit withdrawn Preferred
Securities by delivery to a trustee of the Trust of a certificate or
certificates for the Preferred Securities to be deposited, properly endorsed or
accompanied, if required by such trustee, by a properly executed instrument of
transfer or endorsement in form satisfactory to such trustee and in compliance
with the terms of the Partnership Agreement, together with all such
certifications as may be required by such trustee in its sole discretion and in
accordance with the provisions of the Trust Agreement.
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Voting Rights
If the holders of the Preferred Securities, acting as a single class, are
entitled to appoint and authorize a Special Representative (as defined below)
pursuant to the Partnership Agreement, a trustee of the Trust shall notify the
holders of the Trust Securities of such right, request direction of each holder
of a Trust Security as to the appointment of a Special Representative and vote
the Preferred Securities represented by such Trust Security in accordance with
such direction.
Upon receipt of notice of any meeting at which the holders of the
Preferred Securities are entitled to vote, a trustee of the Trust shall, as soon
as practicable thereafter, mail to the holders of the Trust Securities a notice,
which shall be provided by the General Partner and which shall contain (i) such
information as is contained in such notice of meeting, (ii) a statement that the
holders of Trust Securities at the close of business on a specified record date
will be entitled, subject to any applicable provision of law, to instruct such
trustee as to the exercise of the voting rights pertaining to the amount of
Preferred Securities represented by their respective Trust Securities, and (iii)
a brief statement as to the manner in which such instructions may be given. Upon
the written request of a holder of a Trust Security, such trustee shall vote or
cause to be voted the number of Preferred Securities represented by such Trust
Securities in accordance with the instructions set forth in such request.
Expenses of the Trust
All charges or expenses of the Trust, including the charges and expenses
of the trustees of the Trust, will be paid by the General Partner.
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DESCRIPTION OF THE PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the
Preferred Securities represented by the Trust Securities. Reference is made to
the Amended and Restated Limited Partnership Agreement of Penelec Capital (the
"Partnership Agreement"), which is an exhibit to the Registration Statement of
which this Prospectus forms a part.
General
The Preferred Securities will be issued from time to time in one or more
series and shall have the terms described in the Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to any series of
Preferred Securities of Penelec Capital for specific terms, including (i) the
distinctive designation of such Preferred Securities; (ii) the number of
Preferred Securities issued; (iii) the annual distribution rate or rates (or
method of determining such rate or rates) for Preferred Securities and the date
or dates upon which such distributions shall be payable; (iv) the date or dates
(or method of determining the date or dates) from which distributions on
Preferred Securities shall be cumulative; (v) the obligation or option, if any,
of Penelec Capital to purchase or redeem Preferred Securities and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which, Preferred Securities shall be purchased or redeemed, in
whole or in part, pursuant to such obligation or option; (vi) the terms and
conditions, if any, upon which the Subordinated Debentures may be distributed to
holders of Preferred Securities; and (vii) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities,
including any rights to defer distributions on the Preferred Securities, not
inconsistent with the Partnership Agreement or with applicable law.
The Preferred Securities will be guaranteed by the Company to the extent
set forth below under "Description of the Guarantee". The Guarantee of the
Company, when taken together with the Company's obligations under the
Subordinated Debentures and the Debenture Indenture and the General Partner's
obligations under the Partnership Agreement, would provide a full and
unconditional guarantee of amounts due on Preferred Securities issued by Penelec
Capital.
All of the general partner interests of Penelec Capital are owned by the
General Partner, which is a wholly owned subsidiary of the Company. The
Preferred Securities represent preferred limited partner interests of Penelec
Capital. All of the Preferred Securities issued by Penelec Capital will be of
equal rank in participation in the profits and assets and income of Penelec
Capital. The Partnership Agreement authorizes the General Partner to establish
series of Preferred Securities having such designations, rights, privileges,
restrictions and other terms and provisions as the General Partner may
determine. Distributions on all series of Preferred Securities must be paid in
full before the General Partner may participate in the profits or assets of
Penelec Capital.
Certain United States federal income tax considerations applicable to any
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto.
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Distributions
The General Partner may make distributions on the general partner
interests of Penelec Capital only after payment in full of all distributions
accumulated on all outstanding Preferred Securities of Penelec Capital.
Distributions on the Preferred Securities must be paid by Penelec Capital
to the extent that Penelec Capital has funds on hand legally available therefor.
The funds available for distribution by Penelec Capital will be limited to
payments received by Penelec Capital in respect of the Subordinated Debentures.
See "Description of the Subordinated Debentures and the Debenture Indenture".
Mandatory Redemption
A series of Preferred Securities will be subject to mandatory redemption
upon the repayment at maturity or prior redemption of the corresponding series
of the Subordinated Debentures.
Liquidation Distribution
In the event of any voluntary or involuntary dissolution or winding up of
Penelec Capital, the holders of Preferred Securities will be entitled to receive
out of the assets of Penelec Capital, after satisfaction of liabilities to
creditors and before any distribution of assets is made to the General Partner,
the lesser of (i) the sum of their stated liquidation preference and all
accumulated and unpaid distributions to the date of payment of the Preferred
Securities, and (ii) the amount of assets of Penelec Capital legally available
for distribution to the holders of Preferred Securities. All assets of Penelec
Capital remaining after payment of the liquidation distribution to the holders
of Preferred Securities will be distributed to the General Partner.
Voting Rights
Except as provided in a Prospectus Supplement and as otherwise required by
law and the Partnership Agreement, the holders of the Preferred Securities have
no voting rights.
If (i) Penelec Capital fails to pay distributions in full on a series of
Preferred Securities for a period as set forth in the Prospectus Supplement,
(ii) an Event of Default (as defined in the Debenture Indenture) occurs and is
continuing, or (iii) the Company is in default on any of its payment obligations
under the related Guarantee, then the holders of the Preferred Securities,
acting as a single class, will be entitled by a vote of the majority of the
aggregate stated liquidation preference of the outstanding Preferred Securities
to appoint a special representative (the "Special Representative") to enforce
Penelec Capital's rights against the Company under the Subordinated Debentures
and the Debenture Indenture and the obligations undertaken by the Company under
the Guarantee issued in conjunction with the issuance of such Preferred
Securities. The Special Representative shall not be admitted as a partner of
Penelec Capital or otherwise be deemed a partner of Penelec Capital and shall
have no liability for the debts, obligations or liabilities of Penelec Capital.
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If any proposed amendment to the 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 attached
to any series of Preferred Securities, whether by way of amendment to the
Partnership Agreement or otherwise, then the holders of such series of Preferred
Securities will be entitled to vote on such amendment or action of the General
Partner.
So long as any series of Subordinated Debentures are held by Penelec
Capital, the General Partner may not, except as directed to do so by the Special
Representative, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the holder of the Subordinated Debentures
or the Trustee under the Debenture Indenture (the "Debenture Trustee"), or
executing any trust or power conferred on the Debenture Trustee, (ii) waive any
past default under the Debenture Indenture, (iii) exercise any right to rescind
or annul a declaration that the principal of all the Subordinated Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Debenture Indenture, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders of not less
than a majority of the aggregate stated liquidation preference of all series of
Preferred Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of Preferred
Securities. The General Partner shall notify all holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to any series of Subordinated Debentures.
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DESCRIPTION OF THE GUARANTEE
The following is a summary of certain provisions of the Guarantee which
will be executed and delivered by the Company concurrently with the issuance of
each series of the Preferred Securities. Reference is made to the Guarantee,
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
General
Under the Guarantee, the Company will agree to pay (i) any accumulated and
unpaid distributions on the Preferred Securities to the extent that Penelec
Capital has funds on hand legally available therefor, (ii) the applicable
redemption price payable with respect to any Preferred Securities called for
redemption by Penelec Capital to the extent that Penelec Capital has funds on
hand legally available therefor, and (iii) upon a liquidation of Penelec
Capital, other than in connection with a Distribution Event, the lesser of (a)
the portion of the partnership liquidation distribution applicable to the
Preferred Securities and (b) the amount of assets of Penelec Capital legally
available for distribution to holders of Preferred Securities in liquidation of
Penelec Capital (collectively, the "Guarantee Payments"). The Company will agree
to pay the Guarantee Payments, as and when due (except to the extent paid by
Penelec Capital), to the fullest extent permitted by law, regardless of any
defense, right of setoff or counterclaim which the Company may have or assert
against Penelec Capital, the General Partner, the Trust or a trustee of the
Trust. The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of
Preferred Securities or by causing Penelec Capital to pay such amounts to such
holders.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all general liabilities
of the Company, except trade accounts payable arising in the ordinary course of
business.
The Guarantee will constitute a guarantee of payment and not of
collection. The Guarantee will be held by the General Partner for the benefit of
the holders of the Preferred Securities. In the event of the appointment of a
Special Representative, the Special Representative may enforce the Guarantee. If
no Special Representative has been appointed to enforce the Guarantee, the
General Partner will have the right to enforce the Guarantee on behalf of the
holders of the Preferred Securities. The holders of Trust Securities, together
with the holders of the Preferred Securities other than the Trust, representing
not less than 10% in aggregate stated liquidation preference of the Preferred
Securities, will have the right to direct the time, method and place of
conducting any proceeding to enforce any remedy available in respect of the
Guarantee, including the giving of directions to the General Partner or the
Special Representative, as the case may be. If the General Partner or the
Special Representative fails to enforce the Guarantee as above provided, any
holder of Trust Securities representing Preferred Securities, and any holder of
Preferred Securities other than the Trust, may institute a legal proceeding
directly against the Company to enforce the
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Company's obligations under the Guarantee without first instituting a legal
proceeding against Penelec Capital or any other person or entity. The Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by Penelec Capital and by complete performance of all
obligations of the Company contained in the Guarantee.
Relationship Among Guarantee, Subordinated Debentures and Preferred Securities
In addition to the obligations of the Company under the Guarantee, the
Debenture Indenture provides that the Company shall cause the General Partner to
remain the general partner of Penelec Capital and timely perform all its duties
as such (including the duty to pay distributions on the Preferred Securities),
which include, among other things, the General Partner's duties under the
Partnership Agreement to directly pay all costs and expenses of Penelec Capital
(for the purpose of insuring that payment of principal and interest by the
Company on the Subordinated Debentures will be sufficient to allow payment in
full to the holders of the Preferred Securities). While the assets of the
General Partner will not be available for making distributions on the Preferred
Securities, they will be available for payment of the expenses of Penelec
Capital. Accordingly, the Guarantee and the Debenture Indenture, together with
the related covenants contained in the Partnership Agreement and the Company's
obligations under the Subordinated Debentures, provide for the Company's full
and unconditional guarantee of the Preferred Securities as set forth above.
Certain Covenants of the Company
Under the Guarantee, the Company will covenant that, so long as any
Preferred Securities remain outstanding, neither the Company nor any majority
owned subsidiary of the Company shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock (other than dividends by a wholly owned subsidiary) if at such
time the Company shall be in default with respect to its payment obligations
under the Guarantee or there shall have occurred any event that, with the giving
of notice or the lapse of time or both, would constitute an event of default
under the Debenture Indenture.
Amendments
Except with respect to any changes which do not materially adversely
affect the rights of holders of Preferred Securities (in which case no vote will
be required), the Guarantee may be amended only with the prior approval of the
holders of Trust Securities, together with the holders of Preferred Securities
other than the Trust, representing not less than a majority of the aggregate
stated liquidation preference of the outstanding Preferred Securities.
Merger of the Company
So long as the Preferred Securities remain outstanding, the Company will
maintain its corporate existence; provided that the Company may consolidate with
or merge with or into any other person or sell, convey, transfer or lease all or
substantially all its assets (either in one transaction or a series of
transactions) to any person if the successor person
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shall be organized and existing under the laws of the United States or any state
thereof or the District of Columbia and shall expressly assume the obligations
of the Company under the Guarantee.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable redemption price of all Preferred Securities or
upon full payment of the amounts payable with respect to the Preferred
Securities upon liquidation of Penelec Capital or upon the occurrence of a
Distribution Event. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payments of any sums paid under the Preferred Securities
or the Guarantee.
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DESCRIPTION OF THE SUBORDINATED DEBENTURES
AND THE DEBENTURE INDENTURE
The following is a summary of certain terms and provisions of the
Subordinated Debentures and the Debenture Indenture. Reference is made to the
Debenture Indenture, which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
General
The Subordinated Debentures will be unsecured, subordinated obligations of
the Company issued under the Debenture Indenture (the "Debenture Indenture").
The Subordinated Debentures will be in a principal amount equal to the aggregate
stated liquidation preference of the corresponding series of Preferred
Securities plus the General Partner's capital contribution in Penelec Capital,
will bear interest at a rate equal to the distribution rate on the Preferred
Securities payable on the distribution dates for the Preferred Securities, will
have maturity and redemption provisions corresponding to the redemption
provisions of the Preferred Securities and will be subject to mandatory
redemption upon the dissolution and liquidation of Penelec Capital other than in
connection with a Distribution Event.
The Company will deliver the Subordinated Debentures to the General
Partner to be held on behalf of the holders of the Preferred Securities. The
Subordinated Debentures will be delivered by the Company to evidence the loan by
Penelec Capital to the Company of an amount equal to the proceeds received from
the sale of the Preferred Securities, plus the General Partner's concurrent
capital contribution in Penelec Capital.
Redemption
The Subordinated Debentures will be subject to mandatory redemption upon
the liquidation and dissolution of Penelec Capital other than in connection with
a Distribution Event or upon redemption of the Preferred Securities and as
described in the Prospectus Supplement.
If the Company gives a notice of redemption in respect of Subordinated
Debentures, then, except as set forth below, on or prior to the redemption date,
the Company shall deposit with the paying agent funds sufficient to pay the
applicable redemption price and will give irrevocable instructions and authority
to pay the applicable redemption price. If notice of redemption shall have been
given, if required, and the funds so deposited, then the Subordinated Debentures
called for redemption shall become due and payable on the redemption date and
upon the redemption date, interest will cease to accrue on the Subordinated
Debentures called for redemption and such Subordinated Debentures will no longer
be deemed to be outstanding.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Debenture Trustee, on or
prior to the date fixed for such redemption, of money sufficient to pay the
applicable redemption price on such Subordinated Debentures and, that if such
money has not been so received, such notice will be of no force and effect and
the Company will not be required to redeem such Subordinated Debentures.
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Additional Interest
If at any time 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 also will 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 not be less than the amounts Penelec Capital would have received had no
such taxes, duties or governmental charges been imposed.
Subordination
The Debenture Indenture provides that all payments by the Company in
respect of the Subordinated Debentures shall be subordinated to the prior
payment in full of all amounts payable on Senior Indebtedness. The term "Senior
Indebtedness" means (i) the principal of and premium, if any, in respect of (a)
indebtedness of the Company for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds or other similar instruments; including purchase
money obligation, 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 Subordinated Debentures.
Upon any payment or distribution of assets or securities of the Company,
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 Penelec Capital (as
holder of the Subordinated Debentures), the Debenture Trustee on behalf of such
holder or any Special Representative appointed by the holders of the Preferred
Securities shall be entitled to receive from the Company any payment of
principal of or interest on or any other amounts in respect of the Subordinated
Debentures or distribution of any assets or securities.
No direct or indirect payment by or on behalf of the Company of principal
of or interest on the Subordinated Debentures, whether pursuant to the terms of
the Subordinated Debentures or upon acceleration or otherwise, shall 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
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default pursuant to which the maturity of Senior Indebtedness has been
accelerated and, in either case, requisite notice has been received by the
Debenture Trustee and such default shall not have been cured or waived by or on
behalf of the holders of such Senior Indebtedness.
If the Debenture Trustee, Penelec Capital (as holder of the Subordinated
Debentures) or any Special Representative appointed by the holders of the
Preferred Securities, shall have received any payment on account of the
principal of or interest on the Subordinated Debentures when such payment is
prohibited and before all amounts payable on, under or in connection with Senior
Indebtedness are paid in full, then such payment shall be received and held in
trust for the holders of Senior Indebtedness and shall be paid over or delivered
first to the holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full.
Nothing in the Debenture Indenture shall limit the right of the Debenture
Trustee, Penelec Capital (as holder of the Subordinated Debentures) or the
Special Representative to take any action to accelerate the maturity of the
Subordinated Debentures or to pursue any rights or remedies against the Company;
provided that all Senior Indebtedness shall be paid before Penelec Capital (as
holder of the Subordinated Debentures) is entitled to receive any payment from
the Company of principal of or interest on the Subordinated Debentures.
Upon the payment in full of all Senior Indebtedness, Penelec Capital (as
holder of the Subordinated Debentures) (and any Special Representative appointed
by the holders of the Preferred Securities) shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
assets of the Company made on such Senior Indebtedness until the Subordinated
Debentures shall be paid in full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which the Company may issue.
Certain Covenants of the Company
The Company will covenant that it and any majority owned subsidiary
will not declare or pay any dividend 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) (i) during
an Extension Period (as defined in the accompanying Prospectus Supplement or
Supplements), (ii) if 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 Debenture Indenture or (iii) if the Company shall be in default with
respect to its payment obligations under any Guarantee. The Company will also
covenant (i) to maintain direct or indirect 100% ownership of the General
Partner and will cause the General Partner to maintain 100% ownership of the
general partner interests of Penelec Capital, (ii) to cause the General Partner
to at all times maintain "fair market net worth " of at least 10% of the total
capital contributions (less redemptions) to Penelec Capital and to maintain
General Partner interests representing 3% of all interests in the capital,
income, gain, loss, deduction and credit of Penelec Capital, (iii) to cause the
General Partner to timely perform all of its duties as general partner of
Penelec Capital (including the duty to pay distributions on the Preferred
Securities), and (iv) to use its reasonable
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efforts to cause Penelec Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for federal income tax purposes.
Penelec Capital may not waive compliance or waive any default in
compliance by the Company with any covenant or other term in the Debenture
Indenture without the approval of the Special Representative or without the
direction of the holders of a majority of the aggregate stated liquidation
preference of the Preferred Securities.
Modification of the Debenture Indenture without Approval
The Debenture Indenture contains provisions permitting the Company and the
Debenture Trustee, without the consent of the Special Representative or Penelec
Capital (as holder of the Subordinated Debentures), to modify the Debenture
Indenture or any supplemental indenture: (i) to cure any ambiguity, defect or
inconsistency; (ii) to comply with the provisions of the Debenture Indenture
regarding a successor to the Company; (iii) to provide for uncertificated
Subordinated Debentures in addition to or in place of certificated Subordinated
Debentures; (iv) to make any other change that does not adversely affect the
rights of any holder of the Subordinated Debentures; (v) to comply with any
requirement for qualification of the Debenture Indenture under the Trust
Indenture Act of 1939, as amended; and (vi) to set forth the terms and
conditions of any series of Subordinated Debentures.
Modifications of the Debenture Indenture with Approval
The Debenture Indenture contains provisions permitting the Company the
Debenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the Subordinated Debentures which are affected by the
amendment or waiver, to amend the Debenture Indenture or the Subordinated
Debentures or to waive compliance by the Company by the Company with any
provisions of the Debenture Indenture or the Subordinated Debentures; provided
that no such amendment or waiver may, without the consent of the holder of each
outstanding Subordinated Debenture affected thereby, (a) reduce the principal
amount of the Subordinated Debentures, (b) reduce the percentage of principal
amount of outstanding Subordinated Debentures of any series, the consent of
holders of which is required for amendment of the Debenture Indenture or for
waiver of compliance with certain provisions of the Debenture Indenture or for
waiver of certain defaults, (c) change the stated maturity date of the principal
of, or the interest or the rate of interest on, the Subordinated Debentures, (d)
change the redemption provisions applicable to the Subordinated Debentures
adversely to the holders thereof, (e) impair the right to institute suit for the
enforcement of any payment with respect to the Subordinated Debentures, (f)
change the currency in which payment with respect to the Subordinated Debentures
are to be made, (g) change the subordination provisions applicable to the
Subordinated Debentures adversely to the holders thereof, or (h) waive a default
in the payment of the principal of, or interest on, any Subordinated Debenture.
Events of Default
The following are Events of Default under the Debenture Indenture: (i)
default for 15 days in payment of any interest on any series of the Subordinated
Debentures (other than as may be permitted by the terms thereof
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and as described in a Prospectus Supplement); (ii) default in payment of
principal of (or premium, if any, on) any Subordinated Debentures; (iii) default
for 60 days after notice in the performance of any other covenant or agreement
in the Debenture Indenture or any series of Subordinated Debentures, or (iv)
certain events of bankruptcy, insolvency or reorganization of the Company. In
case an Event of Default under the Debenture Indenture shall occur and be
continuing (other than an Event of Default relating to bankruptcy, insolvency or
reorganization of the Company, in which case principal and interest on all of
the Subordinated Debentures shall become immediately due and payable), the
Debenture Trustee, Penelec Capital (as holder of the Subordinated Debentures) or
the Special Representative may declare the principal of all the Subordinated
Debentures to be due and payable. Under certain circumstances, a declaration of
acceleration with respect to Subordinated Debentures may be rescinded and past
defaults (except, unless theretofore cured, a default in the payment of
principal of or interest on the Subordinated Debentures) may be waived only by
the Special Representative or by Penelec Capital at the direction of the holders
of a majority in aggregate principal amount of the Subordinated Debentures
outstanding liquidation preference of Preferred Securities. The Company is
required to furnish to the Debenture Trustee annually a statement as to the
performance by the Company of its obligations under the Debenture Indenture and
as to any default in such performance.
Enforcement of Certain Rights of Holders of Preferred Securities
So long as any Subordinated Debentures are held by Penelec Capital, the
holders of the Preferred Securities will have the rights referred to under
"Description of the Preferred Securities--Voting Rights," including the right to
appoint a Special Representative authorized to exercise the rights of Penelec
Capital, as the holder of the Subordinated Debentures, to declare the principal
of and interest on the Subordinated Debentures due and payable and to enforce
the obligations of the Company under the Subordinated Debentures and the
Debenture Indenture directly against the Company, without first proceeding
against Penelec Capital or any other person or entity.
Consolidation, Merger, Sale or Conveyance
The Debenture Indenture provides that the Company may not consolidate with
or merge with or into, or sell, convey, transfer or lease all or substantially
all its assets (either in one transaction or a series of transactions) to any
person unless, among other things (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, and shall expressly assume by a supplemental indenture all
of the obligations of the Company under the Subordinated Debentures and the
Debenture Indenture and (ii) immediately prior to and after giving effect to
such transaction, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have happened and be
continuing. Upon any such consolidation, merger, sale, transfer or other
disposition of the assets of the Company substantially as an entirety, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Debenture
Indenture with the same effect as if such successor corporation had been named
as the Company therein and the Company will be released from all obligations
under the Debenture Indenture.
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For purposes of the Debenture Indenture, the conveyance or other transfer by the
Company of (a) all or any portion of its facilities for the generation of
electric energy, or (b) all of its facilities for the transmission of electric
energy, in each case considered alone or in combination with properties
described in the other clause, shall in no event be deemed to constitute a
conveyance or other transfer of all the assets of the Company, as or
substantially as an entirety.
Defeasance And Discharge
Under the terms of the Debenture Indenture, the Company will be deemed to
have paid and discharged the entire indebtedness of the Subordinated Debentures
if the Company irrevocably deposits with the Debenture Trustee or other paying
agent, in trust (i) cash and/or (ii) United States Government Obligations (as
defined in the Debenture Indenture), which through the payment of interest
thereon and principal thereof in accordance with their terms will provide cash
in an amount sufficient to pay all the principal of, premium, if any, and
interest on, the Subordinated Debentures then outstanding on the dates such
payments are due in accordance with the terms of the Subordinated Debentures. A
condition to any such discharge is the delivery by the Company to the Debenture
Trustee of either a private Internal Revenue Service Ruling or an opinion of
counsel to the effect that the holders of the Subordinated Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance or discharge of the Debenture Indenture.
Information Concerning the Debenture Trustee
Subject to the provisions of the Debenture Indenture relating to its
duties, the Debenture Trustee will be under no obligation to exercise any of its
rights or powers under the Debenture Indenture, unless the Debenture Trustee
receives security and indemnity reasonably satisfactory to it. Subject to such
provision for indemnification, the holders of a majority in principal amount of
the Subordinated Debentures then outstanding thereunder or the Special
Representative will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee
thereunder, or exercising any trust or power conferred on the Debenture Trustee.
The Debenture Indenture contains limitations on the right of the Debenture
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 Debenture Trustee may be deemed to
have a conflicting interest and may be required to resign as Debenture Trustee
if at the time of default under the Debenture Indenture it is a creditor of the
Company. The United States Trust Company of New York also acts as the Senior
Note Trustee and the Mortgage Trustee.
PLAN OF DISTRIBUTION
The Company and/or the Trust may sell the Senior Notes and Trust
Securities: (i) directly to purchasers; (ii) to or through underwriters; or
(iii) through agents or dealers. The Prospectus Supplement with respect to the
each series of Senior Notes and Trust Securities will set forth the terms of the
offering thereof, including the name or names of any such underwriters,
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agents or dealers; the purchase price of and the net proceeds to the Company
and/or the Trust from such sale; any underwriting discounts and commissions or
agency fees and other items constituting underwriters' or agents' compensation;
the initial public offering price; any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchange on which such series of
Senior Notes or Trust Securities may be listed. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are used in any sale, the Senior Notes or Trust
Securities, as the case may be, will be acquired by such underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Senior Notes and Trust
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering will be named in the Prospectus Supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Senior
Notes or Trust Securities, as the case may be, will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such series of Senior Notes or Trust Securities if any are purchased.
If dealers are utilized in a sale of Senior Notes or Trust Securities, the
Company and/or the Trust will sell such securities to the dealers as principal.
The dealers may then resell such Senior Notes or Trust Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Senior Notes and Trust Securities may be sold directly by the Company
and/or the Trust or through agents designated by the Company and/or the Trust
from time to time. Any agent involved in the offer or sale of the Senior Notes
or Trust Securities with respect to which this Prospectus is delivered will be
named, and any commissions payable by the Company and/or the Trust to such agent
will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
Agents, dealers and underwriters may be entitled under agreements with the
Company and/or the Trust to indemnification by the Company and/or the Trust
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments which such agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for the Company and/or the Trust in the ordinary course of business.
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LEGAL MATTERS
Certain legal matters will be passed upon for the Company, the Trust and
Penelec Capital by Berlack, Israels & Liberman LLP, New York, New York and
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania and for the
underwriters by Thelen Reid & Priest LLP, New York, New York. Certain matters of
Delaware law relating to the validity of the Trust Securities and Preferred
Securities will be passed upon on behalf of the Company, the Trust, Penelec
Capital and the General Partner by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Company, the Trust, Penelec Capital
and the General Partner. Berlack, Israels & Liberman LLP, Ballard Spahr Andrews
& Ingersoll, LLP and Thelen Reid & Priest LLP may rely on the opinion of
Richards, Layton & Finger, P.A. as to matters of Delaware law. Berlack, Israels
& Liberman LLP and Thelen Reid & Priest LLP may rely on the opinion of Ballard
Spahr Andrews & Ingersoll, LLP as to matters of Pennsylvania law. Attorneys of
Berlack, Israels & Liberman LLP own an aggregate of 14,560 shares of the Common
Stock of the Company's parent, GPU, Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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======================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE
HEREBY EXCEPT AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, NO SUCH INFORMATION OR REPRESENTATIONS SHOULD BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, PENELEC CAPITAL OR THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE TRUST SECURITIES OR THE SENIOR NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
PAGE
Available Information............... 4
Incorporation Of Certain Documents
By Reference...................... 5
Pennsylvania Electric Company....... 6
Penelec Capital Trust............... 6
Penelec Capital II, L.P............. 7
Financing Program................... 7
Use Of Proceeds..................... 7
Company Coverage Ratios............. 8
Accounting Treatment................ 8
Description Of Senior Notes......... 9
Description Of Senior Note Mortgage
Bonds............................. 19
Description Of The Trust Securities. 24
Description Of The Preferred Securities 27
Description Of The Guarantee........ 30
Description Of The Subordinated
Debentures And The Debenture Indenture 33
Plan Of Distribution ............... 39
Legal Matters....................... 40
Experts............................. 40
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Registration Fee... $213,875
NYSE Listing Fee...................................... $ 50,000
Blue Sky Fees......................................... $ 5,000
* Accountants' Fees and Expenses........................ $ 25,000
* Company Counsel's Fees and Expenses................... $300,000
* Trustees' Fees and Expenses, including Counsel and
Authentication Fees................................... $ 30,000
* Printing of Registration Statement, Prospectus, Prospectus
Supplements, Supplemental Indentures, etc............. $ 25,000
* Rating Agencies' Fees................................. $ 50,000
* Miscellaneous......................................... $ 41,125
----------
*Total Expenses........................................ $740,000
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*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of the Company provide, in part, as follows:
"32. A director shall not be personally liable for monetary damages as
such for any action taken, or any failure to take any action, on or after
January 27, 1987 unless the director has breached or failed to perform the
duties of his office under Section 1721 of the Pennsylvania Business Corporation
Law, and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. The provisions of this subsection (a) shall not
apply to the responsibility or liability of a director pursuant to any criminal
statute, or the liability of a director for the payment of taxes pursuant to
local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
whether formal or informal, and whether brought by or in the right of the
corporation or otherwise, by reason of the fact that he was a director, officer
or employee of the corporation (and may indemnify any person who was an agent of
the corporation), or a person serving at the request of the corporation as a
director, officer, partner, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise to
the fullest extent permitted by law, including without limitation
indemnification against expenses (including attorneys' fees and disbursements),
damages, punitive damages, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such proceeding unless the act or failure to act giving rise to the claim for
indemnification is finally determined by a court to have constituted willful
misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys' fees and
disbursements) actually and reasonably incurred in defending a civil or criminal
action, suit or proceeding on behalf of any person entitled to
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indemnification under subsection (b) in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation, and may pay such expenses in advance on
behalf of any agent on receipt of a similar undertaking. The financial ability
of such person to make such repayment shall not be a prerequisite to the making
of an advance.
(d) For purposes of this Section: (i) the corporation shall be deemed to
have requested an officer, director, employee or agent to serve as fiduciary
with respect to an employee benefit plan where the performance by such person of
duties to the corporation also imposes duties on, or otherwise involves services
by, such person as a fiduciary with respect to the plan; (ii) excise taxes
assessed with respect to any transaction with an employee benefit plan shall be
deemed "fines"; and (iii) action taken or omitted by such person with respect to
an employee benefit plan in the performance of duties for a purpose reasonably
believed to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the best interests
of the corporation.
(e) To further effect, satisfy or secure the indemnification obligations
provided herein or otherwise, the corporation may maintain insurance, obtain a
letter of credit, act as self-insurer, create a reserve, trust, escrow, cash
collateral or other fund or account, enter into indemnification agreements,
pledge or grant a security interest in any assets or properties of the
corporation, or use any other mechanism or arrangement whatsoever in such
amounts, at such costs, and upon such other terms and conditions as the Board of
Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be deemed a
contract between the corporation and the person entitled to indemnification
under this Section pursuant to which the corporation and each such person intend
to be legally bound. Any repeal, amendment or modification hereof shall be
prospective only and shall not limit, but may expand, any rights or obligations
in respect of any proceeding whether commenced prior to or after such change to
the extent such proceeding pertains to actions or failures to act occurring
prior to such change.
(g) The indemnification, as authorized by this Section, shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in any
official capacity and as to action in any other capacity while holding such
office. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section shall continue as to a person who has ceased to be an
officer, director, employee or agent in respect of matters arising prior to such
time, and shall inure to the benefit of the heirs, executors and administrators
of such person."
The Partnership Agreement provides, in part, as follows:
Section 9.03. Indemnification. To the fullest extent permitted by
applicable law, except as set forth in Section 8.03(c), an Indemnified Person
shall be entitled to indemnification from the Partnership for any loss, damage
or claim incurred by such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
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Partnership and in a manner reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of willful
misconduct, gross negligence or fraud with respect to such acts or omissions;
provided, however, that any indemnity under this Section 9.03 shall be provided
out of and to the extent of Partnership assets only, and except as otherwise
expressly provided in Section 9.01(a) or by the Delaware Act, no Covered Person
shall have any personal liability on account thereof. To the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Partnership of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified as authorized in this Section 9.03.
"Affiliate" shall mean, with respect to the Person to which it refers, a
Person that directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such subject Person.
"Covered Person" shall mean any Partner, any Affiliate of a Partner or any
officers, directors, shareholders, partners, their respective Affiliates, or any
employee or agent of the Partnership or its Affiliates.
"Delaware Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. Section 17-101, et seq., as amended from time to
time or any successor statute thereto.
"General Partner" shall mean Penelec Preferred, in its capacity as general
partner of the Partnership, together with any successor thereto that becomes a
general partner of the Partnership pursuant to the terms of this Agreement.
"Indemnified Person" shall mean the General Partner, any Affiliate of the
General Partner or any officers, directors, shareholders, partners, members,
employees, representatives or agents of the General Partner, or any employee or
agent of the Partnership or its Affiliates.
"Partnership" shall mean Penelec Capital II, L.P., a limited partnership
formed under the laws of the State of Delaware.
In addition, applicable Delaware partnership law provides authority for
limited partnerships to indemnify under certain circumstances any partner or
other person from and against any and all claims and demands.
Section 1741 of the Pennsylvania Business Corporation Law authorizes a
corporation to provide in its by-laws for indemnification to be granted under
certain circumstances to its officers, directors and other agents against
expenses and liabilities incurred in connection with proceedings arising out of
such persons having taken action or failed to take action on behalf of the
corporation.
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The Trust Agreement provides, in part, as follows:
Section 10.4 Indemnification.
(a) (i) To the fullest extent permitted by applicable law, the Grantor
shall indemnify and hold harmless any Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was an Indemnified Person against expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Grantor shall indemnify, to the fullest extent permitted by
law, any Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Trust to procure a judgment in its favor by reason of the fact that he is
or was an Indemnified Person against expenses (including reasonable attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust
and except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Indemnified Person shall have been adjudged to
be liable to the Trust unless and only to the extent that the Court of Chancery
of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(iii) To the extent that an Indemnified Person shall be successful
on the merits or otherwise (including dismissal of an action without prejudice
or the settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (i) and (ii) of this
Section 10.4(a), or in defense of any claim, issue or matter therein, he shall
be indemnified, to the fullest extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Grantor only as
authorized in the specific case upon a determination that indemnification of the
Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) and (ii).
II-5
<PAGE>
(v) To the fullest extent permitted by law, expenses (including
attorneys' fees) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Grantor
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Grantor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Grantor if a
determination is reasonably and promptly made that, based upon the facts known
to the Grantor at the time such determination is made, such Indemnified Person
acted in bad faith or in a manner that such Person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to any criminal
proceeding, that such Indemnified Person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Grantor, independent legal counsel or Holder of the Trust
Securities reasonably determine that such Person deliberately breached his duty
to the Trust.
(vi) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger or conversion, so that any Person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.
(vii) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a person.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to
time, or any successor legislation.
"Company Indemnified Person" means: (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any partners, employees,
representatives or agents of any Regular Trustee; or (d) any officer,
director, shareholder, member, partner, employee, representative or agent
of the Trust or its Affiliates.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b) of the
Trust Agreement.
II-6
<PAGE>
"General Partner" means Penelec Preferred Capital II, Inc., a Delaware
corporation, as general partner of the Grantor, and any successor thereto
pursuant to the terms of the Partnership Agreement.
"Grantor" means Penelec Capital II, L.P., a Delaware limited partnership
formed pursuant to the Partnership Agreement, and any successor entity thereto.
"Holder" means the Person in whose name a certificate representing one or
more Trust Securities is registered on the Register maintained by the Registrar
for such purposes, such Person being a beneficial owner within the meaning of
the Business Trust Act.
"Indemnified Person" means: a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of the Grantor dated as of ---------, 1999, as amended from time to
time, together with any Action (as defined in the Partnership Agreement)
established by the General Partner.
"Person" means any natural person, general partnership, limited
partnership, corporation, limited liability company, joint venture, trust,
business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Preferred Securities" means the cumulative preferred securities,
representing preferred limited partner interests of the Grantor, or any
Successor Securities issued to the Trust and held by the Trustee from time to
time under this Trust Agreement for the benefit of the Holders.
"Property Trustee" has the meaning set forth in Section 7.3 of the
Trust Agreement.
"Register" has the meaning set forth in Section 5.3 of the Trust Agreement.
"Registrar" means any bank or trust company appointed to register Trust
Security certificates and to register transfers thereof as herein provided.
"Regular Trustee" has the meaning set forth in Section 7.5 of the
Trust Agreement.
"Successor Securities" has the meaning set forth in Section 13.02(e)
of the Partnership Agreement.
"Trust" means the trust governed by the Trust Agreement.
"Trust Security" or "Trust Securities" means a Trust Security issued
hereunder representing a beneficial interest in the Trust equal to and
representing a Preferred Security and evidenced by a certificate executed by the
Property Trustee pursuant to Article V of the Trust Agreement.
II-7
<PAGE>
In addition, applicable Delaware trust law provides authority for trusts
to indemnify under certain circumstances any person from and against any and all
claims and demands.
ITEM 16. EXHIBITS.
1-A - Form of Underwriting Agreement relating to the Trust
Securities - to be filed by Form 8-K.
1-B - Form of Underwriting Agreement for the Senior Notes -
to be filed by Form 8-K.
3-A - Restated Articles of Incorporation of the Company
Incorporated by reference to Exhibit 3A to the Company's
Annual Report on Form 10-K for the year 1991, SEC File No.
1-3522.
3-B - Amended By-Laws of the Company - Incorporated by reference
to Exhibit B-45 to GPU, Inc.'s Annual Report on Form U5S for
the year 1997, SEC File No. 30-126.
3-C* - Certificate of Incorporation of General Partner.
3-D* - By-Laws of General Partner.
3-E* - Certificate of Limited Partnership of Penelec Capital.
3-F* - Form of Limited Partnership Agreement of Penelec Capital.
3-G* - Form of Amended and Restated Limited Partnership
Agreement of Penelec Capital.
3-H* - Form of Action Creating Series A Preferred Securities.
4-A* - Form of Subordinated Debenture Indenture.
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 - included in
Exhibit 4-A hereto.
4-B* - Form of Note Indenture for the Senior Notes.
4-B(a) - Cross-reference sheet showing location in the Note Indenture
of provisions of Sections 310(a) through 318(a) of the Trust
Indenture Act of 1939 - included in Exhibit 4 -B hereto.
4-C - Form of Supplemental Indenture for the First Mortgage Bonds.
4-E* - Form of Preferred Security Certificate -
Incorporated by reference to
Exhibit A to Exhibit 3-G hereto.
4-F* - Form of Subordinated Debenture - Incorporated by reference
to form of Subordinated Debenture contained in Exhibit 4-A.
II-8
<PAGE>
4-G* - Form of Senior Notes - Incorporated by reference to Exhibits
A through D of Exhibit 4-B hereto.
4-H* - Form of First Mortgage Bonds- Incorporated by reference to
Exhibit A of Exhibit 4-C hereto.
4-I* - Form of Payment and Guarantee Agreement.
4-J* - Certificate of Trust for the Trust.
4-K* - Trust Agreement for the Trust.
4-L* - Form of Amended and Restated Trust Agreement for the Trust.
4L(A)* - Cross-reference sheet showing location in the Amended and
Restated Trust Agreement of Sections 310(a) through 318(a) of
the Trust Indenture Act of 1939 - included in Exhibit 4-L
hereto.
4-M - Form of Certificate representing the Trust Securities
incorporated by reference to Exhibit A to Exhibit 4-K hereto.
4-N - Mortgage and Deed of Trust, dated January 1, 1942 with
United States Trust Company of New York, Successor Trustee,
as amended and supplemented by fourteen supplemental
indentures - Incorporated by reference to the Company's
Instruments of Indebtedness Nos. 1 to 20, inclusive, filed
as part of Amendment No. 1 to the Annual Report of General
Public Utilities Corporation on Form U-5-S for the year
1959, SEC File Nos. 30-126 and 1-3292.
4-N(1) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated May 1, 1961 through December 1, 1977 - Incorporated by
reference to Exhibit 2-D(1) through 2-D(19), Registration No.
2-61502.
4-N(2) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated June 1, 1978 through May 1, 1989 - Incorporated by
reference to Exhibits 4-A(2) through 4-A(7), Registration No.
33-49669.
4-N(3) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated December 1, 1990 and March 1, 1992 - Incorporated by
reference to Exhibits 4-A(8) and 4-A(9), Registration No.
33-45312.
4-N(4) - Supplemental Indenture, dated June 1, 1993 - Incorporated by
reference to Exhibit C-73, Annual Report of General Public
Utilities Corporation on Form U-5-S for the year 1993, SEC
File No. 30-126.
4-N(5) - Supplemental Indenture, dated November 1, 1995 Incorporated
by reference to Exhibit 4-C-11 to the Company's Annual Report
on Form 10-K for the year 1995, SEC File No.
1-3522.
II-9
<PAGE>
4-N(6) - Supplemental Indenture, dated August 15, 1996 - Incorporated
by reference to Exhibit 4-C-12 to the Company's Annual Report
on Form 10-K for the year 1996, SEC File No. 1-3522.
5-A - Opinion of Berlack, Israels & Liberman LLP.
5-B - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
5-C - Opinion of Richards, Layton & Finger, P.A.
8 - Opinion of Carter,Ledyard & Milburn- to be filed by Form 8-K.
12-A* - Statement Showing Computation of Ratio of Earnings to Fixed
Charges and Statement Showing Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends.
Incorporated by reference to Exhibit 12D to the Company's
Annual Report on Form 10-K for the year 1997, SEC File No.
1-3522.
12-B - Statement Showing Computation of Ratio of Earnings to Fixed
Charges and Statement Showing Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
13 - The Company's Annual Report on Form 10-K for the year 1997 -
incorporated by reference to SEC File No 1-3522.
23-A - Consent of Berlack, Israels & Liberman LLP (included in
their opinion filed as Exhibit 5-A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll, LLP (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 (to be included in
their opinion filed as Exhibit 8).
23-E* - Consent of PricewaterhouseCoopers, LLP
24* - Power of Attorney-included in signature pages.
24-A - Power of Attorney of B.L. Levy.
25-A* - Statement of Eligibility under the Trust Indenture Act of
1939 of United States Trust Company of New York, as Trustee
under the Senior Note Indenture and the Debenture Indenture.
25-B* - Statement of Eligibility under the Trust Indenture Act of
1939 of The Bank of New York, as Property Trustee under the
Trust Agreement.
26-A - Form of Invitation for Competitive Proposals for the Senior Notes.
II-10
<PAGE>
26-B - Form of Statement of Terms and Conditions Relating to the
Proposals for the Senior Notes.
26-C - Form of Proposal for the Senior Notes.
- ---------
*Previously filed.
The Exhibits listed above which have heretofore been filed with the
Securities and Exchange Commission and which are designated in prior filings as
noted above, are hereby incorporated by reference and made a part hereof with
the same effect as if filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "1933 Act");
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrants pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-11
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the 1933 Act,
each filing of the Registrants annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(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 Registrants 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 declared 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.
(7) The Trust and Penelec Capital hereby undertake to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Registrants
pursuant to the provisions under Item 15 above, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ D. Baldassari
---------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities with respect to Pennsylvania Electric
Company and on the date indicated:
Signature Title Date
* Chairman, Chief January 11, 1999
- ------------------------
(F.D. Hafer) Executive Officer (Principal
Executive Officer) and Director
/s/ D. Baldassari President and Director January 11, 1999
- ------------------------
(D. Baldassari)
/s/ B.L. Levy Vice President and January 11, 1999
(B.L. Levy) Chief Financial Officer
(Principal Financial Officer)
* Vice President, January 11, 1999
- ------------------------
(D.W. Myers) Comptroller (Principal
Accounting Officer)
and Director
* Director January 11, 1999
- ------------------------
(C. B. Snyder)
*By:/s/T.G. Howson
----------------------
T.G. Howson, attorney-in-fact
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENELEC CAPITAL II, L.P.
By: Penelec Preferred Capital II, Inc.
Its General Partner
By: /s/ D. Baldassari
--------------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 1 to the Registration Statement has been signed below by the following
person in the capacity on behalf of Penelec Preferred Capital II, Inc., as the
general partner of Penelec Capital II, L.P., and on the date indicated:
Signature Title Date
/s/ D. Baldassari Sole Director January 11, 1999
- -------------------
(D. Baldassari)
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENELEC CAPITAL TRUST
By: Penelec Capital II, L.P.,
as grantor
By: Penelec Preferred Capital II, Inc.,
as general partner
By: /s/ D. Baldassari
---------------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 1 to the Registration Statement has been signed below by the following
person in the capacity on behalf of Penelec Preferred Capital II, Inc., as
general partner of Penelec Capital II, L.P., as grantor of Penelec Capital
Trust, on the date indicated:
Signature Title Date
/s/ D. Baldassari Sole Director January 11, 1999
- -------------------
(D. Baldassari)
II-15
EXHIBITS TO BE FILED BY EDGAR
Exhibits
4-C - Form of Supplemental Indenture for the First Mortgage Bonds.
5-A - Opinion of Berlack, Israels & Liberman LLP.
5-B - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
5-C - Opinion of Richards, Layton & Finger, P.A.
12-B - Statement Showing Computation of Ratio of Earnings to Fixed
Charges and Statement Showing Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
24-A - Power of Attorney of B.L. Levy.
26-A - Form of Invitation for Competitive Proposals for the Senior
Notes.
26-B - Form of Statement of Terms and Conditions Relating to the
Proposals for the Senior Notes.
26-C - Form of Proposal for the Senior Notes.
Exhibit 4-C
EXECUTED IN COUNTERPARTS OF
WHICH THIS IS COUNTERPART NO.
PENNSYLVANIA ELECTRIC COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK, SUCCESSOR TRUSTEE
--------------------
SUPPLEMENTAL INDENTURE
(First Mortgage Bonds, Senior Note Series --- due -----------)
--------------------
Dated as of , 199_
<PAGE>
TABLE OF CONTENTS
PAGE
Parties 1
Recitals 1
Granting Clauses 4
Excepted Property 6
Habendum 6
Subject Clause 6
Grant in Trust 6
ARTICLE I
SENIOR NOTE SERIES -- BONDS 6
SECTION 1.01 Creation of Senior Notes Series -- Bonds 6
SECTION 1.02 Dating of Senior Note Series -- Bonds 7
SECTION 1.03 Payment of Principal and Interest 7
SECTION 1.04 Credits with Respect to Senior Notes Series -- Bonds 7
SECTION 1.05 Registration of Senior Notes Series -- Bonds 7
SECTION 1.06 Transferability and Assignability of Senior Notes
Series -- Bonds. 7
SECTION 1.07 Redemption of Senior Note Series -- Bonds. 8
SECTION 1.08 Mandatory Repurchase of Senior Notes Series -- Bonds 8
SECTION 1.09 Related Series of Senior Note First Mortgage Bonds 9
SECTION 1.10 Satisfaction and Discharge 9
SECTION 1.11 Release Date 9
ARTICLE II
FORM OF THE SENIOR NOTE SERIES -- BONDS 9
SECTION 2.01 Form of Senior Notes Series -- Bonds 9
ARTICLE III
MISCELLANEOUS 16
SECTION 3.01 Covenants of the Company 16
SECTION 3.02 Indemnification of Trustee 17
SECTION 3.03 Table of Contents and Titles of
Articles not Part 17
SECTION 3.04 Original Indenture Confirmed as Amended and
Supplemented 17
SECTION 3.05 Execution in Counterparts 17
Names and Addresses of debtor and secured party 17
Testimonium 18
Signatures and seals 18
Acknowledgments 19
Certificate of Residence 20
Schedule A A-1
<PAGE>
SUPPLEMENTAL INDENTURE, dated as of ------------- ----, 199--, made and entered
into by and between PENNSYLVANIA ELECTRIC COMPANY, a corporation of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), party
of the first part, and UNITED STATES TRUST COMPANY OF NEW YORK, a company
organized under the laws of the State of New York (hereinafter sometimes called
the "Trustee"), as successor trustee under the Mortgage and Deed of Trust
hereinafter referred to, party of the second part.
WHEREAS, the Company heretofore executed and delivered its Mortgage and
Deed of Trust (hereinafter called the "Original Indenture"), dated as of the
first day of January, 1942, to Bankers Trust Company, as trustee, to secure the
First Mortgage Bonds of the Company, unlimited in aggregate principal amount and
issuable in series, from time to time, in the manner and subject to the
conditions set forth in the Mortgage (as hereinafter defined) and by said
Original Indenture granted and conveyed unto the Trustee, upon the trusts, uses
and purposes specifically therein set forth, certain real estate, franchises and
other property therein described, including property acquired after the date
thereof, except as therein otherwise provided; and
WHEREAS, indentures supplemental to and amendatory of the Original
Indenture have been executed and delivered by the Company and the Trustee,
namely, Supplemental Indentures dated March 7, 1942, April 28, 1943, August 20,
1943, August 30, 1943, August 31, 1943, April 26, 1944, April 19, 1945, October
25, 1945, as of June 1, 1946, as of November 1, 1949, as of October 1, 1951, as
of August 1, 1952, as of June 1, 1953, as of March 1, 1954, as of April 30,
1956, as of May 1, 1956, as of March 1, 1958, as of August 1, 1959, as of May 1,
1960, as of May 1, 1961, October 1, 1964, November 1, 1966, as of June 1, 1967,
as of August 1, 1968, as of May 1, 1969, as of April 1, 1970, as of December 1,
1971, as of July 1, 1973, as of June 1, 1974, as of December 1, 1974, as of
August 1, 1975, as of December 1, 1975, as of April 1, 1976, as of June 1, 1976,
as of July 1, 1976, as of November 1, 1976, as of November 30, 1977, as of
December 1, 1977, as of June 1, 1978, as of June 1, 1979, as of September 1,
1984, as of December 1, 1985, as of December 1, 1986, as of May 1, 1989, as of
December 1, 1990, as of March 1, 1992, as of June 1, 1993, as of November 1,
1995 and as of August 15, 1996, respectively; and the Original Indenture as
supplemented and amended by said Supplemental Indentures and by this
Supplemental Indenture is hereinafter referred to as the "Mortgage"; and
WHEREAS, the Original Indenture, certain of said Supplemental Indentures
and an Instrument of Resignation, Appointment and Acceptance dated as of October
27, 1995 among the Company, Bankers Trust Company and United States Trust
Company of New York have been duly recorded in mortgage books in the respective
Offices of the Recorders of Deeds in and for the Counties of Pennsylvania in
which this Supplemental Indenture is to be recorded, and in the mortgage records
of Garrett County, Maryland; and
WHEREAS, the Mortgage provides for the issuance of bonds thereunder in one
or more series, the form of each series of bonds and of the coupons to be
attached to the coupon bonds, if any, of each series to be substantially in the
forms set forth therein with such
<PAGE>
omissions, variations and insertions as are authorized or permitted by the
Mortgage and determined and specified by the Board of Directors of the
Company; and
WHEREAS, the Company has entered into an Indenture dated as of
- ----------_, 199- (the "Senior Note Indenture") with United States Trust Company
of New York, as trustee (the "Senior Note Trustee"), providing for the issuance
of notes thereunder (the "Senior Notes") from time to time, and pursuant to the
Senior Note Indenture the Company has agreed to issue to the Senior Note
Trustee, as security for the Senior Notes, a new series of bonds under the
Mortgage at the time of authentication of each series of Senior Notes issued
prior to the Release Date (as defined in the Senior Note Indenture); and
WHEREAS, for such purposes the Company desires to issue a new series of
bonds and by appropriate corporate action in conformity with the terms of the
Mortgage has duly determined to create a separate series of bonds, which shall
be designated as "First Mortgage Bonds, Senior Note Series due -------------"
(hereinafter sometimes referred to as the "Senior Note Series __ Bonds"), which
said Senior Note Series -- Bonds are to be substantially in the form set forth
in Article II hereof with the insertion of numbers, denominations, dated dates,
maturities, redemption prices and interest rates as determined in accordance
with the terms of the Mortgage; and
WHEREAS, the Senior Note Series -- Bonds shall be issued to the Senior
Note Trustee in connection with the issuance by the Company of its Senior Notes,
- ----% due ----, Series -- (the "Series -- Notes"); and
WHEREAS, all acts and things prescribed by law and by the charter and
by-laws of the Company necessary to make the Senior Note Series -- Bonds, when
executed by the Company and authenticated by the Trustee, as in the Mortgage
provided, valid, binding and legal obligations of the Company, entitled in all
respects to the security of the Mortgage, have been performed or will have been
performed prior to execution of such Senior Note Series -- Bonds by the Company
and authentication thereof by the Trustee; and
WHEREAS, provision is made in Sections 5.11 and 17.01 of the Original
Indenture for such further instruments and indentures supplemental to the
Original Indenture as may be necessary or proper (a) to carry out more
effectually the purposes of the Original Indenture; (b) expressly to subject to
the lien of the Original Indenture any property acquired after the date of the
Original Indenture and intended to be covered thereby, with the same force and
effect as though included in the granting clauses thereof; (c) to set forth the
terms and provisions of any series of bonds to be issued and the forms of the
bonds and coupons, if any, of such series; (d) to add such further covenants,
restrictions or conditions for the protection of the mortgaged and pledged
property and the holders of bonds as the Board of Directors of the Company and
the Trustee shall consider to be for the protection of the holders of bonds; and
(e) to cure any ambiguity of the Original Indenture which shall not adversely
affect the interests of the holders of the bonds; and
<PAGE>
[WHEREAS, the Company has acquired additional property; and it is desired
to add certain further covenants, restrictions and conditions for the protection
of the mortgaged and pledged property and the holders of bonds which the Board
of Directors of the Company and the Trustee consider to be for the protection of
the holders of bonds;] and the Company desires to issue the Senior Note Series
- ---Bonds; and the Company and the Trustee deem it advisable to enter into this
Supplemental Indenture for the purposes of carrying out the purposes of the
Original Indenture[, of expressly subjecting additional property to the lien of
the Mortgage,] of setting forth the terms and provisions of the Senior Note
Series --- Bonds, and the form of the Senior Note Series --- Bonds, [and of
setting forth such further covenants, restrictions and conditions]; and
WHEREAS, it was intended by the execution and delivery of the Original
Indenture and the aforesaid Supplemental Indentures to subject to the lien of
the Original Indenture, and to grant to the Trustee a security interest in, all
of the property, real, personal and mixed, then owned by the Company or
thereafter acquired by the Company, as and to the extent set forth therein,
subject to the provisions thereof, except such property as was therein expressly
excepted and excluded from the lien and operation thereof; and it is the
intention of the parties hereto, by the execution and delivery of this
Supplemental Indenture, to provide the Trustee with further assurances by also
creating in favor of the Trustee a security interest, pursuant to the provisions
of the Uniform Commercial Code, in such of the aforesaid property as may by law
be subjected to such a security interest, except such thereof as is expressly
excepted and excluded as aforesaid or herein; and
WHEREAS, the execution and delivery of this Supplemental Indenture have
been duly authorized by the Board of Directors of the Company at a meeting duly
called and held according to law, and all conditions and requirements necessary
to make this Supplemental Indenture a valid, binding and legal instrument in
accordance with its terms, for the purposes herein expressed, and the execution
and delivery hereof, in the form and terms hereof, have been in all respects
duly authorized;
NOW, THEREFORE, in order further to secure the payment of the principal
and interest of all bonds issued and to be issued under the Original Indenture
and any indenture supplemental thereto, including this Supplemental Indenture,
according to their tenor, purport and effect and the performance and observance
of all the covenants and conditions in said bonds and the Original Indenture and
indentures supplemental thereto, including this Supplemental Indenture,
contained, and for and in consideration of the premises and of the sum of One
Dollar ($1.00), lawful money of the United States of America, to the Company
duly paid by the Trustee at or before the unsealing and delivery hereof, and
other valuable consideration, the receipt whereof is hereby acknowledged, and
intending to be legally bound hereby, the Company has executed and delivered
this Supplemental Indenture, and hath granted, bargained, sold, released,
conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and
granted a security interest therein, and by these presents doth grant, bargain,
sell, release, convey, assign, transfer, mortgage, pledge, set over and confirm,
and grant a security interest therein, subject to the provisions of the
<PAGE>
Mortgage, unto United States Trust Company of New York, as Trustee, and to its
successors in the trust and to its and their assigns forever, all the properties
of the Company described or mentioned below, that is to say:
All property, real, personal and mixed, tangible and intangible, owned by
the Company on the date of the execution hereof or which may be hereafter
acquired by it (except such property as is in the Original Indenture or in any
indenture supplemental thereto, including this Supplemental Indenture, expressly
excepted from the lien and operation of the Original Indenture).
The property covered by this Supplemental Indenture shall include
particularly, among other property, without prejudice to the generality of the
language hereinbefore or hereinafter contained, the following described
property:
All the electric generating stations, station sites, stations, electric
reserve generating stations, substations, substation sites, steam plants, hot
water plants, hydro-electric stations, hydro-electric station sites, electric
transmission lines, electric distribution systems, steam distribution systems,
hot water distribution systems, regulator stations, regulator station sites,
office buildings, storeroom buildings, warehouse buildings, boiler houses,
plants, plant sites, service plants, coal, other mineral land mining rights and
privileges, coal storage yards, pole yards, electric works, power houses,
generators, turbines, boilers, engines, furnaces, dynamos, buildings,
structures, transformers, meters, towers, poles, tower lines, cables, pole
lines, tanks, storage holders, regulators, pipes, pipe-lines, mains, pipe
fittings, valves, drips, connections, tunnels, conduits, gates, motors, wires,
switch racks, switches, brackets, insulators, and all equipment, improvements,
machinery, appliances, devices, appurtenances, supplies and miscellaneous
property for generating, producing, transforming, converting, storing and
distributing electric energy, steam and hot water, together with all furniture
and fixtures located in the aforesaid buildings, and all land on which the same
or any part thereof are situated;
And all of the real estate, leases, leaseholds (except the last day of the
term of each lease and leasehold), and lands owned by the Company, including
land located on or adjacent to any river, stream or other water, together with
all flowage rights, flooding rights, water rights, riparian rights, dams and dam
sites and rights, flumes, canals, races, raceways, head works and diversion
works;
And all of the municipal and other franchises, licenses, consents,
ordinances, permits, privileges, rights, servitudes, easements and rights-of-way
and other rights in or relating to real estate or the occupancy of the same,
owned by the Company;
And all of the other property, real, personal or mixed, owned by the
Company, forming a part of any of the foregoing property or used or enjoyed or
capable of being used or enjoyed in connection therewith or in anywise
appertaining thereto, whether developed or undeveloped, or partially developed,
or whether now equipped and operating or not and
<PAGE>
wherever situated, and all of the Company's right, title and interest in and to
the land on which the same or any part thereof are situated or adjacent thereto;
And all rights for or relating to the construction, maintenance or
operation of any of the foregoing property through, over, under or upon any
public streets or highways or other lands, public or private;
And (except as in the Original Indenture or in any indenture supplemental
thereto, including this Supplemental Indenture, expressly excepted) all the
right, title and interest of the Company presently held or hereafter acquired in
and to all other property of any of the foregoing kinds or any other kind or
nature appertaining to and/or used and/or occupied and/or enjoyed in connection
with any property hereinbefore described;
And all the items of the kinds hereinabove mentioned including those
thereof now owned by the Company and those thereof hereafter acquired by the
Company;
[Without limitation of the generality of the foregoing, all of the parcels
of land and interests in land situate as set forth in Schedule A, attached
hereto and hereby made a part hereof, and buildings and improvements thereon
erected, owned by the Company, and whether used or not used in connection with
the Company's operations, all of which real estate was conveyed to the Company
or its predecessors in title as set forth by the conveyances set forth in said
Schedule A to which conveyances reference is made for a more particular
description;]
Also all other land and the buildings and improvements thereon erected
hereafter acquired;
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder or remainders and
(subject to the provisions of Section 9.01 of the Original Indenture) the tolls,
rents, revenues, issues, earnings, income, product and profits thereof, and all
the estate, right, title and interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that all the property, rights and
franchises hereafter acquired by the Company (except any in the Original
Indenture or in any indenture supplemental thereto, including this Supplemental
Indenture, expressly excepted) shall (subject to the provisions of Section 9.01
of the Original Indenture), to the extent permitted by law, be as fully embraced
within this Supplemental Indenture as if such property, rights and franchises
were now owned by the Company and/or specifically described herein and conveyed
hereby;
PROVIDED THAT, in addition to the reservations and exceptions herein
elsewhere contained, any property hereinbefore mentioned which has been released
by the Trustee from the lien of the Mortgage or disposed of by the Company in
accordance with the provisions of the Mortgage prior to the date of the
execution and delivery of this
<PAGE>
Supplemental Indenture, and the following, are not and are not intended to be
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over or confirmed hereunder or to have a security interest created
therein, and are hereby expressly excepted from this Supplemental Indenture and
from the lien and operation of the Mortgage, viz.: (1) cash and shares of stock
and certificates or evidence of interest therein and obligations (including
bonds, notes and other securities) not in the Original Indenture or in any
indenture supplemental thereto, including this Supplemental Indenture,
specifically pledged or covenanted so to be or deposited or delivered hereunder
or under any other supplemental indenture; (2) any goods, wares, merchandise,
equipment, materials or supplies held or acquired for the purpose of sale or
resale in the usual course of business or for consumption in the operation of
any properties of the Company, and automobiles and trucks; and (3) all
judgments, contracts, accounts and choses in action, the proceeds of which the
Company is not obligated as in the Original Indenture provided to deposit with
the Trustee hereunder; provided, however, that the property and rights expressly
excepted from this Supplemental Indenture in the above subdivisions (2) and (3)
shall (to the extent permitted by law) cease to be so excepted, in the event
that the Trustee or a receiver or trustee shall take possession of the mortgaged
and pledged property in the manner provided in Article X of the Original
Indenture, by reason of the occurrence of a completed default, as defined in
said Article X of the Original Indenture;
TO HAVE AND TO HOLD all such properties, real, personal and mixed,
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over or confirmed, or in which a security interest has been
granted, by the Company as aforesaid, or intended so to be, unto the Trustee and
its successors in the trust created in the Original Indenture and its and their
assigns forever;
SUBJECT, HOWEVER, to the reservations, exceptions, conditions, limitations
and restrictions contained in the several deeds, servitudes, franchises and
contracts or other instruments through which the Company acquired and/or claims
title to and/or enjoys the use of the properties mentioned above; and subject
also to such servitudes, easements, rights and privileges in, over, on, and/or
through said properties as have been granted to other persons prior to the date
of the execution and delivery of this Supplemental Indenture; and subject also
to encumbrances of the character in the Original Indenture defined as "excepted
encumbrances" insofar as the same may attach to any of the property embraced
herein;
IN TRUST NEVERTHELESS upon the terms, trusts, uses and purposes
specifically set forth in the Mortgage;
AND IT IS HEREBY FURTHER COVENANTED AND AGREED, and the Company and the
Trustee have mutually agreed, in consideration of the premises, as follows:
<PAGE>
ARTICLE I
SENIOR NOTE SERIES __ BONDS
SECTION 1.01. The Company hereby creates a series of bonds to be issued
under and secured by the Mortgage, to be designated and to be distinguished from
bonds of all other series by the title "First Mortgage Bonds, Senior Note Series
due ------------." The aggregate principal amount of the Senior Note Series __
Bonds which may be initially authenticated and delivered shall be limited to
- ------------------------------- ($----------), shall mature on ------------,
- ---- and shall be issued only as a single registered bond without coupons. The
serial numbers of bonds of the Senior Note Series -- Bonds shall be such as may
be approved by any officer of the Company, the execution thereof by any such
officer either manually or by facsimile signature to be conclusive evidence of
such approval. Senior Note Series -- Bonds shall bear interest at a rate of
- ----% per annum until the principal thereof shall have become due and payable,
payable semi-annually on ------------ and ------------ in each year commencing
- -------------, with interest on overdue interest payable at the rate per annum
specified in this Section 1.01. Except as provided in Sections 2.03, 2.04, 2.05,
8.03 and 17.04 of the Original Indenture, no Senior Note Series __ Bonds shall
be authenticated and delivered after such initial issue.
SECTION 1.02. Each Senior Note Series -- Bond shall be dated the date of
its authentication and shall bear interest from ---------- or from the most
recent interest payment date to which interest has been paid or duly provided.
SECTION 1.03. The principal of and the premium, if any, and interest on
any Senior Note Series--- Bond shall be payable, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and shall be payable at the "office" or
agency of the Company in the Borough of Manhattan, The City of New York.
Interest on the Senior Note Series -- Bonds shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
SECTION 1.04. Upon any payment of the principal of, premium, if any, and
interest on, all or any portion of the Series -- Notes, whether at maturity or
prior to maturity by redemption or otherwise or upon provision for the payment
thereof having been made in accordance with Section 5.01(a) of the Senior Note
Indenture, Senior Note Series -- Bonds in a principal amount equal to the
principal amount of such Series -- Notes and having both a corresponding
maturity date and interest rate shall, to the extent of such payment of
principal, premium, if any, and interest, be deemed paid and the obligation of
the Company thereunder to make such payment shall be discharged to such extent
and, in the case of the payment of principal (and premium, if any), the Senior
Note Series -- Bonds in an equal principal amount of the related Series -- Notes
shall be surrendered to the Company for cancellation as provided in Section 4.08
of the Senior Note Indenture. The Trustee may at anytime and all times
conclusively assume that the obligation of the Company to make payments with
respect to the principal
<PAGE>
of and premium, if any, and interest on the Senior Note Series __ Bonds, so far
as such payments at the time have become due, has been fully satisfied and
discharged pursuant to the foregoing sentence unless and until the Trustee shall
have received a written notice from the Senior Note Trustee signed by one of its
officers stating (i) that timely payment of, or premium or interest on, the
Series -- Notes has not been so made, (ii) that the Company is in arrears as to
the payments required to be made by it to the Senior Note Trustee pursuant to
the Senior Note Indenture, and (iii) the amount of the arrearage.
SECTION 1.05. Each Senior Note Series -- Bond is to be issued to and
registered in the name of United States Trust Company of New York, as the Senior
Note Trustee, or a successor trustee thereto, under the Senior Note Indenture to
secure any and all obligations of the Company under the Series __ Notes and any
other series of Senior Notes from time to time outstanding under the Senior Note
Indenture.
SECTION 1.06. Except (i) as required to effect an assignment to a
successor Trustee under the Senior Note Indenture, (ii) pursuant to Section 4.05
or Section 4.08 of the Senior Note Indenture, or (iii) in compliance with a
final order of a court of competent jurisdiction in connection with any
bankruptcy or reorganization proceeding of the Company, the Senior Note Series
- -- Bonds are not transferable. The Senior Note Series -- Bonds shall be
exchangeable for other registered bonds of the same series and for the same
aggregate principal amount, in the manner and upon the conditions prescribed in
the Mortgage, upon the surrender of such bonds at the "office" or agency of the
Company in the Borough of Manhattan, The City of New York. The Company covenants
and agrees that, notwithstanding Section 2.03 of the Original Indenture, it will
not charge any sum for or in connection with any exchange or transfer of any
Senior Note Series -- Bond, but may require the payment of a sum sufficient to
cover any tax or taxes or other governmental charges incident to any exchange,
transfer or registration thereof.
SECTION 1.07. (a) Senior Note Series -- Bonds shall not be redeemable
except on the respective dates, in the respective principal amounts and for the
respective redemption prices which correspond to the redemption dates for, the
principal amounts to be redeemed of, and the redemption prices for, the Series
- -- Notes and except as set forth in Section 1.08 hereof.
(b) In the event the Company redeems any Series -- Notes prior to maturity
in accordance with the provisions of the Senior Note Indenture, the Senior Note
Trustee shall on the same date deliver to the Company the Senior Note Series --
Bonds in principal amounts corresponding to the Series -- Notes so redeemed, as
provided in Section 4.08 of the Senior Note Indenture.
(c) Senior Note Series -- Bonds are not redeemable by the operation of the
improvement fund or the maintenance and replacement provisions of the Mortgage
or with the proceeds of released property.
(d) Notice with respect to any redemption of the Senior Note Series __
Bonds shall be mailed by the Company to the Trustee not less than thirty (30)
days and not more than ninety (90) days prior to the
<PAGE>
redemption date and shall specify the matters set forth in the penultimate
sentence of the first paragraph, and if applicable, the second sentence of the
third paragraph of Section 8.02 of the Original Indenture. Notice of any such
redemption shall be given by the Trustee to the Senior Note Trustee, as the
holder of the Senior Note Series -- Bonds, in accordance with the terms of
Section 8.02 of the Original Indenture.
(e) If at the time of the mailing of any such notice of redemption, the
Company shall not have irrevocably directed the Trustee to apply funds deposited
with the Trustee, or held by it available to be used, for the redemption of the
Senior Note Series -- Bonds, to redeem all of the Senior Note Series -- Bonds
called for redemption, including accrued interest to the date fixed for
redemption, such notice may state that it is subject to the receipt of the
redemption moneys by the Trustee before the date fixed for redemption and such
notice shall be of no effect unless such moneys are so received before such
date.
(f) The last sentence of Section 2.03 of the Original Indenture shall not
apply to the Senior Note Series -- Bonds. In case less than all of the Senior
Note Series -- Bonds at the time outstanding are called for redemption, the
Company shall not be required to transfer any Senior Note Series--- Bonds, for a
period of ten (10) days before the mailing of a notice of redemption of bonds of
such Senior Note Series -- Bonds selected for redemption, to transfer any Senior
Note Series -- Bond called for redemption in its entirety or to transfer any
portion of a Senior Note Series -- Bond which portion has been called for
redemption.
SECTION 1.08. The Senior Note Series -- Bonds shall be immediately
redeemable at a redemption price of 100% of the principal amount thereof, plus
interest accrued to the redemption date, in whole, upon a written demand for
redemption by the Senior Note Trustee stating that the principal of all Senior
Notes then outstanding under the Senior Note Indenture have been declared to be
immediately due and payable pursuant to the provisions of the first sentence of
Section 8.01(a) thereof.
SECTION 1.09. For purposes of Section 4.09 of the Senior Note Indenture,
this bond shall be deemed to be the "Related Series of Senior Note First
Mortgage Bonds" in respect of the Series -- Notes.
SECTION 1.10. At any time a Series -- Note shall cease to be entitled to
any lien, benefit or security under the Senior Note Indenture pursuant to
Section 5.01(b) thereof and the Company shall have provided the Senior Note
Trustee with notice thereof, the Senior Note Trustee shall surrender an equal
principal amount of the Related Series of Senior Note First Mortgage Bonds,
subject to the limitations of Section 4.08 of the Senior Note Indenture, to the
Company for cancellation.
SECTION 1.11. As provided in Section 4.11 of the Senior Note Indenture,
from and after the Release Date, the obligations of the Company with respect to
the Senior Note Series -- Bonds shall be deemed to be satisfied and discharged,
the Senior Note Series -- Bonds shall
<PAGE>
cease to secure in any manner any Senior Notes outstanding under the Senior Note
Indenture, and, pursuant to Section 4.08 of the Senior Note Indenture, the
Senior Note Trustee shall forthwith deliver the Senior Note Series -- Bonds to
the Company for cancellation.
ARTICLE II
FORM OF THE SENIOR NOTE SERIES -- BONDS
SECTION 2.01. The form of the Senior Note Series -- Bonds and the
Trustee's authentication certificate to be endorsed thereon shall be
substantially as follows, the maturity date or dates, denominations, redemption
prices and interest rates thereof to be appropriately inserted.
[FORM OF SENIOR NOTE SERIES __ BONDS]
PENNSYLVANIA ELECTRIC COMPANY
FIRST MORTGAGE BOND, SENIOR NOTE SERIES -------DUE------------
$ No.
PENNSYLVANIA ELECTRIC COMPANY, a corporation of the Commonwealth of
Pennsylvania (hereinafter called the "Company"), for value received, hereby
promises to pay to United States Trust Company of New York, as Trustee under the
Company's Indenture dated as of --------------------, 1998, or registered
assigns, --------------- Dollars on --------, -----, unless this Bond shall have
been duly called for previous redemption in whole or in part and payment of the
redemption price shall have been duly made or provided for, at the office or
agency of the Company in the Borough of Manhattan, The City of New York, in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts, and to pay to the
registered holder hereof interest thereon, at said office or agency, in like
coin or currency, from ,
, or from the most recent interest payment date to which
interest has been paid or duly provided for until said principal sum has been
paid or provided for, at the rate or rates per annum provided for in Section
1.01 of the Supplemental Indenture dated as of , , supplementing the Mortgage,
on and of each year, and, to the extent permitted by law, to pay interest on
overdue interest at the rate per annum above specified.
This bond is one of an issue of bonds of the Company (hereinafter referred
to as the "bonds"), not limited in principal amount, issuable in series, which
different series may mature at different times, may bear interest at different
rates, and may otherwise vary as in the Mortgage hereinafter mentioned provided,
and is one of a series known as its First Mortgage Bonds, Senior Note Series
- -----due ---------- (herein called the "Senior Note Series -- Bonds"), all bonds
of all series issued and to be issued under and equally and ratably secured
(except insofar as any sinking fund or analogous fund, established in accordance
<PAGE>
with the provisions of the Mortgage hereinafter mentioned, may afford additional
security for the bonds of any particular series) by a Mortgage and Deed of Trust
(herein, together with any indentures supplemental thereto, called the
"Mortgage") dated as of January 1, 1942, executed by the Company to UNITED
STATES TRUST COMPANY OF NEW YORK, as successor Trustee to BANKERS TRUST COMPANY
(herein called the "Trustee"), to which reference is made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights and limitations of rights of the holders of the bonds and of the Company
in respect thereof, the rights, duties and immunities of the Trustee, and the
terms and conditions upon which the bonds are, and are to be, issued and
secured. The Senior Note Series -- Bonds are described in the Supplemental
Indenture dated as of , between the Company and the Trustee (the "Supplemental
Indenture").
Interest on this bond shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
Under an Indenture dated as of ------------, 1998 (hereinafter sometimes
referred to as the "Senior Note Indenture"), between the Company and United
Trust Company of New York, as trustee (hereinafter sometimes called the "Senior
Note Trustee"), the Company will issue, concurrently with the issuance of this
bond, an issue of notes under the Senior Note Indenture entitled Senior Notes,
- ----% due ----, Series--- (the "Series __ Notes"). Pursuant to Article IV of the
Senior Note Indenture, this bond is issued to the Senior Note Trustee to secure
any and all obligations of the Company under the Series __ Notes and any other
series of senior notes from time to time outstanding under the Senior Note
Indenture. Payment of principal of, or premium, if any, or interest on, the
Series -- Notes shall constitute payments on this bond as further provided
herein and in the Supplemental Indenture.
As provided in Section 4.11 of the Senior Note Indenture, from and after
the Release Date (as defined in the Senior Note Indenture), the obligations of
the Company with respect to this bond shall be deemed to be satisfied and
discharged, this bond shall cease to secure in any manner any senior notes
outstanding under the Senior Note Indenture, and, pursuant to Section 4.08 of
the Senior Note Indenture, the Senior Note Trustee shall forthwith deliver this
bond to the Company for cancellation.
Upon any payment of the principal of, premium, if any, and interest on,
all or any portion of the Series -- Notes, whether at maturity or prior to
maturity by redemption or otherwise or upon provision for the payment thereof
having been made in accordance with Section 5.01(a) of the Senior Note
Indenture, Senior Note Series -- Bonds in a principal amount equal to the
principal amount of such Series --- Notes and having both a corresponding
maturity date and interest rate shall, to the extent of such payment of
principal, premium, if any, and interest, be deemed paid and the obligation of
the Company thereunder to make such payment shall be discharged to such extent
and, in the case of the payment of principal (and premium, if any) such bonds of
said series shall be surrendered to the Company for cancellation as provided in
Section 4.08 of the Senior Note Indenture. The Trustee may at anytime and all
times conclusively assume that the
<PAGE>
obligation of the Company to make payments with respect to the principal of and
premium, if any, and interest on the Senior Note Series -- Bonds, so far as such
payments at the time have become due, has been fully satisfied and discharged
pursuant to the foregoing sentence unless and until the Trustee shall have
received a written notice from the Senior Note Trustee signed by one of its
officers stating (i) that timely payment of, or premium or interest on, the
Series -- Notes has not been made, (ii) that the Company is in arrears as to the
payments required to be made by it to the Senior Note Trustee pursuant to the
Senior Note Indenture, and (iii) the amount of the arrearage.
For purposes of Section 4.09 of the Senior Note Indenture, this bond shall
be deemed to be the "Related Series of Senior Note First Mortgage Bonds" in
respect of the Series -- Notes.
The Mortgage contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than seventy-five per centum (75%)
in principal amount of all the bonds at the time outstanding (determined as
provided in the Mortgage) evidenced as in the Mortgage provided, or in case the
rights under the Mortgage of the holders of bonds of one or more, but less than
all, of the series of bonds outstanding shall be affected, then with the consent
of the holders of not less than seventy-five per centum (75%) in principal
amount of the bonds at the time outstanding of the series affected (determined
as provided in the Mortgage) evidenced as in the Mortgage provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Mortgage or modifying in any manner the
rights of the holders of the bonds and coupons thereunto appertaining; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any bonds, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof, without the consent of the
holder of each bond so affected, or (ii) reduce the aforesaid percentage of
bonds, the holders of which are required to consent to any such supplemental
indenture without the consent of the holders of all bonds then outstanding. Any
such consent by the registered holder of this bond (unless effectively revoked
as provided in the Mortgage) shall be conclusive and binding upon such holder
and upon all future holders of this bond, irrespective of whether or not any
notation of such waiver or consent is made upon this bond.
No reference herein to the Mortgage and no provision of this bond or of
the Mortgage shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this bond at
the time and place and at the rate and in the coin or currency herein
prescribed.
The Senior Note Series -- Bonds are issuable only in fully registered form
and shall be issued only as one single bond.
The Senior Note Series -- Bonds may be redeemed at the option of the
Company at the times and upon the terms and conditions set forth in the Mortgage
upon mailing of a notice from the Company to the Trustee not less than thirty
(30) days and not more than ninety (90) days prior to the redemption date.
Notice of any such redemption shall be given by
<PAGE>
the Trustee to the Senior Note Trustee, as the holder of the Senior Note Series
__ Bonds, as provided in the Mortgage.
The Mortgage provides that if the Company shall deposit with the Trustee
in trust for the purpose funds sufficient to pay the principal of all of the
bonds of any series, or such of the bonds of any series as have been or are to
be called for redemption, and premium, if any, thereon, and all interest payable
on such bonds to the date on which they become due and payable, at maturity or
upon redemption or otherwise, and complies with the other provisions of the
Mortgage in respect thereof, then from the date of such deposit such bonds shall
no longer be entitled to any lien or benefit under the Mortgage.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a completed default as in
the Mortgage provided.
This bond is not transferable except (i) as required to effect an
assignment to a successor Trustee under the Senior Note Indenture, (ii) pursuant
to Section 4.05 or Section 4.08 of the Senior Note Indenture, or (iii) in
compliance with a final order of a court of competent jurisdiction in connection
with any bankruptcy or reorganization proceeding of the Company. This bond shall
be exchangeable for other registered bonds of the same series and for the same
aggregate principal amount, in the manner and upon the conditions prescribed in
the Mortgage, upon the surrender of such bonds at the "office" or agency of the
Company in the Borough of Manhattan, the City of New York. However,
notwithstanding the provisions of Section 2.05 of the Mortgage, no charge shall
be made upon any registration of transfer or exchange of bonds of said series
other than for any tax or taxes or other governmental charge required to be paid
by the Company. The Company and the Trustee, any paying agent and any bond
registrar may deem and treat the person in whose name this bond is registered as
the absolute owner hereof, whether or not this bond shall be overdue, for the
purpose of receiving payment and for all other purposes and neither the Company
nor the Trustee nor any paying agent nor any bond registrar shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of or interest
on this bond, or for any claim based hereon, or otherwise in respect hereof, or
based on or in respect of the Mortgage, against any incorporator or any past,
present or future subscriber to the capital stock, stockholder, officer or
director, as such, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, under any rule of
law, statute or constitution or by the enforcement of any assessment or
otherwise, all such liability of incorporators, subscribers, stockholders,
officers and directors, as such, being waived and released by the holder and
owner hereof by the acceptance of this bond and being likewise waived and
released by the terms of the Mortgage.
This bond shall not become valid or obligatory for any purpose until
UNITED STATES TRUST COMPANY OF NEW YORK, the Trustee under the
<PAGE>
Mortgage, or its successor thereunder, shall have signed the certificate of
authentication endorsed hereon.
<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY has caused this bond to
be signed in its name by the manual or facsimile signature of its President or
one of its Vice Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature of its
Secretary or one of its Assistant Secretaries.
Dated:
PENNSYLVANIA ELECTRIC COMPANY
By
--------------------
(Vice) President
Attest:
- -------------------
(Assistant) Secretary
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein designated, provided
for in the within-mentioned Mortgage.
UNITED STATES TRUST COMPANY OF NEW YORK
By:
-----------------------------------
Authorized Officer
[END OF FORM OF SENIOR NOTE SERIES -- BOND]
<PAGE>
ARTICLE III
MISCELLANEOUS
SECTION 3.01. The Company covenants and agrees that, so long as any of the
Senior Note Series -- Bonds shall be secured by the lien of the Mortgage, the
following provisions of the following aforesaid Supplemental Indentures shall be
effective, and the Company will observe and perform each and all of the
conditions and of its covenants and agreements therein set forth, as if the
Senior Note Series -- Bonds were specified therein:
(a) Section 1 of Article II of the Supplemental Indenture dated as
of November 1, 1949, as amended by paragraph (a) of Section 2.01 of Article II
of the Supplemental Indenture dated as of August 1, 1959.
(b) Section 2 of Article II of the Supplemental Indenture dated as
of November 1, 1949.
(c) Section 1 of Article III of the Supplemental Indenture dated as
of October 1, 1951.
(d) Section 2 of Article II of the supplemental Indenture dated as
of June 1, 1953. Subsection (D) thereof as heretofore amended is hereby further
amended to read as follows:
[Penelec to update the list below]
"(D) the provisions of this Section shall be effective
only so long as any of the 1996 Series or of the 1997 Series or of the
July 1, 2006 Series or of the December 1, 2007 Series A or of the December
1, 2007 Series B or of the Series A due 2015 or of the Series due 2016 or
of the Secured Medium-Term Notes, Series B or of the Secured Medium-Term
Notes, Series C or of the Secured Medium-Term Notes, Series D bonds shall
be outstanding, and may be waived by the holders of not less than 75% in
aggregate principal amount of all bonds specifically entitled to the
benefit of the covenants set forth in this Section (which need not include
75% in principal amount of the then outstanding 1996 Series or the 1997
Series or the July 1, 2006 Series or the December 1, 2007 Series A or the
December 1, 2007 Series B or the Series A due 2015 or the Series due 2016
or the Secured Medium-Term Notes, Series B or the Secured Medium-Term
Notes, Series C or the Secured Medium-Term Notes, Series D bonds or any
other series of bonds specifically entitled to the benefit of such
covenants), outstanding at the time of such acquisition, by a consent
given in writing or given at a meeting of the holders of the 1996 Series
and the 1997 Series and the July 1, 2006 Series and the December 1, 2007
Series A and the December 1, 2007 Series B and the Series A due 2015 and
the Series due 2016 and the Secured Medium-Term Notes, Series B and the
Secured Medium-Term Notes, Series C and the Secured Medium-Term Notes,
Series D bonds
<PAGE>
and such other bonds, if any, held pursuant to the applicable provisions
of Article XVI of the Original Indenture. Moreover, none of the provisions
of subsection (B) of this Section shall be applicable to any acquisition
of property ordered, approved or permitted by the Securities and Exchange
Commission under the provisions of the Public Utility Holding Company Act
of 1935 as then in force, or by any successor regulatory body of the
United States of America having jurisdiction in the premises."
(e) Section 2 of Article II of the Supplemental Indenture dated as
of May 1, 1956.
SECTION 3.02. The Trustee shall be entitled to rely conclusively on each
notice delivered to it by the Senior Note Trustee or the Company pursuant to the
terms of this Supplemental Indenture for all purposes under the Mortgage. The
Trustee shall have no duty or responsibility to the Company or to the holder or
holders of the Senior Note Series -- Bonds from time to time to verify
independently the information contained in any such notice or with respect to
the determinations or calculations of interest which may from time to time or at
any given time be due on the Senior Note Series -- Bonds.
SECTION 3.03. The table of contents and the titles of the Articles of this
Supplemental Indenture shall not be deemed to be any part thereof.
SECTION 3.04. As amended and supplemented by the aforesaid indentures
supplemental thereto and by this Supplemental Indenture, the Original Indenture
is in all respects ratified and confirmed and the Original Indenture and the
aforesaid indentures supplemental thereto and this Supplemental Indenture shall
be read, taken and construed as one and the same instrument.
SECTION 3.05. This Supplemental Indenture shall be simultaneously executed
in several counterparts, and all such counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
The debtor and its mailing address are Pennsylvania Electric Company, 2800
Pottsville Pike, Reading, Pennsylvania 19605. The secured party and an address
of the secured party from which information concerning the security interest may
be obtained are United States Trust Company of New York, Trustee, 114 West 47th
Street, New York, New York 10036.
<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA ELECTRIC COMPANY, party of the first
part, has caused this instrument to be signed in its name and behalf by its
President or a Vice President, and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and UNITED STATES TRUST
COMPANY OF NEW YORK, party of the second part, has caused this instrument to be
signed in its name and behalf by a Senior Vice President or a Vice President and
its corporate seal to be hereunto affixed and attested by a Vice President or an
Assistant Vice President, all as of the day and year first above written.
ATTEST: PENNSYLVANIA ELECTRIC COMPANY
- ------------------ By:
--------------------------------
(Assistant) Secretary (Vice) President
[CORPORATE SEAL]
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK
- -------------------------------- By:
(Assistant) Vice President ----------------------------
(Senior) Vice President
[CORPORATE SEAL]
<PAGE>
STATE OF NEW JERSEY :
: ss:
COUNTY OF MORRIS :
On this ---- day of , 199---, before me, ----------------------, a Notary
Public for the State and County aforesaid, the undersigned officer, personally
appeared ----------------------, who acknowledged himself to be a (Vice)
President of Pennsylvania Electric Company, a corporation, and that he as such
(Vice) President, being authorized to do so, executed the foregoing instrument
for the purposes therein contained by signing the name of the corporation by
himself as (Vice) President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK :
: ss:
COUNTY OF NEW YORK :
On this ---- day of , 199---, before me, -----------------------, a Notary
Public for the State and County aforesaid, the undersigned officer, personally
appeared -----------------------, who acknowledged herself to be a (Senior) Vice
President of United States Trust Company of New York, a corporation, and that he
as such (Senior) Vice President, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name of
the corporation by himself as (Senior) Vice President.
I am not a director or officer of said United States Trust Company of New
York.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
CERTIFICATE OF RESIDENCE
United States Trust Company of New York, Mortgagee and Trustee within
named, hereby certifies that its precise residence is 114 West 47th Street, in
the Borough of Manhattan, in the City of New York, in the State of New York.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
---------------------------
(Vice) President
<PAGE>
SCHEDULE A
[To be provided by Penelec, if applicable]
EXHIBIT 5-A
[Berlack, Israels & Liberman LLP Letterhead]
January 11, 1999
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
Penelec Capital II, L.P.
Penelec Capital Trust
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
Pennsylvania Electric Company (the "Company"), Penelec Capital II, L.P.
("Penelec Capital") and Penelec Capital Trust ("Penelec Trust") 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 August 26, 1998, 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 the Company
of up to $725,000,000 aggregate principal amount of senior notes ("Senior
Notes"). The Senior Notes 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 "Senior Note Indenture"). The Senior Notes will be secured by first
mortgage bonds ("Senior Note First Mortgage Bonds") until a release date.
The Registration Statement also relates to the proposed issuance and sale
by Penelec Trust of up to $125,000,000 aggregate liquidation value of preferred
beneficial interests, in the form of trust securities ("Trust Securities"). Each
Trust Security represents a cumulative preferred limited partner interest (the
"Preferred Securities") of Penelec Capital, the proceeds of which, together with
the capital contribution of Penelec Capital's general partner, Penelec Preferred
Capital II, 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 Trust Securities are to be
issued by Penelec Trust pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), 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 "Debenture Indenture").
We have been counsel to the Company for many years. In such
capacity, we are familiar with the affairs of the Company, Penelec Capital and
Penelec Trust and the transactions that are the subject matter of the
Registration Statement. We have examined such corporate records of the Company,
Penelec Capital and Penelec Trust and such other instruments, documents,
certificates and agreements, including the forms of Senior Note Indenture,
Limited Partnership Agreement, Trust Agreement and Debenture Indenture, and made
such further investigation as we have deemed necessary as a basis for this
opinion. With respect to all matters of Pennsylvania law, we have relied on the
opinion of Ballard Spahr Andrews & Ingersoll, LLP 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, partnership and
trust action required on the part of the Company, Penelec Preferred Capital II,
Inc., Penelec Capital and Penelec Trust 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 Senior Note
Indenture, the Debenture Indenture and the Trust Agreement shall have been
qualified under the Trust Indenture Act of 1939, as amended, and (5) the
issuance and sale of the Senior Notes, the Trust Securities, the Preferred
Securities and the 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) when properly authenticated and
delivered by the Trustee under the Senior Note Indenture, the Senior Notes will
be legally issued and will be binding obligations of the Company, (2) the Trust
Securities to be issued and sold in accordance with the
-2-
<PAGE>
Registration Statement, when properly issued, delivered and paid for, will be
legally issued, fully paid and non-assessable preferred beneficial interests,
(3) 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 preferred limited partner
interests, (4) when properly authenticated and delivered by the Trustee under
the Debenture Indenture, the Subordinated Debentures will be legally issued and
will be binding obligations of the Company and (5) 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 Matters" in the Prospectus which is a part of the
Registration Statement.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
-3-
Exhibit 5-B
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
January 11, 1999
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, PA 19605
Re: Registration Statement on Form S-3
(Nos. 333-62295, 333-62295-01 and 333-62295-02)
Ladies and Gentlemen:
Pennsylvania Electric Company (the "Company"), Penelec Capital II, L.P.
("Penelec Capital II") and Penelec Capital Trust ("Penelec Trust") 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 dated August 26, 1998, and Amendment No. 1 thereto, dated today's date
(as so amended, the "Registration Statement"), of which this opinion is to be a
part. The Registration Statement relates to the proposed issuance and sale, in
one or more series, by (i) the Company of up to $725,000,000 aggregate principal
amount of its Senior Notes (the "Senior Notes") under the Senior Note Indenture
(as defined in the Registration Statement), which Senior Notes will be secured
by the Company's Senior Note Mortgage Bonds (as defined in the Registration
Statement) until the Release Date (as defined in the Registration Statement),
(ii) Penelec Trust of up to $125,000,000 aggregate liquidation value of
preferred beneficial interests, in the form of trust securities (the "Trust
Securities"), representing cumulative preferred limited partner interests of
Penelec Capital II (the "Preferred Securities") and (iii) the Company of up to
$130,000,000 of its subordinated debentures (the "Subordinated Debentures") and
the Guarantee (as defined below). Penelec Trust will apply the proceeds from the
sale of the Trust Securities to purchase the Preferred Securities. Penelec
Capital II will, in turn, lend the proceeds from the sale of its Preferred
Securities, plus the capital contribution made by Penelec Preferred Capital II,
Inc., a Delaware special purpose corporation and the sole general partner of
Penelec Capital II, to the Company, which loan will be evidenced by the
Subordinated Debentures of the Company. The Company will guarantee (the
"Guarantee") the payment by Penelec Capital II of distributions on the Preferred
Securities and of amounts due upon liquidation of Penelec Capital II or
<PAGE>
redemption of the Preferred Securities, all to the extent set forth in the
Guarantee. The Trust Securities are to be issued by Penelec Trust pursuant to an
Amended and Restated Trust Agreement (the "Trust Agreement"), the Preferred
Securities are to be issued by Penelec Capital II 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 "Debenture
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 II
and the transactions that are the subject matter of the Registration Statement.
We have examined such records of the Company and Penelec Capital II and such
other instruments, documents, certificates and agreements, including the forms
of Trust Agreement, Limited Partnership Agreement, Senior Note Indenture and
Debenture Indenture, and made such further investigation as we have deemed
necessary as a basis for this opinion.
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 the Senior Notes or the
Senior Note Mortgage Bonds, all necessary corporate action required on the part
of the Company shall have been duly taken and all necessary documents relating
thereto shall have been executed and delivered;
(c) Prior to issuance of any series of the Trust Securities, the
Preferred Securities, the Guarantee or the Subordinated Debentures, all
necessary corporate, partnership and trust action required on the part of the
Company, Penelec Preferred Capital II, Inc., Penelec Capital II and Penelec
Trust shall have been duly taken and all necessary documents relating thereto,
including, without limitation, the Trust Agreement, the Limited Partnership
Agreement, the Guarantee and the Debenture Indenture, shall have been executed
and delivered;
(d) The Commission shall have issued an order declaring
effective
<PAGE>
(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");
(e) The issuance and sale of the Trust Securities, the Preferred
Securities and Subordinated Debentures do not violate Section 12(f) of the 1935
Act or Rule 70 thereunder; and
(f) The Debenture Indenture, the Senior Note Indenture and the Trust
Agreement will be qualified in accordance with the provisions of the Trust
Indenture Act of 1939, as amended.
Based on the foregoing, insofar as the laws of the Commonwealth of
Pennsylvania are concerned, we are of the opinion that:
(1) when properly executed, authenticated, delivered and paid
for as provided in the Senior Note Indenture, the Senior Notes will
be legally issued and binding obligations of the Company subject 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; and
(2) when properly executed, authenticated, delivered and paid
for as provided in the Debenture 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.
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 Matters"
in the Prospectus which is a part of the Registration Statement. In addition,
<PAGE>
we consent to the reliance by Berlack, Israels & Liberman LLP upon this opinion.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
Exhibit 5-C
[Letterhead of Richards, Layton & Finger, P.A.]
January 11, 1999
Penelec Capital II, L.P.
Penelec Capital Trust
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, NJ 07962
Re: Penelec Capital II, L.P.
and Penelec Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for Penelec Capital II,
L.P., a Delaware limited partnership (the "Partnership"), Penelec Capital Trust,
a Delaware business trust (the "Trust"), and Penelec Preferred Capital II, Inc.,
a Delaware corporation (the "General Partner"), 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 August 20, 1998 (the "Partnership Certificate"), as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary of State") on
August 20, 1998;
(b) The Limited Partnership Agreement of the Partnership, dated as
of August 20, 1998;
(c) A form of Amended and Restated Limited Partnership Agreement of
the Partnership (the "Partnership Agreement"), attached as an exhibit to the
Registration Statement (as defined below);
(d) A form of Action of Penelec Preferred Capital II, Inc., as
general partner of the Partnership (the "General Partner"), relating to the
Preferred Partner Interests (as defined below) (the "Action"), attached as an
exhibit to the Registration Statement;
(e) The Certificate of Incorporation of the General Partner, dated
August 20, 1998 (the "Certificate of Incorporation"), as filed in the office of
the Secretary of State on August 20, 1998;
<PAGE>
(f) The By-Laws of the General Partner (the "By-Laws");
(g) A certificate of an officer of the General Partner;
(h) The Certificate of Trust of the Trust, dated as of August 20,
1998 (the "Trust Certificate"), as filed in the office of the Secretary of State
on August 20, 1998;
(i) The Trust Agreement of the Trust, dated as of August 20, 1998,
among the Partnership and the trustees of the Trust named therein;
(j) A form of Amended and Restated Trust Agreement of the Trust (the
"Trust Agreement"), to be entered into among the Partnership, the trustees named
therein and, for limited purposes, the General Partner, attached as an exhibit
to the Registration Statement;
(k) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-3, including a related prospectus (the "Prospectus"),
relating to the Cumulative Preferred Securities of the Partnership (each, a
"Preferred Partner Interest" and collectively, the "Preferred Partner
Interests") and to the Trust Securities of the Trust (each, a "Trust Security"
and collectively, the "Trust Securities"), as proposed to be filed by
Pennsylvania Electric Company, a Pennsylvania corporation, the Partnership and
the Trust with the Securities and Exchange Commission on or about January 11,
1999;
(l) A Certificate of Good Standing for the Partnership, dated
January 8, 1999, obtained from the Secretary of State;
(m) A Certificate of Good Standing for the Trust, dated January 11,
1999, obtained from the Secretary of State; and
(n) A Certificate of Good Standing for the General Partner, dated
January 11, 1999, obtained from the Secretary of State.
The Partnership 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 (n) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (n) above) that is referred to in or incorporated by
reference into the documents reviewed by us. 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.
<PAGE>
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 Trust Agreement constitutes the
entire agreement among the parties thereto with respect to the subject matter
thereof, including with respect to the creation, operation and termination of
the Trust, and that the Trust Agreement and the Trust Certificate are in full
force and effect and have not been amended, (iii) 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 and the Trust
Agreement, and the execution and delivery of, on behalf of the Partnership, the
Trust Agreement, (iv) that the Certificate of Incorporation and the By-Laws are
in full force and effect and have not been amended, (v) except to the extent
provided in paragraphs 1 and 4 below, the due creation or 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 creation or organization or formation, (vi) the legal capacity of
natural persons who are signatories to the documents examined by us, (vii)
except to the extent set forth in the last sentence of each of paragraphs 2 and
5 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, (viii) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (ix) the receipt by each Person to whom
a Preferred Partner Interest is to be issued by the Partnership (each, a
"Preferred Partner" and collectively, the "Preferred Partners") of a Certificate
and the payment for the Preferred Partner Interests acquired by it, in
accordance with the LP Agreement and the Registration Statement, (x) the receipt
by each Person to whom a Trust Security is to be issued by the Trust
(collectively, the "Holders") of a certificate substantially in the form of the
trust certificate attached to the Trust Agreement as Exhibit A and the payment
for the Trust Security acquired by it, in accordance with the Trust Agreement
and the Registration Statement, (xi) 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. ss. 17-101, et seq.)
(the "Partnership Act"), including all information with respect to all Persons
to be admitted as Partners and their contributions to the Partnership, (xii)
that the Preferred Partner Interests are issued and sold to the Preferred
Partners in accordance with the Registration Statement and the LP Agreement, and
(xiii) that the Trust Securities are issued and sold to the Holders in
accordance with the Registration Statement and the Trust Agreement. We
<PAGE>
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 that 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 Partnership 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 represent valid 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 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. ss. 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 and the Trust
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.
4. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act (12 Del. C.
ss. 3801, et seq.).
5. The Trust Securities will represent valid and, subject to the
qualifications set forth in paragraph 6 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust. The Partnership has
the requisite partnership power and authority under
<PAGE>
the Partnership Act and the LP Agreement to execute and deliver, and to perform
its obligations under, the Trust Agreement.
6. The Holders, in their capacity as such, will be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note that the Holders may be obligated to make payments as set
forth in the Trust Agreement.
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 LLP's relying as to matters of Delaware law upon
this opinion in connection with an opinion to be rendered by it in connection
with the Registration Statement. In addition, we hereby consent to the use of
our name under the heading "Legal Matters" in the Prospectus. 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 for any purpose.
Very truly yours,
Richards, Layton & Finger, P.A.
BJK/DLD
Exhibit 12-B
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K,
ITEM 503
(In Thousands)
UNAUDITED
Twelve Months Ended
September 30, 1998
OPERATING REVENUES $1,031,116
OPERATING EXPENSES 868,517
Interest portion of rentals (A) 4,845
Net expense 863,672
OTHER INCOME AND DEDUCTIONS:
Allowance for funds used
during construction 2,158
Other income/(expense), net (3,041)
Total other income and deductions (883)
EARNINGS AVAILABLE FOR FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS (excluding
taxes based on income) $ 166,561
FIXED CHARGES:
Interest on funded indebtedness $ 48,375
Other interest (B) 17,973
Interest portion of rentals (A) 4,845
Total fixed charges $ 71,193
RATIO OF EARNINGS TO FIXED CHARGES 2.34
Preferred stock dividend requirement $ 695
Ratio of income before provision for
income taxes to net income (C) 175.1%
Preferred stock dividend requirement
on a pretax basis 1,217
Fixed charges, as above 71,193
Total fixed charges and
preferred stock dividends $ 72,410
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS 2.30
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K,
ITEM 503
(In Thousands)
UNAUDITED
NOTES:
(A) Penelec has included the equivalent of the interest portion of all rentals
charged to income as fixed charges for this statement and has excluded
such components from Operating Expenses.
(B) Includes amount for company-obligated mandatorily redeemable preferred
securities of $9,188 for the twelve month period ended September 30, 1998.
(C) Represents income before provision for income taxes of $95,368 for the
twelve month period ended September 30, 1998 divided by income before
extraordinary item of $54,455 for the same period.
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Vice President and
Chief Financial Officer of Pennsylvania Electric Company hereby constitutes and
appoints each of Ira H. Jolles and T.G. Howson his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign all
or any amendments (including post-effective amendments) of and supplements to
this Registration Statement on Form S-3 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each such attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, to all intents and purposes and
as fully as said corporation itself might or could do in person, hereby
ratifying and confirming all that each such attorney-in-fact and agent, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ B.L. Levy Vice President and January 11, 1999
(B.L. Levy) Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 26-A
[LETTERHEAD OF PENNSYLVANIA ELECTRIC COMPANY]
-----------, 1999
Dear Prospective Purchaser:
Pennsylvania Electric Company ("Company") is requesting proposals
for the purchase of $--------- aggregate principal amount of Senior Notes ___%
due --------- ("Notes"). Proposals will not be accepted for less than all of the
Notes.
All proposals for the Notes must be made on the Form of Proposal and
in accordance with the Statement of Terms and Conditions Relating to Proposals
for the Purchase of Senior Notes ("Terms and Conditions"), copies of which are
enclosed, together with a copy of the related Purchase Agreement.
All proposals must be submitted to the Company in accordance with
such procedures and on such day and time as shall be designated by the Company
by telephonic and written notice. Such notice will be first communicated by the
Company not less than 72 hours prior to the designated time.
A Registration Statement on Form S-3 relating to these securities
has been declared effective by the Securities and Exchange Commission ("SEC").
The specific terms of the Notes with respect to sinking fund,
redemption prices, etc. are included in Appendix A to this letter. In accordance
with the Terms and Conditions, please include the annual interest rate (which
rate shall be a multiple of 1/8 of 1%) and the price to be paid to the Company,
which shall be not less than --% nor more than ---% of the principal amount of
the Notes. Representatives of the Company will notify you as to whether your
proposal has been accepted or rejected by the Company. Subject to the
reservations set forth in the Terms and Conditions, such notice will be given
not later than three hours after the time designated for receipt by the Company
<PAGE>
of written confirmation of telephonic proposals on the date designated for the
submission of proposals, in accordance with the Terms and Conditions.
Enclosed is a copy of the Company's Registration Statement on Form
S-3 relating to the Notes among other securities of the Company, together with
the order of the SEC in connection therewith, and the Company's Annual Report on
Form 10-K for 199_ [and Quarterly Reports on Form 10-Q for the quarter(s) ended
- --------------------------------], as filed with the SEC. Also enclosed are
copies of the Company's Securities Certificate filed with the Pennsylvania
Public Utility Commission ("PaPUC") together with the related order of the
PaPUC. Thelen Reid & Priest LLP, who are acting as counsel for the prospective
purchasers of the Notes are sending you copies of the Preliminary Blue Sky
Survey and, if requested in accordance with Section 1(f)(1) of the Terms and
Conditions, a Legal Investment Survey. Should you wish to discuss the legal
aspects of the offering, or the fees and disbursements of such counsel, please
contact John P. Hood, Esq. of that firm at (212) 603-2000.
Representatives of the Company will be available by telephone
conference call at ---------- on ----------, 1999 to answer any questions you
may have.
Sincerely,
PENNSYLVANIA ELECTRIC COMPANY
By: /s/T. G. Howson
----------------------
Title: Vice President and Treasurer
-2-
<PAGE>
Appendix A
Aggregate Principal Amount: $
Maturity:
Interest Payment Dates:
Redemption Provisions:
Sinking Fund Provisions:
-3-
EXHIBIT 26-B
PENNSYLVANIA ELECTRIC COMPANY
Statement of
Terms and Conditions Relating to Proposals
for the Purchase of
Senior Notes
Pennsylvania Electric Company ("Company") expects to issue from time to
time through ---------- in one or more series not more than $725,000,000
aggregate principal amount of its Senior Notes, to be secured by one or more
series of the Company's Senior First Mortgage Bonds. The Company will invite
proposals, in accordance with the notice provisions and the other terms and
conditions hereof, for the purchase of all or a portion of such Senior Notes.
The Senior Notes to be issued in response to proposals therefor are referred to
herein as the "Notes". Proposals for the purchase of the Notes may be
transmitted to the Company only in accordance with the terms and conditions
hereof. Any communication received by the Company relating to the purchase of
the Notes other than as contemplated herein shall be treated as market
information and not as a proposal.
1. Information Concerning the Company and the Notes.
Prospective purchasers may examine at the office of GPU Service, Inc. 310
Madison Avenue, Morristown, New Jersey 07962, at any time during business hours,
copies of the following:
(a) the Senior Note Indenture, dated as of ------, 1999, and all
indentures supplemental thereto and, when available, the form of Supplemental
Indenture thereto to be dated as of the date on which the Notes are issued
("Indenture" and "Supplemental Indenture" respectively), to United States Trust
Company of New York, as Trustee ("Trustee"), under which the Notes are to be
issued;
(b) the Mortgage and Deed of Trust, dated as of January 1, 1942, and all
indentures supplemental thereto and, when available, the form of Supplemental
Indenture, thereto to be dated as of the date on which the Senior Note First
Mortgage Bonds are issued, to United States Trust Company of New York, as
Successor Trustee, under which the Senior Note First Mortgage Bonds are to be
issued;
(c) the Registration Statement (including exhibits, the prospectus
contained therein ("Prospectus"), and the documents incorporated therein by
reference), and any amendments or supplements thereto, relating to the Notes,
filed with the Securities and Exchange Commission ("SEC") under the Securities
Act of 1933, as amended ("Registration Statement");
(d) the Securities Certificate and any amendments or supplements thereto
(including exhibits) ("Securities Certificate")of the Company relating to the
issuance and sale of the Notes, as filed with the Pennsylvania Public Utility
Commission ("PaPUC") and the related order or orders of the PaPUC;
(e) the Form of Proposal ("Proposal") to be used by prospective purchasers
in offering to purchase each series of Notes, which includes the form of
Purchase Agreement for the purchase of the Notes ("Purchase Agreement");
(f) (1) if requested by a single prospective purchaser or a
Representative, as defined below, a form of survey by Thelen Reid & Priest LLP,
who are the counsel referred to in Section 8 hereof, with respect to the
legality of the Notes as investments for savings banks, life and certain other
insurance companies and fiduciaries in certain jurisdictions, and (2) form of a
preliminary Blue Sky survey by that firm with respect to the qualification of
the Notes for sale under the securities laws of various jurisdictions; and
(g) one or more statements, when available, with respect to proposals to
purchase the Notes and the terms of the Notes, which shall specify for each
series of Notes being offered (1) the date and time for the submission of
proposals to purchase the Notes, (2) the aggregate principal amount of Notes,
(3) the series designation of the Notes, (4) the minimum and maximum percentages
of principal amounts which may be specified in the Proposal as the purchase
price for the Notes, (5) the term of the Notes, which shall not be less than one
year nor more than 35 years, (6) the terms and conditions upon which the Notes
may be redeemed, either at the option of the Company, pursuant to any sinking
fund for the Notes or otherwise, and (7) such other provisions as may be
necessary or desirable to establish the terms and conditions of the Notes and
the terms of proposals therefor.
Copies of items (d) and (e) and copies of the Supplemental Indenture and
the Registration Statement (excluding exhibits) will be supplied in reasonable
quantities to prospective purchasers on request. The Company will make copies of
the form of Supplemental Indenture and of the statement(s) referred to in item
(g) above available to prospective purchasers as soon as practicable, but in no
event less than 24 hours prior to the time for the submission of proposals.
The Company reserves the right to amend the Registration Statement and
Prospectus and the Securities Certificate, and to make changes in the form of
Supplemental Indenture, and in the form of any other documents relating to the
issuance and sale of the Notes, at any time and from time to time with the
approval of Thelen Reid & Priest LLP, or as may be provided in the Purchase
-2-
<PAGE>
Agreement after such agreement has become effective. The Company will give
telephonic notice, confirmed in writing, of the date and time for the receipt of
proposals and of any such amendments and changes to its request for proposals,
which in its opinion are material, made prior to the submission of proposals, to
any person who will be submitting a proposal and who notifies the Company c/o
GPU Service, Inc. 310 Madison Avenue, Morristown, New Jersey 07962 Attn: T.G.
Howson, Vice President and Treasurer, that it desires such notice and furnishes
the name, address and telephone number of the person to whom such notice shall
be given. The notice of any such amendment or change need not include the text
thereof, but the text thereof may be examined at said office. The Notes will be
issuable only in fully registered form.
2. Form and Content of Proposals.
Each proposal for a series of Notes must be for the purchase of the entire
principal amount of such series for which proposals are being received, and
shall specify (i) the interest rate (which shall be a multiple of 1/8 of 1%) on
the Notes and (ii) the price to be paid to the Company for the Notes, which
price shall be stated as a percent of the principal amount of the Notes and
shall be not less than nor more than the minimum and maximum percentages of the
principal amount thereof specified in a statement referred to in Section 1(g)
hereof, plus, unless otherwise directed in a statement referred to in Section
1(g) hereof, accrued interest from the first day of the month in which the Notes
are issued to the date of delivery of and payment for the Notes.
Proposals may be made by a single prospective purchaser or by a group of
prospective purchasers. No prospective purchaser who makes a separate single
proposal may participate in a group proposal, and no prospective purchaser who
participates in one group proposal may participate in another group proposal.
In the case of a proposal by a group of prospective purchasers, the
several members of the group shall act through a duly authorized representative
or representatives (herein referred to as the "Representative"), who shall be
named as Representative in such group proposal and who may be included in the
group. If a proposal of a group of prospective purchasers is accepted, the
obligations of the members of the group shall be several and not joint,
including the obligation to purchase the principal amount of Notes set forth
opposite the respective names of such members in Schedule A to such group
proposal.
If a proposal is submitted by a Representative on behalf of a group of
prospective purchasers, and the principal amount of Notes to be purchased by any
member of the group is incorrectly stated in Schedule A to such proposal, the
Representative may correct any such error or errors forthwith upon discovery
-3-
<PAGE>
thereof. If no such correction is made or if, after all such corrections are
made, the total principal amount set forth in said Schedule A is more or less
than the entire principal amount of Notes for which proposals are being
received, then the total principal amount of Notes offered to be purchased by
the Representative shall be deemed to be increased or decreased, as the case may
be, to the extent of the discrepancy.
All proposals must be signed by a single prospective purchaser or, in the
case of a proposal by a group of prospective purchasers, by their Representative
on behalf of the group, and must be submitted in duplicate.
3. Certain Representations by the Prospective Purchasers to be Furnished
to the Company.
By submitting a proposal for the Notes, each prospective purchaser shall
be deemed to represent to the Company, as of the date of the proposal for the
Notes, that, except as stated to the Company in writing prior to the time for
receipt of proposals for the Notes:
(a) neither such prospective purchaser nor any of its directors,
officers or partners have a material relationship with the Company or the
Company's parent, GPU, Inc.;
(b) such prospective purchaser and its directors and officers or
partners, as a group, do not own beneficially 10% or more of any class of
capital stock of the Company or the Company's parent, GPU, Inc.;
(c) neither such prospective purchaser nor any of its directors,
executive officers or partners directly or indirectly controls or is
directly or indirectly controlled by or is under direct common control of
the Trustee;
(d) such prospective purchaser and its directors, executive officers
or partners, as a group, do not own beneficially more than 10% of the
voting securities of the Trustee;
(e) neither the Trustee nor any director, executive officer or
partner thereof is a "director, officer, partner, employee, appointee or
representative" of such prospective purchaser, as those terms are defined
in or pursuant to the Trust Indenture Act of 1939, as amended ("1939
Act");
(f) other than any matters disclosed to the Company pursuant to
paragraphs (c), (d) and (e) above, there is no relationship between such
prospective purchaser or any director, executive officer or partner
thereof and any bank that would disqualify such bank under the 1939 Act
that is
-4-
<PAGE>
currently acting as trustee from so acting with respect to any of the
Company's debt securities;
(g) such prospective purchaser is not a "holding company", a
"subsidiary company" of a "holding company", or an "affiliate" or
"associate company" of a "holding company" or of a "public utility
company", each as defined in the Public Utility Holding Company Act of
1935, as amended ("1935 Act");
(h) such prospective purchaser has not prepared any report or
memorandum for external use in connection with the proposed offering; and
(i) such prospective purchaser's commitment to purchase the Notes
will not result in a violation of the financial responsibility
requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as
amended, and is not prohibited or restricted by any action of the SEC or
of any national securities exchange applicable to such prospective
purchaser.
4. Submission of Proposals.
As set forth below and in a statement to be furnished to prospective
purchasers pursuant to Section 1(g) hereof, the Company will receive proposals
by telephone, confirmed in writing (including facsimile). The "time for the
submission of proposals" as used herein shall mean the earliest time designated
in a statement to be furnished to prospective purchasers pursuant to Section
1(f) hereof for submission of telephonic proposals to the Company.
(a) Each telephonic proposal, confirmed in writing, for the Notes
must be received by the Company on the date and no later than the time
designated by the Company in a statement furnished to prospective
purchasers pursuant to Section 1(g) hereof. Such telephonic proposals must
be directed to the person and telephone number specified therein by the
Company for each prospective purchaser and must provide the Company with
(i) the name of any single prospective purchaser or all members of a group
of prospective purchasers and the Representative of such group, (ii) a
telephone number at which such proposal may be immediately confirmed and
the name of the individual who will provide confirmation, (iii) the
interest rate to be borne by the Notes and (iv) the price to be paid to
the Company for the Notes stated as a percent of the principal amount of
the Notes. Such telephonic proposals must be confirmed in writing by means
of a duly executed proposal in writing on the form of Proposal (with
Schedule A thereto completed), or by other similar written instrument
acceptable to the Company and providing the information
-5-
<PAGE>
required in this paragraph to be set forth, which must be delivered to the
offices of Berlack, Israels & Liberman LLP, 120 West 45th Street, New
York, New York 10036, Attention: Douglas E. Davidson, Esq., by 5:00 p.m.
on such date, and sent by facsimile transmission to the offices of the
Company at the telephone number specified by the company in a statement
furnished to prospective purchasers pursuant to Section 1(g) hereof, as
soon as possible but in no event more than one hour after the time
specified as the deadline for receipt of telephonic proposals. Except as
set forth in the fourth paragraph of Section 2 hereof, any failure by a
prospective purchaser to confirm a telephonic proposal in a timely manner
by a duly executed proposal in writing on the form of Proposal or other
similar written instrument acceptable to the Company, with all information
properly specified therein, may result in such telephonic proposal being
rejected as not in the proper form as specified by the Company.
(b) The Company reserves the right, in its discretion from time to
time, to postpone the times or date for telephonic submission and written
confirmation of proposals, and will give telephonic notice confirmed in
writing of any such postponement to any prospective purchaser who shall
have furnished its name to the Company for such purpose pursuant to
Section 1 hereof.
(c) The Company reserves the right to designate, not less than 24
hours prior to the time, or postponed time, specified for submission of
proposals, a principal amount less than the principal amount originally
specified in the Company's request for proposals for the purchase of the
Notes, in which event the principal amount so designated shall be deemed
to be the principal amount of the Notes.
5. Acceptance or Rejection of Proposals.
Subject to the reservations set forth below, the decision of the Company
with respect to the proposals submitted will be announced not later than three
hours after the time designated for submission of proposals on the date
designated for such submission as specified in each case by the Company in a
statement furnished to prospective purchasers pursuant to Section 1(g) hereof,
or at such later time or date as may be fixed by the Company as provided in
Section 4(b) hereof. Within three hours of the receipt of proposals, the Company
will (subject to the provisions and reservations stated below) accept the
proposal which will provide the Company with the lowest "annual cost of money".
Said "annual cost of money" in respect of each proposal shall be determined by
the Company as twice the semi-annual rate necessary to discount the semi-annual
debt service payments (interest or interest and principal as due) to amounts
which in the aggregate equal the purchase price for the Notes, exclusive
-6-
<PAGE>
of accrued interest. The decision of the Company with respect to the lowest
"annual cost of money" shall in all cases be final. Each proposal will be
accepted or rejected in its entirety. All proposals shall be irrevocable until
three hours after the time for submission of proposals, unless sooner rejected.
If two or more such proposals provide an identical lowest "annual cost of
money" to the Company, then the Company (unless it shall reject all proposals)
shall by oral or telephonic announcement give the makers of such identical
proposals the opportunity (the duration of which shall be in the Company's
discretion, but shall not extend beyond one hour after such announcement) to
improve their proposals, such improved proposals to be made in a manner similar
to that specified in a statement furnished to prospective purchasers pursuant to
Section 1(g) hereof, adjusted to reflect the new proposal submission and
confirmation times. The Company will accept, subject to the reservations stated
below, the improved proposal which will provide the lowest "annual cost of
money" to the Company. If no improved proposal is so made, or if on
resubmission, two or more proposals providing an identical lowest "annual cost
of money" to the Company are again received, the Company may, in its sole
discretion and without liability to the maker of any other proposal, accept any
one of the identical proposals providing the lowest "annual cost of money" to
the Company.
Notwithstanding the foregoing provision hereof, the Company reserves the
right:
(a) to reject all proposals (at or after the submission and
confirmation thereof irrespective of the terms stated therein), and
(b) to reject the proposal of any prospective purchaser or of any
group of prospective purchasers (i) if such prospective purchaser or any
member of such group of prospective purchasers is in such relationship
with the Trustee as would disqualify the Trustee from acting as Trustee
under the Indenture if the proposal of such prospective purchaser or group
of prospective purchasers shall be accepted, (ii) if the Company, in the
opinion of its counsel, may not lawfully sell the Notes to such
prospective purchaser or to any member of such group of prospective
purchasers, and, in either such event, in the case of a group of
prospective purchasers, if within one hour after the time for submission
of proposals, the member or members of such group causing such
disqualification or illegality have not withdrawn from the group and the
remaining members, including substituted members, if any are permitted by
the Company, have not agreed to purchase the Notes which such withdrawing
member or members have offered to purchase, (iii) if the Company is not
satisfied with the
-7-
<PAGE>
financial responsibility of such prospective purchaser or any member of
any such group of prospective purchasers, or (iv) if the acceptance of
such proposal might, in the judgment of the Company, bring about the risk
of a delay in the sale of the Notes.
6. Determination of Redemption of the Notes.
As soon as practicable after the acceptance of a proposal, any applicable
redemption prices of the Notes will be determined by the Company in accordance
with a statement furnished to prospective purchasers pursuant to the statement
referred to in Section 1(g) hereof. Such determination by the Company shall be
final.
7. Purchase Agreement.
Upon the acceptance of a proposal for the Notes, the Company will
forthwith signify such acceptance by signing a duplicate or reproduction copy of
the proposal of the successful purchaser, or, in the case of a proposal by a
group of purchasers, of the Representative on its behalf. Upon such acceptance
of a proposal, the Purchase Agreement shall become effective without any
separate execution thereof, and thereafter all rights of the Company and of the
successful purchaser, or group of purchasers, shall be determined solely in
accordance with the terms of the proposal and such Purchase Agreement, subject,
however, to such changes therein as may be appropriate if the successful
purchaser or group of purchasers shall not contemplate a public offering of the
Notes. Forthwith upon such acceptance of any proposal, the successful purchaser
or, in the case of a proposal by a group of purchasers, the Representative on
its behalf, shall furnish to the Company in writing the information which is (i)
required to supplement the Prospectus and for the filing thereof, (ii) required
to be filed by the Company with the PaPUC and (iii) required to be filed with
the SEC under the 1935 Act.
8. Opinion of Counsel for the Purchasers.
Thelen Reid & Priest LLP has been selected by the Company as counsel to
give to the successful purchaser or purchasers an opinion with respect to the
legal matters specified in Section 5(e) of the Purchase Agreement. Such counsel
has participated from the standpoint of prospective purchasers of the Notes in
the preparation of the proposal papers and the documents under which the Notes
are to be issued and have reviewed or will review the corporate proceedings and
the registration procedure with respect to the authorization and issuance of the
Notes. They have also prepared the survey referred to in Section 1(f)(2) hereof.
Prospective purchasers may confer with Thelen Reid & Priest LLP with respect to
any of the foregoing matters. The compensation and disbursements of such counsel
are to be paid by the successful purchaser or purchasers, except as otherwise
provided
-8-
<PAGE>
in the Purchase Agreement, and any prospective purchaser and any Representative
of a group of prospective purchasers may obtain from such counsel, upon request,
advice regarding the amount of such compensation and an estimate of the amount
of such disbursements.
9. Miscellaneous.
The Company reserves the right to waive any irregularity, which it deems
to be immaterial, in complying with any of the foregoing terms and conditions.
PENNSYLVANIA ELECTRIC COMPANY
------------------------------------
By: T. G. Howson
Vice President and Treasurer
[date]
-9-
EXHIBIT 26-C
P R O P O S A L
for the purchase of
$--------1 Principal Amount of Senior Notes
---% Series1 due -----------1
of
PENNSYLVANIA ELECTRIC COMPANY
------------------
Interest Rate: ---- % per annum
Price: ----% of principal amount
Pennsylvania Electric Company
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
Ladies and Gentlemen:
Referring to the Statement of Terms and Conditions Relating to
Proposals dated -------------- ("Terms and Conditions") for the purchase of not
more than $---------- aggregate principal amount of the above series of Senior
Notes of Pennsylvania Electric Company ("Company"), the persons, firms and
corporations named in Schedule A attached hereto ("Prospective Purchasers")
submit herewith the following Proposal for the above series of Senior Notes of
the Company ("Notes"):
1. Each of the Prospective Purchasers, severally and not jointly,
hereby offers to purchase from the Company, at the price (expressed as a
percentage of the principal amount of the Notes) and with an interest rate to be
paid by the Company as specified in the space provided therefor above, and upon
the terms and conditions set forth in the Terms and Conditions, including the
statement(s) relating to the Notes furnished to the Prospective Purchasers by
the Company pursuant to Section 1(g) thereof, and in the form of Purchase
Agreement attached hereto as Schedule B (the "Purchase Agreement"), the
principal amount of Notes set forth opposite the name of such Prospective
Purchaser in said Schedule A (unless corrected or deemed to have been corrected
as provided in Section 2 of the Terms and Conditions, in which case said
principal amount shall be as so corrected or deemed to have been corrected).
- --------
1 Insert the principal amount, the series designation and the year of
maturity of the notes designated by the Company pursuant to Section 1 of the
Terms and Conditions.
<PAGE>
2. If this Proposal shall be accepted by the Company, the Purchase
Agreement shall thereupon become effective as of the time of the acceptance of
this Proposal without any separate execution thereof, with the blanks therein
deemed to be appropriately filled in, in accordance with the terms of this
Proposal, and with such modifications therein as may be necessary and as are
contemplated by the Terms and Conditions.
3. This Proposal is independent of all other proposals which may be
presented to the Company pursuant to the Terms and Conditions.
4. Each of the Prospective Purchasers acknowledges receipt of a copy
of the Terms and Conditions and the Prospectus relating to the Notes.
5. By making this Proposal each of the Prospective Purchasers
confirms its representations to the Company as set forth in Section 3 of the
Terms and Conditions.
The undersigned Representative represents and warrants that it has
all necessary power and authority to submit proposals for each of the
Prospective Purchasers in respect of the matters referred to in this Proposal
and to act on behalf of each of the Prospective Purchasers in any purchase of
the Notes if this Proposal is accepted as contemplated by the Terms and
Conditions.
Please indicate your acceptance of this Proposal by signing below or
on a counterpart hereof, in which event each such counterpart shall be deemed to
be an original but both of which, when taken together, shall constitute one and
the same document.
Very truly yours,
Representative(s)
By:--------------------------------------
Acting on behalf of the several
Prospective Purchasers named in Schedule
A attached hereto, including itself; or
single prospective purchaser.
Accepted-------------, 1999
PENNSYLVANIA ELECTRIC COMPANY
By:---------------------------------
Title:-----------------------------
2
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SCHEDULE A
Name of
Prospective Purchaser Principal Amount
---------
Total............................................$=========
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SCHEDULE B
PENNSYLVANIA ELECTRIC COMPANY
SENIOR NOTES
PURCHASE AGREEMENT
AGREEMENT made as of the date of acceptance of the proposal (which
includes Schedule A thereto) to which this Agreement is attached as Schedule B
("Proposal"), between Pennsylvania Electric Company, a Pennsylvania corporation
("Company"), and the several Purchasers (hereinafter defined) of the Company's
Senior Notes of the designated series, in the principal amount and with the
interest rate specified in the Proposal ("Notes").
Section 1. Registration and Issue of Notes. (a) The Company proposes
to issue the Notes under its Senior Note Indenture between the Company and
United States Trust Company of New York, as Trustee ("Trustee"), as supplemented
by a supplemental indenture between the Company and the Trustee (said Indenture,
as so supplemented, being hereinafter referred to as the "Indenture" and such
supplemental indenture, as executed and delivered, being hereinafter referred to
as the "Supplemental Indenture"), which Notes and Indenture are more fully
described in the prospectus hereinafter referred to.
(b) The Company represents and warrants that it has duly filed
with the Securities and Exchange Commission ("SEC") a registration statement on
Form S-3 relating to up to $725 million aggregate principal amount of the Notes
and the offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended ("1933 Act"), and has filed such amendments
thereto, if any, and such amended preliminary prospectus as may have been
required to the date hereof. Such registration statement as so amended has been
declared effective by the SEC. Copies of such registration statement have been
delivered to the Representative hereinafter referred to, and copies of a
prospectus supplement ("Prospectus Supplement") or prospectus filed pursuant to
Rule 424(b) under the 1933 Act satisfactory to counsel for the Purchasers
reflecting the terms of the Notes will similarly be delivered. The Company will
not file any amendment to said registration statement, any prospectus supplement
or any documents with the SEC pursuant to Sections 13, 14 or 15 of the
Securities Exchange Act of 1934, as amended ("1934 Act"), which modify said
registration statement, unless such amendment, supplement or modification is
reasonably satisfactory to counsel for the Purchasers. Such registration
statement as so amended on the date
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of this Agreement, and the prospectus constituting a part thereof, as amended or
supplemented to reflect the terms of the offering of the Notes pursuant to a
prospectus supplement or prospectus filed by the Company pursuant to Rule 424(b)
under the 1933 Act (including, in each case, all documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act), are
hereinafter called the "Registration Statement" and the "Prospectus",
respectively, except that if the Company files any documents pursuant to
Sections 13, 14 or 15 of the 1934 Act after the date of this Agreement and prior
to the termination of the offering of the Notes by the Purchasers, which
documents are deemed to be incorporated by reference in the Prospectus, the term
"Prospectus" shall refer to the Prospectus as supplemented by the documents so
filed from and after the date said documents are mailed or otherwise delivered
for filing to the SEC. The Company will advise Thelen Reid & Priest LLP, who are
acting as counsel for the Purchasers, of the filing of any amendment or
supplement to the Prospectus (including any documents incorporated by
reference), prior to any such filing and will not file any such amendment or
supplement to which counsel for the Purchasers shall reasonably object in
writing.
Section 2. Purchase and Sale. Subject to the terms and conditions
herein set forth, the Company agrees to sell to the several persons, firms or
corporations named in the Proposal (herein referred to as "Purchasers" or singly
as "Purchaser" and the Purchaser or Purchasers named as Representative(s) in the
Proposal being herein referred to as "Representative"), severally and not
jointly, and each of the Purchasers, upon the basis of the representations and
warranties herein set forth, agrees to purchase from the Company, severally and
not jointly, the principal amount of Notes set forth opposite its name in the
Proposal at the price set forth in the Proposal plus accrued interest thereon
from the first day of the month in which the Notes are to be issued, to the date
of delivery of and payment for the Notes.
Section 3. Public Offering. The Company is advised by the
Representative that the Purchasers propose to make a bona fide public offering
of the Notes as soon as practicable. The Representative is contemporaneously
advising the Company of such details of the offering, including the price to the
public and the concessions, if any, to dealers, brokers and others, as are
needed to complete the filing of any supplement to the Prospectus.
Section 4. Delivery of and Payment for the Notes. (a) Payment of the
purchase price for the Notes, including accrued interest at the rate specified
in the Proposal from the first day of the month in which the Notes are issued to
the Closing Date (as herein below defined), shall be made by or on behalf of the
several Purchasers by a check or checks payable in
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Federal funds or wire transfer to the order of the Company, at the offices of
Thelen Reid & Priest LLP, 40 West 57th Street, New York, New York 10019 (or such
other place or places of payment as may be agreed upon between the Company and
the Representative), at 10:00 A.M., New York time, on the date which is [three
business days] after the date on which the Proposal is accepted by the Company,
or at such other time and by such alternative method as shall be agreed upon by
the Company and the Representative, upon delivery of the Notes to the
Representative for the account of the Purchasers at the offices of Thelen Reid &
Priest LLP, 40 West 57th Street, New York, New York 10019 (or such other place
or places of delivery as shall be agreed upon between the Company and the
Representative). The consummation and the time and date of such payment and
delivery, which may be postponed as provided in paragraph (c) below, are herein
referred to, respectively, as the "Closing" and the "Closing Date."
(b) The Notes will be delivered to the Representative for the
respective accounts of the Purchasers in fully registered form in denominations
of $1,000 and any integral multiple thereof as the Representative may reasonably
request in writing not later than 12:00 Noon, New York time, on the second
business day prior to the Closing Date, or to the extent not so requested,
registered in the names of the respective Purchasers in such denominations as
the Company may determine. The Company agrees to make such Notes available to
the Representative for inspection not later than 12:00 Noon, New York time, on
the business day next preceding the Closing Date at the offices of Thelen Reid &
Priest LLP, 40 West 57th Street, New York, New York 10019 (or such other place
or places as shall be agreed upon between the Company and the Representative).
(c) If any one or more of the Purchasers shall fail or refuse
to purchase and pay for the principal amount of Notes set forth opposite its or
their names in the Proposal in accordance with the terms hereof ("Defaulted
Notes"), the Company shall immediately notify the Representative orally, and the
Representative shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Purchasers, or any other
purchasers, to purchase all, but not less than all, of the Defaulted Notes in
such amounts as may be agreed upon and upon the terms herein set forth. If,
however, during such 24 hours the Representative shall not have completed such
arrangements for the purchase of all of the Defaulted Notes, then the Company
shall have the right within a further period of 24 hours:
(i) to require each non-defaulting Purchaser to purchase the
Defaulted Notes of the defaulting Purchaser up to a principal amount
thereof equal to 10% of the principal amount of Notes which such
non-defaulting Purchaser has otherwise agreed to purchase hereunder;
and
4
(ii) to procure one or more other members of the National
Association of Securities Dealers, Inc., satisfactory to the
Representative, to purchase, upon the terms herein set forth, the
aggregate amount of Defaulted Notes which the non-defaulting
Purchasers shall not be obligated to purchase pursuant to the
foregoing clause (i).
In the event of a default by any Purchaser or Purchasers as
set forth in this Section, either the Representative or the Company shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order that any required changes in the Registration Statement or Prospectus or
in any other documents or arrangements may be effected.
Section 5. Conditions of Purchasers' Obligations. The obligations of
the several Purchasers to purchase and pay for the Notes are subject to the
following conditions:
(a) Any prospectus or prospectus supplement required to be
filed pursuant to Rule 424(b) under the 1933 Act to reflect the terms of the
Proposal shall have been timely filed in accordance with the 1933 Act.
(b) On the Closing Date there shall be in full force and
effect an order of the Pennsylvania Public Utility Commission ("PaPUC")
permitting the issuance and sale of the Notes, containing no provision
unacceptable to the Representative (it being understood that any such order in
effect as of the date of this Agreement does not contain any such unacceptable
provision and that no subsequent order shall be deemed to contain any such
unacceptable provision, unless the Representative within 24 hours after
receiving a copy thereof from the Company shall have given notice to the Company
to the effect that such order contains an unacceptable provision or unacceptable
provisions).
(c) On the Closing Date
(i) no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for
that purpose shall be pending before, or to the knowledge of the
Company threatened by, the SEC;
(ii) since the respective most recent dates as of which
information is given in the Registration Statement and Prospectus
and up to the Closing Date, there shall have been no material
adverse change in the business, properties or financial condition of
the Company, except as reflected in or contemplated by the
Registration Statement and the Prospectus, and since
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<PAGE>
such dates and up to the Closing Date there shall have been no
material transaction entered into by the Company other than
transactions disclosed in or contemplated by the Registration
Statement and the Prospectus and transactions in the ordinary course
of business;
(iii) the Company shall have performed all agreements
contained herein to be performed by it at or prior to such date; and
(iv) the representations and warranties of the Company herein
contained shall be true and correct; and the Representative shall
have received, prior to payment for the Notes, a certificate, dated
the day of the Closing Date and signed by the President or any Vice
President of the Company, to such effect.
(d) On the Closing Date, the Representative shall be furnished
with opinions of Berlack, Israels & Liberman LLP and Ballard Spahr Andrews &
Ingersoll, LLP (together, herein sometimes referred to as "counsel for the
Company"), dated the Closing Date and with copies thereof for each of the other
Purchasers, to the effect that:
(i) the Company is duly incorporated and validly
subsisting under the laws of the Commonwealth of
Pennsylvania and has corporate authority to carry on its
business as described in the Prospectus, to own and
operate the properties used and useful in said business
and to issue the Notes under and pursuant to the
Indenture;
(ii) the Indenture has been duly authorized,
executed and delivered by the Company and is a valid
instrument legally binding upon the Company (except as
limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws,
including, without limitation, the Atomic Energy Act of
1954 and the regulations thereunder, affecting
creditors' rights generally and general equitable
principles);
(iii when the Notes have been duly executed by the
Company, authenticated by the Trustee and delivered by
the Company, and payment therefor has been received by
the Company pursuant to this Agreement, they will
6
<PAGE>
be valid and binding obligations of the Company in
accordance with their terms and entitled to the benefits
provided by the Indenture, subject to the limitation set
forth in item (ii);
(iv) the Notes conform as to legal matters to the
statements concerning them in the Prospectus, and the
summary therein of certain provisions of the Indenture
constitutes a correct summary thereof for use in the
Prospectus;
(v) the franchises of the Company are
sufficient authority for it to carry on its business
as described in the Prospectus;
(vi) all approvals, consents, and orders of the
PaPUC and the SEC legally required for the execution and
delivery of the Supplemental Indenture and the issuance
and sale of the Notes have been obtained, and no
approval or consent of any other commission or other
governmental authority is legally required for such
execution, delivery, issuance and sale (except that the
sale of the Notes in certain jurisdictions may be
subject to the provisions of the securities laws of such
jurisdictions) and the issuance and sale of the Notes
are in accordance with the approvals and consents
obtained;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) at the time the Registration Statement
became effective, and as of the date hereof, the
Registration Statement and Prospectus (except the
financial statements and other financial and statistical
information included or incorporated by reference
therein, as to which counsel need express no opinion)
complied as to form in all material respects with the
requirements of the 1933 Act and the rules and
regulations of the SEC regarding registration statements
on Form S-3 and related prospectuses; and
(ix) with respect to matters required to be
included in the Registration Statement, the statements
made in the Registration Statement under the heading
"Description of Senior Notes" fairly present the
information called for insofar as such statements
constitute summaries of certain documents referred to
therein.
In addition, such counsel shall state that to the best of such counsel's
knowledge, without independent check or verification except as indicated,
nothing has come to the attention of such counsel that would lead them to
believe that the Registration Statement at the time it became effective, or if
an annual report on Form 10-K has been filed by the Company with the SEC
subsequent to the effectiveness of the Registration Statement, then at the time
of the most recent such filing (in each case other than with respect to the
financial statements and other financial and statistical information included or
incorporated by reference therein), 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 the Prospectus,
at the time it was electronically transmitted to the SEC or at the Closing Date
(other than with respect to the financial statements and other financial and
statistical information included or incorporated by reference therein),
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
In giving such opinion, Berlack, Israels & Liberman LLP may rely as to all
matters of Pennsylvania law and legal conclusions based thereon upon the opinion
of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania.
(e) On the Closing Date, the Representative shall be furnished
with an opinion of Thelen Reid & Priest LLP (herein sometimes referred to as
"counsel for the Purchasers"), dated the Closing Date, and with copies thereof
for each of the other Purchasers, stating in substance the matters set forth in
subparagraphs (ii), (iii), (iv), (vi), (vii), (ix) and the penultimate paragraph
of paragraph (d) of this Section 5; and stating that the opinion given pursuant
to paragraph (d) of this Section 5 is satisfactory in form to them. In giving
such opinion, counsel for the Purchasers may rely as to all matters of
Pennsylvania law and legal conclusions based thereon upon the opinion of Ballard
Spahr Andrews & Ingersoll, LLP.
(f) On the Closing Date, the Representative shall be furnished
with a letter from PricewaterhouseCoopers, LLP, dated such date and addressed to
the Board of Directors of the Company and the Representative, with copies
thereof for each of the Purchasers, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the 1933 Act and the applicable published rules and regulations thereunder; (ii)
in their opinion, the financial statements and supplemental schedules audited by
them and
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incorporated by reference in the Prospectus and included or incorporated by
reference in the Company's most recent Annual Report on Form 10-K filed with the
SEC under Section 13 of the 1934 Act ("Form 10-K") comply as to form in all
material respects with the applicable accounting requirements of the 1934 Act
and the published rules and regulations thereunder ("1934 Act Regulations");
(iii) on the basis of (1) procedures performed as specified by the American
Institute of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial Information, on the
unaudited balance sheets and related unaudited condensed statements of income,
retained earnings and cash flows of the Company incorporated by reference in the
Registration Statement and included in the Company's quarterly reports on Form
10-Q (collectively, "Form 10-Qs"), (2) a reading of the latest unaudited
Operating Revenues and Net Income included or incorporated by reference in the
Prospectus, (3) a reading of the latest available unaudited financial statements
of the Company, (4) a reading of the minutes of the meetings of the stockholder,
the Board of Directors and the Executive Committee of the Board of Directors of
the Company as set forth in the minute books since [September 30, 1998], and (5)
inquiries of certain officials of the Company who have responsibility for
financial and accounting matters (it being understood that the foregoing
procedures do not constitute an audit made in accordance with generally accepted
auditing standards and would not necessarily reveal matters of significance with
respect to the comments made in such letter and, accordingly, that
PricewaterhouseCoopers, LLP makes no representations as to the sufficiency of
such procedures for the several Purchasers' purposes), nothing has come to their
attention which caused them to believe that (A) the unaudited financial
statements included in the Form 10-Qs do not comply as to form in all material
respects with the applicable accounting requirements of the 1934 Act and the
1934 Act Regulations or that any material modifications should be made to said
unaudited financial statements for them to be in conformity with generally
accepted accounting principles, (B) any material modifications should be made to
the unaudited amounts of operating revenues and net income for the most recent
12-month period included or incorporated by reference in the Registration
Statement for them to be in conformity with generally accepted accounting
principles or (C) on the date of the latest available financial statements and
on a specified date not more than five days prior to the Closing Date there was
any change in the common stock, preferred stock without mandatory redemption,
company-obligated mandatorily redeemable preferred securities, preferred stock
with mandatory redemption or long-term debt (except for such stock and long-term
debt acquired for sinking fund purposes or redeemed pursuant to sinking fund
provisions, or changes in obligations under capital leases incurred in the
ordinary course of the Company's business), of the Company, or any decrease in
its net assets
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<PAGE>
(except as occasioned by the declaration of dividends), in each case as compared
with the amounts shown in the most recent balance sheet included in the most
recent Form 10-K or Form 10-Q, except in all instances for changes or decreases
which the Registration Statement discloses have occurred or may occur, and (iv)
they have proved the arithmetic accuracy of or performed certain other
procedures on the Ratios of Earnings to Fixed Charges contained in the
Registration Statement under the heading "Company Coverage Ratios" and such
other financial information contained or incorporated by reference in the
Registration Statement as reasonably requested by the Representative; provided,
that said letter may vary from the requirements specified above in such manner
as the Representative may deem not to be material or may be acceptable to the
Representative with the consent of Purchasers who, together with the
Representative, have agreed to purchase in the aggregate 50% or more of the
Notes.
Section 6. Conditions of Company's Obligations. The obligations of
the Company to issue and sell the Notes are subject to the following conditions:
(a) Any prospectus or prospectus supplement pursuant to Rule 424(b)
under the 1933 Act shall have been filed not later than the time specified in or
agreed to under paragraph (a) of Section 5 hereof.
(b) On the Closing Date no stop order suspending the effectiveness
of the Registration Statement shall be in effect and no proceedings for that
purpose shall be pending before or, to the knowledge of the Company, threatened
by the SEC.
(c) On the Closing Date there shall be in full force and effect an
order of the PaPUC permitting the issuance and sale of the Notes in accordance
with the terms thereof containing no provision unacceptable to the Company (it
being understood that any such order in effect as of the date of this Agreement
does not contain any such unacceptable provision and that no subsequent order
shall be deemed to contain any such unacceptable provision, unless the Company,
within 24 hours after receiving a copy thereof, shall give notice to the
Representative to the effect that such order contains an unacceptable provision
or unacceptable provisions).
(d) On the Closing Date the Company shall concurrently sell and
receive payment for all of the Notes.
(e) The issuance and sale of the Notes shall be exempt from the
provisions of the Public Utility Holding Company Act of 1935, as amended,
pursuant to Rule 52 thereunder.
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Section 7. Covenants of the Company. In further consideration of the
agreements of the Purchasers herein contained, the Company agrees that:
(a) The Company will file with the SEC a prospectus or prospectus
supplement pursuant to Rule 424(b) under the 1933 Act, with such changes therein
as may be approved by counsel for the Purchasers, as soon as practicable after
the acceptance of the Proposal.
(b) As soon as the Company is advised thereof, it will notify the
Representative orally (i) when any amendment or supplement to the Registration
Statement has been filed, and (ii) when any stop order has been issued under the
1933 Act with respect to the Registration Statement or any proceedings therefor
have been instituted or to the knowledge of the Company are threatened; and it
will use its best efforts to prevent the issuance of any such stop order and
secure the prompt removal thereof, if issued. The Company will not, after the
acceptance of the Proposal and prior to termination of the offering of the
Notes, file any amendment of or any further supplement to the Registration
Statement or the Prospectus unless such amendment or supplement is reasonably
satisfactory to counsel for the Purchasers.
(c) The Company will, on or prior to the Closing Date, deliver to
the Representative and also, on request, to counsel for the Purchasers:
(i) a copy of the Registration Statement as originally filed
and of each amendment thereto, each signed by or on behalf of the
proper officers of the Company and a majority of its Board of
Directors, including a signed copy of each consent, opinion and
certificate included therein or filed as an exhibit thereto, and
also including the exhibits to, and the documents incorporated by
reference in, such Registration Statement and amendments thereto
(other than such exhibits as are incorporated in the Registration
Statement by reference, unless specifically requested); and
(ii) such other documents (including copies of the
Registration Statement and of any amendments thereto, in each case
including documents incorporated therein by reference but excluding
exhibits) appropriately signed or certified if so requested,
relating to the issuance and validity of the Notes as the
Representative or counsel for the Purchasers may reasonably request.
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<PAGE>
(d) Promptly after the date of any prospectus supplement or
prospectus filed with the SEC to reflect the terms of the Proposal, the Company
will furnish to the Purchasers, in accordance with the Representative's
instructions, without charge, as many copies of the Prospectus (without the
documents incorporated therein by reference) as the Representative may
reasonably request for the purposes contemplated by the 1933 Act, and will
deliver to the Representative as soon as practicable after the effective date of
the Registration Statement sufficient conformed copies of the Registration
Statement and of all amendments thereto (in each case including documents
incorporated therein by reference but excluding exhibits) for distribution of
one to each Purchaser. If any event relating to or affecting the Company, or of
which the Company shall be advised by the Representative, shall occur, which in
the opinion of the Company or of counsel for the Purchasers should be set forth
in a supplement to or an amendment of the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances when it is delivered
to a Purchaser, the Company will, upon the occurrence of each such event,
forthwith at its expense, (i) prepare and furnish to the Representative a
reasonable number of copies of a supplement or amendment to the Prospectus,
satisfactory to counsel for the Purchasers, or (ii) file with the SEC documents
to be incorporated by reference in the Prospectus, reasonably satisfactory to
counsel for the Purchasers in either case so that statements in the Prospectus
as so supplemented, amended or modified will not contain as of the date of such
supplement, amendment or modification, any 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 when the Prospectus is delivered, not
misleading.
(e) After the acceptance of the Proposal, and prior to the
termination of the offering of the Notes, the Company will file promptly all
documents required to be filed with the SEC pursuant to Section 13(a), 13(c), 14
or 15(d) of the 1934 Act, which documents shall be reasonably satisfactory to
counsel for the Purchasers.
(f) The Company will make generally available to its security
holders, as soon as practicable, an earning statement of the Company (covering a
period and otherwise in form consistent with the provisions of Section 11(a) and
Rule 158 promulgated under the 1933 Act which earning statement need not be
certified by independent public accountants unless required by the 1933 Act),
which earning statement shall be in the same detail as the Statement of Income
incorporated by reference in the Registration Statement.
(g) The Company will use its best efforts to comply with the
conditions precedent to the obligations of the
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<PAGE>
purchasers, specified in Section 5 hereof, or to cause such conditions to be
complied with.
(h) The Company will pay all expenses in connection with the
preparation of the Registration Statement and Prospectus, the issuance and
delivery of the Notes, and the printing and delivery of copies of the
Registration Statement, the Prospectus, the Terms and Conditions and the various
documents therein referred to; and will pay all taxes, if any, on the issuance
of the Notes, but will not pay any transfer taxes. The Company will not,
however, be required to pay any amount for any expenses of the Representative or
of any of the Purchasers or compensation and disbursements of their counsel,
except as provided in Section 9(c) hereof, and, except as provided in said
Section 9(c), the Purchasers agree to pay such expenses, compensation and
disbursements. The Company shall not, in any event, be liable to the several
Purchasers for damages on account of loss of anticipated profits.
(i) The Company will use its best efforts to qualify at its expense
the Notes for offer and sale, under the securities laws in such states as the
Representative may designate, and will pay all fees and expenses including fees
and disbursements of counsel not to exceed $----- incurred in connection with
the preparation of surveys relating thereto and to their legality for
investment, if any, provided that the Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of process in
any state.
Section 8. Representations and Warranties of the Company;
Indemnification. (a) The Company represents and warrants to each Purchaser
that
(i) when any prospectus or prospectus supplement reflecting
the acceptance of the Proposal is filed with the SEC, and at the
Closing Date, (A) the Registration Statement will comply in all
material respects with the provisions of the 1933 Act and the rules
and regulations of the SEC thereunder, and will not contain any
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, and (B) the Prospectus will comply in all
material respects with the provisions of the 1933 Act and the rules
and regulations of the SEC thereunder and will not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; except
that the representations and warranties contained in this subsection
(i) shall not apply to statements in or omissions from the
Registration
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statement and Prospectus made in reliance upon and in conformity
with information furnished herein or in writing to the Company by
any Purchaser or by the Representative on behalf of any Purchaser
expressly for use in the Registration Statement or Prospectus;
(ii) the documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they
were filed with the SEC, complied in all material respects with the
requirements of the 1934 Act Regulations, and, when read together
with the other information in the Prospectus, and, when any
prospectus or prospectus supplement reflecting the acceptance of the
Proposal is filed with the SEC, and at the Closing Date, will not
contain any 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 light of the circumstances under which they
are made, not misleading, and any documents deemed to be
incorporated by reference in the Prospectus will, when they are
filed with the SEC, comply in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations and will
not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they are made, not misleading;
(iii) PricewaterhouseCoopers, LLP are independent certified
public accountants with respect to the Company within the meaning of
the 1933 Act and the rules and regulations of the SEC thereunder;
(iv) the performance by the Company of the terms of this
Agreement will not result in a breach by the Company of any terms
of, or constitute a default under, any other material agreement or
undertaking of the Company; and
(v) except as reflected in, or contemplated by, the
Registration Statement and Prospectus, since the respective most
recent dates as of which information is given in the Registration
Statement and Prospectus, there has not been any material adverse
change in the business, properties or financial condition of the
Company, and since such dates there has not been any material
transaction entered into by the Company other than transactions
disclosed in or contemplated by the Registration Statement and
Prospectus and transactions in the ordinary course of business, and
the Company has
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no material contingent obligation which is not disclosed in the
Registration Statement and Prospectus.
(b) The Company agrees to indemnify and hold harmless each Purchaser
and each person, if any, who controls any Purchaser within the meaning of
Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged
omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with written information furnished to the
Company by any Purchaser or by the Representative on behalf of any
Purchaser expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus
(or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission or
any alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is
not paid under (i) or (ii) above.
This indemnity agreement is subject to the condition that insofar as
it relates to any untrue statement or omission, or any alleged untrue statement
or omission, made in any
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preliminary prospectus or the Prospectus but eliminated or remedied in a
supplement or amendment thereto, such indemnity agreement shall not inure to the
benefit of any Purchaser (or of any person controlling such Purchaser) from and
after the time such supplement or amendment shall have been furnished unless the
Prospectus is used as so supplemented or amended, provided that such use shall
not require delivery of documents incorporated by reference. In no case shall
the Company be liable under this indemnity agreement with respect to any claim
made against any Purchaser or any such controlling person unless the Company
shall be notified in writing of the nature of the claim promptly after the
assertion thereof, but failure so to notify the Company shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. The Company shall be entitled to participate at its own expense in
the defense, or, if it so elects within a reasonable time after receipt of such
notice, to assume the defense of any suit brought to enforce any such claim, but
if it so elects to assume the defense, such defense shall be conducted by
counsel chosen by it and approved by the Purchaser or Purchasers or controlling
person or persons, defendant or defendants in any suit so brought, which
approval shall not be unreasonably withheld. In the event that the Company
elects to assume the defense of any such suit and retains such counsel, the
Purchaser or Purchasers or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel thereafter retained by them. In the event that the parties to any such
action (including impleaded parties) include both the Company and one or more
Purchasers and any such Purchaser shall have been advised by counsel chosen by
it and satisfactory to the Company that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume the defense of such
action on behalf of such Purchaser and will reimburse such Purchaser and any
person controlling such Purchaser as aforesaid for the reasonable fees and
expenses of any counsel retained by them, it being understood that the Company
shall not, in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for all such Purchasers and controlling persons,
which firm will be designated in writing by the Representative. The Company
agrees to notify the Representative promptly after the assertion of any claim
against it, any of its directors or any of its officers who signed the
Registration Statement, or any person who controls the Company within the
meaning of Section 15 of the 1933 Act, in connection with the sale of the Notes.
(c) Each Purchaser severally agrees that it will indemnify and hold
harmless the Company, its directors, and each of its officers who signed the
Registration Statement and each
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person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act to the same extent as the indemnity contained in subsection (b) of this
Section, but only with respect to statements or omissions made in the
Registration Statement (or any amendment thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) in reliance upon and
in conformity with written information furnished to the Company by such
Purchaser or by the Representative on behalf of such Purchaser expressly for use
in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto). In case
any action shall be brought against the Company or any person so indemnified
based on the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) and in respect of which indemnity may be sought against any Purchaser,
such Purchaser shall have the rights and duties given to the Company, and the
Company and each person so indemnified shall have the rights and duties given to
the Purchasers by the provisions of subsection (b) of this Section.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 8 is
for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company and the Purchasers shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
one or more Purchasers in respect of such offering in such proportions that the
Purchasers shall be responsible for that portion of the aggregate losses,
liabilities, claims, damages and expenses represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus Supplement
relating to the Notes bears to the initial public offering price appearing
thereon and the Company shall be responsible for the balance, provided, however,
that no such person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section, each person, if any, who controls a Purchaser within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as such
Purchaser and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
(e) The indemnity agreements contained in this Section 8 shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of the Company, or any
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purchaser or any controlling person, and shall survive the delivery of the
Notes to the Purchasers.
Section 9. Termination and Survival. (a) This Agreement may be
terminated by notice to the Company by the Representative with the consent of
Purchasers who have agreed to purchase in the aggregate 50% or more of the
aggregate principal amount of the Notes (i) at any time prior to the expiration
of 24 hours after acceptance of the Proposal (but not after the initial public
offering of the Notes), if the market value of securities in general or
political, financial or economic conditions shall have so materially changed
after the time for the submission of proposals for the Notes and within the time
set forth above as, in the judgment of the Representative, to render it
inadvisable to proceed with the public offering of the Notes, and (ii) at any
time prior to the Closing if, subsequent to the time for the submission of
proposals (A) a general banking moratorium shall have been declared by Federal
authorities which in the judgment of the Representative would materially
restrict a free market for the Notes, (B) there shall have been a general
suspension of trading on the New York Stock Exchange, (C) there shall have
occurred any new outbreak or escalation of hostilities or other national or
international calamity or crisis the effect of which on the financial markets of
the United States shall be such as, in the judgment of the Representative, to
make it impracticable for the Purchasers to enforce contracts for the sale of
the Notes, or (D) the Company shall have sustained a loss by fire, flood,
accident or other calamity which is substantial with respect to the property of
the Company and which in the judgment of the Representative renders it
inadvisable to consummate the sale of the Notes and the delivery of the Notes by
the several Purchasers at the initial public offering price, whether or not such
loss shall have been insured. The time of the initial public offering for the
purposes of this Section 9 shall mean the time at which the Notes are first
generally offered by the Representative on behalf of the Purchasers to dealers
by letter, facsimile transmission or telegram.
(b) This Agreement shall terminate:
(i) if, under the conditions, within the time and otherwise as
provided in Section 4(c) hereof, neither the Representative nor the
Company shall procure another party or parties to purchase Defaulted
Notes;
(ii) if any of the conditions specified in Section 5 hereof
shall not have been fulfilled and the Representative shall give
notice to the Company that this Agreement is terminated by reason
thereof; or
(iii) if any of the conditions specified in Section 6 hereof
shall not have been fulfilled and the
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Company shall give notice to the Representative that this Agreement
is terminated by reason thereof.
(c) Subject to the provisions of paragraph (d) below, in the event
that this Agreement shall terminate as provided in paragraph (a) or (b) above,
no Purchaser (other than a Purchaser who shall have failed or refused to
purchase the Notes which it has agreed to purchase hereunder without some reason
sufficient to justify its termination of its obligations hereunder) shall be
under any liability to the Company, and the Company shall not be under any
liability to any Purchaser, except that the Company shall, unless such
termination shall be under the provisions of paragraph (a) or (b)(i) above, pay
the Representative, for the account of the Purchasers severally, the amount of
their out-of-pocket expenses (but not exceeding $--------- in the aggregate in
addition to the fee and disbursements of counsel for the Purchasers, a statement
of the amount of such fee and estimate of such disbursements having been
furnished to the Company) reasonably incurred by the Purchasers hereunder,
except for those Purchasers who have failed or refused (without some reason
sufficient to justify the termination of their obligations hereunder) to
purchase and pay for the Notes which such Purchasers have agreed to purchase
hereunder. The Company will not in any event be liable to any of the several
Purchasers for damages on account of loss of anticipated profits.
The agreements and representations and warranties set forth in
Sections 1, 7(h), 7(i) and 8 hereof shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any Purchaser or
controlling person or by or on behalf of the Company, and regardless of
acceptance of any payment for the Notes hereunder, and the agreements and
representations and warranties set forth in Sections 1, 7(h), 7(i) and 8 hereof
shall remain operative and in full force and effect, regardless of termination
hereof as above provided or otherwise.
Section 10. Notices. All notices and other communications hereunder shall
be in writing or by telegram or facsimile transmission (confirmed in writing)
(or where oral notice is specified, shall be promptly confirmed in writing or by
telegram or facsimile transmission (confirmed in writing)) and if to the
Company, shall be mailed or delivered to Pennsylvania Electric Company, c/o GPU
Service, Inc., 310 Madison Avenue, Morristown, New Jersey 07962, Attention: T.
G. Howson, Vice President and Treasurer or if to the Purchaser or the
Representative shall be mailed or delivered to such person at the address set
forth for the Representative in the Proposal.
Section 11. Validity and Interpretation. The validity, construction and
interpretation of this Agreement shall be governed by the laws of the State of
New York. In the event that the Proposal was made by a single person, firm or
corporation, as
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used herein the term "Purchaser" shall mean such single person, firm or
corporation, the term "Representative" shall mean such Purchaser, the term
"Purchasers" shall be read in the singular to mean such Purchaser, and the
provisions of this Agreement shall be deemed appropriately modified to reflect
that it is an Agreement between the Company and a single Purchaser.
Section 12. Succession. This Agreement shall inure to the benefit of the
Company, of the several Purchasers and, with respect to paragraphs (b), (c), (d)
and (e) of Section 8 hereof, of each controlling person, officer and director
referred to in said paragraphs, and their respective successors, assigns,
executors and administrators. Nothing in this Agreement is intended or shall be
construed to give any other person, firm or corporation any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provision
herein contained. The terms "successors" and "assigns" as used in this Agreement
shall not include any purchaser, as such purchaser, of any of the Notes from any
of the several Purchasers.
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