SEC FILE NO. 70-9327
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CERTIFICATE PURSUANT TO
RULE 24
OF PARTIAL COMPLETION OF TRANSACTIONS
PENNSYLVANIA ELECTRIC COMPANY
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -----------------------------------x
:
In the Matter of :
: Certificate
Pennsylvania Electric Company : Pursuant to
: Rule 24 of
File No. 70-9327 : Partial
: Completion of
(Public Utility Holding : Transactions
Company Act of 1935) :
:
:
- -----------------------------------x
To the Members of the Securities and Exchange Commission:
The undersigned, Pennsylvania Electric Company ("Penelec"), hereby
certifies pursuant to Rule 24 of the General Rules and Regulations under the
Public Utility Holding Company Act of 1935 (the "Act") that a portion of the
transactions proposed in the Application, as amended, filed in SEC File No.
70-9327 have been carried out in accordance with the terms and conditions of,
and for the purposes requested in, said Application and pursuant to the
Commission's Order, dated January 19, 1999 (HCAR No. 26908), with respect
thereto as follows:
1. On June 9, 1999, Penelec, Penelec Capital II, L.P. ("Penelec Capital"),
a Delaware limited partnership of which Penelec Preferred Capital II, Inc. (the
"General Partner"), a wholly owned subsidiary of Penelec, serves as sole general
partner, and Penelec Capital Trust (the "Trust"), a Delaware business trust of
which Penelec Capital is the grantor, entered
2
<PAGE>
into an Underwriting Agreement with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CIBC World Markets Corp., First Union Capital Markets Corp.,
Goldman Sachs & Co. and PaineWebber Incorporated as representatives of the
several underwriters listed in Schedule I thereto (the "Underwriters"),
providing for the issuance and sale by the Trust of 4,000,000 7.34% Trust
Originated Preferred Securities ("Trust Securities"), to the Underwriters. The
Agreement provides that the Underwriters pay the Trust $25 per Trust Security
and that Penelec pay the Underwriters commissions of $0.7875 per Trust Security,
which represents 3.15% of the purchase price per Trust Security, except that
such commissions are $0.50 per Trust Security for sales of 10,000 or more.
2. On June 16, 1999, the Trust issued and sold to the Underwriters an
aggregate of 4,000,000 Trust Securities for a total purchase price of
$100,000,000, and Penelec paid to the Underwriters aggregate commissions of
$3,150,000. Also on June 16, 1999, Penelec Capital sold 4,000,000 of its 7.34%
Cumulative Preferred Securities ("Preferred Securities") to the Trust for a
total purchase price of $100,000,000. In addition, on June 16, 1999, Penelec
Capital used such $100,000,000, together with a $3,092,800 capital contribution
from the General Partner, to purchase from Penelec $103,092,800 aggregate
principal amount of Penelec's 7.34% Subordinated Debentures, Series A due
September 1, 2039, which were issued under and pursuant to the Indenture, dated
as of June 1, 1999, between Penelec and United States Trust
3
<PAGE>
Company of New York, as Trustee. Also on June 16, 1999, Penelec issued its
Payment and Guarantee Agreement to Penelec Capital.
3. Pursuant to the Commission's Order, dated January 19, 1999, an
additional 1,000,000 Trust Securities may be sold by the Trust from time to time
through December 31, 2000.
4. The following exhibits in Item 6 are filed herewith:
A-5(a) - Amended and Restated Limited Partnership Agreement of
Penelec Capital, dated June 9, 1999.
A-6(a) - Action Creating Series A Preferred Securities, dated June
9, 1999.
A-6(b) - Preferred Security Certificate, dated June 16, 1999,
representing 4,000,000 Series A Preferred Securities.
A-9(a) - Amended and Restated Trust Agreement of Penelec Capital
Trust, dated June 9, 1999.
A-10(a) - Trust Securities Certificate, dated June 16, 1999,
representing 4,000,000 Trust Preferred Securities.
A-11(a) - Indenture, dated as of June 1, 1999, between Penelec and
United States Trust Company of New York, as Trustee.
A-12(a) - 7.34% Subordinated Debenture, Series A due 2039.
B-1(a) - Payment and Guarantee Agreement of Penelec, dated as of
June 16, 1999.
B-2(a) - Underwriting Agreement, dated June 9, 1999 -- incorporated
by reference to Exhibit 1-A to Pennsylvania Electric
Company's Report on Form 8-K dated June 17, 1999.
4
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935,
THE UNDERSIGNED COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T. G. Howson
-----------------------------
T.G. Howson
Vice President and Treasurer
Date: June 25, 1999
EXHIBITS TO BE FILED BY EDGAR
Exhibits
A-5(a) - Amended and Restated Limited Partnership Agreement of
Penelec Capital, dated June 9, 1999.
A-6(a) - Action Creating Series A Preferred Securities, dated June
9, 1999.
A-6(b) - Preferred Security Certificate, dated June 16, 1999,
representing 4,000,000 Series A Preferred Securities.
A-9(a) - Amended and Restated Trust Agreement of Penelec Capital
Trust, dated June 9, 1999.
A-10(a) - Trust Securities Certificate, dated June 16, 1999,
representing 4,000,000 Trust Preferred Securities.
A-11(a) - Indenture, dated as of June 1, 1999, between Penelec and
United States Trust Company of New York, as
Trustee.
A-12(a) - 7.34% Subordinated Debenture, Series A due 2039.
B-1(a) - Payment and Guarantee Agreement of Penelec, dated as of
June 16, 1999.
(..continued)
Exhibit A-5(a)
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF PENELEC CAPITAL II, L.P.
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of
June 9, 1999, of Penelec Capital II, L.P., a Delaware limited partnership (the
"Partnership"), is made by and among Penelec Preferred Capital II, Inc., as
General Partner, T.G. Howson, as Class A Limited Partner, and the Persons (as
defined below) who become limited partners of the Partnership in accordance with
the provisions hereof.
WHEREAS, Penelec Preferred Capital II, Inc. and T.G. Howson have
heretofore formed a limited partnership pursuant to the Delaware Act (as defined
below), by filing a Certificate of Limited Partnership (as defined below) with
the Secretary of State of the State of Delaware on August 20, 1998, and entering
into a Limited Partnership Agreement of the Partnership dated as of August 20,
1998 (the "Limited Partnership Agreement"); and
WHEREAS, the parties hereto desire to continue the Partnership as a
limited partnership under the Delaware Act and to amend and restate the Limited
Partnership Agreement in its entirety.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to amend and restate the Limited Partnership Agreement in its
entirety as follows:
ARTICLE I - Definitions
-----------------------
For purposes of this Agreement, each of the following terms shall
have the meaning set forth below (such meaning to be equally applicable to both
singular and plural forms of the terms so defined).
"Action" shall have the meaning set forth in Section 13.01(b).
"Affiliate" shall mean, with respect to the Person to which it
refers, a Person that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, such subject
Person.
"Agreement" shall mean this Amended and Restated Limited Partnership
Agreement, as amended, modified, supplemented or restated from time to time,
including, without limitation, by any Action establishing a series of Preferred
Partner Interests.
<PAGE>
"Book Entry Interests" shall mean a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 14.04.
"Business Day" shall mean any day other than a day on which banking
institutions in The City of New York are authorized or required by law to close.
"Capital Account" shall have the meaning set forth in Section 4.01.
For purposes of determining the Capital Accounts as set forth in Article IV,
partnership items shall be computed in the same manner as the Partnership
computes its income for Federal income tax purposes, rather than generally
accepted accounting principles, except that (1) a distribution in kind of
Partnership property shall be treated as a taxable disposition of such property
for its fair market value (taking into account Section 7701(g) of the Code) on
the date of distribution, and (2) adjustments shall be made in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv), which adjustments shall include
any income which is exempt from United States Federal income tax, all
Partnership losses and all expenses properly chargeable to the Partnership,
whether deductible or non-deductible and whether described in Section
705(a)(2)(B) of the Code, treated as so described pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(i), or otherwise.
"Certificate" shall mean a certificate substantially in the form
attached hereto as Exhibit A, evidencing a Preferred Partner Interest.
"Certificate of Limited Partnership" shall mean the Certificate of
Limited Partnership of the Partnership and any and all amendments thereto and
restatements thereof filed with the Secretary of State of the State of Delaware.
"Class A Limited Partner" shall mean T.G. Howson in his capacity
as a limited partner of the Partnership.
"Clearing Agency" shall mean an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Code" shall mean the United States Internal Revenue Code of 1986
and (unless the context requires otherwise) the rules and regulations
promulgated thereunder, as amended from time to time.
2
<PAGE>
"Commission" shall mean the Securities and Exchange Commission.
"Covered Person" shall mean any Partner, any Affiliate of a Partner
or any officers, directors, shareholders, partners, members, employees,
representatives or agents of a Partner or their respective Affiliates, or any
employee or agent of the Partnership or its Affiliates.
"Definitive Certificate" shall have the meaning set forth in
Section 14.04.
"Delaware Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. Section 17-101, et seq., as amended from time to
time or any successor statute thereto.
"Economic Risk of Loss" shall mean the "economic risk of loss" that
any Partner is treated as bearing under Treasury Regulation Section 1.752-2 with
respect to any Partnership liability.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fiscal Year" shall have the meaning set forth in Section 7.01.
"General Partner" shall mean Penelec Preferred, in its capacity as
general partner of the Partnership, together with any successor thereto that
becomes a general partner of the Partnership pursuant to the terms of this
Agreement.
"Global Certificate" shall mean a Certificate issued in the form of
a typewritten Certificate or Certificates representing the Book Entry Interests
to be delivered to a Clearing Agency in accordance with Section 14.04.
"Guarantee" shall mean the Payment and Guarantee Agreement to be
dated as of June 16, 1999 of Penelec, as amended or supplemented from time to
time, and any additional Payment and Guarantee Agreements entered into by
Penelec for the benefit of the Preferred Partners.
"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.
"Indenture" shall mean the Indenture to be dated as of June 1, 1999,
as amended or supplemented from time to time, between Penelec and United States
Trust Company of New York as
3
<PAGE>
Trustee, and any additional Indentures entered into by Penelec pursuant to which
Subordinated Debentures of Penelec are to be issued.
"Interest" shall mean the entire partnership interest of a Partner
in the Partnership at any particular time, including the right of such Partner
to any and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all of
the terms and provisions of this Agreement.
"Investment Company Act Event" shall mean that the Partnership and
the Trust shall have received an opinion of counsel (which may be regular
counsel to Penelec or an Affiliate of Penelec, but not an employee thereof),
experienced in such matters, to the effect that a change in law or regulation or
a change in an official interpretation of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in 40 Act
Law") has occurred to the effect that the Partnership or the Trust is or will be
considered an "investment company" required to be registered under the 1940 Act,
which Change in 40 Act Law becomes effective on or after the date of issuance of
any series of Preferred Partner Interests.
"Limited Partners" shall mean the Class A Limited Partner, if any,
and the Preferred Partners.
"Liquidating Distributions" shall mean distributions of Partnership
property made upon a liquidation and dissolution of the Partnership as provided
in Article XII.
"Liquidation Distribution" shall mean the liquidation preference of
each series of Preferred Partner Interests as set forth in the Action for such
series.
"Liquidating Trustee" shall have the meaning set forth in Section
12.01.
"1940 Act" shall mean the Investment Company Act of 1940, as
amended.
"Partners" or "Partner" shall mean the General Partner and the
Limited Partners.
"Partnership" shall mean Penelec Capital II, L.P., a limited
partnership formed under the laws of the State of Delaware.
"Penelec" shall mean Pennsylvania Electric Company and its
successors.
"Penelec Preferred" shall mean Penelec Preferred Capital II, Inc.
and its successors.
4
<PAGE>
"Person" shall mean any individual, general partnership, limited
partnership, corporation, limited liability company, joint venture, trust,
business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Preferred Partner" shall mean a limited partner of the Partnership
who holds one or more Preferred Partner Interests.
"Preferred Partner Distribution" shall have the meaning set forth
in Section 13.02(a)(i).
"Preferred Partner Interest Owner" shall mean, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Partner Interests" shall mean the Interests described
in Article XIII.
"Purchase Price" shall mean the amount paid for each Preferred
Partner Interest.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Special Event" shall mean a Tax Event or an Investment Company
Act Event.
"Special Representative" shall have the meaning set forth in
Section 13.02(d).
"Subordinated Debentures" shall mean the Subordinated Debentures of
Penelec issued under the Indenture.
"Tax Event" shall mean that the Partnership and the Trust shall have
obtained an opinion of tax counsel (which may be regular tax counsel to Penelec
or an Affiliate of Penelec, but not an employee thereof), experienced in such
matters, to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying any
applicable laws or regulations, which amendment or change is effective, or which
pronouncement or interpretation is announced, on or after the date of issuance
of any series of Preferred Partner Interests, there is more than an
insubstantial risk that
5
<PAGE>
(i) the Partnership or the Trust will be subject to Federal income tax with
respect to interest accrued or received on the related Subordinated Debentures,
the Partnership will otherwise not be taxed as a partnership or the Trust will
otherwise not be taxed as a grantor trust, or (ii) interest payable by Penelec
to the Partnership on the related Subordinated Debentures will not be deductible
by Penelec for Federal income tax purposes, or (iii) the Partnership or the
Trust is subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Tax Matters Partner" shall have the meaning set forth in Section
7.05.
"Transfer" shall mean any transfer, sale, assignment, gift, pledge,
hypothecation or other disposition or encumbrance of an interest in the
Partnership.
"Treasury Regulations" shall mean the final and temporary income tax
regulations, as well as the procedural and administrative regulations,
promulgated by the United States Department of the Treasury under the Code, as
amended from time to time.
"Trust" shall mean Penelec Capital Trust, a Delaware business trust,
and any additional Trusts created by any Trust Agreements to, among other
things, acquire Preferred Partner Interests.
"Trust Agreement" shall mean the Amended and Restated Trust
Agreement of the Trust, dated June 9, 1999, as amended or supplemented from time
to time, and any additional Trust Agreements entered into by the Partnership as
grantor.
"Trust Securities" shall mean preferred beneficial interests in the
Trust, each representing a Preferred Partner Interest.
"Trustee" shall mean United States Trust Company of New York or any
other trustee under the Indenture.
"Underwriting Agreement" shall mean any Underwriting Agreement
entered into by the Trust, the Partnership and/or Penelec with regard to the
sale of Trust Securities, Preferred Partner Interests and/or other securities.
ARTICLE II - Continuation; Name; Purposes; Term; Definitions
------------------------------------------------------------
Section 2.01. Formation. The parties hereto hereby join
together to continue the heretofore formed limited partnership which shall
exist under and be governed by the Delaware Act. The Partnership shall make
any and all filings or
6
<PAGE>
disclosures required under the laws of Delaware or otherwise with respect to its
continuation as a limited partnership, its use of a fictitious name or otherwise
as may be required. The Partnership shall be a limited partnership among the
Partners solely for the purposes specified in Section 2.03 hereof, and this
Agreement shall not be deemed to create a partnership among the Partners with
respect to any activities whatsoever other than the activities within the
business purposes of the Partnership as specified in Section 2.03. No Partner
shall have any power to bind any other Partner with respect to any matter except
as specifically provided in this Agreement. No Partner shall be responsible or
liable for any indebtedness or obligation of any other Partner incurred either
before or after the execution of this Agreement. The assets of the Partnership
shall be owned by the Partnership as an entity, and no Partner individually
shall own any direct interest in the assets of the Partnership.
Section 2.02. Name and Place of Business. The name of the
Partnership is "Penelec Capital II, L.P." The Partnership may operate under the
name of "Penelec Capital II" and such name shall be used for no purposes other
than those set forth herein. The General Partner may change the name in its sole
and absolute discretion. The principal place of business of the Partnership
shall be c/o GPU Service, Inc., 310 Madison Avenue, Morristown, New Jersey 07962
or at such other place as may be selected by the General Partner in its sole and
absolute discretion.
Section 2.03. Purposes.
(a) The sole purposes of the Partnership are to issue and sell
Interests in the Partnership, including, without limitation, Preferred Partner
Interests, and to use the proceeds of all sales of Interests in the Partnership
to purchase Subordinated Debentures issued by Penelec pursuant to the Indenture,
to act as the grantor of the Trust and to effect other similar arrangements
permitted by this Agreement, and to engage in any and all activities necessary,
convenient, advisable or incidental thereto. The Partnership shall not incur
debt for borrowed money.
(b) In furtherance of the purposes set forth in Section 2.03(a) and
without limiting the generality thereof, the Partnership may issue Preferred
Partner Interests for consideration other than cash, including Subordinated
Debentures, which consideration shall constitute payment for the Preferred
Partner Interests so issued.
Section 2.04. Term. The Partnership was formed on August 20,
1998 and shall continue without dissolution through June 30, 2063, unless
sooner dissolved as provided in Article XI hereof.
7
<PAGE>
Section 2.05. Qualification in Other Jurisdictions. The General
Partner shall cause the Partnership to be qualified or registered under assumed
or fictitious name statutes or similar laws in any jurisdiction in which the
Partnership transacts business. The General Partner shall execute, deliver and
file any certificates (and any amendments and/or restatements thereof) necessary
for the Partnership to qualify to do business in a jurisdiction in which the
Partnership may wish to conduct business.
Section 2.06. Treatment as a Partnership. The Partnership shall be
treated as a partnership for Federal income tax purposes under Treasury
Regulation Section 1.7701-3(b)(1). Neither the Tax Matters Partner, nor any
other Partner, shall file an election to treat the Partnership as a corporation
for Federal income tax purposes.
Section 2.07. Admission of Preferred Partners. Without execution of
this Agreement, upon receipt by a Person of a Certificate and giving of
consideration for the Preferred Partner Interest being acquired by such Person,
which shall be deemed to constitute a request by such Person that the books and
records of the Partnership reflect its admission as a Preferred Partner, such
Person shall be admitted to the Partnership as a Preferred Partner and shall
become bound by this Agreement. A Person may also be admitted to the Partnership
as a Preferred Partner and become bound by this Agreement by execution of this
Agreement (by counterpart or otherwise).
Section 2.08. Records. The name and mailing address of each Partner
and the amount contributed to the capital of the Partnership shall be listed on
the books and records of the Partnership. The Partnership shall keep such other
records as are required by Section 17-305 of the Delaware Act. The General
Partner shall update the books and records from time to time as necessary to
accurately reflect the information therein.
ARTICLE III - Capital Contributions
-----------------------------------
Section 3.01. Capital Contributions. As of the date of this
Agreement, the General Partner has contributed the amount of $99 to the capital
of the Partnership and shall make any further contributions required to satisfy
its obligations under Section 3.04. With respect to each Person who is issued a
Preferred Partner Interest by the Partnership in connection with the initial
issuance by the Partnership of such Preferred Partner Interest, there shall be
contributed to the capital of the Partnership an amount equal to the Purchase
Price for such Preferred Partner Interest (such amount being such Person's
capital contribution to the Partnership).
8
<PAGE>
Section 3.02. Additional Capital Contributions. No Partner
shall be required to make any additional contributions or advances to the
Partnership except as provided in Section 3.04 or by law.
Section 3.03. No Interest or Withdrawals. No interest shall accrue
on any capital contribution made by or on behalf of a Partner, and no Partner
shall have the right to withdraw or to be repaid any portions of its capital
contributions so made, except as specifically provided in this Agreement.
Section 3.04. Minimum Capital Account Balance of General Partner. At
all times throughout the term of the Partnership, the General Partner shall
maintain a Capital Account balance equal to at least 3% of the total positive
Capital Account balances for the Partnership. If necessary, the General Partner
shall immediately make additional contributions to satisfy this requirement,
which contributions shall constitute additional capital contributions made by
the General Partner.
Section 3.05. Partnership Interests. Unless otherwise
provided herein, the percentage interests of the Partners shall be determined
in proportion to the capital contributions of the Partners.
Section 3.06. Interests. Each Preferred Partner's respective
Preferred Partner Interests shall be set forth on the books and records of the
Partnership. Each Partner hereby agrees that its Interests shall for all
purposes be personal property. No Partner has an interest in specific
Partnership property. The Partnership shall not issue any additional interest in
the Partnership after the date hereof other than General Partner Interests or
Preferred Partner Interests. The immediately preceding sentence shall not be
construed to limit the effect of Section 10.04 of this Agreement.
ARTICLE IV - Capital Accounts
Section 4.01. Capital Accounts. There shall be established on the
books of the Partnership a capital account ("Capital Account") for each Partner
that shall consist of the initial capital contribution to the Partnership made
by such Partner (or such Partner's predecessor in interest), increased by: (a)
any additional capital contributions made by such Partner (or predecessor
thereof), (b) the agreed value of any property subsequently contributed to the
capital of the Partnership by such Partner (or predecessor thereof); and (c)
items of income and gain allocated to such Partner (or predecessor thereof). A
Partner's Capital Account shall be decreased by: (a) items of loss and deduction
allocated to such Partner (or predecessor thereof); and (b) any distributions
made
9
<PAGE>
to such Partner (or predecessor thereof). In addition to and notwithstanding the
foregoing, Capital Accounts shall be maintained at all times in accordance with
the Capital Account maintenance rules set forth in Treasury Regulation Section
1.704-1(b)(2)(iv).
Section 4.02. Compliance With Treasury Regulations. The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Section 704(b) of
the Code and Treasury Regulation Section 1.704-1(b) and shall be interpreted and
applied in a manner consistent with such regulations. In the event that the
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are determined in order
to comply with such regulations, the General Partner may make such modification.
ARTICLE V - Allocations
-----------------------
Section 5.01. Profits and Losses. Each fiscal period, items of
income, gain, loss, deduction or credit of the Partnership shall be allocated
(i) first, items of income of the Partnership to the Preferred Partners, pro
rata in proportion to the number of Preferred Partner Interests held by each
Preferred Partner and at the distribution rate specified in the Action for each
series of Preferred Partner Interests, in an amount equal to the excess of (a)
the Preferred Partner Distributions accrued on such Preferred Partner Interests
since their date of issuance through and including the close of the current
fiscal period (whether or not paid) over (b) the items of income of the
Partnership allocated to the Preferred Partners pursuant to this Section 5.01(i)
in all prior fiscal periods; and (ii) thereafter, all remaining items of income,
gain, loss, deduction or credit to the General Partner; provided however, that
the percentage of items of income, gain, loss, deduction or credit of the
Partnership allocated to the General Partner for any fiscal period shall at
least equal three percent.
Section 5.02. Allocation Rules. For purposes of determining the
profits, losses or any other items allocable to any period, profits, losses and
any such other items shall be determined on a daily, monthly or other basis, as
determined by the General Partner in its sole and absolute discretion using any
method that is permissible under Section 706 of the Code and the Treasury
Regulations thereunder. The Partners are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by the
provisions of this Article V in reporting their shares of Partnership income and
loss for income tax purposes.
Section 5.03. Adjustments to Reflect Changes in Interests.
Notwithstanding the foregoing, with respect to any
10
<PAGE>
Fiscal Year during which any Partner's percentage interest in the Partnership
changes, whether by reason of the admission of a Partner, the withdrawal of a
Partner, a non-pro rata contribution of capital to the Partnership or any other
event described in Section 706(d)(1) of the Code and the Treasury Regulations
issued thereunder, allocations of the items of income, gain, loss, deduction or
credit of the Partnership shall be adjusted appropriately to take into account
the varying interests of the Partners during such Fiscal Year. The General
Partner shall consult with the Partnership's accountants and other advisors and
shall select the method of making such adjustments, which method shall be used
consistently thereafter.
Section 5.04. Tax Allocations. For purposes of this Article V and
Federal, state and local income tax purposes, Partnership income, gain, loss,
deduction or credit (or any item thereof) for each Fiscal Year shall be
determined in accordance with Federal tax accounting principles rather than
generally accepted accounting principles and shall be allocated to and among the
Partners in order to reflect the allocations made pursuant to the provisions of
this Article V for such Fiscal Year (other than allocations of items which are
not deductible or are excluded from taxable income), taking into account any
variation between the adjusted tax basis and book value of Partnership property
in accordance with the principles of Section 704(c) of the Code.
Section 5.05. Qualified Income Offset. Notwithstanding any other
provision hereof, if any Partner unexpectedly receives an adjustment, allocation
or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6) which creates or increases a deficit in
the Capital Account of such Partner (and, for this purpose, the existence of a
deficit shall be determined by increasing the Partner's Capital Account by any
amounts that the Partner is obligated to restore to the Partnership pursuant to
Treasury Regulation Section 1.704-1(b)(2)(ii)(C) and reducing the Partner's
Capital Account by the items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6)), the next available gross income of the
Partnership shall be allocated to the Partners having such deficit balances, in
proportion to the deficit balances, until such deficit balances are eliminated
as quickly as possible. The provisions of this Section 5.05 are intended to
constitute a "qualified income offset" within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and implemented as therein
provided.
ARTICLE VI - Distributions
--------------------------
Section 6.01. Distributions. Preferred Partners shall
receive periodic distributions, if any, in accordance with the applicable
terms of the applicable Action creating the series of
11
<PAGE>
Preferred Partner Interests held by them, when, as and if declared by the
General Partner out of funds held by the Partnership to the extent that the
Partnership has cash on hand sufficient to permit such payments and funds
legally available therefor. Subject to the rights of the holders of the
Preferred Partner Interests, the General Partner shall receive such
distributions, if any, as may be declared from time to time by the General
Partner.
Section 6.02. Certain Distributions Prohibited.
Notwithstanding anything in this Agreement to the contrary, all Partnership
distributions shall be subject to the following limitations:
(a) No distribution shall be made to any Partner if, and to the
extent that, such distribution would not be permitted under Section 17-607 of
the Delaware Act or other applicable law.
(b) No distribution shall be made to any Partner to the extent that
such distribution, if made, would create or increase a deficit balance in the
Capital Account of such Partner.
(c) Notwithstanding anything in the Delaware Act or this Agreement
to the contrary, in the event of a Liquidating Distribution, a Partner may be
compelled in accordance with Section 12.01 to accept a distribution of
Subordinated Debentures, cash or any other asset in kind from the Partnership
even if the percentage of the asset distributed to it exceeds a percentage of
that asset which is equal to the percentage in which such Partner shares in
distributions from the Partnership.
Section 6.03. Withholding. The Partnership shall comply with all
withholding requirements under Federal, state and local law. To the extent that
the Partnership is required to withhold and pay over any amounts to any
authority with respect to distributions or allocations to or for the account of
any Partner, the amount withheld shall be deemed to be a distribution in the
amount of the withholding to or for the account of the Partner. In the event of
any claimed overwithholding, Partners shall be limited to an action against the
applicable jurisdiction. If the amount withheld was not withheld from actual
distributions, the Partnership may reduce subsequent distributions by the amount
of such withholding.
ARTICLE VII - Accounting Matters; Banking
-----------------------------------------
Section 7.01. Fiscal Year. The fiscal year ("Fiscal Year")
of the Partnership shall be the calendar year, or such other year as is
required by the Code.
12
<PAGE>
Section 7.02. Certain Accounting Matters.
(a) At all times during the existence of the Partnership, the
General Partner shall keep, or cause to be kept, full books of account, records
and supporting documents, which shall reflect in reasonable detail each
transaction of the Partnership. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Partnership shall use the accrual method
of accounting for United States Federal income tax purposes. The books of
account and the records of the Partnership shall be examined by and reported
upon as of the end of each Fiscal Year by a firm of independent certified public
accountants selected by the General Partner.
(b) The General Partner shall cause to be prepared, within 90 days
after the end of each Fiscal Year of the Partnership, annual financial
statements of the Partnership, including a balance sheet of the Partnership as
of the end of such Fiscal Year and the related statements of income or loss. The
General Partner shall cause such financial statements to be delivered to each
Partner that so requests in writing, together with a statement indicating such
Partner's share of each item of Partnership income, gain, loss, deduction or
credit for such Fiscal Year for income tax purposes.
(c) Notwithstanding anything in this Agreement to the contrary, the
General Partner may, to the maximum extent permitted by applicable law, keep
confidential from the Partners for such period of time as the General Partner
deems reasonable any information which the General Partner reasonably believes
to be in the nature of trade secrets or other information the disclosure of
which the General Partner in good faith believes is not in the best interest of
the Partnership or could damage the Partnership or its business or which the
Partnership is required by law or by an agreement with a third party to keep
confidential.
(d) The General Partner may make, or revoke, in its sole and
absolute discretion, any elections for the Partnership that are permitted under
tax or other applicable laws, including elections under Section 704(c) of the
Code, provided that the General Partner shall not make any elections pursuant to
Section 754 of the Code.
Section 7.03. Banking. The Partnership shall maintain one or more
bank accounts in the name and for the sole benefit of the Partnership. The
signatories for such accounts shall be designated by the General Partner.
Reserve cash, cash held pending the expenditure of funds for the business of the
Partnership or cash held pending a distribution to one or more of the Partners
may, but need not, be invested in any manner at the sole and absolute discretion
of the General Partner.
13
<PAGE>
Section 7.04. Right to Rely on Authority of General Partner. No
Person that is not a Partner, in dealing with the General Partner, shall be
required to determine such General Partner's authority to make any commitment or
engage in any undertaking on behalf of the Partnership, or to determine any fact
or circumstance bearing upon the existence of the authority of the General
Partner.
Section 7.05. Tax Matters Partner. The "tax matters partner," as
defined in Section 6231 of the Code, of the Partnership shall be the General
Partner (the "Tax Matters Partner"). The Tax Matters Partner shall receive no
compensation from the Partnership for its services in that capacity. The Tax
Matters Partner is authorized to employ such accountants, attorneys and agents
as it, in its sole and absolute discretion, deems necessary or appropriate. Any
Person who serves as Tax Matters Partner shall not be liable to the Partnership
or to any Partner for any action it takes or fails to take as Tax Matters
Partner with respect to any administrative or judicial proceeding involving
"partnership items" (as defined in Section 6231 of the Code) of the Partnership.
Section 7.06. Taxpayer Information. Any Person who holds a Preferred
Partner Interest as a nominee for another Person is required to furnish to the
Partnership (a) the name, address and taxpayer identification number of the
beneficial owner and the nominee; (b) information as to whether the beneficial
owner is (1) a Person that is not subject to United States taxation on its
income regardless of source, (2) a foreign government, an international
organization or any wholly owned agency or instrumentality of either of the
foregoing, or (3) a tax-exempt entity; (c) the amount and description of
Preferred Partner Interest held, acquired or transferred for the beneficial
owner; and (d) certain other information, including the dates of acquisitions
and transfers, means of acquisitions and transfers and acquisition cost for
purchases, as well as the amount of net proceeds from sales.
ARTICLE VIII - Management
-------------------------
Section 8.01. Management.
(a) The General Partner shall have full and exclusive authority with
respect to all matters concerning the conduct of the business and affairs of the
Partnership, including (without limitation) the power, without the consent of
the Limited Partners, to make all decisions it deems necessary, advisable,
convenient or appropriate to accomplish the purposes of the Partnership. The
acts of the General Partner acting alone shall serve to bind the Partnership and
shall constitute the acts of the Partners.
14
<PAGE>
(b) The Limited Partners, in their capacity as such, shall not take
part in the management, operation or control of the business of the Partnership
or transact any business in the name of the Partnership. In addition, the
Limited Partners, in their capacity as such, shall not be agents of the
Partnership and shall not have the power to sign or bind the Partnership to any
agreement or document. The Limited Partners shall have the right to vote only
with respect to those matters specifically provided for in this Agreement.
Notwithstanding anything herein to the contrary, the Preferred Partners may
exercise all rights provided to them, if any, under this Agreement, the
Indenture, the Guarantee and the Delaware Act.
(c) The General Partner is authorized and directed to use its best
efforts to conduct the affairs of, and to operate, the Partnership in such a way
that the Partnership would not be deemed to be an "investment company" required
to be registered under the 1940 Act or taxed as a corporation for Federal income
tax purposes and so that the Subordinated Debentures will be treated as
indebtedness of Penelec for Federal income tax purposes. In this connection, the
General Partner is authorized, in its sole and absolute discretion, to take any
action not inconsistent with applicable law, the Certificate of Limited
Partnership or this Agreement that does not materially adversely affect the
interests of holders of Preferred Partner Interests that the General Partner
determines in its sole and absolute discretion to be necessary, advisable or
desirable for such purposes.
Section 8.02. Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any other Covered Person, an Indemnified Person acting under
this Agreement shall not be liable to the Partnership or to any other Covered
Person for its good faith reliance on the provisions of this Agreement or the
advice of counsel selected by the Indemnified Person in good faith. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between an Indemnified Person and any
Covered Person, or (ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the
Partnership or any Partner, the Indemnified Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each
15
<PAGE>
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, the advice of counsel selected by the
Indemnified Person in good faith, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the
Indemnified Person, the resolution, action or term so made, taken or provided by
the Indemnified Person shall not constitute a breach of this Agreement or any
other agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Agreement an Indemnified Person is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority or latitude, the Indemnified Person shall be entitled to consider only
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the Partnership or any other Person, or (ii) in its "good
faith" or under another express standard, the Indemnified Person shall act under
such express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
Section 8.03. Specific Obligations of the General Partner.
The General Partner hereby undertakes:
(a) to devote to the affairs of the Partnership so much of its time
as shall be necessary to carry on properly the Partnership's business and its
responsibilities hereunder;
(b) subject to the terms of this Agreement, to cause the Partnership
to do or refrain from doing such acts as shall be required by Delaware law in
order to preserve the valid existence of the Partnership as a Delaware limited
partnership and to preserve the limited liability of the Limited Partners;
(c) to pay directly (without any obligation to first exhaust the
assets of the Partnership) (i) all of the costs and expenses of the Partnership
(including, without limitation, costs and expenses relating to the organization
of, and offering of Preferred Partner Interests in, the Partnership and costs
and expenses relating to the operation of the Partnership, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and costs and
expenses incurred in connection with the acquisition, financing, and disposition
of Partnership assets) and (ii) all expenses of the Trust, any trustee thereof
and of the Partnership as grantor of the Trust;
(d) to take such action as it, in good faith, deems
16
<PAGE>
appropriate and consistent with the terms of this Agreement to enforce the
Partnership's rights under the Subordinated Debentures and the Indenture; and
(e) to provide promptly to any trustee of the Trust a copy of any
notice of Default received by the General Partner pursuant to Section 7.05 of
the Indenture.
Section 8.04. Powers of the General Partner. The General Partner
shall have the right, power and authority, in the management of the business and
affairs of the Partnership, to do or cause to be done any and all acts deemed by
the General Partner to be necessary or appropriate to effectuate the business,
purposes and objectives of the Partnership. Without limiting the generality of
the foregoing, the General Partner shall have the power and authority without
any further act, approval or vote of any Partner to:
(a) cause the Partnership to issue Interests, including
Preferred Partner Interests, and determine classes and series thereof, in
accordance with this Agreement;
(b) act as, or appoint another Person to act as, registrar and
transfer agent for the Preferred Partner Interests;
(c) establish a record date with respect to all actions to be
taken hereunder that require a record date to be established, including with
respect to allocations, distributions and voting rights and declare
distributions and make all other required payments on General Partner, Class A
Limited Partner and Preferred Partner Interests as the Partnership's paying
agent;
(d) enter into and perform one or more Underwriting Agreements
and use the proceeds from the issuance of the Interests to purchase the
Subordinated Debentures, in each case on behalf of the Partnership;
(e) bring and defend on behalf of the Partnership actions and
proceedings at law or in equity before any court or governmental, administrative
or other regulatory agency, body or commission or otherwise;
(f) employ or otherwise engage employees and agents (who may
be designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(g) redeem each series of Preferred Partner Interests (which
shall constitute a return of capital and not a distribution of income) in
accordance with its terms and/or to the extent that the related series of
Subordinated Debentures is redeemed or reaches maturity;
17
<PAGE>
(h) take such action as may be necessary or appropriate to
permit the withdrawal and redeposit of Preferred Partner Interests as provided
for in the Trust Agreement;
(i) enter into and perform one or more Trust Agreements or
other organizational documents relating to the creation of one or more Preferred
Partners that will own Preferred Partner Interests, including by entering into
and performing agreements or documents referred to in such Trust Agreements or
other organizational documents, in each case on behalf of the Partnership; and
(j) execute all documents or instruments, perform all duties
and powers and do all things for and on behalf of the Partnership in all matters
necessary, convenient, advisable or incidental to the foregoing.
The expression of any power or authority of the General Partner in
this Agreement shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in, or precluded by,
this Agreement.
Section 8.05. Independent Affairs. Any Partner or Affiliate thereof
may engage in or possess an interest in any other business venture of whatever
nature and description, independently or with others, wherever located and
whether or not comparable to or in competition with the Partnership or the
General Partner, or any Affiliate thereof, and neither the Partnership nor any
of the Partners shall, by virtue of this Agreement, have any rights with respect
to, or interests in, such independent ventures or the income, profits or losses
derived therefrom. No Partner or Affiliate thereof shall be obligated to present
any particular investment opportunity to the Partnership even if such
opportunity is of a character that, if presented to the Partnership, could be
taken by the Partnership, and any Partner or Affiliate thereof shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment opportunity.
Section 8.06. Meetings of the Partners. Meetings of the Partners of
any class or series or of all classes or series of the Partnership's Interests
may be called at any time by the Partners holding 10% in liquidation preference
of such class or series of Interests, or of all classes or series of Interests,
as the case may be, or as provided in any Action establishing a series of
Preferred Partner Interests. Except to the extent otherwise provided in any such
Action, the following provisions shall apply to meetings of Partners:
(a) Notice of any meeting shall be given to all Partners not
less than ten (10) business days nor more than sixty (60) days prior to the date
of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever a vote, consent
18
<PAGE>
or approval of Partners is permitted or required under this Agreement, such
vote, consent or approval may be given at a meeting of Partners or by written
consent.
(b) Each Partner may authorize any Person to act for it by
proxy on all matters in which a Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Partner executing it.
(c) Each meeting of Partners shall be conducted by the General
Partner or by such other Person that the General Partner may designate.
(d) Subject to the provisions of this Section 8.06, the
General Partner, in its sole and absolute discretion, shall establish all other
provisions relating to meetings of Partners, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any Partners,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote; provided, however, that unless the General Partner has established a lower
percentage, a majority of the Partners entitled to vote thereat shall constitute
a quorum at all meetings of the Partners.
Section 8.07. Restrictions on General Partner. So long as any series
of Subordinated Debentures are held by the Partnership, the General Partner
shall not (i) direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or executing any trust or power conferred
on the holders of the Subordinated Debentures or the Trustee with respect to
such series, (ii) waive any past default which is waivable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all of a series of Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture, where
such consent shall be required, without, in each case, obtaining the prior
approval of the holders of not less than a majority of the aggregate stated
liquidation preference of all series of Preferred Partner Interests affected
thereby, acting as a single class (or the Special Representative acting on their
behalf); provided, however, that where a consent under the Indenture would
require the consent of each holder affected thereby, no such consent shall be
given by the General Partner without the prior consent of each holder of all
series of Preferred Partner Interests affected thereby. The General Partner
shall not revoke any action previously authorized or approved by a vote of any
series of Preferred Partner Interests.
19
<PAGE>
The General Partner shall notify all holders of such Preferred Partner Interests
of any notice of default received from the Trustee with respect to such series
of Subordinated Debentures. In addition, the General Partner will not permit or
cause the Partnership to file a voluntary petition in bankruptcy without the
approval of the holders of not less than a majority of the aggregate stated
liquidation preference of the outstanding Preferred Partner Interests.
ARTICLE IX - Liability and Indemnification
------------------------------------------
Section 9.01. Partnership Expenses and Liabilities.
(a) Except as provided in the Delaware Act, the General Partner
shall have the liabilities of a partner in a partnership without limited
partners to Persons other than the Partnership and the other Partners. Except as
provided in the Delaware Act or this Agreement, the General Partner shall have
the liabilities of a partner in a partnership without limited partners to the
Partnership and to the other Partners.
(b) Except as otherwise expressly required by law, a Limited
Partner, in its capacity as such, shall have no liability in excess of (i) the
amount of its capital contributions to the Partnership, (ii) its share of any
assets and undistributed profits of the Partnership, and (iii) the amount of any
distributions wrongfully distributed to it.
Section 9.02. No Liability. Except as otherwise expressly provided
by the Delaware Act or in Section 9.01(a), no Covered Person shall be liable to
the Partnership or to any other Partner for any act or omission performed or
omitted pursuant to the authority granted to it hereunder or by law, or from a
loss resulting from any mistake or error in judgment on its part or from the
negligence, dishonesty, fraud or bad faith of any employee, independent
contractor, broker or other agent of the Partnership, provided that such act or
omission, such mistake or error in judgment or the selection of such employee,
independent contractor, broker or other agent, as the case may be, did not
result from the willful misconduct, gross negligence or fraud of such Covered
Person. Any Covered Person shall be fully protected in relying in good faith
upon the records of the Partnership and upon such information, opinions, reports
or statements presented to the Partnership by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Partnership, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which distributions to Partners might properly be paid.
Section 9.03. Indemnification. To the fullest extent
20
<PAGE>
permitted by applicable law, except as set forth in Section 8.03(c), an
Indemnified Person shall be entitled to indemnification from the Partnership for
any loss, damage or claim incurred by such Indemnified Person by reason of any
act or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Partnership and in a manner reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Agreement,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
willful misconduct, gross negligence or fraud with respect to such acts or
omissions; provided, however, that any indemnity under this Section 9.03 shall
be provided out of and to the extent of Partnership assets only, and except as
otherwise expressly provided in Section 9.01(a) or by the Delaware Act, no
Covered Person shall have any personal liability on account thereof. To the
fullest extent permitted by applicable law, expenses (including legal fees)
incurred by an Indemnified Person in defending any claim, demand, action, suit
or proceeding shall, from time to time, be advanced by the Partnership prior to
the final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Partnership of an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified as authorized in this Section 9.03.
ARTICLE X - Withdrawal; Transfer Restrictions
---------------------------------------------
Section 10.01. Transfer by General Partner; Admission of Substituted
General Partner. The General Partner may not Transfer its Interest (in whole or
in part) to any Person without the consent of all other Partners, provided that
the General Partner may, without the consent of any Partner, Transfer its
Interest to Penelec or any direct or indirect wholly owned subsidiary of
Penelec. Notwithstanding anything else herein, the General Partner may merge
with or into another Person, may permit another Person to merge with or into the
General Partner and may Transfer all or substantially all of its assets to
another Person if the General Partner is the survivor of such merger or the
Person into which the General Partner is merged or to which the General
Partner's assets are transferred is a Person organized under the laws of the
United States or any state thereof or the District of Columbia. The General
Partner shall have the right to admit the assignee or transferee of its Interest
which is permitted hereunder as a substituted or additional general partner of
the Partnership, with or without the consent of the Limited Partners. Any such
assignee or transferee of all or a part of the Interest of a General Partner
shall be deemed admitted to the Partnership as a general partner of the
Partnership immediately prior to the effective date of such Transfer, and such
additional or successor general partner of the
21
<PAGE>
Partnership is hereby authorized and shall continue the business of the
Partnership without dissolution.
Section 10.02. Withdrawal of Limited Partners. A Preferred Partner
may not withdraw from the Partnership prior to the dissolution and winding up of
the Partnership except upon the assignment of its Preferred Partner Interests
(including any redemption, repurchase, exchange or other acquisition by the
Partnership), as the case may be, in accordance with the provisions of this
Agreement. Any Person who has been assigned one or more Interests shall provide
the Partnership with a completed Form W-9 or such other documents or information
as are requested by the Partnership for tax reporting purposes. A withdrawing
Preferred Partner shall not be entitled to receive any distribution and shall
not otherwise be entitled to receive the fair value of its Preferred Partner
Interest except as otherwise expressly provided in this Agreement.
Section 10.03. Withdrawal of Class A Limited Partner. Upon the
admission of at least one Preferred Partner as a Limited Partner of the
Partnership, the Class A Limited Partner shall be deemed to have withdrawn from
the Partnership as a limited partner of the Partnership, and upon such
withdrawal, the Class A Limited Partner shall have its capital contribution
returned to it without any interest or deduction and shall have no further
interest in the Partnership.
Section 10.04. Withdrawal or Redeposit of Preferred Partner
Interests. Nothing in this Article X or elsewhere in this Agreement (including,
without limitation, Article XIV) shall restrict or limit the right of any Person
to withdraw or redeposit Preferred Partner Interests represented by Trust
Securities and to be admitted to the Partnership as a limited partner of the
Partnership or to withdraw as a limited partner of the Partnership in connection
with such withdrawal or redeposit, as the case may be, as provided for in the
Trust Agreement.
ARTICLE XI - Dissolution of the Partnership
-------------------------------------------
Section 11.01. No Dissolution. The Partnership shall not be
dissolved by the admission of additional or successor Partners in accordance
with the terms of this Agreement. The death, withdrawal, incompetency,
bankruptcy, dissolution or other cessation to exist as a legal entity of a
Limited Partner, or the occurrence of any other event that terminates the
Interest of a Limited Partner in the Partnership, shall not in and of itself
cause the Partnership to be dissolved and its affairs wound up. To the fullest
extent permitted by applicable law, upon the occurrence of any such event, the
General Partner may, without any further act, vote or approval of any Partner,
subject to the terms of this Agreement, admit any Person to the Partnership as
an additional or substitute Limited Partner, which admission
22
<PAGE>
shall be effective as of the date of the occurrence of such event, and the
business of the Partnership shall be continued without dissolution.
Section 11.02. Events Causing Dissolution. The Partnership
shall be dissolved and its affairs shall be wound up upon the occurrence of
any of the following events:
(a) The expiration of the term of the Partnership, as
provided in Section 2.04 hereof;
(b) The withdrawal, removal or bankruptcy of the General
Partner or Transfer (other than a grant of a security interest) by the General
Partner of its entire Interest in the Partnership when the assignee is not
admitted to the Partnership as an additional or successor General Partner in
accordance with Section 10.01 hereof, or the occurrence of any other event that
results in the General Partner ceasing to be a general partner of the
Partnership under the Delaware Act, provided, the Partnership shall not be
dissolved and required to be wound up in connection with any of the events
specified in this clause (b) if (i) at the time of the occurrence of such event
there is at least one remaining general partner of the Partnership who is hereby
authorized to, and agrees to, and does carry on the business of the Partnership,
or (ii) within ninety days after the occurrence of such event, a majority in
Interest of the remaining Partners (or such greater percentage in Interest as is
required by the Delaware Act) agree in writing or by vote to continue the
business of the Partnership and to the appointment, effective as of the date of
such event, if required, of one or more additional general partners of the
Partnership;
(c) The entry of a decree of judicial dissolution under the
Delaware Act;
(d) The bankruptcy, liquidation or dissolution and winding up
of Penelec;
(e) The written consent of the General Partner; or
(f) In accordance with Section 13.02(f).
Section 11.03. Notice of Dissolution. Upon the dissolution of
the Partnership, the General Partner shall promptly notify the Partners of
such dissolution.
ARTICLE XII - Liquidation of Partner Interests
----------------------------------------------
Section 12.01. Liquidation. Upon dissolution of the
Partnership, the General Partner, or, in the event that the dissolution is
caused by an event described in Section 11.02(b)
23
<PAGE>
and there is no other General Partner, a Person or Persons who may be approved
by Preferred Partners holding not less than a majority in liquidation preference
of the Preferred Partners Interests, as liquidating trustee (the "Liquidating
Trustee"), shall immediately commence to wind up the Partnership's affairs;
provided, however, that a reasonable time shall be allowed for the orderly
winding up of the Partnership and the satisfaction of liabilities to creditors
so as to enable the Partners to minimize the normal losses attendant upon a
liquidation. The Preferred Partners shall continue to share profits and losses
during liquidation in the same proportions, as specified in Articles V and VI
hereof, as before liquidation. The proceeds of liquidation shall be distributed,
as realized, in the following order and priority:
(a) to creditors of the Partnership, including Preferred
Partners who are creditors, to the extent otherwise permitted by law, in
satisfaction of the liabilities of the Partnership (whether by payment or the
making of reasonable provision for payment thereof), other than liabilities for
which reasonable provision for payment has been made and liabilities for
distributions to Partners;
(b) to the holders of Preferred Partner Interests of each
series then outstanding in accordance with the terms of this Agreement or the
Action or Actions for such Series; and
(c) to all Partners in accordance with their respective
positive Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
Section 12.02. Termination. The Partnership shall terminate when all
of the assets of the Partnership have been distributed in the manner provided
for in this Article XII, and the Certificate of Limited Partnership shall have
been cancelled in the manner required by the Delaware Act.
Section 12.03. Duty of Care. The General Partner or the Liquidating
Trustee, as the case may be, shall not be liable to the Partnership or any
Partner for any loss attributable to any act or omission of the General Partner
or the Liquidating Trustee, as the case may be, taken in good faith in
connection with the liquidation of the Partnership and distribution of its
assets in belief that such course of conduct was in or not opposed to the best
interest of the Partnership. The General Partner or the Liquidating Trustee, as
the case may be, may consult with counsel and accountants with respect to
liquidating the Partnership and distributing its assets and shall be justified
in acting or omitting to act in accordance with the written opinion of such
counsel or accountants, provided they shall have been selected with reasonable
care.
24
<PAGE>
Section 12.04. No Liability for Return of Capital. The General
Partner and its respective officers, directors, members, shareholders,
employees, representatives, agents, partners and Affiliates shall not be
personally liable for the return of the capital contributions of any Partner to
the Partnership. No Partner shall be obligated to restore to the Partnership any
amount with respect to a negative Capital Account.
ARTICLE XIII - Preferred Partner Interests
------------------------------------------
Section 13.01. Preferred Partner Interests.
(a) The aggregate number of Preferred Partner Interests which the
Partnership shall have authority to issue is unlimited. Each series of Preferred
Partner Interests shall rank equally and all Preferred Partner Interests shall
rank senior to all other Interests in respect of the right to receive
distributions and the right to receive payments out of the assets of the
Partnership upon voluntary or involuntary dissolution and winding up of the
Partnership. The issuance of any Interests ranking senior to the Preferred
Partner Interest shall be deemed to materially adversely affect the rights of
the Preferred Partner Interests under this Agreement.
(b) The General Partner on behalf of the Partnership is authorized
to issue Preferred Partner Interests, in one or more series, having such
designations, rights, privileges, restrictions and other terms and provisions,
whether in regard to distributions, return of capital or otherwise, as may from
time to time be established in a written action or actions (each, an "Action")
of the General Partner providing for the issue of such series. In connection
with the foregoing, the General Partner is expressly authorized, prior to
issuance, to set forth in an Action or Actions providing for the issue of such
series, the following:
(i) The distinctive designation of such series which
shall distinguish it from other series;
(ii) The number of Preferred Partner Interests included in
such series, which number may be increased or decreased from time to time
unless otherwise provided by the General Partner in creating the series;
(iii) The Preferred Partner Distribution rate (or method of
determining such rate) for Preferred Partner Interests of such series and
the first date upon which such Preferred Partner Distribution shall be
payable;
(iv) The amount or amounts which shall be paid out of the
assets of the Partnership to the holders of such series of Preferred
Partner Interests upon voluntary or
25
<PAGE>
involuntary dissolution and winding up of the Partnership;
(v) The price or prices at which, the period or periods within
which and the terms and conditions upon which the Preferred Partner
Interests of such series may be redeemed or purchased, in whole or in
part, at the option of the Partnership;
(vi) The obligation of the Partnership to purchase or redeem
Preferred Partner Interests of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the period or periods within
which and the terms and conditions upon which the Preferred Partner
Interests of such series shall be redeemed, in whole or in part, pursuant
to such obligation;
(vii) The period or periods within which and the terms and
conditions, if any, including the price or prices or the rate or rates of
conversion or exchange and the terms and conditions of any adjustments
thereof, upon which the Preferred Partner Interests of such series shall
be convertible or exchangeable at the option of the Preferred Partner, or
the Partnership, into any other Interests or securities or other property
or cash or into any other series of Preferred Partner Interests;
(viii) The voting rights, if any, of the Preferred Partner
Interests of such series in addition to those required by law and set
forth in this Agreement, and any requirement for the approval by the
Preferred Partner Interests, or of the Preferred Partner Interests of one
or more series, or of both, as a condition to specified Actions or
amendments to this Agreement; and
(ix) Any other relative rights, powers, preferences or
limitations of the Preferred Partner Interests of the series not
inconsistent with this Agreement or with applicable law.
In connection with the foregoing and without limiting the generality
thereof, the General Partner is hereby expressly authorized, without the vote or
approval of any other Partner or any other Person, to take any Action to create
under the provisions of this Agreement a series of Preferred Partner Interests
that was not previously outstanding. Without the vote or approval of any other
Partner or any other Person, the General Partner may execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection with the issue from time to time of Preferred Partner Interests in
one or more series as shall be necessary, convenient or desirable to reflect the
issue of such series. The General Partner shall do all things it deems to be
appropriate or necessary to comply with the Delaware Act and is authorized and
directed to do all things
26
<PAGE>
it deems to be necessary or permissible in connection with any future issuance,
including compliance with any statute, rule, regulation or guideline of any
Federal, state or other governmental agency or any securities exchange.
Any Action or Actions taken by the General Partner pursuant to the
provisions of this paragraph (b) shall be deemed an amendment and supplement to
and part of this Agreement.
(c) Except as otherwise provided in this Agreement or in any Action
in respect of any series of the Preferred Partner Interests and as otherwise
required by law, all rights to the management and control of the Partnership
shall be vested exclusively in the General Partner.
(d) No holder of Interests shall be entitled as a matter of right to
subscribe for or purchase, or have any preemptive or similar right with respect
to, any part of any new or additional issue of Interests of any class or series
whatsoever, or of securities convertible into any Interests of any class or
series whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of distribution. Any Person acquiring
Preferred Partner Interests shall be admitted to the Partnership as a Preferred
Partner upon compliance with Section 2.06.
13.02. Terms of Preferred Partner Interests. Notwithstanding
anything else in any Action to the contrary, all Preferred Partner Interests of
the Partnership shall have the following voting rights, preferences,
participating, optional and other special rights and the qualifications,
limitations or restrictions of, and other matters relating to, the Preferred
Partner Interests as set forth below in this Section 13.02.
(a) Distributions.
(i) The Preferred Partners shall be entitled to receive, when,
as and if declared by the General Partner out of funds held by
the Partnership to the extent that the Partnership has cash on
hand sufficient to permit such payments and funds legally
available therefor, cumulative cash distributions ("Preferred
Partner Distributions") at a rate per annum established by the
General Partner, calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each, and
for any shorter period, Preferred Partner Distributions will
be computed on the basis of the actual number of days elapsed
in such period, and payable in United States dollars, in
arrears, with a payment frequency determined by the General
Partner at the time of issuance. In the event that any date on
which Preferred Partner
27
<PAGE>
Distributions are payable is not a Business Day, then payment
of such Preferred Partner Distribution will be made on the
next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as
if made on such date. Such Preferred Partner Distributions
will accrue and be cumulative from the original date of issue
whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Partnership
legally available for the payment of distributions, or whether
they are deferred.
(ii) If distributions have not been paid in full on any series
of Preferred Partner Interests, the Partnership may not:
(A) pay or declare and set aside for payment, any
distributions on any other series of Preferred Partner
Interests unless the amount of any distributions paid or
declared on any Preferred Partner Interests is paid or
declared on all Preferred Partner Interests then outstanding
on a pro rata basis, on the date such distributions are paid
or declared, so that
(1) (x) the aggregate amount of distributions paid or
declared on such series of Preferred Partner Interests
bears to (y) the aggregate amount of distributions paid
or declared on all such Preferred Partner Interests
outstanding the same ratio as
(2) (x) the aggregate of all accumulated arrears of
unpaid distributions in respect of such series of
Preferred Partner Interests bears to (y) the aggregate
of all accumulated arrears of unpaid distributions in
respect of all such Preferred Partner Interests
outstanding;
(B) pay or declare any distribution on any general partner
Interest; or
(C) redeem, purchase or otherwise acquire any Preferred
Partner Interests or any general partner Interests;
28
<PAGE>
until, in each case, such time as all accumulated and unpaid distributions on
all series of Preferred Partner Interests shall have been paid in full for all
distribution periods terminating on or prior to, in the case of clauses (A) and
(B), such payment and, in the case of clause (C), the date of such redemption,
purchase or acquisition.
(b) Notice of Redemption.
(i) The Partnership may not redeem any outstanding Preferred
Partner Interests unless all accumulated and unpaid
distributions have been paid on all Preferred Partner
Interests for all distribution periods terminating on or prior
to the date of redemption.
(ii) Notice of any redemption (a "Notice of Redemption") of a
series of Preferred Partner Interests will be given by the
Partnership by mail to each record holder of such series of
Preferred Partner Interests to be redeemed not fewer than
thirty (30) nor more than ninety (90) days prior to the date
fixed for redemption thereof; provided that not fewer than
forty five (45) days' notice will be given with respect to the
redemption of any Preferred Partner Interests held by the
Trust or any trustee thereof. For purposes of the calculation
of the date of redemption and the dates on which notices are
given pursuant to this paragraph (b)(ii), a Notice of
Redemption shall be deemed to be given on the day such notice
is first mailed by first-class mail, postage prepaid, or on
the date it was delivered in person, receipt acknowledged, to
the record holders of such series of Preferred Partner
Interests. Each Notice of Redemption shall be addressed to the
record holders of such series of Preferred Partner Interests
at the address appearing in the books and records of the
Partnership. No defect in the Notice of Redemption or in the
mailing thereof or publication of its contents shall affect
the validity of the redemption proceedings.
(iii) Notwithstanding the foregoing, however, any Notice of
Redemption in connection with an optional redemption may state
that it is subject to the receipt by the Partnership of
redemption funds on or before such date fixed for redemption,
which Notice of Redemption shall be of no effect unless such
funds are so received on or before such date. If Notice of
Redemption shall have been given and, by 12:00 noon, New York
time, on the redemption date specified therein, (i) if
29
<PAGE>
the Preferred Partner Interests are then owned by The
Depository Trust Company or its successor securities
depository, the Partnership shall have irrevocably deposited
with The Depository Trust Company or such successor securities
depository funds sufficient to pay the applicable Redemption
Price and shall have given The Depository Trust Company or its
successor securities depository irrevocable instructions and
authority to pay the Redemption Price to the holders of the
Preferred Partner Interests, or (ii) otherwise, if the
Partnership shall have made payment of the Redemption Price to
the holders of Preferred Partner Interests, then on the date
of such deposit or payment, all rights of the Preferred
Partner Interest Owners and the holders of such series of
Preferred Partner Interests so called for redemption will
cease, except the right to receive the Redemption Price, but
without interest. In the event that any date fixed for
redemption of such series of Preferred Partner Interests is
not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such
Business Day falls in the next succeeding calendar year, such
payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on
such date. In the event that payment of the Redemption Price
in respect of a series of Preferred Partner Interests is not
made either by the Partnership or by Penelec pursuant to the
Guarantee pertaining to the series of Preferred Partner
Interests, distributions on such series of Preferred Partner
Interests will continue to accrue at the then applicable rate,
from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the
Redemption Price.
(iv) In the event that less than all the outstanding series of
Preferred Partner Interests are to be redeemed, the series of
Preferred Partner Interests to be redeemed will be selected
(i) if the Preferred Partner Interests are then owned of
record by The Depository Trust Company or its successor
securities depository, according to a determination by The
Depository Trust Company or such successor securities
depository or (ii) otherwise, pro rata, by lot or by other
equitable
30
<PAGE>
means. Subject to applicable law, Penelec or its subsidiaries
may at any time and from time to time purchase outstanding
Preferred Partner Interests by tender, in the open market or
by private agreement. If a partial redemption or a purchase of
outstanding Preferred Partner Interests by tender, in the open
market or by private agreement would result in a delisting of
a series of Preferred Partner Interests from any national
securities exchange on which the series of Preferred Partner
Interests are then listed, the Partnership may then only
redeem or purchase the series of Preferred Partner Interests
in whole.
(c) Liquidation Distribution. If, upon any liquidation, the
Liquidation Distribution on a series of Preferred Partner Interests can be paid
only in part because the Partnership has insufficient assets available to pay in
full the aggregate liquidation distributions on all Preferred Partner Interests
then outstanding, then the amounts payable directly by the Partnership on such
series of Preferred Partner Interests and on all other Preferred Partner
Interests then outstanding shall be paid on a pro rata basis, so that
(i) (A) the aggregate amount paid in respect of the
Liquidation Distribution bears to (B) the aggregate amount
paid as liquidation distributions on all other Preferred
Partnership Interests then outstanding the same ratio as
(ii) (A) the aggregate Liquidation Distribution bears to (B)
the aggregate maximum liquidation distributions on all other
Preferred Partner Interests then outstanding.
(d) Voting Rights. Notwithstanding anything in Section 8.01 hereof
or elsewhere in this Agreement to the contrary, if (i) the Partnership fails to
pay distributions in full on a series of Preferred Partner Interests for
eighteen (18) consecutive months; (ii) an event of default as defined in the
Indenture occurs and is continuing; or (iii) Penelec is in default on any of its
payment or other obligations under the Guarantee, then the holders of such
Preferred Partner Interests, together with the holders of all other series of
Preferred Partner Interests acting as a single class, will be entitled, by a
vote of the majority of the aggregate stated liquidation preference of
outstanding Preferred Partner Interests, to appoint and authorize a special
representative of the Partnership and the Preferred Partners (the "Special
Representative") to enforce the Partnership's rights under the Subordinated
Debentures and the Indenture, including, without limitation, after failure to
pay interest for twenty (20) consecutive quarterly periods, the payment of
interest on the Subordinated Debentures, and to
31
<PAGE>
enforce the obligations of Penelec under the Guarantee. If a Special
Representative has been appointed, the Special Representative shall have the
exclusive right to enforce, or direct the enforcement of, the Partnership's
rights under the Subordinated Debentures, the Indenture and the Guarantee.
Notwithstanding anything in this Agreement to the contrary, including, without
limitation, the immediately preceding sentence, nothing in this Agreement shall
be deemed to adversely affect the right of a Preferred Partner or an assignee of
a Preferred Partner Interest to bring a derivative action in accordance with and
subject to Subchapter X of the Delaware Act.
In furtherance of the foregoing, and without limiting the powers of
any Special Representative so appointed and for the avoidance of any doubt
concerning the powers of the Special Representative, any Special Representative,
in its own name, in the name of the Partnership, in the name of the Preferred
Partners or otherwise, may, to the fullest extent permitted by law, institute or
cause to be instituted any proceedings, including, without limitation, any suit
in equity, an action at law or other judicial or administrative proceeding, to
enforce the Partnership's or the Preferred Partners' rights directly against
Penelec (including, without limitation, the Partnership's rights under the
Indenture or as a holder or beneficial owner of the Subordinated Debentures), or
any other obligor in connection with such obligations on behalf of the
Partnership or the Preferred Partners, and may prosecute such proceeding to
final judgment or decree, including any appeals thereof, and enforce the same
against Penelec or any other obligor in connection with such obligations and
collect, out of the property, wherever situated, of Penelec or any such other
obligor upon such obligations, the monies adjudged or decreed to be payable in
the manner provided by law. The Special Representative shall not by virtue of
acting in such capacity be admitted as a general partner in the Partnership or
otherwise be deemed to be a general partner in the Partnership and shall have no
liability for the debts, obligations or liabilities of the Partnership.
For purposes of determining whether the Partnership has failed to
pay distributions in full for eighteen (18) consecutive months, distributions
shall be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative distributions have been or contemporaneously are
declared and paid with respect to all distribution periods terminating on or
prior to the date of payment of such full cumulative distributions. Subject to
requirements of applicable law, not later than thirty (30) days after such right
to appoint a Special Representative arises, the General Partner will convene a
general meeting for the above purpose. If the General Partner fails to convene
such meeting within such 30-day period, the Preferred Partners who hold 10% of
the aggregate stated liquidation preference of such outstanding series of
Preferred Partner Interests will be entitled to convene such meeting. The
32
<PAGE>
provisions of this Agreement relating to the convening and conduct of meetings
of Partners will apply with respect to any such meeting. Any Special
Representative so appointed shall vacate office immediately if the Partnership
(or Penelec pursuant to the Guarantee) shall have paid in full all accumulated
and unpaid distributions on the Preferred Partner Interests or such default or
breach by Penelec, as the case may be, shall have been cured. Notwithstanding
the appointment of any such Special Representative, Penelec shall retain all
rights under the Indenture, including the right to extend the interest payment
period on the Subordinated Debentures as provided in the Indenture.
If any proposed amendment of this Agreement provides for, or the
General Partner otherwise proposes to effect any action which would materially
adversely affect the powers, preferences or special rights of such series of
Preferred Partner Interests, then holders of the outstanding series of Preferred
Partner Interests will be entitled to vote on such amendment or action of the
General Partner (but not on any other amendment or action) and, in the case of
an amendment or action which would equally adversely affect the powers,
preferences or special rights of any other series of outstanding Preferred
Partner Interests, all holders of all such series of Preferred Partner
Interests, will be entitled to vote together as a class on such amendment or
action of the General Partner (but not on any other amendment or action), and
such amendment or action shall not be effective except with the approval of
Preferred Partners holding not less than a majority of the aggregate stated
liquidation preference of such outstanding series of Preferred Partner
Interests. Except as otherwise provided under Section 11.02 or the Delaware Act,
the Partnership will be dissolved and wound up only with the consent of the
holders of all Preferred Partner Interests outstanding as well as the General
Partner.
The powers, preferences or special rights of a series of Preferred
Partner Interests will be deemed not to be adversely affected by the creation or
issue of, and no vote will be required for the creation or issue of, any further
series of Preferred Partner Interests or any general partner Interests; provided
that the Partnership shall have utilized the proceeds of the sale of such
Interests to have purchased Subordinated Debentures of a class and with terms
that correspond in all material respects with the terms of such Interests. The
Holders of Preferred Securities have no preemptive rights.
Any required approval of a series of Preferred Partner Interests may
be given at a separate meeting of such holders convened for such purpose, at a
meeting of the holders of all series of Preferred Partner Interests or pursuant
to written consent. The Partnership will cause a notice of any meeting at which
holders of a series of Preferred Partner Interests are entitled to vote, or of
any matter upon which action by written
33
<PAGE>
consent of such holders is to be taken, to be mailed to each holder of Preferred
Partner Interests. Each such notice will include a statement setting forth (i)
the date of such meeting, (ii) a description of any matter proposed for adoption
at such meeting on which such holders are entitled to vote or of such matter
upon which written consent is sought and (iii) instructions for the delivery of
proxies or consents.
No vote or consent of the holders of a series of Preferred Partner
Interests will be required for the Partnership to redeem and cancel such series
of Preferred Partner Interests in accordance with this Agreement and the related
Action.
Notwithstanding that holders of a series of Preferred Partner
Interests are entitled to vote or consent under any of the circumstances
described above or under any other circumstances provided for in this Agreement
or under the Delaware Act, any Preferred Partner Interests that are owned by
Penelec or Penelec's parent, GPU, Inc., or any Person owned more than 50% by
Penelec or GPU, Inc., either directly or indirectly, shall not be entitled to
vote or consent and shall, for the purposes of such vote or consent, be treated
as if they were not outstanding.
(e) Mergers. The Partnership shall not consolidate, amalgamate,
convert into, merge with or into, or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety to any corporation,
limited liability company, limited partnership, trust (including a business
trust) or other entity, except with the prior approval of the Preferred Partners
holding not less than a majority of the aggregate stated liquidation preference
of such outstanding Preferred Partner Interests or as described below or under
Article XII. The General Partner may, without the consent of the holders of the
Preferred Securities, cause the Partnership to consolidate, amalgamate, convert
into, merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a corporation, a limited
liability company, a limited partnership or a trust (including a business trust)
or other entity organized as such under the laws of the United States or any
state thereof or the District of Columbia (a "Successor Entity"), provided that
(i) such Successor Entity either (A) expressly assumes all of the terms and
provisions of the Preferred Partner Interests by which the Partnership is bound
and the other obligations of the Partnership or (B) substitutes for the
Preferred Partner Interests other securities (the "Successor Securities") so
long as the Successor Securities rank, with regard to participation in the
profits or assets of the Successor Entity, at least as high as the Preferred
Partner Interests rank, with regard to participation in the profits or assets of
the Partnership, (ii) Penelec confirms its obligations under the Guarantee with
regard to the Preferred Partner Interests or Successor Securities, if any are
issued,
34
<PAGE>
(iii) the Preferred Partner Interests or the Successor Securities will not be
delisted from, or will be listed upon notification of issuance on, any national
securities exchange on which the Preferred Partner Interests or Successor
Securities are then listed, (iv) such merger, consolidation, amalgamation,
conversion, replacement, conveyance, transfer or lease does not cause the
Preferred Partner Interests or Successor Securities to be downgraded by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Securities Act, (v)
such consolidation, amalgamation, conversion, merger, replacement, conveyance,
transfer or lease does not adversely affect in any material respect the powers,
preferences and special rights of the holders of the Preferred Partner Interests
or Successor Securities under the documents governing the Preferred Partner
Interests or Successor Securities, including, without limitation, the voting
rights provided for in Section 13.02(d) hereof (other than with respect to any
dilution of the holders of the Preferred Partner Interests or Successor
Securities in the Successor Entity), (vi) such Successor Entity has a purpose
substantially identical to that of the Partnership and (vii) prior to such
merger, consolidation, amalgamation, conversion, replacement, conveyance,
transfer or lease Penelec has received an opinion of counsel (which may be
regular counsel to the Partnership or an Affiliate, but not an employee thereof)
experienced in such matters to the effect that (A) holders of outstanding
Preferred Partner Interests or Successor Securities will not recognize any gain
or loss for Federal income tax proposes as a result of the merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease, (B) such Successor Entity will be treated as either a partnership or a
grantor trust for Federal income tax purposes, (C) following such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease, Penelec and such Successor Entity will be in compliance with the 1940 Act
without registering thereunder as an "investment company," and (D) such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease will not cause the holders of Preferred Partner Interests or Successor
Securities to be generally liable for the debts, obligations or liabilities of
the Partnership or the Successor Entity.
(f) Substitutions. Notwithstanding any other provision of this
Agreement to the contrary, the General Partner may, without the consent of any
Person, (i) form or cause to be formed a Successor Entity and contribute or
cause to be contributed the Subordinated Debentures (and any rights to receive
interest payments on such Subordinated Debentures) to the Successor Entity in
exchange for all of the equity or beneficial interests in the Successor Entity,
and (ii) dissolve the Partnership and, after satisfaction of liabilities to
creditors as required by the Delaware Act, cause the equity or beneficial
interests in the Successor Entity to be distributed to the
35
<PAGE>
General Partner and the holders of each series of Preferred Partner Interests in
liquidation of such holders' respective Interests in the Partnership (a
"Substitution Event"), provided that a Substitution Event shall not be permitted
to occur unless the conditions set forth in the proviso in the second sentence
of Section 13.02(e) shall have been satisfied. The General Partner may, without
the consent of any Person, take any other action having similar consequences to
the foregoing.
ARTICLE XIV - Transfers
-----------------------
Section 14.01. Transfers of Preferred Partner Interests. Preferred
Partner Interests may be freely transferred by a Preferred Partner. No Interest
shall be transferred, in whole or in part, except in accordance with the terms
and conditions set forth in this Agreement. To the fullest extent permitted by
law, any transfer or purported transfer of any Interest not made in accordance
with this Agreement shall be null and void.
Section 14.02. Transfer of Certificates. The General Partner shall
provide for the registration of Certificates. Upon surrender for registration of
transfer of any Certificate, the General Partner shall cause one or more new
Certificates to be issued in the name of the designated transferee or
transferees. Every Certificate surrendered for registration of transfer shall be
accompanied by a written instrument of transfer and agreement to be bound by the
provisions of this Agreement in form satisfactory to the General Partner duly
executed by the Preferred Partner or his attorney duly authorized in writing.
Each Certificate surrendered for registration of transfer shall be cancelled by
the General Partner. A transferee of a Certificate shall provide the Partnership
with a completed Form W-9 or such other documents or information as are
requested by the Partnership for tax reporting purposes and thereafter shall be
admitted to the Partnership as a Preferred Partner and shall be entitled to the
rights and subject to the obligations of a Preferred Partner hereunder upon the
receipt by such transferee of a Certificate. The transferor of a Certificate
representing such transferor's entire Preferred Partner Interest shall cease to
be a limited partner of the Partnership at the time that the transferee of the
Certificate is admitted to the Partnership as a Preferred Partner in accordance
with this Section 14.02.
Section 14.03. Persons Deemed Preferred Partners. The Partnership
may treat the Person in whose name any Certificate shall be registered on the
books and records of the Partnership as the Preferred Partner and the sole
holder of such Certificate for purposes of receiving distributions and for all
other purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claims to or interest in such Certificate on the part of any
other Person, whether or not the
36
<PAGE>
Partnership shall have actual or other notice thereof.
Section 14.04. Book Entry Interests. The Certificates, on original
issuance, may, but need not, be issued in the form of a typewritten Certificate
or Certificates representing the Book Entry Interests, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Partnership. Any such Certificates shall be registered on the books and records
of the Partnership in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Preferred Partner Interest Owner will receive a
definitive Certificate representing such Preferred Partner Interest Owner's
interests in such Certificate, except as provided in Section 14.06. Except to
the extent that definitive, fully registered Certificates (the "Definitive
Certificates") have been issued to the Preferred Partner Interest Owners
pursuant to Section 14.06 or other Persons pursuant to this Agreement, with
respect to Global Certificates:
(a) The provisions of this Section shall be in full force
and effect;
(b) The Partnership and the General Partner shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement (including
the payment of distributions on such Global Certificates and receiving
approvals, votes or consents hereunder) as a Preferred Partner and the sole
holder of such Global Certificates and shall have no obligations to the
Preferred Partner Interest Owners;
(c) The rights of the Preferred Partner Interest Owners shall
be exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Partner Interest Owners
and the Clearing Agency and/or the Clearing Agency Participants. With respect to
such Global Certificates, the initial Clearing Agency will make book entry
transfers among the Clearing Agency Participants and receive and transmit
payments of distributions on such Global Certificates to such Clearing Agency
Participants;
(d) Subject in all respects to Section 14.07, to the extent
that the provisions of this Section conflict with any other provisions of this
Agreement as they relate to Global Certificates, the provisions of this Section
shall control; and
(e) Whenever this Agreement requires or permits actions to be
taken based upon approvals, votes or consents of a percentage of the Preferred
Partners who hold Global Certificates, the Clearing Agency shall be deemed to
represent such percentage only to the extent that it has received instructions
to such effect from the Preferred Partner Interest Owners and/or Clearing Agency
Participants owning or
37
<PAGE>
representing, respectively, such required percentage of the beneficial interests
in such Global Certificates and has delivered such instructions to the General
Partner.
Section 14.05. Notices to Clearing Agency. Whenever a notice or
other communication to the Preferred Partners who hold Global Certificates is
required under this Agreement, the General Partner shall give all such notices
and communications specified herein to be given to such Preferred Partners to
the Clearing Agency, and shall have no obligations to such Preferred Partner
Interest Owners.
Section 14.06. Definitive Certificates. If (a) the Clearing Agency
elects to discontinue its services as securities depository and gives reasonable
notice to the Partnership, or (b) the Partnership elects to terminate the book
entry system through the Clearing Agency, then Definitive Certificates shall be
prepared by the Partnership. Upon surrender of the typewritten Certificate or
Certificates representing the Book Entry Interests by the Clearing Agency,
accompanied by registration instructions, the General Partner shall cause the
Definitive Certificates to be delivered to the holders of Preferred Partner
Interests in accordance with the instructions of the Clearing Agency. The
General Partner shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Any Person receiving a Definitive Certificate in accordance
with this Article XIV shall be admitted to the Partnership as a Preferred
Partner upon receipt of such Definitive Certificate. The Clearing Agency or the
nominee of the Clearing Agency, as the case may be, shall cease to be a limited
partner of the Partnership, in relation to that series of Preferred Partner
Interests, under this Section 14.06 at the time that at least one additional
Person is admitted to the Partnership as a Preferred Partner in accordance with
this Section 14.06. The Definitive Certificates shall be printed, lithographed
or engraved or may be produced in any other manner as is reasonably acceptable
to the General Partner, as evidenced by its execution thereof.
Section 14.07. Definitive Certificates on Original Issuance.
Notwithstanding anything in this Agreement to the contrary, including, without
limitation, Sections 14.04, 14.05 and 14.06, on original issuance, Certificates
may, but need not, be issued to The Depository Trust Company in the form of a
Global Certificate or Global Certificates in accordance with Section 14.04, and
may, but need not, be issued to any Person in the form of a Definitive
Certificate or Definitive Certificates in accordance with this Section 14.07.
Without limiting the generality of the foregoing, in connection with the
original issuance of Certificates as Definitive Certificates in accordance with
this Section 14.07, (i) a Clearing Agency or a nominee of the Clearing Agency
that is a limited partner of the Partnership in accordance with sections 14.03
and 14.04 with respect to one
38
<PAGE>
or more series of Preferred Partner Interests shall continue to be a limited
partner of the Partnership notwithstanding the fact that another Person holding
a Definitive Certificate issued in accordance with this Section 14.07 has been
admitted to the Partnership as a limited partner of the Partnership with respect
to one or more series of Preferred Partner Interests, and (ii) Section 14.04,
14.05 and 14.06 shall be inapplicable to a Person holding a Definitive
Certificate issued in accordance with this Section 14.07. The Definitive
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the General Partner, as is
evidenced by its execution thereof. Registration of transfers of Preferred
Partner Interests will be effected without charge by or on behalf of the
Partnership, but upon payment of any tax or other governmental charges which may
be imposed in relation to it. The Partnership will not be required to register
or cause to be registered the transfer of Preferred Partner Interests after such
Preferred Partner Interests have been called for redemption. Any Person
receiving a Definitive Certificate in accordance with this Section 14.07 shall
be admitted to the Partnership as a Preferred Partner pursuant to Section 2.06.
ARTICLE XV - General
--------------------
Section 15.01. Power of Attorney.
(a) The Class A Limited Partner and each Preferred Partner
constitutes and appoints the General Partner and the Liquidating Trustee as its
true and lawful representative and attorney-in-fact, in its name, place and
stead, to make, execute, sign, acknowledge and deliver or file (i) all
instruments, documents and certificates which may from time to time be required
by any law to effectuate, implement and continue the valid and subsisting
existence of the Partnership, (ii) all instruments, documents and certificates
that may be required to effectuate the dissolution and termination of the
Partnership in accordance with the provisions hereof and Delaware law, (iii) all
other amendments of this Agreement or the Certificate of Limited Partnership and
other filings contemplated by this Agreement including, without limitation,
amendments reflecting the withdrawal of the General Partner, or the return, in
whole or in part, of the contribution of any Partner, or the addition,
substitution or increased contribution of any Partner, or any action of the
Partners duly taken pursuant to this Agreement whether or not such Partner voted
in favor of or otherwise approved such action, and (iv) any other instrument,
certificate or document required from time to time to admit a Partner, to effect
its substitution as a Partner, to effect the substitution of the Partner's
assignee as a Partner or to reflect any action of the Partners provided for in
this Agreement.
39
<PAGE>
(b) The powers of attorney granted herein (i) shall be deemed to be
coupled with an interest, shall be irrevocable and shall survive the death,
insanity, incompetency or incapacity (or, in the case of a Partner that is a
corporation, association, partnership, limited liability company or trust, shall
survive the merger, consolidation, conversion, dissolution or other termination
of existence) of the Partner and (ii) shall survive the assignment by the
Partner of the whole or any portion of his Interest, except that where the
assignee of the whole or any portion thereof has furnished a power of attorney,
this power of attorney shall survive such assignment for the sole purpose of
enabling the General Partner and the Liquidating Trustee to execute, acknowledge
and file any instrument necessary to effect any permitted substitution of the
assignee for the assignor as a Partner and shall thereafter terminate. In the
event that the appointment conferred in this Section 15.01 would not constitute
a legal and valid appointment by any Partner under the laws of the jurisdiction
in which such Partner is incorporated, established or resident, upon the request
of the General Partner or the Liquidating Trustee, such Partner shall deliver to
the General Partner or the Liquidating Trustee a properly authenticated and duly
executed document constituting a legal and valid power of attorney under the
laws of the appropriate jurisdiction covering the matters set forth in this
Section 15.01.
(c) The General Partner may require a power of attorney to be
executed by a transferee of a Partner as a condition of its admission as a
substitute Partner.
Section 15.02. Waiver of Partition. Each Partner hereby
irrevocably waives any and all rights that it may have to maintain an action
for partition of any of the Partnership's property or assets.
Section 15.03. Notices. Any notice permitted or required to be given
hereunder shall be in writing and shall be deemed given (i) on the day the
notice is first mailed to a Partner by first class mail, postage prepaid, or
(ii) on the date it was delivered in person to a Partner, receipt acknowledged,
at its address appearing on the books and records of the Partnership. Another
address may be designated by a Partner by such Partner giving notice of its new
address as provided in this Section 15.03.
Section 15.04. Entire Agreement. This Agreement, including the
exhibits annexed hereto and incorporated by reference herein, contains the
entire agreement of the parties hereto and supersedes all prior agreements and
understandings, oral or otherwise, among the parties hereto with respect to the
matters contained herein.
Section 15.05. Waivers. Except as otherwise expressly
40
<PAGE>
provided herein, no purported waiver by any party of any breach by another party
of any of his obligations, agreements or covenants hereunder, or any part
thereof, shall be effective unless made in a writing executed by the party or
parties sought to be bound thereby, and no failure to pursue or elect any remedy
with respect to any default under or breach of any provision of this Agreement,
or any part hereof, shall be deemed to be a waiver of any other subsequent
similar or different default or breach, or any election of remedies available in
connection therewith, nor shall the acceptance or receipt by any party of any
money or other consideration due him under this Agreement, with or without
knowledge of any breach hereunder, constitute a waiver of any provision of this
Agreement with respect to such or any other breach.
Section 15.06. Headings. The section headings herein contained have
been inserted only as a matter of convenience of reference and in no way define,
limit or describe the scope or intent of any provisions of this Agreement nor in
any way affect any such provisions.
Section 15.07. Separability. Each provision of this Agreement shall
be considered to be separable, and if, for any reason, any such provision or
provisions, or any part thereof, is determined to be invalid and contrary to any
existing or future applicable law, such invalidity shall not impair the
operation of, or affect, those portions of this Agreement which are valid, and
this Agreement shall be construed and enforced in all respects as if such
invalid or unenforceable provision or provisions had been omitted.
Section 15.08. Contract Construction. Whenever the content of this
Agreement permits, the masculine gender shall include the feminine and neuter
genders, and reference to singular or plural shall be interchangeable with the
other. References in this Agreement to particular sections of the Code or to
provisions of the Delaware Act shall be deemed to refer to such sections or
provisions as they may be amended after the date of this Agreement.
Section 15.09. Counterparts. This Agreement may be executed in one
or more counterparts and each of such counterparts for all purposes shall be
deemed to be an original, but all of such counterparts, when taken together,
shall constitute but one and the same instrument, binding upon all parties
hereto, notwithstanding that all of such parties may not have executed the same
counterpart.
Section 15.10. Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns, but shall not be deemed for the benefit of creditors
or any other Persons, nor shall it
41
<PAGE>
be deemed to permit any assignment by a Partner of any of its rights or
obligations hereunder except as expressly provided herein.
Section 15.11. Further Actions. Each of the Partners hereby agrees
that it shall hereafter execute and deliver such further instruments and do such
further acts and things as may be required or useful to carry out the intent and
purposes of this Agreement and as are not inconsistent with the terms hereof.
Section 15.12. Governing Law. This Agreement shall be
governed by and construed in accordance with the substantive laws of the
State of Delaware, without regard to conflict of laws.
Section 15.13. Amendments. Except as otherwise expressly
provided herein or as otherwise required by law, this Agreement may be
amended by a written instrument executed by only the General Partner.
42
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
GENERAL PARTNER:
PENELEC PREFERRED CAPITAL II, INC.
By: /s/ T.G. Howson
---------------------
Name: T.G. Howson
Title: Vice President
CLASS A LIMITED PARTNER:
/s/ T.G. Howson
---------------------
T.G. Howson
PREFERRED LIMITED PARTNER:
PENELEC CAPITAL TRUST
By: /s/ T.G. Howson
---------------------
Name: T.G. Howson
Title: Regular Trustee
By: /s/ P.R. Chatman
---------------------
Name: P.R. Chatman
Title: Regular Trustee
By: /s/ M.E. Gramlich
---------------------
Name: M.E. Gramlich
Title: Regular Trustee
<PAGE>
Exhibit A
Certificate Evidencing Preferred Partner Interests
of
Penelec Capital II, L.P.
7.34% Cumulative Preferred Partner
Interests, Series A (liquidation preference
$25 per Preferred Partner Interest)
Penelec Capital II, L.P., a Delaware limited partnership (the
"Partnership"), hereby certifies that Penelec Capital Trust (the "Holder") is
the registered owner of Four Million (4,000,000) fully paid Preferred Partner
Interests of the Partnership designated the 7.34% Cumulative Preferred Partner
Interests, Series A (liquidation preference $25 per Preferred Partner Interest)
(the "Series A Preferred Partner Interests") representing preferred limited
partner interests in the Partnership transferable on the books and records of
the Partnership, in person or by a duly authorized attorney, upon surrender of
this Certificate duly endorsed and in proper form for transfer. The powers,
preferences and special rights and limitations of the Series A Preferred Partner
Interests are set forth in, and this Certificate and the Series A Preferred
Partner Interests represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Limited
Partnership Agreement dated as of June 9, 1999 of the Partnership as the same
may, from time to time, be amended (the "Partnership Agreement") authorizing the
issuance of the
1
<PAGE>
Series A Preferred Partner Interests and determining, along with any Actions of
the General Partner of the Partnership as authorized under the Partnership
Agreement, the preferred, deferred and other special rights and restrictions,
regarding distributions, voting, redemption and otherwise and other matters
relating to the Series A Preferred Partner Interests. The Partnership will
furnish a copy of the Partnership Agreement to the Holder without charge upon
written request to the Partnership at its principal place of business.
Capitalized terms used herein but not defined shall have the meaning given them
in the Partnership Agreement. The Holder is entitled to the benefits of the
Payment and Guarantee Agreement of Pennsylvania Electric Company, dated as of
June 16, 1999, as the same may be amended from time to time, relating to the
Preferred Partner Interests (the "Guarantee") and of the Indenture between
Pennsylvania Electric Company and United States Trust Company of New York, dated
as of June 1, 1999, as the same may be amended from time to time (the
"Indenture"), under and pursuant to which the related series of Subordinated
Debentures are issued and outstanding, in either case to the extent provided
therein. The Partnership will furnish a copy of the Guarantee and Indenture to
the Holder without charge upon written request to the Partnership at its
principal place of business or registered office.
The Holder, by accepting this Certificate, is deemed to have (i)
agreed that the Subordinated Debentures issued pursuant to the Indenture are
subordinate and junior in right of payment
2
<PAGE>
to all Senior Indebtedness of Pennsylvania Electric Company as and to the extent
provided in the Indenture and (ii) agreed that the Guarantee is subordinate and
junior in right of payment to all general liabilities of Pennsylvania Electric
Company (other than trade accounts payable arising in the ordinary course of
business). Upon receipt of this Certificate, the Holder is admitted to the
Partnership as a Preferred Partner, is bound by the Partnership Agreement and is
entitled to the benefits thereunder.
3
<PAGE>
IN WITNESS WHEREOF, the Partnership has executed this Certificate
this 25th day of June, 1999.
PENELEC CAPITAL II, L.P.
By: Penelec Preferred Capital II,
Inc., its General Partner
By: /s/ T. G. Howson
-----------------------------
Name: T.G. Howson
Title: Vice President
4
Exhibit A-6(a)
Action by the General Partner of Penelec Capital II, L.P.
Creating the 7.34% Cumulative
Preferred Partner Interests, Series A
Pursuant to Section 13.01 of the Amended and Restated Limited
Partnership Agreement of Penelec Capital II, L.P. dated as of June 9, 1999 (as
amended from time to time, the "Partnership Agreement"), Penelec Preferred
Capital II, Inc., as general partner (the "General Partner") of Penelec Capital
II, L.P. (the "Partnership"), desiring to state the designations, distribution
rights, redemption rights, preferences, privileges, limitations and other rights
of a new series of Preferred Partner Interests, hereby authorizes and
establishes such new series of Preferred Partner Interests according to the
following terms and conditions (each capitalized term used but not defined
herein shall have the meaning set forth in the Partnership Agreement):
(a) Designation. Four million (4,000,000) interests with an
aggregate liquidation preference of $100,000,000 of the Preferred Partner
Interests of the Partnership, liquidation preference $25 per Preferred Partner
Interest, are hereby designated as "7.34% Cumulative Preferred Partner
Interests, Series A" (hereinafter the "Series A Preferred Partner Interests.")
(b) Distributions.
(i) The Preferred Partners who hold the Series A Preferred
Partner Interests shall be entitled to receive, when, as and
if declared by the General Partner to the extent that the
Partnership has funds on hand legally available therefor,
cumulative cash distributions at a rate per annum of 7.34% of
the stated liquidation preference of $25 per Series A
Preferred Partner Interest per annum.
(ii) Distributions on the Series A Preferred Partner Interests
must be declared quarterly by the General Partner to be
payable on September 1, December 1, March 1 and June 1 of each
year commencing September 1, 1999 (each a "Payment Date"), and
must be paid on each such Payment Date by the Partnership to
the extent that at such Payment Date it has funds on hand
legally available therefor. Distributions on the Series A
Preferred Partner Interests will be deferred if and for so
long as Pennsylvania Electric Company ("Penelec") defers
payments to the Partnership on the Debentures (as defined
below) ("Deferral Period"). During a Deferral Period,
distributions will continue to accrue quarterly, as set forth
above (whether or not declared), on the Series A Preferred
Partner Interests at an annual rate of
<PAGE>
7.34% of the liquidation amount of $25 per Series A Preferred
Partner Interest. Also, deferred distributions on the Series A
Preferred Partner Interests will accrue additional
distributions in respect thereof after the payment date
therefor, to the extent permitted by law, at a rate of 7.34%
per annum. Such additional distributions shall be payable at
the time the related deferred distribution is paid, but in any
event by the end of such Deferral Period. Distributions
declared on the Series A Preferred Partner Interests will be
payable to the Series A Preferred Partners as they appear on
the books and records of the Partnership on the relevant
record dates, which will be one Business Day prior to the
relevant Payment Dates, provided that if the Series A
Preferred Partner Interests are not in book-entry-only form,
the record dates will be the fifteenth day of the month
preceding the month in which the relevant Payment Date falls.
(c) Redemption.
(i) The Series A Preferred Partner Interests are redeemable,
at the option of the Partnership in whole or in part from time
to time, on or after September 1, 2004, at the Redemption
Price (as defined below).
(ii) Upon payment when due or redemption at any time of the
7.34% Subordinated Debentures, Series A due September 1, 2039
(the "Debentures") issued by Penelec pursuant to an Indenture
dated as of June 1, 1999 between Penelec and United States
Trust Company of New York, as Trustee (the "Indenture"), which
Debentures were purchased by the Partnership from Penelec with
the proceeds from the issuance and sale of the Series A
Preferred Partner Interests and the related capital
contribution of the General Partner, the proceeds from such
payment or redemption of the Debentures shall be applied to
redeem the Series A Preferred Partner Interests at the
redemption price of $25 per Preferred Partner Interest plus
accumulated and unpaid distributions (whether or not declared)
to the date fixed for redemption, together with any additional
distributions accrued thereon (the "Redemption Price").
(iii) If an Investment Company Act Event shall occur and be
continuing, the Partnership shall either: (1) redeem the
Series A Preferred Partner Interests in whole but not in part
at the Redemption Price within ninety (90) days following the
occurrence of such Investment Company Act Event; (2) cause
Debentures (and any rights to
2
<PAGE>
interest on such Debentures) with an aggregate principal
amount equal to the aggregate stated liquidation preference of
the outstanding Series A Preferred Partner Interests to be
distributed to the holders of the Series A Preferred Partner
Interests, within ninety (90) days following the occurrence of
such Investment Company Act Event, either in connection with a
dissolution of the Partnership, in which case liabilities to
creditors shall first be satisfied as required by the Delaware
Act, or otherwise, in liquidation of or exchange for such
holders' Interests in the Partnership, as the case may be; or
(3) have the Series A Preferred Partner Interests remain
outstanding; provided, however, if at the time of the
occurrence of the Investment Company Act Event, there is
available to Penelec, the Trust or the Partnership the
opportunity to eliminate, within such 90-day period, the
Investment Company Act Event by taking some ministerial
action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, which would
have no adverse effect on the Partnership, the Trust, Penelec
or the holders of the Trust Securities or the Preferred
Securities, then Penelec, the Partnership or the Trust, as the
case may be, will pursue such measure in lieu of redemption or
distribution.
(iv) If a Tax Event shall occur and be continuing, the
Partnership shall either: (1) redeem the Series A Preferred
Partner Interests in whole (but not in part) at the Redemption
Price within ninety (90) days following the occurrence of such
Tax Event; (2) cause Debentures (and any rights to interest on
such Debentures) with an aggregate principal amount equal to
the aggregate stated liquidation preference of the outstanding
Series A Preferred Partner Interests to be distributed to the
holders of the Series A Preferred Partner Interests, within
ninety (90) days following the occurrence of such Tax Event,
either in connection with a dissolution of the Partnership, in
which case liabilities to creditors shall first be satisfied
as required by the Delaware Act, or otherwise, in liquidation
of or exchange for such holders' Interests in the Partnership,
as the case may be; or (3) have the Series A Preferred Partner
Interests remain outstanding; provided, however, that if at
the time of the occurrence of the Tax Event, there is
available to Penelec, the Trust or the Partnership the
opportunity to eliminate, within such 90-day period, the Tax
Event by taking some ministerial action, such as filing a form
or making an election, or pursuing some other similar
3
<PAGE>
reasonable measure, which would have no adverse effect on the
Partnership, the Trust, Penelec or the holders of the Trust
Securities or the Preferred Securities, then Penelec, the
Partnership or the Trust, as the case may be, will pursue such
measure in lieu of redemption or distribution.
(d) Liquidation Distribution. In the event of any voluntary or
involuntary dissolution and winding up of the Partnership (other than pursuant
to paragraphs (c)(iii) or (c)(iv) hereof or Section 13.02(f) of the Partnership
Agreement), holders of the Series A Preferred Partner Interests at the time
outstanding will be entitled to receive out of the assets of the Partnership
available for distribution to holders of Preferred Partner Interests, after
satisfaction of liabilities to creditors as required by the Delaware Act, before
any distribution of assets is made to holders of the general partner interests,
but together with holders of every other series of Preferred Partner Interests
outstanding, the lesser of (i) the sum of their stated liquidation preference
and all accumulated and unpaid distributions to the date of payment in respect
of the Series A Preferred Partner Interest and (ii) the amount of assets of the
Partnership legally available for distribution to the holders of the Series A
Preferred Partner Interest.
(e) Subordination. The holders of Series A Preferred Partner
Interests are deemed, by acceptance of such Interests, to have (i) agreed that
the Debentures issued pursuant to the Indenture are subordinate and junior in
right of payment to all Senior Indebtedness as and to the extent provided in the
Indenture and (ii) agreed that the Guarantee relating to the Series A Preferred
Partner Interests is subordinate and junior in right of payment to all general
liabilities of Penelec (other than trade accounts payable arising in the
ordinary course of business.)
(f) Voting Rights. The holders of the Series A Preferred Partner
Interests shall have no voting rights except as provided in the Partnership
Agreement or as required under the Delaware Act.
4
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Action as
of June 9, 1999.
PENELEC PREFERRED CAPITAL II, INC.
By: /s/ T.G. Howson
-----------------------
Name: T.G. Howson
Title: Vice President
5
Exhibit A-6(b)
Certificate Evidencing Preferred Partner Interests
of
Penelec Capital II, L.P.
7.34% Cumulative Preferred Partner
Interests, Series A (liquidation preference
$25 per Preferred Partner Interest)
Penelec Capital II, L.P., a Delaware limited partnership (the
"Partnership"), hereby certifies that Penelec Capital Trust (the "Holder") is
the registered owner of Four Million (4,000,000) fully paid Preferred Partner
Interests of the Partnership designated the 7.34% Cumulative Preferred Partner
Interests, Series A (liquidation preference $25 per Preferred Partner Interest)
(the "Series A Preferred Partner Interests") representing preferred limited
partner interests in the Partnership transferable on the books and records of
the Partnership, in person or by a duly authorized attorney, upon surrender of
this Certificate duly endorsed and in proper form for transfer. The powers,
preferences and special rights and limitations of the Series A Preferred Partner
Interests are set forth in, and this Certificate and the Series A Preferred
Partner Interests represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Limited
Partnership Agreement dated as of June 9, 1999 of the Partnership as the same
may, from time to time, be amended (the "Partnership Agreement") authorizing the
issuance of the
<PAGE>
Series A Preferred Partner Interests and determining, along with any Actions of
the General Partner of the Partnership as authorized under the Partnership
Agreement, the preferred, deferred and other special rights and restrictions,
regarding distributions, voting, redemption and otherwise and other matters
relating to the Series A Preferred Partner Interests. The Partnership will
furnish a copy of the Partnership Agreement to the Holder without charge upon
written request to the Partnership at its principal place of business.
Capitalized terms used herein but not defined shall have the meaning given them
in the Partnership Agreement. The Holder is entitled to the benefits of the
Payment and Guarantee Agreement of Pennsylvania Electric Company, dated as of
June 16, 1999, as the same may be amended from time to time, relating to the
Preferred Partner Interests (the "Guarantee") and of the Indenture between
Pennsylvania Electric Company and United States Trust Company of New York, dated
as of June 1, 1999, as the same may be amended from time to time (the
"Indenture"), under and pursuant to which the related series of Subordinated
Debentures are issued and outstanding, in either case to the extent provided
therein. The Partnership will furnish a copy of the Guarantee and Indenture to
the Holder without charge upon written request to the Partnership at its
principal place of business or registered office.
The Holder, by accepting this Certificate, is deemed to have (i)
agreed that the Subordinated Debentures issued pursuant to the Indenture are
subordinate and junior in right of payment
2
<PAGE>
to all Senior Indebtedness of Pennsylvania Electric Company as and to the extent
provided in the Indenture and (ii) agreed that the Guarantee is subordinate and
junior in right of payment to all general liabilities of Pennsylvania Electric
Company (other than trade accounts payable arising in the ordinary course of
business). Upon receipt of this Certificate, the Holder is admitted to the
Partnership as a Preferred Partner, is bound by the Partnership Agreement and is
entitled to the benefits thereunder.
3
<PAGE>
IN WITNESS WHEREOF, the Partnership has executed this Certificate
this 16th day of June, 1999.
PENELEC CAPITAL II, L.P.
By: Penelec Preferred Capital II,
Inc., its General Partner
By: /s/ T. G. Howson
-----------------------------
Name: T.G. Howson
Title: Vice President
4
Exhibit A-9(a)
AMENDED AND RESTATED TRUST AGREEMENT
OF
PENELEC CAPITAL TRUST
PENELEC CAPITAL II, L.P.
as Grantor
PENELEC PREFERRED CAPITAL II, INC.
as General Partner of Grantor
and
THE BANK OF NEW YORK (Delaware)
as Delaware Trustee
and
The Bank of New York
as Property Trustee
and
T.G. Howson
P.R. Chatman
and
M.E. Gramlich
as Regular Trustees
Dated as of June 9, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................1
ARTICLE II - CONTINUATION OF TRUST...........................................6
Section 2.1. Continuation of Trust....................................6
Section 2.2. Situs of Trust...........................................6
ARTICLE III - TRUST INDENTURE ACT............................................6
Section 3.1 Trust Indenture Act; Application.........................6
Section 3.2 Lists of Holders of Trust Securities.....................7
Section 3.3 Reports by the Property Trustee..........................7
Section 3.4 Periodic Reports to Property Trustee.....................8
Section 3.5 Evidence of Compliance with Conditions
Precedent.................................................................8
Section 3.6 Trust Enforcement Events; Waiver.........................8
Section 3.7 Trust Enforcement Event; Notice..........................9
ARTICLE IV - ORGANIZATION....................................................9
Section 4.1 Name.....................................................9
Section 4.2 Office...................................................9
Section 4.3 Purpose.................................................10
Section 4.4 Authority...............................................10
Section 4.5 Title to Property of the Trust..........................10
Section 4.6 Power and Duties of the Regular Trustees................10
Section 4.7 Prohibition of Actions by the Trust and
the Trustees.............................................................12
Section 4.8 Powers and Duties of the Property Trustee...............13
Section 4.9 Certain Duties and Responsibilities of
the Property Trustee.....................................................15
Section 4.10 Certain Rights of Property Trustee......................17
Section 4.11 Delaware Trustee........................................20
Section 4.12 Not Responsible for Recitals or Issuance
of Trust Securities......................................................20
i
<PAGE>
Section 4.13 Execution of Documents..................................20
Section 4.14 Responsibilities of the Grantor.........................20
Section 4.15 Indemnification and Expenses of the
Property Trustee and the Delaware Trustee................................21
ARTICLE V - FORM OF TRUST SECURITIES, EXECUTION AND DELIVERY,
TRANSFER AND SURRENDER OF TRUST SECURITIES..................................21
Section 5.1. Form and Transferability of Trust Securities............21
Section 5.2. Issuance of Trust Securities............................22
Section 5.3. Registration, Transfer and Exchange of Trust
Securities...............................................................23
Section 5.4. Lost or Stolen Trust Securities, Etc....................24
Section 5.5. Cancellation and Destruction of Surrendered
Trust Securities 24
Section 5.6. Surrender of Trust Securities and Withdrawal of
Preferred Securities.....................................................25
Section 5.7. Redeposit of Preferred Securities.......................26
Section 5.8. Filing Proofs, Certificates and
Other Information........................................................26
Section 5.9. CUSIP Numbers...........................................27
ARTICLE VI - DISTRIBUTIONS AND OTHER RIGHTS OF HOLDERS OF TRUST
SECURITIES..................................................................27
Section 6.1. Distributions of Distributions on Preferred
Securities...............................................................27
Section 6.2. Redemptions of Preferred Securities.....................27
Section 6.3. Distributions in Liquidation of Grantor.................29
Section 6.4. Fixing of Record Date for Holders of Trust
Securities...............................................................29
Section 6.5. Payment of Distributions................................29
Section 6.6. Special Representative and Voting Rights................30
Section 6.7. Changes Affecting Preferred Securities and
Reclassifications, Recapitalizations, Etc................................30
Section 6.8 The Guarantee...........................................31
ARTICLE VII - TRUSTEES......................................................31
ii
<PAGE>
Section 7.1 Number of Trustees......................................31
Section 7.2 Delaware Trustee........................................31
Section 7.3 Property Trustee; Eligibility...........................31
Section 7.4 Qualifications of the Regular Trustees and the
Delaware Trustee Generally...............................................32
Section 7.5 Regular Trustees........................................32
Section 7.6 Delaware Trustee........................................33
Section 7.7 Appointment, Removal and Resignation of
Trustees.................................................................33
Section 7.8 Vacancies among Trustees................................34
Section 7.9 Effect of Vacancies.....................................34
Section 7.10 Merger, Conversion, Consolidation of Succession
To Business..............................................................35
Section 7.11 Status of Trust.........................................35
ARTICLE VIII - DISSOLUTION AND TERMINATION..................................35
Section 8.1. Dissolution of Trust....................................35
Section 8.2. Winding Up..............................................35
ARTICLE IX - MERGER, CONSOLIDATION, ETC. OF GRANTOR OR TRUST................36
Section 9.1. Limitation on Permitted Merger Consolidation,
Etc. of Grantor 36
Section 9.2. Mergers and Consolidations of Trust.....................36
ARTICLE X - LIMITATION OF LIABILITY OF HOLDERS OF TRUST
SECURITIES, TRUSTEES OR OTHERS..............................................38
Section 10.1 Liability...............................................38
Section 10.2 Exculpation.............................................39
Section 10.3 Fiduciary Duty..........................................39
Section 10.4 Indemnification.........................................40
Section 10.5 Outside Businesses......................................43
ARTICLE XI - AMENDMENTS AND MEETINGS........................................44
Section 11.1 Amendments..............................................44
iii
<PAGE>
Section 11.2 Meetings of the Holders of Trust Securities;
Action by Written Consent................................................46
ARTICLE XII - REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE
TRUSTEE.....................................................................48
Section 12.1 Representations and Warranties of Property
Trustee..................................................................48
Section 12.2 Representations and Warranties of Delaware
Trustee..................................................................48
ARTICLE XIII - MISCELLANEOUS................................................49
Section 13.1 Notices.................................................49
Section 13.2 Governing Law...........................................50
Section 13.3 Intention of the Parties................................50
Section 13.4 Headings................................................50
Section 13.5 Successors and Assigns..................................50
Section 13.6 Partial Enforceability..................................50
Section 13.7 Counterparts............................................50
Section 13.8 Agreement to be Bound...................................51
iv
<PAGE>
CROSS-REFERENCE TABLE*
SECTION OF
SECTION OF ACT TRUST AGREEMENT
- ------------------ ---------------
310(a)(1) and (2).................................................7.3(a)
310(a)(3) and (4)...........................................Inapplicable
310(b)............................................................7.3(c)
310(c)......................................................Inapplicable
311(a)............................................................3.2(b)
311(b)............................................................3.2(b)
311(c)......................................................Inapplicable
312(a)............................................................3.2(a)
312(b)............................................................3.2(b)
312(c)............................................................3.2(b)
313(a),(b)(2),(c) and (d)............................................3.3
313(b)(1)...................................................Inapplicable
314(a)....................................................3.4 and 4.6(j)
314(b)......................................................Inapplicable
314(c)(1) and (2)............................................3.4 and 3.5
314(c)(3)...................................................Inapplicable
314(d)......................................................Inapplicable
314(e).........................................................Article I
314(f)......................................................Inapplicable
315(a) and (d)....................................................4.9(b)
315(b)..................................................3.6(a)and 3.6(b)
315(c)............................................................4.9(a)
315(e)............................................................3.1(a)
316(a)(1)..............................................3.6(a) and 3.6(b)
316(a)(2)...................................................Not required
316(b)............................................................3.1(a)
316(c)............................................................4.6(d)
317(a)............................................................3.1(a)
317(b)............................................................4.8(g)
318(a)............................................................3.1(c)
- -------------------------
* This Cross-Reference Table does not constitute part of this Trust
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of June 9, 1999 (as
amended, modified, supplemented or restated from time to time, the "Trust
Agreement"), is among PENELEC CAPITAL II, L.P., a Delaware limited partnership,
as grantor, THE BANK OF NEW YORK (Delaware), as trustee, the Regular Trustees
(as defined herein), THE BANK OF NEW YORK, a New York banking corporation, as
trustee, PENELEC PREFERRED CAPITAL II, INC., a Delaware corporation, as general
partner of Penelec Capital II, L.P. (with respect to certain sections of this
Trust Agreement) and the several Holders (as defined herein).
W I T N E S S E T H:
- - - - - - - - - -
......WHEREAS, the Trustees (as defined below) and the Grantor (as defined
below) established the Trust (as defined below) under the Delaware Business
Trust Act (12 Del. C. Section 3801, et seq.), pursuant to a Trust Agreement,
dated as of August 20, 1998 (the "Original Trust Agreement"), and a Certificate
of Trust filed with the Secretary of State of the State of Delaware on August
20, 1998; and
......WHEREAS, the parties hereto desire to continue the Trust and to amend
and restate in its entirety the Original Trust Agreement; and
......WHEREAS, the Trust proposes to issue Trust Securities (as defined below),
each representing a Preferred Security (as defined below) of the Grantor; and
......WHEREAS, interests in the Trust are to be evidenced by Trust Security
certificates executed by the Property Trustee in accordance with this Trust
Agreement, which are to be delivered to the Holders;
......NOW, THEREFORE, in consideration of the premises contained herein and
intending to be legally bound hereby, it is agreed by and among the parties
hereto to amend and restate in its entirety the Original Trust Agreement as
follows:
ARTICLE I
DEFINITIONS
......The following definitions shall apply to the respective terms (in the
singular and plural forms of such terms) used in this Trust Agreement and the
Trust Securities:
......"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
1
<PAGE>
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 Day" means any day other than a day on which banking
institutions in the City of New York are closed for business.
"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.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository for the
Trust Securities. The initial clearing Agency shall be DTC.
"Commission" means the Securities and Exchange Commission.
"Company Indemnified Person" means: (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any 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.
"Corporate Office" means the office of the Delaware Trustee at which, at
any particular time, its business in respect of matters governed by this Trust
Agreement shall be administered, which office at the date hereof is located at
White Clay Center, Rte. 273, Newark, Delaware 19711.
"Corporate Trust Office" means the principal corporate trust office of the
Property Trustee at which, at any particular time, its corporate trust business
shall be administered, which office at the date hereof is located at 101 Barclay
Street, 21st Floor, New York, NY 10286.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii)
the Trust's Affiliates; and (b) any Holder of Trust Securities.
"Delaware Trustee" has the meaning set forth in Section 7.2 of this
Trust Agreement.
"DTC" means The Depository Trust Company or any successor thereto.
"Distributions" has the meaning set forth in Article VI.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b) of this Trust Agreement.
2
<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.
"Guarantee" means the Payment and Guarantee Agreement dated as of June 16,
1999, as amended from time to time, with respect to the Preferred Securities and
received by the Grantor from Penelec.
"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.
"Legal Action" has the meaning set forth in Section 4.6(g) of this
Trust Agreement.
"Majority in liquidation amount of the Trust Securities" means, except as
provided in the terms of the Trust Securities or by the Trust Indenture Act,
Holders of outstanding Trust Securities, who are the record owners of more than
50% of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accumulated and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Trust Securities.
"Ministerial Action" means a ministerial action (such as filing a form or
making an election or pursuing some other similar reasonable measure) which in
the sole judgment of the Grantor has or will cause no adverse effect on the
Trust, the Grantor, or the Holders of the Trust Securities and will involve no
material cost.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time, or any successor legislation.
"Officers' Certificate" means, with respect to any Person (who is not a
natural person), a certificate signed by two Responsible Officers of such
Person, and, with respect to a natural person, a certificate signed by such
person. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
3
<PAGE>
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Owner" has the meaning set forth in Section 5.6 of this Trust
Agreement.
"Partnership" means Penelec Capital II, L.P., a Delaware limited
partnership formed pursuant to the Partnership Agreement, and any successor
entity thereto.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of the Grantor dated as of June 9, 1999, as amended from time to time,
together with any Action (as defined in the Partnership Agreement) established
by the General Partner.
"Paying Agent" means the Person from time to time acting as Paying Agent
as provided in Section 4.8(g) of this Trust Agreement.
"Penelec" means Pennsylvania Electric Company, a Pennsylvania
corporation.
"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 Account" has the meaning set forth in Section 4.8(c) of this
Trust Agreement.
4
<PAGE>
"Property Trustee" has the meaning set forth in Section 7.3 of this
Trust Agreement.
"Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both of them.
"Register" has the meaning set forth in Section 5.3.
"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 this
Trust Agreement.
"Responsible Officer" means, with respect to the Property Trustee, any
officer within the Corporate Trust Office of the Property Trustee and, with
respect to the Delaware Trustee, any officer within the Corporate Office of the
Delaware Trustee, including, in either case, any vice-president, any assistant
vice-president, any assistant secretary, any assistant treasurer or other
officer of the Corporate Trust Office of the Property Trustee or any authorized
signatory of the Delaware Trustee, as the case may be, customarily performing
functions similar to those performed by any of the above designated officers,
who has direct responsibility for the administration of the Trust, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Special Representative" has the meaning set forth in Section 13.02(d)
of the Partnership Agreement.
"Successor Property Trustee" shall have the meaning set forth in
Section 7.7(b)(i).
"Successor Securities" has the meaning set forth in Section 13.02(e) of
the Partnership Agreement.
"Trust" means the trust governed by this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the
same may be amended, modified or supplemented from time to time.
"Trustees" mean the collective reference to the Delaware Trustee, the
Property Trustee, and the Regular Trustees.
"Trust Enforcement Event" means the occurrence, at any time, of (i)
arrearages on distributions on the Trust Securities that shall exist for 20
consecutive quarterly periods or (ii) a default by Penelec in respect of any of
its obligations under the Guarantee.
5
<PAGE>
"Trust Estate" means all right, title and interest of the Trust in and to
the Preferred Securities (including any Successor Securities), and all
distributions and payments with respect thereto, including payments by Penelec
under the Guarantee. "Trust Estate" shall not include any amounts paid or
payable to the Trustee pursuant to this Trust Agreement, including, without
limitation, fees, expenses and indemnities.
"Trust Indenture Act" means The Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"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 authenticated
by the Property Trustee pursuant to Article V.
ARTICLE II
CONTINUATION OF TRUST
Section 2.1. Continuation of Trust
The Trust exists for the purpose described in Section 4.3 of this Trust
Agreement. The Grantor shall deliver to the Property Trustee for deposit in the
Trust a certificate representing the Preferred Securities for the benefit of the
Holders. Each Holder is intended by the Grantor to be the beneficial owner of
the number of Preferred Securities represented by the Trust Securities held by
such Holder, not to hold an undivided interest in all of the Preferred
Securities. To the fullest extent permitted by law, without the need for any
other action of any Person, including the Trustees and any other Holder, each
Holder 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 and any recovery on such an enforcement action shall belong solely to
such Holder who brought the action, not to the Trust, the Trustees or any other
Holder individually or to Holders as a group. Subject to Article VIII, this
Trust shall be irrevocable.
......Section 2.2. Situs of Trust. The Trust's bank account shall be
maintained with a bank in the State of New York. The Trust Estate shall be
held in the State of New York.
ARTICLE III
TRUST INDENTURE ACT
......Section 3.1 Trust Indenture Act; Application.
......(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this
6
<PAGE>
Trust Agreement and shall, to the extent applicable, be governed by such
provisions, including, but not limited to, Sections 315(e), 316(b) and 317(a) of
the Trust Indenture Act.
(b) The Property Trustee shall be the only Trustee which is a Trustee for
the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Trust Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such duties imposed by the Trust
Indenture Act shall control.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as securities representing
Preferred Securities pursuant to Section 2.1 of this Trust Agreement.
Section 3.2 Lists of Holders of Trust Securities.
(a) The Grantor and the Regular Trustees on behalf of the Trust shall
provide the Property Trustee unless the Property Trustee is the Registrar for
the Trust Securities (i) within 14 days after each record date for payment of
Distributions, a list, in such form as the Property Trustee may reasonably
require, of the names and addresses of the Holders of the Trust Securities
("List of Holders") as of such record date, provided that neither the Grantor
nor the Regular Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Grantor and the
Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30
days of receipt by the Trust of a written request for a List of Holders, a List
of Holders as of a date no more than 14 days before such List of Holders is
given to the Property Trustee. The Property Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in Lists
of Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity) provided that the Property Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act. The Property Trustee and
the Grantor are protected under Section 312(c) of the Trust Indenture Act.
Section 3.3 Reports by the Property Trustee. Within 60 days after April 30
of each year beginning with the April 30 next following the date of this Trust
Agreement, the Property Trustee shall provide to the Holders of the Trust
Securities such reports as are required by Section 313(a) of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Property Trustee shall also comply with
7
<PAGE>
Section 313(b) of the Trust Indenture Act, if and as required, in the form and
manner provided by Section 313 of the Trust Indenture Act. The Property Trustee
shall also comply with the requirements of Section 313(d) of the Trust Indenture
Act.
Section 3.4 Periodic Reports to Property Trustee. Each of the Grantor and
the Regular Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as are required by Section
314(a) of the Trust Indenture Act, if any, and the compliance certificate
required by Section 314(a) of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314(a) of the Trust Indenture Act.
Section 3.5 Evidence of Compliance with Conditions Precedent. Each of the
Grantor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Trust Agreement that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
Section 3.6 Trust Enforcement Events; Waiver.
(a) The Holders of a Majority in liquidation amount of the Trust
Securities may, by vote, on behalf of the Holders of all of the Trust
Securities, waive any past Trust Enforcement Event in respect of the Trust
Securities and its consequences, provided that, if the underlying event of
default:
(i) is not waivable under the Guarantee or the Partnership
Agreement, the Trust Enforcement Event under this Trust Agreement shall also not
be waivable; or
(ii) requires the consent or vote of the Holders of greater than a
Majority in liquidation amount of the Trust Securities to be waived under the
Guarantee or the Preferred Securities to be waived under the Partnership
Agreement (a "Super Majority"), the Trust Enforcement Event under this Trust
Agreement may only be waived by the vote of the Holders of at least the relevant
Super Majority in liquidation amount of the Trust Securities.
The foregoing provisions of this Section 3.6(a) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Trust Agreement
and the Trust Securities, as permitted by the Trust Indenture Act. Upon such
waiver, any such default shall cease to exist, and any Trust Enforcement Event
with respect to the Trust Securities arising therefrom shall be deemed to have
been cured, for every purpose of this Trust Agreement, but no such waiver shall
extend to any
8
<PAGE>
subsequent or other default or Trust Enforcement Event with respect to the Trust
Securities or impair any right consequent thereon.
(b) A waiver of non-performance or a default under the Partnership
Agreement or the Guarantee, as the case may be, at the direction of the Holders
of the Trust Securities or a Special Representative, of which the Property
Trustee shall have received notice, constitutes a waiver of the corresponding
Trust Enforcement Event under this Trust Agreement. The foregoing provisions of
this Section 3.6(b) shall be in lieu of Section 316(a)(1)(B) of the Trust
Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby
expressly excluded from this Trust Agreement and the Trust Securities, as
permitted by the Trust Indenture Act.
Section 3.7 Trust Enforcement Event; Notice. The Property Trustee shall,
within 90 days after the occurrence of a Trust Enforcement Event, transmit by
mail, first class postage prepaid, to the Holders of the Trust Securities as the
names and addresses of the Holders appear on the books and records of the Trust,
notices of all defaults with respect to the Trust Securities actually known to a
Responsible Officer of the Property Trustee, unless such Trust Enforcement Event
has been cured or waived before the giving of such notice (the term "defaults"
for the purposes of this Section 3.7 being hereby defined to be defaults with
respect to Penelec's obligations under the Guarantee or instances of
non-performance under the Partnership Agreement, as the case may be, not
including any periods of grace provided for therein and irrespective of the
giving of any notice provided therein); provided that, the Property Trustee
shall be protected in withholding such notice if and so long as a Responsible
Officer of the Property Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Trust Securities. The
Property Trustee shall not be deemed to have knowledge of any default except if
the Property Trustee shall have received written notice or has actual notice of
such default.
ARTICLE IV
ORGANIZATION
Section 4.1 Name. The Trust is named "Penelec Capital Trust", as such name
may be modified from time to time by the Regular Trustees following written
notice to the Holders of Trust Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
Section 4.2 Office. The address of the principal office of the Trust is
the Corporate Trust Office. On ten Business Days written notice to the Holders
of Trust Securities, the Regular Trustees may designate another principal
office.
9
<PAGE>
Section 4.3 Purpose. The exclusive purposes and functions of the Trust are
(a) to issue and sell Trust Securities and to use the proceeds from such sales
to acquire the Preferred Securities, and (b) except as otherwise limited herein,
to engage in only those other activities necessary or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would be inconsistent with the Trust being
classified for United States federal income tax purposes as a grantor trust.
Section 4.4 Authority. Subject to the limitations provided in this Trust
Agreement and to the specific duties of the Property Trustee, the Regular
Trustees shall have exclusive and complete authority to carry out the purposes
of the Trust. An action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee on behalf of the Trust in accordance with its
powers shall constitute the act of and serve to bind the Trust. In dealing with
the Trustees and the Grantor acting on behalf of the Trust, no Person shall be
required to inquire into the authority of the Trustees or the Grantor to bind
the Trust. Persons dealing with the Trust are entitled to rely conclusively on
the power and authority of the Trustees and the Grantor as set forth in this
Trust Agreement.
Section 4.5 Title to Property of the Trust. Except as provided in Section
4.8 with respect to the Preferred Securities and the Property Account or as
otherwise provided in this Trust Agreement, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title to
any part of the assets of the Trust, but shall have a beneficial ownership
interest in certain Preferred Securities pursuant to Section 2.1 of this Trust
Agreement.
Section 4.6 Power and Duties of the Regular Trustees. The Regular Trustees
shall have exclusive power, duty and authority to cause the Trust to engage in
the following activities and shall use good faith in the performance of the
following duties and such other duties required to be performed by them under
this Trust Agreement:
(a) To issue and sell the Trust Securities in accordance with this Trust
Agreement, and to execute and deliver (after authentication thereof by the
Property Trustee) certificates representing the Trust Securities; provided,
however, that there shall be no interests in the Trust other than the Trust
Securities;
(b) To acquire the Preferred Securities with the proceeds of the sales of
the Trust Securities, including the execution and delivery of the Partnership
Agreement in connection therewith on behalf of the Trust, as a limited partner;
provided, however, that the Regular Trustees shall cause legal title to the
10
<PAGE>
Preferred Securities to be held of record in the name of the Property Trustee
for the benefit of the Holders of the Trust Securities;
(c) To give the Grantor and the Property Trustee prompt written notice of
the occurrence of any Special Event (as defined in the Partnership Agreement)
and to take any Ministerial Actions in connection therewith.
(d) To give the Grantor and the Property Trustee prompt written notice of
the occurrence of a Trust Enforcement Event.
(e) To establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Trust Securities as to such actions and applicable
record dates;
(f) To give prompt written notice to the Holders of the Trust Securities
and the Property Trustee of any notice received from the Partnership of the
General Partner's election not to make a current distribution on the Preferred
Securities under the Partnership Agreement;
(g) To take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Trust Securities;
(h) To bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless, pursuant to Sections 4.8(f), the Property Trustee has
the power to bring such Legal Action;
(i) To employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(j) To cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(k) To give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Regular Trustee;
(l) To incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(m) To act as, or appoint another Person to act as, Registrar and
transfer agent for the Trust Securities;
11
<PAGE>
(n) To take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Trust
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(o) To take any action, or to take no action, not inconsistent with this
Trust Agreement or with applicable law, that any Regular Trustee determines in
its discretion to be necessary or desirable in carrying out the activities of
the Trust as set out in this Section 4.6, including, but not limited to:
(i)...causing the Trust not to be deemed to be an Investment
Company required to be registered under the 1940 Act;
(ii)..taking no action which would be inconsistent with the Trust
being classified as a grantor trust for United States federal income tax
purposes;
provided that such action does not materially adversely affect the interests
of Holders;
(p) To take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Regular Trustees, on behalf of the Trust;
and
(q) To execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.
Subject to this Section 4.6, the Regular Trustees shall have none of the
duties, liabilities, powers or the authority of the Property Trustee set forth
in Section 4.8.
The Regular Trustees must exercise the powers set forth in this Section
4.6 in a manner that is consistent with the purposes and functions of the Trust
set forth in Section 4.3, and the Regular Trustees shall not take any action
that is inconsistent with the purposes and functions of the Trust set forth in
Section 4.3. Any expenses incurred by the Regular Trustees pursuant to this
Section 4.6 shall be reimbursed by the General Partner pursuant to Section 8.03
of the Partnership Agreement and Section 4.15 of this Trust Agreement.
Section 4.7 Prohibition of Actions by the Trust and the Trustees. The
Trust shall not, and the Trustees shall cause the Trust not to, engage in any
activity other than as required or authorized by this Trust Agreement. In
particular, the Trust shall not and the Trustees shall cause the Trust not to:
12
<PAGE>
(a) invest any proceeds received by the Trust from holding the Preferred
Securities, but shall distribute all such proceeds to Holders of Trust
Securities pursuant to the terms of this Trust Agreement and of the Trust
Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans or incur any indebtedness or acquire any securities
other than the Preferred Securities;
(e) possess any power or otherwise act in such a way as to vary the Trust
assets or the terms of the Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership of, or
beneficial interest in, the Trust other than the Trust Securities;
(g) other than as set forth herein, (A) cause the Special Representative
to direct the time, method and place of conducting any proceeding for any remedy
available to the Special Representative or exercising any trust or power
conferred upon the Special Representative with respect to the Preferred
Securities and the Guarantee, (B) cause the Special Representative to waive any
non-performance that is waivable under the Partnership Agreement, or (C) consent
to any amendment, modification or termination of the Partnership Agreement or
the Preferred Securities where such consent shall be required; and
(h) other than pursuant to Section 8.1(b), file a certificate of
cancellation of the Trust.
Section 4.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Preferred Securities shall be owned by and held
of record in the name of the Property Trustee in trust for the benefit of the
Holders of the Trust Securities. The right, title and interest of the Property
Trustee to the Preferred Securities shall vest automatically in each Person who
may hereafter be appointed as Property Trustee in accordance with Section 7.7.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Preferred Securities have been
executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Preferred Securities to the Regular Trustees or the Delaware Trustee (if
the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
13
<PAGE>
(i) establish and maintain a segregated non-interest bearing trust
account (the "Property Account") in the name of and under the exclusive control
of the Property Trustee on behalf of the Holders of the Trust Securities and,
upon the receipt of payments of funds made in respect of the Preferred
Securities held by the Property Trustee, deposit such funds into the Property
Account and make payments to the Holders of the Trust Securities from the
Property Account in accordance with Article VI. Funds in the Property Account
shall be held uninvested until disbursed in accordance with this Trust
Agreement. The Property Account shall be an account that is maintained with a
banking institution authorized to exercise corporate trust powers and having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Trust Securities to the extent the
Preferred Securities are redeemed; and
(iii) upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Trust Securities, engage in such
ministerial activities as shall be necessary or appropriate to effect the
distribution of the Trust Estate to Holders of Trust Securities.
(d) The Property Trustee shall take all actions and perform such duties as
may be specifically required of the Property Trustee pursuant to the terms of
this Trust Agreement.
(e) The Property Trustee shall take any Legal Action which arises out of
or in connection with (i) a Trust Enforcement Event of which a Responsible
Officer of the Property Trustee has actual knowledge or (ii) the Property
Trustee's duties and obligations under this Trust Agreement or the Trust
Indenture Act.
(f) The Property Trustee shall have the legal power to exercise all of the
rights, powers and privileges of a Holder of Preferred Securities and, if a
Trust Enforcement Event occurs and is continuing, the Property Trustee may
exercise all of the rights, powers and privileges of a Holder of Preferred
Securities, including the right to appoint a Special Representative to enforce
the Partnership's right against Penelec.
(g) The Property Trustee may authorize one or more Persons (each, a
"Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all Trust Securities and any
such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act.
Any Paying Agent may be removed by the Property Trustee at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any time
by the Property Trustee.
14
<PAGE>
(h) The Property Trustee shall continue to serve as a Trustee until
either:
(i)...the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of Trust Securities pursuant to the
terms of the Trust Securities; or
(ii)..a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 7.7.
(i) The Property Trustee shall make available for inspection by Holders of
the Trust Securities at the Corporate Trust Office and at such other places as
it may from time to time deem advisable during normal business hours for any
purpose reasonably related to such Holders interest in the Trust any reports and
communications received by the Property Trustee as the record holder of
Preferred Securities. The Registrar shall keep books at the Corporate Trust
Office for the registration of transfer of Trust Securities, which books at all
reasonable times will be open for inspection by the Holders of the Trust
Securities as and to the extent provided by applicable law and for any purpose
reasonably related to the Holders' interest in the Trust.
Subject to this Section 4.8, the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the Regular Trustees set forth
in Section 4.6.
The Property Trustee must exercise the powers set forth in this Section
4.8 in a manner that is consistent with the purposes and functions of the Trust
set forth in Section 4.3, and the Property Trustee shall not take any action
that is inconsistent with the purposes and functions of the Trust set forth in
Section 4.3. Any expenses incurred by the Property Trustee pursuant to this
Section 4.8 shall be reimbursed by the General Partner pursuant to Section 8.03
of the Partnership Agreement and Section 4.15 of this Trust Agreement.
Section 4.9 Certain Duties and Responsibilities of the Property Trustee
(a) The Property Trustee, before the occurrence of any Trust Enforcement
Event and after the curing or waiver of all Trust Enforcement Events that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Trust Agreement and no implied covenants shall be read into
this Trust Agreement against the Property Trustee. In case a Trust Enforcement
Event has occurred (that has not been cured or waived pursuant to Section 3.6)
of which a Responsible Officer of the Property Trustee has actual knowledge, the
Property Trustee shall exercise such of the rights and powers vested in it by
this Trust Agreement, and use the same degree of care and skill in their
15
<PAGE>
exercise, as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs.
(b) The Grantor may instruct the Property Trustee to dissolve the Trust
and distribute the Trust Estate on a pro rata basis to the Holders, upon the
occurrence, at any time, of a Special Event (as defined in the Partnership
Agreement); provided, that, the Grantor shall not so instruct the Property
Trustee if at the time of the occurrence of the Special Event, there is
available to Penelec, the Trust or the Partnership the opportunity to eliminate
the Special Event, within 90 days after the occurrence thereof, by taking some
Ministerial Action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, which would have no adverse effect on the
Partnership, the Trust, Penelec, the Holders or the holders of the Partnership
Securities, and Penelec, the Trust or the Partnership, as the case may be, will
take such Ministerial Action.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of a Trust Enforcement Event and after
the curing or waiving of all such Trust Enforcement Events that may have
occurred:
(A)...the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Trust Agreement and the
Property Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Trust Agreement, and no
implied covenants or obligations shall be read into this Trust Agreement against
the Property Trustee; and
(B)...in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Property Trustee and conforming to the
requirements of this Trust Agreement; but in the case of any such certificates
or opinions that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Trust Agreement;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
16
<PAGE>
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
liquidation amount of the Trust Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Property
Trustee, or exercising any trust or power conferred upon the Property Trustee
under this Trust Agreement;
(iv) no provision of this Trust Agreement shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Trust Agreement or indemnity reasonably satisfactory to the
Property Trustee against such risk or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the custody,
safekeeping and physical preservation of the Preferred Securities and the
Property Account shall be to deal with such property in a similar manner as the
Property Trustee deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the Property Trustee under
this Trust Agreement and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of the
Preferred Securities or the payment of any taxes or assessments levied thereon
or in connection therewith;
(vii) money held by the Property Trustee need not be segregated from
other funds held by it except in relation to the Property Account maintained by
the Property Trustee pursuant to Section 4.8(c)(i) and except to the extent
otherwise required by law; and
(viii) the Property Trustee shall not be responsible for monitoring
the compliance by the Regular Trustees or the Grantor with their respective
duties under this Trust Agreement, nor shall the Property Trustee be liable for
any default or misconduct of the Regular Trustees or the Grantor.
Section 4.10 Certain Rights of Property Trustee
(a) Subject to the provisions of Section 4.9:
(i) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed,
17
<PAGE>
sent or presented by the proper party or parties;
(ii) any direction or act of the Grantor or the Regular Trustees
acting on behalf of the Trust contemplated by this Trust Agreement shall be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Grantor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or re-registration thereof;
(v) the Property Trustee may, at the expense of the General Partner,
consult with counsel or other experts of its selection and the advice or opinion
of such counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with such advice or opinion;
such counsel may be counsel to the Grantor or any of its Affiliates, and may
include any of its employees. The Property Trustee shall have the right at any
time to seek instructions concerning the administration of this Trust Agreement
from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any Holder, unless such Holder shall have provided to the
Property Trustee security and indemnity, reasonably satisfactory to the Property
Trustee, against the fees, charges, costs, expenses (including attorneys' fees
and expenses and the expenses of the Property Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Property Trustee provided, that, nothing contained in this Section
4.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence
of a Trust Enforcement Event, of its obligation to exercise the rights and
powers vested in it by this Trust Agreement;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report,
18
<PAGE>
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Property Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, custodians, nominees or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Trust Securities, and the
signature of the Property Trustee or its agents alone shall be sufficient and
effective to perform any such action and no third party shall be required to
inquire as to the authority of the Property Trustee to so act or as to its
compliance with any of the terms and provisions of this Trust Agreement, both of
which shall be conclusively evidenced by the Property Trustee's or its agent's
taking such action;
(x) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (a) may request instructions from the Holders of the Trust Securities,
which instructions may only be given by the Holders of the same proportion in
liquidation amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of this Trust Agreement in respect of such
remedy, right or action, (b) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (c) shall be
protected in conclusively relying on or acting in accordance with such
instructions; and
(xi) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Trust Agreement.
In the event that the Property Trustee is also acting as Paying Agent,
transfer agent and security registrar, the rights and protections afforded to
the Property Trustee pursuant to this Article IV shall also be afforded to such
Paying Agent, transfer agent and security registrar.
(b) No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any
19
<PAGE>
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 4.11 Delaware Trustee. Notwithstanding any provision of this Trust
Agreement other than Section 7.2, the Delaware Trustee shall not be entitled to
exercise any powers, nor shall the Delaware Trustee have any of the duties,
liabilities and responsibilities or the authority of the Regular Trustees or
Property Trustee described in this Trust Agreement. Except as set forth in
Section 7.2, the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of Section 3807 of the Business Trust
Act. In no event shall the Property Trustee or the Delaware Trustee be liable
for any act or omission of any of the Regular Trustees hereunder.
Section 4.12 Not Responsible for Recitals or Issuance of Trust Securities
The recitals contained in this Trust Agreement and the Trust Securities shall be
taken as the statements of the Grantor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this Trust
Agreement or the Trust Securities.
Section 4.13 Execution of Documents. Except as otherwise required by the
Business Trust Act or applicable law, any Regular Trustee is authorized to
execute on behalf of the Trust any documents that the Regular Trustees have the
power and authority to cause the Trust to execute pursuant to Section 4.6 or
otherwise authorized in this Agreement.
Section 4.14 Responsibilities of the Grantor. In connection with the
issuance and sale of the Trust Securities, the Grantor shall have the exclusive
right and responsibility to engage in the following activities on behalf of the
Trust:
(a) To execute and file with the Commission the registration statement on
Form S-3, including any amendments thereto, pertaining to the Trust Securities;
(b) To execute and file any documents or take any action as determined
necessary by the Grantor in order to qualify or register all or part of the
Trust Securities in any jurisdiction;
(c) To execute and file an application to the New York Stock Exchange,
Inc. or any other national stock exchange or the NASDAQ Stock Market's National
Market System for listing upon notice of issuance of the Trust Securities;
(d) To execute and file with the Commission a registration statement on
Form 8-A, including any amendments thereto, relating to the registration of the
Trust Securities under Section 12(b)
20
<PAGE>
of the Securities Exchange Act of 1934 (the "Exchange Act");
(e) To negotiate, execute and enter into an underwriting agreement
providing for the sale of the Trust Securities.
Section 4.15 Indemnification and Expenses of the Regular Trustees, the
Property Trustee and the Delaware Trustee. To the extent the Partnership fails
to do so, the General Partner agrees to indemnify the Regular Trustee, the
Property Trustee and the Delaware Trustee and their respective officers,
directors, employees and agents for, and to hold each of them harmless against,
any loss, liability or expense incurred without negligence or bad faith on the
part of the Regular Trustee, the Property Trustee or the Delaware Trustee, as
the case may be, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending either of them against any claim (whether asserted by the
Grantor, Penelec, a Holder or any other Person) or liability in connection with
the exercise or performance of any of their respective powers or duties
hereunder; the provisions of this Section 4.15 shall survive the resignation or
removal of the Regular Trustees, the Delaware Trustee or the Property Trustee or
the termination of this Trust Agreement.
ARTICLE V
FORM OF TRUST SECURITIES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF
TRUST SECURITIES
Section 5.1. Form and Transferability of Trust Securities.
(a) Except as otherwise required by the Clearing Agency, Trust Securities
shall be evidenced by certificates engraved, printed or lithographed or may be
produced in any other manner as is reasonably acceptable to the Regular Trustees
and in substantially the form set forth in Exhibit A annexed to this Trust
Agreement, with the appropriate insertions, modifications and omissions, as
hereinafter provided.
(b) Certificates evidencing Trust Securities shall be (i) executed by one
or more of the Regular Trustees by manual or facsimile signature and (ii) upon
order of the Regular Trustees authenticated by the Property Trustee by manual
signature of an authorized signatory thereof. No certificate evidencing one or
more Trust Securities shall be entitled to any benefit under this Trust
Agreement or be valid or obligatory for any purpose unless it shall have been
executed and authenticated as provided in this paragraph. The Registrar shall
record on the Register each Trust Security certificate executed as provided
above and delivered as hereinafter provided.
21
<PAGE>
(c) Certificates evidencing Trust Securities shall be issued in minimum
denominations of $25 liquidation amount and integral multiples of $25 in excess
thereof. All Trust Security certificates shall be dated the date of their
authentication.
(d) Certificates evidencing Trust Securities may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Trust Agreement as may be required by
the Registrar or the Property Trustee or required to comply with any applicable
law or regulation or with the rules and regulations of any securities exchange
upon which the Trust Securities may be listed or to conform with any usage with
respect thereto.
(e) Title to any Trust Security certificate that is properly endorsed or
accompanied by a properly executed instrument of transfer or endorsement shall
be transferable by delivery with the same effect as in the case of a negotiable
instrument; provided, however, that until the transfer shall be registered on
the Register as provided in Section 5.3, the Trust, the Property Trustee, the
Regular Trustees, the Registrar and the Grantor may, notwithstanding any notice
to the contrary, treat the Holder thereof at such time as the absolute owner
thereof for the purpose of determining the Person entitled to distributions or
to any notice provided for in this Trust Agreement and for all other purposes.
Section 5.2. Issuance of Trust Securities.
(a) Upon receipt by the Property Trustee on behalf of the Trust of a
written order and a certificate or certificates for the Preferred Securities,
subject to the terms and conditions of this Trust Agreement, the Property
Trustee, shall authenticate and make available for delivery one or more
certificates evidencing the Trust Securities in the name of DTC's nominee, who
shall thereupon be the initial Holder of Trust Securities.
(b) If a Clearing Agency elects to discontinue its services as securities
depository with respect to the Trust Securities, the Grantor may, in its sole
discretion, appoint a successor Clearing Agency with respect to such Trust
Securities.
(c) If (x) a Clearing Agency elects to discontinue its services as
securities depository with respect to the Trust Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 5.2(b); or (y) the Regular Trustees elect after consultation
with the Grantor to terminate the book-entry system through the Clearing Agency
with respect to the Trust Securities; then:
(i)...definitive Trust Security certificates shall be prepared by
the Regular Trustees on behalf of the Trust with respect to such Trust
Securities; and
22
<PAGE>
(ii)..the Regular Trustees shall execute and deliver to the Property
Trustee for authentication such definitive certificates accompanied by an
authentication order and accompanied by registration instructions to be
delivered to Trust Security beneficial owners in accordance with the
instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be
liable for any delay in delivery of such instructions and each of them may
conclusively rely on and shall be protected in relying on, said instructions of
the Clearing Agency. The Definitive Trust Security Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Property Trustee, as evidenced by its
authentication thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustee may deem appropriate, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which Trust Securities may be listed, or to conform to
usage.
Section 5.3. Registration, Transfer and Exchange of Trust Securities. The
Property Trustee shall cause a Register (the "Register") to be kept at the
office of the Registrar in which, subject to such reasonable regulations as the
Property Trustee and the Registrar may prescribe, the Registrar shall provide
for the registration of Trust Security certificates and of transfers and
exchanges of Trust Security certificates as herein provided. The Grantor hereby
appoints The Bank of New York as the Registrar. The Registrar shall also act as
transfer agent. The Grantor may remove the Registrar and, upon removal or
resignation of the Registrar, appoint a successor Registrar. Subject to the
terms and conditions of this Trust Agreement, the Registrar shall register the
transfers on the Register from time to time of Trust Security certificates upon
any surrender thereof by the Holder in person or by a duly authorized attorney,
properly endorsed or accompanied by a properly executed instrument of transfer
or endorsement, together with evidence of the payment of any transfer taxes as
may be required by law. Upon such surrender, the Property Trustee shall, upon
the order of a Regular Trustees, authenticate and make available by delivery a
new Trust Security certificate representing the same number of Preferred
Securities in accordance with Section 5.1(b) and deliver the same to or upon the
order of the Person entitled thereto.
At the option of a Holder, Trust Security certificates may be exchanged
for other authorized denominations of Trust Security certificates of a like
aggregate liquidation amount. Upon surrender of a Trust Security certificate at
the office of the Registrar or such other office as the Property Trustee may
designate for the purpose of effecting an exchange of Trust Security
certificates, subject to the terms and conditions of this Trust Agreement, the
Property Trustee shall upon the order of a Regular Trustee authenticate and make
available for delivery
23
<PAGE>
a new Trust Security certificate of an authorized denomination and of a like
aggregate liquidation amount as the Trust Security certificate surrendered.
As a condition precedent to the registration of the transfer or exchange
of any Trust Security certificate, the Registrar may require (i) production of
proof satisfactory to it as to the identity and genuineness of any signature;
and (ii) compliance with such regulations, if any, as the Property Trustee or
the Registrar may establish not inconsistent with the provisions of this Trust
Agreement.
No service charge shall be made to a Holder of Trust Securities for any
registration of transfer or exchange of Trust Security certificates, but the
Property Trustee or the Registrar shall require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Trust Security certificates.
Neither the Property Trustee nor the Registrar shall be required to
register the transfer of or exchange any Trust Security certificate for a period
beginning 15 days prior to the mailing of a notice of redemption and ending at
the close of business on the date of such mailing.
Section 5.4. Lost or Stolen Trust Securities, Etc. In case any Trust
Security certificate shall be mutilated, destroyed, lost or stolen and in the
absence of notice to the Property Trustee that such Trust Security has been
acquired by a protected purchaser (as such term is used in Section 8-405(a)(1)
of the Delaware Uniform Commercial Code), the Property Trustee shall upon the
order of a Regular Trustee, authenticate and make available for delivery a Trust
Security certificate of like form and tenor in exchange and substitution for
such mutilated Trust Security certificate or in lieu of and in substitution for
such destroyed, lost or stolen Trust Security certificate, provided, however,
that the Holder thereof provides the Property Trustee with (i) evidence
satisfactory to the Property Trustee of such destruction, loss or theft of such
Trust Security certificate, of the authenticity thereof and of his ownership
thereof, (ii) reasonable indemnification satisfactory to the Property Trustee,
and (iii) payment of any expense (including fees, charges and expenses of the
Property Trustee) in connection with such execution and delivery. Any duplicate
Trust Security certificate issued pursuant to this Section 5.4 shall constitute
complete and indefeasible evidence of beneficial ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust Security
certificate shall be found at any time.
Section 5.5. Cancellation and Destruction of Surrendered Trust Securities.
All Trust Security certificates surrendered to the Property Trustee shall be
canceled by the Property Trustee and, upon receipt of written request from the
Regular Trustees, returned to the Regular Trustees.
24
<PAGE>
Section 5.6. Surrender of Trust Securities and Withdrawal of Preferred
Securities. Any Person who is the beneficial owner (an "Owner") of the Trust
Securities represented by the global certificate held by a Clearing Agency as
reflected in the records of the Clearing Agency or successor Clearing Agency or,
if a participant in the Clearing Agency is not the Owner, then as reflected in
the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly), in accordance with the rules of such Clearing Agency,
may withdraw all, but not less than all, of the Preferred Securities represented
by such Trust Securities by providing a written notice and an agreement to be
bound by the terms of the Partnership Agreement to the Property Trustee at the
Corporate Trust Office or at such other office as the Property Trustee may
designate for such withdrawals, all in form satisfactory to the Regular
Trustees. Within three (3) business days after such request has been properly
made, (i) the Owner or the Owner's agent shall instruct the Clearing Agency to
reduce the number of Trust Securities represented by the global certificate held
by the Property Trustee on behalf of the Clearing Agency by an amount equal to
the number of Trust Securities to be so withdrawn by the Owner, (ii) the
Partnership shall issue to the Owner a certificate, in form substantially
similar to that certificate attached as Exhibit A to the Partnership Agreement,
representing the number of Preferred Securities so withdrawn (and equal to the
number of Trust Securities so reduced pursuant to subsection (i) hereof),
provided that the Partnership shall not issue any fractional number of Preferred
Securities, and (iii) the Property Trustee, on behalf of the Trust, shall notify
the Partnership of the withdrawal and the Partnership shall reduce the number of
Preferred Securities represented by the global certificate held by the Property
Trustee by a like amount. If an Owner of Trust Securities withdraws Preferred
Securities in accordance with this Section 5.6, such Owner of Trust Securities
shall cease to be an Owner with respect to the withdrawn Trust Securities.
An Owner who wishes to withdraw Preferred Securities in accordance with
this Section 5.6 will be required to provide the Grantor with a completed Form
W-9 or such other documents or information as are requested by the Grantor for
tax reporting purposes and thereafter shall be admitted to the Grantor as a
preferred limited partner of the Grantor upon such Owner's receipt of a
certificate evidencing such Preferred Securities registered in such Owner's
name.
The Partnership shall deliver the Preferred Securities represented by the
surrendered Trust Securities to the Owner in accordance with this Section 5.6,
at the request, risk and expense of the Owner and for the account of the Owner
thereof, such delivery may be made at such other place as may be designated by
such Owner.
Notwithstanding anything in this Section 5.6 to the contrary, if the
Preferred Securities represented by Trust
25
<PAGE>
Securities have been called for redemption in accordance with the Partnership
Agreement, no Owner of such Trust Securities may withdraw any or all of the
Preferred Securities represented by such Trust Securities.
Section 5.7. Redeposit of Preferred Securities. Subject to the terms and
conditions of this Trust Agreement, any holder of Preferred Securities may
redeposit withdrawn Preferred Securities under this Trust Agreement by delivery
to the Partnership of a certificate or certificates for the Preferred Securities
to be deposited, properly endorsed or accompanied, if required by the
Partnership, by a properly executed instrument of transfer or endorsement in
form satisfactory to the Partnership and in compliance with the terms of the
Partnership Agreement, together with all such certifications as may be required
by the Partnership in its sole discretion and in accordance with the provisions
of the Partnership Agreement. Within a reasonable period after such deposit is
properly made, the Partnership shall issue the redeposited Preferred Securities
to the Property Trustee, and the Regular Trustees shall instruct the Property
Trustee by written order to increase the number of Trust Securities represented
by the global certificate held by the Property Trustee by an amount equal to the
Preferred Securities to be deposited. The Trust Securities that represent such
redeposited Preferred Securities will not be issued in certificated form (other
than as part of the global certificate). The Partnership will accept the deposit
of such Preferred Securities only upon payment by such holder of Preferred
Securities to the Partnership of all taxes and other governmental charges and
any fees payable in connection with such deposit and the transfer of the
deposited Preferred Securities.
If required by the Partnership, Preferred Securities presented for deposit
at any time shall also be accompanied by an agreement or assignment, or other
instrument satisfactory to the Partnership, that will provide for the prompt
transfer to the Property Trustee or its nominee of any distribution or other
right that any Person in whose name the Preferred Securities are registered may
thereafter receive upon or in respect of such deposited Preferred Securities, or
in lieu thereof such agreement of indemnity or other agreement as shall be
satisfactory to the Property Trustee.
Section 5.8. Filing Proofs, Certificates and Other Information. Any Person
presenting Preferred Securities for redeposit in accordance with Section 5.7 may
be required from time to time to file such proof of residence or other
information, to execute such Preferred Security certificates and to make such
representations and warranties as the Partnership may reasonably deem necessary
or proper. The Partnership may withhold or delay the delivery of any Trust
Security or Trust Securities, the transfer, redemption or exchange of any Trust
Security or Trust Securities or the making of any distribution until such proof
or other information is filed, such certificates
26
<PAGE>
are executed or such representations and warranties are made.
Section 5.9. CUSIP Numbers. The Trust, in issuing the Trust Securities,
may use "CUSIP" numbers applicable to such Trust Securities (if then generally
in use), and the Property Trustee shall use CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Trust Securities or as contained in any notice
of redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Trust Securities and any redemption shall
not be affected by any defect in or omission of such numbers. The Grantor shall
promptly notify the Property Trustee of any changes in the CUSIP numbers.
ARTICLE VI
DISTRIBUTIONS AND OTHER RIGHTS OF HOLDERS OF TRUST SECURITIES
Section 6.1. Distributions on Preferred Securities. On each date on which
the Property Trustee shall receive any cash distribution representing a
distribution on the Preferred Securities (whether or not distributed by the
Grantor on the regular distribution date therefor) or payment under the
Guarantee in respect thereof, the Property Trustee acting directly or through
any Paying Agent shall distribute to Holders of Trust Securities as of the
record date fixed pursuant to Section 6.4, such amounts in proportion to the
respective numbers of Preferred Securities represented by the Trust Securities
held by such Holders (the "Distributions"). Distributions on the Trust
Securities will be deferred if and for so long as the Partnership defers
payments to the Trust on Preferred Securities. The Partnership will provide the
Property Trustee with five days notice of its intention to defer payment to the
Trust.
Section 6.2. Redemptions of Preferred Securities. Whenever the Grantor
shall elect or is required to redeem Preferred Securities in accordance with the
Partnership Agreement, it shall (unless otherwise agreed in writing with the
Property Trustee) give the Property Trustee not less than 45 days' prior notice
thereof to redeem the Trust Securities. The Property Trustee shall, as directed
by the Grantor, mail, or cause to be mailed, first-class postage prepaid, notice
of the redemption of the Trust Securities to be redeemed in connection herewith,
not less than 30 and not more than 90 days prior to the date fixed for
redemption (the "Redemption Date") of the Trust Securities. Such notice shall be
mailed to the Holders of the Trust Securities to be redeemed, at the addresses
of such Holders as the same appear on the records of the Registrar. No defect in
the notice of redemption or in the mailing or delivery thereof or publication of
its contents shall affect the validity of the redemption proceedings. The
Grantor shall provide the Property Trustee with such notice, and each such
notice and the notice of redemption
27
<PAGE>
from the Property Trustee to the Holders shall state: the Redemption Date; the
redemption price at which the Trust Securities are to be redeemed; that all
outstanding Trust Securities are to be redeemed or, in the case of a redemption
of fewer than all outstanding Trust Securities, the number of such Trust
Securities to be so redeemed; the place or places where Trust Securities to be
redeemed are to be surrendered for redemption; and specifying the CUSIP number
assigned to the Trust Securities. In case fewer than all the outstanding Trust
Securities are to be redeemed, the Trust Securities to be redeemed shall be
selected (i) if the Trust Securities are then owned of record by DTC or its
successors or securities depositary, according to a determination by DTC or such
successor securities depository, or (ii) otherwise, the Property Trustee shall
select the Trust Securities of such series to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which the
Trust Securities are listed, or if the Trust Securities are not listed on a
national securities exchange, on a pro rata basis, by lot or any other method
the Property Trustee considers fair and appropriate. If, when an optional notice
of redemption is mailed, the notice of redemption shall be of no effect unless
such monies are so received on or before the Redemption Date.
The Grantor agrees that if a partial redemption of the Preferred
Securities would result in a delisting of the Trust Securities from any national
exchange on which the Trust Securities are then listed, the Grantor will redeem
the Preferred Securities only in whole.
On the date of any such redemption of Trust Securities, provided that the
Grantor (or Penelec pursuant to the Guarantee) shall then have deposited with
the Trust the aggregate amount payable upon redemption of the Trust Securities
to be redeemed, the Property Trustee, on behalf of the Trust, shall redeem
(using the funds so deposited with it) Trust Securities representing the same
number of Preferred Securities (in like denominations and like aggregate
liquidation amounts) redeemed by the Grantor.
Notice having been mailed by the Trustee as aforesaid, from and after the
Redemption Date (unless the Grantor shall have failed to redeem the Preferred
Securities to be redeemed by it as set forth in the Grantor's notice provided
for in this Section 6.2 and Penelec shall have failed to pay the redemption
price of the Preferred Securities under the Guarantee), the Trust Securities
called for redemption shall be deemed no longer to be outstanding and all rights
of the Holders of Trust Securities (except the right to receive the redemption
price in cash upon surrender of Trust Securities) shall cease and terminate.
Upon surrender in accordance with said notice of the Trust Securities endorsed
or assigned for transfer, if the Property Trustee shall so require, the Holders
of such Trust Securities shall receive for each such Trust Security an amount
equal to the redemption price for each Preferred Security, in addition to
accumulated and
28
<PAGE>
unpaid Distributions thereon to the date fixed for redemption.
If fewer than all of the Trust Securities of any Holder are called for
redemption, the Property Trustee will deliver to the Holder of such Trust
Securities upon surrender of the certificate evidencing such Trust Securities a
new certificate evidencing the number of Trust Securities not called for
redemption.
Section 6.3. Distributions in Liquidation of Grantor. Upon and to the
extent of receipt by the Trust of any distribution (of monies or subordinated
debentures as provided in the Partnership Agreement) from the Grantor, upon the
liquidation of the Grantor or otherwise, or any payment under the Guarantee in
respect thereof, after satisfaction of creditors of the Trust as required by
applicable law, the Property Trustee shall distribute, in cash or in kind, to
the Holders of Trust Securities as of the record date fixed pursuant to Section
6.4, the Trust Estate, in proportion to the respective number of Preferred
Securities which were represented by the Trust Securities held by such Holders.
Section 6.4. Fixing of Record Date for Holders of Trust Securities.
Whenever any Distribution (other than upon any redemption) shall become payable,
or whenever the Property Trustee shall receive notice of any meeting at which
holders of Preferred Securities are entitled to vote or of which holders of
Preferred Securities are entitled to notice, the Regular Trustees shall in each
such instance fix a record date (which shall be the same date as the record date
fixed by the General Partner with respect to the Preferred Securities, of which
the Regular Trustees shall promptly inform the Property Trustee) for the
determination of the Holders of Trust Securities who shall be entitled (i) to
receive such Distribution, and (ii) to receive notice of, and to give
instructions for the exercise of voting rights at, any such meeting.
Section 6.5. Payment of Distributions. The Grantor hereby appoints the
Property Trustee to act as Paying Agent and designates the Corporate Trust
Office of the Paying Agent as the place of payment of the redemption price of
and of Distributions in liquidation on the Trust Securities. The aforesaid
appointment and designation shall remain in effect until changed by the Grantor.
Payments of Distributions on the Trust Securities shall be payable (i) by check
mailed to the addresses of the Holders thereof as of the record date therefor,
or (ii) by wire transfer in Federal funds to an account designated in writing by
Holders. Payments of the redemption price of Trust Securities and distributions
in liquidation shall be made upon surrender of such Trust Securities at the
principal corporate trust office of the Paying Agent. The Grantor shall pay
Distributions on, the redemption price of, and distributions in liquidation on,
the Preferred Securities directly to the Paying Agent for distribution to the
Holders of the Trust Securities in accordance with the terms of this Trust
Agreement.
29
<PAGE>
Section 6.6. Special Representative and Voting Rights.
(a) If the holders of the Preferred Securities, acting as a single class,
are entitled to appoint and authorize a Special Representative pursuant to
Section 13.02(d) of the Partnership Agreement, upon written notice from the
Partnership, the Property Trustee 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.
If the General Partner fails to convene a general meeting of the Partnership as
required in Section 13.02(d) of the Partnership Agreement, upon written notice
of the Partnership, the Property Trustee shall notify the Holders of the Trust
Securities and, if so directed by the Holders of Trust Securities representing
Preferred Securities constituting at least 10% of the aggregate stated
liquidation preference of the outstanding Preferred Securities, shall convene
such meeting.
(b) Upon receipt of notice of any meeting at which the holders of
Preferred Securities are entitled to vote, the Property Trustee shall, as soon
as practicable thereafter, mail to the Holders of 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
fixed pursuant to Section 6.4 will be entitled, subject to any applicable
provision of law or of the Partnership Agreement, to instruct the Property
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 on such record date, the
Property 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. The Grantor hereby agrees to take all
reasonable action that may be deemed necessary by the Property Trustee in order
to enable the Property Trustee to vote such Preferred Securities or cause such
Preferred Securities to be voted. In the absence of specific instructions from
the Holder of a Trust Security, the Property Trustee will abstain from voting to
the extent of the Preferred Securities represented by such Trust Security.
Section 6.7. Changes Affecting Preferred Securities and Reclassifications,
Recapitalizations, Etc. Upon any consolidation, amalgamation, conversion,
merger, replacement or conveyance, transfer or lease by the Partnership of its
properties and assets as an entirety in accordance with Section 13.02(e) of the
Partnership Agreement, the Property Trustee shall, upon the instructions of the
Grantor, treat any Successor Securities or other property (including cash) that
shall be
30
<PAGE>
received by the Property Trustee in exchange for or upon conversion of or in
respect of the Preferred Securities as part of the Trust Estate, and Trust
Securities then outstanding shall thenceforth represent the proportionate
interests of Holders thereof in the new deposited property so received in
exchange for or upon conversion or in respect of such Preferred Securities.
Section 6.8 The Guarantee. In connection with the issuance of the
Preferred Securities, Penelec has delivered to the Grantor the Guarantee for the
benefit of the holders of Preferred Securities. If the Grantor receives any
payments under the Guarantee, the Grantor will immediately transfer such payment
to the Property Trustee.
ARTICLE VII
TRUSTEES
Section 7.1 Number of Trustees. The number of Trustees initially
shall be five (5), and:
(a) At any time before the issuance of any Trust Securities, the Grantor
may, by written instrument, increase or decrease the number of Trustees; and
(b) After the issuance of any Trust Securities, the number of Trustees may
be increased or decreased by vote of the Holders of Trust Securities; provided,
however, that the number of Trustees shall in no event be less than one (1);
provided further that (1) if required by the Business Trust Act, one Trustee
shall be the Delaware Trustee; and (2) one Trustee shall be the Property Trustee
for so long as this Trust Agreement is required to qualify as an indenture under
the Trust Indenture Act, and such Property Trustee may also serve as Delaware
Trustee if it meets the applicable requirements.
Section 7.2 Delaware Trustee. If required by the Business Trust Act,
one Trustee (the "Delaware Trustee") shall be:
(a) A natural person who is a resident of the State of Delaware; or
(b) If not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, provided that, if the Property Trustee has its principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee may also be the Delaware Trustee (in
which case Section 4.11 shall have no application).
Section 7.3 Property Trustee; Eligibility.
(a) There shall at all times for so long as this Trust
31
<PAGE>
Agreement is required to qualify as an indenture under the Trust Indenture Act,
be one Trustee which shall act as Property Trustee (the "Property Trustee")
which shall:
(i)...not be an Affiliate of the Grantor; and
(ii)..be a corporation organized and doing business under the laws
of the United States of America or any state or territory thereof or of the
District of Columbia, or a Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes of
this Section 7.3(a)(ii), the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time for so long as this Trust Agreement is required to
qualify as an indenture under the Trust Indenture Act, the Property Trustee
shall cease to be eligible to so act under Section 7.3(a), the Property Trustee
shall immediately resign in the manner and with the effect set forth in Section
7.7(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
(d) The initial Property Trustee shall be: The Bank of New York, 101
Barclay Street, Floor 21 West, New York, New York 10286.
Section 7.4 Qualifications of the Regular Trustees and the Delaware
Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Responsible Officers.
Section 7.5 Regular Trustees. The initial Regular Trustees shall be:
T.G. Howson
P.R.Chatman
M.E. Gramlich
32
<PAGE>
Except as expressly set forth in this Trust Agreement and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.
Section 7.6 Delaware Trustee. The initial Delaware Trustee shall be:
The Bank of New York (Delaware), White Clay Center, Route 273, Newark,
Delaware 19711.
Section 7.7 Appointment, Removal and Resignation of Trustees
(a) Subject to Section 7.7(b), Trustees may be appointed or removed
without cause at any time by the Grantor.
(b) (i) The Trustee that acts as Property Trustee shall not be removed
until a successor Trustee possessing the qualifications to act as Property
Trustee under Section 7.3 (a "Successor Property Trustee") has been appointed
and has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the removed Property Trustee, the
Regular Trustees and the Grantor;
(ii) The Trustee that acts as Delaware Trustee shall not be removed
until a successor Trustee possessing the qualifications to act as Delaware
Trustee under Sections 7.2 and 7.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument executed by
such Successor Delaware Trustee and delivered to the removed Delaware Trustee,
the Regular Trustees and the Grantor;
(iii) No removal of the Property Trustee or the Delaware Trustee
shall be effective until all of the fees, charges, and expenses incurred by such
entity have been paid.
(c) A Trustee appointed to office shall hold office until his or its
successor shall have been appointed or until his or its dissolution,
termination, bankruptcy, death, removal or resignation. Any Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing signed by the Trustee and delivered to the Grantor and the Trust,
which resignation shall take effect upon such delivery or upon such later date
as is specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed and has
accepted such appointment by instrument executed by such Successor Property
Trustee and delivered to the Trust, the Grantor, the Regular Trustees and the
resigning Property Trustee; or
33
<PAGE>
(B) until the assets of the Trust have been completely liquidated
and the proceeds thereof distributed to the Holders of the Trust Securities;
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such Successor
Delaware Trustee and delivered to the Trust, the Grantor, the Regular Trustees
and the resigning Delaware Trustee; and
(iii) no such resignation of the Property Trustee or the Delaware
Trustee shall be effective until all of the fees, charges, and expenses incurred
by such entity have been paid.
(d) The Grantor shall use its best efforts to promptly appoint a Successor
Delaware Trustee or Successor Property Trustee, as the case may be, if the
Delaware Trustee or the Property Trustee delivers an instrument of resignation
in accordance with this Section 7.7.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 7.7
within 30 days after delivery of an instrument of resignation or removal, the
Property Trustee or Delaware Trustee resigning or being removed, as applicable,
may petition, at the expense of the Grantor, any court of competent jurisdiction
for appointment of a Successor Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the acts
or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
Section 7.8 Vacancies among Trustees. If a Trustee ceases to hold office
for any reason and the number of Trustees is not reduced pursuant to Section
7.1, or if the number of Trustees is increased pursuant to Section 7.1, a
vacancy shall occur. A resolution certifying the existence of such vacancy by
the Regular Trustees or, if there are more than two Regular Trustees, a majority
of the Regular Trustees shall be conclusive evidence of the existence of such
vacancy. The vacancy shall be filled with a Trustee appointed in accordance with
Section 7.7.
Section 7.9 Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust or terminate this Trust Agreement. Whenever a vacancy in the
number of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section
34
<PAGE>
7.8, the Regular Trustees in office, regardless of their number, shall have all
the powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Trust Agreement.
Section 7.10 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee, as the case
may be, may be merged or converted or with which either may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Property Trustee or the Delaware Trustee, as the case may be, shall be a party,
or any Person succeeding to all or substantially all the corporate trust
business of the Property Trustee or the Delaware Trustee, as the case may be,
shall be the Successor Property Trustee or the Successor Delaware Trustee, as
the case may be, hereunder, provided such Person shall be otherwise qualified
and eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.
Section 7.11 Status of Trust. It is intended that the Trust shall
not be an "Investment Company" under the 1940 Act.
ARTICLE VIII - DISSOLUTION AND TERMINATION
Section 8.1. Dissolution of Trust.
(a) The Trust shall dissolve:
(i) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Trust Securities; or
(ii) upon a final distribution in respect of the Preferred
Securities and such distribution has been delivered to the Holders.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), and upon completion of the winding up of the Trust in
accordance with Section 8.2, the Regular Trustees shall prepare and file a
certificate of cancellation with the Secretary of State of the State of
Delaware. This Trust Agreement will terminate upon the effective time and date
of the certificate of cancellation filed with the Secretary of State of the
State of Delaware. Upon termination of this Trust Agreement and the Trust in
accordance with the foregoing, the respective obligations and responsibilities
of the Trustees and the Grantor shall terminate.
Section 8.2. Winding Up. After the dissolution of the Trust and after
the satisfaction of creditors of the Trust, if any, as required by applicable
law, the remaining assets of the Trust shall be distributed in kind to the
Holders of the Trust
35
<PAGE>
Securities pro rata in proportion to the respective numbers of Preferred
Securities represented by the Trust Securities held by such Holders.
ARTICLE IX
MERGER, CONSOLIDATION, ETC. OF GRANTOR OR TRUST
Section 9.1. Limitation on Permitted Merger Consolidation, Etc. of
Grantor. The Grantor agrees that it will not consolidate, amalgamate, convert
into, merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially in their entirety to any Person without the
consent of the Holders of a majority of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of the Trust Securities unless permitted by
Section 13.02(e) of the Partnership Agreement and (i) such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease does not cause the Trust Securities to be delisted by any national
securities exchange or other organization on which the Trust Securities are then
listed, (ii) such merger, consolidation, amalgamation, conversion, replacement,
conveyance, transfer or lease does not cause the Trust Securities to be
downgraded by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act of 1933, as amended, and (iii) prior to such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease, Grantor has received an opinion of counsel (which may be regular counsel
to Penelec or an Affiliate, but not an employee thereof) experienced in such
matters to the effect that Holders of outstanding Trust Securities will not
recognize any gain or loss for Federal income tax purposes as a result of the
merger, consolidation, amalgamation, conversion, replacement, conveyance,
transfer or lease.
Section 9.2. Mergers and Consolidations of Trust.
(a) The Trust may not consolidate, amalgamate, convert, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described in Article VIII
and this Article IX.
(b) The Trust may, with the consent of the Grantor and without the consent
of the Holders of the Trust Securities, the Delaware Trustee, the Property
Trustee or the Regular Trustees consolidate, amalgamate, merge, convert, with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; provided that:
36
<PAGE>
(i) if the Trust is not the survivor, such successor entity (the
"Successor Entity") either:
(A)...expressly assumes all of the obligations of the Trust under
the Trust Securities; or
(B)...substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (the "Successor Trust
Securities") so long as the Successor Trust Securities rank the same as the
Trust Securities rank with respect to Distributions, assets and payments upon
liquidation, redemption and otherwise;
(ii) the Grantor expressly acknowledges a trustee of the Successor
Entity that possesses the same powers and duties as the Property Trustee as the
Holder of the Preferred Securities;
(iii) the Trust Securities or any Successor Trust Securities are
listed, or any Successor Trust Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Trust Securities are then listed or quoted;
(iv) such merger, conversion, consolidation, amalgamation or
replacement does not cause the Trust Securities (including any Successor Trust
Securities) to be downgraded by any nationally recognized statistical rating
organization;
(v) such merger, conversion, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the Holders of the Trust Securities (including any Successor Trust Securities)
in any material respect;
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust; and
(vii) prior to such merger, conversion, consolidation, amalgamation
or replacement, the Grantor has received an opinion of counsel (which may be
regular counsel to Penelec or an Affiliate, but not an employee thereof) to the
Trust experienced in such matters to the effect that:
(A)...such merger, conversion, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences and privileges of
the Holders of the Trust Securities (including any Successor Trust Securities)
in any material respect (other than with respect to any dilution of the Holders'
interest in the new entity);
(B)...following such merger, conversion, consolidation, amalgamation
or replacement, neither the Trust nor the Successor Entity will be required to
register as an Investment Company under the 1940 Act;
37
<PAGE>
(C)...following such merger, conversion, consolidation, amalgamation
or replacement, the Trust (or the Successor Entity) will not be classified as an
association or a publicly traded partnership taxable as a corporation for United
States federal income tax purposes; and
(D)...following such merger, conversion, consolidation, amalgamation
or replacement, the Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
(c) The Trust shall not, except with the consent of Holders of 100% in
liquidation amount of the Trust Securities, consolidate, amalgamate, convert,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, conversion, merger or replacement would cause the
Trust or Successor Entity to be classified as an association or a publicly
traded partnership taxable as a corporation for United States federal income tax
purposes.
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS OF
TRUST SECURITIES, TRUSTEES OR OTHERS
Section 10.1 Liability.
(a) Except as expressly set forth in this Trust Agreement and the terms of
the Trust Securities, the Grantor and the Trustees shall not be:
(i)...personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Trust Securities,
which shall be made solely from assets of the Trust; and
(ii)..required to pay to the Trust or to any Holder of Trust
Securities any deficit upon dissolution or termination of the Trust or
otherwise.
(b) Notwithstanding any other provision herein, the Grantor, by entering
into this Trust Agreement, agrees that it shall be liable directly to any
creditor or claimant of or against the Trust for the entire amount of all of the
debts and obligations of the Trust (other than obligations to the Holders of
Trust Securities in their capacities as Holders) to the extent not satisfied out
of the Trust's assets as if the Grantor were the general partner of a limited
partnership formed under the Delaware Revised Uniform Limited Partnership Act.
This Section 10.1(b) will automatically terminate upon (i) the adoption of final
or temporary United States federal tax regulations which,
38
<PAGE>
if the Trust were not classified as a grantor trust for United States federal
income tax purposes, would result in the classification of the Trust as a
partnership for United States federal income tax purposes without regard to its
organic characteristics and (ii) the taking of such action, if any, by the Trust
or the Holders of Trust Securities as may be necessary to achieve such
classification.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Trust Securities shall 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.
Section 10.2 Exculpation.
(a) No Company Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Company Indemnified Person in good faith on behalf of the Trust
and in a manner such Company Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Company Indemnified Person by this
Trust Agreement or by law, except that a Company Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Company
Indemnified Person's gross negligence or willful misconduct with respect to such
acts or omissions.
(b) A Company Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Company Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Trust Securities might properly be paid.
Section 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Trust Agreement shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties
39
<PAGE>
imposed on the Property Trustee under the Trust Indenture Act), are agreed by
the parties hereto to replace such other duties and liabilities of such
Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i)...whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii)..whenever this Trust Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the Trust
or any Holder of Trust Securities, the Indemnified Person shall resolve such
conflict of interest, take such action or provide such terms, considering in
each case the relative interest of each party (including its own interest) to
such conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices, and
any applicable generally accepted accounting practices or principles. In the
absence of bad faith by the Indemnified Person, the resolution, action or term
so made, taken or provided by the Indemnified Person shall not constitute a
breach of this Trust Agreement or any other agreement contemplated herein or of
any duty or obligation of the Indemnified Person at law or in equity or
otherwise.
(c) Whenever in this Trust Agreement an Indemnified Person is permitted or
required to make a decision:
(i)...in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors as
it desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Trust or any
other Person; or
(ii)..in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Trust Agreement or by
applicable law.
Section 10.4 Indemnification.
(a) (i).....To the fullest extent permitted by applicable law, the Grantor
shall indemnify and hold harmless any Company 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 a Company 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
40
<PAGE>
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 Company 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 Company 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 a Company 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 Company 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 a Company 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
Company Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority vote of a
Quorum consisting of such Regular Trustees who were not parties to such action,
suit or
41
<PAGE>
proceeding, or (2) if such Quorum is not obtainable, or, even if obtainable, if
a Quorum of disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion.
(v) To the fullest extent permitted by law, expenses (including
reasonable attorneys' fees) incurred by a Company 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 Company
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 (i) by the Regular
Trustees by a majority vote of a Quorum of disinterested Regular Trustees, or
(ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Regular Trustees so directs, by independent legal counsel in a
written opinion that, based upon the facts known to the Regular Trustees at the
time such determination is made, such Company 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 Company 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 Regular Trustees, independent legal counsel or Holder of the Trust
Securities reasonably determine that such Person deliberately breached his duty
to the Trust.
(vi) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
shareholders or disinterested directors of the Grantor or Holders of the Trust
Securities or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. All rights to
indemnification under this Section 10.4(a) shall be deemed to be provided by a
contract between the Grantor and each Company Indemnified Person who serves in
such capacity at any time while this Section 10.4(a) is in effect. Any repeal or
modification of this Section 10.4(a) shall not affect any rights or obligations
then existing.
(vii) The Grantor or the Trust may purchase and maintain insurance
on behalf of any Person who is or was a Company Indemnified Person against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Grantor would have the
power to indemnify him against such liability under the
42
<PAGE>
provisions of this Section 10.4(a).
(viii) 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.
(ix) 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 a Company
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(b) The Grantor shall indemnify, to the fullest extent permitted by law,
the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Property Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee and the Delaware Trustee (each of the
Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any loss, damage, claim, liability or expense including taxes (other than taxes
based on the income of such Fiduciary Indemnified Trustee) incurred without
negligence or bad faith on the part of the Fiduciary Indemnified Person arising
out of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses (including reasonable legal
fees and expenses) of defending itself against or investigating any claim
(whether asserted by the Grantor, a Holder, or any other Person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The provisions of this Section shall survive the termination of this
Trust Agreement.
Section 10.5 Outside Businesses. Any Covered Person, the Grantor, the
Delaware Trustee, the Regular Trustees and the Property Trustee (subject to
Section 7.3(c)) may engage in or possess an interest in other business ventures
of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of Trust
Securities shall have no rights by virtue of this Trust Agreement in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture,
43
<PAGE>
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Grantor, the Delaware Trustee, the Regular
Trustees nor the Property Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Grantor, the Regular Trustees, the Delaware Trustee and the
Property Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Covered Person, the Delaware Trustee, the
Regular Trustees and the Property Trustee may engage or be interested in any
financial or other transaction with the Grantor or any Affiliate of the Grantor,
or may act as depository for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Grantor or its
Affiliates.
ARTICLE XI - AMENDMENTS AND MEETINGS
Section 11.1 Amendments.
(a) Except as otherwise provided in this Trust Agreement or by any
applicable terms of the Trust Securities, this Trust Agreement may only be
amended by a written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two
Regular Trustees, a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property Trustee;
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such purported amendment shall be
void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate from the Grantor that
such amendment is permitted by, and conforms to, the terms of this Trust
Agreement (including the terms of the Trust Securities);
(ii) unless, in the case of any proposed amendment that affects the
rights, powers, duties, obligations or immunities of the Property Trustee, the
Regular Trustees or the Delaware Trustee, the Property Trustee, the Regular
Trustees or the Delaware Trustee, as the case may be, shall have first
44
<PAGE>
received an opinion of counsel (who may be counsel to the Grantor or the Trust)
that such amendment is permitted by, and conforms to, the terms of this Trust
Agreement (including the terms of the Trust Securities); and
(iii) to the extent the result of such amendment would be to:
(A)...cause the Trust to not be classified for purposes of United
States federal income taxation as a grantor trust;
(B)...cause the Partnership to be classified for purposes of United
States federal income tax as an association or a publicly traded partnership
taxable as a corporation;
(C)...reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(D)...cause the Trust to be deemed to be an Investment Company
required to be registered under the 1940 Act.
(c) In the event the consent of the Property Trustee, as the Holder of the
Preferred Securities, is required under the Partnership Agreement with respect
to any amendment, modification or termination of the Partnership Agreement or
the Preferred Securities, the Property Trustee shall request the direction of
the Holders of the Trust Securities with respect to such amendment, modification
or termination and shall vote with respect to such amendment, modification or
termination as directed by a Majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where a
consent under the Partnership Agreement would require the consent of a Super
Majority of the Holders of Preferred Securities, the Property Trustee may only
give such consent at the direction of the Holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super Majority
represents of the aggregate liquidation amount of the Preferred Securities
outstanding; provided, further, that the Property Trustee shall not be obligated
to take any action in accordance with the directions of the Holders of the Trust
Securities under this Section 11.1(c) unless the Property Trustee has received
an opinion of independent tax counsel to the effect that such action is not
inconsistent with the Trust being classified as a grantor trust for United
States federal income tax purposes;
(d) At such time after the Trust has issued any Trust Securities that
remain outstanding, any amendment that would (i) materially adversely affect the
powers, preferences or special rights of the Trust Securities or (ii) provide
for the dissolution, winding-up or termination of the Trust other than pursuant
to the terms of this Trust Agreement, may be effected only with the approval of
the Holders of at least a Majority in
45
<PAGE>
liquidation amount of the Trust Securities;
(e) Section 10.1(c) and this Section 11.1 shall not be amended without the
consent of all of the Holders of the Trust Securities;
(f) Notwithstanding Section 11.1(c), this Trust Agreement may be amended
without the consent of the Holders of the Trust Securities by the Grantor or the
General Partner and the Property Trustee:
(i) to cure any ambiguity or correct any mistake;
(ii) to correct or supplement any provision in this Trust Agreement
that may be defective or inconsistent with any other provision of this Trust
Agreement or to make any other provisions with respect to matters or questions
arising under this Trust Agreement provided that any such action shall not
materially adversely affect the interests of the Holders;
(iii) to evidence the succession of another Person to the Grantor or
the General Partner and the assumption by any such successor of the covenants of
the Grantor or the General Partner herein contained; or
(iv) to add to the covenants of the Grantor or the General Partner
for the benefit of the Holders, or to surrender any right or power herein
conferred upon the Grantor or the General Partner; or
(v) to conform to any change in the 1940 Act or written change in
interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority;
(vi) to conform to any change in the Trust Indenture Act or written
change in interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority; and
(vii) to modify, eliminate and add to any provision of this Trust
Agreement to such extent as may be necessary or desirable; provided that such
amendments do not have a material adverse effect on the rights, preferences or
privileges of the Holders of the Trust Securities.
Section 11.2 Meetings of the Holders of Trust Securities; Action by
Written Consent.
(a) Meetings of the Holders of Trust Securities may be called at any time
by the Regular Trustees (or as provided in the terms of this Trust Agreement) to
consider and act on any matter on which Holders of Trust Securities are entitled
to act under the terms of this Trust Agreement, the Partnership Agreement, the
46
<PAGE>
rules of any stock exchange on which the Trust Securities are listed or admitted
for trading, the Business Trust Act or other applicable law. The Regular
Trustees shall call a meeting of the Holders of Trust Securities if directed to
do so by the Holders of at least 10% in liquidation amount of the Trust
Securities. Such direction shall be given by delivering to the Regular Trustees
one or more calls in writing stating that the signing Holders of Trust
Securities wish to call a meeting and indicating the general or specific purpose
for which the meeting is to be called. Any Holders of Trust Securities calling a
meeting shall specify in writing the certificates held by the Holders of Trust
Securities exercising the right to call a meeting and only those Trust
Securities specified shall be counted for purposes of determining whether the
required percentage set forth in the second sentence of this paragraph has been
met.
(b) Except to the extent otherwise provided in the Trust Agreement, the
following provisions shall apply to meetings of Holders of Trust Securities:
(i) notice of any such meeting shall be given to all the Holders of
Trust Securities having a right to vote thereat at least 7 days and not more
than 60 days before the date of such meeting. Any action that may be taken at a
meeting of the Holders of Trust Securities may be taken without a meeting and
without notice if a consent in writing setting forth the action so taken is
signed by the Holders of Trust Securities owning not less than the minimum
amount of Trust Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of Trust
Securities having a right to vote thereon were present and voting. Prompt notice
of the taking of action without a meeting shall be given to the Holders of Trust
Securities entitled to vote who have not consented in writing. The Regular
Trustees may specify that any written ballot submitted to the Holder for the
purpose of taking any action without a meeting shall be returned to the Trust
within the time specified by the Regular Trustees;
(ii) each Holder of a Trust Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Trust Securities is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Holder of Trust Securities executing
it. Except as otherwise provided herein, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders of the
Trust Securities were shareholders of a Delaware corporation;
47
<PAGE>
(iii) each meeting of the Holders of the Trust Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
(iv) unless the Business Trust Act, this Trust Agreement, the Trust
Indenture Act or the listing rules of any stock exchange on which the Trust
Securities are then listed for trading, otherwise provide, the Regular Trustees,
in their sole discretion, shall establish all other provisions relating to
meetings of Holders of Trust Securities, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any Holders of
Trust Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any such
right to vote.
ARTICLE XII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
Section 12.1 Representations and Warranties of Property Trustee. The
Trustee that acts as initial Property Trustee represents and warrants to the
Trust and to the Grantor at the date of this Trust Agreement, and each Successor
Property Trustee represents and warrants to the Trust and the Grantor at the
time of the Successor Property Trustee's acceptance of its appointment as
Property Trustee that:
(a) The Property Trustee is a banking corporation with trust powers, duly
organized, validly existing and in good standing under the laws of the state of
its domicile or under federal law, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Trust Agreement;
(b) The execution, delivery and performance by the Property Trustee of
this Trust Agreement has been duly authorized by all necessary corporate action
on the part of the Property Trustee. This Trust Agreement has been duly executed
and delivered by the Property Trustee; and
(c) The execution, delivery and performance of this Trust Agreement by the
Property Trustee do not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee.
Section 12.2 Representations and Warranties of Delaware Trustee. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Grantor at the date of this Trust Agreement, and each Successor
Delaware Trustee represents and warrants to the Trust and the Grantor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:
48
<PAGE>
(a) The Delaware Trustee is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with power and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, this Trust Agreement; and
(b) The Delaware Trustee is an entity which has its principal place of
business in the State of Delaware.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. All notices provided for in this Trust Agreement
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class or certified mail, as follows:
(a) If given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of):
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
Fax: (973) 644-4224
(b) If given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of):
The Bank of New York (Delaware)
c/o The Bank of New York
101 Barclay Street, 21st Floor
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Fax: (212) 815-5915
(c) If given to the Property Trustee, at the mailing address set forth
below (or such other address as the Property Trustee may give notice of):
The Bank of New York
101 Barclay Street, 21st Floor
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Fax: (212) 815-5915
(d) if given to any other Holder, at the address set forth on the books
and records of the Trust.
(e) if given to the Grantor, at the address set forth below (or such other
address as the Grantor may give notice of):
49
<PAGE>
Penelec Capital II, L.P.
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, NJ 07962
Attention: Vice President and Treasurer
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
Section 13.2 Governing Law. This Trust Agreement and the rights of the
parties hereunder shall be governed by and construed in accordance with the
internal laws of the State of Delaware and all rights and remedies shall be
governed by such laws without regard to principles of conflict of laws.
Section 13.3 Intention of the Parties. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Trust Agreement shall be
interpreted to further this intention of the parties.
Section 13.4 Headings. Headings contained in this Trust Agreement are
inserted for convenience of reference only and do not affect the interpretation
of this Trust Agreement or any provision hereof.
Section 13.5 Successors and Assigns. Whenever in this Trust Agreement any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Trust Agreement by the Grantor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
Section 13.6 Partial Enforceability. If any provision of this Trust
Agreement, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Trust Agreement, or the application
of such provision to Persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
Section 13.7 Counterparts. This Trust Agreement may contain more than one
counterpart of the signature page and this Trust Agreement may be executed by
the affixing of the signature of each of the Trustees and a duly authorized
officer of the Grantor to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
50
<PAGE>
Section 13.8 Agreement to be Bound. The acceptance of a Trust Security or
any interest therein by or on behalf of a Holder of Trust Securities or a
beneficial owner, without signature or further manifestation of consent, shall
constitute the unconditional acceptance by such Holder or owner of all the terms
and provisions of this Trust Agreement.
51
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused these presents to
be executed as of the day and year first above written.
/s/ T.G. Howson
----------------------------------
T. G. Howson, Regular Trustee
/s/ P.R. Chatman
----------------------------------
P. R. Chatman, Regular Trustee
/s/ M.E. Gramlich
----------------------------------
M. E. Gramlich, Regular Trustee
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Frederick Clark
--------------------------------
Name: Frederick Clark
Title: Authorized Signatory
THE BANK OF NEW YORK, as Property
Trustee
By: /s/ Michele Russo
--------------------------------
Name: Michele Russo
Title: Assistant Treasurer
PENELEC CAPITAL II, L.P.
as Grantor
By: Penelec Preferred Capital II, Inc.
its General Partner
By: /s/ T. G. Howson
--------------------------------
Name: T. G. Howson
Title: Vice President and Treasurer
Accepted and Agreed (with respect
to Sections 4.15 and 6.6(b))
PENELEC PREFERRED CAPITAL II, INC.
By: /s/ T.G. Howson
--------------------------------
Name: T. G. Howson
Title: Vice President and Treasurer
52
<PAGE>
This Trust PREFERRED Security is a Global Certificate within the
meaning of the Trust Agreement hereinafter referred to and is registered in the
name of The Depository Trust Company (the "Depository") or a nominee of the
Depository. This TRUST PREFERRED SECURITY is exchangeable for Trust PREFERRED
Securities registered in the name of personS other than the Depository or its
nominee only in the limited circumstances described in the Trust Agreement and
no transfer of this TRUST PREFERRED SECURITY (other than a transfer of this
TRUST PREFERRED SECURITY as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) maY be registered except in limited circumstances.
Unless this TRUST PREFERRED SECURITY is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
PENELEC Capital Trust or its agent for registration of transfer, exchange or
payment, and any TRUST PREFERRED SECURITY issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
The Depository and any payment hereon is made to Cede & Co. or to such other
entity as is requested by an authorized representative of the depository, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY or to Any PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
No. 1 4,000,000 Trust Preferred Securities
(liquidation amount $25 per Trust
Preferred Security)
CUSIP # 706871209
7.34% TRUST PREFERRED SECURITIES
(Liquidation amount $25 per Trust Preferred Security)
OF PENELEC CAPITAL TRUST,
a Delaware Business Trust,
each Representing a 7.34% Cumulative Preferred Security of
Penelec Capital II, L.P. (a Delaware limited partnership)
Cede & Co. is the registered owner of 4,000,000 Trust Preferred Securities
("Trust Securities"), each representing a 7.34% cumulative preferred limited
partner interest, Series A (the "Preferred Securities") of Penelec Capital II,
L.P., a Delaware limited partnership (the "Grantor"), deposited in trust by the
Grantor with the Property Trustee pursuant to an Amended and Restated Trust
Agreement of Penelec Capital Trust dated as of June 9, 1999 (as amended or
supplemented from time to time, the "Trust Agreement") among the Grantor, The
Bank of New York (Delaware), not in its individual capacity, but solely as
Delaware Trustee (the "Delaware Trustee"), The Bank of New York, not in its
individual capacity, but solely as Property Trustee
<PAGE>
(the "Property Trustee"), the Regular Trustees (collectively, the "Trustees"),
the General Partner, and the several Holders (as defined in the Trust
Agreement). Subject to the terms of the Trust Agreement, the registered Holder
hereof is entitled to a full interest in the same number of Preferred Securities
held by the Property Trustee under the Trust Agreement, as are represented by
the Trust Securities, including the distribution, voting, liquidation and other
rights of the Preferred Securities specified in the Amended and Restated Limited
Partnership Agreement of the Grantor, as amended or supplemented from time to
time, a copy of which is on file at the Corporate Trust Office.
1. The Trust Agreement. The Trust Securities are issued upon the terms and
conditions set forth in the Trust Agreement. The Trust Agreement (a copy of
which is on file at the Corporate Trust Office of the Property Trustee) sets
forth the rights of Holders of Trust Securities and the rights and duties of the
Trustees, the Grantor and the General Partner. The statements made herein are
summaries of certain provisions of the Trust Agreement and are subject to the
detailed provisions thereof, to which reference is hereby made. In the event of
any conflict or discrepancy between the provisions hereof and the provisions of
the Trust Agreement, the provisions of the Trust Agreement will govern. Unless
otherwise expressly herein provided, all defined terms used herein shall have
the meanings ascribed thereto in the Trust Agreement.
2. Enforcement of Rights; Withdrawal of Preferred Securities. To the
fullest extent permitted by law, without the need for any other action of any
Person, including the Trustees and any other Holder, each Holder 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 and
any recovery on such enforcement action shall belong solely to such Holder who
brought the action, not to the Trust, the Trustees or any other Holder
individually or to Holders as a group. 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 an agreement to be
bound by the terms of the Partnership Agreement to the Property Trustee at the
Corporate Trust Office, with evidence of beneficial ownership in form
satisfactory to the Property Trustee; provided, however, that the Grantor shall
not issue any fractional number of Preferred Securities.
3. Distributions on Preferred Securities. Whenever and to the extent, and
on each date on which, the Property Trustee shall receive any cash distribution
representing a distribution on the Preferred Securities (whether or not
distributed by the Grantor on the regular distribution date therefor) or payment
by Pennsylvania Electric Company ("Penelec") under the Payment and Guarantee
Agreement dated as of June 16, 1999 (as amended and supplemented from time to
time, the "Guarantee") in respect
2
<PAGE>
thereof, the Property Trustee acting directly or through any Paying Agent shall
distribute to Holders of Trust Securities as of the record date therefor, such
amounts in proportion to the respective numbers of Preferred Securities
represented by the Trust Securities held by such Holders.
4. Redemptions of Preferred Securities. Whenever the Grantor shall elect
or is required to redeem Preferred Securities in accordance with the Partnership
Agreement, it shall (unless otherwise agreed in writing with the Property
Trustee) give the Property Trustee not less than 45 days' prior notice thereof
to redeem the Trust Securities. The Property Trustee shall, as directed by the
Grantor, mail, with first-class postage prepaid, notice of the redemption of the
Trust Securities to be redeemed, not less than 30 and not more than 90 days
prior to the date fixed for redemption of such Trust Securities. Such notice
shall be mailed to the Holders of the Trust Securities, at the addresses of such
Holders as the same appear on the records of the Trust. No defect in the notice
of redemption or in the mailing or delivery thereof or publication of its
contents shall affect the validity of the redemption proceedings. In case fewer
than all the outstanding Trust Securities are to be redeemed, the Trust
Securities to be redeemed shall be selected by lot or pro rata (as nearly as may
be practicable without creating fractional shares) or by any other equitable
method determined by the Grantor. On the date of any such redemption of such
Trust Securities, provided that the Grantor (or Penelec pursuant to the
Guarantee) shall then have deposited with the Trust the aggregate amount payable
upon redemption of the Trust Securities to be redeemed, the Property Trustee, on
behalf of the Trust, shall redeem (using the funds so deposited with it) Trust
Securities representing the same number of Preferred Securities in like
denominations and like liquidation amounts to be redeemed by the Grantor.
5. Distributions in Liquidation. Upon receipt by the Trust of any
distribution from the Grantor, or otherwise upon the liquidation of the Grantor,
or any payment under the Guarantee in respect thereof, after satisfaction of
creditors of the Trust required by applicable law, the Property Trustee shall
distribute to Holders of Trust Securities as of the record date therefor, the
Trust Estate in proportion to the respective number of Preferred Securities
which were represented by the Trust Securities held by such Holders.
6. Fixing of Record Date for Holders of Trust Securities. Whenever any
Distribution (other than upon any redemption) shall become payable, or whenever
the Property Trustee shall receive notice of any meeting at which holders of
Preferred Securities are entitled to vote or of which holders of Preferred
Securities are entitled to notice, the Property Trustee shall in each such
instance fix a record date (which shall be the same date as the record date
fixed by the General Partner with respect to the Preferred Securities) for the
determination of the Holders of
3
<PAGE>
Trust Securities who shall be entitled (i) to receive such Distribution or (ii)
to receive notice of, and to give instructions for the exercise of voting rights
at, any such meeting.
7. Payment of Distributions. Payments of Distributions on the Trust
Securities shall be payable (i) by check mailed to the addresses of the Holders
thereof on the record date therefor, or (ii) by wire transfer in Federal funds
to an account designated in writing by Holders. Payments of the redemption price
of Trust Securities and distributions in liquidation shall be made upon
surrender of such Trust Securities at the Corporate Trust Office of The Bank of
New York, as the Paying Agent.
8. Special Representative; Voting Rights. (a) If the holders of the
Preferred Securities, acting as a single class, are entitled to appoint and
authorize a Special Representative pursuant to Section 13.02(d) of the
Partnership Agreement, upon written notice, the Property Trustee shall notify
the Holders of the Trust Securities of such right, request direction of each
Holder of a Trust Security and vote the Preferred Securities represented by such
Trust Security in accordance with such direction. If the General Partner fails
to convene a general meeting of the Partnership as required in Section 13.02(d)
of the Partnership Agreement, upon written notice, the Property Trustee shall
notify the Holders of the Trust Securities and, if so directed by the Holders of
Trust Securities representing Preferred Securities constituting at least 10% of
the aggregate stated liquidation preference of the outstanding Preferred
Securities, shall convene such meeting.
(b) Upon receipt of notice by the Regular Trustee of any meeting at which
the holders of Preferred Securities are entitled to vote, the Property Trustee
shall, as soon as practicable thereafter, mail to the Holders of 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 therefor will be entitled, subject to any applicable
provision of law or of the Partnership Agreement, to instruct the Property
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 on such record date, the
Property Trustee shall vote or cause to be voted the number of Preferred
Securities represented by the Trust Securities in accordance with the
instructions set forth in such request. In the absence of specific instructions
from the Holder of a Trust Security, the Property Trustee will abstain from
voting to the extent of the Preferred Securities represented by such Trust
Security.
9. The Guarantee. In connection with the issuance of the
4
<PAGE>
Preferred Securities, Penelec has delivered to the Grantor the Guarantee for the
benefit of the holders of Preferred Securities. If the Grantor receives any
payments under the Guarantee, the Grantor will immediately transfer such payment
to the Property Trustee.
10. Changes Affecting Preferred Securities and Reclassifications,
Recapitalizations, Etc. Upon any consolidation, amalgamation, conversion,
merger, replacement or conveyance, transfer or lease by the Grantor of its
properties and assets substantially in their entirety in accordance with Section
13.02(e) of the Partnership Agreement, the Property Trustee shall, upon the
instructions of the Grantor, treat any Successor Securities or other property
that shall be received by the Property Trustee in exchange for or upon
conversion of or in respect of the Preferred Securities as part of the Trust
Estate, and Trust Securities then outstanding shall thenceforth represent the
proportionate interests of Holders thereof in the new deposited property so
received in exchange for or upon conversion or in respect of such Preferred
Securities.
11. Transfer and Exchange of Trust Securities. Subject to the terms and
conditions of the Trust Agreement, the Registrar shall register the transfer on
the Register from time to time of Trust Security certificates upon any surrender
thereof by the Holder in person or by a duly authorized attorney, properly
endorsed or accompanied by a properly executed instrument of transfer or
endorsement, together with evidence of the payment of any transfer taxes as may
be required by law. Upon such surrender, a Regular Trustee shall execute a new
Trust Security representing the same aggregate number of the Trust Securities
surrendered in accordance with the Trust Agreement and make available for
delivery the same to or upon the order of the Person entitled thereto.
Upon surrender of a Trust Security at the Corporate Trust Office or such
other office as the Property Trustee may designate for the purpose of effecting
an exchange of Trust Security certificates, subject to the terms and conditions
of the Trust Agreement, a Regular Trustee execute and the Property Trustee shall
authenticate and make available for delivery a new Trust Security certificate
representing the same number of Preferred Securities as the Trust Security
certificate surrendered.
As a condition precedent to the registration of a transfer or exchange of
any Trust Security certificate, the Registrar, may require (i) the production of
proof satisfactory to it as to the identity and genuineness of any signature;
and (ii) compliance with such regulations, if any, as the Property Trustee or
the Registrar may establish not inconsistent with the provisions of the Trust
Agreement.
Neither the Property Trustee nor the Registrar shall be required (a) to
register the transfer or exchange of any Trust
5
<PAGE>
Security certificate for a period beginning at the opening of business 15 days
prior to the mailing of a notice of redemption for the Trust Securities and
ending at the close of business on the date of such mailing or (b) to transfer
or exchange Trust Securities called or being called for redemption in whole or
in part.
12. Title to Trust Securities. It is a condition of the Trust Securities,
and every successive Holder hereof by accepting or holding the same consents and
agrees, that title to this Trust Security certificate, when properly endorsed or
accompanied by a properly executed instrument of transfer or endorsement, is
transferable by delivery with the same effect as in the case of a negotiable
instrument; provided, however, that until the transfer of this Trust Security
certificate shall be registered on the Register, the Trust, the Property
Trustee, the Regular Trustees, the Registrar and the Grantor may,
notwithstanding any notice to the contrary, treat the Holder hereof at such time
as the absolute owner hereof for the purpose of determining the Person entitled
to distributions or to any notice provided for in the Trust Agreement and for
all other purposes.
13. Reports, Inspection of Transfer Books. The Property Trustee shall make
available for inspection by Holders of the Trust Securities at the Corporate
Trust Office and at such other places as it may from time to time deem advisable
during normal business hours for any purpose reasonably related to such Holders
interest in the Trust any reports and communications received by the Property
Trustee as the record holder of Preferred Securities. The Registrar shall keep
books at the Corporate Trust Office for the registration of transfer of Trust
Securities, which books at all reasonable times will be open for inspection by
the Holders of the Trust Securities as and to the extent provided by applicable
law and for any purpose reasonably related to the Holders' interest in the
Trust.
14. Amendments to Trust Agreement. The Grantor, the General Partner and
the Property Trustee may, at any time and from time to time, without the consent
of the Holders, amend or enter into one or more agreements supplemental to the
Trust Agreement, in form satisfactory to the Property Trustee, for any of the
following purposes: (i) to cure any ambiguity or correct any mistake; (ii) to
correct or supplement any provision in the Trust Agreement that may be defective
or inconsistent with any other provision of the Trust Agreement or to make any
other provisions with respect to matters or questions arising under the Trust
Agreement provided that any such action shall not materially adversely affect
the interests of the Holders; (iii) to evidence the succession of another Person
to the Grantor or the General Partner and the assumption by any such successor
of the covenants of the Grantor or the General Partner contained in the Trust
Agreement; (iv) to add to the covenants of the Grantor or the General Partner
for the benefit of the Holders, or to
6
<PAGE>
surrender any right or power conferred by the Trust Agreement upon the Grantor
or the General Partner; (v) to conform to any change in the 1940 Act or written
change in interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority; (vi) to conform to any change in the Trust Indenture Act or written
change in interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority; and (vii) to modify, eliminate and add to any provision of the Trust
Agreement to such extent as may be necessary or desirable; provided that such
amendments do not have a material adverse effect on the rights, preferences or
privileges of the Holders of the Trust Securities.
15. Governing Law. The Trust Agreement and this Trust Security and all
rights thereunder and hereunder and provisions thereof and hereof shall be
governed by, and construed in accordance with, the law of the State of Delaware
without giving effect to principles of conflict of laws.
16. Trust Security Non-Assessable and Fully Paid. Holders of Trust
Securities shall not be personally liable for obligations of the Trust, the
interest in the Trust represented by the Trust Securities shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever and the Trust Securities upon issuance in accordance with the Trust
Agreement are and shall be deemed fully paid.
17. Liability of Holders of Trust Securities. Holders of Trust Securities
shall 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.
18. No Preemptive Rights. No Holder shall be entitled as a matter of right
to subscribe for or purchase, or have any preemptive or other similar right with
respect to, any part of any new or additional interest in the Trust, whether now
or hereafter authorized and whether issued for cash or other consideration or by
way of distribution.
This Trust Security certificate shall not be entitled to any benefits
under the Trust Agreement or be valid or obligatory for any purpose unless this
Trust Security's certificate of authentication shall have been executed
manually.
THE PROPERTY TRUSTEE IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY PREFERRED
SECURITIES. THE PROPERTY TRUSTEE ASSUMES NO RESPONSIBILITY FOR THE
CORRECTNESS OF THE FOREGOING DESCRIPTION WHICH CAN BE TAKEN AS A STATEMENT OF
THE GRANTOR SUMMARIZING CERTAIN PROVISIONS OF THE TRUST AGREEMENT. THE
PROPERTY TRUSTEE MAKES NO WARRANTIES OR REPRESENTATIONS AS TO THE VALIDITY,
7
<PAGE>
GENUINENESS OR SUFFICIENCY OF PREFERRED SECURITIES OR OF TRUST SECURITIES; AS TO
THE VALIDITY OR SUFFICIENCY OF THE TRUST AGREEMENT; AS TO THE VALUE OF TRUST
SECURITIES OR AS TO ANY RIGHT, TITLE OR INTEREST OF THE HOLDERS OF TRUST
SECURITIES IN AND TO TRUST SECURITIES.
8
<PAGE>
PENELEC CAPITAL TRUST
By: /s/ T. G. Howson
--------------------------------
Name: T.G. Howson
Title: Regular Trustee
By: /s/ P. R. Chatman
--------------------------------
Name: P.R. Chatman
Title: Regular Trustee
By: /s/ M. E. Gramlich
--------------------------------
Name: M.E. Gramlich
Title: Regular Trustee
Dated: June 25, 1999
Authenticated:
This is one of the Securities
referred to in the within mentioned
Trust Agreement
The Bank of New York,
as Property Trustee
By:
------------------------------
Authorized Signatory
9
<PAGE>
Notice of Withdrawal
--------------------
To: Bank of New York
101 Barclay Street
21st Floor
New York, New York 10286
Attn: Corporate Trust Administration
Re: Penelec Capital Trust - Cusip #
-------------------- , ("Holder"), DTC participant number-----,
(Holder or Trust Securities)
requests the withdrawal of ---- Shares with liquidation value $25 of the
Preferred Securities represented by such Trust Securities that are presently
owned by the Holder and held in global form by the Bank of New York as custodian
for the Depository Trust Company. In accordance with the terms of Section 5.6 of
the Trust Agreement, Holder hereby agrees to be bound by the terms of the
Partnership Agreement governing said Preferred Securities.
By:
--------------------------------
, Holder
Signature Guarantee
----------------------------------
[Signature must be guaranteed by an
eligible guarantor institution or
participant in a signature medallion
guarantee program]
Exhibit A-10(a)
This Trust PREFERRED Security is a Global Certificate within the
meaning of the Trust Agreement hereinafter referred to and is registered in the
name of The Depository Trust Company (the "Depository") or a nominee of the
Depository. This TRUST PREFERRED SECURITY is exchangeable for Trust PREFERRED
Securities registered in the name of personS other than the Depository or its
nominee only in the limited circumstances described in the Trust Agreement and
no transfer of this TRUST PREFERRED SECURITY (other than a transfer of this
TRUST PREFERRED SECURITY as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) maY be registered except in limited circumstances.
Unless this TRUST PREFERRED SECURITY is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
PENELEC Capital Trust or its agent for registration of transfer, exchange or
payment, and any TRUST PREFERRED SECURITY issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
The Depository and any payment hereon is made to Cede & Co. or to such other
entity as is requested by an authorized representative of the depository, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY or to Any PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
No. 1 4,000,000 Trust Preferred Securities
(liquidation amount $25 per Trust Preferred
Security)
CUSIP # 706871209
7.34% TRUST PREFERRED SECURITIES
(Liquidation amount $25 per Trust Preferred Security)
OF PENELEC CAPITAL TRUST,
a Delaware Business Trust,
each Representing a 7.34% Cumulative Preferred Security of
Penelec Capital II, L.P. (a Delaware limited partnership)
Cede & Co. is the registered owner of 4,000,000 Trust Preferred Securities
("Trust Securities"), each representing a 7.34% cumulative preferred limited
partner interest, Series A (the "Preferred Securities") of Penelec Capital II,
L.P., a Delaware limited partnership (the "Grantor"), deposited in trust by the
Grantor with the Property Trustee pursuant to an Amended and Restated Trust
Agreement of Penelec Capital Trust dated as of June 9, 1999 (as amended or
supplemented from time to time, the
<PAGE>
"Trust Agreement") among the Grantor, The Bank of New York (Delaware), not in
its individual capacity, but solely as Delaware Trustee (the "Delaware
Trustee"), The Bank of New York, not in its individual capacity, but solely as
Property Trustee (the "Property Trustee"), the Regular Trustees (collectively,
the "Trustees"), the General Partner, and the several Holders (as defined in the
Trust Agreement). Subject to the terms of the Trust Agreement, the registered
Holder hereof is entitled to a full interest in the same number of Preferred
Securities held by the Property Trustee under the Trust Agreement, as are
represented by the Trust Securities, including the distribution, voting,
liquidation and other rights of the Preferred Securities specified in the
Amended and Restated Limited Partnership Agreement of the Grantor, as amended or
supplemented from time to time, a copy of which is on file at the Corporate
Trust Office.
1. The Trust Agreement. The Trust Securities are issued upon the terms and
conditions set forth in the Trust Agreement. The Trust Agreement (a copy of
which is on file at the Corporate Trust Office of the Property Trustee) sets
forth the rights of Holders of Trust Securities and the rights and duties of the
Trustees, the Grantor and the General Partner. The statements made herein are
summaries of certain provisions of the Trust Agreement and are subject to the
detailed provisions thereof, to which reference is hereby made. In the event of
any conflict or discrepancy between the provisions hereof and the provisions of
the Trust Agreement, the provisions of the Trust Agreement will govern. Unless
otherwise expressly herein provided, all defined terms used herein shall have
the meanings ascribed thereto in the Trust Agreement.
2. Enforcement of Rights; Withdrawal of Preferred Securities. To the
fullest extent permitted by law, without the need for any other action of any
Person, including the Trustees and any other Holder, each Holder 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 and
any recovery on such enforcement action shall belong solely to such Holder who
brought the action, not to the Trust, the Trustees or any other Holder
individually or to Holders as a group. 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 an agreement to be
bound by the terms of the Partnership Agreement to the Property Trustee at the
Corporate Trust Office, with evidence of beneficial ownership in form
satisfactory to the Property Trustee; provided, however, that the Grantor shall
not issue any fractional number of Preferred Securities.
3. Distributions on Preferred Securities. Whenever and to the
extent, and on each date on which, the Property Trustee shall receive any
cash distribution representing a distribution on the
2
<PAGE>
Preferred Securities (whether or not distributed by the Grantor on the regular
distribution date therefor) or payment by Pennsylvania Electric Company
("Penelec") under the Payment and Guarantee Agreement dated as of June 16, 1999
(as amended and supplemented from time to time, the "Guarantee") in respect
thereof, the Property Trustee acting directly or through any Paying Agent shall
distribute to Holders of Trust Securities as of the record date therefor, such
amounts in proportion to the respective numbers of Preferred Securities
represented by the Trust Securities held by such Holders.
4. Redemptions of Preferred Securities. Whenever the Grantor shall elect
or is required to redeem Preferred Securities in accordance with the Partnership
Agreement, it shall (unless otherwise agreed in writing with the Property
Trustee) give the Property Trustee not less than 45 days' prior notice thereof
to redeem the Trust Securities. The Property Trustee shall, as directed by the
Grantor, mail, with first-class postage prepaid, notice of the redemption of the
Trust Securities to be redeemed, not less than 30 and not more than 90 days
prior to the date fixed for redemption of such Trust Securities. Such notice
shall be mailed to the Holders of the Trust Securities, at the addresses of such
Holders as the same appear on the records of the Trust. No defect in the notice
of redemption or in the mailing or delivery thereof or publication of its
contents shall affect the validity of the redemption proceedings. In case fewer
than all the outstanding Trust Securities are to be redeemed, the Trust
Securities to be redeemed shall be selected by lot or pro rata (as nearly as may
be practicable without creating fractional shares) or by any other equitable
method determined by the Grantor. On the date of any such redemption of such
Trust Securities, provided that the Grantor (or Penelec pursuant to the
Guarantee) shall then have deposited with the Trust the aggregate amount payable
upon redemption of the Trust Securities to be redeemed, the Property Trustee, on
behalf of the Trust, shall redeem (using the funds so deposited with it) Trust
Securities representing the same number of Preferred Securities in like
denominations and like liquidation amounts to be redeemed by the Grantor.
5. Distributions in Liquidation. Upon receipt by the Trust of any
distribution from the Grantor, or otherwise upon the liquidation of the Grantor,
or any payment under the Guarantee in respect thereof, after satisfaction of
creditors of the Trust required by applicable law, the Property Trustee shall
distribute to Holders of Trust Securities as of the record date therefor, the
Trust Estate in proportion to the respective number of Preferred Securities
which were represented by the Trust Securities held by such Holders.
6. Fixing of Record Date for Holders of Trust Securities. Whenever any
Distribution (other than upon any redemption) shall become payable, or whenever
the Property Trustee shall receive
3
<PAGE>
notice of any meeting at which holders of Preferred Securities are entitled to
vote or of which holders of Preferred Securities are entitled to notice, the
Property Trustee shall in each such instance fix a record date (which shall be
the same date as the record date fixed by the General Partner with respect to
the Preferred Securities) for the determination of the Holders of Trust
Securities who shall be entitled (i) to receive such Distribution or (ii) to
receive notice of, and to give instructions for the exercise of voting rights
at, any such meeting.
7. Payment of Distributions. Payments of Distributions on the Trust
Securities shall be payable (i) by check mailed to the addresses of the Holders
thereof on the record date therefor, or (ii) by wire transfer in Federal funds
to an account designated in writing by Holders. Payments of the redemption price
of Trust Securities and distributions in liquidation shall be made upon
surrender of such Trust Securities at the Corporate Trust Office of The Bank of
New York, as the Paying Agent.
8. Special Representative; Voting Rights. (a) If the holders of the
Preferred Securities, acting as a single class, are entitled to appoint and
authorize a Special Representative pursuant to Section 13.02(d) of the
Partnership Agreement, upon written notice, the Property Trustee shall notify
the Holders of the Trust Securities of such right, request direction of each
Holder of a Trust Security and vote the Preferred Securities represented by such
Trust Security in accordance with such direction. If the General Partner fails
to convene a general meeting of the Partnership as required in Section 13.02(d)
of the Partnership Agreement, upon written notice, the Property Trustee shall
notify the Holders of the Trust Securities and, if so directed by the Holders of
Trust Securities representing Preferred Securities constituting at least 10% of
the aggregate stated liquidation preference of the outstanding Preferred
Securities, shall convene such meeting.
(b) Upon receipt of notice by the Regular Trustee of any meeting at which
the holders of Preferred Securities are entitled to vote, the Property Trustee
shall, as soon as practicable thereafter, mail to the Holders of 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 therefor will be entitled, subject to any applicable
provision of law or of the Partnership Agreement, to instruct the Property
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 on such record date, the
Property Trustee shall vote or cause to be voted the number of Preferred
4
<PAGE>
Securities represented by the Trust Securities in accordance with the
instructions set forth in such request. In the absence of specific instructions
from the Holder of a Trust Security, the Property Trustee will abstain from
voting to the extent of the Preferred Securities represented by such Trust
Security.
9. The Guarantee. In connection with the issuance of the Preferred
Securities, Penelec has delivered to the Grantor the Guarantee for the benefit
of the holders of Preferred Securities. If the Grantor receives any payments
under the Guarantee, the Grantor will immediately transfer such payment to the
Property Trustee.
10. Changes Affecting Preferred Securities and Reclassifications,
Recapitalizations, Etc. Upon any consolidation, amalgamation, conversion,
merger, replacement or conveyance, transfer or lease by the Grantor of its
properties and assets substantially in their entirety in accordance with Section
13.02(e) of the Partnership Agreement, the Property Trustee shall, upon the
instructions of the Grantor, treat any Successor Securities or other property
that shall be received by the Property Trustee in exchange for or upon
conversion of or in respect of the Preferred Securities as part of the Trust
Estate, and Trust Securities then outstanding shall thenceforth represent the
proportionate interests of Holders thereof in the new deposited property so
received in exchange for or upon conversion or in respect of such Preferred
Securities.
11. Transfer and Exchange of Trust Securities. Subject to the terms and
conditions of the Trust Agreement, the Registrar shall register the transfer on
the Register from time to time of Trust Security certificates upon any surrender
thereof by the Holder in person or by a duly authorized attorney, properly
endorsed or accompanied by a properly executed instrument of transfer or
endorsement, together with evidence of the payment of any transfer taxes as may
be required by law. Upon such surrender, a Regular Trustee shall execute a new
Trust Security representing the same aggregate number of the Trust Securities
surrendered in accordance with the Trust Agreement and make available for
delivery the same to or upon the order of the Person entitled thereto.
Upon surrender of a Trust Security at the Corporate Trust Office or such
other office as the Property Trustee may designate for the purpose of effecting
an exchange of Trust Security certificates, subject to the terms and conditions
of the Trust Agreement, a Regular Trustee execute and the Property Trustee shall
authenticate and make available for delivery a new Trust Security certificate
representing the same number of Preferred Securities as the Trust Security
certificate surrendered.
As a condition precedent to the registration of a transfer or exchange
of any Trust Security certificate, the Registrar, may
5
<PAGE>
require (i) the production of proof satisfactory to it as to the identity and
genuineness of any signature; and (ii) compliance with such regulations, if any,
as the Property Trustee or the Registrar may establish not inconsistent with the
provisions of the Trust Agreement.
Neither the Property Trustee nor the Registrar shall be required (a) to
register the transfer or exchange of any Trust Security certificate for a period
beginning at the opening of business 15 days prior to the mailing of a notice of
redemption for the Trust Securities and ending at the close of business on the
date of such mailing or (b) to transfer or exchange Trust Securities called or
being called for redemption in whole or in part.
12. Title to Trust Securities. It is a condition of the Trust Securities,
and every successive Holder hereof by accepting or holding the same consents and
agrees, that title to this Trust Security certificate, when properly endorsed or
accompanied by a properly executed instrument of transfer or endorsement, is
transferable by delivery with the same effect as in the case of a negotiable
instrument; provided, however, that until the transfer of this Trust Security
certificate shall be registered on the Register, the Trust, the Property
Trustee, the Regular Trustees, the Registrar and the Grantor may,
notwithstanding any notice to the contrary, treat the Holder hereof at such time
as the absolute owner hereof for the purpose of determining the Person entitled
to distributions or to any notice provided for in the Trust Agreement and for
all other purposes.
13. Reports, Inspection of Transfer Books. The Property Trustee shall make
available for inspection by Holders of the Trust Securities at the Corporate
Trust Office and at such other places as it may from time to time deem advisable
during normal business hours for any purpose reasonably related to such Holders
interest in the Trust any reports and communications received by the Property
Trustee as the record holder of Preferred Securities. The Registrar shall keep
books at the Corporate Trust Office for the registration of transfer of Trust
Securities, which books at all reasonable times will be open for inspection by
the Holders of the Trust Securities as and to the extent provided by applicable
law and for any purpose reasonably related to the Holders' interest in the
Trust.
14. Amendments to Trust Agreement. The Grantor, the General Partner and
the Property Trustee may, at any time and from time to time, without the consent
of the Holders, amend or enter into one or more agreements supplemental to the
Trust Agreement, in form satisfactory to the Property Trustee, for any of the
following purposes: (i) to cure any ambiguity or correct any mistake; (ii) to
correct or supplement any provision in the Trust Agreement that may be defective
or inconsistent with any other provision of the Trust Agreement or to make any
other
6
<PAGE>
provisions with respect to matters or questions arising under the Trust
Agreement provided that any such action shall not materially adversely affect
the interests of the Holders; (iii) to evidence the succession of another Person
to the Grantor or the General Partner and the assumption by any such successor
of the covenants of the Grantor or the General Partner contained in the Trust
Agreement; (iv) to add to the covenants of the Grantor or the General Partner
for the benefit of the Holders, or to surrender any right or power conferred by
the Trust Agreement upon the Grantor or the General Partner; (v) to conform to
any change in the 1940 Act or written change in interpretation or application of
the rules and regulations promulgated thereunder by any legislative body, court,
government agency or regulatory authority; (vi) to conform to any change in the
Trust Indenture Act or written change in interpretation or application of the
rules and regulations promulgated thereunder by any legislative body, court,
government agency or regulatory authority; and (vii) to modify, eliminate and
add to any provision of the Trust Agreement to such extent as may be necessary
or desirable; provided that such amendments do not have a material adverse
effect on the rights, preferences or privileges of the Holders of the Trust
Securities.
15. Governing Law. The Trust Agreement and this Trust Security and all
rights thereunder and hereunder and provisions thereof and hereof shall be
governed by, and construed in accordance with, the law of the State of Delaware
without giving effect to principles of conflict of laws.
16. Trust Security Non-Assessable and Fully Paid. Holders of Trust
Securities shall not be personally liable for obligations of the Trust, the
interest in the Trust represented by the Trust Securities shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever and the Trust Securities upon issuance in accordance with the Trust
Agreement are and shall be deemed fully paid.
17. Liability of Holders of Trust Securities. Holders of Trust Securities
shall 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.
18. No Preemptive Rights. No Holder shall be entitled as a matter of right
to subscribe for or purchase, or have any preemptive or other similar right with
respect to, any part of any new or additional interest in the Trust, whether now
or hereafter authorized and whether issued for cash or other consideration or by
way of distribution.
This Trust Security certificate shall not be entitled to any benefits
under the Trust Agreement or be valid or obligatory for any purpose unless this
Trust Security's certificate of
7
<PAGE>
authentication shall have been executed manually.
THE PROPERTY TRUSTEE IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY PREFERRED
SECURITIES. THE PROPERTY TRUSTEE ASSUMES NO RESPONSIBILITY FOR THE CORRECTNESS
OF THE FOREGOING DESCRIPTION WHICH CAN BE TAKEN AS A STATEMENT OF THE GRANTOR
SUMMARIZING CERTAIN PROVISIONS OF THE TRUST AGREEMENT. THE PROPERTY TRUSTEE
MAKES NO WARRANTIES OR REPRESENTATIONS AS TO THE VALIDITY, GENUINENESS OR
SUFFICIENCY OF PREFERRED SECURITIES OR OF TRUST SECURITIES; AS TO THE VALIDITY
OR SUFFICIENCY OF THE TRUST AGREEMENT; AS TO THE VALUE OF TRUST SECURITIES OR AS
TO ANY RIGHT, TITLE OR INTEREST OF THE HOLDERS OF TRUST SECURITIES IN AND TO
TRUST SECURITIES.
8
<PAGE>
PENELEC CAPITAL TRUST
By: /s/ T.G. Howson
-------------------------------
Name: T.G. Howson
Title: Regular Trustee
By: /s/ P.R. Chatman
-------------------------------
Name: P.R. Chatman
Title: Regular Trustee
By: /s/ M.E. Gramlich
-------------------------------
Name: M.E. Gramlich
Title: Regular Trustee
Dated: June 16, 1999
Authenticated:
This is one of the Securities
referred to in the within mentioned
Trust Agreement
The Bank of New York,
as Property Trustee
By: /s/ Michele Russo
- ----------------------------------
Authorized Signatory
Exhibit A-11(a)
PENNSYLVANIA ELECTRIC COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
As Trustee
INDENTURE
Dated as of June 1, 1999
Providing for the Issuance of Subordinated
Debentures in Series and for the
7.34% Subordinated Debentures,
Series A due 2039
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
CROSS-REFERENCE TABLE
of Provisions of the Indenture
Required by the Trust Indenture Act of 1939
Trust Indenture Provision of
Act Section Indenture
--------------- -------------
Section 310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.08; 7.10; 11.01
(c) Not Applicable
Section 311 (a) 7.11
(b) 7.11
(c) Not Applicable
Section 312 (a) 2.06
(b) 11.03
(c) 11.03
Section 313 (a) 7.06
(b)(1) Not Applicable
(b)(2) 7.06
(c) 7.06; 11.02
(d) 7.06
Section 314 (a) 4.03; 11.02
(b) Not Applicable
(c)(1) 2.02; 11.04
(c)(2) 2.02; 11.04
(c)(3) Not Applicable
(d) Not Applicable
(e) 11.05
(f) Not Applicable
Section 315 (a) 7.01(2)
(b) 7.05; 11.02
(c) 7.01(1)
(d) 7.01(3)
(e) 6.11
Section 316 (a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) Not Applicable
(a)(last sentence) 2.10
(b) 6.07
Section 317 (a)(1) 6.08
(a)(2) 6.09
(b) 2.06
Section 318 (a) 11.01
- ---------------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
-i-
<PAGE>
INDENTURE BETWEEN PENNSYLVANIA ELECTRIC COMPANY
AND UNITED STATES TRUST COMPANY OF NEW YORK
DATED AS OF JUNE 1, 1999
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions. ...................................... 1
SECTION 1.02 Other Definitions. ................................ 6
SECTION 1.03 Incorporation by Reference of Trust Indenture
Act................................................ 6
SECTION 1.04 Rules of Construction.............................. 7
SECTION 1.05 Acts of Holders.................................... 7
ARTICLE 2
THE SECURITIES; THE SERIES A SECURITIES
SECTION 2.01 Issue of Securities Generally...................... 8
SECTION 2.02 Form of the Series A Securities; Denominations;
Global Security.................................... 9
SECTION 2.03 Payment of Principal and Interest...................10
SECTION 2.04 Execution and Authentication...................... 11
SECTION 2.05 Registrar and Paying Agent........................ 11
SECTION 2.06 Paying Agent to Hold Money in Trust............... 12
SECTION 2.07 Securityholder Lists.............................. 12
SECTION 2.08 Transfer and Exchange............................. 13
SECTION 2.09 Replacement Securities............................ 13
SECTION 2.10 Outstanding Securities; Determinations of
Holders' Action................................... 14
SECTION 2.11 Temporary and Definitive Securities............... 15
SECTION 2.12 Cancellation...................................... 16
SECTION 2.13 CUSIP Numbers..................................... 16
-ii-
<PAGE>
SECTION 2.14 Defaulted Interest................................ 16
ARTICLE 3
REDEMPTION
SECTION 3.01 Redemption Right, Obligation; Notice to Trustee... 17
SECTION 3.02 Selection of Securities to be Redeemed............ 17
SECTION 3.03 Notice of Redemption; Conditional Notice.......... 18
SECTION 3.04 Effect of Notice of Redemption.................... 19
SECTION 3.05 Deposit of Redemption Price....................... 19
SECTION 3.06 Securities Redeemed in Part....................... 19
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of the Securities......................... 19
SECTION 4.02 Prohibition Against Dividends, etc. During an
Event of Default.................................. 21
SECTION 4.03 SEC Reports....................................... 22
SECTION 4.04 Compliance Certificates........................... 22
SECTION 4.05 Relationship with Penelec Capital................. 23
SECTION 4.06 Further Instruments and Acts...................... 23
SECTION 4.07 Investment Company Act............................ 23
SECTION 4.08 Payments for Consents...............................23
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When the Company May Merge, Etc................... 23
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default................................. 24
SECTION 6.02 Acceleration...................................... 26
-iii-
<PAGE>
SECTION 6.03 Other Remedies.................................... 26
SECTION 6.04 Waiver of Past Defaults........................... 27
SECTION 6.05 Control by Majority............................... 27
SECTION 6.06 Limitation on Suits............................... 27
SECTION 6.07 Rights of Holders to Receive Payment.............. 28
SECTION 6.08 Collection Suit by the Trustee.................... 28
SECTION 6.09 The Trustee May File Proofs of Claim.............. 28
SECTION 6.10 Priorities........................................ 29
SECTION 6.11 Undertaking for Costs............................. 29
SECTION 6.12 Waiver of Stay, Extension or
Usury Laws........................................ 30
ARTICLE 7
THE TRUSTEE
SECTION 7.01 Duties of the Trustee............................. 30
SECTION 7.02 Rights of the Trustee............................. 31
SECTION 7.03 Individual Rights of the Trustee.................. 32
SECTION 7.04 The Trustee's Disclaimer.......................... 32
SECTION 7.05 Notice of Defaults................................ 33
SECTION 7.06 Reports by Trustee to Holders..................... 33
SECTION 7.07 Compensation and Indemnity........................ 33
SECTION 7.08 Replacement of Trustee............................ 34
SECTION 7.09 Successor Trustee by Merger....................... 35
SECTION 7.10 Eligibility; Disqualification..................... 35
SECTION 7.11 Preferential Collection of Claims Against the
Company........................................... 35
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS
SECTION 8.01 Satisfaction and Discharge of Indenture........... 35
-iv-
<PAGE>
SECTION 8.02 Application by Trustee of Funds Deposited for
Payment of Securities............................. 36
SECTION 8.03 Repayment of Moneys Held by Paying Agent.......... 37
SECTION 8.04 Return of Moneys Held by the Trustee and Paying
Agent Unclaimed for Three Years................... 37
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders........................ 37
SECTION 9.02 With Consent of Holders........................... 38
SECTION 9.03 Compliance with Trust Indenture Act............... 39
SECTION 9.04 Revocation and Effect Of Consents, Waivers and
Actions........................................... 39
SECTION 9.05 Notation on or Exchange of Securities............. 39
SECTION 9.06 Trustee to Sign Supplemental Indentures........... 40
SECTION 9.07 Effect of Supplemental Indentures................. 40
ARTICLE 10
SUBORDINATION
SECTION 10.01 Securities Subordinated to Senior Indebtedness.... 40
SECTION 10.02 Priority and Payment of Proceeds in Certain
Events; Remedies Standstill....................... 40
SECTION 10.03 Payments which May Be Made Prior to Notice........ 42
SECTION 10.04 Rights of Holders of Senior Indebtedness Not to
Be Impaired....................................... 42
SECTION 10.05 Trustee May Take Action to Effectuate
Subordination..................................... 43
SECTION 10.06 Subrogation....................................... 43
SECTION 10.07 Obligations of Company Unconditional;
Reinstatement..................................... 43
SECTION 10.08 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice................... 44
-v-
<PAGE>
SECTION 10.09 Right of Trustee to Hold Senior Indebtedness...... 45
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 Trust Indenture Act Controls...................... 45
SECTION 11.02 Notices........................................... 45
SECTION 11.03 Communication by Holders with Other Holders....... 46
SECTION 11.04 Certificate and Opinion as to Conditions
Precedent......................................... 46
SECTION 11.05 Statements Required in Certificate or Opinion..... 46
SECTION 11.06 Severability Clause............................... 47
SECTION 11.07 Rules by Trustee, Paying Agent and Registrar...... 47
SECTION 11.08 Legal Holidays.................................... 47
SECTION 11.09 Governing Law..................................... 47
SECTION 11.10 No Recourse Against Others........................ 47
SECTION 11.11 Successors........................................ 48
SECTION 11.12 Multiple Original Copies of this Indenture........ 48
SECTION 11.13 No Adverse Interpretation of Other Agreements..... 48
SECTION 11.14 Table of Contents; Headings, Etc.................. 48
SECTION 11.15 Benefits of the Indenture......................... 48
Exhibits
FORM OF FACE OF THE SECURITY
FORM OF REVERSE SIDE OF SECURITY
ASSIGNMENT FORM
-vi-
<PAGE>
INDENTURE, dated as of June 1, 1999, by and between Pennsylvania Electric
Company, a Pennsylvania corporation (the "Company"), and United States Trust
Company of New York, as trustee (the "Trustee").
Whereas, the Company desires to borrow money from time to time and to
issue securities from time to time, in one or more series, including securities
to be issued from time to time to one or more of its Subsidiaries, as in this
Indenture provided; and
Whereas, the Company has authorized the issuance of the initial series of
securities to be known as the 7.34% Subordinated Debentures, Series A due 2039
(the "Series A Securities"), and to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture, and all things
necessary to make the Series A Securities when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid obligations of the
Company, and to make this Indenture a valid and binding agreement of the
Company, in accordance with its terms, have been done;
Now, therefore, each party, intending to be legally bound hereby, agrees
as follows for the equal and ratable benefit of the Holders of the Series A
Securities:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Action" means an Action as defined in Section 13.01(b) of the Limited
Partnership Agreement.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. When used with respect to any Person,
"control" 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.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board, and any
resolution of the Board of Directors means any resolution of the Board of
Directors or any committee thereof duly authorized to act on behalf of such
Board.
"Business Day" means any day other than a day on which banking
institutions in The City of New York are authorized or required by law to close.
<PAGE>
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock.
"Company" means Pennsylvania Electric Company until a Successor replaces
it pursuant to Article 5 of this Indenture and, thereafter, shall mean the
Successor.
"Default" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"Distribution Event" means any distribution of Securities to holders of
Preferred Securities, as may be provided for in the Limited Partnership
Agreement or any Action.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board.
"General Partner" means Penelec Preferred Capital II, Inc., in its
capacity as general partner of Penelec Capital, together with any successor
thereto that becomes a general partner of Penelec Capital pursuant to the terms
of the Limited Partnership Agreement.
"Guarantee" means the Payment and Guarantee Agreement, or other guaranty,
if any, of the Company of the payment of periodic cash distributions, and
payments on liquidation or redemption, with respect to the Preferred Securities
of any series.
"Indenture" means this indenture, as amended or supplemented from time to
time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"Interest Payment Date" means the interest payment date specified in
the Securities.
"Issue Date" means the date on which the Securities are originally
issued.
"Limited Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement of Penelec Capital, as amended or supplemented from
time to time in accordance with the terms thereof.
-2-
<PAGE>
"Officer" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary
of such corporation.
"Officer's Certificate" means a written certificate containing the
applicable information specified in Sections 11.04 and 11.05 hereof, signed in
the name of the Company by any one of its Officers, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion containing the applicable
information specified in Sections 11.04 and 11.05 hereof, by legal counsel who
is reasonably acceptable to the Trustee.
"Penelec Capital" means Penelec Capital II, L.P., a Delaware limited
partnership, all of the Voting Interests of which are indirectly owned by the
Company through a Wholly Owned Subsidiary. Penelec Capital also means any
successor in interest to Penelec Capital II, L.P., regardless of its form,
including a business trust.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Securities" means the securities representing limited partner
interests of Penelec Capital of any series with a preference in respect of cash
distributions and amounts payable on liquidation over the Voting Interests
indirectly owned by the Company. Preferred Securities also means any securities
issued by Penelec Capital in substitution for the Preferred Securities,
including preferred undivided beneficial interests in the properties of a
business trust.
"Preferred Stock" means any class of Capital Stock of an issuer that is
preferred as to dividends or rights in liquidation as compared with any other
class of Capital Stock of the same issuer.
"Record Date" with respect to any security means the date set to determine
the holders of any security entitled to participate in any distribution,
dividend, interest or other payment or to vote, consent, make a request or
exercise any other right associated with such security.
"Redemption Date" or "redemption date" means the date specified for the
redemption of Securities in accordance with the terms of the Securities and
Article 3 of this Indenture.
"Redemption Price" or "redemption price", with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture and the Securities.
-3-
<PAGE>
"Regular Record Date", with respect to an interest payment on the
Securities, means the date set forth on the face of the Securities for the
determination of Holders entitled to receive payment of interest on the next
succeeding interest payment date.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means any of the securities of any series issued,
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" or "Holder" means a Person in whose name a Security is
registered on the Registrar's books.
"Senior Indebtedness" means, without duplication, (i) the principal of and
premium (if any) in respect of (A) indebtedness of the Company for money
borrowed and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments (including purchase money obligations) for payment of
which the Company is responsible or liable; (ii) all Capital Lease Obligations
of the Company; (iii) all obligations of the Company issued or assumed as the
deferred purchase price of property, 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) all 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 (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of the Company to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by the Company of a demand for reimbursement following payment
on the letter of credit); (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), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured; provided, however, that Senior Indebtedness does not
include endorsements of negotiable instruments for collection in the ordinary
course of business. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness shall not include any indebtedness that is by its terms
subordinated to or pari passu with the Securities or any indebtedness between or
among the Company and any Affiliates.
"Series A Preferred Securities" means the securities representing limited
partner interests of Penelec Capital, with a preference in respect of cash
distributions and amounts payable on
-4-
<PAGE>
liquidation over the Voting Interests indirectly owned by the Company, the
proceeds of the sale of which are used by Penelec Capital to purchase Series A
Securities. Series A Preferred Securities also means any Preferred Securities
issued by Penelec Capital in substitution for the Series A Preferred Securities
originally issued by Penelec Capital.
"Series A Securities" means any of the Company's 7.34% Subordinated
Debentures, Series A, due 2039, issued under this Indenture.
"Special Event" means a Special Event as defined in Article I of the
Limited Partnership Agreement.
"Special Representative" means a special representative appointed by the
holders of the Preferred Securities pursuant to Section 13.02(d) of the Limited
Partnership Agreement.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory prepayment provision.
"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of all the Voting Stock or Voting Interests is at the time owned or
controlled, directly or indirectly, by (i) the Company, (ii) the Company and one
or more Subsidiaries, or (iii) one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended and as in effect
on the date of this Indenture; provided, however, that if the TIA is amended
after such date, TIA means, to the extent required by any such amendment, the
TIA as so amended.
"Trust Officer" means the Chairman of the Board of Directors, the
President, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"Trustee" means the party named as the "Trustee" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor.
"United States Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Interests" means interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or a
-5-
<PAGE>
trustee of an entity or to direct the management of the affairs of such
entity.
"Voting Stock" means, with respect to a corporation, all classes of
Capital Stock then outstanding of such corporation normally entitled to vote in
elections of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Voting Stock or
Voting Interests of which (other than directors' qualifying shares) are owned by
the Company or another Wholly Owned Subsidiary.
SECTION 1.02......Other Definitions.
TERM DEFINED IN SECTION
"Act" . . . . . . . . . . . . . . . . . . 1.05
"Additional Interest" . . . . . . . . . . 4.01
"Bankruptcy Law" . . . . . . . . . . . . 6.01
"Control" . . . . . . . . . . . . . . . . 1.01
"Custodian" . . . . . . . . . . . . . . . 6.01
"Event of Default". . . . . . . . . . . . 6.01
"Extension Period". . . . . . . . . . . . 4.01
"Legal Holiday" . . . . . . . . . . . . . 11.08
"Notice of Default" . . . . . . . . . . . 6.01
"Paying Agent" . . . . . . . . . . . . . 2.04
"Register" . . . . . . . . . . . . . . . 2.04
"Registrar" . . . . . . . . . . . . . . . 2.04
"Successor" . . . . . . . . . . . . . . . 5.01
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
-6-
<PAGE>
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural, and words in the plural
include the singular;
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(7) whenever the masculine gender is used herein, it shall be deemed to
include the female gender and the neuter, as well.
SECTION 1.05 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made, given or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of Holders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Securities shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything
-7-
<PAGE>
done, omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(e) If the Company solicits from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a resolution of its Board of Directors, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the outstanding Securities shall be computed as of
such record date.
ARTICLE 2
THE SECURITIES; THE SERIES A SECURITIES
SECTION 2.01 Issue of Securities Generally.
The Securities may be issued in one or more series as from time to time
shall be authorized by the Board of Directors.
The Securities of each series and the Trustee's Certificate of
Authentication shall be substantially in the forms to be attached as exhibits to
this Indenture or supplemental indenture providing for their issuance, but in
the case of Securities other than Series A Securities, with such inclusions,
omissions and variations as are authorized or permitted by this Indenture. The
Securities may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any securities exchange on which the Securities may be listed, or to conform
to usage. Each Security shall be dated the date of its authentication.
The several series of Securities may differ from the Series A Securities,
and as and between series, in respect of any or all of the following matters:
(a) designation;
(b) date or dates of maturity, which may be serial;
-8-
<PAGE>
(c) rate (or method of determining the rate) of interest or
Additional Interest, if any;
(d) interest payment dates and the record dates therefor and the
frequency of interest payments;
(e) Issue Date;
(f) provisions, if any, authorizing the Company to extend the
interest payment dates;
(g) authorized denominations;
(h) the place or places for the payment of principal and for
the payment of interest;
(i) limitation, if any, upon the aggregate principal amount of
Securities of the series which may be issued;
(j) provisions, if any, with regard to any obligation of the Company
to permit the exchange of the Securities of such series into stock or other
securities of the Company or of any other corporations or entities;
(k) provisions, if any, reserving to the Company the right to redeem
all or any part of the Securities of such series before maturity at such time or
times, upon such notice and at such redemption price or prices (together with
accrued interest to the date of redemption) as may be specified in the
respective forms of Securities;
(l) provisions, if any, for any sinking or analogous fund with
respect to the Securities of such series; and
(m) any other provisions expressing or referring to the terms and
conditions upon which the Securities of such series are to be issued under this
Indenture which are not in conflict with the provisions of this Indenture;
in each case as determined and specified by the Board of Directors. The Trustee
shall not authenticate and deliver Securities of any series (other than the
Series A Securities) upon initial issue unless the terms and conditions of such
series shall have been set forth in a supplemental indenture entered into
between the Company and the Trustee as provided in Section 9.01 hereof.
SECTION 2.02 Form of the Series A Securities; Denominations; Global
Security.
The Series A Securities and the Trustee's Certificate of Authentication
shall be substantially in the form of Exhibit A attached hereto. The terms and
provisions contained in the Series A Securities, a form of which is annexed
hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of
this
-9-
<PAGE>
Indenture. The Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
The Trustee shall authenticate and make available for delivery Series A
Securities for original issue in the aggregate principal amount of $103,092,800
for issuance to Penelec Capital in consideration of a cash payment equal to the
principal amount thereof, upon a resolution of the Board of Directors and a
written order of the Company signed by two Officers of the Company, but without
any further action by the Company. Such order shall specify the date on which
the original issue of the Series A Securities is to be authenticated and
delivered. The aggregate principal amount of Series A Securities outstanding at
any time may not exceed $103,092,800, except as provided in Section 2.08 hereof.
The Series A Securities shall be issuable only in registered form without
coupons and only in denominations of $25.00 and any integral multiple thereof.
Initially, the Series A Securities shall be issued as a temporary
certificate in global form, that is, as one Security for the total principal
amount of the Series A Securities to be outstanding, registered in the name of
Penelec Capital. If and when the Series A Securities are registered in the name
of a custodian, the custodian shall be responsible for maintaining records of
the names and addresses of, and the principal amounts owned by, the beneficial
owners of its global Security. After initial issuance, the Series A Securities
may be transferred or exchanged in accordance with Section 2.08 hereof.
SECTION 2.03 Payment of Principal and Interest.
The principal of and interest on the Securities of any series, as well as
any premium thereon in the case of redemption thereof prior to maturity, shall
be payable in the coin or currency of the United States which at the time is
legal tender for public and private debts at the office of the Paying Agent.
Each Security shall be dated its Issue Date. Interest on the Securities shall be
computed on the basis on a 360-day year composed of twelve 30-day months, and
for any period shorter than a full monthly distribution period, distributions
will be computed on the basis of the actual number of days elapsed in such
period.
The interest on any Securities which is payable and is punctually paid or
duly provided for, on any interest payment date for Securities of that series
shall be paid to the person in whose name the Securities are registered at the
close of business on the regular record date therefor. In the event that any
Securities of a particular series or portion thereof is called for redemption,
and the redemption date is subsequent to the regular record date with respect to
any interest payment date and prior to such interest payment date, interest on
such Securities will be paid upon presentation and surrender of such Securities
to the Paying Agent.
-10-
<PAGE>
SECTION 2.04 Execution and Authentication.
The Securities shall be executed on behalf of the Company by its Chief
Executive Officer, its President or one of its Vice Presidents, under its
corporate seal imprinted or reproduced thereon attested by its Secretary or one
of its Assistant Secretaries. The signature of any such Officer on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
Certificate of Authentication duly executed by the Trustee by manual signature
of an authorized officer, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and made available for delivery hereunder.
The Trustee shall act as the initial authenticating agent. Thereafter, the
Trustee, with the concurrence of the Company, may appoint an authenticating
agent. An authenticating agent may authenticate Securities whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as a Paying Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.05 Registrar and Paying Agent.
The Company shall maintain or cause to be maintained, within the State of
New York, an office or agency where the Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented or surrendered for redemption or payment
("Paying Agent"), and an office or agency where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register (the "Register") of the Securities and of their
transfer and exchange. The Register shall be open to inspection by the Company
and the Trustee at all reasonable times. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The terms Paying Agent
and Registrar include any additional paying agent and co-Registrar. The
corporate trust office of the Trustee at 114 West 47th Street, New York, New
York, 10036, Attention: Corporate Trust Department, Department B, shall
initially be the location for the Registrar, Paying Agent and agent for service
of notice or demands on the Company.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-Registrar (if not the
-11-
<PAGE>
Trustee or the Company). The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall give prompt written
notice to the Trustee of any change of location of such office or agency. If at
any time the Company shall fail to maintain or cause to be maintained any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.02 hereof. The
Company shall notify the Trustee of the name and address of any such agent. If
the Company fails to maintain a Registrar, Paying Agent or agent for service of
notices or demands, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07 hereof. The Company
or any Affiliate of the Company may act as Paying Agent, Registrar or
co-Registrar or agent for service of notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in location of any such other office or agency.
SECTION 2.06 Paying Agent to Hold Money in Trust.
Except as otherwise provided herein, prior to each due date of the
principal and interest on any Security, the Company shall deposit with the
Paying Agent a sum of money sufficient to pay such principal and interest so
becoming due. The Company shall require each Paying Agent (other than the
Trustee or the Company) to agree in writing that such Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal and interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. At any time during the continuance of any such default, the Paying
Agent shall, upon the request of the Trustee, forthwith pay to the Trustee all
money so held in trust and account for any money disbursed by it. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee
and to account for any money disbursed by it. Upon doing so, the Paying Agent
shall have no further liability for the money so paid over to the Trustee. If
the Company, a Subsidiary or an Affiliate of either of them acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund.
SECTION 2.07 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall cause to
be furnished to the Trustee
-12-
<PAGE>
on or before the Record Date for each interest payment date and at such other
times as the Trustee may request in writing, within five Business Days of such
request, a list, in such form as the Trustee may reasonably require, of the
names and addresses of Securityholders.
SECTION 2.08 Transfer and Exchange.
When Securities of any series are presented to the Registrar or a
co-Registrar with a request to register the transfer or to exchange them for an
equal principal amount of Securities of the same series of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfer and exchanges of Securities of any series, the Company
shall execute and the Trustee shall authenticate Securities of the same series,
all at the Registrar's request.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by the Holder or his
attorney duly authorized in writing.
The Company shall not charge a service charge for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
pay all taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange of the Securities from the
Securityholder requesting such transfer or exchange (other than any exchange of
a temporary Security for a definitive Security not involving any change in
ownership).
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) any Security for a period beginning at
the opening of business five days before the mailing of a notice of redemption
of Securities and ending at the close of business on the day of such mailing or
(b) any Security selected, called or being called for redemption, except, in the
case of any Security to be redeemed in part, the portion thereof not to be
redeemed.
SECTION 2.09 Replacement Securities.
If (a) any mutilated Security is surrendered to the Company or the
Trustee, or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide
-13-
<PAGE>
purchaser, the Company shall execute in exchange for any such mutilated Security
of any series or in lieu of any such destroyed, lost or stolen Security of any
series, a new Security of the same series and of like tenor and principal
amount, bearing a number not contemporaneously outstanding, and the Trustee
shall authenticate and make such new Security available for delivery.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be redeemed by the Company
pursuant to Article 3 hereof, the Company in its discretion may, instead of
issuing a new Security, pay or purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.09, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Security issued pursuant to this Section 2.09 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and ratably with
any and all other Securities duly issued hereunder.
The provisions of this Section 2.09 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.10 Outstanding Securities; Determinations of Holders' Action.
Securities outstanding at any time are all the Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those mutilated, destroyed, lost or stolen Securities referred to
in Section 2.08 hereof, those redeemed by the Company pursuant to Article 3
hereof, and those described in this Section 2.09 as not outstanding. A Security
does not cease to be outstanding because the Company or a Subsidiary or
Affiliate thereof holds the Security; provided, however, that in determining
whether the Holders of the requisite principal amount of Securities have given
or concurred in any request, demand, authorization, direction, notice, consent
or waiver hereunder, Securities owned by the Company or any Affiliate or
Subsidiary of the Company (other than Penelec Capital, so long as any of its
Preferred Securities are outstanding) shall be disregarded and deemed not to be
outstanding; provided, further, that if the Trustee is making such
determination, it shall disregard only such Securities as it knows to be owned
by the Company or any Affiliate or Subsidiary thereof. Securities owned by
Penelec Capital shall be deemed to be outstanding, so long as any of its
Preferred Securities are outstanding.
-14-
<PAGE>
Subject to the foregoing, only Securities outstanding at the time of such
determination shall be considered in any such determination (including
determinations pursuant to Articles 3, 6 and 9).
If a Security is replaced pursuant to Section 2.09, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds, in accordance with
this Indenture, whenever payment of principal on the Securities is due, whether
at Stated Maturity, upon acceleration or on a Redemption Date, money sufficient
to pay the Securities payable on that date, then immediately on the date of
Stated Maturity, upon acceleration or on such Redemption Date, as the case may
be, such Securities shall cease to be outstanding, and interest, if any, on such
Securities shall cease to accrue.
SECTION 2.11 Temporary and Definitive Securities.
Until definitive Securities are ready for delivery, the Company may
execute temporary Securities, and upon the Company's written request, signed by
two Officers of the Company, the Trustee shall authenticate and make such
temporary Securities available for delivery. Temporary Securities shall be
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
of the same series in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the Officers of the
Company executing such Securities may determine, as conclusively evidenced by
their execution of such Securities. Definitive Securities shall be engraved,
printed or lithographed or may be produced in any other manner reasonably
acceptable to the Company and with such appropriate insertions, omissions,
substitutions and other variations as the Officers of the Company executing such
Securities may determine, as conclusively evidence by their execution of such
Securities.
If temporary Securities of any series are issued (except for the global
form of certificate issued initially as described in Section 2.02 hereof), the
Company shall cause definitive Securities of the same series to be prepared
without unreasonable delay. After the preparation of definitive Securities, the
temporary Securities of the same series shall be exchangeable for such
definitive Securities upon surrender of such temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.05
hereof, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series, the Company shall execute a like
principal amount of definitive Securities of the same series of authorized
denominations, and the Trustee, upon written request of the Company signed by
two Officers of the Company, shall authenticate and make such Securities
available for delivery in exchange therefor. Until
-15-
<PAGE>
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 2.12 Cancellation.
All Securities surrendered for payment, redemption by the Company pursuant
to Article 3 hereof or registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and made available for delivery hereunder which the Company may have acquired in
any manner whatsoever, and all Securities so delivered shall be promptly
canceled by the Trustee. The Company may not reissue, or issue new Securities to
replace, Securities it has paid or delivered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section 2.12, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be destroyed by the
Trustee, and the Trustee shall deliver a certificate of destruction to the
Company.
SECTION 2.13 CUSIP Numbers.
The Company, in issuing the Securities of any series, may use "CUSIP"
numbers applicable to such series (if then generally in use), and the Trustee
shall use CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; provided that any such notice shall state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Securities and
any redemption shall not be affected by any defect in or omission of such
numbers.
SECTION 2.14 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, and such special record date, as used in this
Section 2.14 with respect to the payment of any defaulted interest, shall mean
the 15th day next preceding the date fixed by the Company for the payment of
defaulted interest, whether or not such day is a Business Day. At least ten days
before the subsequent special record date, the Company shall mail to each Holder
and to the Trustee a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest to be paid.
-16-
<PAGE>
ARTICLE 3
REDEMPTION
SECTION 3.01 Redemption Right, Obligation; Notice to Trustee.
(a) The Company, at its option, may redeem the Securities pursuant to
paragraph 6 of the Securities, subject to paragraph (c) hereof.
(b) If Penelec Capital redeems all or a portion of any series of Preferred
Securities, the Company shall also redeem, pursuant to paragraph 6 of the
Securities, all or a corresponding portion, as the case may be, of the series of
Securities that Penelec Capital purchased with the proceeds from the sale of
such series of Preferred Securities. The Company shall also redeem all
outstanding Securities upon the dissolution of Penelec Capital, except in
connection with a Distribution Event.
(c) The Company may not redeem (or otherwise purchase) less than all of
the Securities of any series if as a result of such partial redemption (or
purchase) such series of the Securities would be delisted from any national
securities exchange on which they are then listed, and in such case if the
Company elects to redeem (or otherwise purchase) any of the Securities of such
series, it shall redeem (or otherwise purchase) all of them.
(d) Additional redemption terms for any series of Securities, other than
the Series A Securities, shall be as specified in the supplemental indenture for
such series.
(e) If the Company elects or is required to redeem Securities of any
series, it shall notify the Trustee in writing of the Redemption Date, the
aggregate principal amount of Securities to be redeemed and the Redemption
Price. The Company shall give such notice to the Trustee at least 45 days before
the Redemption Date (unless a shorter notice shall be satisfactory to the
Trustee).
SECTION 3.02 Selection of Securities to be Redeemed.
If less than all the outstanding Securities of any series are to be
redeemed at any time, the Securities of such series to be redeemed will be
selected (i) if all of the Securities of the series to be partially redeemed are
held in global form by the Depository Trust Company or any successor securities
depository, as custodian, it shall select the Securities according to a
determination by the Depository Trust Company or such successor securities
depository or (ii) otherwise, the Trustee shall select the Securities of such
series to be redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities are listed, or if
the Securities are not listed on a national securities exchange, on a pro rata
basis, by lot or, any other method the Trustee considers fair and appropriate.
The Trustee shall make the selection at least 30
-17-
<PAGE>
days, but not more than 90 days, before the Redemption Date from outstanding
Securities not previously called for redemption. Securities and portions of them
the Trustee selects shall be in authorized denominations only. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03 Notice of Redemption; Conditional Notice.
At least 30 days but not more than 90 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first-class
mail, postage prepaid, to each Holder of Securities to be redeemed at the
Holder's last address, as it appears on the Register. A copy of such notice
shall be mailed to the Trustee when the notice is mailed to Holders of
Securities. At the Company's written request, the Trustee shall give the notice
of redemption in the Company's name and at its expense.
The notice shall identify the Securities (by series and by certificate
number) to be redeemed, the provision of the Securities or this Indenture
pursuant to which the Securities called for redemption are being redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the CUSIP number (subject to Section 2.12 hereof);
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(6) if fewer than all the outstanding Securities of any series are to be
redeemed, the identification and principal amounts of the particular Securities
to be redeemed and that, on and after the Redemption Date, upon surrender of
such Securities, a new Security or Securities of the same series in principal
amount equal to the unredeemed portion thereof will be issued; and
(7) that, unless the Company defaults in making such redemption payment,
interest will cease to accrue on Securities called for redemption on and after
the Redemption Date.
If, when a notice of optional redemption is mailed, the Company shall not
have irrevocably directed the Trustee to apply towards such redemption funds
deposited with the Trustee or held by it for the redemption of the Securities
called for redemption, such notice may state that it is subject to the receipt
of the redemption monies by the Trustee on or before the Redemption Date, and in
such case, the notice of redemption shall be of no effect
-18-
<PAGE>
unless such monies are so received on or before the Redemption Date.
SECTION 3.04 Effect of Notice of Redemption.
Subject to the provisions of the last paragraph of Section 3.03 hereof,
after notice of redemption is given, all Securities called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon the
later of the Redemption Date and the date such Securities are surrendered to the
Trustee or the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued and unpaid interest, including Additional Interest, if any,
and accrued interest thereon, to the Redemption Date.
SECTION 3.05 Deposit of Redemption Price.
Subject to the provisions of the last paragraph of Section 3.03 hereof, on
or prior to a Redemption Date, the Company shall irrevocably deposit with the
Trustee or the Paying Agent (or if the Company or an Affiliate is the Paying
Agent, the Company shall segregate and hold in trust or cause such Affiliate to
segregate and hold in trust) money sufficient to pay the Redemption Price of,
and accrued and unpaid interest, including Additional Interest, if any, and
accrued interest thereon, on all Securities to be redeemed on that date. After
the Redemption Date, interest ceases to accrue on the Securities to be redeemed
with respect to which the Company has deposited sufficient money to pay the
Redemption Price and accrued interest whether or not such Securities are
surrendered for payment. Subject to applicable law, the Trustee or the Paying
Agent shall return to the Company three years after the Redemption Date any
money deposited with it and not applied for redemption.
SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security of any series that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security of the same series
equal in principal amount to the unredeemed portion of such Security.
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of the Securities.
(a) The Company shall pay the principal of and interest (including
interest accruing on or after the filing of a petition in bankruptcy or
reorganization relating to the Company, whether or not a claim for post-filing
interest is allowed in such proceeding) on the Securities on the dates and in
the manner provided in the Securities or pursuant to this Indenture. An
installment of
-19-
<PAGE>
principal or interest shall be considered paid on the applicable date due if on
such date the Trustee or the Paying Agent holds, in accordance with this
Indenture, money sufficient to pay all of such installment then due. The Company
shall pay interest on overdue principal and interest on overdue installments of
interest (including interest accruing during an Extension Period (as hereinafter
defined) and/or on or after the filing of a petition in bankruptcy or
reorganization relating to the Company, whether or not a claim for post-filing
interest is allowed in such proceeding), to the extent lawful, at the rate per
annum borne by the Securities in default, which interest on overdue interest
shall accrue from the date such amounts became overdue, or from such other date
as may be specified in the Securities.
(b) Notwithstanding paragraph (a) of this Section 4.01 or any other
provision herein to the contrary, if before an event occurs which, under the
terms of the Series A Preferred Securities, results in a distribution of Series
A Securities to the holders of the Series A Preferred Securities in liquidation
of their interests in Penelec Capital, the Company makes a payment under the
Guarantee, the Company shall receive a credit for any payment it makes (i) in
lieu of a periodic distribution to the holders of the Series A Preferred
Securities pursuant to the Guarantee, and the Company shall have no obligation
to pay interest on the Series A Securities in the amount of such payment and
(ii) in lieu of a liquidation or redemption distribution to the holders of the
Series A Preferred Securities pursuant to the Guarantee, and the Company shall
have no obligation to pay the principal of the Series A Securities in the amount
of such payment. The Company shall notify the Trustee and the Holders of any
credit to which it is entitled hereunder.
(c) Notwithstanding paragraph (a) of this Section 4.01 or any other
provision herein to the contrary, the Company shall have the right in its sole
and absolute discretion at any time and from time to time while the Series A
Securities are outstanding, so long as an Event of Default has not occurred and
is not continuing, to extend the interest payment period for up to 20
consecutive quarterly periods, but not beyond the Stated Maturity or Redemption
Date of such Securities, provided that at the end of each such period (referred
to herein as an "Extension Period") the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified in the
title of the Series A Securities to the extent permitted by applicable law); and
provided that, during any such Extension Period, neither the Company nor any
Subsidiary, (i) 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 paid to the Company by a Wholly Owned Subsidiary) or make
any guarantee payments with respect to the foregoing, or (ii) make any interest,
principal or premium payment or repurchase or redeem any of its debt securities
that rank equal with or junior to the Series A Securities. Prior to the
termination of an Extension Period, the Company may shorten or may further
extend the interest payment period, provided that such Extension Period together
with all such further extensions may not exceed 20 consecutive quarterly
periods. If Penelec Capital is
-20-
<PAGE>
the sole holder of the Securities, the Company shall give Penelec Capital notice
of its selection of such extended interest payment period one Business Day prior
to the earlier of (i) the date any distributions on Preferred Securities are
payable or (ii) the date Penelec Capital is required to give notice to any
national securities exchange on which the Preferred Securities are listed or
other applicable self-regulatory organization or to the holders of the Preferred
Securities of the record date or the date such distribution is payable, but in
any event not less than one Business Day prior to such record date. The Company
shall cause Penelec Capital to give notice of the Company's selection of such
extended interest payment period to the holders of the Preferred Securities. If
Penelec Capital shall not be the sole holder of the Securities, the Company will
give the holders of the Securities notice of its selection of such extended
interest payment period ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date the Company is required to give notice of
the record or payment date of such related interest payment to any national
securities exchange on which the Securities are then listed or other applicable
self-regulatory organization or to holders of the Securities, but in any event
not less than two Business Days prior to such record date. The Company shall
give or cause the Trustee to give such notice of the Company's selection of such
extended interest payment period to the Holders.
(d) If and when Penelec Capital is required to pay any federal, state or
local taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes), then the Company shall pay additional interest
("Additional Interest") on the Securities in such amounts as shall be required
so that the net amounts received and retained by Penelec Capital as a
Securityholder after paying such taxes, duties, assessments or charges will not
be less than the amounts that Penelec Capital as a Securityholder would have
received had no such taxes, duties, assessments or charges been imposed. The
Company shall furnish the Trustee with an Officer's Certificate or other written
notice reporting the events described in this subsection and their consequences.
(e) If and when Penelec Capital redeems the Series A Preferred Securities
in accordance with their terms, the Series A Securities shall become due and
payable in a principal amount equal to the aggregate stated liquidation
preference of such Series A Preferred Securities, together with all accrued and
unpaid interest, including Additional Interest, if any, and accrued interest
thereon to the date of payment. The Company shall furnish the Trustee with an
Officer's Certificate or other written notice reporting the events described in
this subsection and their consequences.
SECTION 4.02 Prohibition Against Dividends, etc. During an Event of
Default.
Neither the Company nor any Subsidiary shall declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation
-21-
<PAGE>
payment with respect to, any of its Capital Stock, other than dividends paid to
the Company by a Wholly Owned Subsidiary, if at such time (a) 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, or (b) any Preferred Securities are at the
time outstanding and the Company is in default under the Guarantee.
SECTION 4.03 SEC Reports.
The Company shall file with the Trustee, within 15 days after it files
them with the SEC, copies of its annual report and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act. If the
Company is not subject to the reporting requirements of Sections 13 or 15(d) of
the Exchange Act, the Company shall file with the Trustee and the SEC, in
accordance with the rules and regulations prescribed by the SEC, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act, in respect of a security
listed and registered on a national securities exchange as may be prescribed in
such rules and regulations. The Company shall also comply with the provisions of
Section 314(a) of the TIA.
SECTION 4.04 Compliance Certificates.
(a) The Company shall deliver to the Trustee within 90 days after the end
of each of the Company's fiscal years an Officer's Certificate, stating whether
or not the signer knows of any Default or Event of Default. Such certificate
shall contain a certification from the principal executive officer, principal
financial officer or principal accounting officer of the Company as to his or
her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this Section 4.04(a), such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture. If such Officer does know of such a
Default or Event of Default, the certificate shall describe any such Default or
Event of Default, and its status. Such Officer's Certificate need not comply
with Section 11.04 hereof.
(b) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, as promptly as practicable after any Officer becomes
aware of any continuing Default or Event of Default, an Officer's Certificate
specifying such Default, Event of Default or other default and what action the
Company is taking or proposes to take with respect thereto.
(c) The Company shall deliver to the Trustee any information reasonably
requested by the Trustee in connection with the compliance by the Trustee or the
Company with the TIA.
-22-
<PAGE>
SECTION 4.05 Relationship with Penelec Capital.
The Company agrees: (a) to maintain direct or indirect, through a wholly
owned subsidiary, 100% ownership of the General Partner and will cause the
General Partner to maintain 100% ownership of the general partner interests in
Penelec Capital; (b) to maintain general partner interests representing 3% of
all interests in the capital, income, gain, loss, deduction and credit of
Penelec Capital; (c) 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 (d) to use its reasonable
efforts to cause Penelec Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for United States federal income tax
purposes.
SECTION 4.06 Further Instruments and Acts.
Upon request of the Trustee, the Company shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
SECTION 4.07 Investment Company Act.
The Company shall not become an investment company subject to registration
under the Investment Company Act of 1940, as amended.
SECTION 4.08 Payments for Consents.
Neither the Company nor any Subsidiary shall, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Securities for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or agreed to
be paid to all Holders of the Securities who so consent, waive or agree to amend
in the time frame set forth in the documents soliciting such consent, waiver or
agreement.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When the Company May Merge, Etc.
The Company may not consolidate with or merge with or into, or sell,
convey, transfer or lease all or substantially all of its assets (either in one
transaction or a series of transactions) to, any Person unless:
(a) the Person formed by or surviving such consolidation or
-23-
<PAGE>
merger or to which such sale, conveyance, transfer or lease shall have been made
(the "Successor") if other than the Company, is organized and existing under the
laws of the United States of America or any State thereof or the District of
Columbia, and the Successor (i) shall expressly assume by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and the
Indenture, and (ii) if any Preferred Securities are then outstanding, the
Successor shall expressly assume the Company's obligations under the Guarantee,
and shall become or acquire the general partner of, or any person with
substantially equivalent authority to act for, Penelec Capital;
(b) 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; and
(c) the Company delivers to the Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
conveyance, transfer or lease and such supplemental indenture comply with this
Indenture.
The Successor will be the successor to the Company, and will be
substituted for, and may exercise every right and power and become the obligor
on the Securities with the same effect as if the Successor had been named as,
the Company herein. The predecessor shall be released from the obligations of
the Company set forth in this Indenture and in the Securities.
Anything in this Indenture to the contrary notwithstanding, the sale,
conveyance or other transfer by the Company of (i) all or any portion of its
facilities for the generation of electric energy, or (ii) 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 sale, conveyance or other transfer of all the properties
of the Company, as or substantially as an entirety. The character of particular
facilities shall be determined in accordance with the Uniform System of Accounts
prescribed for public utilities and licensees subject to the Federal Power Act,
as amended, to the extent applicable.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" occurs if one of the following shall have occurred
and be continuing:
(a) The Company defaults in the payment, when due and payable, of (i)
interest on any Security or Additional Interest, if any, and the default
continues for a period of 15 days, or (ii) the
-24-
<PAGE>
principal of any Security when the same becomes due and payable at maturity,
upon acceleration, on any Redemption Date, or otherwise; provided that the
failure of the Company to pay interest or Additional Interest on any series of
Securities during an Extension Period applicable to the Securities of such
series shall not constitute a default hereunder;
(b) The Company defaults in the performance of, fails to comply with, any
of its other covenants or agreements in the Securities or this Indenture and
such failure continues for 60 days after receipt by the Company of a "Notice of
Default";
(c) The Company, pursuant to or within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding;
(2) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(3) consents to the appointment of a Custodian of it or for all or
substantially all of its property, and such Custodian is not
discharged within 90 days;
(4) makes a general assignment for the benefit of its
creditors; or
(5) admits in writing its inability to pay its debts generally
as they become due; or
(d) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(l) is for relief against the Company in an involuntary case or
proceeding;
(2) appoints a Custodian of the Company or for all or
substantially all of its properties; or
(3) orders the liquidation of the Company;
and in each case the order or decree remains unstayed and in effect for 90
days.
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator, custodian or similar
official under any Bankruptcy Law.
-25-
<PAGE>
A Default under clause (b) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least a majority in aggregate
principal amount of the Securities at the time outstanding notify the Company
and the Trustee, of the Default and the Company does not cure such Default
within the time specified in clause (b) above after receipt of such notice. Any
such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default."
SECTION 6.02 Acceleration.
If any Event of Default other than an Event of Default under clauses (c)
or (d) of Section 6.01 hereof occurs and is continuing, the Trustee may, by
notice to the Company, or the Holders of at least a majority in aggregate
principal amount of the Securities at the time outstanding or the Special
Representative may, by notice to the Company and the Trustee (each, an
"Acceleration Notice"), and the Trustee shall, upon the request of such Holders
or Special Representative, declare the principal of and accrued and unpaid
interest, including Additional Interest, if any, and accrued interest thereon,
on all of the Securities to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately.
The Company shall deliver to the Trustee, as promptly as practicable after
it obtains knowledge thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (b) of Section 6.01 hereof, its
status and what action the Company is taking or proposes to take with respect
thereto.
If an Event of Default specified in clauses (c) or (d) of Section 6.01
hereof occurs, the principal of and interest, including Additional Interest, if
any, on all the Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Securityholders.
The Special Representative or Holders of a majority in aggregate principal
amount of the Securities at the time outstanding, by notice to the Trustee, may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may, in its
own name or as trustee of an express trust, institute, pursue and prosecute any
proceeding, including, without limitation,
-26-
<PAGE>
any action at law or suit in equity or other judicial or administrative
proceeding to collect the payment of principal of or interest on the Securities,
or to enforce the performance of any provision of the Securities or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of the Securities in the proceeding. A
delay or omission by the Trustee, the Special Representative or any
Securityholder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of, or
acquiescence in, the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults.
Subject to Section 6.07 hereof, the Special Representative or the Holders
of a majority in aggregate principal amount of the Securities of any series at
the time outstanding, by notice to the Trustee (and without notice to any other
Securityholder), may waive an existing Default or Event of Default affecting the
Securities of such series and its consequences. When a Default is waived, it is
deemed cured and shall cease to exist, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05 Control by Majority or the Special Representative.
The Holders of a majority in aggregate principal amount of the Securities
at the time outstanding or, in the event a Special Representative has been
appointed, the Special Representative, may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines in good faith is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal liability. The
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction, including withholding notice to the Holders of
the Securities of any series of continuing default (except in the payment of the
principal (other than any mandatory sinking fund payment) of (or premium, if
any) or interest on any Securities of such series) if the Trustee considers it
in the interest of the Holders of such series of Securities to do so.
SECTION 6.06 Limitation on Suits.
Except as provided in Section 6.07 hereof, a Securityholder or the Special
Representative may not pursue any remedy with respect to this Indenture or the
Securities unless:
-27-
<PAGE>
(a) the Holders or the Special Representative, as the case may be,
gives to the Trustee written notice stating that an Event of Default is
continuing;
(b) the Holders of at least a majority in aggregate principal amount
of the Securities at the time outstanding or the Special Representative, as the
case may be, make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders or the Special Representative, as the
case may be, offer to the Trustee reasonable security and indemnity against any
loss, liability or expense satisfactory to the Trustee;
(d) the Trustee does not comply with the request within 60 days
after receipt of the notice, the request and the offer of security and
indemnity; and
(e) the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding or the Special Representative, as the case
may be, do not give the Trustee a direction inconsistent with the request during
such 60 days.
A Securityholder may not use this Indenture to prejudice the rights of any
other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of the principal amount of or interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities (in the case of interest, as the same may be extended pursuant
to the provisions of this Indenture and the Securities) or any Redemption Date,
or to bring suit for the enforcement of any such payment on or after such
respective dates shall not be impaired or affected adversely without the consent
of each such Holder.
SECTION 6.08 Collection Suit by the Trustee.
If an Event of Default described in Section 6.01(a) hereof occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any obligor on the Securities for the
whole amount owing with respect to the Securities and the amounts provided for
in Section 7.07 hereof.
SECTION 6.09 The Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment,
-28-
<PAGE>
composition or other judicial proceeding relating to the Company or its
properties or assets, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal
amount and interest on the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and of the Holders allowed
in such judicial proceeding; and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the Trustee any amount
due it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for the principal amount, Redemption Price or
interest, if any, as the case may be, ratably, without
preference or priority of any kind, according to such
amounts due and payable on the Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may
-29-
<PAGE>
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 hereof or a suit by Holders of more than 10% in aggregate principal amount
of the Securities at the time outstanding or a suit by the Special
Representative.
SECTION 6.12 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, that would
prohibit or forgive the Company from paying all or any portion of the principal
or interest on the Securities (or interest on such interest accrued during an
Extension Period or period of Default) as contemplated herein or affect the
covenants or the performance by the Company of its obligations under this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 7
THE TRUSTEE
SECTION 7.01 Duties of the Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default, (i) the Trustee
need perform only those duties that are specifically set forth in this Indenture
and no others; and (ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, in the
case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine
the certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
-30-
<PAGE>
(c) No provision in this Indenture shall relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraphs (a)
and (b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof; and
(4) the Trustee may refuse to perform any duty or exercise any
right or power or extend or risk its own funds or otherwise
incur any financial liability unless it receives security and
indemnity reasonably satisfactory to it against any loss,
liability or expense.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01 and
to Section 7.02.
(e) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall not be
liable for interest on any money held by it hereunder.
SECTION 7.02 Rights of the Trustee.
Except as otherwise provided in Section 7.01 hereof:
(a) the Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
shall not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
determines to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally or by
agent or attorney;
(b) whenever the Trustee is requested by the Company to act or
refrain from acting hereunder, the Trustee may require an Officer's Certificate
directing it to act or refrain from so acting, and, if appropriate, an Opinion
of Counsel. The Trustee shall not be liable for any action it takes or omits to
take in the
-31-
<PAGE>
absence of bad faith in reliance on such Officer's Certificate and Opinion of
Counsel;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care;
(e) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers;
(f) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon; and
(g) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security and indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
SECTION 7.03 Individual Rights of the Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not the Trustee. Any
Paying Agent, Registrar or co-Registrar may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11 hereof.
SECTION 7.04 The Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in this Indenture or the Securities or any report or certificate
issued by the Company hereunder (other than the Trustee's Certificate of
Authentication), or the determination as to which beneficial owners are entitled
to receive any notices hereunder.
-32-
<PAGE>
SECTION 7.05 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Securityholder, as their names and addresses
appear on the Security Register, notice of the Default within 90 days after it
becomes known to the Trustee unless such Default shall have been cured or
waived. Except in the case of a Default described in Section 6.01(a) hereof, the
Trustee may withhold such notice if and so long as a committee of Trust Officers
in good faith determines that the withholding of such notice is in the interests
of Securityholders. The second sentence of this Section 7.05 shall be in lieu of
the proviso to TIA Section 315(b). Said proviso is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each May 31 beginning with the May 31 next following
the date of this Indenture, the Trustee shall mail to each Securityholder a
brief report dated as of such May 31 in accordance with and to the extent
required under TIA Section 313.
A copy of each report at the time of its mailing to Securityholders shall
be filed with the Company, the SEC and each securities exchange on which the
Securities are listed. The Company agrees to promptly notify the Trustee
whenever the Securities become listed on any securities exchange and of any
delisting thereof.
SECTION 7.07 Compensation and Indemnity.
The Company agrees:
(a) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and advances of its agents and counsel), including
all reasonable expenses and advances incurred or made by the Trustee in
connection with any membership on any creditors' committee, except any such
expense or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee, its officers, directors and
shareholders, for, and to hold it harmless against, any and all loss, liability
or expense, incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including
the costs and
-33-
<PAGE>
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
The Trustee shall have a claim and lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 7.07, except with respect to funds
held in trust for the payment of principal of or interest on particular
Securities.
The Company's payment obligations pursuant to this Section 7.07 are not
subject to Article 10 of this Indenture and shall survive the discharge of this
Indenture. When the Trustee renders services or incurs expenses after the
occurrence of a Default specified in Section 6.01 hereof, the compensation for
services and expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.08 Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing at least 30
days prior to the date of the proposed resignation; provided, however, no such
resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.08. The Holders of a majority in
aggregate principal amount of the Securities at the time outstanding may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee, which shall be subject to the consent of the Company unless an Event of
Default has occurred and is continuing. The Trustee shall resign if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the
retiring Trustee and to the Company. Thereupon the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders.
Subject to payment of all amounts owing to the Trustee under Section 7.07 hereof
and subject further to its lien under Section 7.07, the retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 30 days after the retiring
Trustee resigns or is removed, the retiring
-34-
<PAGE>
Trustee, the Company or the Holders of a majority in aggregate principal amount
of the Securities at the time outstanding may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Securityholder may petition any court of competent jurisdiction for its removal
and the appointment of a successor Trustee.
SECTION 7.09 Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets (including this
Trusteeship) to, another corporation, the resulting, surviving or transferee
corporation without any further act shall, with the concurrence of the Company,
be the successor Trustee.
SECTION 7.10 Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA Sections
310(a)(1) and 310(a)(2). The Trustee shall have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent published annual report
of condition. The Trustee shall comply with TIA Section 310(b). In determining
whether the Trustee has conflicting interests as defined in TIA Section
310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1)
shall be deemed incorporated herein.
SECTION 7.11 Preferential Collection of Claims Against the Company.
If and when the Trustee shall be or become a creditor of the Company, the
Trustee shall be subject to the provisions of the TIA regarding the collection
of claims against the Company.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE;
DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS
SECTION 8.01 Satisfaction and Discharge of Indenture.
The Company shall be deemed to have paid and discharged the entire
indebtedness on all Securities outstanding upon the deposit referred to in
subparagraph (a) below, and the provisions of this Indenture with respect to the
Securities shall no longer be in effect (except as to (1) the rights of
registration of transfer, substitution and exchange of Securities, (2) the
replacement of apparently mutilated, defaced, destroyed, lost or stolen
Securities, (3) the rights of Holders to receive payments of principal thereof
and interest thereon, (4) the rights of the
-35-
<PAGE>
Holders as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them, (5) the obligation of the Company to
maintain an office or agency for payments on and registration of transfer of the
Securities, and (6) the rights, obligations and immunities of the Trustee
hereunder) and the Trustee shall, at the request and expense of the Company,
execute proper instruments acknowledging the same, if:
(a) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders (i)
cash in an amount, or (ii) United States Government Obligations, maturing as to
principal and interest at such times and in such amounts as will ensure the
availability of cash, or (iii) a combination thereof, sufficient to pay the
principal of, and interest on, all Securities then outstanding, whether at the
Stated Maturity, upon acceleration or upon the redemption of the Securities;
(b) no Default or Event of Default with respect to the Securities
has occurred and is continuing on the date of such deposit or occurs as a result
of such deposit;
(c) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the defeasance contemplated by this provision have been
complied with; and
(d) the Company has delivered to the Trustee (i) either a private
Internal Revenue Service ruling or an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount and in the manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred, and (ii) an Opinion of Counsel to the effect that (y) the deposit
shall not result in the Company, the Trustee or the trust being deemed to be an
"investment company" under the Investment Company Act of 1940, as amended, and
(z) such deposit creates a valid trust in which the Holders of the Securities
have the sole beneficial ownership interest or that the Holders of the
Securities have a nonavoidable first priority security interest in such trust.
Notwithstanding the foregoing, the Company's obligations to pay principal of and
interest, including Additional Interest, if any, on the Securities shall
continue until the Internal Revenue Service ruling or Opinion of Counsel
referred to in clause (i) above is provided with regard to and without reliance
upon such obligations continuing to be obligations of the Company.
SECTION 8.02 Application by Trustee of Funds Deposited for Payment of
Securities.
Subject to Section 8.04 and Article 10 of this Indenture, all moneys
deposited with the Trustee pursuant to Section 8.01 hereof shall be held in
trust and applied by it to the payment, either
-36
<PAGE>
directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the Holders of the particular Securities for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 8.03 Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture, all
moneys then held by any Paying Agent under this Indenture shall, upon demand of
the Company, be repaid to it or paid to the Trustee, and thereupon such Paying
Agent shall be released from all further liability with respect to such moneys.
SECTION 8.04 Return of Moneys Held by the Trustee and Paying Agent
Unclaimed for Three Years.
Any moneys deposited with or paid to the Trustee or any Paying Agent for
the payment of the principal or interest on any Security and not applied but
remaining unclaimed for three years after the date when such principal or
interest shall have become due and payable shall, upon the written request of
the Company and unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, be repaid to the Company by the
Trustee or such Paying Agent, and the Holder of such Security shall, unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Company for any payment
which such Holder may be entitled to collect, and all liability of the Trustee
or any Paying Agent with respect to such moneys shall thereupon cease.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders.
From time to time, when authorized by a resolution of the Board of
Directors, the Company and the Trustee, without notice to or the consent of the
Holders of the Securities issued hereunder or the Special Representative, may
amend or supplement this Indenture or the Securities:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article 5 hereof;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
-37-
<PAGE>
(d) to make any other change that does not adversely affect the
rights of any Securityholder;
(e) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA; or
(f) to set forth the terms and conditions, which shall not be
inconsistent with this Indenture, of the series of Securities (other than the
Series A Securities) that are to be issued hereunder and the form of Securities
of such series.
SECTION 9.02 With Consent of Holders.
With the written consent of the Holders of at least a majority in
aggregate principal amount of any series of Securities at the time outstanding,
who are affected by any amendment or waiver, or, in the event a Special
Representative has been appointed, with the written consent of the Special
Representative, the Company and the Trustee may amend this Indenture or the
Securities or may waive future compliance by the Company with any provisions of
this Indenture or the Securities of such series. However, without the consent of
each Securityholder affected, such an amendment or waiver may not:
(a) reduce the principal amount of the Securities, or reduce the
principal amount of the Securities the Holders of which must consent to an
amendment of this Indenture or a waiver;
(b) change the Stated Maturity of the principal of, or the interest
or rate of interest on the Securities, change adversely to the Holders the
redemption provisions of Article 3 hereof or in the Securities, or impair the
right to institute suit for the enforcement of any such payment or make any
Security payable in money or securities other than that stated in the Security;
(c) make any change in Article 10 hereof that adversely affects the
rights of the Holders of the Securities or any change to any other section
hereof that adversely affects their rights under Article 10 hereof;
(d) waive a Default in the payment of the principal of, or interest
on, any Security; or
(e) change Section 6.07 hereof.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
If certain Holders agree to defer or waive certain obligations of the
Company hereunder with respect to Securities held by them, such deferral or
waiver shall not affect the rights of any other
-38-
<PAGE>
Holder to receive the payment or performance required hereunder in a timely
manner, unless such deferral or waiver complies with the requirements of this
Section 9.02.
After an amendment or waiver under this Section 9.02 becomes effective,
the Company shall mail to the Special Representative and to each Holder affected
by such amendment or waiver a notice briefly describing the amendment or waiver.
Any failure of the Company to mail such notices, or any defect therein, shall
not, however, in any way impair or affect the validity of such amendment or
waiver.
SECTION 9.03 Compliance with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article 9 shall
comply with the TIA.
SECTION 9.04 Revocation and Effect Of Consents, Waivers and Actions.
Until an amendment, waiver or other action by Holders becomes effective, a
consent to it or any other action by a Holder of a Security hereunder is a
continuing consent by the Holder and every subsequent Holder of that Security or
portion of the Security that evidences the same obligation as the consenting
Holder's Security, even if notation of the consent, waiver or action is not made
on the Security. However, any such Holder or subsequent Holder may revoke the
consent, waiver or action as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the consent of
the requisite aggregate principal amount of the Securities at the time
outstanding has been obtained and not revoked. After an amendment, waiver or
action becomes effective, it shall bind every Securityholder, except as provided
in Section 9.02 hereof.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment or
waiver. If a record date is fixed, then, notwithstanding the first two sentences
of the immediately preceding paragraph, those Persons who were Holders at such
record date or their duly designated proxies, and only those Persons, shall be
entitled to consent to such amendment, supplement or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date.
SECTION 9.05 Notation on or Exchange of Securities.
Securities authenticated and made available for delivery after the
execution of any supplemental indenture pursuant to this Article 9 may, and
shall, if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities of any series so modified as to
conform,
-39-
<PAGE>
in the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and made available for delivery by the Trustee in exchange for
outstanding Securities of the same series.
SECTION 9.06 Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental indenture authorized pursuant to
this Article 9 if the supplemental indenture does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment the Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an
Officer's Certificate and Opinion of Counsel stating that such supplemental
indenture is authorized or permitted by this Indenture.
SECTION 9.07 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article 9,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes and every Holder
of Securities theretofore or thereafter authenticated and made available for
delivery hereunder shall be bound thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.01 Securities Subordinated to Senior Indebtedness.
Notwithstanding the provisions of Section 6.01 hereof or any other
provision herein or in the Securities, the Company and the Trustee and each
Holder by his acceptance thereof (a) covenant and agree that all payments by the
Company of the principal of and interest (which term for purposes of this
Article 10 shall include Additional Interest, if any, and any additional accrued
interest) on the Securities shall be subordinated in accordance with the
provisions of this Article 10 to the prior payment in full, in cash or cash
equivalents, of all amounts payable on Senior Indebtedness, and (b) acknowledge
that holders of Senior Indebtedness are or shall be relying on this Article 10.
SECTION 10.02 Priority and Payment of Proceeds in Certain Events;
Remedies Standstill.
(a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, 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
-40-
<PAGE>
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 in cash, or payment provided for
in cash or cash equivalents, before the Holders or the Trustee on behalf of the
Holders shall be entitled to receive from the Company any payment of principal
of or interest on or any other amounts in respect of the Securities or
distribution of any assets or securities. Before any payment may be made by the
Company of the principal of or interest on the Securities upon any such
dissolution or winding up or liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee on
their behalf would be entitled, except for the provisions of this Article 10,
shall be made by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution
first to the holders of all Senior Indebtedness or their representatives to the
extent necessary to pay all Senior Indebtedness in full after giving effect to
any concurrent payment or distribution to the holders of Senior Indebtedness.
(b) No direct or indirect payment by or on behalf of the Company of
principal of or interest on the Securities whether pursuant to the terms of the
Securities or upon acceleration or otherwise shall be made if, at the time of
such payment, there exists any default in the payment of all or any portion of
any Senior Indebtedness, or any other default affecting Senior Indebtedness
permitting its acceleration, as the result of which the maturity of Senior
Indebtedness has been accelerated, and the Trustee has received written notice
from any trustee, representative or agent for the holders of the Senior
Indebtedness or the holders of at least a majority in principal amount of the
Senior Indebtedness at the time outstanding of such default and acceleration,
and such default shall not have been cured or waived by or on behalf of the
holders of such Senior Indebtedness.
(c) If, notwithstanding the foregoing provision prohibiting such payment
or distribution, the Trustee, any Holder or the Special Representative shall
have received any payment on account of the principal of or interest on the
Securities (other than as permitted by subsections (a) and (b) of this Section
10.02) when such payment is prohibited by this Section 10.02 and before all
amounts payable on Senior Indebtedness are paid in full in cash or cash
equivalents, then and in such event (subject to the provisions of Section 10.08
hereof) such payment or distribution shall be received and held in trust for the
holders of Senior Indebtedness and shall be paid over or delivered first to the
representatives of the holders of the Senior Indebtedness remaining unpaid to
the extent necessary to pay such Senior Indebtedness in full in cash or cash
equivalents.
Upon any payment or distribution of assets or securities referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which such dissolution,
winding up,
-41-
<PAGE>
liquidation or reorganization proceedings are pending, and upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making any such payment or distribution, delivered to the Trustee for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.03 Payments which May Be Made Prior to Notice.
Nothing in this Article 10 or elsewhere in this Indenture shall prevent (a
the Company, except under the conditions described in Section 10.02 hereof, from
making payments of principal of and interest on the Securities or from
depositing with the Trustee any monies for such payments, or (b the application
by the Trustee of any monies deposited with it for the purpose of making such
payments of principal of and interest on the Securities, to the Holders entitled
thereto, unless at least one day prior to the date when such payment would
otherwise (except for the prohibitions contained in Section 10.02 hereof) become
due and payable, the Trustee shall have received the written notice provided for
in Section 10.02(b) hereof.
SECTION 10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time or in any way be
prejudiced or impaired by any good faith act or omission to act by any such
holder, or by any noncompliance by the Company with the terms and provisions and
covenants herein regardless of any knowledge thereof any such holder may have or
otherwise be charged with.
The provisions of this Article 10 are intended to be for the benefit of,
and shall be enforceable directly by, the holders of Senior Indebtedness.
Notwithstanding anything to the contrary in this Article 10, to the extent
the Holders or the Trustee have paid over or delivered to any holder of Senior
Indebtedness any payment or distribution received on account of the principal
of, or interest on, the Securities to which any other holder of Senior
Indebtedness shall be entitled to share in accordance with Section 10.02 hereof,
no holder of Senior Indebtedness shall have a claim or right against the Holders
or the Trustee with respect to any such payment or distribution or as a result
of the failure to make payments or distributions to such other holder of Senior
Indebtedness.
-42-
<PAGE>
SECTION 10.05 Trustee May Take Action to Effectuate Subordination.
Each Holder by his acceptance of the Securities authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate, as between the holders of Senior Indebtedness and the Holders, the
subordination and the subrogation as provided in this Article 10 and appoints
the Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.06 Subrogation.
Upon the payment in full, in cash or cash equivalents, of all Senior
Indebtedness, the Holders 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 Securities shall be paid in
full; and for the purposes of such subrogation, no payments or distributions to
holders of such Senior Indebtedness of any cash, property or securities to which
Holders of the Securities would be entitled, except for this Article 10, and no
payment pursuant to this Article 10 to holders of such Senior Indebtedness by
the Holders of the Securities, shall, as between the Company, its creditors
other than holders of such Senior Indebtedness and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness, it being understood that the provisions of this Article 10
are solely for the purpose of defining the relative rights of the holders of
such Senior Indebtedness, on the one hand, and the Holders of the Securities, on
the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article 10
shall have been applied, pursuant to this Article 10, to the payment of all
Senior Indebtedness, then and in such case, the Holders of the Securities shall
be entitled to receive from the holders of such Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay, in cash or cash
equivalents, all such Senior Indebtedness in full.
SECTION 10.07 Obligations of Company Unconditional; Reinstatement.
Nothing in this Article 10, or elsewhere in this Indenture or in any
Security, is intended to or shall impair, as between the Company and the Holders
of the Securities, the obligations of the Company, which are absolute and
unconditional, to pay to the Holders the principal of, and interest on, the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee, the Special Representative or any Holder from exercising all remedies
otherwise permitted by
-43-
<PAGE>
applicable law upon Default under this Indenture, subject to the rights, if any,
under this Article 10 of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Company received upon the exercise of any
such remedy.
The failure to make a scheduled payment of principal of, or interest on,
the Securities by reason of Section 10.02 hereof shall not be construed as
preventing the occurrence of an Event of Default under Section 6.01 hereof;
provided, however, that if (a the conditions preventing the making of such
payment no longer exist, and (b the Holders of the Securities are made whole
with respect to such omitted payments, the Event of Default relating thereto
(including any failure to pay any accelerated amounts) shall be automatically
waived, and the provisions of the Indenture shall be reinstated as if no such
Event of Default had occurred.
SECTION 10.08 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee or Paying Agent shall not be charged with the knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee or Paying Agent, unless and until the Trustee or Paying Agent shall
have received written notice thereof from the Company or one or more holders of
Senior Indebtedness or from any trustee or agent therefor or unless the Trustee
or Paying Agent otherwise had actual knowledge thereof; and, prior to the
receipt of any such written notice or actual knowledge, the Trustee or Paying
Agent may conclusively assume that no such facts exist.
Unless at least one day prior to the date when by the terms of this
Indenture any monies are to be deposited by the Company with the Trustee or any
Paying Agent for any purpose (including, without limitation, the payment of the
principal of or the interest on any Security), the Trustee or Paying Agent
shall, except where no notice is necessary or where notice is deemed given in
Sections 10.02 and 10.03 hereof, have received with respect to such monies the
notice provided for in the preceding sentence, the Trustee or Paying Agent shall
have full power and authority to receive and apply such monies to the purpose
for which they were received. Neither of them shall be affected by any notice to
the contrary, which may be received by either on or after such date. The
foregoing shall not apply to the Paying Agent if the Company is acting as Paying
Agent. Nothing in this Section 10.08 shall limit the right of the holders of
Senior Indebtedness to recover payments as contemplated by Section 10.02 hereof.
The Trustee or Paying Agent shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of such
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder. The
Trustee shall not be deemed to have any fiduciary duty to the holders of Senior
Indebtedness.
-44-
<PAGE>
SECTION 10.09 Right of Trustee to Hold Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all of the rights
set forth in this Article 10 in respect of any Senior Indebtedness at any time
held by them to the same extent as any other holder of such Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee or any
Paying Agent of any of its rights as such holder.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by operation of subsection (c) of Section 318 of the TIA, the
imposed duties shall control. The provisions of Sections 310 to 317, inclusive,
of the TIA that impose duties on any Person (including provisions automatically
deemed included in an indenture unless the indenture provides that such
provisions are excluded) are a part of and govern this Indenture, except as, and
to the extent, they are expressly excluded from this Indenture, as permitted by
the TIA.
SECTION 11.02 Notices.
Any notice or communication shall be in writing and delivered in person or
mailed by first-class mail, postage prepaid, addressed as follows:
if to the Company:
Pennsylvania Electric Company
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962-1957
Attention: Treasurer
Facsimile No.: (973) 644-4224
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attn: Corporate Trust Department,
Department B
Facsimile No.: (212) 852-1626
The Company or the Trustee, by giving notice to the other, may designate
additional or different addresses for subsequent notices of communications. Upon
request from the holder, if any, of Senior Indebtedness, the Company shall
notify such holder of any such additional or different addresses of which the
Company receives notice from the Trustee.
-45-
<PAGE>
Any notice or communication given to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the Register
of the Registrar and shall be sufficiently given if mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the Securityholders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent or
co-Registrar.
SECTION 11.03 Communication by Holders with Other Holders.
Securityholders may communicate, pursuant to TIA Section 312(b), with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent and anyone
else shall have the protection of TIA Section 312(c).
SECTION 11.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officer's Certificate (complying with Section 11.05 hereof)
stating that, in the opinion of such Officer, all conditions precedent to the
taking of such action have been complied with; and
(b) if appropriate, an Opinion of Counsel (complying with Section
11.05 hereof) stating that, in the opinion of such counsel, all such conditions
precedent to the taking of such action have been complied with.
SECTION 11.05 Statements Required in Certificate or Opinion.
Each Officer's Certificate and Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:
(a) a statement that each individual making such Officer's
Certificate or Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officer's Certificate or Opinion of Counsel are based;
-46-
<PAGE>
(c) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement that, in the opinion of such individual, such
covenant or condition has been complied with; provided, however, that with
respect to matters of fact not involving any legal conclusion, an Opinion of
Counsel may rely on an Officer's Certificate or certificates of public
officials.
SECTION 11.06 Severability Clause.
If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.07 Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
SECTION 11.08 Legal Holidays.
A "Legal Holiday" is any day other than a Business Day. If any specified
date (including a date for giving notice) is a Legal Holiday, the action to be
taken on such date shall be taken on the next succeeding day that is not a Legal
Holiday, and if such action is a payment in respect of the Securities, no
principal or interest installment shall accrue for the intervening period;
except that if any payment is due on a Legal Holiday and the next succeeding day
that is not a Legal Holiday is in the next succeeding calendar year, such
payment shall be made on the Business Day immediately preceding such Legal
Holiday.
SECTION 11.09 Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to its principles of
conflicts of laws.
SECTION 11.10 No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the Company
shall have any liability for any obligations of the Company under the Securities
or this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation.
-47-
<PAGE>
By accepting a Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 11.11 Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors and assigns. All agreements of the Trustee in this Indenture
shall bind its successors and assigns.
SECTION 11.12 Multiple Original Copies of this Indenture.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement. Any signed copy shall be sufficient proof of this Indenture.
SECTION 11.13 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.14 Table of Contents; Headings, Etc.
The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
SECTION 11.15 Benefits of the Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture, except as expressly provided in Article 10 hereof.
-48-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Indenture on behalf of the respective parties hereto as of the date first
above written.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T.G. Howson
----------------------------------
Name: T.G. Howson
Title: Vice President
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By: /s/ Louis P. Young
----------------------------------
Name: Louis P. Young
Title: Vice President
<PAGE>
[FORM OF FACE OF THE SECURITY]
% Subordinated Debentures, Series A due
----- -----
No. $
---- ------------------
Pennsylvania Electric Company, a Pennsylvania corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), promises to pay to Penelec Capital II, L.P. or registered assigns,
the principal amount of --------------------- Dollars on -----------------.
Interest Payment Dates:
-------------------------
Regular Record Dates: the 15th day of the month before the month in which
each Interest Payment Date falls (or if all the Securities are held in
book-entry-only form, the Business Day immediately preceding the applicable
Interest Payment Date).
This Security shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication below.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof which shall for all purposes have the same effect as
if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Pennsylvania Electric Company
By:
------------------------------
Name: T.G. Howson
Title: Vice President
By:
-----------------------------
Name: S.H. Somich
Title: Assistant Treasurer
-2-
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred
to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK
By:
--------------------------
Authorized Signatory
-3-
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
% Subordinated Debentures, Series A due
---- ------
1. Payment of Interest and Additional Interest
Pennsylvania Electric Company, a Pennsylvania corporation (the "Company"),
promises to pay interest on the principal amount of this Security (the "Series A
Securities") at the rate per annum shown in its title above. Interest will be
payable on each Interest Payment Date, commencing -----------------. Interest on
this Security will accrue for each day that elapses from the most recent date to
which interest has been paid, or if no interest has been paid, from the date of
its authentication, to the next Interest Payment Date; provided that, if there
is no existing Event of Default in the payment of interest and if this Security
is authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Under certain circumstances, the Company
may be required to pay Additional Interest.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
borne by this Security.
2. Deferral of Interest
The Company may at any time and from time to time, if it is not in default
in the payment of interest on the Series A Securities, extend the interest
payment period on the Series A Securities for up to 20 consecutive quarterly
periods, but not later than -------------. At the end of such period the Company
will pay all interest then accrued and unpaid (including interest on such
interest if legally permitted), provided that during such interest extension
period, which the Company may shorten at its option, neither the Company nor any
Subsidiary will (i) declare or pay any dividend on or purchase, redeem or
acquire or make a liquidation payment on its Capital Stock (other than dividends
by wholly-owned Subsidiaries), or make any guarantee payments with respect to
the foregoing; or (ii) make any interest, principal or premium payment on, or
repurchase or redeem, any of its debt securities that rank equal with or junior
to the Series A Securities.
3. Method of Payment
The Company will pay interest on the Series A Securities (except defaulted
interest) to the persons who are registered Holders at the close of business on
the 15th day of the month before the month in which each Interest Payment Date
falls (or if all the Series A Securities are held in book-entry-only form, on
-4-
<PAGE>
the Business Day immediately preceding the Interest Payment Date) even if the
Series A Security is thereafter canceled on registration of transfer or
registration of exchange. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
its check payable in such money. It may mail an interest payment to a
Securityholder's registered address.
4. Paying Agent and Registrar
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent or Registrar without notice, other than
notice to the Trustee. The Company or an Affiliate of the Company may act as
Paying Agent, Registrar or co-Registrar.
5. Indenture
The Company issued the Series A Securities under an Indenture, dated as of
June 1, 1999 (the "Indenture"), between the Company and the Trustee. The
Indenture also provides for the issuance by the Company from time to time of
additional Securities of different series and with different terms and
conditions but subject, nevertheless, to the Indenture. The terms of the Series
A Securities include those stated herein and in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). Capitalized terms used herein and not defined herein have
the meanings ascribed thereto in the Indenture. The Series A Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.
The Series A Securities are general unsecured obligations of the Company
limited to $----------- aggregate principal amount.
6. Redemption
Optional. At the option of the Company, the Series A Securities are
redeemable from and after ------------, as a whole, or from time to time in
part. The amount to be paid on redemption (the "Redemption Price") shall be
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
including Additional Interest, if any, and accrued interest thereon, to the
Redemption Date. The Company must notify the Trustee of its election to redeem
the Series A Securities at least 45 days before the Redemption Date. In
addition, upon occurrence of a Special Event, the Company may, within ninety
(90) days following the occurrence thereof and subject to the terms and
conditions of the Indenture, elect to redeem the Series A Securities, in whole,
at a price equal to 100% of the principal amount to be redeemed plus any accrued
but unpaid interest (including Additional Interest) to the
-5-
<PAGE>
Redemption Date and accrued interest thereon; provided, however, that if at the
time of the occurrence of the Special Event, there is available to the Company,
Penelec Capital or the Trust, the opportunity to eliminate, within such 90-day
period, the Special Event by taking some ministerial action, such as filing a
form or making an election, or pursuing some other similar reasonable measure,
which would have no adverse effect on Penelec Capital, the Trust, the Company or
the Holders or holders of Trust Securities, the Company, Penelec Capital or the
Trust, as the case may be, will pursue such measure in lieu of redemption.
Mandatory. If Penelec Capital II, L.P. (or any successor in interest)
redeems all or a portion of the Series A Preferred Securities (or any securities
issued in substitution for the Series A Preferred Securities), the Company is
required to redeem all or a corresponding portion, as the case may be, of the
Series A Securities in accordance with the provisions of the first two sentences
of the immediately preceding paragraph. The Company is also required to redeem
all outstanding Securities upon the dissolution of Penelec Capital II, L.P. (or
any successor in interest), except in connection with a Distribution Event.
7. Notice of Redemption; Conditional Notice.
Notice of redemption will be mailed at least 30 days but not more than 90
days before the Redemption Date to each Holder of Series A Securities to be
redeemed at the Holder's registered address. Interest on the Securities to be
redeemed by the Company will cease to accrue after the Redemption Date. Series A
Securities in denominations larger than $25 of principal amount may be redeemed
in part but only in integral multiples of $25 of principal amount.
In connection with an optional redemption, such notice may state that it
is subject to the receipt by the Trustee of funds from the Company on or before
the Redemption Date, in which event such notice shall be ineffective unless such
funds are so received.
8. Subordination
The Securities are subordinated to Senior Indebtedness (as that term is
defined in the Indenture). To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to such subordination
and authorizes the Trustee to give it effect.
9. Denominations; Transfer; Exchange
The Series A Securities are in registered form, without coupons, in
denominations of $25 of principal amount and integral multiples of $25. A
Holder may transfer or exchange Series A Securities in accordance with the
Indenture. The Registrar may
-6-
<PAGE>
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not transfer or exchange any Securities for a
period of five days before notice of redemption is given or any Securities that
are selected for redemption (except, in the case of a Security to be redeemed in
part, the portion of the Security not to be redeemed).
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
11. Amendment; Waiver
Subject to certain exceptions in the Indenture which require the consent
of every Holder, (i) the Indenture or the Series A Securities may be amended
with the written consent of the Special Representative or the Holders of a
majority in aggregate principal amount of the Series A Securities at the time
outstanding, and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Special Representative or the
Holders of a majority in aggregate principal amount of the Series A Securities
at the time outstanding. Subject to certain exceptions in the Indenture, without
the consent of any Securityholder or the Special Representative, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to bind a successor to the obligations of the
Indenture, to provide for uncertificated Securities in addition to certificated
Securities, to comply with any requirements of the Securities and Exchange
Commission in connection with the qualification of the Indenture under the TIA,
to make any change that does not adversely affect the rights of any
Securityholder or to provide for the issuance of any other series of Securities.
Amendments bind all Holders and subsequent Holders.
12. Defaults and Remedies
Under the Indenture, Events of Default include (i) default in payment of
the principal amount, or interest (including Additional Interest, if any), in
respect of the Securities when the same becomes due and payable subject, in the
case of interest, to the grace period and any extension period provided for in
the Indenture; (ii) failure by the Company to comply with its other covenants in
the Indenture or the Securities, subject to notice and lapse of time; and (iii)
certain events of bankruptcy or insolvency of the Company. If an Event of
Default occurs and is continuing, the Trustee, the Special Representative, or
the Holders of at least a majority in aggregate principal amount of the
Securities at the time outstanding, may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities becoming due
-7-
<PAGE>
and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity and security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities at the time outstanding or the Special Representative may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing Default (except a Default in paying
principal and/or interest) if it determines that withholding notice is in their
interests.
13. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
15. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (tenants in common), TEN ENT (tenants by the
entireties), JT TEN (joint tenants with right of survivorship and not as tenants
in common), CUST (custodian), and U/G/M/A (Uniform Gift to Minors Act).
16. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
three years, the Trustee or Paying Agent will pay the money back to the Company
at its request. After that, Holders entitled to such money must look to the
Company for payment.
-8-
<PAGE>
17. Discharge Prior to Maturity
If the Company deposits with the Trustee or Paying Agent money or United
States Government Obligations sufficient to pay the principal of and interest on
the Securities to maturity, the Company will be discharged from the Indenture
under certain conditions and except for certain provisions thereof.
18. Successor
When a successor Person to the Company assumes all the obligations of its
predecessor under the Securities and the Indenture in accordance with the
Indenture, such predecessor shall be released from those obligations.
19. Governing Law
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAWS.
-9-
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to:
- --------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ------------------------- agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Dated: Signature:
---------------- ----------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guaranty:
-------------------------
(New York commercial bank or trust company or member
of an accepted medallion guaranty
-10-
Exhibit A-12(a)
PENNSYLVANIA ELECTRIC COMPANY
7.34% Subordinated Debentures, Series A due 2039
No. 1 $103,092,800.00
Pennsylvania Electric Company, a Pennsylvania corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), promises to pay to Penelec Capital II, L.P. or registered assigns,
the principal amount of One Hundred Three Million, Ninety-Two Thousand, Eight
Hundred and 00/100 Dollars on September 1, 2039.
Interest Payment Dates: September 1, December 1, March 1 and June 1 of
each year, commencing September 1, 1999
Regular Record Dates: the 15th day of the month before the month in which
each Interest Payment Date falls (or if all the Securities are held in
book-entry-only form, the Business Day immediately preceding the applicable
Interest Payment Date).
This Security shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication below.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof which shall for all purposes have the same effect as
if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Pennsylvania Electric Company
By: /s/ T. G. Howson
-----------------------------
Name: T.G. Howson
Title: Vice President
By: /s/ S. H. Somich
-----------------------------
Name: S.H. Somich
Title: Assistant Treasurer
2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred
to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK
By:
--------------------------
Authorized Signatory
3
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY
7.34% Subordinated Debentures, Series A due 2039
1. Payment of Interest and Additional Interest
Pennsylvania Electric Company, a Pennsylvania corporation (the "Company"),
promises to pay interest on the principal amount of this Security (the "Series A
Securities") at the rate per annum shown in its title above. Interest will be
payable on each Interest Payment Date, commencing September 1, 1999. Interest on
this Security will accrue for each day that elapses from the most recent date to
which interest has been paid, or if no interest has been paid, from the date of
its authentication, to the next Interest Payment Date; provided that, if there
is no existing Event of Default in the payment of interest and if this Security
is authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Under certain circumstances, the Company
may be required to pay Additional Interest.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
borne by this Security.
2. Deferral of Interest
The Company may at any time and from time to time, if it is not in default
in the payment of interest on the Series A Securities, extend the interest
payment period on the Series A Securities for up to 20 consecutive quarterly
periods, but not later than September 1, 2039. At the end of such period the
Company will pay all interest then accrued and unpaid (including interest on
such interest if legally permitted), provided that during such interest
extension period, which the Company may shorten at its option, neither the
Company nor any Subsidiary will (i) declare or pay any dividend on or purchase,
redeem or acquire or make a liquidation payment on its Capital Stock (other than
dividends by wholly-owned Subsidiaries), or make any guarantee payments with
respect to the foregoing; or (ii) make any interest, principal or premium
payment on, or repurchase or redeem, any of its debt securities that rank equal
with or junior to the Series A Securities.
3. Method of Payment
The Company will pay interest on the Series A Securities (except defaulted
interest) to the persons who are registered Holders at the close of business on
the 15th day of the month
4
<PAGE>
before the month in which each Interest Payment Date falls (or if all the Series
A Securities are held in book-entry-only form, on the Business Day immediately
preceding the Interest Payment Date) even if the Series A Security is thereafter
canceled on registration of transfer or registration of exchange. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by its check payable in such
money. It may mail an interest payment to a Securityholder's registered address.
4. Paying Agent and Registrar
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent or Registrar without notice, other than
notice to the Trustee. The Company or an Affiliate of the Company may act as
Paying Agent, Registrar or co-Registrar.
5. Indenture
The Company issued the Series A Securities under an Indenture, dated as of
June 1, 1999 (the "Indenture"), between the Company and the Trustee. The
Indenture also provides for the issuance by the Company from time to time of
additional Securities of different series and with different terms and
conditions but subject, nevertheless, to the Indenture. The terms of the Series
A Securities include those stated herein and in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). Capitalized terms used herein and not defined herein have
the meanings ascribed thereto in the Indenture. The Series A Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.
The Series A Securities are general unsecured obligations of the Company
limited to $103,092,800 aggregate principal amount.
6. Redemption
Optional. At the option of the Company, the Series A Securities are
redeemable from and after September 1, 2004, as a whole, or from time to time in
part. The amount to be paid on redemption (the "Redemption Price") shall be
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
including Additional Interest, if any, and accrued interest thereon, to the
Redemption Date. The Company must notify the Trustee of its election to redeem
the Series A Securities at least 45 days before the Redemption Date. In
addition, upon occurrence of a Special Event, the Company may, within ninety
(90) days following the occurrence thereof and subject to the terms and
conditions of the Indenture, elect to redeem the Series A
5
<PAGE>
Securities, in whole, at a price equal to 100% of the principal amount to be
redeemed plus any accrued but unpaid interest (including Additional Interest) to
the Redemption Date and accrued interest thereon; provided, however, that if at
the time of the occurrence of the Special Event, there is available to the
Company, Penelec Capital or the Trust, the opportunity to eliminate, within such
90-day period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar reasonable
measure, which would have no adverse effect on Penelec Capital, the Trust, the
Company or the Holders or holders of Trust Securities, the Company, Penelec
Capital or the Trust, as the case may be, will pursue such measure in lieu of
redemption.
Mandatory. If Penelec Capital II, L.P. (or any successor in interest)
redeems all or a portion of the Series A Preferred Securities (or any securities
issued in substitution for the Series A Preferred Securities), the Company is
required to redeem all or a corresponding portion, as the case may be, of the
Series A Securities in accordance with the provisions of the first two sentences
of the immediately preceding paragraph. The Company is also required to redeem
all outstanding Securities upon the dissolution of Penelec Capital II, L.P. (or
any successor in interest), except in connection with a Distribution Event.
7. Notice of Redemption; Conditional Notice.
Notice of redemption will be mailed at least 30 days but not more than 90
days before the Redemption Date to each Holder of Series A Securities to be
redeemed at the Holder's registered address. Interest on the Securities to be
redeemed by the Company will cease to accrue after the Redemption Date. Series A
Securities in denominations larger than $25 of principal amount may be redeemed
in part but only in integral multiples of $25 of principal amount.
In connection with an optional redemption, such notice may state that it
is subject to the receipt by the Trustee of funds from the Company on or before
the Redemption Date, in which event such notice shall be ineffective unless such
funds are so received.
8. Subordination
The Securities are subordinated to Senior Indebtedness (as that term is
defined in the Indenture). To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to such subordination
and authorizes the Trustee to give it effect.
9. Denominations; Transfer; Exchange
The Series A Securities are in registered form, without
6
<PAGE>
coupons, in denominations of $25 of principal amount and integral multiples of
$25. A Holder may transfer or exchange Series A Securities in accordance with
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Securities for a period of five days before notice of
redemption is given or any Securities that are selected for redemption (except,
in the case of a Security to be redeemed in part, the portion of the Security
not to be redeemed).
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
11. Amendment; Waiver
Subject to certain exceptions in the Indenture which require the consent
of every Holder, (i) the Indenture or the Series A Securities may be amended
with the written consent of the Special Representative or the Holders of a
majority in aggregate principal amount of the Series A Securities at the time
outstanding, and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Special Representative or the
Holders of a majority in aggregate principal amount of the Series A Securities
at the time outstanding. Subject to certain exceptions in the Indenture, without
the consent of any Securityholder or the Special Representative, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to bind a successor to the obligations of the
Indenture, to provide for uncertificated Securities in addition to certificated
Securities, to comply with any requirements of the Securities and Exchange
Commission in connection with the qualification of the Indenture under the TIA,
to make any change that does not adversely affect the rights of any
Securityholder or to provide for the issuance of any other series of Securities.
Amendments bind all Holders and subsequent Holders.
12. Defaults and Remedies
Under the Indenture, Events of Default include (i) default in payment of
the principal amount, or interest (including Additional Interest, if any), in
respect of the Securities when the same becomes due and payable subject, in the
case of interest, to the grace period and any extension period provided for in
the Indenture; (ii) failure by the Company to comply with its other covenants in
the Indenture or the Securities, subject to notice and lapse of time; and (iii)
certain events of bankruptcy or insolvency of the Company. If an Event of
Default occurs and is continuing, the Trustee, the Special Representative, or
the Holders of at least a majority in aggregate principal amount of the
Securities at the time outstanding, may declare all the Securities to be due and
7
<PAGE>
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities becoming due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity and security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities at the time outstanding or the Special Representative may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing Default (except a Default in paying
principal and/or interest) if it determines that withholding notice is in their
interests.
13. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with and collect obligations owed to it by the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
15. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (tenants in common), TEN ENT (tenants by the
entireties), JT TEN (joint tenants with right of survivorship and not as tenants
in common), CUST (custodian), and U/G/M/A (Uniform Gift to Minors Act).
16. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
three years, the Trustee or Paying Agent will pay the money back to the Company
at its request. After that, Holders entitled to such money must look to the
Company for payment.
8
<PAGE>
17. Discharge Prior to Maturity
If the Company deposits with the Trustee or Paying Agent money or United
States Government Obligations sufficient to pay the principal of and interest on
the Securities to maturity, the Company will be discharged from the Indenture
under certain conditions and except for certain provisions thereof.
18. Successor
When a successor Person to the Company assumes all the obligations of its
predecessor under the Securities and the Indenture in accordance with the
Indenture, such predecessor shall be released from those obligations.
19. Governing Law
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAWS.
9
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to:
- --------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ------------------------- agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Dated: Signature:
------------------- ----------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guaranty:
-----------------------
(New York commercial bank or trust company or member
of an accepted medallion guaranty)
10
Exhibit B-1(a)
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of
June 16, 1999, is executed and delivered by Pennsylvania Electric Company, a
Pennsylvania corporation (the "Guarantor"), for the benefit of the Holder (as
defined below) from time to time of the Preferred Securities (as defined below)
of Penelec Capital II, L.P., a Delaware limited partnership (the "Issuer").
WHEREAS, the Issuer is issuing on the date hereof $100,000,000 aggregate
stated liquidation preference of preferred limited partner interests of a series
designated the 7.34% Cumulative Preferred Securities, Series A (the "Preferred
Securities"), and the Guarantor desires to enter into this Guarantee Agreement
for the benefit of the Holder, as provided herein;
WHEREAS, the Issuer will use (i) the proceeds from the issuance and sale
of the Preferred Securities to the Holder and (ii) the capital contributions
relating to the issuance of the Issuer's general partner interests (the "Common
Securities") to Penelec Preferred Capital II, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Guarantor (the "General Partner"), to purchase
Subordinated Debentures (as defined below) issued by the Guarantor under the
Indenture (as defined below); and
WHEREAS, the Guarantor desires irrevocably and unconditionally to agree to
the extent set forth herein to pay to the Holder the Guarantee Payments (as
defined below) and to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and other consideration,
receipt of which is hereby acknowledged, the Guarantor, intending to be legally
bound hereby, agrees as follows:
ARTICLE I
---------
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Issuer's Amended and Restated Limited Partnership Agreement
dated as of June 9, 1999 (as amended from time to time, the "Limited Partnership
Agreement").
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated and
unpaid distributions on the Preferred Securities to the extent that the
Issuer has funds on hand legally available
<PAGE>
therefor, (ii) the Redemption Price (as defined below) payable with respect to
any Preferred Securities called for redemption by the Issuer to the extent that
the Issuer has funds on hand legally available therefor, and (iii) upon a
dissolution of the Issuer, other than in connection with a distribution of
Subordinated Debentures (a "Distribution Event"), the lesser of (a) the
Liquidation Distribution (as defined below) and (b) the amount of assets of the
Issuer legally available for distribution to the Holder in liquidation of the
Issuer.
"Holder" shall mean Penelec Capital Trust, a Delaware business trust
("Penelec Capital Trust"), or any other holder or holders from time to time of
any Preferred Securities of the Issuer, provided, however, that in determining
whether the Holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or the Guarantor's parent, GPU, Inc., or any entity owned
more than 50% by the Guarantor or GPU, Inc., either directly or indirectly.
"Indenture" shall mean the Indenture dated as of June 1, 1999 between the
Guarantor and United States Trust Company of New York, as Trustee, pursuant to
which the Guarantor has issued and/or will issue its Subordinated Debentures (as
defined below).
"Liquidation Distribution" shall mean the aggregate of the stated
liquidation preference of $25 per Preferred Security, plus all accumulated and
unpaid distributions to the date of payment.
"Redemption Price" shall mean the aggregate of $25 per Preferred Security,
plus all accumulated and unpaid distributions to the date fixed for redemption.
"Special Representative" shall mean any representative of the Holder
appointed pursuant to Section 13.02(d) of the Limited Partnership Agreement.
"Subordinated Debentures" shall mean the Guarantor's 7.34% Subordinated
Debentures, Series A, due 2039 issued under and pursuant to the Indenture.
"Trust Securities" shall mean beneficial interests in Penelec Capital
Trust, each representing a Preferred Security.
ARTICLE II
----------
SECTION 2.01. The Guarantor hereby irrevocably and unconditionally
agrees to pay in full to the Holder the Guarantee Payments, as and when due
(except to the extent paid by the Issuer), to the fullest extent permitted by
law, regardless of any defense, right of set-off or counterclaim which the
Guarantor may have or assert against the Issuer, the General Partner, Penelec
Capital Trust or any trustee of Penelec Capital Trust. The
-2-
<PAGE>
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment by the Guarantor to the Holder or by payment of such amounts by the
Issuer to the Holder. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under Section 4.01(c) of the Indenture to
extend the interest payment period thereunder and the Guarantor shall not be
obligated hereunder to pay during an Extension Period (as defined in the
Indenture) any distributions on the Preferred Securities which are not paid by
the Issuer during such Extension Period.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 2.03. Except as otherwise set forth herein, the obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall to the fullest extent permitted by law in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with,
the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holder or the Special Representative to enforce, assert
or exercise any right, privilege, power or remedy conferred on the
Holder or the Special Representative pursuant to the terms of the
Preferred Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or
any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, any of
the Preferred Securities; or
-3-
<PAGE>
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred.
The Holder shall have no obligation to give notice to, or obtain consent of, the
Guarantor with respect to the occurrence of any of the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection. The
General Partner or the Special Representative may enforce this Guarantee
Agreement directly against the Guarantor, and the Guarantor will waive any right
or remedy to require that any action be brought against the Issuer or any other
person or entity before proceeding against the Guarantor. Subject to Section
2.05, all waivers hereunder shall be without prejudice to the Holder's right at
the Holder's option to proceed against the Issuer, whether by separate action or
by joinder. The Guarantor agrees that this Guarantee Agreement shall not be
discharged except by payment of the Guarantee Payments in full (to the extent
not paid by the Issuer) and by complete performance of all obligations of the
Guarantor contained in this Guarantee Agreement.
SECTION 2.05. The Guarantor will be subrogated to all rights of the Holder
against the Issuer in respect of any amounts paid to the Holder by the Guarantor
under this Guarantee Agreement and shall have the right to waive payment by the
Issuer of any amount of distributions in respect of which payment has been made
to the Holder by the Guarantor pursuant to Section 2.01; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of a
payment under this Guarantee Agreement, if, at the time of any such payment, any
amounts remain due and unpaid under this Guarantee Agreement. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to pay over such amount to the Holder.
SECTION 2.06. The Guarantor acknowledges that its obligations hereunder
are independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and sole debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (f), inclusive, of Section 2.03 hereof.
SECTION 2.07. The Guarantor expressly acknowledges that (i) this Guarantee
Agreement will be deposited with the General Partner to be held for the benefit
of the Holder; (ii) in the event of the appointment of a Special Representative,
the Special Representative may enforce this Guarantee Agreement on behalf of the
Holder and take possession of this Guarantee Agreement for such purpose; (iii)
if no Special Representative has been appointed, the General Partner has the
right to enforce this Guarantee Agreement on behalf
-4-
<PAGE>
of the Holder; (iv) the holders of Trust Securities, together with the holders
of the Preferred Securities other than Penelec Capital Trust, representing not
less than 10% of the aggregate stated liquidation preference of the Preferred
Securities then outstanding, have the right to direct the time, method and place
of conducting any proceeding for any remedy available in respect of this
Guarantee Agreement, including the giving of directions to the General Partner
or the Special Representative, as the case may be; and (v) if the General
Partner or Special Representative fails to enforce this Guarantee Agreement as
above provided, any holder of Trust Securities representing Preferred
Securities, and any holder of Preferred Securities other than Penelec Capital
Trust, may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Issuer or any other person or entity.
Any such Special Representative may enforce the Issuer's rights
against the Guarantor under the Indenture, including, after failure to pay
interest for 20 consecutive quarterly periods, the payment of interest on the
Subordinated Debentures, enforce the obligations of the Guarantor under this
Guarantee Agreement and enforce the Guarantor's obligations under the Indenture
and the Subordinated Debentures directly against the Guarantor; the Guarantor,
upon request of a Special Representative, agrees to execute and deliver such
documents as may be necessary, appropriate or convenient for such Special
Representative with respect to such enforcement.
ARTICLE III
-----------
SECTION 3.01. So long as any of the Preferred Securities remain
outstanding, neither the Guarantor nor any majority owned subsidiary of the
Guarantor shall declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock (other than
dividends by a wholly-owned subsidiary of the Guarantor) if at such time the
Guarantor shall be in default with respect to its payment or other obligations
hereunder or there shall have occurred any event that, with the giving of notice
or the lapse of time or both, would constitute an Event of Default under the
Indenture. The Guarantor shall take all actions necessary to ensure the
compliance of its subsidiaries with this Section 3.01.
SECTION 3.02. The Guarantor covenants, so long as any Preferred Securities
remain outstanding: (i) to maintain direct or indirect 100% ownership of the
Common Securities; (ii) to cause at least 3% of the total value of the Issuer
and at least 3% of all interests in the capital, income, gain, loss, deduction
and credit of the Issuer to be represented by Common Securities; (iii) not to
cause the Issuer to be voluntarily dissolved, wound-up or terminated, except
upon the entry of a decree of judicial dissolution or in connection with a
Distribution Event or certain
-5-
<PAGE>
mergers, consolidations or other transactions permitted by the Limited
Partnership Agreement; (iv) except as otherwise provided in the Limited
Partnership Agreement, to cause the General Partner to remain the general
partner of the Issuer and timely perform all of its duties as general partner of
the Issuer (including the duty to pay distributions on the Preferred Securities
out of funds on hand legally available therefor) in all material respects,
provided that any permitted successor of the Guarantor under the Indenture may
directly or indirectly succeed to the duties as general partner of the Issuer;
and (v) to use its reasonable efforts to cause the Issuer to remain an entity
that will be treated as a grantor trust for United States federal income tax
purposes.
SECTION 3.03. So long as any of the Preferred Securities remain
outstanding, the Guarantor agrees to maintain its corporate existence; provided
that, the Guarantor may consolidate with or merge with or into, or sell, convey,
transfer or lease all or substantially all of its assets (either in one
transaction or a series of transactions) to, any person, corporation,
partnership, limited liability company, joint venture association, joint stock
company, trust or unincorporated association if such entity formed by or
surviving such consolidation or merger or to which such sale, conveyance,
transfer or lease shall have been made, if other than the Guarantor, (i) is
organized and existing under the laws of the United States or any state thereof
or the District of Columbia, and (ii) shall expressly assume all the obligations
of the Guarantor under this Guarantee Agreement.
SECTION 3.04. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will (a) rank subordinate and junior in right of
payment to all general liabilities of the Guarantor, except trade accounts
payable arising in the ordinary course of business, (b) rank pari passu to
obligations to the holders of any preferred securities including obligations
under any other guarantee, and (c) rank senior to obligations to the holders of
the Guarantor's common stock.
ARTICLE IV
----------
This Guarantee Agreement shall terminate and be of no further force and
effect upon full payment of the Redemption Price of all Preferred Securities or
upon full payment of the amounts payable to the Holder upon liquidation of the
Issuer or upon the occurrence of a Distribution Event; provided, however, that
this Guarantee Agreement shall continue to be effective or shall be reinstated,
as the case may be, if at any time any Holder must restore payments of any sums
paid under the Preferred Securities or under this Guarantee Agreement.
ARTICLE V
---------
SECTION 5.01. All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns,
-6-
<PAGE>
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holder. The Guarantor may not assign its obligations hereunder
without the prior approval of the Holders of not less than a majority of the
aggregate stated liquidation preference of all Preferred Securities then
outstanding; provided that nothing herein shall preclude any transaction
involving the Guarantor pursuant to Section 5.01 of the Indenture. No such
permitted transaction shall be deemed an assignment of the Guarantor's
obligations hereunder for purposes hereof.
SECTION 5.02. This Guarantee Agreement may only be amended by a written
instrument executed by the Guarantor; provided that, so long as any of the
Preferred Securities remain outstanding, any such amendment that materially
adversely affects the rights of Holders, any termination of this Guarantee
Agreement or any waiver of compliance with any covenant hereunder shall be
effected only with the prior approval of the holders of Trust Securities,
together with the holders of Preferred Securities other than Penelec Capital
Trust, representing not less than a majority of the aggregate stated liquidation
preference of all Preferred Securities then outstanding.
SECTION 5.03. All notices, requests or other communications required or
permitted to be given hereunder to the Guarantor shall be deemed given if in
writing and delivered personally or by recognized overnight courier or express
mail service or by facsimile transmission (confirmed in writing) or by
registered or certified mail (return receipt requested), addressed to the
Guarantor at the following address (or at such other address as shall be
specified by notice to the Holder):
Pennsylvania Electric Company
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, NJ 07962-1957
Facsimile No.: (973) 644-4224
Attention: Vice President and Treasurer
All notices, requests or other communications required or permitted to be
given hereunder to the Holder shall be deemed given if in writing and delivered
by the Guarantor in the same manner as notices sent by the Issuer to the Holder.
SECTION 5.04. This Guarantee Agreement is solely for the benefit of the
Holder and is not separately transferable from the Preferred Securities.
SECTION 5.05. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES.
-7-
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T. G. Howson
----------------------------------
Name: T.G. Howson
Title: Vice President and Treasurer
