<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 1995
REGISTRATION NOS. 33-60859
33-60859-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
<TABLE>
<S> <C> <C>
PECO ENERGY COMPANY PECO ENERGY CAPITAL, L.P. PECO ENERGY CAPITAL TRUST I
(EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
AS SPECIFIED IN ITS CHARTER) SPECIFIED IN SPECIFIED
ITS CERTIFICATE OF LIMITED IN ITS CERTIFICATE OF TRUST)
PARTNERSHIP)
Pennsylvania Delaware Delaware
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
4931 6799 6799
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
23-0970240 51-0355322 51-0369609
(I.R.S. EMPLOYER IDENTIFICATION NO.)
P.O. Box 8699, 2301 Market 1013 Centre Road, Suite 350F c/o PNC Bank, Delaware
Street Wilmington, DE 19805 222 Delaware Avenue
Philadelphia, PA 19101 (302) 998-0592 Wilmington, DE 19801
(215) 841-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE
OFFICES)
J. B. MITCHELL
P.O. Box 8699, 2301 Market Street
Philadelphia, PA 19101
(215) 841-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR
SERVICE FOR EACH REGISTRANT)
with copies to:
JAMES W. DURHAM, ESQ.
Senior Vice President and General Counsel
P.O. Box 8699, 2301 Market Street, Philadelphia, PA 19101
ROBERT C. GERLACH, ESQ. ROBERT M. JONES, JR., ESQ.
Ballard Spahr Andrews & Drinker Biddle & Reath
Ingersoll 1345 Chestnut Street
1735 Market Street Philadelphia, PA 19107
Philadelphia, PA 19103-7599
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
CROSS REFERENCE SHEET
PECO ENERGY COMPANY
PECO ENERGY CAPITAL, L.P.
PECO ENERGY CAPITAL TRUST I
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING
LOCATION IN OFFERING CIRCULAR/PROSPECTUS OF ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NO. CAPTION IN OFFERING CIRCULAR/PROSPECTUS
------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page; Inside Front
Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Available
Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Offering Circular/Prospectus Summary; Risk
Factors; Coverage Ratios; Selected
Consolidated Financial Data; Comparison
of Preferred Trust Receipts and
Depositary Shares; The Offer -- General;
United States Taxation
4. Terms of the Transaction................... Offering Circular/Prospectus Summary
5. Pro Forma Financial Information............ Not Applicable
6. Material Contracts with the Company Being
Acquired................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
10. Information with Respect to S-3
Registrants.............................. Incorporation of Certain Documents by
Reference
11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants........ The Trust
15. Information with Respect to S-3
Companies................................ Not Applicable
16. Information with Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information with Respect to Companies Other
than S-3 or S-2 Companies................ Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer..................... Incorporation of Certain Documents by
Reference
</TABLE>
<PAGE> 3
SUBJECT TO COMPLETION, DATED NOVEMBER 3, 1995
OFFERING CIRCULAR/PROSPECTUS
PECO ENERGY COMPANY
OFFER TO EXCHANGE
TRUST RECEIPTS ("TOPRS SM") EACH REPRESENTING A
8.72% CUMULATIVE MONTHLY INCOME PREFERRED SECURITY,
SERIES B OF PECO ENERGY CAPITAL, L.P.
(STATED LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
FOR UP TO 5,400,000 OUTSTANDING DEPOSITARY SHARES
EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF $7.96
CUMULATIVE PREFERRED STOCK
OF
PECO ENERGY COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON DECEMBER 13, 1995,
UNLESS THE OFFER IS EXTENDED.
---------------------
PECO Energy Company, a Pennsylvania corporation ("PECO Energy"), hereby
offers, upon the terms and subject to the conditions set forth in this Offering
Circular/Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with this Offering Circular/Prospectus, constitute
the "Offer"), to effect the exchange (the "Exchange") of Trust Receipts, each
representing a 8.72% Cumulative Monthly Income Preferred Security, Series B,
representing a limited partner interest issued by PECO Energy Capital, L.P., a
limited partnership formed under the laws of the State of Delaware ("PECO Energy
Capital"), for up to 5,400,000 depositary shares (the "Depositary Shares"), or
96.4% of the outstanding Depositary Shares, each representing a one-fourth
interest in a share of $7.96 Cumulative Preferred Stock of PECO Energy. The
Trust Receipts, which will be issued by PECO Energy Capital Trust I, a statutory
business trust created under the laws of the State of Delaware (the "Trust"),
are hereinafter referred to as the "Preferred Trust Receipts" and the underlying
8.72% Cumulative Monthly Income Preferred Securities, Series B of PECO Energy
Capital are hereinafter referred to as the "Series B Preferred Securities."
Exchanges will be made on the basis of one Preferred Trust Receipt for each
Depositary Share validly tendered and accepted for exchange in the Offer.
Depositary Shares not accepted for exchange because of proration or otherwise
will be returned.
IN ORDER TO PARTICIPATE IN THE OFFER, HOLDERS OF DEPOSITARY SHARES MUST
EITHER SUBMIT A LETTER OF TRANSMITTAL (OR AN AGENT'S MESSAGE, IF APPLICABLE) OR
SUBMIT A NOTICE OF GUARANTEED DELIVERY AND COMPLY WITH THE OTHER PROCEDURES FOR
TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER
OF TRANSMITTAL PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1995
(THE "EXPIRATION DATE").
The Preferred Trust Receipts have been approved for listing on the New York
Stock Exchange (the "NYSE") subject to notice of issuance and attainment of the
NYSE distribution standards. Trading of the Preferred Trust Receipts on the NYSE
is expected to commence within a 30-day period after the initial delivery of the
Preferred Trust Receipts.
---------------------
SEE "RISK FACTORS" WHICH COMMENCES ON PAGE 9 OF THIS OFFERING
CIRCULAR/PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE
PREFERRED TRUST RECEIPTS THAT SHOULD BE CONSIDERED BY INVESTORS, INCLUDING THE
PERIOD DURING WHICH AND CIRCUMSTANCES UNDER WHICH DISTRIBUTIONS ON THE
UNDERLYING SERIES B PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL
INCOME TAX CONSEQUENCES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
OFFERING CIRCULAR/PROSPECTUS, AND ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
NO RECOMMENDATION TO HOLDERS OF DEPOSITARY SHARES TO TENDER OR TO REFRAIN
FROM TENDERING IN THE OFFER IS MADE BY PECO ENERGY, THE BOARD OF DIRECTORS OF
PECO ENERGY, PECO ENERGY CAPITAL, THE GENERAL PARTNER OF PECO ENERGY CAPITAL,
THE TRUST OR THE TRUSTEE (AS DEFINED BELOW). HOLDERS OF DEPOSITARY SHARES ARE
URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISERS IN MAKING THEIR DECISIONS ON
WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
---------------------
PECO Energy will pay to Soliciting Dealers (as defined herein) designated by
the record or beneficial owner, as appropriate, of Depositary Shares a
solicitation fee of $0.50 per Depositary Share validly tendered and accepted for
exchange pursuant to the Offer and to Merrill Lynch & Co. and Smith Barney Inc.,
as Dealer Managers, an aggregate fee of $0.125 per Depositary Share tendered
pursuant to the Offer, subject to certain conditions. Soliciting Dealers are not
entitled to a solicitation fee for Depositary Shares beneficially owned by such
Soliciting Dealer. See "The Offer -- Dealer Managers; Soliciting Dealers."
---------------------
The Dealer Managers for the Offer are:
MERRILL LYNCH & CO. SMITH BARNEY INC.
---------------------
THE DATE OF THIS OFFERING CIRCULAR/PROSPECTUS IS NOVEMBER , 1995.
(SM) "TOPrS" is a service mark of Merrill Lynch & Co., Inc.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS OFFERING CIRCULAR/PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 4
DIAGRAM OF OFFER
The diagram shows that the Depositary Shares will be tendered by the
holders thereof to the Exchange Agent which will return the Depositary Shares
to PECO Energy. PECO Energy will issue its Series B Subordinated Debentures to
the Exchange Agent, and the Exchange Agent will deliver the Series B
Subordinated Debentures to PECO Energy Capital. PECO Energy Capital will issue
its Series B Preferred Securities to the Trust, and the Trust will issue its
Preferred Trust Receipts to the Exchange Agent which will deliver Preferred
Trust Receipts to each tendering holder of Depositary Shares.
- ---------------
(1) Depositary Shares
(2) Series B Subordinated Debentures*
(3) Series B Preferred Securities
(4) Preferred Trust Receipts**
* The principal amount of the Series B Subordinated Debentures delivered to
PECO Energy Capital pursuant to the Exchange will be equal to the aggregate
stated liquidation preference of the Series B Preferred Securities issued
in connection with the Offer. PECO Energy Capital will also purchase Series
B Subordinated Debentures with a principal amount equal to the proceeds
received by PECO Energy Capital from the issuance of additional general
partner interests to PECO Energy Capital Corp., the general partner.
** Holders of Depositary Shares who participate in the Offer will receive one
Preferred Trust Receipt for each outstanding Depositary Share that is
validly tendered and accepted for exchange.
<PAGE> 5
DIAGRAM OF OFFER SHOWING END RESULT
FOR HOLDERS OF DEPOSITARY SHARES
The diagram shows that each holder of Depositary Shares tendering
Depositary Shares to the Exchange Agent will receive, in exchange therefor,
Preferred Trust Receipts from the Exchange Agent.
- ---------------
* Holders of Depositary Shares who participate in the Offer will receive one
Preferred Trust Receipt for each outstanding Depositary Share that is validly
tendered and accepted for exchange.
DIAGRAM OF PAYMENT
FLOWS AFTER COMPLETION
OF THE EXCHANGE
The diagram shows that PECO Energy will pay interest on its Series B
Subordinated Debentures to PECO Energy Capital as the holder thereof. PECO
Energy Capital will then make distributions on its Series B Preferred
Securities to the Trust which will concurrently make distributions on its
Preferred Trust Receipts to the holders thereof.
<PAGE> 6
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS
OFFERING CIRCULAR/PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PECO
ENERGY, PECO ENERGY CAPITAL, THE TRUST OR THE DEALER MANAGERS. NEITHER THE
DELIVERY OF THIS OFFERING CIRCULAR/PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF PECO ENERGY, PECO ENERGY CAPITAL OR THE TRUST SINCE THE
RESPECTIVE DATES AS OF WHICH INFORMATION IS GIVEN HEREIN. THE OFFER IS NOT BEING
MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF
DEPOSITARY SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. HOWEVER, PECO ENERGY, PECO ENERGY CAPITAL OR THE TRUST MAY, AT
THEIR DISCRETION, TAKE SUCH ACTION AS THEY MAY DEEM NECESSARY TO MAKE THE OFFER
IN ANY SUCH JURISDICTION AND EXTEND THE OFFER TO HOLDERS OF DEPOSITARY SHARES IN
SUCH JURISDICTION. IN ANY JURISDICTION THE LAWS OF WHICH REQUIRE THE OFFER TO BE
MADE BY A LICENSED BROKER OR DEALER, THE OFFER IS BEING MADE ON BEHALF OF PECO
ENERGY BY THE DEALER MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS WHICH
ARE LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
PECO Energy is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy and
information statements and other information filed by PECO Energy may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at certain of its regional
offices at Suite 1400, 500 West Madison Street, Chicago, IL 60661-2511 and Suite
1300, 7 World Trade Center, New York, NY 10048. Copies of such material may also
be obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Securities of PECO Energy are
listed on the New York and Philadelphia Stock Exchanges, where reports, proxy
and information statements and other information concerning PECO Energy may be
inspected.
No separate financial statements of PECO Energy Capital or the Trust have
been included herein. PECO Energy does not consider that such financial
statements would be material to holders of Preferred Trust Receipts offered
hereby because PECO Energy Capital and the Trust are special purpose entities,
have no independent operations and are not engaged in, and do not propose to
engage in, any activity other than as set forth below. See "PECO Energy Capital"
and "The Trust."
1
<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC pursuant to Section 13 of the
Exchange Act by PECO Energy (File No. 1-1401) are incorporated herein by
reference:
1. PECO Energy's Annual Report on Form 10-K for the year ended
December 31, 1994;
2. PECO Energy's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995; and
3. PECO Energy's Current Reports on Form 8-K dated February 2, 1995,
May 24, 1995, June 13, 1995, July 24, 1995, August 14, 1995, October 17,
1995, October 23, 1995 and November 1, 1995.
Each document filed subsequent to the date of this Offering
Circular/Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act and prior to the termination of the offering shall be deemed to be
incorporated by reference in this Offering Circular/Prospectus and shall be a
part hereof from the date of filing of such document. Any statement contained
herein or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Offering Circular/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Offering
Circular/Prospectus.
THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. PECO ENERGY UNDERTAKES TO
PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
AN OFFERING CIRCULAR/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS DESCRIBED ABOVE UNDER "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," OTHER THAN EXHIBITS TO SUCH DOCUMENTS. SUCH
REQUESTS SHOULD BE DIRECTED TO PECO ENERGY COMPANY, FINANCIAL DIVISION, S21-1,
P.O. BOX 8699, PHILADELPHIA, PA 19101, (215) 841-5741. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Offering Circular/Prospectus Summary.................................................. 3
Risk Factors.......................................................................... 9
Comparison of Preferred Trust Receipts and Depositary Shares.......................... 11
PECO Energy........................................................................... 14
PECO Energy Capital................................................................... 14
The Trust............................................................................. 14
Coverage Ratios....................................................................... 14
Selected Consolidated Financial Data.................................................. 16
The Offer............................................................................. 18
Listing and Trading of Preferred Trust Receipts and Depositary Shares................. 25
Transactions and Arrangements Concerning the Offer.................................... 26
Fees and Expenses; Transfer Taxes..................................................... 26
Price Range of Depositary Shares...................................................... 26
Description of the Preferred Trust Receipts........................................... 27
Description of the Series B Preferred Securities...................................... 30
Description of the Series B Guarantee................................................. 36
Description of the Series B Subordinated Debentures and the Indenture................. 38
Description of the Depositary Shares.................................................. 43
United States Taxation................................................................ 48
Legal Matters......................................................................... 51
Experts............................................................................... 51
</TABLE>
2
<PAGE> 8
OFFERING CIRCULAR/PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information contained elsewhere in, or
incorporated by reference in, this Offering Circular/Prospectus.
PECO ENERGY
PECO Energy Company, incorporated in Pennsylvania in 1929, is an operating
utility which provides electric and gas service to the public in southeastern
Pennsylvania. In 1994, PECO Energy's total revenues were $4 billion, with
approximately 90% derived from its electric business and 10% from its gas
business. PECO Energy's mailing address is P.O. Box 8699, Philadelphia, PA
19101, and its telephone number is (215) 841-4000. See "PECO Energy -- Recent
Developments."
PECO ENERGY CAPITAL
PECO Energy Capital, L.P. is a limited partnership formed in 1994 under the
laws of the State of Delaware solely for the purpose of issuing one or more
series of its limited partner interests (the "Preferred Securities") and lending
the proceeds thereof to PECO Energy and entering into similar arrangements. PECO
Energy Capital's mailing address is 1013 Centre Road, Suite 350F, Wilmington, DE
19805, and its telephone number is (302) 998-0592.
THE TRUST
PECO Energy Capital Trust I is a statutory business trust recently created
under the laws of the State of Delaware solely for the purpose of issuing
Preferred Trust Receipts representing the Series B Preferred Securities held by
the Trust and performing functions directly related thereto. The Trust's mailing
address is c/o PNC Bank, Delaware, Corporate Trust Department, 222 Delaware
Avenue, Wilmington, Delaware 19801, and its telephone number is (302) 429-1546.
THE OFFER
Subject to the terms and conditions set forth herein and in the Letter of
Transmittal, PECO Energy offers to effect the exchange of Preferred Trust
Receipts, each representing a Series B Preferred Security, for up to 5,400,000
Depositary Shares. The exchange of Preferred Trust Receipts for Depositary
Shares will be effected by (a) the delivery by PECO Energy of its 8.72%
Deferrable Interest Subordinated Debentures, Series B (the "Series B
Subordinated Debentures") to First Chicago Trust Company of New York (the
"Exchange Agent"), which will receive the Series B Subordinated Debentures on
behalf of the Holders (as defined herein) of the Depositary Shares in exchange
for Depositary Shares, (b) the delivery by the Exchange Agent (acting pursuant
to the directions of the Holders of the Depositary Shares) of the Series B
Subordinated Debentures to PECO Energy Capital in consideration for the issuance
and deposit by PECO Energy Capital of the Series B Preferred Securities to the
Trust under an Amended and Restated Trust Agreement (the "Trust Agreement") with
PNC Bank, Delaware, as Trustee and (c) the issuance and delivery by the Trust of
the Preferred Trust Receipts to the Exchange Agent for distribution to the
former Holders of the Depositary Shares.
The Preferred Trust Receipts are being issued in exchange for the
Depositary Shares instead of directly issuing the Series B Preferred Securities
to Holders so that a holder of Preferred Trust Receipts will receive a Form 1099
to report interest income for Federal income tax purposes, rather than a Form
K-1 which would have been required if the Series B Preferred Securities were
held directly by investors.
On July 3, 1995, the last day of trading prior to the first public
announcement of the Offer, the closing sales price of the Depositary Shares on
the NYSE as reported on the Composite Tape was $25 1/8 per share. Holders of
Depositary Shares are urged to obtain a current market quotation for the
Depositary Shares.
3
<PAGE> 9
PURPOSE OF THE OFFER
- The purpose of the Offer is to reduce the after-tax financing costs of
PECO Energy through the replacement of Depositary Shares with Preferred
Trust Receipts.
POTENTIAL BENEFITS TO EXCHANGING HOLDERS
- The rate of Distributions on the Preferred Trust Receipts will be 76
basis points greater than the dividend rate on the Depositary Shares.
- Dividends on the Depositary Shares accumulate but do not compound.
Monthly Distributions on Preferred Trust Receipts will be cumulative and
monthly Distributions in arrears after the monthly payment date therefor
will accumulate additional Distributions thereon at the Distribution
rate. The term "Distributions" as used herein shall include, as
applicable, monthly distributions and distributions on monthly
distributions in arrears. Monthly Distributions on the Series B Preferred
Securities underlying the Preferred Trust Receipts will be made from
interest payments by PECO Energy on the Series B Subordinated Debentures.
PECO Energy can defer such interest payments for up to 60 consecutive
months (the "Extension Period"). During such deferral, PECO Energy may
not pay dividends on any of its capital stock, including the Depositary
Shares. PECO Energy currently believes that it is unlikely that it (a)
will discontinue declaring dividends on its capital stock, including the
Depositary Shares, or (b) defer interest payments on the Series B
Subordinated Debentures.
- Monies for Distributions and liquidation and redemption payments on the
Preferred Trust Receipts will only be available if PECO Energy pays
principal and interest on the Series B Subordinated Debentures. Although
the Series B Subordinated Debentures are subordinated to all Senior
Indebtedness (as defined herein) of PECO Energy (approximately $5.0
billion at September 30, 1995) and the Payment and Guarantee Agreement
delivered by PECO Energy for the benefit of the holders of the Series B
Preferred Securities (the "Series B Guarantee") is subordinated to all
creditors of PECO Energy, in the event of a liquidation of PECO Energy,
the Series B Subordinated Debentures and the Series B Guarantee must be
satisfied in full before the holders of PECO Energy's preferred stock,
including the Depositary Shares, will be entitled to any liquidation
payments.
- The Series B Preferred Securities and the Preferred Trust Receipts will
be redeemed upon payment at maturity of the Series B Subordinated
Debentures on December 19, 2025. As a result, the Preferred Trust
Receipts are effectively subject to mandatory redemption; in contrast the
Depositary Shares could remain outstanding indefinitely.
POTENTIAL DISADVANTAGES TO EXCHANGING HOLDERS
- Participation in the Offer will be a taxable event for Holders of
Depositary Shares; Holders of Depositary Shares should consult their tax
advisers.
- If PECO Energy elects to defer payments of interest on the Series B
Subordinated Debentures by extending the interest period thereon,
Distributions on the Preferred Trust Receipts would also be deferred but
the holders of the Preferred Trust Receipts would continue to accrue
interest income (as original issue discount) in respect of the Preferred
Trust Receipts which will be taxable to owners of the Preferred Trust
Receipts. As a result, owners of the Preferred Trust Receipts during an
Extension Period of interest on the Series B Subordinated Debentures will
include their pro rata share of the interest in gross income in advance
of the receipt of cash.
- Holders of Preferred Trust Receipts will have no voting rights with
respect to PECO Energy. If preferred dividends of PECO Energy are in
arrears in an aggregate amount equivalent to four full quarterly dividend
payments, the holders of PECO Energy's preferred stock, including Holders
of Depositary Shares, have the right to elect the least number of
directors necessary to constitute a majority of the full board of
directors of PECO Energy.
4
<PAGE> 10
- While the Depositary Shares are not redeemable prior to October 1, 1997,
the Series B Preferred Securities (and thus the Preferred Trust Receipts)
in certain circumstances will be redeemable prior to that date upon the
occurrence of a Tax Event (as defined herein) or an Investment Company
Act Event (as defined herein).
- While dividends on the Depositary Shares are eligible for the dividends
received deduction for corporate holders, distributions on the Preferred
Trust Receipts are not eligible for the dividends received deduction for
corporate holders.
- While the Preferred Trust Receipts have been approved for listing on the
NYSE, subject to notice of issuance and attainment of the NYSE
distribution standards, the Preferred Trust Receipts are a new issue of
securities with no established trading market.
- Holders of the Depositary Shares are entitled to participate in PECO
Energy's Dividend Reinvestment and Stock Purchase Plan. Holders of
Preferred Trust Receipts will not be entitled to participate in such
plan.
POTENTIAL RISK TO NON-EXCHANGING HOLDERS
- The liquidity and trading market for Depositary Shares which are not
exchanged in the Offer could be adversely affected by the reduction in
the number of publicly traded Depositary Shares resulting from the Offer.
For more detailed information concerning the potential disadvantages to
exchanging Holders of Depositary Shares and the potential risk to non-exchanging
Holders of Depositary Shares, see "Risk Factors" and "United States Taxation"
herein.
TERMS OF THE OFFER
BASIS OF EXCHANGE: One Preferred Trust Receipt for each Depositary
Share validly tendered and accepted.
MAXIMUM NUMBER OF SHARES;
PRORATION: The Offer is for up to 5,400,000 Depositary Shares,
unless reduced by PECO Energy in its sole
discretion. If more than 5,400,000 Depositary
Shares are validly tendered, acceptance of
Depositary Shares of each tendering Holder will
be pro rated.
EXPIRATION DATE: 12:00 Midnight, New York City time on December 13,
1995 unless extended by PECO Energy in its sole
discretion or as required by law.
EXCHANGE DATE: The date of issuance of the Preferred Trust
Receipts will be as soon as practicable following
the Expiration Date or up to 12 Business Days
following the Expiration Date if proration of
tendered Depositary Shares is required.
WITHDRAWALS: Any time prior to the Expiration Date and, unless
accepted for exchange, at any time after 40
Business Days (defined, for purposes of the
Offer, as any day other than a Saturday, Sunday
or federal holiday) from November 8, 1995.
AMENDMENT; TERMINATION: PECO Energy may amend or terminate the Offer and
not accept any Depositary Shares at any time
prior to the Expiration Date, provided PECO
Energy will not accept Depositary Shares if as of
the Expiration Date for any reason there would be
fewer than 1,000,000 Preferred Trust Receipts to
be issued or 400 record or beneficial holders of
Preferred Trust Receipts to be issued as a result
of the Exchange.
PROCEDURES FOR TENDERING: In order to participate in the Offer, Holders of
Depositary Shares must submit a Letter of
Transmittal or Agent's Message (as defined
herein)
5
<PAGE> 11
or submit a Notice of Guaranteed Delivery and
comply with the other procedures for tendering in
accordance with instructions contained herein and
in the Letter of Transmittal prior to the
Expiration Date.
LETTERS OF TRANSMITTAL, DEPOSITARY SHARES AND ANY OTHER REQUIRED DOCUMENTS
SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO PECO ENERGY, PECO ENERGY
CAPITAL, THE TRUST, THE DEALER MANAGERS OR THE INFORMATION AGENT.
BENEFICIAL OWNERS: Any beneficial owner of Depositary Shares
registered in the name of a broker/dealer,
commercial bank, trust company or other nominee
who wishes to tender must instruct such
registered holder to tender on behalf of such
beneficial owner.
GUARANTEED DELIVERY
PROCEDURES: A tender may be effected in accordance with the
guaranteed delivery procedures set forth in "The
Offer -- Procedures for Tendering -- Guaranteed
Delivery."
EXCHANGE AGENT: First Chicago Trust Company of New York.
INFORMATION AGENT: D. F. King & Co., Inc.
DEALER MANAGERS: Merrill Lynch & Co. and Smith Barney Inc.
Questions and requests for assistance, requests for additional copies of
this Offering Circular/Prospectus or of the Letter of Transmittal and requests
for Notices of Guaranteed Delivery should be directed to the Information Agent.
The address and telephone number of the Information Agent are set forth in "The
Offer -- Exchange Agent and Information Agent" and on the outside back cover of
this Offering Circular/Prospectus. Questions with respect to the Offer may be
directed to Merrill Lynch & Co. Marketing Support at (212) 236-4565 (call
collect) or the Smith Barney Inc. Liability Management Group at (800) 813-3754.
PREFERRED TRUST RECEIPTS
NATURE OF SECURITY: Each Preferred Trust Receipt represents a Series B
Preferred Security
DISTRIBUTIONS: Cumulative Distributions at the annual rate of
8.72% per annum payable monthly in arrears.
Distributions in arrears after the monthly
payment date therefor will accumulate additional
Distributions thereon at the Distribution rate.
Additionally, the Preferred Trust Receipts will
accrue an additional distribution at the rate of
7.96% per annum of the liquidation amount thereof
from November 1, 1995 up to but not including the
Exchange Date, payable on the first Distribution
payment date.
DENOMINATIONS: Each Preferred Trust Receipt represents a Series B
Preferred Security; each Series B Preferred
Security has a stated liquidation preference of
$25.
FORM: Certificated or Book-Entry
REDEMPTION: Upon any redemption of Series B Preferred
Securities, which are subject to the following
redemptions:
Optional:
(i) After October 1, 1997
(ii) Upon a Tax Event
Mandatory:
(i) Upon an Investment Company Event
(ii) Upon payment at maturity of the Series
B Subordinated Debentures on
December 19, 2025
6
<PAGE> 12
<TABLE>
<S> <C>
(iii) Upon redemption of the Series B Subordinated
Debentures, which are subject to optional redemption
upon a Tax Event or after October 1, 1997
</TABLE>
LISTING: The Preferred Trust Receipts have been approved for
listing on the NYSE, subject to notice of
issuance and attainment of the NYSE distribution
standards. In order to satisfy the NYSE listing
requirements, acceptance of Depositary Shares
validly tendered in the Offer is subject to the
conditions that as of the Expiration Date there
be at least 1,000,000 Preferred Trust Receipts to
be issued and 400 record or beneficial holders of
Preferred Trust Receipts to be issued in exchange
for such Depositary Shares, which conditions may
not be waived.
WITHDRAWAL: Upon surrender of Preferred Trust Receipts at the
principal office of the Trustee, and subject to
the terms of the Partnership Agreement, a holder
of Preferred Trust Receipts represented thereby
is entitled to delivery of the whole number of
Series B Preferred Securities represented by such
Preferred Trust Receipts.
SERIES B SUBORDINATED
DEBENTURES: The Distribution rate and the Distribution and
other payment dates for the Series B Preferred
Securities represented by the Preferred Trust
Receipts will correspond to the interest rate and
the interest and other payment dates of the
Series B Subordinated Debentures issued to PECO
Energy Capital concurrently with the issuance of
the Series B Preferred Securities. The Series B
Subordinated Debentures will be issued under PECO
Energy's Indenture dated as of July 1, 1994
between PECO Energy and Meridian Trust Company,
as trustee (the "Indenture Trustee"), as
supplemented by a First Supplemental Indenture
dated as of December 1, 1995 (as so supplemented,
the "Indenture").
SERIES B GUARANTEE: The Series B Guarantee guarantees payment of
accumulated and unpaid monthly Distributions,
amounts payable upon redemption, and amounts
payable upon liquidation with respect to the
Series B Preferred Securities, in each case, only
to the extent that PECO Energy Capital has funds
on hand legally available therefor and payment
does not violate applicable law. If PECO Energy
fails to make interest payments on its Series B
Subordinated Debentures, PECO Energy Capital will
not have sufficient funds to pay Distributions on
the Series B Preferred Securities. The Series B
Guarantee does not cover payment of Distributions
when PECO Energy Capital does not have sufficient
funds to pay such Distributions. In such event,
the remedy of a holder of Series B Preferred
Securities is to enforce the rights of PECO
Energy Capital under the Series B Subordinated
Debentures.
SUBORDINATION OF PECO
ENERGY OBLIGATIONS: The obligations of PECO Energy under the Series B
Guarantee are subordinate and junior in right of
payment to all general liabilities of PECO Energy
and its obligations under the Series B
Subordinated Debentures are subordinate and
junior in right of payment to all present and
future Senior Indebtedness of PECO Energy, which
aggregated approximately $5.0 billion at
September 30, 1995.
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
The Exchange will be a taxable event. Gain or loss generally will be
recognized in an amount equal to the difference between the fair market value on
the Exchange Date of the Holder's pro rata share of the Series B Subordinated
Debentures deemed received in the Exchange and the exchanging Holder's tax basis
in the Depositary Shares surrendered. For this purpose, the fair market value of
the Series B Subordinated
7
<PAGE> 13
Debentures deemed issued in exchange for Depositary Shares on the Exchange Date
will equal the fair market value of the Preferred Trust Receipts on that date.
See "United States Taxation -- Receipt of Preferred Trust Receipts for
Depositary Shares."
No portion of the amounts received on the Preferred Trust Receipts will be
eligible for the dividends received deduction.
The Preferred Trust Receipts may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the Series B
Subordinated Debentures. During any extension period, each holder of Preferred
Trust Receipts (a "Securityholder") who disposes of his Preferred Trust Receipts
prior to the record date for payment of Distributions at the end of such
Extension Period will nevertheless be required to include his pro rata share of
accrued but unpaid interest on the Series B Subordinated Debentures allocable
monthly to the Trust through the date of disposition in income as ordinary
income, and to add such amount to his adjusted tax basis in his pro rata share
of the Series B Preferred Securities deemed disposed of. Accordingly, such a
Securityholder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is less
than the Securityholder's adjusted tax basis (which will include accrued but
unpaid interest). Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for United States federal income tax
purposes.
8
<PAGE> 14
RISK FACTORS
Holders of the Depositary Shares who plan to participate in the Offer
should carefully consider, in addition to the information set forth elsewhere in
this Offering Circular/Prospectus, the following:
TAX CONSEQUENCES OF THE EXCHANGE
The Exchange will be a taxable event. Generally, gain or loss will be
recognized in an amount equal to the difference between the fair market value on
the Exchange Date of the Holder's pro rata share of the Series B Subordinated
Debentures deemed received in the Exchange and the exchanging Holder's tax basis
in the Depositary Shares exchanged. See "United States Taxation -- Receipt of
Preferred Trust Receipts for Depositary Shares." All Holders of the Depositary
Shares are advised to consult their tax advisers regarding the United States
federal, state, local and foreign tax consequences of the exchange of the
Depositary Shares and the issuance of Preferred Trust Receipts.
SUBORDINATE OBLIGATIONS OF SERIES B GUARANTEE AND SERIES B SUBORDINATED
DEBENTURES
PECO Energy's obligations under the Series B Guarantee are subordinate and
junior in right of payment to all general liabilities of PECO Energy and its
obligations under the Series B Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness of PECO Energy. At
September 30, 1995, the Senior Indebtedness of PECO Energy aggregated
approximately $5.0 billion. There are no terms in the Series B Subordinated
Debentures or the Series B Guarantee that limit PECO Energy's ability to incur
additional indebtedness, including indebtedness that ranks senior to the Series
B Subordinated Debentures and the Series B Guarantee. The Series B Guarantee
guarantees payment of accumulated and unpaid monthly distributions, amounts
payable on redemption, and amounts payable on liquidation with respect to the
Series B Preferred Securities, in each case, however, only to the extent that
PECO Energy Capital has funds on hand legally available therefor and payment
thereof does not otherwise violate applicable law. If PECO Energy were to
default on its obligation to pay interest or amounts payable on redemption or
maturity of the Series B Subordinated Debentures, PECO Energy Capital would lack
legally available funds for the payment of Distributions or amounts payable on
redemption of the Series B Preferred Securities or upon liquidation of PECO
Energy Capital, and in such event the holders of the Preferred Trust Receipts
representing the Series B Preferred Securities would not be able to rely upon
the Series B Guarantee for payment of such amounts. Instead, holders of the
Preferred Trust Receipts representing the Series B Preferred Securities would be
required to seek enforcement of PECO Energy Capital's rights against PECO Energy
pursuant to the terms of the Indenture. See "Description of the Series B
Guarantee -- Status of the Series B Guarantee" and "Description of the Series B
Subordinated Debentures and the Indenture -- Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
PECO Energy has the right under the Indenture to extend interest payment
periods on the Series B Subordinated Debentures for up to 60 consecutive months,
and, as a consequence, monthly Distributions on the Series B Preferred
Securities can be deferred by PECO Energy Capital during any such extended
interest payment period. Distributions in arrears after the monthly payment date
therefor will accumulate additional distributions thereon at the rate per annum
of 8.72% thereof. In the event PECO Energy exercises its right to extend the
interest payment periods on the Series B Subordinated Debentures, PECO Energy
may not declare dividends on any shares of its capital stock during such
extension period. See "Description of the Series B Subordinated Debentures and
the Indenture -- Option to Extend Interest Payment Period."
Should an extended interest payment period occur, PECO Energy Capital will
continue to accrue income for United States federal income tax purposes which
will be allocated, but not distributed, to the holders of the Preferred Trust
Receipts, as the owners for tax purposes of the Series B Preferred Securities
represented by the Preferred Trust Receipts. As a result, the owner will include
such interest in gross income for United States federal income tax purposes in
advance of the receipt of cash, and will not receive the cash related to such
income if the owner disposes of the Preferred Trust Receipts prior to the record
date for payment of Distributions. See "United States Taxation -- Potential
Extension of Payment Period."
9
<PAGE> 15
LISTING AND TRADING OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES
The Preferred Trust Receipts constitute a new issue of securities with no
established trading market. While the Preferred Trust Receipts have been
approved for listing on the NYSE, subject to notice of issuance and attainment
of the NYSE distribution standards, there can be no assurance that an active
market for the Preferred Trust Receipts will develop or be sustained in the
future on the NYSE. Although the Dealer Managers have indicated to PECO Energy
and PECO Energy Capital that they intend to make a market in the Preferred Trust
Receipts as permitted by applicable laws and regulations prior to the
commencement of trading on the NYSE, they are not obligated to do so and may
discontinue any such market-making at any time without notice. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the
Preferred Trust Receipts. In order to satisfy the NYSE listing requirements,
acceptance of Depositary Shares validly tendered in the Offer is subject to the
conditions that as of the Expiration Date there be at least 1,000,000 Preferred
Trust Receipts to be issued and 400 record or beneficial holders of Preferred
Trust Receipts to be issued as a result of the Exchange, which conditions may
not be waived by PECO Energy.
The liquidity and trading market for Depositary Shares which are not
exchanged in the Offer could be adversely affected by the reduction in the
number of publicly traded Depositary Shares resulting from the Offer. The Offer
is for up to 5,400,000 Depositary Shares (or 96.4% of the 5,600,000 Depositary
Shares outstanding) rather than for all the outstanding Depositary Shares, to
reduce the risk that the Depositary Shares would be subject to delisting
following consummation of the Offer.
Under the rules of the NYSE, preferred securities such as the Depositary
Shares are subject to delisting if (i) the aggregate value of publicly held
shares is less than $2 million and (ii) the number of publicly held shares is
less than 100,000. Since at least 200,000 Depositary Shares will remain
outstanding following consummation of the Offer, the number of outstanding
Depositary Shares will exceed the delisting criteria set forth in clause (ii)
above. In addition, based on the market price of the Depositary Shares on the
NYSE ($25 1/8 on July 3, 1995, the closing sales price of the Depositary Shares
on the NYSE on the last trading day immediately prior to PECO Energy's first
public announcement of the Offer, and $25 3/8 on November 2, 1995), PECO Energy
believes that the aggregate value of the minimum number (200,000) of Depositary
Shares which will be outstanding following consummation of the Offer should
exceed the delisting criteria set forth in clause (i) above. See "Price Range of
Depositary Shares." If less than 5,400,000 Depositary Shares are validly
tendered, then the number of Depositary Shares remaining outstanding, and the
aggregate value thereof, will be even greater.
POSSIBLE REDEMPTION OF PREFERRED TRUST RECEIPTS PRIOR TO OCTOBER 1, 1997
The Depositary Shares are not subject to redemption prior to October 1,
1997. Except as described below, the Series B Preferred Securities will not be
subject to redemption prior to October 1, 1997. If a Tax Event shall occur and
be continuing, the Series B Preferred Securities will be subject to redemption,
at the option of PECO Energy Capital Corp., a Delaware corporation and a wholly
owned subsidiary of PECO Energy, as the sole general partner (the "General
Partner") of PECO Energy Capital, in whole or in part. If an Investment Company
Act Event shall occur and be continuing, the Series B Preferred Securities will
be subject to mandatory redemption following the occurrence of such event. In
the event the Series B Preferred Securities are redeemed, an equal amount of
related Preferred Trust Receipts will be redeemed. See "Description of the
Series B Preferred Securities -- Special Event Redemptions" and "Description of
the Series B Subordinated Debentures and the Indenture -- Redemption."
10
<PAGE> 16
COMPARISON OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES
The following is a brief summary of certain terms of the Preferred Trust
Receipts and the Depositary Shares. For a more complete description of the
Preferred Trust Receipts, see "Description of the Preferred Trust Receipts" and
"Description of the Series B Preferred Securities." For a more complete
description of the Series B Subordinated Debentures which will represent the
sole source for the payment of distributions and other payments on the Series B
Preferred Securities represented by the Preferred Trust Receipts, see
"Description of the Series B Subordinated Debentures and the Indenture."
<TABLE>
<CAPTION>
PREFERRED TRUST RECEIPTS DEPOSITARY SHARES
--------------------------------- ---------------------------------
<S> <C> <C>
Nature of Security....... Represents a Series B Preferred A one-fourth interest in $7.96
Security, which represents a Cumulative Preferred Stock issued
limited partner interest in PECO by PECO Energy.
Energy Capital.
Distribution/Dividend
Rate................... 8.72% per annum payable $1.99 ($7.96 per share of $7.96
monthly in arrears on the Cumulative Preferred Stock) per
last day of each month of each annum payable on February 1, May
year, commencing 1, August 1 and November 1 of
December 29, 1995 from and each year, out of funds legally
including the Exchange Date but available therefor, when, as and
only if, and to the extent that, if declared by PECO Energy's
Distributions are made in respect Board of Directors. Dividends are
of the Series B Preferred cumulative. Accumulated unpaid
Securities. Distributions in dividends do not accumulate
arrears after the monthly payment additional dividends thereon.
date therefor, including during
any Extension Period for the
Series B Subordinated Debentures,
accumulate additional
Distributions thereon at the rate
of 8.72% per annum.
Optional Redemption...... See "Maturity/Mandatory Redeemable at the option of PECO
Redemption" below. Energy on and after October 1,
1997, in whole or in part, at a
redemption price equal to 100% of
the stated liquidation preference
of the shares to be redeemed,
plus accrued and unpaid
dividends, if any, to the
redemption date.
Maturity/Mandatory
Redemption............. The Preferred Trust Receipts will None
be redeemed upon: (1) the
redemption of the Series B
Preferred Securities upon the
payment at maturity of the Series
B Subordinated Debentures, (2)
optional redemption, in whole or
in part, of the Series B
Subordinated Debentures or the
Series B Preferred Securities on
or after October 1, 1997 or (3)
the optional redemption of the
Series B Subordinated Debentures
or Series B Preferred Securities
upon the occurrence of a Tax
Event or mandatory redemption of
the Series B Preferred Securities
upon occurrence of an Investment
Company Act Event. Any such
redemption of the Preferred Trust
Receipts will be at a redemption
price equal to 100% of the stated
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
PREFERRED TRUST RECEIPTS DEPOSITARY SHARES
--------------------------------- ---------------------------------
<S> <C> <C>
liquidation preference of the
Series B Preferred Securities to
be redeemed, plus accrued and
unpaid Distributions, if any, to
the redemption date, including
Distributions accrued as a result
of PECO Energy's election to
defer payments of interest on the
Series B Subordinated Debentures.
The Series B Subordinated
Debentures have a final maturity
of December 19, 2025. See
"Description of the Preferred
Trust Receipts -- Redemption of
Preferred Trust Receipts" and
"Description of the Series B
Preferred Securities -- Mandatory
Redemption" and "-- Special Event
Redemptions."
Withdrawal Rights........ Upon surrender of Preferred Trust Upon surrender of Depositary
Receipts at the principal office Receipts (as defined below) at
of the Trustee, and subject to the principal office of the
the terms of the Partnership Depositary (as defined below),
Agreement, a holder of Preferred and upon payment of the
Trust Receipts is entitled to Depositary's customary charges
delivery of the number of whole therefor, and subject to the
Series B Preferred Securities terms of the deposit agreement
represented by such Preferred for the Depositary Shares, a
Trust Receipts. holder of the Depositary Shares
is entitled to delivery of the
number of whole shares of the
$7.96 Preferred Stock and all
money and other property, if any,
represented by such Depositary
Shares.
Subordination............ The Series B Preferred Securities Subordinate to claims of
will rank subordinate to claims creditors of PECO Energy,
of creditors of PECO Energy including the Subordinated
Capital, but senior to the Debentures, but senior to the
general partner interests in PECO common stock of PECO Energy and
Energy Capital and pari passu pari passu with all other
with all other Preferred outstanding series of preferred
Securities of PECO Energy stock of PECO Energy.
Capital. The obligations of PECO
Energy under the Series B
Guarantee are subordinate and
junior in right of payment to all
general liabilities of PECO
Energy and its obligations under
the Series B Subordinated
Debentures are subordinate and
junior in right of payment to all
present and future Senior
Indebtedness of PECO Energy,
which aggregated approximately
$5.0 billion at September 30,
1995, but senior in payment to
all capital stock of PECO Energy,
including the Depositary Shares.
Listing.................. The Preferred Trust Receipts have The Depositary Shares are listed
been approved for listing on the on the NYSE.
NYSE, subject to notice of
issuance and attainment of the
NYSE
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
PREFERRED TRUST RECEIPTS DEPOSITARY SHARES
--------------------------------- ---------------------------------
<S> <C> <C>
distribution standards. In order
to satisfy the NYSE listing
requirements, acceptance of
Depositary Shares validly
tendered in the Offer is subject
to the conditions that as of the
Expiration Date there be at least
1,000,000 Preferred Trust
Receipts to be issued and 400
record or beneficial holders of
Preferred Trust Receipts to be
issued in exchange for such
Depositary Shares, which
conditions may not be waived.
Federal Income Tax
Consequences of
Distributions/
Dividends.............. Distributions are not eligible Dividends are eligible for the
for the dividends received dividends received deduction for
deduction for corporate holders. corporate holders.
Voting
Rights/Enforcement..... If (i) PECO Energy Capital fails If dividends shall be in arrears
to pay Distributions in full on in an aggregate amount equivalent
any series of the Preferred to four quarterly dividend
Securities for 18 consecutive payments, the holders of PECO
monthly distribution periods, Energy preferred stock, including
(ii) an Event of Default (as the holders of Depositary Shares,
defined in the Indenture) occurs have the right to elect the
and is continuing, or (iii) PECO smallest number of directors
Energy is in default on any of necessary to constitute a
its payment obligations under the majority of the full board of
Payment and Guarantee Agreements directors of PECO Energy.
(the "Guarantees") relating to
the Preferred Securities issued
by PECO Energy Capital, then the
holders of the Preferred
Securities, including the Trust
acting through the Trustee at the
direction of the holders of the
Preferred Trust Receipts, acting
as a single class, will be
entitled by a vote of the
majority of the aggregate stated
liquidation preference of the
outstanding Preferred Securities
to appoint a special
representative (the "Special
Representative") to enforce PECO
Energy Capital's rights against
PECO Energy under the Deferrable
Interest Subordinated Debentures
of PECO Energy (the "Subordinated
Debentures") and the Indenture
and the obligations undertaken by
PECO Energy under the Guarantees,
including, after failure to pay
distributions for 60 consecutive
monthly distribution periods on
the Preferred Securities, the
payment of distributions on the
Preferred Securities.
</TABLE>
13
<PAGE> 19
PECO ENERGY
PECO Energy, incorporated in Pennsylvania in 1929, is an operating utility
which provides electric and gas service to the public in southeastern
Pennsylvania. The total area served by PECO Energy covers 2,107 square miles.
Electric service is supplied in an area of 1,972 square miles with a population
of about 3,638,000, including 1,600,000 in the City of Philadelphia.
Approximately 94% of the electric service area and 63% of retail kilowatthour
sales are in the suburbs around Philadelphia, and 6% of the service area and 37%
of such sales are in the City of Philadelphia. In 1994, approximately 60% of
PECO Energy's electric output was generated from nuclear sources. PECO Energy
estimates for 1995 that 59% of its electric output will come from nuclear
sources. Natural gas service is supplied in a 1,475-square-mile area of
southeastern Pennsylvania adjacent to Philadelphia with a population of
1,900,000. PECO Energy and its subsidiaries hold franchises to the extent
necessary to operate in the areas served.
PECO ENERGY CAPITAL
PECO Energy Capital is a limited partnership formed in 1994 under the laws
of the State of Delaware. All of its general partner interests are owned by PECO
Energy Capital Corp., as the General Partner. As a limited partnership, all of
the business and affairs of PECO Energy Capital are managed by the General
Partner. PECO Energy Capital was created solely for the purpose of issuing the
Preferred Securities and lending the proceeds thereof to PECO Energy, and
entering into similar financing arrangements. Such loans are evidenced by the
Subordinated Debentures issued by PECO Energy under the Indenture. The
Subordinated Debentures are the only assets of PECO Energy Capital and the only
revenues of PECO Energy Capital are interest on the Subordinated Debentures. The
General Partner pays all of PECO Energy Capital's operating expenses and has
general liability for all of PECO Energy Capital's obligations.
THE TRUST
PECO Energy Capital Trust I is a statutory business trust recently created
under the laws of the State of Delaware. PNC Bank, Delaware is the sole trustee
of the Trust (in such capacity, and not in its individual capacity, the
"Trustee"). The Trust exists for the sole purpose of issuing the Preferred Trust
Receipts representing the Series B Preferred Securities held by the Trust and
performing functions directly related thereto. The Series B Preferred Securities
are the only assets of the Trust. All expenses or liabilities of the Trust will
be paid by the General Partner, provided that if the Trustee incurs fees,
charges or expenses for which it is not otherwise liable under the Trust
Agreement at the election of a holder of Preferred Trust Receipts or other
person, such holder or other person will be liable for such fees, charges and
expenses.
COVERAGE RATIOS
PECO Energy's Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
- ---------------------------------------- -------------
1990 1991 1992 1993 1994 1994 1995
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.31(1) 2.55 2.43 3.15 2.66(2) 3.30 3.46
</TABLE>
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income to
which has been added fixed charges and taxes based on income of PECO Energy.
Fixed charges consist of interest on funded indebtedness, other interest,
amortization of net gain on reacquired debt and net discount on debt and the
interest portion of all rentals charged to income.
14
<PAGE> 20
PECO Energy's Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends for each of the periods indicated was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
- ---------------------------------------- -------------
1990 1991 1992 1993 1994 1994 1995
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.04(1) 2.14 2.06 2.67 2.32(2) 2.80 3.15
</TABLE>
- ---------------
(1) Reflects the one-time, after-tax charge against income of $250 million
associated with various disallowances made by the Pennsylvania Public
Utility Commission in the Limerick Unit No. 2 rate order and the one-time,
after-tax charge against income of $150 million associated with PECO
Energy's 1990 early retirement plan.
(2) Reflects a one-time after-tax charge against income of $254 million
associated with early retirement and separation programs.
The Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends represents, on a pre-tax basis, the number of times earnings cover
fixed charges and preferred stock dividends. Earnings consist of net income to
which has been added fixed charges and taxes based on income of PECO Energy.
Combined fixed charges and preferred stock dividends consist of interest on
funded indebtedness, other interest, amortization of net gain on reacquired debt
and net discount on debt, preferred stock dividends (increased to reflect the
pre-tax earnings required to cover such dividend requirements) and the interest
portion of all rentals charged to income.
15
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
Reference is made to PECO Energy's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (the "Form 10-K"), which is incorporated by
reference in this Offering Circular/Prospectus and which contains PECO Energy's
audited consolidated financial statements, including the consolidated income
statement for the three fiscal years in the period ended December 31, 1994,
consolidated balance sheets as of December 31, 1993 and 1994, and the related
notes. Selected unaudited financial information as of and for the six months
ended June 30, 1994 and 1995 should be read in conjunction with the audited
consolidated financial statements and related notes contained in the Form 10-K
and the unaudited consolidated financial statements contained in PECO Energy's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, which report
is also incorporated by reference in this Offering Circular/Prospectus. Such
unaudited information reflects, in the opinion of management, all adjustments,
consisting of only normal accruals, necessary for a consistent presentation with
the audited financial information. Results of operations for the six months
ended June 30, 1995 are not necessarily indicative of the results to be expected
for the full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Operating Revenues........................ $ 2,017.2 $ 2,080.0 $ 4,040.6 $ 3,988.1 $ 3,962.5 $ 4,018.6 $ 3,786.7
Operating Income.......................... 489.3 463.1 829.6 1,035.4 1,033.4 1,081.2 767.7
Income from Continuing Operations......... 305.6 275.4 426.7 590.6 478.9 534.7 105.8
Net Income................................ 305.6 275.4 426.7 590.6 478.9 534.7 214.2
Earnings Applicable to Common Stock....... 293.5 253.8 389.4(2) 541.6 418.2 468.6 123.9(1)
Earnings Per Average Common Share From
Continuing Operations (Dollars)......... 1.32 1.15 1.76 2.45 1.90 2.15 0.07
Earnings Per Average Common Share
(Dollars)............................... 1.32 1.15 1.76 2.45 1.90 2.15 0.58
Dividends Per Common Share (Dollars)...... 0.81 0.76 1.545 1.43 1.325 1.225 1.45
Common Stock Equity (Per Share)........... 19.94 19.63 19.41 19.25 18.24 17.69 16.71
Average Shares of Common Stock Outstanding
(Millions).............................. 221.7 221.5 221.6 221.1 220.2 218.2 214.4
FINANCIAL CONDITION AT END OF PERIOD
Net Utility Plant, at Original Cost....... 10,693.4 10,727.6 10,828.7 10,763.0 10,691.2 10,598.4 10,591.3
Leased Property, Net...................... 163.2 167.6 174.6 194.7 210.0 223.8 241.3
--------- --------- --------- --------- --------- --------- ---------
Total Current Assets...................... 683.3 605.0 454.8 514.8 550.0 783.2 745.0
Total Deferred Debits and Other Assets.... 3,539.5 3,664.8 3,634.7 3,559.8 1,127.0 918.1 938.6
--------- --------- --------- --------- --------- --------- ---------
Total Assets............................ $15,079.4 $15,165.0 $15,092.8 $15,032.3 $12,578.2 $12,523.5 $12,516.2
======== ======== ======== ======== ======== ======== ========
Common Shareholders' Equity............... $ 4,423.2 $ 4,349.3 $ 4,302.5 $ 4,263.4 $ 4,022.2 $ 3,892.3 $ 3,624.5
Preferred and Preference Stock
Without Mandatory Redemption............ 277.4 422.5 277.5 422.5 422.5 422.5 422.5
With Mandatory Redemption............... 92.7 182.1 92.7 186.5 231.1 315.6 330.9
Company Obligated Mandatorily Redeemable
Preferred Securities of Partnership
holding solely PECO Energy Debentures... 221.3 -- 221.3 -- -- -- --
Long-Term Debt............................ 4,515.5 4,876.5 4,785.6 4,884.3 5,203.9 5,415.6 5,830.8
--------- --------- --------- --------- --------- --------- ---------
Total Capitalization...................... 9,530.1 9,830.4 9,679.6 9,756.7 9,879.7 10,046.0 10,208.7
--------- --------- --------- --------- --------- --------- ---------
Total Current Liabilities................. 1,064.3 930.4 878.6 954.6 830.6 823.4 783.8
--------- --------- --------- --------- --------- --------- ---------
Total Deferred Credits and Other
Liabilities............................. 4,485.0 4,404.2 4,534.6 4,321.0 1,867.9 1,654.1 1,523.7
--------- --------- --------- --------- --------- --------- ---------
Total Capitalization and Liabilities...... $15,079.4 $15,165.0 $15,092.8 $15,032.3 $12,578.2 $12,523.5 $12,516.2
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Reflects the one-time, after-tax charge against income of $250 million
associated with various disallowances made by the Pennsylvania Public
Utility Commission in the Limerick Unit No. 2 rate order and the one-time,
after-tax charge against income of $150 million associated with PECO
Energy's 1990 early retirement plan.
(2) Reflects a one-time after-tax charge against income of $254 million
associated with early retirement and separation programs.
16
<PAGE> 22
On October 23, 1995, PECO Energy reported that common stock earnings for
the quarter ended September 30, 1995 were $0.80 per share, which are $0.08 per
share, or 11% higher than the third quarter of last year after adjusting for the
one-time charge in 1994 of $0.66 per share associated with PECO Energy's
retirement and separation programs. The increase in earnings was attributable to
higher electric sales resulting primarily from warmer weather in August 1995
compared to last year and lower operations and maintenance expenses related to
PECO Energy's retirement and separation programs.
Total electric sales increased 11% from the third quarter of 1994 primarily
due to increased sales to other utilities and increased residential sales. Gas
sold and transported increased 42% primarily due to increased gas transported
for others.
Earnings for the twelve months ended September 30, 1995 were $2.68 per
share as compared to $1.78 per share for the corresponding period in 1994. The
increase is primarily attributable to the one-time charge in the third quarter
of 1994 associated with PECO Energy's retirement and separation programs. Also
contributing to the increase in earnings were lower operations and maintenance
expenses related to PECO Energy's retirement and separation programs, the
ongoing emphasis on cost control, a one-time gain on the sale of Conowingo Power
Company in June 1995, and benefits of PECO Energy's ongoing debt and preferred
stock refinancing program. These increases were partially offset by a reduction
in revenue received in 1994 for accepting nuclear fuel from the Shoreham Nuclear
Power Station.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
--------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Total Operating Revenues.......... $ 1,125.2 $ 1,041.1 $ 3,142.4 $ 3,121.1 $ 4,061.9 $ 4,062.8
Net Income........................ 184.3 22.2 489.9 297.6 619.0 436.6
Shares of Common Stock -- Average
(Millions)...................... 221.9 221.6 221.8 221.5 221.7 221.5
Earnings Per Average Common Share
(Dollars)....................... $ 0.80 $ 0.06 $ 2.13 $ 1.20 $ 2.68 $ 1.78
</TABLE>
17
<PAGE> 23
THE OFFER
PURPOSE OF THE OFFER
The purpose of the Offer is to reduce the after-tax financing costs of PECO
Energy through the replacement of Depositary Shares with Preferred Trust
Receipts. Although the Distribution rate on the Preferred Trust Receipts will be
higher than the dividend rate on the Depositary Shares, PECO Energy will deduct
interest payable on the Series B Subordinated Debentures for federal income tax
purposes; dividends payable on the Depositary Shares are not deductible by PECO
Energy for federal income tax purposes.
Except as described herein, PECO Energy has no present plans or intentions
to make acquisitions of or offers for the Depositary Shares. PECO Energy will
continue to monitor the market for the Depositary Shares outstanding after the
expiration of the Offer and reserves the right, in its sole discretion, subject
to applicable law, to acquire and to make offers for Depositary Shares
subsequent to the Expiration Date for cash or in exchange for other securities,
by optional redemption of the Depositary Shares, after October 1, 1997, or
otherwise. The terms of any such acquisitions or offers may differ from the
terms of the Offer. Such acquisitions or offers, if any, may depend upon, among
other things, the market price of the Depositary Shares, and general economic
and market conditions.
GENERAL
PARTICIPATION IN THE OFFER IS VOLUNTARY AND HOLDERS OF DEPOSITARY SHARES
SHOULD CAREFULLY CONSIDER WHETHER TO ACCEPT. NO RECOMMENDATION TO HOLDERS TO
TENDER OR TO REFRAIN FROM TENDERING IN THE OFFER IS MADE BY PECO ENERGY, THE
BOARD OF DIRECTORS OF PECO ENERGY, PECO ENERGY CAPITAL, THE GENERAL PARTNER, THE
TRUST OR THE TRUSTEE. HOLDERS OF DEPOSITARY SHARES ARE URGED TO CONSULT THEIR
FINANCIAL AND TAX ADVISERS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
Holders of Depositary Shares will not have any appraisal or dissenters'
rights under the Pennsylvania Business Corporation Law in connection with the
Offer. PECO Energy intends to conduct the Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
SEC thereunder. PECO Energy has received all regulatory approvals necessary to
consummate the Exchange.
Unless the context requires otherwise, the term "Holder" with respect to
the Offer means (i) any person in whose name any Depositary Shares are
registered on the books of the Depositary or (ii) any other person who has
obtained a properly completed stock power from the registered Holder, or (iii)
any person whose Depositary Shares are held of record by The Depository Trust
Company ("DTC"), Philadelphia Depository Trust Company or Midwest Securities
Trust Company (collectively, the "Depositories" and each, a "Depository") who
desires to deliver such Depositary Shares by book-entry transfer at such
Depository.
The $7.96 Cumulative Preferred Stock represented by the Depositary Shares
exchanged pursuant to the Offer will be retired. PECO Energy will take all
actions necessary to restore such retired Preferred Stock to the status of
authorized but unissued Preferred Stock which may thereafter be reissued.
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, PECO Energy will offer to effect an exchange of Preferred
Trust Receipts for up to 5,400,000 outstanding Depositary Shares. The exchange
of Preferred Trust Receipts for Depositary Shares will be effected by (a) the
delivery by PECO Energy of its Series B Subordinated Debentures to the Exchange
Agent, which will receive the Series B Subordinated Debentures on behalf of the
Holders of the Depositary Shares, in exchange for Depositary Shares, (b) the
delivery by the Exchange Agent (acting pursuant to the directions of the Holders
of Depositary Shares) of the Series B Subordinated Debentures to PECO Energy
Capital in consideration for the issuance and deposit by PECO Energy Capital of
the Series B Preferred Securities to and with the Trust under the Trust
Agreement and (c) the issuance and delivery by the Trust of the Preferred Trust
Receipts to the Exchange Agent for distribution to the former Holders of the
Depositary Shares.
18
<PAGE> 24
Holders of Depositary Shares will not have the right to retain the Series B
Subordinated Debentures delivered to the Exchange Agent in exchange for
Depositary Shares validly tendered and accepted. The Offer will be effected on
the basis of one Preferred Trust Receipt for each Depositary Share validly
tendered and accepted for exchange. See "-- Procedures for Tendering." Upon the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal, PECO Energy will accept up to 5,400,000 Depositary Shares validly
tendered and not withdrawn prior to the Expiration Date and, unless the Offer
has been withdrawn or terminated, PECO Energy will cause to be delivered
Preferred Trust Receipts to tendering Holders of Depositary Shares as promptly
as practicable following the Exchange Date. PECO Energy expressly reserves the
right, in its sole discretion, to delay acceptance for exchange of Depositary
Shares tendered under the Offer and the delivery of the Preferred Trust Receipts
with respect to the Depositary Shares accepted for exchange (subject to Rules
13e-4 and 14e-1 under the Exchange Act, which require that PECO Energy
consummate the Offer or return the Depositary Shares deposited by or on behalf
of the Holders thereof promptly after the termination or withdrawal of the
Offer), or to withdraw or terminate the Offer at any time prior to the
Expiration Date for any reason.
In all cases, except to the extent waived by PECO Energy, delivery of
Preferred Trust Receipts issued with respect to the Depositary Shares accepted
for exchange pursuant to the Offer will be made only after timely receipt by the
Exchange Agent of Depositary Shares (or confirmation of book-entry transfer
thereof), a properly completed and duly executed Letter of Transmittal or
Agent's Message, as applicable, and any other documents required thereby.
As of the date of this Offering Circular/Prospectus, there are 5,600,000
Depositary Shares outstanding. This Offering Circular/Prospectus, together with
the Letter of Transmittal, is being sent to all registered Holders as of
November 8, 1995.
PECO Energy will accept validly tendered Depositary Shares (or defectively
tendered Depositary Shares with respect to which PECO Energy has waived such
defect) by giving oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering Holders for the purpose of
receiving Depositary Shares from, and remitting Preferred Trust Receipts to,
tendering Holders who are participating in the Offer and whose shares are
accepted. Upon the terms and subject to the conditions of the Offer, delivery of
Preferred Trust Receipts to tendering Holders will be made as promptly as
practicable following the Expiration Date.
If proration of tendered Depositary Shares is required, the Preferred Trust
Receipts will be issued and distributed by the Exchange Agent up to 12 Business
Days following the Expiration Date. If proration of tendered Depositary Shares
is required, because of the difficulty in determining the number of Depositary
Shares validly tendered (including shares tendered by the guaranteed delivery
procedures described in "-- Procedures for Tendering"), PECO Energy does not
expect that it would be able to announce the final proration factor or to
commence the Exchange for any Depositary Shares pursuant to the Offer until
approximately seven Business Days after the Expiration Date. Preliminary results
of the proration will be announced by press release as promptly as practicable
after the Expiration Date. Holders of Depositary Shares may obtain such
preliminary information from the Dealer Managers, the Information Agent or the
Exchange Agent and may also be able to obtain such information from their
brokers.
If any tendered Depositary Shares are not accepted for exchange because of
an invalid tender, proration or withdrawal or termination by PECO Energy of the
Offer, unless otherwise requested by the Holder under "Special Delivery
Instructions" in the Letter of Transmittal, such Depositary Shares will be
returned, without expense, to the tendering Holder thereof (or in the case of
Depositary Shares tendered by book-entry transfer into the Exchange Agent's
account at the Depository where such Depositary Shares are held, such Depositary
Shares will be credited to an account maintained at the Depository designated by
the participant therein who so delivered such Depositary Shares), as promptly as
practicable after the Expiration Date or the withdrawal or termination of the
Offer.
Holders who tender Depositary Shares in the Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Depositary Shares
pursuant to the Offer. See "Fees and Expenses; Transfer Taxes."
19
<PAGE> 25
Holders who tender Depositary Shares held in global form shall receive
Preferred Trust Receipts in global form and holders tendering Depositary Shares
held directly in certificated form shall receive Preferred Trust Receipts in
certificated form in each case unless otherwise provided in the Letter of
Transmittal. See "-- Procedures for Tendering."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Offer will expire on the Expiration Date. PECO Energy reserves the
right to extend the Offer in its sole discretion at any time and from time to
time by giving oral or written notice to the Exchange Agent and by timely public
announcement communicated or as otherwise required by applicable law or
regulation. During any extension of the Offer, all Depositary Shares previously
tendered pursuant to the Offer and not withdrawn will remain subject to the
Offer.
PECO Energy expressly reserves the right to (i) extend, amend or modify the
terms of the Offer in any manner and (ii) withdraw or terminate the Offer and
not accept for exchange any Depositary Shares at any time prior to the
Expiration Date for any reason. PECO also reserves the right to waive any
condition of the Offer, including the condition that at least 2,800,000
Depositary Shares are tendered in the Offer; provided that in order to satisfy
the NYSE listing requirements, acceptance of Depositary Shares validly tendered
in the Offer is subject to the conditions that as of the Exchange Date there be
at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or
beneficial holders of Preferred Trust Receipts to be issued in exchange for such
Depositary Shares, which conditions may not be waived. If PECO Energy makes a
material change in the terms of the Offer or if it waives a material condition
of the Offer, PECO Energy may extend the Offer. The minimum period for which the
Offer will be extended following a material change or waiver, other than a
change in the amount of Depositary Shares sought for exchange, the consideration
offered therefor or the fee paid to the Soliciting Dealers, will depend upon the
facts and circumstances, including the relative materiality of the change or
waiver. With respect to a change in the amount of Depositary Shares sought, the
consideration offered therefor or the fee paid to the Soliciting Dealers, if
required, the Offer will remain open for a minimum of ten Business Days
following public announcement of such change. Any withdrawal or termination of
the Offer will be followed as promptly as practicable by public announcement
thereof. If PECO Energy withdraws or terminates the Offer, it will give
immediate notice to the Exchange Agent, and all Depositary Shares theretofore
tendered pursuant to the Offer will be returned promptly to the tendering
Holders thereof. See "-- Withdrawal of Tenders."
ACCUMULATED DIVIDENDS AND DISTRIBUTIONS
The Preferred Trust Receipts will bear Distributions at an annual rate of
8.72% from and including the Exchange Date. Dividends accumulated after October
31, 1995 on the Depositary Shares which have been accepted for exchange in the
Offer will not be paid. In lieu thereof, holders of Preferred Trust Receipts
will be entitled to an additional distribution at the rate of 7.96% per annum
(equal to the dividend rate on the Depositary Shares) from and including
November 1, 1995 up to but not including the Exchange Date, payable at the time
of the first Distribution payment on the Preferred Trust Receipts. See
"Description of Preferred Trust Receipts -- Distributions."
PROCEDURES FOR TENDERING
The tender of Depositary Shares by a Holder thereof pursuant to one of the
procedures set forth below will constitute an agreement between such Holder and
PECO Energy in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal and PECO Energy's right to terminate or
withdraw the Offer at any time for any reason.
EACH HOLDER OF THE DEPOSITARY SHARES WISHING TO PARTICIPATE IN THE OFFER
MUST (I) PROPERLY COMPLETE AND SIGN THE LETTER OF TRANSMITTAL IN ACCORDANCE WITH
THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER OF TRANSMITTAL (EXCEPT WHEN
AN AGENT'S MESSAGE IS APPROPRIATE AND UTILIZED), TOGETHER WITH ANY REQUIRED
SIGNATURE GUARANTEES, AND DELIVER THE SAME TO THE EXCHANGE AGENT, AT ONE OF ITS
ADDRESSES SET FORTH IN "-- EXCHANGE AGENT AND INFORMATION AGENT" PRIOR TO THE
EXPIRATION DATE AND EITHER (A) CERTIFICATES FOR THE
20
<PAGE> 26
DEPOSITARY SHARES MUST BE RECEIVED BY THE EXCHANGE AGENT AT SUCH ADDRESS OR (B)
SUCH DEPOSITARY SHARES MUST BE TRANSFERRED PURSUANT TO THE PROCEDURES FOR
BOOK-ENTRY TRANSFER DESCRIBED BELOW AND A CONFIRMATION OF SUCH BOOK-ENTRY
TRANSFER MUST BE RECEIVED BY THE EXCHANGE AGENT, IN EACH CASE PRIOR TO THE
EXPIRATION DATE OR (II) COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES DESCRIBED
BELOW. LETTERS OF TRANSMITTAL, DEPOSITARY SHARES AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO PECO ENERGY, PECO
ENERGY CAPITAL, THE TRUST, THE TRUSTEE, THE DEALER MANAGERS OR THE INFORMATION
AGENT.
Special Procedure for Beneficial Owners. Any beneficial owner whose
Depositary Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact
such registered Holder promptly and instruct such registered Holder to tender on
such beneficial owner's behalf. If such beneficial owner wishes to tender on its
own behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering its Depositary Shares, either make appropriate
arrangements to register ownership of the Depositary Shares in such owner's name
or obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership may take considerable time and may not be able
to be completed prior to the Expiration Date.
THE METHOD OF DELIVERY OF DEPOSITARY SHARES AND ALL OTHER DOCUMENTS IS AT
THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT (A)
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, (B) INSURANCE BE OBTAINED,
AND (C) THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Signature Guarantees. If tendered Depositary Shares are registered in the
name of the signer of the Letter of Transmittal and the Preferred Trust Receipts
to be issued in exchange therefor are to be issued (and any untendered
Depositary Shares are to be reissued) in the name of the registered holder
(which includes any participant in a Depository whose name appears on a security
listing as the owner of Depositary Shares), the signature of such signer need
not be guaranteed. If the tendered Depositary Shares are registered in the name
of someone other than the signer of the Letter of Transmittal, or if Preferred
Trust Receipts issued in exchange therefor are to be issued in the name of any
other person other than the signer of the Letter of Transmittal, such tendered
Depositary Shares must be endorsed or accompanied by written instruments of
transfer in form satisfactory to First Chicago Trust Company of New York,
transfer agent for the Depositary Shares, and duly executed by the registered
Holder, and the signature on the endorsement or instrument of transfer must be
guaranteed by a financial institution (including most banks, savings and loans
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program or the Stock Exchange Medallion Program (any
of the foregoing hereinafter referred to as an "Eligible Institution"). If the
Depositary Shares not exchanged are to be delivered to an address other than
that of the registered Holder appearing on the register for the Depositary
Shares, the signature in the Letter of Transmittal must be guaranteed by an
Eligible Institution.
Book-Entry Transfer. PECO Energy understands that the Exchange Agent has
an account or will make a request promptly after the date of this Offering
Circular/Prospectus to establish accounts with respect to the Depositary Shares
at DTC and such other Depositories which hold Depositary Shares for the purpose
of facilitating the Offer, and subject to the establishment thereof, any
financial institution that is a participant in DTC's or such other Depository's
system may make book-entry delivery of Depositary Shares by causing DTC or such
other Depository to transfer such Depositary Shares into the Exchange Agent's
account with respect to the Depositary Shares in accordance with DTC's Automated
Tender Offer Program ("ATOP") procedures, in the case of DTC, or the procedures
of such other Depository, in the case of such other Depository, for such
book-entry transfers. However, the exchange for the Depositary Shares so
tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer of Depositary Shares into the
Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's
Message (as such term is defined in the next sentence), in the case of a
book-entry transfer effected by DTC, or the Letter of Transmittal and any other
documents required by the Letter of Transmittal, in the case of DTC or any other
Depository.
21
<PAGE> 27
The term "Agent's Message" means a message, transmitted by DTC and received
by the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from a participant
tendering Depositary Shares that are the subject of such Book-Entry Confirmation
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal, and that PECO Energy may enforce such agreement against
such participant.
Guaranteed Delivery. If a Holder desires to participate in the Offer and
time will not permit a Letter of Transmittal or Depositary Shares to reach the
Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if the
Exchange Agent has received at its office prior to the Expiration Date a Notice
of Guaranteed Delivery from an Eligible Institution setting forth the name and
address of the tendering Holder, the name(s) in which the Depositary Shares are
registered and, if the Depositary Shares are held in certificated form, the
certificate numbers of the Depositary Shares to be tendered, and stating that
the tender is being made thereby and guaranteeing that within three NYSE trading
days after the date of execution of such Notice of Guaranteed Delivery by the
Eligible Institution, the Depositary Shares in proper form for transfer together
with a properly and duly executed Letter of Transmittal (and any other required
documents), or a confirmation of book-entry transfer of such Depositary Shares
into the Exchange Agent's account at a Depository with a Letter of Transmittal
(and any other required documents) or, in the case of DTC, an Agent's Message,
will be delivered by such Eligible Institution. Unless the Depositary Shares
being tendered by the above-described method are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents) or a
confirmation of book-entry transfer of such Depositary Shares into the Exchange
Agent's account at a Depository, in accordance with such Depository's procedures
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents) or, in the case of DTC, in accordance with DTC's ATOP
procedures (along with a Letter of Transmittal or an Agent's Message), is
received, PECO Energy may, at its option, reject the tender. In addition to the
copy being transmitted herewith, copies of a Notice of Guaranteed Delivery which
may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent and the Information Agent.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Depositary Shares will be determined by PECO Energy, whose determination will be
final and binding. PECO Energy reserves the absolute right to reject any or all
tenders not in proper form or the acceptance for exchange of which may, in the
opinion of PECO Energy's counsel, be unlawful. PECO Energy also reserves the
absolute right to waive any defect or irregularity in the tender of any
Depositary Shares, and PECO Energy's interpretation of the terms and conditions
of the Offer (including the instructions in the Letter of Transmittal) will be
final and binding. None of PECO Energy, the Exchange Agent, the Dealer Managers,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Tenders of Depositary Shares involving any irregularities will not be
deemed to have been made until such irregularities have been cured or waived.
Depositary Shares received by the Exchange Agent that are not validly tendered
and as to which the irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holder (or in the case of
Depositary Shares tendered by book-entry transfer into the Exchange Agent's
account at DTC or such other Depository, such Depositary Shares will be credited
to an account maintained at DTC or such other Depository designated by the
participant therein who so delivered such Depositary Shares), unless otherwise
requested by the Holder in the Letter of Transmittal, as promptly as practicable
after the Expiration Date or the withdrawal or termination of the Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Offer.
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<PAGE> 28
The party tendering Depositary Shares for exchange (the "Transferor")
sells, assigns and transfers the Depositary Shares to PECO Energy, and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Depositary Shares to be assigned,
transferred and exchanged. The Letter of Transmittal directs the Exchange Agent
to deliver the Series B Subordinated Debentures received upon exchange of the
Depositary Shares to PECO Energy Capital. The Transferor represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Depositary Shares and to acquire Preferred Trust Receipts issuable upon the
exchange of such tendered Depositary Shares and that, when such Transferor's
Depositary Shares are accepted for exchange, PECO Energy will acquire good and
unencumbered title to such tendered Depositary Shares, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The Transferor also warrants that it will, upon request, execute and
deliver any additional documents deemed by PECO Energy to be necessary or
desirable to complete the exchange, assignment and transfer of tendered
Depositary Shares or transfer ownership of such Depositary Shares. All authority
conferred by the Transferor will survive the death, bankruptcy or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
WITHDRAWAL OF TENDERS
Tenders of Depositary Shares pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date and, unless accepted for exchange by PECO
Energy, may be withdrawn at any time after 40 Business Days from November 8,
1995.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange Agent
at the address set forth below under "-- Exchange Agent and Information Agent."
The method of notification is at the risk and election of the Holder. Any such
notice of withdrawal must specify (i) the Holder named in the Letter of
Transmittal as having tendered Depositary Shares to be withdrawn, (ii) if the
Depositary Shares are held in certificated form, the certificate numbers of the
Depositary Shares to be withdrawn, (iii) that such Holder is withdrawing his
election to have such Depositary Shares exchanged and (iv) the name of the
registered Holder of such Depositary Shares. Any notice of withdrawal must be
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to PECO Energy that the person withdrawing the tender
has succeeded to the beneficial ownership of the Depositary Shares being
withdrawn. The Exchange Agent will return the properly withdrawn Depositary
Shares promptly following receipt of notice of withdrawal. If Depositary Shares
have been tendered pursuant to the procedure for book-entry transfer, any notice
of withdrawal must specify the name and number of the account at DTC or other
Depository to be credited with the withdrawn Depositary Shares and otherwise
comply with DTC's or such other Depository's procedures. All questions as to the
validity of notice of withdrawal, including time of receipt, will be determined
by PECO Energy, and such determination will be final and binding on all parties.
Withdrawals of tenders of Depositary Shares may not be rescinded and any
Depositary Shares withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. Properly withdrawn Depositary Shares, however, may be
retendered by following the procedures therefor described elsewhere herein at
any time prior to the Expiration Date. See "-- Procedures for Tendering."
ACCEPTANCE OF DEPOSITARY SHARES AND PRORATION
Upon the terms and subject to the conditions of the Offer, if 5,400,000
Depositary Shares (or, if decreased as described herein, such lesser number as
PECO Energy may elect to exchange pursuant to the Offer) have been validly
tendered and not withdrawn prior to the Expiration Date, PECO Energy will accept
for exchange all such Depositary Shares. Upon the terms and subject to the
conditions of the Offer, if more than 5,400,000 Depositary Shares (or, if
decreased as described herein, such lesser number) have been validly tendered
and not withdrawn prior to the Expiration Date, PECO Energy will accept for
exchange Depositary Shares from each Holder on a pro rata basis, subject to
adjustment to avoid the acceptance for exchange of fractional shares.
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<PAGE> 29
If PECO Energy decreases the amount of Depositary Shares sought, changes
the consideration offered therefor or changes the fee offered to the Soliciting
Dealers, and the Offer is scheduled to expire less than ten Business Days from
and including the date that notice of such decrease is first published, sent or
given in the manner specified above in "-- Expiration Date; Extensions;
Amendments; Termination," then the Offer will be extended for ten Business Days
from and including the date of such notice.
All Depositary Shares not accepted pursuant to the Offer, including
Depositary Shares not accepted because of proration, will be returned to the
tendering Holders at PECO Energy's expense as promptly as practicable following
the Expiration Date.
EXCHANGE AGENT AND INFORMATION AGENT
First Chicago Trust Company of New York has been appointed as the Exchange
Agent for the Offer.
THE EXCHANGE AGENT:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand or Overnight Courier in New York:
First Chicago Trust Company of New York
14 Wall Street
Tenders and Exchanges
8th Floor -- Suite 4680-PECO
New York, New York 10005
By Mail:
(Registered or certified mail recommended)
First Chicago Trust Company of New York
Tenders and Exchanges
Suite 4660-PECO
P.O. Box 2559
Jersey City, New Jersey 07303-2559
By Facsimile Transmission:
(For Eligible Institutions Only)
(201) 222-4720 or 4721
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(201) 222-4707
D. F. King & Co., Inc. (the "Information Agent") has been retained by PECO
Energy as the Information Agent to assist in connection with the Offer.
Questions and requests for assistance regarding the Offer, requests for
additional copies of this Offering Circular/Prospectus, the Letter of
Transmittal and requests for Notice of Guaranteed Delivery may be directed to
the Information Agent at 77 Water Street, New York, New York 10005. Banks and
brokers call: (212) 425-1685; all others telephone (800) 628-8509.
PECO Energy will pay the Exchange Agent and the Information Agent
reasonable and customary fees for their services and will reimburse them for all
their reasonable out-of-pocket expenses in connection therewith.
DEALER MANAGERS; SOLICITING DEALERS
Merrill Lynch & Co. and Smith Barney Inc., as Dealer Managers, have agreed
to solicit exchanges of Depositary Shares for Preferred Trust Receipts. PECO
Energy will pay the Dealer Managers an aggregate fee of $0.125 per Depositary
Share tendered and not withdrawn (up to 5,400,000 Depositary Shares) pursuant to
24
<PAGE> 30
the Offer. The maximum fee payable to the Dealer Managers is approximately
$675,000 plus such amount, if any, that Merrill Lynch & Co. and Smith Barney
Inc. may be entitled to pursuant to the next paragraph. PECO Energy will also
reimburse the Dealer Managers for certain reasonable out-of-pocket expenses in
connection with the Offer and will indemnify the Dealer Managers against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
("Securities Act"). Merrill Lynch & Co. and Smith Barney Inc. engage in
transactions with, and from time to time have each performed services for, PECO
Energy, including acting as an underwriter for the issuance of the Depositary
Shares.
PECO Energy will pay to a Soliciting Dealer a solicitation fee of $0.50 per
Depositary Share validly tendered and accepted for exchange pursuant to the
Offer. As used in this Offering Circular/Prospectus, "Soliciting Dealer"
includes (i) any broker or dealer in securities, including each Dealer Manager
in its capacity as a broker or dealer, who is a member of any national
securities exchange or of the National Association of Securities Dealers, Inc.
(the "NASD"), (ii) any foreign broker or dealer not eligible for membership in
the NASD who agrees to conform to the NASD's Rules of Fair Practice in
soliciting tenders outside the United States to the same extent as though it
were an NASD member, or (iii) any bank or trust company, any one of whom has
solicited and obtained a tender pursuant to the Offer. No such fee shall be
payable to a Soliciting Dealer in respect of Depositary Shares registered in the
name of such Soliciting Dealer unless such Depositary Shares are held by such
Soliciting Dealer as nominee and such shares are being tendered for the benefit
of one or more beneficial owners identified on the Letter of Transmittal or on
the Notice of Solicited Tenders (included in the materials provided to brokers
and dealers). No such fee shall be payable to a Soliciting Dealer with respect
to the tender of Depositary Shares by a holder unless the Letter of Transmittal
accompanying such tender designates such Soliciting Dealer as such in the box
captioned "Solicited Tenders" or the Notice of Solicited Tenders accompanying
such tender designates such Soliciting Dealer. No such fee shall be payable to
the Soliciting Dealer with respect to the tender of Depositary Shares by the
holder of record, for the benefit of the beneficial owner, unless the beneficial
owner has designated such Soliciting Dealer. No such fee shall be payable to the
Soliciting Dealer unless the Soliciting Dealer returns a Notice of Solicited
Tenders to the Exchange Agent within five business days after the Expiration
Date. No such fee shall be payable to a Soliciting Dealer if such Soliciting
Dealer is required for any reason to transfer the amount of such fee to a
depositing holder. No broker, dealer, bank, trust company or fiduciary shall be
deemed to be the agent of PECO Energy, PECO Energy Capital, the Trust, the
Exchange Agent, the Information Agent or the Dealer Managers for purposes of the
Offer. Soliciting Dealers are not entitled to a solicitation fee for Depositary
Shares beneficially owned by such Soliciting Dealer. The maximum fee payable to
Soliciting Dealers is $2,700,000, exclusive of the amount that Merrill Lynch &
Co. and Smith Barney Inc. are entitled to pursuant to the preceding paragraph.
Additional solicitation may be made by telephone or in person by officers
and regular employees of PECO Energy and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
LISTING AND TRADING OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES
The Preferred Trust Receipts constitute a new issue of securities with no
established trading market. The Preferred Trust Receipts have been approved for
listing on the NYSE subject to notice of issuance and attainment of the NYSE
distribution standards. Trading of the Preferred Trust Receipts on the NYSE is
expected to commence within a 30-day period after the initial delivery of the
Preferred Trust Receipts. There can be no assurance, however, that an active
market for the Preferred Trust Receipts will develop or be sustained in the
future on such exchange. Although the Dealer Managers have indicated to PECO
Energy that they intend to make a market in the Preferred Trust Receipts as
permitted by applicable laws and regulations prior to the commencement of
trading on the NYSE, they are not obligated to do so and may discontinue any
such market-making at any time without notice. Accordingly, no assurance can be
given as to the liquidity of, or trading markets for, the Preferred Trust
Receipts. In order to satisfy the NYSE listing requirements, acceptance of
Depositary Shares validly tendered in the Offer are subject to the conditions
that as of the Exchange Date there be at least 1,000,000 Preferred Trust
Receipts to be issued and 400 record or beneficial
25
<PAGE> 31
holders of Preferred Trust Receipts to be issued in exchange for such Depositary
Shares, which conditions may not be waived.
To the extent that Depositary Shares are tendered and accepted in the
Offer, the terms on which untendered Depositary Shares could subsequently be
sold could be adversely affected. In addition, if the Offer is substantially
subscribed or oversubscribed, there would be a significant risk that round lot
holdings of Depositary Shares outstanding following the Offer would be limited.
See "Risk Factors -- Listing and Trading of Preferred Trust Receipts and
Depositary Shares."
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OFFER
Except as described or referred to herein, there are no material contracts,
arrangements, understandings or relationships in connection with the Offer
between PECO Energy or any of its directors or executive officers, PECO Energy
Capital or the General Partner, the Trust or the Trustee and any person with
respect to the Series B Subordinated Debentures, the Depositary Shares, the
Series B Preferred Securities and the Preferred Trust Receipts.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Depositary Shares will be borne
by PECO Energy. For compensation to be paid to the Dealer Managers and
Soliciting Dealers, see "The Offer -- Dealer Managers; Soliciting Dealers." The
total cash expenditures to be incurred by PECO Energy in connection with the
Offer, other than fees payable to the Dealer Managers and Soliciting Dealers,
but including the expenses of the Dealer Managers, accounting and legal fees,
and the fees and expenses of the Exchange Agent, the Information Agent, the
Trustee, and Meridian Trust Company, as trustee under the Indenture (the
"Indenture Trustee") are estimated to be approximately $525,000.
PECO Energy will pay all transfer taxes, if any, applicable to the exchange
of Depositary Shares pursuant to the Offer. If, however, Depositary Shares not
tendered or accepted for exchange, are to be delivered to, or are to be issued
in the name of, any person other than the registered Holder of the Depositary
Shares tendered or if a transfer tax is imposed for any reason other than the
exchange of Depositary Shares pursuant to the Offer, then the amount of any such
transfer taxes (whether imposed on the registered Holder or any other persons)
will be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder.
PRICE RANGE OF DEPOSITARY SHARES
The Depositary Shares are listed and principally traded on the NYSE. The
following table sets forth, for each period shown, the high and low sales prices
of the Depositary Shares as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
--- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1993
1st Quarter............................................................ 27 1/8 25
2nd Quarter............................................................ 26 1/2 25 1/2
3rd Quarter............................................................ 27 1/8 26
4th Quarter............................................................ 27 25 3/8
Fiscal Year Ended December 31, 1994
1st Quarter............................................................ 26 3/8 24 1/2
2nd Quarter............................................................ 25 1/4 23 7/8
3rd Quarter............................................................ 25 1/8 23 3/8
4th Quarter............................................................ 24 1/4 21 5/8
</TABLE>
26
<PAGE> 32
<TABLE>
<CAPTION>
HIGH LOW
--- ---
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
Fiscal Year Ended December 31, 1995
1st Quarter............................................................ 25 22 3/8
2nd Quarter............................................................ 25 1/4 24
3rd Quarter............................................................ 26 24 7/8
4th Quarter (through November 2, 1995)................................. 26 25 1/4
</TABLE>
On July 3, 1995 the last day of trading prior to the first public
announcement of the Offer, the closing sales price of the Depositary Shares on
the NYSE as reported on the Composite Tape was $25 1/8 per share. Holders of
Depositary Shares are urged to obtain a current market quotation for the
Depositary Shares.
DESCRIPTION OF THE PREFERRED TRUST RECEIPTS
The following is a summary of certain terms and provisions of the Preferred
Trust Receipts and the Trust Agreement. The summary is subject to, and qualified
in its entirety by reference to, the Trust Agreement and the laws of the State
of Delaware for business trusts. The Trust Agreement is an exhibit to the
Registration Statement of which this Offering Circular/Prospectus forms a part.
The Preferred Trust Receipts will be issued by the Trust pursuant to the
Trust Agreement. Each Preferred Trust Receipt represents a Series B Preferred
Security. Each Series B Preferred Security has a stated liquidation preference
of $25. The Preferred Trust Receipts will be issued directly to the holders
thereof or in book-entry form through DTC or such other Depository at which the
Exchange Agent may have established an account.
The Trust is a statutory business trust created under the Delaware Business
Trust Act. The Trustee will hold the Series B Preferred Securities deposited in
the Trust for the benefit of the holders of the Preferred Trust Receipts. The
holders of the Preferred Trust Receipts will have the right to withdraw
Preferred Securities from the Trust as described below. The Trust Agreement
provides that, to the fullest extent permitted by law, without the need for any
other action of any person, including the Trustee and any other holder of
Preferred Trust Receipts, each holder of Preferred Trust Receipts shall be
entitled to enforce in the name of the Trust the Trust's rights under the Series
B Preferred Securities represented by the Preferred Trust Receipts held by such
holder.
DISTRIBUTIONS
Whenever the Trust shall receive any cash distribution representing a
monthly distribution on the Series B Preferred Securities (whether or not
distributed by PECO Energy Capital on the regular monthly distribution date
therefor) or payment under the Series B Guarantee in respect thereof, the Trust
shall distribute such amounts to the holders of the Preferred Trust Receipts in
proportion to the respective number of Series B Preferred Securities represented
by such Preferred Trust Receipts. Under the Indenture, PECO Energy shall have
the right at any time after payment of the Additional Distribution (as defined
below), so long as an Event of Default under the Indenture has not occurred and
is continuing, to extend the interest payment period for all Subordinated
Debentures for up to 60 consecutive months; provided that no Extension Period
shall extend beyond the stated maturity date or date of redemption of any series
of Subordinated Debentures. At the end of the Extension Period, PECO Energy
shall pay all interest then accrued and unpaid on such Subordinated Debentures
(together with interest thereon to the extent permitted by applicable law at the
rate per annum borne by such Subordinated Debentures). During any Extension
Period, no Distributions will be made on the Series B Preferred Securities
represented by the Preferred Trust Receipts; however, all accrued and unpaid
Distributions (together with any applicable Distributions on such Distributions)
shall be paid at the end of the Extension Period. See "Description of the Series
B Subordinated Debentures and the Indenture -- Option to Extend Interest Payment
Period."
The paying agent for the Preferred Trust Receipts will be First Chicago
Trust Company of New York.
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<PAGE> 33
REDEMPTION OF PREFERRED TRUST RECEIPTS
Whenever PECO Energy Capital shall elect or is required to redeem Series B
Preferred Securities in accordance with the Amended and Restated Limited
Partnership Agreement of PECO Energy Capital, dated as of July 25, 1994, as
amended (the "Partnership Agreement"), PECO Energy Capital shall give the
Trustee at least 40 days' prior notice thereof. The Trustee will mail the notice
of redemption not less than 30 nor more than 60 days prior to the date fixed for
redemption of the Series B Preferred Securities and the Preferred Trust Receipts
to the holders of the Preferred Trust Receipts. On the date of redemption of the
Series B Preferred Securities, provided that PECO Energy Capital (or PECO Energy
pursuant to the Series B Guarantee) shall have deposited with the Trustee the
aggregate amount payable upon redemption of all Series B Preferred Securities
held by the Trust to be redeemed, the Trustee shall redeem Preferred Trust
Receipts representing the same number of such Series B Preferred Securities
redeemed by PECO Energy Capital at the same redemption price at which such
Series B Preferred Securities are redeemed. In the event that fewer than all the
outstanding Preferred Trust Receipts are redeemed, the Preferred Trust Receipts
to be redeemed shall be selected by lot or pro rata or other equitable method
determined by the Trustee. Under the Trust Agreement, PECO Energy Capital agrees
that if a partial redemption of the Series B Preferred Securities would result
in a delisting of the Preferred Trust Receipts from any national exchange on
which the Preferred Trust Receipts are then listed, PECO Energy Capital will
only redeem the Series B Preferred Securities in whole.
PAYMENTS ON LIQUIDATION OF PECO ENERGY CAPITAL
Upon receipt by the Trust of any distribution from PECO Energy Capital upon
liquidation of PECO Energy Capital (or payment by PECO Energy under the Series B
Guarantee in respect thereof), after satisfaction of creditors of the Trust as
required by applicable law, the Trustee shall distribute to the holders of the
Preferred Trust Receipts such amounts in proportion to the respective number of
Series B Preferred Securities represented by such Preferred Trust Receipts.
PAYMENTS ON PREFERRED TRUST RECEIPTS
Monthly distributions on the Preferred Trust Receipts in certificated form
will be payable by check to the holders of record on the record date therefor
which will be the fifteenth day (whether or not a business day) of the month,
provided that the record date for the Distribution on December 29, 1995 will be
the date of initial issuance of the Preferred Trust Receipts. Payments of the
redemption price of the Preferred Trust Receipts in certificated form and
distributions in liquidation will be made at the office of First Chicago Trust
Company of New York, as paying agent, upon surrender of such Preferred Trust
Receipts. Payments on Preferred Trust Receipts in global form will be made
through the appropriate Depository.
TRANSFERS AND EXCHANGES
First Chicago Trust Company of New York will act as transfer agent and
registrar for the Preferred Trust Receipts. Subject to the terms and conditions
of the Trust Agreement, the transfer agent shall register the transfers on its
books from time to time of Preferred Trust Receipts 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 surrender of Preferred Trust Receipts at the office of the transfer
agent, subject to the terms and conditions of the Trust Agreement, the transfer
agent shall execute and deliver new Preferred Trust Receipts representing the
same number of Series B Preferred Securities as the Preferred Trust Receipts
surrendered.
As a condition precedent to the registration of the transfer or exchange of
any Preferred Trust Receipt, the transfer agent, may require (i) payment to it
of a sum sufficient for the payment of any tax or other governmental charge with
respect thereto; (ii) the production of proof satisfactory to it as to the
identity and genuineness of any signature; and (iii) compliance with such
requirements as the Trustee may establish not inconsistent with the provisions
of the Trust Agreement.
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<PAGE> 34
No service charge shall be made to a holder of Preferred Trust Receipts for
any registration of transfer or exchange of Preferred Trust Receipts, but the
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 Preferred Trust Receipts.
The transfer agent shall not be required (i) to register the transfer of or
exchange any Preferred Trust Receipts for a period beginning at the opening of
business ten days next preceding any selection of Preferred Trust Receipts to be
redeemed and ending at the close of business on the day of the mailing of a
notice of redemption of Preferred Trust Receipts or (ii) to transfer or exchange
for another Preferred Trust Receipt any Preferred Trust Receipt called or being
called for redemption in whole or in part.
WITHDRAWAL OF SERIES B PREFERRED SECURITIES
Upon surrender of Preferred Trust Receipts at the principal office of the
Trustee and subject to the terms of the Trust Agreement and the Partnership
Agreement, an owner of Preferred Trust Receipts is entitled to delivery of the
number of whole Series B Preferred Securities represented by such Preferred
Trust Receipts. Owners of Preferred Trust Receipts will be entitled to receive
whole numbers of Series B Preferred Securities on the basis of one Series B
Preferred Security for each Preferred Trust Receipt. Partial Series B Preferred
Securities will not be issued. If the Preferred Trust Receipts delivered by the
owner exceed the number of the Series B Preferred Securities to be withdrawn,
the Trustee will deliver to such owner at the same time a new Preferred Trust
Receipt evidencing such excess number of Preferred Trust Receipts. Subject to
the terms of the Trust Agreement, owners of the Series B Preferred Securities
thus withdrawn will thereafter be entitled to deposit such Series B Preferred
Securities under the Trust Agreement and to receive Preferred Trust Receipts
representing Series B Preferred Securities therefor. The Series B Preferred
Securities will not be listed on any exchange, and as a result, the liquidity
and trading market for the Series B Preferred Securities will be limited.
VOTING RIGHTS
If the holders of the Preferred Partner Interests (as defined in the
Partnership Agreement), acting as a single class, are entitled to appoint and
authorize a Special Representative pursuant to the Partnership Agreement, the
Trustee shall notify the holders of the Preferred Trust Receipts of such right,
request direction of each holder of a Preferred Trust Receipt as to the
appointment of a Special Representative and vote the Series B Preferred
Securities represented by such Preferred Trust Receipt in accordance with such
direction. If the General Partner fails to convene a general meeting of PECO
Energy Capital as required in the Partnership Agreement, the Trustee shall
notify the holders of the Preferred Trust Receipts and, if so directed by the
holders of the Preferred Trust Receipts representing Preferred Securities
constituting at least 10% of the aggregate stated liquidation preference of the
outstanding Preferred Partner Interests shall convene such meeting. Under the
Trust Agreement, PECO Energy Capital has agreed that without the consent of the
holders of 66 2/3% in liquidation amount of the Preferred Trust Receipts it may
not consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets substantially as an entirety to any
corporation or other entity if, as a result, the Preferred Trust Receipts would
be delisted, downgraded or the holders thereof would recognize any gain or loss
for federal income tax purposes.
Upon receipt of notice of any meeting at which the holders of Series B
Preferred Securities are entitled to vote, the Trustee shall, as soon as
practicable thereafter, mail to the holders of Preferred Trust Receipts 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 Preferred Trust Receipts will be entitled, subject to any
applicable provision of law, to instruct the Trustee as to the exercise of the
voting rights pertaining to the amount of Series B Preferred Securities
represented by their respective Preferred Trust Receipts, 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 Preferred Trust Receipt, the Trustee shall vote
or cause to be voted the number of Series B Preferred Securities represented by
such Preferred Trust Receipts in accordance with the instructions set forth in
such request.
29
<PAGE> 35
AMENDMENT AND TERMINATION OF TRUST AGREEMENT
PECO Energy Capital or the General Partner may, and the Trustee shall, at
any time and from time to time enter into one or more agreements supplemental to
the Trust Agreement without the consent of the holders of the Preferred Trust
Receipts: (i) to evidence the succession of another partnership, corporation or
other entity to PECO Energy Capital or the General Partner and the assumption by
any such successor of the covenants of PECO Energy Capital or the General
Partner in the Trust Agreement; (ii) to add to the covenants of PECO Energy
Capital or the General Partner for the benefit of the holders of the Preferred
Trust Receipts, or to surrender any right or power herein conferred upon PECO
Energy Capital or the General Partner; (iii) to correct or supplement any
provision in the Trust Agreement which may be defective or inconsistent with any
other provision therein 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 of Preferred
Trust Receipts; or (iv) to cure any ambiguity or correct any mistake. Any other
amendment of the Trust Agreement must be approved by the holders of 66 2/3% of
the Preferred Trust Receipts.
The Trust Agreement shall terminate upon the redemption of the Preferred
Trust Receipts or a final distribution in respect of the Series B Preferred
Securities and such distribution has been delivered to the holders of the
Preferred Trust Receipts.
EXPENSES OF THE TRUSTEE
All charges or expenses of the Trust, including the charges and expenses of
the Trustee, will be paid by the General Partner, provided that if the Trustee
incurs fees, charges or expenses for which it is not otherwise liable under the
Trust Agreement at the election of a holder of Preferred Trust Receipts or other
person, such holder or other person will be liable for such fees, charges and
expenses.
RESIGNATION AND REMOVAL OF TRUSTEE
The Trust shall at all times have a Trustee which is a bank that has its
principal place of business in the State of Delaware having a combined capital
and surplus of $50,000,000. If the Trustee ceases to be eligible, it will
resign.
The Trustee may at any time resign as trustee under the Trust Agreement by
notice of its election to do so delivered to PECO Energy Capital and the General
Partner, such resignation to take effect upon the appointment of a successor
trustee and its acceptance of such appointment as hereinafter provided. The
Trustee may at any time be removed by PECO Energy Capital by notice of such
removal delivered to the Trustee, such removal to take effect upon the
appointment of a successor trustee and its acceptance of such appointment.
In case at any time the Trustee shall resign or be removed, PECO Energy
Capital shall, within 45 days after the delivery of the notice of resignation or
removal, as the case may be, appoint a successor trustee, which shall be a bank
or trust company, or an affiliate of a bank or trust company, having its
principal office in the State of Delaware and having a combined capital and
surplus of at least $50,000,000.
DESCRIPTION OF THE SERIES B PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the Series B
Preferred Securities represented by the Preferred Trust Receipts and the
Partnership Agreement. The summary is subject to, and qualified in its entirety
by reference to, the Partnership Agreement and the Delaware Revised Uniform
Limited Partnership Act. The Partnership Agreement is an exhibit to the
Registration Statement of which this Offering Circular/Prospectus forms a part.
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GENERAL
Under the Partnership Agreement, PECO Energy Capital is authorized to issue
two classes of partner interests: the Preferred Securities representing limited
partner interests, including the Series B Preferred Securities, and general
partner interests. All of the general partner interests of PECO Energy Capital
are owned by the General Partner, which is a wholly owned subsidiary of PECO
Energy. All of the Preferred Securities issued by PECO Energy Capital will be of
equal rank in participation in the profits and assets and income of PECO Energy
Capital. The Partnership Agreement authorizes the General Partner to establish
series of Preferred Securities having such designations, rights, privileges,
restrictions and other terms and provisions as the General Partner may
determine. Distributions on all series of Preferred Securities must be paid in
full before the General Partner may participate in the profits or assets of PECO
Energy Capital.
DISTRIBUTIONS
The Series B Preferred Securities will be entitled to Distributions out of
funds on hand legally available therefor held by PECO Energy Capital at the
annual rate of 8.72% of the stated liquidation preference of $25, payable
monthly in arrears on the last day of each calendar month. Distributions on the
Series B Preferred Securities will be cumulative, will accrue from the Exchange
Date and, except as otherwise described below, will be payable monthly in
arrears, on the last day of each month of each year, commencing on December 29,
1995. Distributions in arrears after the monthly payment date therefor will
accumulate additional distributions thereon at the rate of 8.72% per annum. In
addition, holders of Series B Preferred Securities will be entitled to receive,
when, as and if declared by the General Partner out of funds on hand and legally
available therefor an additional cash distribution at the rate of 7.96% per
annum of the stated liquidation preference thereof from November 1, 1995 up to
but not including the Exchange Date in lieu of dividends accumulating from
November 1, 1995 on their Depositary Shares accepted for exchange, such
additional distribution to be made at the time the first distribution on the
Series B Preferred Securities is made (the "Additional Distribution").
The General Partner may make distributions on the general partner interests
of PECO Energy Capital only after payment in full of all Distributions accrued
on the Series B Preferred Securities and any other outstanding Preferred
Securities of PECO Energy Capital. The Series B Preferred Securities will rank
pari passu with all other series of Preferred Securities which may be issued by
PECO Energy Capital. The Series A Preferred Securities are the only other series
of Preferred Securities which have been issued by PECO Energy Capital to date.
The stated liquidation preference of the Series A Preferred Securities is
$221,250,000.
After payment of the Additional Distribution, PECO Energy has the right
under the Indenture to extend the interest payment period from time to time on
the Series B Subordinated Debentures to a period not exceeding 60 consecutive
months; provided that such extended interest period shall not extend beyond the
stated maturity date or redemption date of any Subordinated Debentures,
including the Series B Subordinated Debentures. As a consequence, monthly
Distributions on the Series B Preferred Securities would be deferred (but would
continue to accumulate with Distributions thereon) by PECO Energy Capital during
any such extended interest payment period. In the event that PECO Energy
exercises its right to extend the interest payment period on the Subordinated
Debentures, PECO Energy may not declare or pay dividends on, or redeem, purchase
or acquire, any of its capital stock during the extension period. PECO Energy
Capital and PECO Energy currently believe that the extension of an interest
payment period is unlikely. Prior to the termination of any such extension
period, PECO Energy may further extend the interest payment period, provided
that such extension period together with all such previous and further
extensions thereof may not exceed 60 consecutive months. Upon the termination of
any extension period and the payment of all amounts then due on the Subordinated
Debentures, PECO Energy may elect to extend the interest payment period again,
subject to the above requirements. Following an extension period of eighteen
(18) months or more, the holders of Preferred Securities, including the Series B
Preferred Securities, shall have the right to appoint a Special Representative
(as hereinafter defined) to enforce PECO Energy Capital's rights against PECO
Energy under the Subordinated Debentures and the Indenture and the obligations
of PECO Energy under the Guarantees. See "-- Voting Rights," "Risk Factors" and
"Description of the Series B Subordinated Debentures and the Indenture -- Option
to Extend Interest Payment Period" and "-- Interest."
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Distributions on the Series B Preferred Securities must be paid by PECO
Energy Capital in any calendar year or portion thereof to the extent that PECO
Energy Capital has funds on hand legally available therefor. It is anticipated
that the funds available for distribution by PECO Energy Capital will be limited
to payments received by PECO Energy Capital in respect of the Series B
Subordinated Debentures. See "Description of the Series B Subordinated
Debentures and the Indenture."
The amount of Distributions payable for any period will be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full monthly distribution period, will be computed on the basis of the
actual number of days elapsed in such period. Distributions on the Series B
Preferred Securities will be made to the Holders thereof as they appear on the
books and records of PECO Energy Capital on the relevant record dates, which
will be the 15th day of each month, provided that the record date for the
Distribution on December 29, 1995 will be the date of initial issuance of the
Series B Preferred Securities. If any date on which Distributions are payable on
the Series B Preferred Securities is not a business day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
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. The term
"business day," as used in relation to the Series B Preferred Securities, shall
mean any day other than a day on which banking institutions in the City of New
York or the State of Delaware are authorized or required by law to close.
CERTAIN RESTRICTIONS ON PECO ENERGY CAPITAL
If distributions have not been paid in full on any series of Preferred
Securities of PECO Energy Capital, PECO Energy Capital shall not:
(i) pay any distributions on any other series of Preferred Securities,
unless the amount of any distributions paid on any Preferred Securities is
paid on all Preferred Securities then outstanding on a pro rata basis in
proportion to the full distributions to which each series of Preferred
Securities would be entitled if paid in full;
(ii) pay any distribution on the general partner interests; or
(iii) redeem, purchase or otherwise acquire any Preferred Securities
or the general partner interests;
until, in each case, such time as all accumulated and unpaid distributions on
all series of Preferred Securities shall have been paid in full for all prior
distribution periods.
OPTIONAL REDEMPTION
The Series B Preferred Securities are subject to redemption, at the option
of the General Partner, in whole or in part, from time to time, on or after
October 1, 1997, at $25 per Series B Preferred Security, plus accumulated and
unpaid Distributions(whether or not declared), if any, to the date fixed for
redemption (the "Redemption Price").
MANDATORY REDEMPTION
If at any time PECO Energy redeems the Series B Subordinated Debentures or
pays the Series B Subordinated Debentures at maturity, the Series B Preferred
Securities will be subject to mandatory redemption at the Redemption Price.
The Series B Preferred Securities will not be entitled to any sinking fund.
SPECIAL EVENT REDEMPTIONS
If a Tax Event (as defined below) shall occur and be continuing, the Series
B Preferred Securities will be subject to redemption, at the option of the
General Partner, in whole or in part at the Redemption Price within 90 days
following the occurrence of such Tax Event. "Tax Event" means that PECO Energy
Capital shall have received an opinion of counsel (which may be regular counsel
to PECO Energy or an affiliate but not an employee thereof) experienced in such
matters to the effect that, as a result of any amendment to, or change
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(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
interpretation or pronouncement is announced on or after the date of issuance of
the Series B Preferred Securities, there is more than an insubstantial risk that
(i) PECO Energy Capital is subject to United States federal income tax with
respect to interest received on the Series B Subordinated Debentures or PECO
Energy Capital will otherwise not be taxed as a partnership, (ii) interest
payable by PECO Energy on the Series B Subordinated Debentures will not be
deductible for United States federal income tax purposes or (iii) PECO Energy
Capital is subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
If an Investment Company Act Event (as defined below) shall occur and be
continuing, the Series B Preferred Securities will be subject to mandatory
redemption in whole at the Redemption Price within 90 days following the
occurrence of such Investment Company Act Event. "Investment Company Act Event"
means the occurrence of a change in law or regulation or a change in official
interpretation of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law") to the effect that
PECO Energy Capital is or will be considered an "Investment Company" which is
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), which Change in 1940 Act Law becomes effective on or after the
date of the issuance of the Series B Preferred Securities; provided, that no
Investment Company Act Event shall be deemed to have occurred if PECO Energy
Capital has received an opinion of counsel (which may be regular counsel to PECO
Energy or any affiliate but not an employee thereof) experienced in such
matters, to the effect that PECO Energy Capital and/or PECO Energy has taken
reasonable measures, in its discretion, to avoid such Change in 1940 Act Law so
that notwithstanding such Change in 1940 Act Law, PECO Energy Capital is not
required to be registered as an "Investment Company" within the meaning of the
1940 Act.
REDEMPTION PROCEDURES
PECO Energy Capital may not redeem any Series B Preferred Securities unless
all accumulated and unpaid Distributions have been paid on all Series B
Preferred Securities for all monthly distribution periods terminating on or
prior to the date of redemption.
Notice of any redemption of the Preferred Partner Interests will be given
by the Partnership by mail or delivery to each record holder of Series B
Preferred Securities to be redeemed not fewer than 30, nor more than 60 days
prior to the date fixed for redemption thereof (at least 40 days' prior for
notice to the Trust). 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 holders of such
Series B Preferred Securities. Notices of redemption shall be addressed to the
record holders of the Series B Preferred Securities at the addresses of the
holders appearing in the books and records of the Partnership.
If notice of redemption shall have been given and payment shall have been
made by the Partnership to the Trust and any other holder of Series B Preferred
Securities, then, upon the date of such payment all rights of beneficial owners
of the Series B Preferred Securities so called for redemption will cease. In the
event that any date fixed for redemption of Series B Preferred Securities is not
a business day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day which is a business day (and without any
interest or other payment in respect of any such delay), except that if such
business day falls in the next succeeding calendar year, such payment will be
made on the immediately preceding business day (in each case with the same force
and effect as if made on such day).
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution and winding up of
PECO Energy Capital, the holders of the Preferred Securities will be entitled to
receive out of the assets of PECO Energy Capital after satisfaction of
liabilities to creditors as required by Delaware law and before any distribution
of assets is made to holders of its general partner interests, the sum of their
stated liquidation preference and all accumulated
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and unpaid Distributions to the date of payment for such series of Preferred
Securities (collectively, the "Partnership Liquidation Distribution"). All
assets of PECO Energy Capital remaining after payment of the Partnership
Liquidation Distribution will be distributed to the General Partner. If, upon
such liquidation, the Partnership Liquidation Distribution can be paid only in
part because PECO Energy Capital has insufficient assets available to pay in
full the aggregate Partnership Liquidation Distribution on all Preferred
Securities, then the amounts payable on each series of Preferred Securities
shall be paid on a pro rata basis, in proportion to the full Partnership
Liquidation Distribution to which each series of Preferred Securities would be
entitled.
Pursuant to the Partnership Agreement, PECO Energy Capital shall be
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events: (i) upon the expiration of the term of PECO Energy Capital,
which is 99 years, (ii) upon the withdrawal, removal or bankruptcy of the
General Partner or the occurrence of any other event that under applicable law
causes PECO Energy Capital Corp. to cease to be the General Partner, except for
a transfer to a permitted successor of the General Partner or as otherwise
provided in the Partnership Agreement, (iii) the entry of a decree of judicial
dissolution, or (iv) the written consent of the General Partner and all of the
holders of the Preferred Securities. Upon such dissolution, PECO Energy is
required to redeem the Subordinated Debentures to fund the Partnership
Liquidation Distribution.
The amount per share payable on the Series B Preferred Securities in the
event of any voluntary or involuntary liquidation of PECO Energy Capital is $25
plus accumulated and unpaid Distributions.
MERGER, CONSOLIDATION, ETC. OF PECO ENERGY CAPITAL
PECO Energy Capital may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity, except with the
approval of the General Partner and the holders of 66 2/3% in aggregate stated
liquidation preference of the outstanding Preferred Securities or as otherwise
described below. The General Partner may, without the consent of the holders of
the Preferred Securities, cause PECO Energy Capital to consolidate, amalgamate,
merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a corporation, a limited
liability company or a limited partnership, a trust or other entity organized as
such under the laws of any state of the United States of America or the District
of Columbia, provided that (i) such successor entity either (x) expressly
assumes all of the obligations of PECO Energy Capital under the Preferred
Securities or (y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank, as regards participation
in the profits and assets of the successor entity, at least as high as the
Preferred Securities rank, as regards participation in the profits and assets of
PECO Energy Capital, (ii) PECO Energy confirms its obligations under the
Guarantee with regard to the Successor Securities, if any, (iii) such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
does not cause any series of Preferred Securities or Successor Securities to be
delisted by any national securities exchange on which such series of Preferred
Securities is then listed, (iv) such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease does not cause the Preferred
Securities or Successor Securities to be downgraded by any "nationally
recognized statistical rating organization," as that term is defined by the SEC
for purposes of Rule 436(g)(2) under the Securities Act, (v) such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease does not
adversely affect the powers, preferences and other special rights of holders of
Preferred Securities or Successor Securities in any material respect, (vi) such
successor entity has a purpose substantially identical to that of PECO Energy
Capital and (vii) prior to such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease, PECO Energy has received an opinion
of counsel (which may be regular tax or other counsel to PECO Energy or an
affiliate, but not an employee thereof) experienced in such matters to the
effect that (w) holders of outstanding Preferred Securities will not recognize
any gain or loss for United States federal income tax purposes as a result of
the consolidation, amalgamation, merger, replacement, conveyance, transfer or
lease, (x) such successor entity will be treated as a partnership for United
States federal income tax purposes, (y) following such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease, PECO Energy
and such successor entity will be in compliance with the 1940 Act without
registering thereunder as an
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investment company, and (z) such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease will not adversely affect the limited
liability of holders of Preferred Securities or Successor Securities.
VOTING RIGHTS
Except as provided below and under "-- Merger, Consolidation, etc. of PECO
Energy Capital" and "Description of the Series B Guarantee -- Amendments" and as
otherwise required by law and the Partnership Agreement, the holders of the
Preferred Securities will have no voting rights.
If (i) PECO Energy Capital fails to pay Distributions in full on the
Preferred Securities for 18 consecutive monthly distribution periods, (ii) an
Event of Default (as defined in the Indenture) occurs and is continuing, or
(iii) PECO Energy is in default on any of its payment obligations under the
Guarantees, then the holders of the Preferred Securities, acting as a single
class, will be entitled by a vote of the majority of the aggregate stated
liquidation preference of the outstanding Preferred Securities to appoint a
special representative (the "Special Representative") to enforce PECO Energy
Capital's rights against PECO Energy under the Subordinated Debentures and the
Indenture and the obligations undertaken by PECO Energy under the Guarantees,
including, after failure to pay Distributions for 60 consecutive monthly
distribution periods on the Preferred Securities, the payment of Distributions
on the Preferred Securities. The Special Representative shall not be admitted as
a partner of PECO Energy Capital or otherwise be deemed a partner of PECO Energy
Capital and shall have no liability for the debts, obligations or liabilities of
PECO Energy Capital.
For purposes of determining whether PECO Energy Capital has failed to pay
Distributions in full for 18 consecutive monthly distribution periods,
Distributions shall be deemed to remain in arrears, notwithstanding any payments
in respect thereof, until full cumulative Distributions on all Preferred
Securities have been or contemporaneously are paid with respect to all monthly
distribution periods terminating on or prior to the date of payment of such full
cumulative Distributions. Subject to the requirements of applicable law, not
later than 30 days after such right to appoint the Special Representative, the
General Partner will convene a general meeting for the above purpose. If the
General Partner fails to convene such meeting within such 30-day period, the
holders of 10% of the aggregate stated liquidation preference of the Preferred
Securities will be entitled to convene such meeting. The provisions of the
Partnership Agreement relating to the convening and conduct of the general
meetings of security holders will apply with respect to any such meeting. Any
Special Representative so appointed shall vacate office immediately if PECO
Energy Capital (or PECO Energy pursuant to the Guarantee) shall have paid in
full all accumulated and unpaid Distributions on the Preferred Securities or
such default or breach, as the case may be, shall have been cured.
Notwithstanding the appointment of any such Special Representative, PECO Energy
retains all rights under the Indenture, including the right to extend the
interest payment period on the Subordinated Debentures.
If any proposed amendment to the Partnership Agreement provides for, or the
General Partner otherwise proposes to effect, any action which would materially
adversely affect the powers, preferences or special rights attached to any
series of Preferred Securities, whether by way of amendment to the Partnership
Agreement or otherwise, then the holders of such series of Preferred Securities
will be entitled to vote on such amendment or action of the General Partner (but
not on any other amendment or action) and, in the case of an amendment or action
which would equally adversely affect the rights or preferences of any other
Preferred Securities, such Preferred Securities shall vote together as a class
on such amendment or action of the General Partner (but not on any other
amendment or action), and such amendment or action shall not be effective except
with the approval of the holders of not less than 66 2/3% of the aggregate
stated liquidation preference of such series of Preferred Securities. Except in
certain circumstances described under "-- Liquidation Distribution," PECO Energy
Capital will be dissolved and wound up only with the consent of the holders of
all Preferred Securities then outstanding as well as the General Partner.
The powers, preferences or special rights attached to any Preferred
Securities will be deemed not to be adversely affected by the creation or issue
of, and no vote will be required for the creation or issue of, any additional
series of Preferred Securities or additional general partner interests. Holders
of Preferred Securities have no preemptive rights.
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So long as any Subordinated Debentures are held by PECO Energy Capital, the
General Partner, unless so directed by the Special Representative, shall not (i)
direct the time, method and place of conducting any proceeding for any remedy
available to the holder of the Subordinated Debentures or the Indenture Trustee
under the Indenture, or executing any trust or power conferred on the Indenture
Trustee, (ii) waive any past default which is available under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture, where such consent
shall be required, without, in each case, obtaining the prior approval of the
holders of at least 66 2/3% in aggregate stated liquidation preference of all
series of Preferred Securities affected thereby, acting as a single class;
provided, however, that where a consent under the Indenture would require the
consent of each holder affected thereby, no such consent shall be given by the
General Partner without the prior consent of each holder of all series of
Preferred Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of Preferred
Securities. The General Partner shall notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Debentures.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of such holders convened for such purposes, at a meeting of all
partners of PECO Energy Capital or pursuant to written consent. PECO Energy
Capital will cause a notice of any meeting at which holders of any series of
Preferred Securities are entitled to vote, or of any matter upon which action by
written consent of such holders is to be taken, to be mailed to each holder of
record of such series of Preferred Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution 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.
The holders of the Preferred Securities will have no rights to remove or
replace the General Partner.
MISCELLANEOUS
The General Partner is authorized and directed to use its best efforts to
manage the affairs of PECO Energy Capital in such a way that PECO Energy Capital
would not be deemed to be an "investment company" required to be registered
under the 1940 Act or taxed as a corporation for United States federal income
tax purposes and so that the Subordinated Debentures will be treated as
indebtedness of PECO Energy for federal income tax purposes. In this connection,
the General Partner is authorized to take any action not inconsistent with
applicable law, the Certificate of Limited Partnership of PECO Energy Capital or
the Partnership Agreement, and that does not materially adversely affect the
interests of holders of Preferred Securities, that the General Partner
determines in its discretion to be necessary or desirable for such purposes.
PECO Energy Capital may not borrow money or issue debt or mortgage or
pledge any of its assets.
DESCRIPTION OF THE SERIES B GUARANTEE
The following is a summary of certain provisions of the Series B Guarantee
which will be executed and delivered by PECO Energy concurrently with the
issuance of the Series B Preferred Securities. The summary is subject to, and
qualified by reference to the Payment and Guarantee Agreement, which is filed as
an exhibit to the Registration Statement of which this Offering
Circular/Prospectus forms a part.
GENERAL
Under the Series B Guarantee, PECO Energy will agree to pay (i) any
accumulated and unpaid Distributions on the Series B Preferred Securities to the
extent that PECO Energy Capital has funds on hand legally available therefor,
(ii) the redemption price payable with respect to any Series B Preferred
Securities called for redemption by PECO Energy Capital to the extent that PECO
Energy Capital has funds on hand legally available therefor, (iii) upon a
liquidation of PECO Energy Capital, the lesser of (a) the portion of the
Partnership Liquidation Distribution applicable to the Series B Preferred
Securities and (b) the amount of
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assets of PECO Energy Capital legally available for distribution to holders of
Series B Preferred Securities in liquidation of PECO Energy Capital and (iv) the
Additional Distribution (collectively, the "Guarantee Payments"). PECO Energy
will agree to pay the Guarantee Payments, as and when due (except to the extent
paid by PECO Energy Capital), to the fullest extent permitted by law, regardless
of any defense, right of set-off or counterclaim which PECO Energy may have or
assert against PECO Energy Capital, the General Partner, the Trust or the
Trustee. PECO Energy's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by PECO Energy to the holders of
Series B Preferred Securities or by causing PECO Energy Capital to pay such
amounts to such holders.
STATUS OF THE SERIES B GUARANTEE
The Series B Guarantee will constitute an unsecured obligation of PECO
Energy and will rank subordinate and junior in right of payment to all general
liabilities of PECO Energy.
The Series B Guarantee will constitute a guarantee of payment and not of
collection. The Series B Guarantee will be held by the General Partner for the
benefit of the holders of the Series B Preferred Securities. In the event of the
appointment of a Special Representative, the Special Representative may enforce
the Series B Guarantee. If no Special Representative has been appointed to
enforce the Series B Guarantee, the General Partner has the right to enforce the
Series B Guarantee on behalf of the holders of the Series B Preferred
Securities. The holders of Preferred Trust Receipts, together with the holders
of the Series B Preferred Securities other than the Trust, representing not less
than 10% in aggregate stated liquidation preference of the Series B Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding to enforce any remedy available in respect of the Series B Guarantee,
including the giving of directions to the General Partner or the Special
Representative, as the case may be. If the General Partner or the Special
Representative fails to enforce the Series B Guarantee as above provided, any
holder of Preferred Trust Receipts representing Series B Preferred Securities,
and any holder of Series B Preferred Securities other than the Trust, may
institute a legal proceeding directly against PECO Energy to enforce its rights
under the Series B Guarantee without first instituting a legal proceeding
against PECO Energy Capital or any other person or entity. The Series B
Guarantee will not be discharged except by payment of the Guarantee Payments in
full to the extent not paid by PECO Energy Capital and by complete performance
of all obligations of PECO Energy contained in the Series B Guarantee.
RELATIONSHIP AMONG SERIES B GUARANTEE, SERIES B SUBORDINATED DEBENTURES AND
SERIES B PREFERRED SECURITIES
In addition to the obligations of PECO Energy under the Series B Guarantee,
the Indenture provides that PECO Energy shall cause the General Partner to
remain the general partner of PECO Energy Capital and timely perform all its
duties as such (including the duty to pay Distributions on the Preferred
Securities), which include, among other things, the General Partner's duties
under the Partnership Agreement to directly pay all costs and expenses of PECO
Energy Capital (for the purpose of insuring that payment of principal and
interest by PECO Energy on the Subordinated Debentures will be sufficient to
allow payment in full to the holders of the Preferred Securities) and the
covenant of the General Partner in the Partnership Agreement to at all times
maintain a "fair market value net worth" of at least 10% of the total
contributions (less redemptions) to PECO Energy Capital. While the assets of the
General Partner will not be available for making Distributions on the Preferred
Securities, they will be available for payment of the expenses of PECO Energy
Capital. Accordingly, the Series B Guarantee and the Indenture, together with
the related covenants contained in the Partnership Agreement and PECO Energy's
obligations under the Subordinated Debentures, provide for PECO Energy's full
and unconditional guarantee of the Series B Preferred Securities as set forth
above.
CERTAIN COVENANTS OF PECO ENERGY
Under the Series B Guarantee, PECO Energy will covenant that, so long as
any Series B Preferred Securities remain outstanding, neither PECO Energy nor
any majority-owned subsidiary of PECO Energy shall declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
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to, any of its capital stock (other than dividends by a wholly owned subsidiary)
if at such time PECO Energy shall be in default with respect to its payment
obligations under the Series B Guarantee or there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default under the Indenture.
AMENDMENTS
Except with respect to any changes which do not materially adversely affect
the rights of holders of Series B Preferred Securities (in which case no vote
will be required), the Series B Guarantee may be amended only with the prior
approval of the holders of Preferred Trust Receipts representing not less than
66 2/3% of the aggregate stated liquidation preference of the outstanding Series
B Preferred Securities.
MERGER OF PECO ENERGY
So long as the Series B Preferred Securities remain outstanding, PECO
Energy will maintain its corporate existence; provided that PECO Energy may
consolidate with or merge with or into any other person or sell, convey,
transfer or lease all or substantially all its properties and assets to any
person if the successor person shall be organized and existing under the laws of
the United States or any state thereof or the District of Columbia and shall
expressly assume the obligations of PECO Energy under the Series B Guarantee.
TERMINATION OF THE SERIES B GUARANTEE
The Series B Guarantee will terminate and be of no further force and effect
upon full payment of the redemption price of all Series B Preferred Securities
or upon full payment of the amounts payable with respect to the Series B
Preferred Securities upon liquidation of PECO Energy Capital. The Series B
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Series B Preferred Securities must restore
payments of any sums paid under the Series B Preferred Securities or the Series
B Guarantee.
DESCRIPTION OF THE SERIES B SUBORDINATED DEBENTURES AND THE INDENTURE
The following is a summary of certain terms and provisions of the Series B
Subordinated Debentures and the Indenture. The summary is subject to, and is
qualified by reference to the Indenture, which is filed as an exhibit to the
Registration Statement of which this Offering Circular/Prospectus forms a part.
GENERAL
The Series B Subordinated Debentures will be unsecured subordinated
obligations of PECO Energy issued under the Indenture. The Series B Subordinated
Debentures will be in a principal amount equal to the aggregate stated
liquidation preference of the Series B Preferred Securities plus the General
Partner's concurrent investment in PECO Energy Capital, will bear interest at a
rate equal to the Distribution rate on the Series B Preferred Securities payable
on the Distribution dates, will have maturity and redemption provisions
corresponding to the redemption provisions of the Series B Preferred Securities
and will be subject to mandatory redemption upon the dissolution and winding up
of PECO Energy Capital. The entire principal amount of the Series B Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, on December 19, 2025.
PECO Energy will deliver the Series B Subordinated Debentures to the
Exchange Agent (which will receive the Series B Subordinated Debentures on
behalf of the Holders of the Depositary Shares) in exchange for the Depositary
Shares. The Series B Subordinated Debentures will be delivered by the Exchange
Agent to PECO Energy Capital in consideration for the issuance and deposit by
PECO Energy Capital of the Series B Preferred Securities with the Trustee under
the Trust Agreement. PECO Energy Capital will purchase additional Series B
Subordinated Debentures issued by PECO Energy in an amount equal to the
contribution made by the General Partner to PECO Energy Capital concurrently
with the Exchange.
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REDEMPTION
Except as provided below, the Series B Subordinated Debentures may not be
redeemed prior to October 1, 1997. PECO Energy shall have the right to redeem
the Series B Subordinated Debentures, in whole or in part, from time to time, on
or after October 1, 1997, upon not less than 30 nor more than 60 days' notice
(and not less than 40 days' notice to the Trust), at a redemption price equal to
100% of the aggregate principal amount to be redeemed, plus any accrued and
unpaid interest, to the redemption date, including interest accrued during an
Extension Period. PECO Energy will also have the right to redeem the Series B
Subordinated Debentures at any time upon the occurrence of a Tax Event if
certain conditions are met as described under "Description of the Series B
Preferred Securities -- Special Event Redemption." The Series B Subordinated
Debentures will be subject to mandatory redemption upon the dissolution of PECO
Energy Capital or upon redemption of the Series B Preferred Securities.
If PECO Energy gives a notice of redemption in respect of Series B
Subordinated Debentures, then, on or prior to the redemption date, PECO Energy
shall deposit with the paying agent funds sufficient to pay the applicable
redemption price and will give irrevocable instructions and authority to pay
such redemption price. If notice of redemption shall have been given, if
required, then the Series B Subordinated Debentures called for redemption shall
become due and payable on the redemption date and upon the redemption date,
interest will cease to accrue on the Series B Subordinated Debentures called for
redemption and such Series B Subordinated Debentures will no longer be deemed to
be outstanding.
INTEREST
The Series B Subordinated Debentures will bear interest at an annual rate
of 8.72% plus Additional Interest, if any, from the Exchange Date. Interest will
be payable monthly in arrears on the last day of each month of each year,
commencing on December 29, 1995, to PECO Energy Capital. In addition, PECO
Energy is obligated under the Series B Subordinated Debentures to pay on the
first interest payment date an amount sufficient to pay the Additional
Distribution.
PECO Energy will make additional interest payments on any overdue
installment of interest on the Series B Subordinated Debentures to PECO Energy
Capital at the same rate per annum as the annual rate payable on the Series B
Subordinated Debentures.
Interest payments on the Subordinated Debentures are eliminated in
consolidation from the Consolidated Statements of Income of PECO Energy.
Distributions on the Preferred Securities appear as a separate line item under
Interest Charges entitled "Dividends on Preferred Securities of Subsidiary" on
the Consolidated Statements of Income of PECO Energy.
ADDITIONAL INTEREST
If at any time PECO Energy Capital would be required to pay any taxes,
duties, or other governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, PECO Energy also will pay as Additional Interest such amounts as
shall be required so that the net amounts received and retained by PECO Energy
Capital after paying any such taxes, duties, or other governmental charges will
not be less than the amounts PECO Energy Capital would have received had no such
taxes, duties or other governmental charges been imposed.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Under the Indenture, PECO Energy shall have the right at any time after
payment of the Additional Distribution, so long as an Event of Default under the
Indenture has not occurred and is continuing, to extend the interest payment
period for all Subordinated Debentures for up to 60 consecutive months; provided
that no Extension Period shall extend beyond the stated maturity date or date of
redemption of any series of Subordinated Debentures. At the end of the Extension
Period, PECO Energy shall pay all interest then accrued and unpaid (together
with interest thereon to the extent permitted by applicable law at the rate per
annum borne by such Subordinated Debentures). During any such Extension Period,
neither PECO Energy
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nor any majority-owned subsidiary of PECO Energy 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 wholly owned
subsidiaries). Prior to the termination of any such Extension Period, PECO
Energy may shorten or further extend the interest payment period, provided that
such Extension Period, together with all such further extensions thereof, may
not exceed 60 consecutive months. Upon the termination of any Extension Period
and the payment of all amounts then due, PECO Energy may select a new Extension
Period subject to the above requirements. PECO Energy shall give the Indenture
Trustee notice of its selection of such extended or shortened interest payment
period one business day prior to the earlier of (i) the date PECO Energy has
selected to make the interest payment or (ii) the date PECO Energy Capital is
required to give notice to the NYSE or other applicable self-regulatory
organization of the record date or the date such Distributions are payable, but
in any event not less than two business days prior to such record date. PECO
Energy shall cause the Indenture Trustee to give such notice of PECO Energy's
selection of such extended interest payment period to the holders of the
Preferred Securities.
SUBORDINATION
The Indenture provides that all payments by PECO Energy in respect of the
Subordinated Debentures, including the Series B Subordinated Debentures, shall
be subordinated to the prior payment in full of all amounts payable on Senior
Indebtedness. The term "Senior Indebtedness" means (i) the principal of and
premium, if any, in respect of (A) indebtedness of PECO Energy for money
borrowed and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by PECO Energy; (ii) all capital lease
obligations of PECO Energy; (iii) all obligations of PECO Energy issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of PECO Energy and all obligations of PECO Energy under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) certain obligations of PECO Energy for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction; (v) all obligations of
the type referred to in clauses (i) through (iv) of other persons and all
dividends of other persons (other than Preferred Securities) for the payment of
which, in either case, PECO Energy 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 PECO Energy (whether or not such obligation is assumed by PECO Energy),
except for any such indebtedness that is by its terms subordinated to or pari
passu with the Subordinated Debentures or indebtedness between or among PECO
Energy and its affiliates.
Upon any payment or distribution of assets or securities of PECO Energy,
upon any dissolution or winding up or total or partial liquidation or
reorganization of PECO Energy, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts payable
on Senior Indebtedness (including any interest accruing on such Senior
Indebtedness subsequent to the commencement of a bankruptcy, insolvency or
similar proceeding) shall first be paid in full before PECO Energy Capital (as
holder of the Subordinated Debentures), the Indenture Trustee on behalf of such
holder or any Special Representative appointed by the holders of the Preferred
Securities shall be entitled to receive from PECO Energy any payment of
principal of or interest on or any other amounts in respect of the Subordinated
Debentures or distribution of any assets or securities.
No direct or indirect payment by or on behalf of PECO Energy of principal
of or interest on the Subordinated Debentures, whether pursuant to the terms of
the Subordinated Debentures or upon acceleration or otherwise, shall be made if,
at the time of such payment, there exists (i) a default in the payment of all or
any portion of any Senior Indebtedness or (ii) any other default pursuant to
which the maturity of Senior Indebtedness has been accelerated and, in either
case, requisite notice has been received by the Indenture Trustee and such
default shall not have been cured or waived by or on behalf of the holders of
such Senior Indebtedness.
If the Indenture Trustee, PECO Energy Capital (as holder of the
Subordinated Debentures) or any Special Representative appointed by the holders
of the Preferred Securities, shall have received any payment on account of the
principal of or interest on the Subordinated Debentures when such payment is
prohibited
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and before all amounts payable on, under or in connection with Senior
Indebtedness are paid in full, then such payment shall be received and held in
trust for the holders of Senior Indebtedness and shall be paid over or delivered
first to the holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full.
Nothing in the Indenture shall limit the right of the Indenture Trustee,
PECO Energy Capital (as holder of the Subordinated Debentures) or the Special
Representative to take any action to accelerate the maturity of the Subordinated
Debentures or to pursue any rights or remedies against PECO Energy; provided
that all Senior Indebtedness shall be paid before PECO Energy Capital (as holder
of the Subordinated Debentures) is entitled to receive any payment from PECO
Energy of principal of or interest on the Subordinated Debentures.
Upon the payment in full of all Senior Indebtedness, PECO Energy Capital
(as holder of the Subordinated Debentures) (and any Special Representative
appointed by such holders) shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of PECO
Energy made on such Senior Indebtedness until the Subordinated Debentures shall
be paid in full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which PECO Energy may issue.
CERTAIN COVENANTS OF PECO ENERGY
PECO Energy will covenant that it and any majority-owned subsidiary will
not declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than
dividends by wholly owned subsidiaries) (i) during an Extension Period, (ii) if
there shall have occurred any event that, with the giving of notice or the lapse
of time or both, would constitute an Event of Default under the Indenture or
(iii) if PECO Energy shall be in default with respect to its payment obligations
under any Guarantee. PECO Energy will also covenant (i) to maintain direct or
indirect 100% ownership of the General Partner and will cause the General
Partner to maintain 100% ownership of the general partner interests of PECO
Energy Capital, (ii) to cause the General Partner to at all times maintain a
"fair market net worth" of at least 10% of the total capital contributions (less
redemptions) to PECO Energy Capital and to maintain general partner interests
representing 3% of all interests in the capital, income, gain, loss, deduction
and credit of PECO Energy Capital, (iii) to cause the General Partner to timely
perform all of its duties as general partner of PECO Energy Capital (including
the duty to pay Distributions on the Series B Preferred Securities), and (iv) to
use its reasonable efforts to cause PECO Energy Capital to remain a limited
partnership and otherwise continue to be treated as a partnership for United
States federal income tax purposes.
PECO Energy Capital may not waive compliance or waive any default in
compliance by PECO Energy with any covenant or other term in the Indenture
without the approval of the Special Representative or without the direction of
the holders of 66 2/3% of the aggregate stated liquidation preference of the
Preferred Securities.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting PECO Energy and the Indenture
Trustee, without the consent of the Special Representative or PECO Energy
Capital, to modify the Indenture or any Supplemental Indenture:
(i) to cure any ambiguity, defect or inconsistency; (ii) to comply
with the provisions of the Indenture regarding a successor to PECO Energy;
(iii) to provide for uncertificated Subordinated Debentures in addition to
or in place of certificated Subordinated Debentures; (iv) to make any other
change that does not adversely affect the rights of any holder of the
Subordinated Debentures; (v) to comply with any requirement for
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended; and (vi) to set forth the terms and conditions of any series of
Subordinated Debentures.
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The Indenture contains provisions permitting PECO Energy and the Indenture
Trustee, with the consent of the Special Representative or PECO Energy Capital
at the direction of the holders of not less than 66 2/3% of the aggregate stated
liquidation preference of the Preferred Securities to modify the Indenture or
any supplemental indenture or the rights of the holders of the Subordinated
Debentures issued under the Indenture; provided that no such modification,
without the consent of each holder of the Subordinated Debentures affected, may,
(i) change the stated maturity date of the principal of, or any installment of
principal of or interest, if any, on, the Subordinated Debentures, (ii) reduce
the principal amount of, or premium or rate of interest, if any, on, the
Subordinated Debentures, (iii) reduce the amount of principal of an original
issue discount Subordinated Debenture payable upon acceleration of the maturity
thereof, (iv) make the Subordinated Debentures payable in money or securities
other than as stated in the Subordinated Debentures, (v) impair the right to
institute suit for the enforcement of any payment on or with respect to the
Subordinated Debentures, (vi) adversely change the redemption provisions of the
Subordinated Debentures, (vii) adversely affect the rights of the holders of the
Subordinated Debentures with respect to subordination or (viii) reduce the
principal amount of the holders of the Subordinated Debentures that must consent
to an amendment of the Indenture.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (i) default for 10
days in payment of any interest on any series of the Subordinated Debentures
(other than the payment of interest during an Extension Period); (ii) default in
payment of principal of (or premium, if any, on) any Subordinated Debentures;
(iii) default for 60 days after notice in the performance of any other covenant
or agreement in the Indenture or any series of Subordinated Debentures or (iv)
certain events of bankruptcy, insolvency or reorganization of PECO Energy. In
case an Event of Default under the Indenture shall occur and be continuing
(other than an Event of Default relating to bankruptcy, insolvency or
reorganization of PECO Energy, in which case principal and interest on all of
the Subordinated Debentures shall become immediately due and payable), the
Indenture Trustee, PECO Energy Capital (as holder of the Subordinated
Debentures) or the Special Representative may declare the principal of all the
Subordinated Debentures to be due and payable. Under certain circumstances, a
declaration of acceleration with respect to Subordinated Debentures may be
rescinded and past defaults (except, unless theretofore cured, a default in the
payment of principal of or interest on the Subordinated Debentures) may be
waived only by the Special Representative or by PECO Energy Capital at the
direction of the holders of 66 2/3% in aggregate stated liquidation preference
of Preferred Securities.
PECO Energy is required to furnish to the Indenture Trustee annually a
statement as to the performance by PECO Energy of its obligations under the
Indenture and as to any default in such performance.
ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF PREFERRED SECURITIES
The holders of the Preferred Securities will have the rights referred to
under "Description of the Series B Preferred Securities -- Voting Rights,"
including the right to appoint a Special Representative authorized to exercise
the rights of PECO Energy Capital, as the holder of the Series B Subordinated
Debentures, to declare the principal and interest on the Series B Subordinated
Debentures due and payable and to enforce the obligations of PECO Energy under
the Series B Subordinated Debentures and the Indenture directly against PECO
Energy, without first proceeding against PECO Energy Capital or any other person
or entity.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that PECO Energy may not consolidate with or merge
with or into, or sell, convey, transfer or lease all or substantially all its
assets (either in one transaction or a series of transactions) to, any person,
unless, among other things, (i) the successor person shall be organized and
existing under the laws of the United States or any state thereof or the
District of Columbia, and shall expressly assume by a supplemental indenture all
of the obligations of PECO Energy under the Subordinated Debentures and the
Indenture and (ii) immediately prior to and after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing.
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DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, PECO Energy will be deemed to have paid
and discharged the entire indebtedness of the Series B Subordinated Debentures
if PECO Energy irrevocably deposits with the Indenture Trustee or other paying
agent, in trust, (i) cash and/or (ii) United States Government Obligations (as
defined in the Indenture), which through the payment of interest thereon and
principal thereof in accordance with their terms will provide cash in an amount
sufficient to pay all the principal of, premium, if any, and interest on, the
Subordinated Debentures then outstanding on the dates such payments are due in
accordance with the terms of the Series B Subordinated Debentures.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
Subject to the provisions of the Indenture relating to its duties, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture, unless the Indenture Trustee receives security and
indemnity reasonably satisfactory to it. Subject to such provision for
indemnification, the holders of a majority in principal amount of the
Subordinated Debentures then outstanding thereunder or the Special
Representative will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee
thereunder, or exercising any trust or power conferred on the Indenture Trustee.
The Indenture contains limitations on the right of the Indenture Trustee,
as a creditor of PECO Energy, to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such claim as security
or otherwise. In addition, the Indenture Trustee may be deemed to have a
conflicting interest and may be required to resign as Indenture Trustee if at
the time of default under the Indenture it is a creditor of PECO Energy.
An affiliate of Meridian Trust Company, the Trustee under the Indenture,
has from time to time engaged in transactions with, or performed services for,
PECO Energy and its affiliates in the ordinary course of business.
Mr. Joseph F. Paquette, Jr. is Chairman of the Board and a Director of PECO
Energy and a Director of Meridian Bancorp, Inc., the parent corporation of the
Indenture Trustee.
DESCRIPTION OF THE DEPOSITARY SHARES
The summary of the terms of the Depositary Shares set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to the provisions of PECO Energy's Amended and Restated Articles of
Incorporation and the Deposit Agreement (the "Deposit Agreement") among PECO
Energy, First Chicago Trust Company of New York, as depositary (the
"Depositary") and Holders from time to time of the Depositary Shares, and copies
of which may be obtained from PECO Energy upon request.
Each Depositary Share represents a one-fourth interest in a share of $7.96
Cumulative Preferred Stock (the "$7.96 Preferred Stock"). The shares of $7.96
Preferred Stock underlying the Depositary Shares are deposited with the
Depositary under the Deposit Agreement. The Depositary Shares are evidenced by
Depositary Receipts ("Depositary Receipts") issued by the Depositary under the
Deposit Agreement. Subject to the terms of the Deposit Agreement, each owner of
a Depositary Share is entitled, through the Depositary, in proportion to the
one-fourth interest in a share of $7.96 Preferred Stock underlying such
Depositary Share, to all rights and preferences of the $7.96 Preferred Stock
(including dividend, voting, redemption and liquidation rights). Since each
share of $7.96 Preferred Stock entitles the holder thereof to one vote on
matters on which the holders of the $7.96 Preferred Stock are entitled to vote,
each Depositary Share, in effect, entitles the Holder thereof to one-fourth of a
vote thereon, rather than one full vote. The Depositary acts as registrar and
transfer agent with respect to the Depositary Shares.
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GENERAL
All shares of preferred stock of PECO Energy, including the $7.96 Preferred
Stock, are of equal rank. The shares of the preferred stock of different series
may vary as to (i) annual dividend rate or rates, (ii) redemption price or
prices, if any, and any special terms and conditions applicable to redemption,
(iii) amount or amounts payable upon any voluntary or involuntary liquidation or
winding up of PECO Energy, (iv) terms and amounts of any sinking fund provided
for the purchase or redemption of shares, and (v) conversion, participating or
other special rights, and qualifications, limitations or restrictions thereof,
if any.
The authorized capital stock of PECO Energy consists of 15 million shares
of preferred stock without par value, issuable in series, 100 million shares of
preference stock, issuable in series, and 500 million shares of common stock
without par value.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary distributes all cash dividends or other cash distributions
received in respect of the $7.96 Preferred Stock, less any amount required to be
withheld, to the record holders of Depositary Receipts representing the related
Depositary Shares in proportion to the number of Depositary Shares owned by such
holders on the relevant record date, which is the same date as the record date
fixed by PECO Energy for the $7.96 Preferred Stock. In the event that the
calculation of any such cash dividend or other cash distribution to be paid to
any record holder on the aggregate number of Depositary Receipts held by such
holder results in an amount which is a fraction of a cent, the amount the
Depositary distributes to such record holder is rounded to the next highest
whole cent.
In the event of a distribution other than in cash, the Depositary is
required to distribute property received by it to the record holders of
Depositary Receipts entitled thereto, in proportion, as nearly as may be
practicable, to the number of Depositary Shares owned by such holders on the
relevant record date, unless PECO Energy determines that it is not feasible to
make such distribution, in which case PECO Energy may adopt any other method for
such distribution as it deems equitable and practicable, including the sale of
such property and distribution of the net proceeds from such sale to such
holders.
The $7.96 Preferred Stock, pari passu with the issued and outstanding
preferred stock of PECO Energy, is entitled to dividends when and as declared by
the Board of Directors of PECO Energy at the rate of $7.96 (equivalent to $1.99
per annum per Depositary Share), payable quarterly on February 1, May 1, August
1 and November 1. After payment in full of all dividends accrued on the
preferred stock, dividends on the common stock of PECO Energy or any other stock
junior to the preferred stock may be declared and paid as the Board of Directors
of PECO Energy determine.
Unless dividends on all outstanding shares of preferred stock of all series
shall have been paid for all past monthly dividend periods, no dividends shall
be paid or declared and no other distribution shall be made on the preference
stock or the common stock, and no preference stock or common stock shall be
purchased or otherwise acquired for value by PECO Energy.
REDEMPTION PROVISIONS
The Depositary Shares will be redeemed from the proceeds received by the
Depositary resulting from the redemption, in whole or in part, of the $7.96
Preferred Stock held by the Depositary. Whenever PECO Energy redeems any $7.96
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing the $7.96
Preferred Stock so redeemed. The Depositary will mail the notice of redemption
no less than 30 nor more than 60 days prior to the date fixed for redemption of
the $7.96 Preferred Stock and Depositary Shares to the record Holders of the
Depositary Receipts. If less than all of the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata or by any other method determined by PECO Energy in its sole discretion to
be equitable.
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The $7.96 Preferred Stock is not subject to redemption prior to October 1,
1997. Thereafter, the $7.96 Preferred Stock may be redeemed as a whole at any
time or in part from time to time by PECO Energy upon not less than 30 days'
notice at a price of $100 per share of $7.96 Preferred Stock (equivalent to $25
per Depositary Share) plus accrued and unpaid dividends.
The $7.96 Preferred Stock is not entitled to any sinking fund.
Notice of redemption having been given as described above, from and after
the date fixed for redemption, unless PECO Energy shall have failed to redeem
the number of shares of $7.96 Preferred Stock called for redemption, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding, and all rights of the Holders of the Depositary Shares will cease,
except for the right to receive the monies payable upon such redemption and any
money or other property to which the Holders of such Depositary Shares were
entitled upon such redemption and surrender to the Depositary of the Depositary
Receipts evidencing such Depositary Shares.
LIQUIDATION VALUE
The amount per share payable on the $7.96 Preferred Stock in the event of
any voluntary or involuntary liquidation of PECO Energy is $100 (equivalent to
$25 per Depositary Share) plus accrued and unpaid dividends. All shares of PECO
Energy preferred stock of all series are of equal rank.
VOTING RIGHTS OF $7.96 PREFERRED STOCK
Except as hereinafter set forth or when some mandatory provision of law
shall be controlling, the holders of preferred stock of PECO Energy, including
the Holders of the Depositary Shares, have no voting rights.
Holders of preferred stock of PECO Energy are entitled to vote on certain
matters relating to (i) authorizing of stock (other than a series of preferred
stock) ranking prior to or on a parity with the preferred stock or any security
convertible into shares of stock of such kind; (ii) change of the express terms
of the preferred stock or of any series thereof in a manner prejudicial to the
holders thereof; (iii) issuance of additional shares of preferred stock unless,
for any twelve consecutive calendar months within the fifteen calendar months
immediately preceding the calendar month within which such additional shares are
issued, net earnings applicable to the payment of dividends on the preferred
stock and net income before payment of interest charges on indebtedness and
after provision for depreciation and taxes shall have been, respectively, at
least two times the dividend requirements upon the entire amount of preferred
stock to be outstanding immediately after the proposed issue of such additional
shares, and at least one and one-half times the aggregate of such dividend
requirements and interest charges for such period on the entire amount of
indebtedness then to be outstanding; (iv) issuance of additional shares of
preferred stock, unless the capital of PECO Energy represented by its preference
stock and common stock together with its surplus is in the aggregate at least
equal to the involuntary liquidating value of the preferred stock to be
outstanding immediately after the proposed issue of such additional shares of
preferred stock; (v) increase in the total authorized amount of preferred stock
of all series; and (vi) merger or consolidation with or into any corporation, or
division, unless ordered, exempted, approved, or permitted by the SEC or other
federal regulatory authority. Except as otherwise provided in the express terms
of any series of preferred stock, the number of authorized shares of preferred
stock of any series may be increased without vote or consent of the holders of
the outstanding shares of the series so affected, subject to the aggregate limit
on the authorized number of shares of preferred stock. With respect to (i),
(ii), (iii), and (iv) above, the consent or affirmative vote of the holders of
shares of the preferred stock entitled to cast at least two-thirds of the votes
which all holders of preferred stock of all series then outstanding are entitled
to cast (or of the affected series in the case of a change prejudicial to less
than all series) is required; and with respect to (v) and (vi), the consent or
affirmative vote of the holders of shares of the preferred stock entitled to
cast at least a majority of the votes which all holders of preferred stock of
all series then issued and outstanding are entitled to cast is required.
Coverage under the more restrictive earnings test of PECO Energy's Amended and
Restated Articles of Incorporation relating to dividend requirements and
interest charges on all indebtedness and preferred stock for the twelve months
ended June 30, 1995 was 2.17.
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<PAGE> 51
The Board of Directors of PECO Energy is classified into three classes. In
each election of Directors, holders of common stock elect an entire class for
three-year terms. If and when dividends payable on all shares of the preferred
stock are in default in an amount equal to four full quarterly dividends, and
until all dividends then in default are paid or declared and set apart for
payment, the holders of all shares of preferred stock, voting separately as a
class, are entitled to elect the smallest number of Directors necessary to
constitute a majority of the full Board of Directors, and the holders of the
common stock (and except as otherwise provided by the terms of the preference
stock), voting separately as a class, are entitled to elect the remaining
Directors. Holders of preferred stock are not entitled to cumulative voting
rights in election of Directors.
The preferred stock of all series constitutes one class in any vote of
shareholders except as stated above, or when some mandatory provision of law is
controlling.
VOTING PROCEDURES FOR DEPOSITARY SHARES
Promptly upon receipt of notice of any meeting at which the holders of the
$7.96 Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts as of the record date for such meeting. Each such record
holder of Depositary Receipts will be entitled to instruct the Depositary as to
the exercise of the voting rights pertaining to the amount of the $7.96
Preferred Stock represented by such record holder's Depositary Shares. The
Depositary will endeavor, insofar as practicable, to vote the amount of the
$7.96 Preferred Stock represented by such Depositary Shares in accordance with
such instructions, and PECO Energy will agree to take all action which may be
deemed necessary by the Depositary in order to enable the Depositary to do so.
The Depositary will abstain from voting any of the $7.96 Preferred Stock to the
extent that it does not receive specific instructions from the Holders of
Depositary Receipts.
Each share of $7.96 Preferred Stock will be entitled to one vote or a
fraction thereof for each $100 or fraction thereof of involuntary liquidation
value of such share on matters on which the $7.96 Preferred Stock is entitled to
vote.
WITHDRAWAL OF $7.96 PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of the Depositary's customary charges therefor, and
subject to the terms of the Deposit Agreement, the owner of the Depositary
Shares evidenced thereby is entitled to delivery of the number of whole shares
of the $7.96 Preferred Stock and all money and other property, if any,
represented by such Depositary Shares. Owners of Depositary Shares will be
entitled to receive whole shares of the $7.96 Preferred Stock on the basis of
one share of $7.96 Preferred Stock for four Depositary Shares. Fractional
interests in the Depositary Shares will not be issued. If the Depositary
Receipts delivered by the holder evidence a number of Depositary Shares in
excess of the number of Depositary Shares representing the number of whole
shares of the $7.96 Preferred Stock to be withdrawn, the Depositary will deliver
to such holder, at the same time, a new Depositary Receipt evidencing such
excess number of Depositary Shares. Subject to the terms of the Deposit
Agreement, holders of the $7.96 Preferred Stock thus withdrawn will thereafter
be entitled to deposit such shares under the Deposit Agreement and to receive
Depositary Receipts evidencing Depositary Shares therefor.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
PECO Energy maintains a Dividend Reinvestment and Stock Purchase Plan (as
described in a separate prospectus) which permits holders of PECO Energy's
common and preferred shares to reinvest cash dividends automatically and make
direct investments of up to $50,000 per calendar year in shares of common stock.
Holders of Preferred Trust Receipts will not be entitled to participate in PECO
Energy's Dividend Reinvestment and Stock Purchase Plan.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between PECO Energy and the
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<PAGE> 52
Depositary. Any amendment that shall impose any fees, taxes or charges shall not
become effective as to outstanding Depositary Receipts until the expiration of
three months after notice of such amendment has been given to the Holders of the
outstanding Depositary Receipts. Any amendment which is prejudicial to any
substantial existing rights of the Holders of Depositary Shares will not be
effective unless such amendment has been approved by the Holders of at least a
majority of the Depositary Shares then outstanding. No such amendment may impair
the right, subject to the terms of the Deposit Agreement, of any owner of any
Depositary Shares to surrender the Depositary Receipt evidencing such Depositary
Shares with instructions to the Depositary to deliver to the holder the $7.96
Preferred Stock and all money and other property, if any represented thereby,
except in order to comply with mandatory provisions of applicable law. The
Deposit Agreement may be terminated by PECO Energy or the Depositary only if all
outstanding Depositary Shares relating thereto have been redeemed or there has
been a final distribution in respect of the $7.96 Preferred Stock in connection
with any liquidation, dissolution or winding up of PECO Energy and such
distribution has been distributed to the holders of the related Depositary
Receipts. Notwithstanding the foregoing, PECO Energy has the right to terminate
the Deposit Agreement upon 30 days' prior written notice to the Holders of the
Depositary Receipts and the Depositary if (i) the deposit arrangement evidenced
by the Deposit Agreement is in violation of applicable law or becomes separately
taxable for federal income tax purposes or (ii) PECO Energy affects a
four-for-one split of the $7.96 Preferred Stock.
CHARGES OF DEPOSITARY
Under the Deposit Agreement, Holders of Depositary Shares are required to
pay all transfer and other taxes and governmental charges arising from the
existence of the depositary arrangements. PECO Energy will pay charges of the
Depositary in connection with any redemption of the $7.96 Preferred Stock.
Holders of Depositary Shares pay transfer and other taxes and governmental
charges and certain other charges as are provided in the Deposit Agreement to be
for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to PECO Energy notice
of its election to do so, and PECO Energy may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor depositary and its acceptance of such appointment. Such successor
depositary must be appointed within 45 days after delivery of the notice for
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $50,000,000.
MISCELLANEOUS
The Depositary forwards all reports and communications from PECO Energy
which are delivered to the Depositary and which PECO Energy is required to
furnish to the holders of the $7.96 Preferred Stock. In addition, the Depositary
makes available for inspection by Holders of Depositary Receipts at the
principal office of the Depositary, and at such other places as it may from time
to time deem advisable, any reports and communications received from PECO Energy
which are received by the Depositary as the holder of $7.96 Preferred Stock.
The obligations of PECO Energy and the Depositary under the Deposit
Agreement are limited to performance in good faith of their duties thereunder
and neither the Depositary nor PECO Energy assumes any other obligation or will
be subject to any other liability under the Deposit Agreement to holders of
Depositary Receipts. Neither the Depositary nor PECO Energy will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The Depositary and PECO
Energy will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or $7.96 Preferred Stock unless satisfactory
indemnity is furnished. PECO Energy and the Depositary may rely on written
advice of counsel or accountants, on information provided by Holders of
Depositary Shares or other persons believed in good faith to be competent to
give such information and on documents believed to be genuine and to have been
signed or presented by the proper party or parties.
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<PAGE> 53
UNITED STATES TAXATION
In the opinion of Ballard Spahr Andrews & Ingersoll, counsel to PECO
Energy, the following are the material United States federal income tax
consequences (and certain Pennsylvania tax considerations) of the receipt of
Preferred Trust Receipts in exchange for the Depositary Shares pursuant to the
Offer and of the ownership and disposition of Preferred Trust Receipts. Unless
otherwise stated, this summary deals only with Preferred Trust Receipts held as
capital assets by holders who acquire the Preferred Trust Receipts pursuant to
the Offer ("Initial Holders"). It does not deal with special classes of holders,
such as dealers in securities or currencies, life insurance companies, persons
holding Preferred Trust Receipts as a hedge against or which are hedged against
currency risks or as a part of a straddle, or persons whose functional currency
is not the United States dollar. This summary is based on the Internal Revenue
Code of 1986, as amended, Treasury Regulations thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change (possibly on a retroactive basis).
ALL HOLDERS OF DEPOSITARY SHARES ARE ADVISED TO CONSULT THEIR TAX ADVISERS
AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT OF
PREFERRED TRUST RECEIPTS FOR DEPOSITARY SHARES AND OF THE OWNERSHIP AND
DISPOSITION OF PREFERRED TRUST RECEIPTS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER LAWS.
RECEIPT OF PREFERRED TRUST RECEIPTS FOR DEPOSITARY SHARES
The receipt in the Exchange of Preferred Trust Receipts for Depositary
Shares pursuant to the Offer will be treated for United States federal income
tax purposes as consisting of three transactions: (a) a taxable exchange of
Depositary Shares for the underlying Series B Subordinated Debentures followed
by (b) a tax-free contribution of the underlying Series B Subordinated
Debentures to PECO Energy Capital in exchange for Series B Preferred Securities
followed, in turn, by (c) a tax-free deposit of Series B Preferred Securities
with the Trust in consideration for the issuance of the Preferred Trust Receipts
to the Holders of the Depositary Shares.
The receipt of Preferred Trust Receipts for Depositary Shares pursuant to
the Offer will be a taxable transaction. In the case of an Initial Holder who
actually or constructively owns solely Depositary Shares, or not more than one
percent of such stock and not more than one percent of any other class of PECO
Energy stock, gain or loss will be recognized in an amount equal to the
difference between (a) the fair market value on the Exchange Date of the
underlying Series B Subordinated Debentures received in the Exchange and (b) the
Initial Holder's tax basis in the Depositary Shares exchanged therefor, and will
be long-term capital gain or loss if the Depositary Shares have been held for
more than one year as of such date. For this purpose, the fair market value of
the Series B Subordinated Debentures deemed issued in exchange for Depositary
Shares on the Exchange Date will equal the fair market value of the Preferred
Trust Receipts on that date.
No further gain or loss will be recognized by an Initial Holder on account
of the contribution of the underlying Series B Subordinated Debentures to PECO
Energy Capital or the deposit of the Series B Preferred Securities with the
Trust in consideration for the issuance of the Preferred Trust Receipts.
An Initial Holder's aggregate tax basis in his pro rata share of the Series
B Preferred Securities (represented by his Preferred Trust Receipts) will be
equal to his tax basis for the Depositary Shares surrendered in the Exchange
increased by the amount of any gain or reduced by the amount of any loss
recognized in the Exchange.
Holders of Depositary Shares who actually or constructively own more than
one percent of any class of PECO Energy stock are advised to consult their tax
advisers as to the income tax consequences of exchanging Depositary Shares.
CLASSIFICATION OF PECO ENERGY CAPITAL AND THE TRUST
In connection with the issuance of Preferred Trust Receipts, Ballard Spahr
Andrews & Ingersoll will render its tax opinion to the effect that, under then
current law and assuming full compliance with the terms of
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<PAGE> 54
the Partnership Agreement and the Trust Agreement, (a) PECO Energy Capital will
be classified for United States federal income tax purposes as a partnership and
not as an association taxable as a corporation and (b) the Trust will be
classified as a grantor trust and not as an association taxable as a
corporation.
As a consequence, each Securityholder will be considered the owner of a pro
rata portion of the Series B Preferred Securities held by the Trust. As a
further consequence, each Securityholder will be required to include in gross
income his pro rata share of the income accrued on the Series B Subordinated
Debentures held by PECO Energy Capital and allocated to the Trust. Such income
should not exceed distributions received by the Securityholders on the Preferred
Trust Receipts except in limited circumstances described under "-- Potential
Extension of Payment Period." No portion of such income will be eligible for the
dividends received deduction.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND PREMIUM
The underlying Series B Subordinated Debentures will be considered to have
been issued with "original issue discount." PECO Energy Capital will be required
to include original issue discount on the Series B Subordinated Debentures in
income as it accrues, in accordance with a constant yield method based on a
compounding of interest. Each Securityholder, including a taxpayer who otherwise
uses the cash method of accounting, will be required to include his pro rata
share of such original issue discount allocated to the Trust. Generally, all of
a Securityholder's taxable interest income with respect to the Series B
Subordinated Debentures will be accounted for by PECO Energy Capital as
"original issue discount" and actual distributions of stated interest will not
be separately reported as taxable income. So long as the interest payment period
is not extended, cash distributions received by an initial Securityholder for
any monthly interest period will equal or exceed the sum of the daily accruals
of income for such interest period, unless the issue price of the underlying
Series B Subordinated Debentures (as defined below) is less than $25.
The total amount of "original issue discount" on the underlying Series B
Subordinated Debentures will equal the difference between the "issue price" of
the Series B Subordinated Debentures and their "stated redemption price at
maturity." Because PECO Energy has the right to extend the interest payment
period of the Series B Subordinated Debentures, all of the stated interest
payments on the Series B Subordinated Debentures will be includible in
determining their "stated redemption price at maturity." The "issue price" of
each $25 principal amount of the Series B Subordinated Debentures will be equal
to the fair market value of the Depositary Shares on the Exchange Date, which
may be more or less than $25, with the result that the total amount of original
issue discount on the underlying Series B Subordinated Debentures may be more or
less than the amount of stated interest payable with respect thereto.
POTENTIAL EXTENSION OF PAYMENT PERIOD
Securityholders will continue to accrue original issue discount with
respect to their pro rata share of the underlying Series B Subordinated
Debentures during an extended interest payment period, and any Securityholders
who dispose of Preferred Trust Receipts prior to the record date for the payment
of Distributions following such extended interest payment period will not
receive from the Trust any cash related thereto.
Under the terms of the Indenture, PECO Energy will be permitted to extend
the interest payment period on the Series B Subordinated Debentures up to 60
consecutive months. In the event that PECO Energy exercises this right, PECO
Energy may not declare dividends on any of its capital stock during such
extended interest period. PECO Energy currently believes that the extension of
an interest payment period is unlikely. In the event that the interest payment
period is extended, PECO Energy Capital will continue to accrue income,
generally equal to the amount of the interest payment due at the end of the
extended payment period, over the length of the extended interest payment
period.
Accrued income will be allocated, but not distributed, to Securityholders
of record on the 15th day of each calendar month. As a result, during an
extended interest payment period, Securityholders will be required to include
interest in gross income in advance of the receipt of cash, and any such
Securityholders who dispose of Preferred Trust Receipts prior to the record date
for the payment of Distributions following
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<PAGE> 55
such extended interest payment period will include interest in gross income but
will not receive any cash related thereto from the Trust. The tax basis of a
Series B Preferred Security will be increased by the amount of any interest that
is included in income without a receipt of cash, and will be decreased again
when and if such cash is subsequently received from PECO Energy and distributed
by PECO Energy Capital and the Trust. The subsequent receipt or distribution of
such cash will not be included in gross income.
TREATMENT OF THE PAYMENT OF THE ADDITIONAL DISTRIBUTION
The Additional Distribution payable on the first monthly Distribution date
for the Preferred Trust Receipts should be treated as a dividend for United
States federal income tax purposes.
WITHDRAWAL OF SERIES B PREFERRED SECURITIES
The receipt of Series B Preferred Securities by a Securityholder in
exchange for Preferred Trust Receipts (and vice versa), at the option of the
Securityholder, will not be a taxable event. The Securityholder's tax basis and
holding period for the Series B Preferred Securities immediately after the
exchange will equal the Securityholder's tax basis and holding period for the
Preferred Trust Receipts (or Series B Preferred Securities, as applicable)
surrendered in the exchange. Income earned from the Series B Preferred
Securities will be reported annually to the Securityholder and to the Internal
Revenue Service on Schedule K-1 and not on Form 1099.
DISPOSITION OF THE PREFERRED TRUST RECEIPTS
Gain or loss will be recognized on a sale, including a redemption for cash,
of Preferred Trust Receipts in an amount equal to the difference between the
amount realized and the Securityholder's tax basis in his pro rata share of
Series B Preferred Securities represented by such Preferred Trust Receipts. Gain
or loss recognized by a Securityholder on the sale or exchange of Preferred
Trust Receipts held for more than one year generally will be taxable as
long-term capital gain or loss.
PENNSYLVANIA TAX CONSIDERATIONS
In the opinion of Ballard Spahr Andrews & Ingersoll, the Preferred Trust
Receipts are exempt from existing personal property taxes in Pennsylvania.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (a) a nonresident alien individual or
(b) a foreign corporation, partnership, estate or trust, in either case not
subject to United States federal income tax on a net income basis in respect of
a Series B Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by the Trust or any of its paying agents to any United
States Alien Holder will not be subject to United States withholding tax
provided that (a) the beneficial owner of the Preferred Trust Receipt does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of PECO Energy, (b) the beneficial owner of
the Preferred Trust Receipt is not a controlled foreign corporation that is
related to PECO Energy through stock ownership, and (c) either (A) the
beneficial owner of the Preferred Trust Receipt certifies to the Trust or
its agent, under penalties of perjury, that it is a United States Alien
Holder and provides its name and address or (B) the holder of the Preferred
Trust Receipt is a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution"), and such
holder certifies to the Trust or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof; and
(ii) a United States Alien Holder of a Preferred Trust Receipt will
not be subject to United States federal income or withholding tax on any
gain realized on the Exchange or on the sale or exchange of a Preferred
Trust Receipt unless such person is present in the United States for 183
days or more in the
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taxable year of sale and such person has a "tax home" in the United States
or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of the Preferred
Trust Receipts within the United States and "backup withholding" at a rate of
31% will apply to such payments if the seller fails to provide a correct
taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Preferred Securities made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that, if the
broker is a United States person, a controlled foreign corporation for United
States federal tax purposes or a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, information reporting may apply to such payment.
Payments of the proceeds from the sale of Preferred Securities to or through the
United States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-United
States status or otherwise establishes an exemption from information reporting
and backup withholding.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Series B
Preferred Securities and the Preferred Trust Receipts will be passed upon for
PECO Energy Capital and the Trust by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to PECO Energy Capital and the
Trust. The validity of the Series B Guarantee and the Series B Subordinated
Debentures will be passed upon on behalf of PECO Energy by Ballard Spahr Andrews
& Ingersoll, Philadelphia, Pennsylvania. Certain legal matters will be passed
upon on behalf of the Dealer Managers by Drinker Biddle & Reath, Philadelphia,
Pennsylvania, counsel to the Dealer Managers. Ballard Spahr Andrews & Ingersoll
and Drinker Biddle & Reath, will rely on Richards, Layton & Finger, P.A. as to
certain matters of Delaware law.
EXPERTS
The consolidated financial statements and schedules of PECO Energy
incorporated by reference in this Offering Circular/Prospectus have been audited
by Coopers & Lybrand L.L.P., independent accountants, for the periods indicated
in their report thereon which is included in the Annual Report on Form 10-K for
the year ended December 31, 1994. The consolidated financial statements and
schedules audited by Coopers & Lybrand L.L.P. have been incorporated herein by
reference in reliance on their report given on their authority as experts in
accounting and auditing.
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Facsimile copies of the Letter of Transmittal will not be accepted. Letters
of Transmittal, certificates representing Depositary Shares and any other
required documents should be sent by each Holder of Depositary Shares or his
broker, dealer, commercial bank, trust company or other nominee to the Exchange
Agent at one of the addresses as set forth below:
THE EXCHANGE AGENT IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand or Overnight Courier in New York:
First Chicago Trust Company of New York
14 Wall Street
Tenders and Exchanges
8th Floor -- Suite 4680 -- PECO
New York, New York 10005
By Mail:
(registered or certified mail recommended)
First Chicago Trust Company of New York
Tenders and Exchanges
Suite 4660 -- PECO
P.O. Box 2559
Jersey City, New Jersey 07303-2559
By Facsimile Transmission:
(For Eligible Institutions Only)
(201) 222-4720 or 4721
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(201) 222-4707
The Information Agent is:
D. F. King & Co., Inc..
77 Water Street
New York, New York 10005
Banks and Brokers Call: (212) 425-1685
ALL OTHERS CALL TOLL-FREE: (800) 628-8509
Any questions or requests for assistance or additional copies of this
Offering Circular/Prospectus, the Letter of Transmittal or for copies of the
Notice of Guaranteed Delivery may be directed to the Information Agent at its
telephone number and location set forth above. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Dealer Managers for the Offer are:
MERRILL LYNCH & CO. SMITH BARNEY INC.
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS
- -------
<S> <C>
1-1 Dealer Manager Agreement.
3-1 Amended and Restated Articles of Incorporation of PECO Energy (incorporated by
reference to Exhibit 3-1 of PECO Energy's 1993 Annual Report on Form 10-K, File No.
1-1401).
3-2 Bylaws of PECO Energy, adopted February 26, 1990 and amended January 24, 1994
(incorporated by reference to Exhibit 3-2 of PECO Energy's 1993 Annual Report on
Form 10-K, File No. 1-1401).
3-3 Certificate of Limited Partnership of PECO Energy Capital, L.P. (incorporated by
reference to Registration Statement Nos. 33-53785 and 33-53785-01).
4-1 Amended and Restated Limited Partnership Agreement of PECO Energy Capital
(incorporated by reference to Exhibit 10-7 of PECO Energy's 1994 Annual Report on
Form 10-K,
File No. 1-1401).
4-2 Amendment to Amended and Restated Limited Partnership Agreement of PECO Energy
Capital.*
4-3 Form of Action of General Partner creating Series B Preferred Securities.*
4-4 Form of Series B Preferred Security Certificate (included in Exhibit 4-1 above).
4-5 Subordinated Debenture Indenture (incorporated by reference to Exhibit 4-5 of PECO
Energy's 1994 Annual Report on Form 10-K, File No. 1-1401).
4-6 Form of Series B Subordinated Debenture (included in Exhibit 4-7 below).
4-7 Form of First Supplemental Indenture.*
4-8 Certificate of Trust.*
4-9 Trust Agreement.*
4-10 Form of Amended and Restated Trust Agreement.*
4-11 Form of Payment and Guarantee Agreement.*
4-12 Form of Certificate Representing the Preferred Trust Receipts (included in Exhibit
4-10 above).
5-1 Opinion of Ballard Spahr Andrews & Ingersoll relating to the legality of the Series
B Subordinated Debentures and Series B Guarantees, including consent.*
5-2 Opinion of Richards, Layton & Finger, P.A., relating to the legality of the
Preferred Trust Receipts, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll as to tax matters.*
12-1 Computations of PECO Energy's Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements for
the years ended December 31, 1990-1994 and for the three months ended March 31,
1994 and March 31, 1995 (incorporated by reference to Exhibits 12-1 and 12-2,
respectively, of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401 and
PECO Energy's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1994
and June 30, 1995).
</TABLE>
- ---------------
* Previously filed as an Exhibit (with the same exhibit number) to Registration
Statement Nos. 33-60859 and 33-60859-01.
II-1
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS
- -------
<S> <C>
13 PECO Energy's Annual Report on Form 10-K for the fiscal year ended December 31,
1994 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and
June 30, 1995 (incorporated by reference, File No. 1-1401).
21 List of Subsidiaries of PECO Energy*.
23-1 Consent of Independent Accountants.
23-2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5-1).
23-3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5-2).
24 Powers of Attorney.*
25-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
Meridian Trust Company, as Trustee under the First Supplemental Indenture.*
25-2 Amendment No. 1 to Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Meridian Trust Company, as Trustee under the First Supplemental
Indenture.*
99-1 Proposed Form of Letter of Transmittal.*
99-2 Proposed Form of Notice of Guaranteed Delivery.*
99-3 Proposed Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
99-4 Proposed Form of Letter to Clients.*
99-5 Form of Exchange Agent Agreement.*
99-6 Form of Information Agent Agreement.*
99-7 Form of Newspaper Announcement.*
99-8 Press Release.*
99-9 Form of Letter from PECO Energy to Holders of $7.96 Cumulative Preferred Stock.*
99-10 Form of Questions and Answers.*
99-11 Form of Dealer Manager's Letter to Non-Contacts.*
</TABLE>
- ---------------
* Previously filed as an Exhibit (with the same exhibit number) to Registration
Statement Nos. 33-60859 and 33-60859-01.
II-2
<PAGE> 60
ITEM 22. UNDERTAKINGS
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(1) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer of controlling person in connection with the securities
being registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(3) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(4) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned registrants hereby undertake to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
II-3
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
PECO Energy Capital, L.P., has duly caused this Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on
the 3rd of November, 1995.
PECO Energy Capital, L.P.
By: PECO Energy Capital Corp.,
its general partner
By: /s/ J.B. MITCHELL
----------------------------------
J.B. Mitchell
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ J.B. MITCHELL President and Director November 3, 1995
- --------------------------------------------- (Principal Executive Officer
J.B. Mitchell and Principal Financial and
Accounting Officer)
/s/ K.G. LAWRENCE Director November 3, 1995
- ---------------------------------------------
K.G. Lawrence
/s/ N.E. DESCANO Director November 3, 1995
- ---------------------------------------------
N.E. Descano
</TABLE>
II-4
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
PECO Energy Company, has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 3rd
of November, 1995.
PECO Energy Company
By: /s/ J.F. PAQUETTE, JR.
------------------------------------
J.F. Paquette, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ----------------
<S> <C> <C>
/s/ J.F. PAQUETTE, JR. Chairman of the Board and November 3, 1995
- --------------------------------------------- Director
J.F. Paquette, Jr.
/s/ C.A. MCNEILL, JR. President and Director November 3, 1995
- --------------------------------------------- (Principal Executive
C.A. McNeill, Jr. Officer)
/s/ K.G. LAWRENCE Senior Vice President -- November 3, 1995
- --------------------------------------------- Finance and Chief Financial
K.G. Lawrence Officer (Principal Financial
and Accounting Officer)
</TABLE>
This Amendment No. 2 to the Registration Statement has also been signed by
C.A. McNeill, Jr., Attorney-in-Fact, on behalf of the following Directors on the
date indicated:
<TABLE>
<S> <C>
Susan W. Catherwood Joseph C. Ladd
M. Walter D'Alessio Edithe J. Levit
Richard G. Gilmore Kinnaird R. McKee
Richard H. Glanton Joseph J. McLaughlin
James A. Hagen John M. Palms
Nelson G. Harris Ronald Rubin
Robert Subin
</TABLE>
By: /s/ C.A. MCNEILL, JR.
----------------------------------
C.A. MCNEILL, JR.,
ATTORNEY-IN-FACT
II-5
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
PECO Energy Capital Trust I, has duly caused this Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on
the 3rd of November, 1995.
PECO Energy Capital Trust I
By: PECO Energy Capital, L.P.,
as its sponsor
By: PECO Energy Capital Corp.,
as general partner
By: /s/ J.B. MITCHELL
-----------------------------------
J.B. Mitchell
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ J.B. MITCHELL President and Director November 3, 1995
- --------------------------------------------- (Principal Executive Officer
J.B. Mitchell and Principal Financial and
Accounting Officer)
/s/ K.G. LAWRENCE Director November 3, 1995
- ---------------------------------------------
K.G. Lawrence
/s/ N.E. DESCANO Director November 3, 1995
- ---------------------------------------------
N.E. Descano
</TABLE>
II-6
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
1-1 Dealer Manager Agreement.
3-1 Amended and Restated Articles of Incorporation of PECO Energy (incorporated by
reference to Exhibit 3-1 of PECO Energy's 1993 Annual Report on Form 10-K, File No.
1-1401).
3-2 Bylaws of PECO Energy, adopted February 26, 1990 and amended January 24, 1994
(incorporated by reference to Exhibit 3-2 of PECO Energy's 1993 Annual Report on
Form 10-K, File No. 1-1401).
3-3 Certificate of Limited Partnership of PECO Energy Capital, L.P. (incorporated by
reference to Registration Statement Nos. 33-53785 and 33-53785-01).
4-1 Amended and Restated Limited Partnership Agreement of PECO Energy Capital
(incorporated by reference to Exhibit 10-7 of PECO Energy's 1994 Annual Report on
Form 10-K,
File No. 1-1401).
4-2 Amendment to Amended and Restated Limited Partnership Agreement of PECO Energy
Capital.*
4-3 Form of Action of General Partner creating Series B Preferred Securities.*
4-4 Form of Series B Preferred Security Certificate (included in Exhibit 4-1 above).
4-5 Subordinated Debenture Indenture (incorporated by reference to Exhibit 4-5 of PECO
Energy's 1994 Annual Report on Form 10-K, File No. 1-1401).
4-6 Form of Series B Subordinated Debenture (included in Exhibit 4-7 below).
4-7 Form of First Supplemental Indenture.*
4-8 Certificate of Trust.*
4-9 Trust Agreement.*
4-10 Form of Amended and Restated Trust Agreement.*
4-11 Form of Payment and Guarantee Agreement.*
4-12 Form of Certificate Representing the Preferred Trust Receipts (included in Exhibit
4-10 above).
5-1 Opinion of Ballard Spahr Andrews & Ingersoll relating to the legality of the Series
B Subordinated Debentures and Series B Guarantees, including consent.*
5-2 Opinion of Richards, Layton & Finger, P.A., relating to the legality of the
Preferred Trust Receipts, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll as to tax matters.*
12-1 Computations of PECO Energy's Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements for the
years ended December 31, 1990-1994 and for the three months ended March 31, 1994 and
March 31, 1995 (incorporated by reference to Exhibits 12-1 and 12-2, respectively,
of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401 and PECO Energy's
Quarterly Reports on Form 10-Q for the quarters ended June 30, 1994 and June 30,
1995).
13 PECO Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June
30, 1995 (incorporated by reference, File No. 1-1401).
21 List of Subsidiaries of PECO Energy.*
23-1 Consent of Independent Accountants.
</TABLE>
- ---------------
* Previously filed as an Exhibit (with the same exhibit number) to Registration
Statement Nos. 33-60859
and 33-60859-01.
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
23-2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5-1).
23-3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5-2).
24 Powers of Attorney.*
25-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
Meridian Trust Company, as Trustee under the First Supplemental Indenture.*
25-2 Amendment No. 1 to Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Meridian Trust Company, as Trustee under the First Supplemental
Indenture.*
99-1 Proposed Form of Letter of Transmittal.*
99-2 Proposed Form of Notice of Guaranteed Delivery.*
99-3 Proposed Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
99-4 Proposed Form of Letter to Clients.*
99-5 Form of Exchange Agent Agreement.*
99-6 Form of Information Agent Agreement.*
99-7 Form of Newspaper Announcement.*
99-8 Press Release.*
99-9 Form of Letter from PECO Energy to Holders of $7.96 Cumulative Preferred Stock.*
99-10 Form of Questions and Answers.*
99-11 Form of Dealer Manager's Letter to Non-Contacts.*
</TABLE>
- ---------------
* Previously filed as an Exhibit (with the same exhibit number) to Registration
Statement Nos. 33-60859 and 33-60859-01.
<PAGE> 1
EXHIBIT 1-1
November 2, 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281-1201
Smith Barney Inc.
388 Greenwich St.
New York, New York 10013
Dear Sir or Madam:
PECO Energy Company (the "Company") proposes to effect the
exchange of Trust Receipts (the "Preferred Trust Receipts") issued by PECO
Energy Capital Trust I (the "Trust"), a statutory business trust created under
the laws of Delaware, each representing a 8.72% Cumulative Monthly Income
Preferred Security, Series B (the "Series B Preferred Securities") representing
a limited partner interest in PECO Energy Capital, L.P., a limited partnership
formed under the laws of the State of Delaware ("PECO Energy Capital"), for up
to 5,400,000 depositary shares (the "Depositary Shares"), each representing a
one-fourth interest in a share of $7.96 Cumulative Preferred Stock of the
Company. The exchange of Preferred Trust Receipts for Depositary Shares will
be effected by (a) the delivery by the Company, pursuant to the Indenture dated
as of July 1, 1994 between the Company and Meridian Trust Company, as trustee,
as supplemented by a First Supplemental Indenture between the Company and
Meridian Trust Company, as trustee (together, the "Indenture"), of its 8.72%
Deferrable Interest Subordinated Debentures, Series B (the "Series B
Subordinated Debentures") to First Chicago Trust Company of New York (the
"Exchange Agent"), which will receive the Series B Subordinated Debentures on
behalf of the holders of the Depositary Shares in exchange for Depositary
Shares, (b) the delivery by the Exchange Agent (acting pursuant to the
directions of the holders of the Depositary Shares) of the Series B
Subordinated Debentures to PECO Energy Capital in consideration for the
issuance and deposit by PECO Energy Capital of the Series B Preferred
Securities to the Trust under an Amended and Restated Trust Agreement (the
"Trust Agreement") with PNC Bank, Delaware, Trustee (the "Trustee") and (c) the
issuance and delivery by the Trust of the Preferred Trust Receipts to the
Exchange Agent for distribution to the former holders of the Depositary Shares.
The Series B Preferred Securities and the Preferred Trust Receipts are together
hereinafter referred as the "Preferred Securities." The Company and PECO
Energy Capital are together hereinafter
<PAGE> 2
referred to as the "Offerors", and the offer, as described above is hereinafter
referred to as the "Offer". Merrill Lynch & Co. of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and Smith Barney Inc. ("Smith
Barney") are together hereinafter referred to as the "Co-Dealer Managers." The
Series B Preferred Securities will be guaranteed (the "Guarantee") by the
Company to the extent described in the Offer Materials (as hereinafter
defined).
This Agreement will confirm the understanding between the
Offerors and the Co-Dealer Managers pursuant to which the Offerors will retain
the Co-Dealer Managers to act as their co-dealer managers, on the terms and
subject to the conditions set forth herein, in connection with the Offer.
1. Appointment and Duties as Co-Dealer Managers.
Subject to the terms and conditions hereof, the Offerors authorize the
Co-Dealer Managers to act as co-dealer managers commencing on the date that the
Registration Statement (as hereinafter defined) becomes effective (the
"Effective Date") and the Co-Dealer Managers agree to act as the Offerors'
co-dealer managers in connection with the Offer commencing on the Effective
Date. The Offerors hereby authorize the Co-Dealer Managers to act in
accordance with this Agreement and the terms of the Offer Materials
(hereinafter defined), which Offer Materials the Co-Dealer Managers and any
other broker or dealer or any commercial bank or trust company are entitled to
use in connection with the solicitation of exchanges in connection with the
Offer. In so soliciting, the Co-Dealer Managers shall not be deemed to act as
agent of the Offerors, and the Offerors shall not be deemed to act as their
agent. In addition, in so soliciting, no broker, dealer, commercial bank or
trust company shall be deemed to act as their agent of the Co-Dealer Managers
or as agent of the Offerors, and the Co-Dealer Managers shall not be deemed to
act as the agent of any broker, dealer, commercial bank or trust company. The
Offerors shall obtain their own legal, tax and accounting advice from
appropriate third party advisers.
The Co-Dealer Managers agree, in accordance with their
customary practice, to perform those services in connection with the Offer as
are customarily performed by investment banking concerns in connection with
offers of like nature, including, but not limited to, soliciting tenders
pursuant to the Offer and communicating generally regarding the Offer with
brokers, dealers, commercial banks and trust companies and other persons,
including the holders of Depositary Shares; notwithstanding the foregoing, we
agree that nothing set forth in this Agreement shall require the Co-Dealer
Managers to continue to render services hereunder (i) for the period during
which any injunction, restraining order or other adverse judicial or regulatory
ruling, declaration, pronouncement, motion or other order shall remain in
effect with respect to the Offer or with
-2-
<PAGE> 3
respect to any of the transactions in connection with, or contemplated by, the
Offer or this Agreement if in their judgment the Co- Dealer Managers believe it
inadvisable to render services pursuant hereto, or (ii) if their continuing so
to act would, in their judgment, violate any statute, regulation or other law
of the United States of America or any state thereof or other jurisdiction
applicable to the Offer.
We further agree that the Co-Dealer Managers shall not be
under any liability to the Offerors or any other person for any act on the part
of any broker or dealer (other than themselves in their capacities as co-dealer
managers for the Offer, which liability shall be governed by Section 6 hereof),
commercial bank or trust company which solicits holders of Depositary Shares;
the Offerors acknowledge and agree that, in their capacities as co-dealer
managers, the Co-Dealer Managers shall act as independent contractors, and any
of their duties arising out of their engagement pursuant to this Agreement
shall be owed solely to the Offerors.
The Offer Materials will be prepared and approved by the
Offerors; the Co-Dealer Managers and any other broker or dealer or any
commercial bank or trust company are authorized to use the Offer Materials in
connection with the solicitation of holders of Depositary Shares. The
Co-Dealer Managers agree not to provide the holders of Depositary Shares any
written information regarding the Offer other than information contained in the
Offer Materials.
2. Duties of the Offerors.
(a) The Offerors have filed a registration
statement on Form S-4 (File No. 33-60859) (the "Registration Statement") with
the Securities Exchange Commission (the "Commission") registering the
securities to be issued in the Offer. The Offerors intend to file with the
Commission a second pre-effective amendment (the "Second Amendment") to the
Registration Statement, in the form previously approved by the Co-Dealer
Managers, containing pricing and other information required by the Securities
Act of 1933, as amended (the "Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Other than pursuant to the Second Amendment,
filings under the Exchange Act incorporated by reference in the Registration
Statement and in the prospectus (the "Prospectus") included therein in the form
first filed pursuant to Rule 424(b) under the Act, the Offerors shall not amend
or supplement the Offer Materials or prepare or approve any related material
for use in connection with the Offer without first having submitted a copy
thereof to the Co-Dealer Managers within a reasonable period of time prior to
the filing or use thereof, including as set forth in Section 3; the Offerors
agree, at their expense, to furnish to each Co-Dealer Manager as many copies of
the Offer
-3-
<PAGE> 4
Materials in final form for use in connection with the Offer as such Co-Dealer
Manager may reasonably request.
(b) The Offerors agree to furnish to the
Co-Dealer Managers cards or lists or copies thereof showing the names and
addresses of, and the number of shares or principal amount, as applicable, of
Depositary Shares held by the registered holders of the Depositary Shares as of
a reasonably appropriate date, and shall advise the Co-Dealer Managers on each
business day during the continuance of the Offer as to any transfers known to
the Offerors or of record of the Depositary Shares.
(c) The Offerors shall or shall cause the
Exchange Agent to inform the Co-Dealer Managers during each business day during
the Offer (to be followed on a daily basis by written confirmation) as to the
respective amounts of Depositary Shares which have been tendered pursuant to
the Offer during the interval since its previous daily report to the Co-Dealer
Managers pursuant to this provision, and the names and addresses of any holders
who have so tendered Depositary Shares.
(d) The Offerors agree to advise the Co-Dealer
Managers promptly of the occurrence of any event which could cause the Offerors
to withdraw, rescind, or modify the Offer and shall also advise the Co-Dealer
Managers promptly of any proposal or requirement to amend or supplement any
filing with respect to the Offer, required pursuant to the Act or the Exchange
Act or, to the extent known by the Company, "blue sky" or other state
securities laws; the Offerors will prepare and, if necessary, file with the
Commission, as required by applicable law or regulation, any and all necessary
amendments and supplements to the Offer Materials; prior to and during the
continuance of the Offer, the Offerors will inform the Co-Dealer Managers
promptly after either of the Offerors receives notice or becomes aware of the
happening of any event, or the discovery of any fact, that would require the
making of any change in any Offer Materials then being used or would affect the
truth or completeness of any representation or warranty contained in this
Agreement if such representation or warranty were being made immediately after
the happening of such event or the discovery of such fact.
(e) The Offerors shall arrange for each
information agent and depositary named in the Offer Materials relating to the
Offer to cooperate with the Co-Dealer Managers in all respects reasonably
requested by you.
(f) The Offerors acknowledge and agree that the
Co-Dealer Managers may use the Offer Materials as specified herein and the
Offerors represent and warrant to the Co-Dealer Managers that the Co-Dealer
Managers may rely on any information delivered to the Co-Dealer Managers by or
on behalf of the
-4-
<PAGE> 5
Offerors without any independent verification of such information or an
appraisal or evaluation of the Offerors' assets and liabilities and that such
information does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Offer Materials and Withdrawal Rights. Prior to the
commencement of the Offer, the Offerors agree to furnish each Co-Dealer Manager
with as many copies as each Co-Dealer Manager may reasonably request of the
following, to the extent prepared by or at the request of the Company: (i)
each of the documents that is filed with the Commission, including each
registration statement, preliminary and final prospectus filed with the
Commission, in connection with or pertaining to the Offer, and all documents
incorporated therein by reference, (ii) each offering circular, sales
memorandum, term sheet, proposed agreement, solicitation statement, disclosure
document, or other explanatory statement, or other report, filing, document,
release or communication mailed, delivered, published, or filed by or on behalf
of the Offerors in connection with the Offer, and (iii) each appendix,
attachment, modification, amendment or supplement to any of the foregoing and
all related documents, including but not limited to the Second Amendment and
each related letter of transmittal. The information referred to in clauses
(i), (ii) and (iii) above, in each case in the form as amended or supplemented
at the time it is first used or made available by the Offerors, together with
each document incorporated by reference into any of the foregoing, in each case
to the extent prepared by or at the request of the Company or approved in
writing by the Company an "Offer Material" and, collectively, the "Offer
Materials"). At the commencement of the Offer, the Offerors shall cause timely
to be delivered to each registered holder of any Depositary Shares legally
entitled thereto, such of the Offer Materials as may be required by the
Securities Act or the Exchange Act to be delivered to such holder and any other
offering materials prepared expressly for use by holders of Depositary Shares
tendering in the Offer, together with a return envelope. Thereafter, to the
extent practicable, until the expiration of the Offer, the Offerors shall use
their best efforts to cause copies of such materials and a return envelope to
be mailed to each person who becomes a holder of any applicable Depositary
Shares.
In connection with the Offer, if either of the Offerors (a)
uses or permits the use of, or files with the Commission or any other
governmental or regulatory agency, authority or instrumentality, any Offer
Material that (i) has not been submitted to the Co-Dealer Managers on a timely
basis for their comments to the extent required in Section 2(a) hereof or (ii)
has been so submitted and with respect to which either Co-Dealer
-5-
<PAGE> 6
Manager reasonably objects or (b) shall have breached any of its
representations, warranties, agreements or covenants herein, then the Co-Dealer
Managers shall be entitled to withdraw as co-dealer managers in connection with
the Offer, without any liability or penalty to the Co-Dealer Managers or any
other Indemnified Party (as hereinafter defined) for such withdrawal and
without loss of any right to indemnification or contribution provided in this
Agreement, to the payment of all fees and expenses payable hereunder that have
accrued to the date of such withdrawal or to the benefit of any other
provisions surviving such withdrawal pursuant to Section 11. In the event of
any such withdrawal, for the purpose of determining the fees payable to the
Co-Dealer Managers pursuant to this Section 3, the amount of Depositary Shares
tendered for exchange as of the close of business on the date of such
withdrawal that are thereafter exchanged pursuant to the Offer shall be deemed
to have been exchanged, pursuant to the Offer, as of the date of such
withdrawal. If the Co-Dealer Managers should withdraw, the fees accrued and
reimbursement for their expenses through the date of such withdrawal shall be
paid to the Co-Dealer Managers in cash on or promptly after such date.
4. Compensation and Expense Reimbursement; Certain
Limitations. (a) In consideration of the services to be rendered pursuant
hereto, the character and sufficiency of which the Offerors hereby acknowledge,
the Company agrees to pay, in cash, the following non-refundable amounts:
(i) The Company agrees to pay to the
Co-Dealer Managers a fee (the "Management Fee"), payable upon the consummation
of the Offer, equal to $.125 per share of Depositary Shares, up to a maximum of
5,400,000 Depository Shares, validly tendered and not withdrawn pursuant to the
Offer. The Management Fee shall be divided 60% to Merrill Lynch and 40% to
Smith Barney.
(ii) In addition, and without regard to
whether the Offer is commenced or consummated or whether this Agreement is
terminated, unless this Agreement is terminated by the Company for cause, the
Company agrees to pay to each Co-Dealer Manager promptly, in cash, all of the
reasonable out-of-pocket expenses such Co-Dealer Manager incurred in connection
with the services rendered or to be rendered by such Co-Dealer Manager pursuant
to this Agreement, including all reasonable fees and expenses of its counsel.
Nothing in this paragraph shall in any way limit or affect the Co-Dealer
Managers' or any other Indemnified Party's right to receive all expenses
(including reasonable counsel fees and expenses) under the indemnification
provisions of this Agreement.
(b) The Company agrees to pay to each Soliciting Dealer (as
defined herein) a solicitation fee of $.50 per share of Depositary Shares
validly tendered and accepted for exchange
-6-
<PAGE> 7
pursuant to the Offer and covered by a Letter of Transmittal which designates,
as having solicited and obtained the tender, the name of (i) any dealer or
broker in securities, including either Co-Dealer Manager in its capacity as a
dealer or broker, who is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. ("NASD"), (ii) any foreign
dealer or broker not eligible for membership in the NASD which agrees to
conform to the NASD's Rules of Fair Practice in soliciting tenders outside the
United States to the same extent as though it were an NASD member, or (iii) any
bank or trust company (each of which is referred to herein as a "Soliciting
Dealer"). No such fee shall be payable to a Soliciting Dealer in respect of
Depositary Shares registered in the name of such Soliciting Dealer unless such
Depositary Shares are held by such Soliciting Dealer as nominee and such
Depositary Shares are being tendered for the benefit of one or more beneficial
owners identified on the Letter of Transmittal. No such fee shall be payable
to a Soliciting Dealer with respect to the tender of Depositary Shares by a
holder unless the Letter of Transmittal accompanying such tender designates
such Soliciting Dealer. If the Depositary Shares covered by the Letter of
Transmittal are held by the Soliciting Dealer as nominee for the tendering
holder, the nominee may only be designated as a Soliciting Dealer if the
beneficial owner has so designated. No such fee shall be payable to a
Soliciting Dealer if such Soliciting Dealer is required for any reason to
transfer the amount of such fee to a tendering holder. No Soliciting Dealer
shall be deemed to be the agent of the Offerors.
(c) Whether or not the Offer is commenced or
consummated and whether or not this Agreement has been terminated, the Company
shall pay or cause to be paid (i) all expenses of preparation, printing,
mailing and dissemination of the Offer Materials and any other documents
related to the Offer; (ii) all fees and expenses paid by brokers, dealers
(including you), commercial banks, trust companies and nominees for their
customary mailing and handling expenses incurred in forwarding Offer Materials
and any other documents related to the Offer to their customers; (iii) all fees
and expenses of the Exchange Agent and any depositary, information agent or
other persons rendering services in connection with the Offer, including,
without limitation, fees payable and expenses incurred in respect of any agent
of the Offerors engaged to solicit holders of the Depositary Shares; (iv) all
fees and expenses of the Trust and the Trustee in connection with the Trust;
(v) all advertising charges incurred with the approval of the Company; (vi) all
filing fees applicable to any transaction addressed herein required to be paid
to any governmental or regulatory agency (including those required of the
Co-Dealer Managers by the Commission); (vii) any fees payable in connection
with the rating of the Preferred Trust Receipts; (viii) the fees and expenses
incurred in connection with the listing on the New York Stock
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<PAGE> 8
Exchange of the Preferred Trust Receipts; and (viii) all other expenses
incurred in connection with the Offer.
(d) Anything in this Agreement to the contrary
notwithstanding, the Co-Dealer Managers' rights to payment under this Agreement
shall be limited to the payment of compensation and expenses as provided in
Section 3, 4 and 5 and indemnification and/or contribution as provided in
Section 6 of this Agreement.
5. Termination. The Co-Dealer Managers may resign upon
written notice to the Company that any of the conditions specified in Section 7
have not been fulfilled pursuant to Section 7, and, following 3 business days
notice, the Offerors may terminate their engagement hereunder at any time. If
this Agreement were to terminate for any reason, however, in addition to, but
without duplication of, any fees earned pursuant to Section 3, the Co-Dealer
Managers shall be entitled to receive from the Company all of the amounts
payable in respect of expenses incurred in accordance with Section 4(a)(ii)
and, to the extent applicable, Section 4(a)(c) hereof up to and including the
effective date of such termination; provided that if this Agreement were to be
terminated by the Co-Dealer Managers for cause or by the Offerors other than
for cause, and on or prior to the first anniversary of the date this Agreement
either of the Offerors or any affiliate of the Offerors proceed or proceeds
with any exchange offer the terms of which do not differ substantially from the
terms set forth in any Offer Material or as recommended by the Co- Dealer
Managers prior to such termination, the Co-Dealer Managers also shall be
entitled to receive from the Company all of the amounts due and payable
pursuant to Section 4(a)(i) hereof as if this Agreement were to remain in
effect with respect to such subsequent exchange offer.
6. Indemnification, Contribution and Other Provisions.
(a) The Company agrees to indemnify and hold
harmless each Co-Dealer Manager and its affiliates and their respective
directors, officers, employees, agents and controlling persons as follows:
(i) from and against any and all loss,
liability, claim, damage, and expense whatsoever, as incurred,
under any applicable federal or state law, or otherwise, and
related to or arising out of (A) an untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement as of its effective date, or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary in order to make
the statements therein not misleading, (B) an untrue
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<PAGE> 9
statement or alleged untrue statement of a material fact contained in
the Offer Materials, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, (C) any breach by either of the Offerors of
any of their representations, warranties and agreements contained in
this Agreement, (D) either of the Offerors' failure to make the Offer,
or the withdrawal, termination or extension of the Offer or any other
failure on their part to comply with the terms and conditions
specified in the Offer Materials, and (E) the Offer, the engagement of
the Co-Dealer Managers pursuant to, and the performance by the
Co-Dealer Managers of the services contemplated by, this Agreement;
(ii) from and against any and all loss,
liability, claim, damage and expense whatsoever, as incurred,
to the extent of the aggregate amount paid in settlement of
any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon the occurrence of any matter
described in clause (i) above, if such settlement is effected
with the written consent of the Offerors; and
(iii) from and against any and all expense
whatsoever, as incurred (including, subject to the last
sentence of Section 6(d) hereof, reasonable fees and
disbursements of counsel chosen by you), reasonably incurred
in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim
whatsoever based upon the occurrence of any matter described
in clause (i) above, whether or not the indemnified party is a
party thereto and whether or not such claim, action or
proceeding is initiated or brought by or on behalf of the
Offerors, to the extent that any such expense is not paid
under clause (i) or (ii) above.
The Offerors shall not, however, be liable under this
subsection 6(a) to a Co-Dealer Manager for any loss, liability, claim,
settlement, damage or expense under (x) clauses (i)(A) and (B) of this
subsection 6(a) to the extent arising out of an untrue statement or omission or
alleged untrue statement or omission made in the Offer Materials in reliance
upon and in conformity with written information furnished to the Offerors by
such Co-Dealer Manager expressly for use in the Offer Materials and (y) clause
(i) (E) of this subsection 6(a) that is found in a final judgment by a court of
competent jurisdiction to have
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<PAGE> 10
resulted from the bad faith, willful misconduct or gross negligence of such
Co-Dealer Manager. Each of the Offerors recognizes and acknowledges for all
purposes of this Agreement that the only information covered by clause (x)
above consists of the third sentence of the first paragraph under the caption
"Listing and Trading of Preferred Trust Receipts and Depositary Shares" in the
Prospectus.
The Offerors also agree that neither Co-Dealer Manager or any
of its affiliates or any of their respective directors, officers, employees,
agents and controlling persons shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Offerors or to the extent
legally enforceable, to either of the Offerors' security holders or creditors
claiming through or on or in behalf of the Offerors or either of them, in each
case related to or arising out of the Offer or the engagement of such Co-Dealer
Manager pursuant to, or the performance by such Co-Dealer Manager of the
services contemplated by, this Agreement except to the extent that any loss,
liability, claim, damage or expense is found in a final judgment by a court of
competent jurisdiction to have resulted from such Co-Dealer Manager's bad
faith, willful misconduct or gross negligence.
The Offerors agree that, without the prior written consent of
the Co-Dealer Managers, they will not settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
in respect of which indemnification could be sought under the indemnification
provisions of this subsection 6(a) (whether or not either Co-Dealer Manager or
any other indemnified party under this subsection 6(a) is an actual or
potential party to such claim, action or proceeding), unless such settlement,
compromise or consent includes an unconditional release of each such
indemnified party from all liability arising out of such claim, action or
proceeding.
(b) Each Co-Dealer Manager agrees, severally and
not jointly, to indemnify and hold harmless the Offerors and their respective
controlling persons, partners, directors, employees, agents and officers to the
same extent as the indemnity described in subsection 6(a) above from the
Offerors to such Co-Dealer Manager, but only with respect to any untrue
statement or omission or alleged untrue statement or omission made in the Offer
Materials in reliance upon and in conformity with written information furnished
to the Offerors by such Co-Dealer Manager expressly for use therein. Each of
the Offerors recognizes and acknowledges that for purposes of the immediately
preceding sentence the only written information provided by either Co-Dealer
Manager consists of the third sentence of the first paragraph under the caption
"Listing and Trading of Preferred Trust Receipts and Depositary Shares" in the
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<PAGE> 11
Prospectus. In case any action shall be brought against the Offerors or any
such controlling person, partner, director or officer in respect of which he or
it may seek indemnity or reimbursement from any Co-Dealer Manager on account of
its agreement contained in this subsection 6(b), such Co-Dealer Manager shall
have the rights and duties given to the Offerors, and the Offerors and any such
controlling person, partner, director, or officer shall have the rights and
duties given to each Co-Dealer Manager, by subsection 6(c) below.
(c) Promptly after the receipt by the Offerors or
either of them of written notice thereof, the Offerors agree to notify each
Co-Dealer Manager promptly of the assertion against any Co-Dealer Manager or
any other person of any claim or the commencement of any action or proceeding
relating to a transaction contemplated by this Agreement. Promptly after its
receipt of written notice of any claim or commencement of any action or
proceeding with respect to which indemnification is being sought hereunder, a
Co-Dealer Manager will notify the Offerors in writing of such claim or of the
commencement of such action or proceeding. Failure to notify the Offerors or
the Co-Dealer Managers, as the case may be, will not relieve an Offeror or a
Co- Dealer Manager from any liability which it may have for indemnification (i)
under this Section 6, except to the extent that the indemnifying party is
materially prejudiced by such failure. The Offerors or either of them may
participate at its own expense in the defense of any action. If it so elects
within a reasonable time after receipt of such notice, the Offeror or either of
them may assume the defense of such action with counsel chosen by it or them
and approved by the indemnified party (which approval shall not be unreasonably
withheld), unless the indemnified party reasonably objects to such assumption
on the ground that there may be legal defenses available to it which are
different from or in addition to those available to the Offerors or either of
them. If an Offeror assumes the defense of such action, the Offerors shall not
be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no event shall the
Offerors be liable for reasonable fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
(d) If the indemnification provided for in this
Agreement and otherwise applicable by its terms is for any reason held
unenforceable, each Co-Dealer Manager, on the one hand, and the Offerors, on
the other hand, shall contribute, respectively, to the aggregate losses,
liabilities, claims, damages and expenses for which such indemnification is
held unenforceable, as incurred, in the proportion as is appropriate to reflect
the
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<PAGE> 12
relative benefits of the Offerors, on the one hand, and such Co-Dealer Manager,
on the other hand, in connection with the matter giving rise to such claims,
losses, expenses, damages or liabilities, subject to the limitation that in any
event each Co-Dealer Manager's aggregate contribution to all claims, losses,
expenses, damages and liabilities shall not exceed the amount of fees actually
received by such Co-Dealer Manager with respect to the Offer pursuant to
Section 4. It is hereby agreed that the relative benefits of a Co-Dealer
Manager, on the one hand, and the Offerors, on the other hand, with respect to
the Offer shall be deemed to be in the same proportion that (x) such Dealer-
Manager's compensation payable hereunder bears to (y) the aggregate liquidation
value of the Depositary Shares tendered and not withdrawn in the Offer, with
such Co-Dealer Manager paying the smaller portion and the Offerors paying the
larger portion. The foregoing contribution provision shall be in addition to
any rights that any person or entity entitled to contribution may have at
common law or otherwise. No investigation or failure to investigate by either
Co-Dealer Manager shall impair the foregoing indemnification and contribution
provisions or any rights the Co-Dealer Managers may have.
7. Representations and Warranties. The Offerors
represent and warrant to each of the Co-Dealer Managers at the commencement of
the Offer, at each mailing or other dissemination of any Offer Material and at
the consummation of the exchange of securities pursuant to the Offer:
(a) The Company is a validly existing corporation
in good standing under the laws of the Commonwealth of Pennsylvania. Each of
the Company's subsidiaries ("Subsidiaries") which constitutes a "gas utility
company" or an "electric utility company," as defined in the Public Utility
Holding Company Act of 1935, as amended (a "Utility Subsidiary"), is a validly
existing corporation under the laws of its jurisdiction of incorporation. The
Company and each Utility Subsidiary have all requisite power and authority to
own or lease and occupy their respective properties and carry on their
respective businesses as presently conducted and as described in the Prospectus
and are duly qualified as foreign corporations to do business and in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by them makes such qualification necessary and in which the
failure to so qualify would have a materially adverse effect on the Company or
the Company and its Subsidiaries taken as a whole.
(b) The Trust has been duly created and is
validly existing in good standing as a business trust under the Delaware
Business Trust Act, is and will be treated as a "grantor trust" for Federal
Income Tax purposes under existing law, has the trust power and authority to
conduct its business as presently conducted and as described in the Offer
Materials, and
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<PAGE> 13
will not be required to be authorized to do business in any other jurisdiction.
(c) PECO Energy Capital is a validly existing
limited partnership in good standing under the laws of the State of Delaware.
PECO Energy Capital has all requisite power and authority to issue the Series B
Preferred Securities.
(d) PECO Energy Capital has no subsidiaries.
(e) The Offerors and the Trust have taken all
corporate, partnership and trust action necessary to authorize this Agreement
and the making and consummation of the Offer and the transactions contemplated
hereby and thereby. This Agreement has been validly executed and delivered by
each of the Offerors.
(f) Each of the Offer Materials and the Offer
complies in all material respects with the Securities Act and the Exchange Act,
as such Acts may be applicable, and in each case the applicable rules and
regulations of the Commission promulgated pursuant thereto, and with all
applicable rules or regulations of governmental or regulatory authorities or
bodies other than the blue sky or similar securities laws, and no
authorization, consent or approval of, or filing with, any court or
governmental body or agency is required in connection with the commencement or
consummation of the Offer and the other transactions contemplated hereby, other
than those which have been obtained or any filing which will have been made
prior to the commencement or consummation, as the case may be, of the Offer.
Neither of the Offerors nor any of their affiliates is presently doing business
with the government of Cuba or with any person or affiliate located in Cuba.
(g) None of the Offer Materials contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements made therein not
misleading in light of the circumstances under which they were made; provided,
however, that the representations and warranties in this subsection shall not
apply to statements or omissions made in the Offer Materials in reliance upon
and in conformity with written information furnished to the Offerors by a
Co-Dealer Manager expressly for use in the Offer Materials.
(h) Upon the consummation of the Offer, the
Preferred Securities will have been duly authorized by PECO Energy Capital's
Amended and Restated Limited Partnership Agreement, as amended (the
"Partnership Agreement") and the Trust Agreement, as applicable, and, when the
Preferred Trust Receipts are issued in exchange for Depositary Shares pursuant
to the Offer, the Preferred Trust Receipts and the Series B Preferred
Securities will be validly issued and fully paid and
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<PAGE> 14
nonassessable beneficial interests in the Trust and limited partner interests
in PECO Energy Capital, respectively, not subject to any preemptive or similar
rights, and will conform to all statements relating thereto contained in the
Offer Materials.
(i) The Trust Agreement has been duly authorized,
executed and delivered by PECO Energy Capital and PECO Energy Capital Corp.,
the general partner of PECO Energy Capital (the "General Partner") and,
assuming due authorization, execution and delivery of the Trust Agreement by
the Trustee, the Trust Agreement is a valid and binding obligation of PECO
Energy Capital and the General Partner and the Trustee, enforceable against
PECO Energy Capital and the General Partner and the Trustee in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(j) The Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended, and, assuming due authorization,
execution and delivery by Meridian Trust Company, upon the consummation of the
Offer, each of the Indenture and the Series B Subordinated Debentures will be a
valid and binding agreement of PECO Energy Capital and the Company enforceable
in accordance with its terms except as (a) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability, and
will conform to all statements relating thereto contained in the Offer
Materials.
(k) Neither of the Offerors or the Trustee nor
any of the Subsidiaries is in violation of its respective trust agreement,
charter, bylaws, certificate of limited partnership or partnership agreement,
as applicable. The issue of the Series B Preferred Securities by PECO Energy
Capital, the issue of the Series B Subordinated Debentures by the Company, the
issue of the Preferred Trust Receipts by the Trust, the execution, delivery and
performance by the Company and PECO Energy Capital, as the case may be, of this
Agreement and the Guarantee, and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company, PECO Energy Capital, the Trust or any other
Subsidiary is a party or by which the Company, PECO Energy Capital, the Trust
or any other Subsidiary is bound or to which any of the property or assets of
the Company, PECO Energy Capital, the Trust or any other Subsidiary is subject,
which breach, violation or default would
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<PAGE> 15
be material to the issue of the Preferred Securities or would have a material
adverse effect on the general affairs, management, prospects, financial
position, stockholders' equity (or partnership net worth, as applicable) or
results of operations of the Trust or of PECO Energy Capital or of the Company
and its Subsidiaries taken as a whole, nor will such action result in any
violation of the provisions of the Articles of Incorporation or Bylaws of the
Company or the Certificate of Limited Partnership or Partnership Agreement of
PECO Energy Capital or the Certificate of Trust or the Trust Agreement or any
statute, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company, PECO Energy Capital or any other
Subsidiary or the Trust or any of their properties.
(l) Except (i) for the orders of the Commission
making the Registration Statement effective and the filing of Schedule 13E-4
with the Commission, (ii) for the Notice of Registration of a Securities
Certificate by the Pennsylvania Public Utility Commission in respect of the
issuance of its Subordinated Debentures and Guarantee in connection with the
issuance of an aggregate principal amount of up to $190 million (liquidation
value) of preferred interests by a special purpose subsidiary of the Company
permitting PECO Energy Capital to issue, inter alia, the Series B Preferred
Securities as contemplated by this Agreement, (iii) for permits and similar
authorizations required under the securities or "blue sky" laws of any
jurisdiction, (iv) for an application for the qualification of the Indenture
under the Trust Indenture Act of 1939, as amended, and (v) to the extent, if
any, required pursuant to the undertakings set forth under Item 17 of Part II
of the Registration Statement, no consent, approval, authorization or other
order of any governmental authority is legally required for the execution,
delivery and performance of this Agreement by the Company and PECO Energy
Capital and the consummation of the transactions contemplated hereby.
(m) Coopers & Lybrand L.L.P. are independent
certified public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(n) The financial statements of the Company
included or incorporated by reference in the Offer Materials present fairly the
financial position of the Company and the consolidated subsidiaries of the
Company as of the dates indicated and the results of their operations for the
periods specified; except as otherwise stated in the Offer Materials, said
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis.
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<PAGE> 16
(o) Since the respective dates as of which
information is given in the Offer Materials, and except as otherwise stated or
contemplated therein, there has been no material adverse change and no
development involving a prospective material adverse change in the financial
condition, business, or results of operations of the Company and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
(p) Neither of the Offerors or the Trust is an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(q) The Offerors and the Trust meet the
registrant requirements for use of Form S-4 under the Securities Act and the
rules and regulations promulgated thereunder.
(r) The Offerors have not retained or caused to
be retained and, during the term of this Agreement, will not retain or cause to
be retained as financial advisor, placement agent, dealer manager or
underwriter any other person to advise or assist them with the Offer or
otherwise directly or indirectly to use any other person to contact, approach
or negotiate with holders of the Depositary Shares with respect to the Offer
other than the Co-Dealer Managers.
(s) Any certificate signed by any officer of
either of the Offerors and delivered to the Co-Dealer Managers or to their
counsel shall be deemed a representation and warranty by the Offerors to the
Co-Dealer Managers as to the matters covered thereby.
8. Conditions to Obligations. The Co-Dealer Managers'
obligation to render services pursuant to this Agreement shall at all times be
subject, in their discretion, to the following conditions:
(a) The Offerors shall at all times during the
Offer have performed all of their obligations hereunder theretofore to be
performed.
(b) All representations, warranties and other
statements of the Offerors contained in this Agreement are now and, at the
commencement of, and at all times during the continuance and upon consummation
of, the Offer, shall be true and correct.
(c) On the commencement date (the "Commencement
Date") of the Offer and on the acceptance date (the "Acceptance Date"), the
Offerors' counsel shall deliver to the Co-Dealer Managers the opinions, in each
case satisfactory to the Co- Dealer
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<PAGE> 17
Managers, covering the matters set forth in Appendix A hereto. The Offerors
agree to furnish to the Co-Dealer Managers, at their request, (i) a letter,
satisfactory in form to the Co-Dealer Managers and their counsel, dated the
Commencement Date (and reaffirmed and updated upon the Acceptance Date) and
addressed to the Co-Dealer Managers, of Coopers & Lybrand L.L.P., independent
certified public accountants for the Company, containing statements and
information of the type ordinarily included in accountants' comfort letters
with respect to the financial statements and certain financial information
contained in the Offer Materials, (ii) a certificate from PNC Bank, Delaware,
as Trustee, dated the Commencement Date (and reaffirmed upon the Acceptance
Date) and signed by appropriate officers of the Trustee, containing statements
and information substantially as set forth in Appendix B hereto, and (iii) a
certificate from the Company upon the Acceptance Date and signed by appropriate
officers of the Company reaffirming that the representations and warranties of
the Company contained in Section 7 are true and correct as of such date and
that the Offerors have complied with all of the agreements and satisfied all of
the conditions on their part to be performed or satisfied on or before the
consummation of the Offer.
(d) The Registration Statement shall have become
effective not later than 6:00 P.M., New York City time on November 6, 1995, and
no stop order, restraining order or injunction has been issued by the
Commission or any court and no litigation shall have been commenced or
threatened before the Commission or any court with respect to (i) the making or
consummation of the Offer, (ii) the execution, delivery or performance by the
Offerors of this Agreement, or (iii) any of the transactions in connection
with, or contemplated by, the Offer Materials which either Co-Dealer Manager or
their legal counsel believes makes it inadvisable for the Co-Dealer Managers to
continue to render services pursuant hereto.
(e) It shall not have become unlawful under any
law or regulation, Federal, state or local, for the Co-Dealer Managers to
render services pursuant to this Agreement, or to continue so to act, as the
case may be.
(f) The Offerors will have advised the Co-Dealer
Managers promptly of (i) the occurrence of any event that could cause the
Offerors to withdraw or terminate the Offer or would permit the Offerors not to
consummate the Offer and (ii) the issuance of any comment or order by the
Commission or any other governmental or regulatory agency or instrumentality
concerning the Offer.
(g) The Preferred Trust Receipts shall have been
approved for listing on the New York Stock Exchange upon notice of issuance.
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<PAGE> 18
(h) At the commencement of, and at all times
during the continuance, and upon consummation of, the Offer, the Preferred
Trust Receipts shall have a rating of at least "baa2" from Moody's Investors
Service, Inc. and at least "BBB" from Standard & Poor's Ratings Group as
evidenced in a letter from such rating agencies or other evidence satisfactory
to you; the Preferred Trust Receipts and any preferred security of the Company
or its Subsidiaries issued and outstanding (including any "MIPS," "TOPrS," or
other similar securities which are equity securities under generally accepted
accounting principles and are preferred as to the receipt of dividends) shall
not have been downgraded or placed on any "watch list" for possible downgrading
by any nationally recognized statistical rating organization.
(i) Since the date of this Agreement, and except
as otherwise stated or contemplated in the Offer Materials as of the date of
this Agreement, there has been no material adverse change and no development
involving a prospective material adverse change in the financial condition,
business or results of operations of the Company and the Subsidiaries
considered as one enterprise, whether or not in the ordinary course of
business.
9. Reference to Co-Dealer Managers. The Offerors agree
that any reference to any Co-Dealer Manager or any of its affiliates in any
Offer Material, or any other release, publication or communication to any party
outside the Offerors, is subject to such Co-Dealer Manager's prior approval.
If either Co-Dealer Manager resigns or is terminated prior to the dissemination
of any Offer Material or any other release or communication, no reference shall
be made therein to such Co-Dealer Manager without its prior written permission.
10. Access to Information. In connection with their
activities hereunder, the Offerors agree to furnish the Co-Dealer Managers and
their counsel with all information concerning the Offerors that the Co-Dealer
Managers reasonably deem appropriate and agree to provide the Co-Dealer
Managers with reasonable access to the Offerors' officers, directors,
accountants, counsel, consultants and other appropriate agents and
representatives.
11. Survival of Certain Provisions. The indemnity and
contribution agreements and other provisions contained in Section 6 of this
Agreement, the representations and warranties of the Offerors made pursuant to
Section 7 of this Agreement, the provisions contained in Sections 4 and 5 of
this Agreement and this Section 11 shall remain operative and in full force and
effect regardless of (a) any investigation made by or on behalf of either
Co-Dealer Manager or by or on behalf of any Indemnified Party, (b) consummation
of the Offer, or (c) any termination of this Agreement, and shall be binding
upon, and shall inure to the benefit of, any successors, assigns, heirs and
personal
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<PAGE> 19
representatives of the Offerors, the Co-Dealer Managers, the Indemnified
Persons and any such person.
12. Notices. Notice given pursuant to any of the
provisions of this Agreement shall be in writing and shall be mailed or
delivered (a) to the Offerors at:
PECO Energy Company
Financial Division
S21-1
P.O. Box 8699
Philadelphia, PA 19101
Attention: J. Barry Mitchell
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
Attention: Robert C. Gerlach, Esq.
and (b) to the Co-Dealer Managers at:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
World Financial Center
North Tower
New York, NY 10281-1327
Attention: Richard A. Vaccari
Smith Barney Inc.
388 Greenwich St.
New York, New York 10013
Attention: Paul Galant
with a copy to:
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Robert Mead Jones, Jr., Esq.
13. Construction. This Agreement incorporates the entire
understanding of the parties and (except as otherwise provided herein)
supersedes all previous agreements, and shall be governed by, and construed in
accordance with, the laws of the State of New York as applied to contracts made
and performed in such State, without regard to principles of conflicts of law.
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<PAGE> 20
14. Severability. Any determination that any provision of
this Agreement may be, or is, unenforceable shall not affect the enforceability
of the remainder of this Agreement.
15. Headings. The section headings in this Agreement
have been inserted as a matter of convenience of reference and are not to be
deemed to be part of this Agreement.
16. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
17. Third Party Beneficiaries. This Agreement has been
and is made solely for the benefit of the Offerors, the Co-Dealer Managers and
the other Indemnified Parties referred to in Section 6 hereof and their
respective successors, heirs, personal representatives and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement.
18. Advertisements. The Offerors agree that the
Co-Dealer Managers shall have the right to place advertisements in financial
and other newspapers and journals at their own expense describing their
services to the Offerors hereunder; provided that such advertisements shall
have been approved in advance by the Company (which approval shall not be
unreasonably withheld), and that the publication of such advertisements shall
comply with applicable law.
19. Modification. This Agreement may not be modified or
amended except in writing, duly executed by the parties hereto.
20. Further Agreements. This Agreement does not
constitute any agreement, express or implied, on the part of the Co-Dealer
Managers or any commitment by the Co-Dealer Managers to underwrite, purchase,
place, or cause the placement of any securities or indebtedness.
21. Certain Actions. To the extent that any action(s) is
(are) required to be taken by the Trust in order to permit the Offerors or
either of them to comply in full with any or all of their respective
representations, covenants, agreements, obligations or undertakings under this
Agreement, the Offerors and each of them agree(s) to cause the Trust promptly
to take such action or actions.
If the foregoing terms correctly set forth our agreement,
please confirm this by signing and returning a duplicate copy of this letter.
Thereupon, this letter, as signed
-20-
<PAGE> 21
in counterpart, shall constitute our agreement on the subject matter herein.
PECO ENERGY COMPANY
By:_____________________________
Name:
Title:
PECO ENERGY CAPITAL, L.P.,
a Delaware limited partnership
BY: PECO ENERGY CAPITAL CORP.,
its general partner
By:______________________________
Name:
Title:
Confirmed and agreed to as
of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:___________________________________
Name:
Title:
SMITH BARNEY INC.
By:___________________________________
Name:
Title:
<PAGE> 22
Appendix A
(1) The favorable opinion of Ballard Spahr Andrews & Ingersoll to
the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of
the Commonwealth of Pennsylvania and has all requisite corporate power
and authority to own and operate its properties, to carry on its
business as now conducted and as currently proposed to be conducted,
to consummate the Offer, to enter into the Dealer Manager Agreement,
the Series B Guarantee and the Indenture, to issue the Series B
Subordinate Debentures and to cause the General Partner of the PECO
Energy Capital to enter into the Trust Agreement.
(ii) The General Partner of PECO Energy Capital is
a corporation duly incorporated, validly existing and in good standing
under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties, to carry on
business as now conducted and as currently proposed to be conducted
and to enter into the Trust Agreement.
(iii) All of the partner interests of PECO Energy
Capital other than the Preferred Securities and the Cumulative Monthly
Income Preferred Securities, Series A, issued by PECO Energy Capital
are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.
(iv) The execution, delivery and performance by
the Company and/or PECO Energy Capital of the Dealer Manager
Agreement, the Trust Agreement, the Series B Guarantee and the
Indenture and the issuance of the Series B Subordinated Debentures by
the Company, the issuance by PECO Energy Capital of the Series B
Preferred Securities and the consummation of the transactions
contemplated in the Dealer Manager Agreement and in the Offer
Materials will not result in any violation of or be in conflict with
or constitute a default under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Trust, PECO Energy Capital, the Company or any of the Subsidiaries
pursuant to any term of the Company's or such General Partner's
Amended and Restated Articles of Incorporation or Bylaws, as
applicable, or of the Certificate of Limited Partnership or
Partnership Agreement of PECO Energy Capital, or, to the best of our
knowledge after due inquiry of officials of the Company and PECO
Energy Capital, any term of any material contract, note, lease,
mortgage, loan agreement, indenture, or other
A-1
<PAGE> 23
instrument to which the Trust, the Company or PECO Energy Capital is a
party or by which any of them is bound or to which any of the property
or assets of the Trust, the Company or PECO Energy Capital are
subject, or any statute, order, rule or regulation known to us of any
local or governmental agency or body having jurisdiction over the
Company or PECO Energy Capital or any of their respective properties.
(v) The Pennsylvania Public Utility Commission
has entered an appropriate order (with respect to Securities
Certificate No. S-00950499) authorizing the Company to execute and
deliver the Series B Guarantee and to issue the Series B Subordinated
Debentures and an appropriate order and Certificate of Public
Convenience authorizing the Company to acquire all of the stock of the
general partner of PECO Energy Capital, such orders are in full force
and effect and, to the best of our knowledge after due inquiry, no
proceeding has been initiated upon appeal from or to review the
effectiveness of such orders; and, except as specified in Paragraphs
(viii) and (ix) hereof and the filing of Schedule 13E- 4, no other
approval, authorization, order or consent of or declaration,
registration or filing with, any governmental authority is required
for the valid execution and delivery by the Company and PECO Energy
Capital of the Trust Agreement or by the Company of the Dealer Manager
Agreement, the Series B Guarantee and the Indenture, the valid
issuance and delivery of the Series B Guarantee and the Series B
Subordinated Debentures by the Company, or the valid issuance and
delivery by PECO Energy Capital of the Series B Preferred Securities
(other than in connection with the provisions of state securities or
"blue sky" laws of any jurisdiction, as to which we express no
opinion).
(vi) The Series B Guarantee and the Indenture have
been duly authorized, executed and delivered by the Company and
constitute [or in the case of the opinion to be delivered on the
Commencement Date, when executed and delivered will constitute] legal,
valid and binding obligations of the Company enforceable in accordance
with their respective terms except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and general
principles of equity.
(vii) The Series B Subordinated Debentures have
been duly authorized by all necessary corporate action on the part of
the Company, have been duly executed and delivered by duly authorized
offices of the Company (or in the case of the opinion to be delivered
on the Consummation Date when executed and delivered) and when
authenticated by
A-2
<PAGE> 24
the Indenture Trustee and delivered to PECO Energy Capital will
constitute legal, valid and binding obligations of the Company
enforceable in accordance with their terms.
(viii) The Dealer Manager Agreement has been duly
authorized by the Offerors and by the General Partner respectively,
and [in the case of the opinion to be delivered on the Acceptance
Date, such agreements have been duly executed and delivered by such
parties respectively].
(ix) The Trust Agreement has been duly authorized,
executed and delivered by PECO Energy Capital and the General Partner
respectively.
(x) The Registration Statement has become
effective under the Securities Act of 1933, as amended (the "Act"),
and, to the best of our knowledge after due inquiry, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated.
(xi) The Indenture has been qualified under the
Trust Indenture Act of 1939, as amended.
(xii) Under current law and interpretations of
current law issued by the Securities and Exchange Commission, none of
the Company, PECO Energy Capital and the Trust is an "investment
company" required to register under the Investment Company Act of
1940, as amended.
(xiii) The descriptions in the Registration
Statement and the Prospectus of the Preferred Trust Receipts, Series B
Preferred Securities, the Series B Guarantee Agreement and Series B
Subordinated Debentures and of statutes, legal and governmental
proceedings and other documents are accurate and fairly present the
information required to be shown and we do not know of any legal or
governmental proceedings required to be described in the Prospectus
which are not described as required, nor or any documents of a
character required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required.
(xiv) The Registration Statement and the Prospectus
comply as to form in all material respects with the Act and the rules
and regulations thereunder, and the documents incorporated therein by
reference in the Prospectus complied, when filed, as to form in all
material respects with the Securities Exchange Act of 1934, as amended
(provided that we express no opinion as to financial
A-3
<PAGE> 25
statements, schedules or other financial data included in the
Registration Statement or the Prospectus).
(xv) The statements made under the caption "United
States Taxation" in the Prospectus, insofar as they describe matters
of United States law (including Pennsylvania law) and legal
conclusions are fair summaries thereof and we confirm to the Co-Dealer
Managers our opinion stated therein.
We have acted as special counsel to the Company in connection
with the Offer and the issuance and delivery of the Series B Subordinated
Debentures and the Series B Guarantee and to PECO Energy Capital in connection
with the issuance of the Series B Preferred Securities and to the Trust in
connection with the issuance of the Preferred Trust Receipts and in connection
therewith have participated in the preparation of the Registration Statement
and have reviewed all of the documents incorporated therein by reference.
Although we have not undertaken to determine independently and assume no
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or in the Prospectus, we do not believe
that either the Registration Statement or the Prospectus, including the
documents incorporated therein by reference (except for financial statements,
schedules and other financial data included therein or incorporated therein by
reference, as to which we express no opinion or belief), at the time the
Registration Statement became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus, including the documents incorporated therein by reference (except
for financial statements, schedules and other financial data included therein
or incorporated therein by reference, as to which we express no opinion or
belief) contained on the date of the Prospectus or contains on the date hereof
any untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(2) The favorable opinion of James W. Durham, Esq., Senior Vice
President and General Counsel of the Company, or Todd Cutler, Esq., Assistant
General Counsel of the Company, to the effect that:
(i) The Company is a corporation duly organized
and existing under the laws of the Commonwealth of Pennsylvania.
(ii) Each of the Company's Utility Subsidiaries is
a validly existing corporation under the laws of the
A-4
<PAGE> 26
jurisdiction of its incorporation. The Company and each Utility
Subsidiary have all requisite corporate power and authority to own and
occupy their respective properties and carry on their respective
businesses as presently conducted and as described in the Prospectus
and are duly qualified as foreign corporations to do business and in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by them makes such qualification
necessary and in which the failure to so qualify would have a
materially adverse effect on the Company. The Company and each
Utility Subsidiary have all such franchises, permits and licenses as
are necessary to conduct their respective businesses, the absence of
which would have a materially adverse effect on the Company.
(iii) There is no pending or, to the best of my
knowledge after due inquiry, threatened action, investigation or
proceeding against or affecting the Company or any of its Subsidiaries
before any court, governmental agency or arbitrator which is likely to
have a material adverse effect on the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a
whole, except as set forth in the Prospectus including the documents
incorporated by reference therein.
(3) The favorable opinion of Richards, Layton & Finger to the
effect that:
(i) PECO Energy Capital has been duly formed and
is validly existing in good standing as a limited partnership under
the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act").
(ii) Under the Partnership Agreement and the
Delaware Act, this Agreement and the Trust Agreement have been duly
authorized for execution and delivery by PECO Energy Capital by all
necessary partnership action on the part of PECO Energy Capital.
(iii) Assuming that the Trust, as a limited partner
of PECO Energy Capital, does not participate in the control of the
business of PECO Energy Capital, the Series B Preferred Securities
issued to the Trust have been duly and validly authorized and are
validly issued and, subject to the qualifications set forth in this
opinion (iii), are fully paid and nonassessable limited partner
interests in PECO Energy Capital, as to which the Trust, as a limited
partner of PECO Energy Capital, will have no liability in excess of
its obligation to make payments provided for in the Partnership
Agreement and its share of PECO Energy Capital's assets and
undistributed profits (subject to the
A-5
<PAGE> 27
obligation of the Trust to repay and funds wrongfully distributed to
it).
(iv) There are no provisions in the Partnership
Agreement the inclusion of which, subject to the terms and conditions
therein, or, assuming that the Trust, as a limited partner of PECO
Energy Capital, takes no action other than actions permitted by the
Partnership Agreement, the exercise of which, in accordance with the
terms and conditions therein, would cause the Trust, as a limited
partner of PECO Energy Capital, to be deemed to be participating in
the control of the business of PECO Energy Capital.
(v) The execution and delivery by PECO Energy
Capital of, and the performance by PECO Energy Capital of its
obligations under, this Agreement and the Trust Agreement will not
violate any provision of any material applicable law of the State of
Delaware or the Certificate of Limited Partnership or the Partnership
Agreement (excluding the securities or Blue Sky Laws of the State of
Delaware, as to which no opinion is expressed).
(vi) The Trust has been duly created and is
validly existing in good standing as a business trust under the
Delaware Business Trust Act, and under the Trust Agreement and the
Delaware Business Trust Act has the trust power and authority to
conduct its business as described in the Prospectus.
(vii) Assuming due authorization, execution and
delivery of the Trust Agreement by PECO Energy Capital Corp., PECO
Energy Capital and the Trustee, the Trust Agreement is a legal, valid
and binding agreement of PECO Energy Capital Corp., PECO Energy
Capital and the Trustee, enforceable against PECO Energy Capital
Corp., PECO Energy Capital and the Trustee, in accordance with its
terms, except as the enforceability thereof may be subject to the
effect upon the Trust Agreement of (a) bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation, fraudulent
conveyance and other similar laws relating to or affecting the rights
and remedies of creditors generally, (b) principles of equity
(regardless of whether considered and applied in a proceeding in
equity or at law), (c) applicable law relating to fiduciary duties,
and (d) the effect of applicable public policy on the enforceability
of provisions relating to indemnification or contribution.
(viii) The Preferred Trust Receipts have been duly
authorized by the Trust Agreement, and when issued and sold in
accordance with the Trust Agreement, the Preferred Trust
A-6
<PAGE> 28
Receipts will be duly and validly issued and, subject to the
qualifications set forth in opinion (ix) below, fully paid and
nonassessable interests in the Trust.
(ix) The holders of Preferred Trust Receipts, in
their capacities as such, will be entitled to the same limitation of
personal liability extended to stockholders of private corporations
for profit organized under the General Corporation Law of the State of
Delaware. In rendering such opinion, such counsel may note that
holders of Preferred Trust Receipts may be obligated to make other
payments provided for in the Trust Agreement.
(x) Under Delaware law and the Trust Agreement,
the issuance of the Preferred Trust Receipts is not subject to
preemptive rights.
(xi) Under Delaware law and the Partnership
Agreement, the issuance of the Series B Preferred Securities is not subject to
preemptive rights.
A-7
<PAGE> 29
Appendix B
TRUSTEE'S CERTIFICATE
PNC Bank, Delaware, a Delaware banking corporation (the
"Trustee"), hereby certifies that:
1. The Trust Agreement dated as of ________ __, 1995
(the "Trust Agreement"), by and among PECO Energy Capital Corp., a Delaware
corporation ("PECO Energy"), PECO Energy Capital, L.P., a Delaware limited
partnership ("PECO Energy Capital") and the Trustee has been duly executed and
delivered in the name and on behalf of the Trustee.
2. Each person who, on behalf of the Trustee, executed
and delivered the Trust Agreement was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer or
authorized signatory of the Trustee and duly authorized to perform such act at
the time of such act and the signatures of such persons appearing on such
documents are their genuine signatures.
3. Attached hereto are (a) an extract from the By-laws
of the undersigned, duly adopted by its Board of Directors, respecting the
signing authority of the persons mentioned above in paragraph 2 above, and (b)
a letter from a Senior Executive Vice President of the undersigned authorizing,
pursuant to such By-laws, such signing authority, which By-laws and letter at
the date hereof are in full force and effect.
4. To the knowledge of the Trustee, without any
independent investigation, the trust created pursuant to the Trust Agreement
(a) has conducted no business other than in connection with the matters
described in the Registration Statement on Form S-4 (No. 33-60859) of PECO
Energy Company, PECO Energy Capital and PECO Energy Capital Trust I (the
"Registration
B-1
<PAGE> 30
Statement") and (b) has no liabilities other than in connection with the
matters described in the Registration Statement.
IN WITNESS WHEREOF, the Trustee has caused this certificate to
be executed in its corporate name by an officer thereunto duly authorized and
its corporate seal to be affixed hereto.
Dated: ___________ __, 1995
PNC BANK, DELAWARE
By: ________________________
Name:
Title:
[SEAL]
B-2
<PAGE> 1
EXHIBIT 23-1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4, as
amended, with respect to the offer to exchange Trust Receipts for up to
5,400,000 depositary shares each representing a one-fourth interest in a share
of $7.96 Cumulative Preferred Stock of our report dated January 30, 1995, on
our audits of the consolidated financial statements and financial statement
schedules of PECO Energy Company. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS & LYBRAND LLP
- -------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 2, 1995
