<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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POTOMAC ELECTRIC POWER DISTRICT OF COLUMBIA AND 53-0127880
COMPANY VIRGINIA NOT APPLICABLE
POTOMAC ELECTRIC POWER DELAWARE (I.R.S. EMPLOYER
COMPANY TRUST I (STATE OR OTHER IDENTIFICATION NO.)
(EXACT NAME OF ISSUER AS JURISDICTION OF
SPECIFIED IN ITS CHARTER) INCORPORATION OR
ORGANIZATION)
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1900 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20068
(202) 872-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES)
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ELLEN SHERIFF ROGERS
ASSOCIATE GENERAL COUNSEL, SECRETARY AND ASSISTANT TREASURER
POTOMAC ELECTRIC POWER COMPANY
1900 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20068
(202) 872-3526
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
D. MICHAEL LEFEVER, ESQ. VINCENT J. PISANO, ESQ.
COVINGTON & BURLING SKADDEN, ARPS, SLATE,
1201 PENNSYLVANIA AVENUE, N.W. MEAGHER & FLOM LLP
WASHINGTON, D.C. 20004 919 THIRD AVENUE
(202) 662-6000 NEW YORK, NY 10022
(212) 735-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Preferred Securities of
Potomac Electric Power
Company Trust I........ (1) (2) (1) N/A
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Guarantee by PEPCO of
the above-referenced
Preferred Securities... (3) (3) (3) N/A
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Junior Subordinated
Debentures of PEPCO.... (1) (2) (1) N/A
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Total................. $125,000,000 N/A $125,000,000 $36,875
</TABLE>
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(1) Subject to the following sentence, there is being registered hereunder an
indeterminate number of Preferred Securities of Potomac Electric Power
Company Trust I (the "Trust") and an indeterminate principal amount of
Junior Subordinated Debentures of Potomac Electric Power Company ("PEPCO")
. In no event will the aggregate initial offering price of the Preferred
Securities exceed $125,000,000, exclusive of accrued distributions, if
any. A like amount of Junior Subordinated Debentures will be issued and
sold by PEPCO to the Trust. The Junior Subordinated Debentures may later
be distributed for no additional consideration to the holders of the
Preferred Securities upon a dissolution of the Trust and the distribution
of the assets thereof. The proposed maximum aggregate offering price has
been estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) The proposed maximum offering price per unit will be determined from time
to time in connection with the issuance of the securities registered
hereunder.
(3) Consists of the rights of holders of the Preferred Securities under the
Guarantee and certain back-up undertakings, comprised of the obligations
of PEPCO under the Declaration of Trust as issuer of the Junior
Subordinated Debentures to provide certain indemnities in respect of, and
pay and be responsible for certain costs, expenses, debts and liabilities
of, the Trust (other than with respect to the Preferred Securities) and
such obligations of PEPCO as set forth in the Declaration of Trust and the
Indenture, in each case as amended from time to time and as further
described in the Registration Statement. The Guarantee, when taken
together with PEPCO's obligations under the Junior Subordinated
Debentures, the Indenture and the Declaration of Trust, will provide a
full and unconditional guarantee on a subordinated basis by PEPCO of
payments due on the Preferred Securities. No separate consideration will
be received for any Guarantee or such back-up obligations.
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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 THIS 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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 28, 1998
PROSPECTUS
POTOMAC ELECTRIC POWER COMPANY TRUST I
PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED BY
POTOMAC ELECTRIC POWER COMPANY
Potomac Electric Power Company Trust I (the "Trust"), a statutory business
trust formed under the laws of the State of Delaware by Potomac Electric Power
Company, a District of Columbia and Virginia corporation ("PEPCO" or the
"Company"), is offering preferred securities representing undivided beneficial
interests in the assets of the Trust ("Preferred Securities"). The payment of
periodic cash distributions ("distributions") with respect to Preferred
Securities out of moneys held by the Trust, and payments on liquidation,
redemption or otherwise with respect to such Preferred Securities, will be
guaranteed by PEPCO to the extent described herein (the "Preferred Securities
Guarantee"). See "Description of the Preferred Securities Guarantee." PEPCO's
obligations under the Preferred Securities Guarantee will be subordinate and
junior in right of payment to all other liabilities of PEPCO and will rank pari
passu with the most senior preferred or preference stock, if any, issued from
time to time by PEPCO. The Trust will invest the proceeds from the offering of
Preferred Securities and Common Securities (as defined herein) in subordinated
debt securities ("Junior Subordinated Debentures") issued by PEPCO. The Junior
Subordinated Debentures purchased by the Trust may be subsequently distributed
pro rata to holders of Preferred Securities and Common Securities in connection
with the dissolution of the Trust upon the occurrence of certain events as
described in an accompanying Prospectus Supplement (the "Prospectus
Supplement"). The Preferred Securities, the Preferred Securities Guarantee and
the Junior Subordinated Debentures are sometimes collectively referred to
hereafter as the "Offered Securities."
The form in which the Offered Securities are to be issued, their specific
designation, aggregate principal amount or liquidation value or aggregate
initial offering price, maturity, if any, rate and times of payment of interest
or dividends, if any, redemption, conversion, and sinking fund terms, if any,
voting or other rights, if any, exercise price and detachability, if any, and
other specific terms will be set forth in the Prospectus Supplement, together
with the terms of offering of such Offered Securities. Any such Prospectus
Supplement will also contain information, as applicable, about certain material
United States federal income tax considerations relating to the particular
Offered Securities offered thereby.
PEPCO and/or the Trust may sell the Offered Securities directly, through
agents designated from time to time, or through underwriters or dealers. See
"Plan of Distribution." If any agents of PEPCO and/or the Trust or any
underwriters or dealers are involved in the sale of the Offered Securities, the
names of such agents, underwriters or dealers and any applicable commissions
and discounts will be set forth in any related Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1998
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by PEPCO and the Trust with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, although it does include a
summary of the material terms of the Indenture and the Declaration (each as
defined herein). Reference is made to such Registration Statement and to the
exhibits thereto for further information with respect to the Company, the
Trust and the Offered Securities. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission or incorporated by reference
herein are not necessarily complete, and, in each instance, reference is made
to the copy of such document so filed for a more complete description of the
matter involved. Each such statement is qualified in its entirety by such
reference.
PEPCO is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Proxy statements, reports and other information concerning PEPCO
can be inspected and copied at the Commission's office at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's
Regional Offices in New York (Suite 1300, Seven World Trade Center, New York,
New York 10048) and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661), and copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates, or by accessing the
Commission's World Wide Web site at http://www.sec.gov. The common stock,
$1.00 par value, of PEPCO (the "Common Stock") and other securities of PEPCO
are listed on the New York Stock Exchange ("NYSE"). Reports, proxy material
and other information concerning PEPCO also may be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
No separate financial statements of the Trust have been included herein.
PEPCO does not consider that such financial statements would be material to
holders of the Preferred Securities because (i) all of the voting securities
of the Trust will be owned, directly or indirectly, by PEPCO, a reporting
company under the Exchange Act, (ii) the Trust has no independent operations
but exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in Junior Subordinated Debentures issued by PEPCO, and (iii) PEPCO's
obligations described herein and in any accompanying Prospectus Supplement to
provide certain indemnities in respect of, and be responsible for, certain
costs, expenses, debts and liabilities of the Trust under the Indenture and
any supplemental indenture thereto and pursuant to the Declaration, the
Preferred Securities Guarantee issued with respect to Preferred Securities,
the Junior Subordinated Debentures purchased by the Trust and the Indenture,
taken together, constitute a full and unconditional guarantee of payments due
on the Preferred Securities. See "Description of the Junior Subordinated
Debentures" and "Description of the Preferred Securities Guarantee."
The Trust is not currently subject to the informational requirements of the
Exchange Act. The Trust will become subject to such requirements upon the
effectiveness of the Registration Statement, although it intends to seek and
expects to receive an exemption therefrom.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document filed with the Commission by PEPCO is incorporated by
reference in this Prospectus:
Annual Report on Form 10-K for the year ended December 31, 1997.
All documents filed with the Commission by PEPCO pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Offered
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein or in any Prospectus Supplement shall
be deemed to be modified or superseded for purposes of this Prospectus or any
Prospectus Supplement to the extent that a statement contained herein or
therein (or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein or therein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
The Company hereby undertakes to furnish, without charge, to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated
by reference in this Prospectus, other than exhibits to such documents.
Requests for such documents should be directed to Ellen Sheriff Rogers,
Associate General Counsel, Secretary and Assistant Treasurer, Potomac Electric
Power Company, 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068, (202)
872-3526.
POTOMAC ELECTRIC POWER COMPANY
Potomac Electric Power Company, a District of Columbia and Virginia
corporation, is engaged in the generation, transmission, distribution and sale
of electric energy in the Washington, D.C. metropolitan area, including the
District of Columbia and major portions of Montgomery and Prince George's
Counties in Maryland. It also supplies, at wholesale, electric energy to the
Southern Maryland Electric Cooperative, Inc., which distributes electricity in
Calvert, Charles, Prince George's and St. Mary's Counties in southern
Maryland. PEPCO's wholly owned nonutility subsidiary, Potomac Capital
Investment Corporation ("PCI"), was organized in late 1983 to provide a
vehicle to conduct PEPCO's ongoing nonutility business and investment
programs. PCI's principal investments consist of equipment leases and
marketable securities, primarily preferred stock with mandatory redemption
features, and real estate. PCI is also involved with activities which provide
telecommunication and energy services. The mailing address of PEPCO's
executive offices is 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068,
and its telephone number is (202) 872-2000.
3
<PAGE>
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust executed by PEPCO, as sponsor for the Trust (the
"Sponsor"), and the Trustees (as defined herein) of the Trust, as amended and
restated from time to time (the "Declaration"), and (ii) the filing of a
certificate of trust with the Delaware Secretary of State. The Trust exists
for the exclusive purposes of (i) issuing the Preferred Securities and common
securities representing undivided beneficial interests in the assets of the
Trust (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities"), (ii) investing the gross proceeds from the sale of
the Trust Securities in Junior Subordinated Debentures, and (iii) engaging in
only those other activities necessary or incidental thereto. All of the Common
Securities will be directly or indirectly owned by PEPCO. The Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities, except that upon an event of default under the
Declaration with respect thereto, the rights of the holders of the Common
Securities to payment in respect of distributions and to payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Preferred Securities. PEPCO will, directly or indirectly,
acquire Common Securities in an aggregate liquidation amount equal to at least
3 percent of the total capital of the Trust.
The Trust has a term of approximately 50 years, but may terminate earlier as
provided in the Declaration. The Trust's business and affairs will be
conducted by the trustees (the "Trustees") appointed by PEPCO, as the direct
or indirect holder of all the Common Securities. The holder of the Common
Securities will be entitled to appoint, remove or replace any of, or increase
or reduce the number of, the Trustees. The duties and obligations of the
Trustees shall be governed by the Declaration. One or more of the Trustees
will be persons who are employees or officers of PEPCO (the "Regular
Trustees"). One Trustee will be a financial institution which will be
unaffiliated with PEPCO and which shall act as institutional trustee under the
Declaration and as indenture trustee for purposes of the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), pursuant to the terms set
forth in a Prospectus Supplement (the "Institutional Trustee"). In addition,
unless the Institutional Trustee maintains a principal place of business in
the State of Delaware, and otherwise meets the requirements of applicable law,
one Trustee will have its principal place of business or reside in the State
of Delaware (the "Delaware Trustee"). PEPCO will pay all fees and expenses
related to the Trust and the offering of Trust Securities.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures will be issued under an indenture, as it
may be supplemented from time to time (the "Indenture"), between the Company
and The Bank of New York, as trustee (the "Debt Trustee"). The form of the
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The terms of the Junior Subordinated Debentures
will include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. While the following summary
of the material terms does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Indenture and the Trust Indenture Act, all material terms of the
Junior Subordinated Debentures are set forth herein and in any Prospectus
Supplement relating to the particular Junior Subordinated Debentures being
offered thereby.
GENERAL
The Junior Subordinated Debentures will be unsecured obligations of the
Company. The Indenture does not limit the aggregate principal amount of Junior
Subordinated Debentures which may be issued thereunder and provides that the
Junior Subordinated Debentures may be issued from time to time in one or more
series.
The Junior Subordinated Debentures may be distributed pro rata to the
holders of the Trust Securities in connection with the dissolution of the
Trust upon the occurrence of certain events described in the Prospectus
Supplement.
4
<PAGE>
Reference is made to the Prospectus Supplement relating to the particular
Junior Subordinated Debentures being offered thereby for the following terms:
(1) the designation of such Junior Subordinated Debentures; (2) the aggregate
principal amount of such Junior Subordinated Debentures; (3) the percentage of
their principal amount at which such Junior Subordinated Debentures will be
issued; (4) the date or dates on which such Junior Subordinated Debentures
will mature and the right, if any, to shorten or extend such date or dates;
(5) the rate or rates, if any, per annum, at which such Junior Subordinated
Debentures will bear interest, or the method of determination of such rate or
rates; (6) the date or dates from which such interest shall accrue, the
interest payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (7) the right, if any, to extend the interest payment periods
and the duration of such extension; (8) provisions, if any, for a sinking
purchase or other analogous fund; (9) the period or periods, if any, within
which, the price or prices of which, and the terms and conditions upon which
such Junior Subordinated Debentures may be redeemed, in whole or in part, at
the option of PEPCO or the holder; (10) the form of such Junior Subordinated
Debentures; and (11) any other specific terms of the Junior Subordinated
Debentures.
The covenants contained in the Indenture would not necessarily afford
protection to holders of the Junior Subordinated Debentures in the event of a
decline in credit quality resulting from takeovers, recapitalizations or
similar restructurings.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the Prospectus Supplement, the Junior
Subordinated Debentures will be issued in fully registered form without
coupons and in denominations of $1,000 and multiples of $1,000. No service
charge will be made for any transfer or exchange of the Junior Subordinated
Debentures, but the Company or the Debt Trustee may require payment of a sum
sufficient to cover any tax or other government charge payable in connection
therewith.
Unless otherwise provided in the Prospectus Supplement, principal and
premium, if any, or interest, if any, will be payable and the Junior
Subordinated Debentures may be surrendered for payment or transferred at the
offices of the Debt Trustee as paying and authenticating agent, provided that
payment of interest on Junior Subordinated Debentures that are not held by the
Trust may be made at the option of PEPCO by check mailed to the address of the
person entitled thereto as it appears in the security register.
BOOK-ENTRY JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued, in whole or in
part, in the form of one or more instruments that will be deposited with, or
on behalf of, a depositary (the "Global Depositary"), or its nominee,
identified in the Prospectus Supplement relating to such series (a "Global
Security"). In such a case, one or more Global Securities will be issued in a
denomination or aggregate denomination equal to the portion of the aggregate
principal amount of outstanding Junior Subordinated Debentures of the series
to be represented by such Global Security or Securities. Unless and until it
is exchanged in whole or in part for Junior Subordinated Debentures in
definitive registered form, a Global Security may not be registered for
transfer or exchange, except as a whole by the Global Depositary to a nominee
for such Global Depositary and except in the circumstances described in the
Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of the Junior Subordinated Debentures to be represented by a Global Security
and a description of the Global Depositary will be provided in the Prospectus
Supplement.
SUBORDINATION
The Junior Subordinated Debentures will be subordinated and junior in right
of payment to certain other indebtedness of PEPCO to the extent set forth in
the Prospectus Supplement.
5
<PAGE>
CERTAIN COVENANTS OF PEPCO
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default (as defined herein) or (ii) PEPCO shall be in
default with respect to its payment of any obligations under the related
Preferred Securities Guarantee or Common Securities Guarantee (as defined
herein), or (iii) PEPCO shall have given notice of its election to defer
payments of interest on such Junior Subordinated Debentures by extending the
interest payment period as provided in the Supplemental Indenture and such
period, or any extension thereof, shall be continuing, then (a) PEPCO shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock (other than (y) purchases or acquisitions of shares of
Common Stock in connection with the satisfaction by PEPCO of its obligations
under any employee benefit plans or any other contractual obligation of PEPCO
(other than a contractual obligation ranking pari passu with or junior to the
Junior Subordinated Debentures) or (z) the purchase of fractional interests in
shares of PEPCO capital stock pursuant to the conversion or exchange
provisions of such PEPCO capital stock or the security being converted or
exchanged), (b) PEPCO shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by PEPCO which rank pari passu with or junior to such Junior Subordinated
Debentures and (c) PEPCO shall not make any guarantee payments with respect to
the foregoing (other than pursuant to the Preferred Securities Guarantee).
For so long as the Trust Securities remain outstanding, PEPCO will covenant
(i) directly or indirectly to maintain 100 percent ownership of the Common
Securities; provided, however, that any permitted successor of PEPCO under the
Indenture may succeed to PEPCO's ownership of such Common Securities, (ii) to
use its reasonable efforts to cause the Trust (a) to remain a statutory
business trust, except in connection with the distribution of Junior
Subordinated Debentures to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (b)
otherwise to continue not to be treated as an association taxable as a
corporation or a partnership for United States federal income tax purposes and
(iii) to use its reasonable efforts to cause each holder of Trust Securities
to be treated as owning an undivided beneficial interest in the Junior
Subordinated Debentures.
LIMITATION ON MERGERS AND SALES OF ASSETS
PEPCO shall not consolidate with, or merge into, any corporation or convey
or transfer its properties and assets substantially as an entirety to any
person or entity unless (a) the successor shall be a corporation organized
under the laws of any domestic jurisdiction and shall expressly assume the
obligations of PEPCO under the Indenture and (b) after giving effect thereto,
no default shall have occurred and be continuing under the Indenture.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The Indenture provides that any one or more of the following described
events which has occurred and is continuing constitutes an event of default
with respect to each series of Junior Subordinated Debentures (an "Indenture
Event of Default"):
(a) default for 30 days in payment of any interest on the Junior
Subordinated Debentures of that series, when due; provided, however, that a
valid extension of the interest payment period by the Company shall not
constitute a default in the payment of interest for this purpose; or
(b) default in payment of principal of, or premium, if any, on, the
Junior Subordinated Debentures of that series when due either at maturity,
upon redemption, by declaration or otherwise; provided, however, that a
valid extension of the maturity of such Junior Subordinated Debentures
shall not constitute a default for this purpose; or
(c) default by the Company in the performance of any other of the
covenants or agreements in the Indenture which shall not have been remedied
for a period of 90 days after notice to PEPCO; or
(d) certain events of bankruptcy, insolvency or reorganization of PEPCO;
or
6
<PAGE>
(e) after Junior Subordinated Debentures are issued to the Trust in
connection with the issuance of Trust Securities by the Trust, the
voluntary or involuntary dissolution, winding-up or termination of the
Trust, except in connection with the distribution of Junior Subordinated
Debentures to the holders of Trust Securities in liquidation of the Trust,
the redemption of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
The Indenture provides that, if an Indenture Event of Default on any series
of Junior Subordinated Debentures shall have occurred and be continuing,
either the Debt Trustee or the holders of not less than 25 percent in
aggregate principal amount of the Junior Subordinated Debentures of such
series then outstanding may declare the principal of all such Junior
Subordinated Debentures of such series to be due and payable immediately. The
holders of a majority in aggregate outstanding principal amount of such series
of Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of such
series of Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debt Trustee.
The holders of a majority in principal amount of the Junior Subordinated
Debentures of any or all series affected and then outstanding shall have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Debt Trustee under the Indenture, provided that
the holders of the Junior Subordinated Debentures shall have offered to the
Debt Trustee reasonable indemnity against expenses and liabilities.
Notwithstanding the foregoing, the right of any holder of Junior Subordinated
Debentures to receive payment of the principal of and interest on such Junior
Subordinated Debentures on or after the due dates therefor, as the same may be
extended in accordance with the terms of such Junior Subordinated Debentures,
or to institute suit for the enforcement of any such payment provisions, shall
not be impaired or affected without the consent of such holder.
The Indenture requires the annual filing by PEPCO with the Debt Trustee of a
certificate as to the absence of defaults under the Indenture.
The Indenture provides that the Debt Trustee may withhold notice to the
holders of a series of Junior Subordinated Debentures of an Indenture Event of
Default (except a default in payment of principal of, or of interest or
premium on, the Junior Subordinated Debentures) if the Debt Trustee in good
faith determines that the withholding of such notice is in the interest of the
holders.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Junior Subordinated Debentures of all series affected
by such modification at the time outstanding, and the holders of a majority in
aggregate liquidation amount of the related Preferred Securities, to modify
the Indenture or any supplemental indenture or the rights of the holders of
the Junior Subordinated Debentures; provided that no such modification shall,
without the consent of the holders of each Junior Subordinated Debenture (and
each Preferred Security, if applicable) affected thereby, (i) extend the fixed
maturity of any Junior Subordinated Debenture, or reduce the principal amount
thereof or any premium thereon, or reduce any amount payable on redemption
thereof, or reduce the rate or extend the time of payment of interest thereon,
or make the principal of, or interest or premium on, the Junior Subordinated
Debentures payable in any coin or currency other than that provided in the
Junior Subordinated Debentures, or impair or affect the right of any holder of
Junior Subordinated Debentures to institute suit for the payment thereof or
the right of repayment, if any, at the option of the holder, (ii) reduce the
aforesaid percentage of Junior Subordinated Debentures the consent of the
holders of which is required for any such modification or (iii) otherwise
materially adversely affect the interest of the holders of any series of
Junior Subordinated Debentures.
DEFEASANCE AND DISCHARGE
The Indenture provides that PEPCO, at PEPCO's option, will be discharged
from any and all obligations in respect of the Junior Subordinated Debentures
of a series (except for certain obligations to register the transfer
7
<PAGE>
or exchange of Junior Subordinated Debentures, replace destroyed, lost, stolen
or mutilated Junior Subordinated Debentures, maintain paying agencies and hold
moneys for payment in trust) if PEPCO deposits, in trust with the Debt Trustee
or a defeasance agent, money or U.S. government obligations which through the
payment of interest thereon and principal thereof in accordance with their
terms will provide money, in an amount sufficient to pay all the principal
(including any mandatory sinking fund payments) of, and interest and premium,
if any, on, the Junior Subordinated Debentures of such series on the dates
such payments are due in accordance with the terms of such Junior Subordinated
Debentures. To exercise any such option, PEPCO is required to deliver to the
Debt Trustee and the defeasance agent, if any, an opinion of counsel to the
effect that (i) the deposit and related defeasance would not cause the holders
of the Junior Subordinated Debentures of such series to recognize income, gain
or loss for U.S. federal income tax purposes, accompanied by a private letter
ruling to that effect received by PEPCO from the United States Internal
Revenue Service or a revenue ruling pertaining to a comparable form of
transaction to that effect published by the United States Internal Revenue
Service, and (ii) if listed on any national securities exchange, such Junior
Subordinated Debentures would not be delisted from such exchange as a result
of the exercise of such option.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
THE DEBT TRUSTEE
PEPCO and its affiliates maintain certain accounts and other banking
relationships with the Debt Trustee and its affiliates in the ordinary course
of business. The Debt Trustee also serves as the Preferred Guarantee Trustee
and as trustee under other indentures of PEPCO.
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust may issue only one series of Preferred Securities. The Preferred
Securities will have the terms described in the Prospectus Supplement. The
Declaration will be qualified as an indenture under the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act and
which will mirror the terms of the Junior Subordinated Debentures held by the
Trust and described in the Prospectus Supplement. Reference is made to the
Prospectus Supplement for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issuable by the Trust; (iii) the distribution rate (or method of
determining such rate) and the date or dates upon which such distributions
shall be payable; (iv) whether distributions shall be cumulative, and, in the
case of Preferred Securities having such cumulative distribution rights, the
date or dates or method of determining the date or dates from which
distributions shall be cumulative; (v) the amount or amounts which shall be
paid out of the assets of the Trust to the holders of Preferred Securities
upon voluntary or involuntary dissolution, winding-up or termination of the
Trust; (vi) the obligation, if any, of the Trust to purchase or redeem
Preferred Securities and the price or prices at which, the period or periods
within which, and the terms and conditions upon which, Preferred Securities
shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (vii) the voting rights, if any, of holders of Preferred
Securities in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified action or amendments to the
Declaration; (viii) the terms and conditions, if any, upon which the Junior
Subordinated Debentures owned by the Trust may be distributed to holders of
Preferred Securities; (ix) if applicable, any securities exchange upon which
the Preferred Securities shall be listed; and (x) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities
not inconsistent with the Declaration or
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<PAGE>
with applicable law. All Preferred Securities offered hereby will be
guaranteed by PEPCO to the extent set forth below under "Description of the
Preferred Securities Guarantee." Certain United States federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement.
In connection with the issuance of Preferred Securities, the Trust will
issue one series of Common Securities. The Declaration authorizes the Regular
Trustees of the Trust to issue on behalf of the Trust one series of Common
Securities having such terms including distributions, redemption, voting,
liquidation rights or such restrictions as shall be set forth therein. Except
for voting rights, the terms of the Common Securities will be substantially
identical to the terms of the Preferred Securities and the Common Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities, except that, upon an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. Except in certain limited circumstances, the Common Securities
will also carry the right to vote to appoint, remove or replace any of the
Trustees of the Trust. All of the Common Securities of the Trust will be owned
directly or indirectly by PEPCO.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
PEPCO will execute and deliver the Preferred Securities Guarantee for the
benefit of the holders from time to time of Preferred Securities. The
Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Bank of New York will act as indenture trustee under
the Preferred Securities Guarantee for purposes of the Trust Indenture Act
(the "Preferred Guarantee Trustee"). The terms of the Preferred Securities
Guarantee will be those set forth in the Preferred Securities Guarantee and
those made part of such Preferred Securities Guarantee by the Trust Indenture
Act. While the following summary of the material terms of the Preferred
Securities Guarantee does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the form of Preferred Securities Guarantee, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and the
Trust Indenture Act, all material terms of the Preferred Securities Guarantee
are set forth herein and in the Prospectus Supplement relating to the
particular Preferred Securities being offered thereby. The Preferred
Securities Guarantee will be held by the Preferred Guarantee Trustee for the
benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, PEPCO will agree, to the
extent set forth therein, to pay in full, to the holders of the Preferred
Securities, the Guarantee Payments (as defined herein), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust
may have or assert. The following payments with respect to Preferred
Securities to the extent not paid by the Trust (the "Guarantee Payments"),
will be covered by the Preferred Securities Guarantee (without duplication):
(i) any accrued and unpaid distributions which are required to be paid on such
Preferred Securities, to the extent the Trust shall have funds available
therefor; (ii) the redemption price, including all accrued and unpaid
distributions to the date of payment (the "Redemption Price"), to the extent
the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust; and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Junior Subordinated Debentures to the
holders of Preferred Securities or the redemption of all of the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Preferred Securities to the date of
payment, to the extent the Trust has funds available therefor, and (b) the
amount of assets of the Trust remaining available for distribution to holders
of such Preferred Securities in liquidation of the Trust. The redemption price
and liquidation amount will be fixed at the time the Preferred Securities are
issued. PEPCO's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by PEPCO to the holders of Preferred
Securities or by causing the Trust to pay such amounts to such holders.
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<PAGE>
The Preferred Securities Guarantee will not apply to any Guarantee Payment,
except to the extent the Trust shall have funds available therefor. If PEPCO
does not make interest payments on the Junior Subordinated Debentures
purchased by the Trust, the Trust will not pay distributions on the Preferred
Securities issued by the Trust and will not have funds available therefor.
The Preferred Securities Guarantee, when taken together with PEPCO's
obligations under the Junior Subordinated Debentures, the Indenture, and the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
will provide a full and unconditional guarantee on a subordinated basis by
PEPCO of payments due on the Preferred Securities.
PEPCO has also agreed separately to guarantee irrevocably and
unconditionally the obligations of the Trust with respect to the Common
Securities (the "Common Securities Guarantee") to the same extent as the
Preferred Securities Guarantee, except that upon an event of default under the
Declaration, holders of Preferred Securities shall have priority over holders
of Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF PEPCO
In the Preferred Securities Guarantee, PEPCO will covenant that, so long as
any Preferred Securities issued remain outstanding, if there shall have
occurred any event that would constitute an event of default under the
Preferred Securities Guarantee or the Declaration, or if PEPCO has exercised
its option to defer interest payments on the Junior Subordinated Debentures by
extending the interest payment period and such period or extension thereof
shall be continuing, then (a) PEPCO shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by PEPCO of its obligations under any employee benefit plans or
any other contractual obligation of PEPCO (other than a contractual obligation
ranking pari passu with or junior to the Junior Subordinated Debentures) or
(ii) the purchase of fractional interests in shares of PEPCO capital stock
pursuant to the conversion or exchange provisions of such PEPCO capital stock
or the security being converted or exchanged), (b) PEPCO shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by PEPCO which rank pari passu with or
junior to such Junior Subordinated Debentures and (c) PEPCO shall not make any
guarantee payments with respect to the foregoing (other than pursuant to such
Preferred Securities Guarantee).
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be
required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of at least a majority in liquidation amount of
the outstanding Preferred Securities. The manner of obtaining any such
approval of holders of such Preferred Securities will be as set forth in an
accompanying Prospectus Supplement. All guarantees and agreements contained in
the Preferred Securities Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of PEPCO and shall inure to the
benefit of the holders of the Preferred Securities then outstanding. Except in
connection with any merger or consolidation of PEPCO with or into another
entity or any sale, transfer or lease of PEPCO's assets to another entity,
each as permitted by the Indenture, PEPCO may not assign its rights or
delegate its obligations under such Preferred Securities Guarantee without the
prior approval of the holders of at least a majority in liquidation amount of
the outstanding Preferred Securities.
TERMINATION
The Preferred Securities Guarantee will terminate as to the Preferred
Securities (a) upon full payment of the Redemption Price of all Preferred
Securities, (b) upon distribution of the Junior Subordinated Debentures held
by the Trust to the holders of the Trust Securities or (c) upon full payment
of the amounts payable in accordance with the Declaration upon liquidation of
the Trust. Notwithstanding the foregoing, the Preferred Securities
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<PAGE>
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Preferred Securities issued by the Trust must
restore payment of any sums paid under such Preferred Securities or such
Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of the Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under the
Preferred Securities Guarantee. Any holder of Preferred Securities may
institute a legal proceeding directly against PEPCO to enforce the Preferred
Guarantee Trustee's rights and the obligations of PEPCO under the Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will constitute an unsecured obligation
of PEPCO and will rank (i) subordinate and junior in right of payment to all
other liabilities of PEPCO, except those made pari passu or subordinate by
their terms, (ii) pari passu with the most senior preferred or preference
stock now or hereafter issued by PEPCO and with any guarantee now or hereafter
entered into by PEPCO in respect of any preferred or preference stock of any
affiliate of PEPCO, and (iii) senior to the Common Stock. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of
the Preferred Securities Guarantee relating thereto.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against PEPCO to enforce its rights under the Preferred
Securities Guarantee without instituting a legal proceeding against any other
person or entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the Preferred Securities Guarantee and after the curing of any such
defaults that may have occurred, undertakes to perform only such duties as are
specifically set forth in such Preferred Securities Guarantee. After such a
default has occurred (of which a responsible officer of the Preferred
Guarantee Trustee has actual knowledge) and is continuing, the Preferred
Guarantee Trustee is required to exercise the rights and powers vested in it
by the Preferred Securities Guarantee using the same degree of care and skill
as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs. Subject to such provisions, the Preferred
Guarantee Trustee is under no obligation to exercise any of the powers vested
in it by the Preferred Securities Guarantee at the request of any holder of
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
PEPCO and its affiliates maintain certain accounts and other banking
relationships with the Preferred Guarantee Trustee and its affiliates in the
ordinary course of business. The Preferred Guarantee Trustee also serves as
the Debt Trustee and as trustee under other indentures of PEPCO.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by and construed in
accordance with the internal laws of the State of New York.
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<PAGE>
PLAN OF DISTRIBUTION
PEPCO and the Trust may sell the Offered Securities in any of, or any
combination of, the following ways: (i) directly to purchasers, (ii) through
agents and (iii) through underwriters or dealers.
Offers to purchase Offered Securities may be solicited directly by PEPCO
and/or the Trust, as the case may be, or by agents designated by PEPCO and/or
the Trust, as the case may be, from time to time. Any such agent, who may be
deemed to be an underwriter as that term is defined in the Securities Act,
involved in the offer or sale of the Offered Securities in respect of which
this Prospectus is delivered will be named, and any commissions payable by
PEPCO to such agent will be set forth, in the Prospectus Supplement. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment (ordinarily
five business days or less). Agents, dealers and underwriters may be customers
of, engage in transactions with, or perform services for PEPCO in the ordinary
course of business.
If an underwriter or underwriters are utilized in the sale, PEPCO will
execute an underwriting agreement with such underwriters at the time of sale
to them and the names of the underwriters and the terms of the transaction
will be set forth in the Prospectus Supplement, which will be used by the
underwriters to make releases of the Offered Securities in respect of which
this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, PEPCO and/or the Trust, as the case may
be, will sell such Offered Securities to the dealer, as principal. The dealer
may then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and
the terms of the transaction will be set forth in the Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by PEPCO and/or the Trust, as the case may be,
against certain liabilities, including liabilities under the Securities Act.
Underwriters, agents or their controlling persons may engage in transactions
with and perform services for PEPCO in the ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Skadden, Arps, Slate,
Meagher & Flom LLP, Wilmington, Delaware, special Delaware counsel to the
Trust. The validity of the Junior Subordinated Debentures and the Preferred
Securities Guarantee and certain legal matters relating thereto will be passed
upon for the Company by Covington & Burling, Washington, D.C.. Certain legal
matters will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses relating to the Offered Securities (assuming an aggregate
issuance of $125,000,000) are as follows:
<TABLE>
<S> <C>
Registration fee................................................... $ 36,875
Rating Agency fees................................................. 44,250
Printing........................................................... 90,000
Trustee's fees and expenses........................................ 20,000
Fee of independent accountants..................................... 22,500
Fees of counsel.................................................... 100,000
Expenses incidental to qualification under Blue Sky Laws........... 10,000
Miscellaneous...................................................... 26,375
--------
Total............................................................ $350,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 29-304(1b) of the District of Columbia Business Corporation
Act, a corporation may indemnify against expenses any directors or officers
made party to a proceeding by reason of his service as such, except in
relation to matters as to which any such director or officer shall be adjudged
to be liable for negligence or misconduct in the performance of duty. Such
indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of shareholders
or otherwise.
Under Section 13.1-697 of the Virginia Stock Corporation Act ("VSCA"), a
Virginia corporation may indemnify a director who was, is or is threatened to
be made a party to any proceeding if the director acted in good faith and (i)
he believed, in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interests of the corporation or,
in the case of other conduct, that his conduct was at least not opposed to the
best interests of the corporation, or (ii) in the case of a criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful. A
corporation may not indemnify a director in connection with (i) a proceeding
by or in the right of the corporation in which the director was found liable
to the corporation or (ii) any other proceeding charging improper personal
benefit to him, whether or not involving action in his official capacity, in
which he was adjudged liable on the basis that personal benefit was improperly
received. Indemnification permitted under this section of the VSCA in
connection with a proceeding by or in the right of the corporation is limited
to reasonable expenses incurred in connection with the proceeding.
Under Section 13.1-698, unless limited by its Articles of Incorporation, a
corporation must indemnify against reasonable expenses a director who entirely
prevails in the defense of any proceeding to which he was a party because he
is or was a director of the corporation.
Under Section 13.1-700.1, a court of appropriate jurisdiction, upon the
application of a director, may order a corporation to advance or reimburse
expenses or provide indemnification if the court determines that the director
is so entitled. With respect to a proceeding by or in the right of the
corporation, a court may order indemnification of the director to the extent
of his reasonable expenses even though he was adjudged liable to the
corporation.
Under Section 13.1-699, a corporation may advance reasonable expenses to a
director made a party to a proceeding under certain circumstances, including
the furnishing by the director of (i) a written statement of his good faith
belief that he has met the standard of conduct necessary to obtain
indemnification and (ii) a written undertaking to repay the advance if it is
ultimately determined that he did not meet that standard. Under Section
II-1
<PAGE>
13.1-702, a corporation may indemnify an officer, employee or agent of a
corporation to the same extent as a director. Under Section 13.1-704, a
corporation may provide indemnification in addition to that provided by
statute if authorized by its Articles of Incorporation, a bylaw made by the
shareholders, or any resolution adopted by the shareholders, except
indemnification against willful misconduct or a knowing violation of the
criminal law.
The By-Laws of the Company provide that the Company shall indemnify each
director or officer and each former director and officer of the Company
against expenses actually and reasonably incurred in connection with the
defense of any action, suit or proceeding by reason of his or her being or
having been such director or officer, including liabilities incurred under the
Securities Act of 1933, as amended, except in relation to matters as to which
such director or officer shall be finally adjudged in such action, suit or
proceeding to have knowingly violated the criminal law or to be liable for
willful misconduct in the performance of his or her duty to the Company; and
that such indemnification shall be in addition to, and not exclusive of, any
other rights to which those indemnified may be entitled under any by-law,
agreement, vote of stockholders, or otherwise.
In the Underwriting Agreement, the underwriters and agents will agree to
indemnify the Company, its directors, officers and controlling persons against
certain civil liabilities that may arise under the Securities Act of 1933 in
connection with this offering.
The Company also has policies of insurance which insure officers and
directors against certain liabilities and expenses incurred by them in such
capacities.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1 --Form of Underwriting Agreement (1)
4.1 --Certificate of Trust of Potomac Electric Power Company Trust I
4.2 --Declaration of Trust of Potomac Electric Power Company Trust I
4.3 --Form of Amended and Restated Declaration of Trust to be used in
connection with the issuance of the Preferred Securities (1)
4.4 --Indenture between PEPCO and The Bank of New York, as Trustee (1)
4.5 --Form of Supplemental Indenture to be used in connection with the
issuance of the Junior Subordinated Debentures (1)
4.6 --Form of Preferred Security (included in Exhibit 4.3)
4.7 --Form of Junior Subordinated Debenture (included in Exhibit 4.5)
4.8 --Form of Preferred Securities Guarantee (1)
5.1 --Opinion of Covington & Burling (1)
5.2 --Opinion of Skadden, Arps, Slate, Meagher & Flom LLP (1)
8 --Tax Opinion of Covington & Burling (1)
12 --Computation of Ratio of Earnings to Fixed Charges (1)
23.1 --Consent of Price Waterhouse LLP
23.2 --Consent of Covington & Burling (included in Exhibit 5.1)
23.3 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.2)
24 --Powers of Attorney for PEPCO
25.1 --Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, of The Bank of New York (Delaware), as
Institutional Trustee (1)
25.2 --Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, of The Bank of New York, as Debt Trustee (1)
25.3 --Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, of The Bank of New York, as Preferred Guarantee
Trustee (1)
</TABLE>
- --------
(1) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
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<PAGE>
(i) To include any prospectus required in section 10(a)(3) of the
Securities Act of 1933 (the "1933 Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement;
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that for purposes of
determining any liability under the 1933 Act, each filing of the Company's
annual report pursuant to section 13(a) or 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in this 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.
(c) Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions described under Item 15 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Form S-3
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Washington, the District of Columbia,
on April 28, 1998.
Potomac Electric Power Company
By: /s/ A.J. Kamerick
-----------------------------------
ANTHONY J. KAMERICK
VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, this Form S-3
Registration Statement has been signed by the following persons in the
capacities indicated on April 28, 1998.
SIGNATURE TITLE DATE
* President, Chief Executive April 28, 1998
- ------------------------------- Officer and Director
JOHN M. DERRICK, JR. (principal executive officer)
* Senior Vice President, Chief April 28, 1998
- ------------------------------- Financial Officer and
DENNIS R. WRAASE Director (principal financial
officer and principal
accounting officer)
* Director April 28, 1998
- -------------------------------
ROGER R. BLUNT, SR.
* Director April 28, 1998
- -------------------------------
EDMUND B. CRONIN, JR.
* Director April 28, 1998
- -------------------------------
RICHARD E. MARRIOTT
* Director April 28, 1998
- -------------------------------
DAVID O. MAXWELL
* Director April 28, 1998
- -------------------------------
FLORETTA D. MCKENZIE
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director April 28, 1998
- -------------------------------
ANN D. MCLAUGHLIN
* Director April 28, 1998
- -------------------------------
EDWARD F. MITCHELL
* Director April 28, 1998
- -------------------------------
PETER F. O'MALLEY
Director April 28, 1998
- -------------------------------
LOUIS A. SIMPSON
* Director April 28, 1998
- -------------------------------
A. THOMAS YOUNG
*By: /s/ Ellen Sheriff Rogers
------------------------
(ELLEN SHERIFF ROGERS,
ATTORNEY-IN-FACT)
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Trust has
duly caused this Form S-3 Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Washington, the
District of Columbia, on April 28, 1998.
Potomac Electric Power Company Trust I
By: /s/ Anthony J. Kamerick
Trustee
II-6
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF TRUST
OF
POTOMAC ELECTRIC POWER COMPANY TRUST I
This Certificate of Trust of Potomac Electric Power Company Trust I dated
April 24, 1998, is hereby duly executed and filed by the undersigned, as
trustees of Potomac Electric Power Company Trust I, for the purpose of forming a
business trust under the Delaware Business Trust Act, 12 Del. Code Section 3801
et. seq. The undersigned hereby certify as follows:
1. Name. The name of the business trust formed hereby (the "Trust") is
----
"Potomac Electric Power Company Trust I."
2. Delaware Trustee. The name and business address of the trustee of the
----------------
Trust which has its principal place of business in the State of Delaware, as
required by 12 Del. Code Sec. 3807 (a), is The Bank of New York (Delaware),
White Clay Center, Route 273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective as of
--------------
the date of its filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust at the
time of filing of this Certificate of Trust, have executed this Certificate of
Trust as of the date first above written.
/s/ Dennis R. Wraase
----------------------------------
Name: Dennis R. Wraase
Title: Trustee
/s/ Anthony J. Kamerick
----------------------------------
Name: Anthony J. Kamerick
Title: Trustee
/s/ Ellen Sheriff Rogers
----------------------------------
Name: Ellen Sheriff Rogers
Title: Trustee
The Bank of New York (Delaware),
as Trustee
By:/s/ Mary Jane Morrissey
-------------------------------
Name: Mary Jane Morrissey
Title: Authorized Signatory
18
<PAGE>
Exhibit 4.2
DECLARATION OF TRUST
OF
POTOMAC ELECTRIC POWER COMPANY TRUST I
Dated as of April 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I DEFINITIONS Page
<S> <C> <C>
SECTION 1.1 Definitions 1
ARTICLE II ORGANIZATION
SECTION 2.1 Name 3
SECTION 2.2 Office 3
SECTION 2.3 Purpose 3
SECTION 2.4 Authority 4
SECTION 2.5 Title to Property of the Trust 4
SECTION 2.6 Powers of the Trustees 4
SECTION 2.7 Filing of Certificate of Trust 5
SECTION 2.8 Duration of Trust 5
SECTION 2.9 Responsibilities of the Sponsor 5
SECTION 2.10 Declaration Binding on Securities Holders 6
ARTICLE III TRUSTEES
SECTION 3.1 Trustees 6
SECTION 3.2 Regular Trustees 7
SECTION 3.3 Delaware Trustee 7
SECTION 3.4 Institutional Trustee 7
SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration. 7
ARTICLE IV LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, TRUSTEES OR OTHERS
SECTION 4.1 Exculpation 8
SECTION 4.2 Fiduciary Duty 8
SECTION 4.3 Indemnification 9
SECTION 4.4 Outside Businesses 13
ARTICLE V AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION 5.1 Amendments 13
SECTION 5.2 Termination of Trust 14
SECTION 5.3 Governing Law 14
SECTION 5.4 Headings 14
SECTION 5.5 Successors and Assigns 14
SECTION 5.6 Partial Enforceability 14
SECTION 5.7 Counterparts 15
</TABLE>
i
<PAGE>
DECLARATION OF TRUST
OF
POTOMAC ELECTRIC POWER COMPANY TRUST I
April 24, 1998
DECLARATION OF TRUST ("Declaration") dated and effective as of April 24,
1998 by the Trustees (as defined herein), the Sponsor (as defined herein), and
by the holders, from time to time, of undivided beneficial interests in the
Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor desire to establish a trust (the
"Trust") pursuant to the Delaware Business Trust Act for the purpose of issuing
and selling the Preferred Securities (as defined herein) and investing the
proceeds thereof in certain Debentures of the Debenture Issuer (as both terms
are defined herein); and
NOW, THEREFORE, it being the intention of the parties hereto that the Trust
constitute a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the exclusive benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration of Trust as modified, supplemented or amended
from time to time;
(d) all references in this Declaration to Articles and Sections are
to Articles and Sections of this Declaration unless otherwise
specified; and
1
<PAGE>
(e) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Commission" means the United States Securities and Exchange Commission.
"Common Security" means a security representing an undivided beneficial
interest in the assets of the Trust with such terms as may be set out in any
amendment to this Declaration.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any employee or agent of the Trust or its Affiliates.
"Covered Person" means (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates and (b) any holder of Securities.
"Debenture Issuer" means the Parent in its capacity as the issuer of the
Debentures under the Indenture.
"Debentures" means the series of Debentures to be issued by the Debenture
Issuer and acquired by the Trust.
"Debenture Trustee" means The Bank of New York, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"Delaware Trustee" has the meaning set forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in Section 4.3(b).
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" means the indenture to be entered into between the Debenture
Issuer and the Debenture Trustee and any indenture supplemental thereto pursuant
to which the Debentures are to be issued.
2
<PAGE>
"Institutional Trustee" has the meaning set forth in Section 3.4.
"Parent" means Potomac Electric Power Company, a District of Columbia and
Virginia corporation, or any successor entity.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Security" means a security representing an undivided beneficial
interest in the assets of the Trust with such terms as may be set out in any
amendment to this Declaration.
"Regular Trustee" means any Trustee other than the Delaware Trustee and the
Institutional Trustee.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Sponsor" means the Parent in its capacity as sponsor of the Trust.
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name.
The Trust created by this Declaration is named "Potomac Electric Power
Company Trust I." The activities of the Trust may be conducted under the name
of the Trust or any other lawful name deemed advisable by the Regular Trustees.
SECTION 2.2 Office.
The address of the principal office of the Trust is c/o Potomac Electric
Power Company, 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068. At any
time, the Regular Trustees may designate another principal office.
3
<PAGE>
SECTION 2.3 Purpose.
The exclusive purposes and functions of the Trust are to issue and sell the
Securities and use the proceeds from such sale to acquire the Debentures and to
engage in only those other activities necessary or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 2.4 Authority.
Subject to the limitations provided in this Declaration, the Regular
Trustees shall have exclusive and complete authority to carry out the purposes
of the Trust. An action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust. In dealing with
the Regular Trustees acting on behalf of the Trust, no person shall be required
to inquire into the authority of the Regular Trustees to bind the Trust. Persons
dealing with the Trust are entitled to rely conclusively on the power and
authority of the Regular Trustees as set forth in this Declaration.
SECTION 2.5 Title to Property of the Trust.
Legal title to all assets of the Trust shall be vested in the Trust.
SECTION 2.6 Powers of the Trustees.
The Regular Trustees shall have the exclusive power and authority to cause
the Trust to engage in the following activities:
(a) to issue the Preferred Securities and the Common Securities in
accordance with this Declaration, provided, however, that the
Trust may issue no more than one series of Preferred Securities
and no more than one series of Common Securities, and, provided
further, that there shall be no interests in the Trust other than
the Securities and the issuance of the Securities shall be
limited to the simultaneous issuance of both Preferred Securities
and Common Securities;
(b) in connection with the issue and sale of the Preferred
Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission under the Securities
Act one or more registration statements on Form S-3
prepared by the Sponsor, including any and all amendments
thereto in relation to the Preferred Securities;
(ii) execute and file any documents prepared by the Sponsor, or
4
<PAGE>
take any acts as determined by the Sponsor to be necessary
in order to qualify or register all or part of the Preferred
Securities in any State in which the Sponsor has determined
to qualify or register such Preferred Securities for sale;
(iii)execute and file an application, prepared by the Sponsor, to
the New York Stock Exchange or any other national stock
exchange or the Nasdaq Stock Market's National Market for
listing or quotation upon notice of issuance of any
Preferred Securities;
(iv) execute and file with the Commission a registration
statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor relating to the registration of the
Preferred Securities under Section 12(b) or Section 12(g) of
the Exchange Act; and
(v) execute and enter into an underwriting agreement and pricing
agreement providing for the sale of the Preferred
Securities.
(c) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors,
advisors, and consultants and provide for reasonable compensation
for such services;
(d) to incur expenses which are necessary or incidental to carry out
any of the purposes of this Declaration; and
(e) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing.
5
<PAGE>
SECTION 2.7 Filing of Certificate of Trust.
On or after the date of execution of this Declaration, the Trustees shall
cause the filing of the Certificate of Trust for the Trust in the form attached
hereto as Exhibit A with the Secretary of State of the State of Delaware.
SECTION 2.8 Duration of Trust.
The Trust, absent termination pursuant to the provisions of Section 5.2,
shall have existence for fifty (50) years from the date hereof.
SECTION 2.9 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare for filing by the Trust with the Commission under the
Securities Act one or more registration statements on Form S-3 in
relation to the Preferred Securities, including any amendments
thereto;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions
which must be taken by the Trust, and advise the Trust of actions
it must take, and prepare for execution and filing any documents
to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable
laws of any such States;
(c) to prepare for filing by the Trust an application to the New York
Stock Exchange or any other national stock exchange or the Nasdaq
National Market for listing or quotation upon notice of issuance
of any Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration
of the class of Preferred Securities under Section 12(b) or
Section 12(g) of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of an underwriting agreement and pricing
agreement providing for the sale of the Preferred Securities.
SECTION 2.10 Declaration Binding on Securities Holders.
Every Person by virtue of having become a holder of a Security or any
interest therein
6
<PAGE>
in accordance with the terms of this Declaration, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound by, this
Declaration.
ARTICLE III
TRUSTEES
SECTION 3.1 Trustees.
The number of Trustees initially shall be four (4), and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor. The Sponsor is entitled to appoint or
remove without cause any Trustee at any time; provided, however, that the number
of Trustees shall in no event be less than two (2); provided further that one
Trustee, in the case of a natural person, shall be a person who is a resident of
the State of Delaware or if not a natural person, shall be entity that has its
principal place of business in the State of Delaware (the "Delaware Trustee");
provided further that there shall be at least one trustee who is an employee or
officer of, or is affiliated with, the Parent (a "Regular Trustee").
SECTION 3.2 Regular Trustees.
The initial Regular Trustees shall be Dennis R. Wraase, Anthony J. Kamerick
and Ellen Sheriff Rogers.
(a) Except as expressly set forth in this Declaration, any power of
the Regular Trustees may be exercised by, or with the consent of,
any one such Regular Trustee;
(b) unless otherwise determined by the Regular Trustees, and except
as otherwise required by the Business Trust Act, any Regular
Trustee is authorized to execute on behalf of the Trust any
documents which the Regular Trustees have the power and authority
to cause the Trust to execute pursuant to Section 2.6; and
(c) a Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age
of 21 his or her power for the purposes of signing any documents
which the Regular Trustees have power and authority to cause the
Trust to execute pursuant to Section 2.6.
SECTION 3.3 Delaware Trustee.
The initial Delaware Trustee shall be The Bank of New York (Delaware).
7
<PAGE>
Notwithstanding any other provision of this Declaration, the Delaware
Trustee shall not be entitled to exercise any of the powers, nor shall the
Delaware Trustee have any of the duties and responsibilities, of the Regular
Trustees described in this Declaration. The Delaware Trustee shall be a Trustee
for the sole and limited purpose of fulfilling the requirements of Section 3807
of the Business Trust Act. Notwithstanding anything herein to the contrary, the
Delaware Trustee shall not be liable for the acts or omissions to act of the
Trust or of the Regular Trustees, except such acts as the Delaware Trustee is
expressly obligated or authorized to undertake under this Declaration or the
Business Trust Act and except for the gross negligence or willful misconduct of
the Delaware Trustee.
SECTION 3.4 Institutional Trustee.
Prior to the issuance of the Preferred Securities and Common Securities,
the Sponsor shall appoint another trustee (the "Institutional Trustee") meeting
the requirements of an eligible trustee of the Trust Indenture Act of 1939, as
amended, by the execution of an amendment to this Declaration executed by the
Regular Trustees, the Sponsor, the Institutional Trustee and the Delaware
Trustee.
SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration.
The recitals contained in this Declaration shall be taken as the statements
of the Sponsor, and the Trustees do not assume any responsibility for their
correctness. The Trustees make no representations as to the value or condition
of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration.
ARTICLE IV
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 4.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for
any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good
faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions; and
8
<PAGE>
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any
Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence
and who has been selected with reasonable care by or on behalf of
the Trust, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount
of assets from which distributions to holders of Securities might
properly be paid.
SECTION 4.2 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating
thereto to the Trust or to any Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the
Trust or to any Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this
Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or
in equity, are agreed by the parties hereto to replace such other
duties and liabilities of such Indemnified Person;
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified
Person shall act in a manner that is, or provides terms that
are, fair and reasonable to the Trust or any holder of
Securities, the Indemnified Person shall resolve such
conflict of interest, take such action or provide such
terms, considering in each case the relative interest of
each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and
burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally
accepted accounting practices or principles. In the absence
of bad faith by the Indemnified Person, the resolution,
action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or
any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or
otherwise; and
9
<PAGE>
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the
Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard
imposed by this Declaration or by applicable law.
SECTION 4.3 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of
the Trust) by reason of the fact that he is or was a
Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Trust, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create
a presumption that the Company Indemnified Person did not
act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or
is a party or is threatened to be made a party to any
10
<PAGE>
threatened, pending or completed action or suit by or in
the right of the Trust to procure a judgment in its favor
by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust
and except that no such indemnification shall be made in
respect of any claim, issue or matter as to which such
Company Indemnified Person shall have been adjudged to be
liable to the Trust unless and only to the extent that the
Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem
proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal
of an action without prejudice or the settlement of an
action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 4.3(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to
the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 4.3(a) (unless ordered by a court) shall be made by
the Debenture Issuer only as authorized in the specific
case upon a determination that indemnification of the
Company Indemnified Person is proper in the circumstances
because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall
be made (1) by the Regular Trustees by a majority vote of a
quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a
quorum is not obtainable, or, even if obtainable, if a
quorum of disinterested Regular Trustees so directs, by
independent legal counsel in a written opinion, or (3) by
the holder of the Common Security.
(v) Expenses (including attorneys' fees) incurred by a Company
11
<PAGE>
Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section
4.3(a) shall be paid by the Debenture Issuer in advance of
the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such
Company Indemnified Person to repay such amount if it shall
ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this
Section 4.3(a). Notwithstanding the foregoing, no advance
shall be made by the Debenture Issuer if a determination is
reasonably and promptly made (i) by the Regular Trustees by
a majority vote of a quorum of disinterested Regular
Trustees, (ii) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested Regular
Trustees so directs, by independent legal counsel in a
written opinion or (iii) the holder of the Common Security
that, based upon the facts known to the Regular Trustees,
counsel or the holder of the Common Security at the time
such determination is made, such Company Indemnified Person
acted in bad faith or in a manner that such person did not
believe to be in or not opposed to the best interests of
the Trust, or, with respect to any criminal proceeding,
that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the
Regular Trustees, independent legal counsel or holder of
the Common Security reasonably determine that such person
deliberately breached his duty to the Trust or its Common
or Preferred Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this
Section 4.3(a) shall not be deemed exclusive of any other
rights to which those seeking indemnification and
advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors
of the Debenture Issuer or holders of the Preferred
Security or otherwise, both as to action in his official
capacity and as to action in another capacity while holding
such office. All rights to indemnification under this
Section 4.3(a) shall be deemed to be provided by a contract
between the Debenture Issuer and each Company Indemnified
Person who serves in such capacity at any time while this
Section 4.3(a) is in effect. Any repeal or modification of
this Section 4.3(a) shall not affect any rights or
obligations then existing.
12
<PAGE>
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a
Company Indemnified Person against any liability asserted
against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him
against such liability under the provisions of this Section
4.3(a).
(viii)For purposes of this Section 4.3(a), references to "the
Trust" shall include, in addition to the resulting or
surviving entity, any constituent entity (including any
constituent of a constituent) absorbed in a consolidation
or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or
is or was serving at the request of such constituent entity
as a director, trustee, officer, employee or agent of
another entity, shall stand in the same position under the
provisions of this Section 4.3(a) with respect to the
resulting or surviving entity as he would have with respect
to such constituent entity if its separate existence had
continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 4.3(a) shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a Company
Indemnified Person and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify (i) the Delaware
Trustee, (ii) any Affiliate of the Delaware Trustee, and (iii)
any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the
Delaware Trustee (each of the Persons in (i) through (iii) being
referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any loss,
liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any
of its powers or duties hereunder. The obligation to indemnify as
set forth in this Section 4.3(b) shall survive the termination of
this Declaration.
13
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SECTION 4.4 Outside Businesses.
Any Covered Person, the Sponsor and the Delaware Trustee may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the holders of Securities shall have no rights by
virtue of this Declaration in and to such independent ventures or the income or
profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor or the Delaware Trustee shall be
obligated to present any particular investment or other opportunity to the Trust
even if such opportunity is of a character that, if presented to the Trust,
could be taken by the Trust, and any Covered Person, the Sponsor and the
Delaware Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Covered Person and the Delaware Trustee may
engage or be interested in any financial or other transaction with the Sponsor
or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent
for or may act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.
ARTICLE V
AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION 5.1 Amendments.
At any time before the issue of any Securities, this Declaration may be
amended by, and only by, a written instrument executed by all of the Regular
Trustees and the Sponsor.
SECTION 5.2 Termination of Trust.
(a) The Trust shall terminate and be of no further force or effect:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor or the revocation of
the Sponsor's charter or of the Trust's certificate of
trust;
(iii)upon the entry of a decree of judicial dissolution of the
Sponsor or the Trust;
(iv) before the issue of any Securities, with the consent of all
of the Regular Trustees and the Sponsor; and
(b) As soon as is practicable after the occurrence of an event
referred to in Section 5.2(a), the Trustees shall file a
certificate of cancellation with the Secretary of State of the
State of Delaware.
14
<PAGE>
SECTION 5.3 Governing Law.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
SECTION 5.4 Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 5.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the Sponsor and the Trustees
shall bind and inure to the benefit of their respective successors and assigns,
whether so expressed.
SECTION 5.6 Partial Enforceability.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
SECTION 5.7 Counterparts.
This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the Trustees to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
/s/ Dennis R. Wraase
----------------------------
Name: Dennis R. Wraase
Title: Trustee
/s/ Anthony J. Kamerick
---------------------------
Name: Anthony J. Kamerick
Title: Trustee
/s/ Ellen Sheriff Rogers
----------------------------
Name: Ellen Sheriff Rogers
Title: Trustee
15
<PAGE>
The Bank of New York (Delaware),
as Trustee
By:/s/ Mary Jane Morrissey
------------------------
Name: Mary Jane Morrissey
Title: Authorized Signatory
Potomac Electric Power Company,
as Sponsor
By:/s/ Dennis R. Wraase
------------------------
Name: Dennis R. Wraase
Title: Senior Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
POTOMAC ELECTRIC POWER COMPANY TRUST I
This Certificate of Trust of Potomac Electric Power Company Trust I dated
April 24, 1998, is hereby duly executed and filed by the undersigned, as
trustees of Potomac Electric Power Company Trust I, for the purpose of forming a
business trust under the Delaware Business Trust Act, 12 Del. Code Section 3801
et. seq. The undersigned hereby certify as follows:
1. Name. The name of the business trust formed hereby (the "Trust") is
----
"Potomac Electric Power Company Trust I."
2. Delaware Trustee. The name and business address of the trustee of the
----------------
Trust which has its principal place of business in the State of Delaware, as
required by 12 Del. Code Sec. 3807 (a), is The Bank of New York (Delaware),
White Clay Center, Route 273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective as of
--------------
the date of its filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust at the
time of filing of this Certificate of Trust, have executed this Certificate of
Trust as of the date first above written.
____________________________________
Name: Dennis R. Wraase
Title: Trustee
____________________________________
Name: Anthony J. Kamerick
Title: Trustee
____________________________________
Name: Ellen Sheriff Rogers
Title: Trustee
The Bank of New York (Delaware),
as Trustee
By:__________________________________
Name:
Title:
17
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this combined Registration Statement on Form S-3 of our
report dated January 16, 1998, which appears on page 32 of the 1997 Annual
Report to Shareholders of Potomac Electric Power Company, which is incorporated
by reference in Potomac Electric Power Company's Annual Report on Form 10-K for
the year ended December 31, 1997. We also consent to the incorporation by
reference of our report on the Consolidated Financial Statement Schedule, which
appears on page 49 of such Annual Report on Form 10-K. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Washington, D.C.
April 27, 1998
<PAGE>
Exhibit 24
POTOMAC ELECTRIC POWER COMAPNY
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and
officers of POTOMAC ELECTRIC POWER COMPANY (the "Company") hereby constitute and
appoint John M. Derrick, Jr., Dennis R. Wraase, William T. Torgerson, Anthony J.
Kamerick, Ellen Sheriff Rogers, Peyton G. Middleton, Jr. and Karen G. Almquist,
and each of them, their true and lawful attorneys and agents with full power and
authority, in their names and on their behalf, to do any and all acts and things
and to execute any and all instruments which said attorneys and agents, or any
of them, may deem necessary or advisable to enable Potomac Electric Power
Company to comply with the Securities Exchange Act of 1933, as amended (the
"Act"), the Securities Exchange Act of 1934, as amended, and the rules,
regulations and requirements of the Securities and Exchange Commission
thereunder, and to comply with the securities laws of any state of the United
States or any other jurisdiction, in connection with a Registration Statement on
Form S-3 to be filed under the Act for the public offering and sale of up to
$130,000,000 in Tax Deductible Trust Preferred Securities, and any Registration
Statement for the public offering and sale of up to an additional 20% thereof
filed in accordance with Rule 462(b) under the Act, including specifically, but
without limiting the generality of the foregoing, power and authority to sign
the names of the undersigned directors and officers, in the respective
capacities indicated below, to of said Registration Statements and to any
instruments or documents filed as a part of or in connection with said
Registration Statements or amendment thereto; and each of the undersigned hereby
ratifies and confirms all that said attorneys and agents, or any of them, shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed, or caused to
be subscribed, these presents this 28th day of April, 1998.
Signature
---------
/s/ JOHN M. DERRICK, JR.
Principal Executive Officer: JOHN M. DERRICK, JR.
President, Chief Executive
Officer and Director
/s/ DENNIS R. WRAASE
Principal Financial Officer and
Principal Accounting Officer: DENNIS R. WRAASE
Senior Vice President, Chief
Financial Officer and Director
<PAGE>
Director /s/ ROGER R. BLUNT, SR.
-------------------------
ROGER R. BLUNT, SR.
Director /s/ EDMUND B. CRONIN, JR.
--------------------------
EDMUND B. CRONIN, JR.
Director /s/ RICHARD E. MARRIOTT
--------------------------
RICHARD E. MARRIOTT
Director /s/ DAVID O. MAXWELL
--------------------------
DAVID O. MAXWELL
Director /s/ FLORETTA D. McKENZIE
--------------------------
FLORETTA D. McKENZIE
Director /s/ ANN D. McLAUGHLIN
--------------------------
ANN D. McLAUGHLIN
Director /s/ EDWARD F. MITCHELL
--------------------------
EDWARD F. MITCHELL
Director /s/ PETER F. O'MALLEY
--------------------------
PETER F. O'MALLEY
Director
--------------------------
LOUIS A. SIMPSON
Director /s/ A. THOMAS YOUNG
--------------------------
A. THOMAS YOUNG
