Filed pursuant to
Rule 424(b)(3)
Registration No. 333-23475
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 21, 1997
$150,000,000
Atlantic City Electric Company
First Mortgage Bonds, Designated Secured Medium Term Notes, Series D
and
Unsecured Medium Term Notes, Series A
Due from One Year to Thirty Years from Date of Issue
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Atlantic City Electric Company (the "Company") may from time to time offer
its First Mortgage Bonds, Designated Secured Medium Term Notes, Series D (the
"Secured Medium Term Notes"), and its Unsecured Medium Term Notes, Series A (the
"Unsecured Medium Term Notes") in the aggregate principal amount of up to
$150,000,000, subject to reduction as a result of the sale of other Debt
Securities as described in the accompanying Prospectus. (The Secured Medium Term
Notes and the Unsecured Medium Term Notes are hereinafter collectively referred
to as "Medium Term Notes.") Each Medium Term Note will mature from one year to
thirty years from its date of issue.
Each Medium Term Note will bear interest at a fixed rate. Interest on each
Medium Term Note will be payable semiannually in arrears on each March 1 and
September 1 and at Stated Maturity.
The interest rate, Issue Price, Stated Maturity, redemption provisions, if
any, and certain other terms with respect to each Medium Term Note will be
established at the time of issuance and set forth in a pricing supplement to
this Prospectus Supplement (a "Pricing Supplement").
Each Medium Term Note will be represented by a global Medium Term Note
("Global Medium Term Note") registered in the name of a nominee of The
Depository Trust Company, as Depository, or another depository (such a Medium
Term Note, so represented, being called a "Book-Entry Medium Term Note").
Beneficial interests in Global Medium Term Notes representing Book-Entry Medium
Term Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository's participants. Book-Entry Medium
Term Notes will not be issuable as certificated Medium Term Notes except under
the circumstances described herein. See "Book-Entry System."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Medium Term Note.......... 100% .150%-.750% 99.850%-99.250%
- --------------------------------------------------------------------------------------------
Total......................... $150,000,000 $225,000-$1,125,000 $149,775,000-$148,875,000
- --------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to the public will be 100% of the principal amount.
(2) The Company will pay Goldman, Sachs & Co., First Chicago Capital Markets,
Inc., and Lehman Brothers, Lehman Brothers Inc., each as agent (together,
the "Agents"), a commission of from .150% to .750% of the principal amount
of any Medium Term Note, depending upon its Stated Maturity, sold through
such Agent. The Company may also sell Medium Term Notes to any Agent, as
principal, at a discount for resale to one or more investors or to another
broker-dealer (acting as principal for purpose of resale) at varying prices
related to prevailing market prices at the time of resale as determined by
such Agent. Unless otherwise indicated in the applicable Pricing
Supplement, any Medium Term Note sold to an Agent as principal shall be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less the percentage equal to the commission applicable to an agency
sale of a Medium Term Note of identical maturity and may be resold
<PAGE>
by such Agent. The Medium Term Notes may also be sold by the Company
directly to investors, in which case no commission will be payable to the
Agents.
(3) Before deduction of expenses payable by the Company estimated at $318,319.
------------------
The Medium Term Notes are being offered on a continuous basis by the
Company through the Agents, which have agreed to use their reasonable best
efforts to solicit offers to purchase Medium Term Notes. The Company may sell
Medium Term Notes at a discount to any Agent, as principal, for resale to one or
more investors or other purchasers at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent. The Company
also may sell Medium Term Notes directly to investors on its own behalf. The
Medium Term Notes will not be listed on any securities exchange, and there is no
assurance that the maximum amount of Medium Term Notes offered by the Prospectus
Supplement will be sold or that there will be a secondary market for the Medium
Term Notes. The Company reserves the right to withdraw, cancel or modify the
offer made hereby without notice. The Company or an Agent may reject an order,
whether or not solicited, in whole or in part. See "Plan of Distribution."
Goldman, Sachs & Co.
First Chicago Capital Markets, Inc.
Lehman Brothers
------------------
The date of this Prospectus Supplement is March 24, 1997.
2
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE MEDIUM TERM NOTES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
------------------
USE OF PROCEEDS
The net proceeds to be received by the Company from the issuance and sale
of the Medium Term Notes will be applied, together with other funds available to
the Company, towards its ongoing construction program, to the repayment or
retirement of outstanding short-term and long-term indebtedness of the Company,
including the redemption of certain series of First Mortgage Bonds. Unsecured
short-term debt has been issued at various times in the past for construction
and other corporate purposes. At March 1, 1997, the Company had approximately
$72,500,000 of short-term debt outstanding at a weighted average interest rate
of 5.60% and with a weighted average maturity of 14 days. In addition, the
Company's First Mortgage Bonds, 7-1/2% Series due 2002 ($20,000,000 principal
amount outstanding), and First Mortgage Bonds, 7-3/4% Series due 2003
($29,976,000 principal amount outstanding), may be redeemed at their regular
redemption prices of 101.20% and 101.76%, respectively.
SUPPLEMENTAL DESCRIPTION OF SECURED MEDIUM TERM NOTES
The following description of the particular terms of the Secured Medium
Term Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the New Bonds set forth under
"Description of New Bonds" in the accompanying Prospectus, to which description
reference is hereby made. Certain capitalized terms used herein are defined
under "Description of New Bonds" in the accompanying Prospectus.
General
The Secured Medium Term Notes will be issued as a series of New Bonds under
the Mortgage. The Secured Medium Term Notes will be limited in aggregate
principal amount to $150,000,000, subject to reduction as a result of the sale
of other Debt Securities as described in this Prospectus Supplement and the
accompanying Prospectus.
The Secured Medium Term Notes will be issued in fully registered form only,
without coupons. Each Secured Medium Term Note will be issued initially as a
Book-Entry Medium Term Note. Except as set forth herein under "Book-Entry
System," the Secured Medium Term Notes will not be issuable as certificated
Medium Term Notes. The authorized denominations of Global Medium Term Notes will
be $1,000 and integral multiples thereof. Secured Medium Term Notes will be
exchangeable and transferable at the office or agency of the Company in New York
City, without payment, until further direction by the Company, of any charge
other than any tax or taxes or other government charge incident thereto. The
Mortgage Trustee will act as the Company's agent for the payment, registration,
transfer and exchange of the Secured Medium Term Notes in New York City.
Each Secured Medium Term Note will mature from one year to thirty years
from its date of issue, as selected by the purchaser and agreed to by the
Company. Each Secured Medium Term Note may also be subject to redemption at the
option of the Company prior to its Stated Maturity (as defined below).
The Pricing Supplement relating to a Secured Medium Term Note will describe
the following terms: (i) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Secured Medium Term Note will be issued
(the "Issue Price"); (ii) the date on which such Secured Medium Term Note will
be issued (the "Issue Date"); (iii) the date on which such Secured Medium Term
Note will mature (the "Stated Maturity"); (iv) the rate per annum at which such
Secured Medium Term Note will bear interest; (v) any applicable discounts or
commissions; (vi) whether such Secured Medium Term Note may be redeemed at the
option of the Company prior to Stated Maturity and, if so, the provisions
relating to such redemption; and (vii) any other terms of such Secured Medium
Term Note not inconsistent with the provisions of the Mortgage.
S-2
<PAGE>
Payment of Principal and Interest
Payment of interest on the Secured Medium Term Notes (other than interest
payable at Stated Maturity) will be made, except as provided below, to the
person in whose name such Secured Medium Term Note is registered (which, in the
case of Global Medium Term Notes representing Book-Entry Medium Term Notes, will
be a nominee of the Depository, as hereinafter defined) at the close of business
on the Record Date (as defined below) for each Interest Payment Date; provided,
however, that if the Issue Date of a Secured Medium Term Note issued as a Global
Medium Term Note is after a Record Date and before the corresponding Interest
Payment Date, such Secured Medium Term Note shall bear interest from the Issue
Date for such Secured Medium Term Note but payment of interest will commence on
the second Interest Payment Date succeeding the Issue Date.
The principal of the Secured Medium Term Notes and any premium and interest
thereon payable at Stated Maturity will be paid upon surrender thereof at the
office of The Bank of New York, in New York, New York.
The "Record Date" with respect to a Secured Medium Term Note will be the
February 15 or August 15, as the case may be, next preceding an Interest Payment
Date for Secured Medium Term Notes or if such February 15 or August 15 is a
legal holiday or a day on which banking institutions in the Borough of
Manhattan, The City of New York, are authorized by law to close, the next
preceding day which is not a legal holiday or a day on which such institutions
are so authorized to close.
Each Secured Medium Term Note issued as a Global Medium Term Note will bear
interest from its Issue Date at the fixed interest rate per annum stated on the
face thereof until the principal amount thereof is paid or made available for
payment. Interest on each Secured Medium Term Note will be payable semiannually
in arrears on each March 1 and September 1 (each such date, an "Interest Payment
Date") and at Stated Maturity. Each payment of interest in respect of an
Interest Payment Date shall include interest accrued through the day before such
Interest Payment Date. Interest on Secured Medium Term Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
Redemption
To the extent, if any, provided in the Pricing Supplement relating to any
Secured Medium Term Note and specified on the face of such Secured Medium Term
Note, such Secured Medium Term Note is subject to Regular Redemption at any time
on or after the Initial Regular Redemption Date set forth in the applicable
Pricing Supplement and specified on the face of such Secured Medium Term Note,
as a whole or, if specified, in part, at the election of the Company, at the
applicable redemption price (as described below) plus accrued interest to the
date fixed for redemption. Unless otherwise specified in such Pricing
Supplement, such redemption price shall be the Initial Regular Redemption Price
set forth in the applicable Pricing Supplement and specified on the face of such
Secured Medium Term Note for the twelve-month period commencing on the Initial
Regular Redemption Date and shall decline for the twelve-month period commencing
on each anniversary of the Initial Regular Redemption Date by a percentage of
principal amount equal to the Reduction Percentage set forth in the applicable
Pricing Supplement and specified on the face of such Secured Medium Term Note
until such redemption price is 100% of the principal amount of such Secured
Medium Term Note.
To the extent, if any, provided in the Pricing Supplement relating to such
Secured Medium Term Note and specified on the face of such Secured Medium Term
Note, such Secured Medium Term Note is subject to Special Redemption at any time
on or after the Initial Special Redemption Date set forth in the applicable
Pricing Supplement and specified on the face of such Secured Medium Term Note,
as a whole or, if specified, in part, at the election of the Company, if
redeemed by the use of proceeds of released property or the proceeds of
insurance, at 100% of the principal amount thereof plus accrued interest to the
date fixed for redemption.
Notwithstanding the foregoing, the Company may not, prior to the Regular
Redemption Limitation Date, if any, or the Special Redemption Limitation Date,
if any, as the case may be, set forth in the applicable Pricing Supplement and
specified on the face of such Secured Medium Term Note, redeem such Secured
Medium Term Note by Regular Redemption or Special Redemption, as the case may
be, as contemplated above as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an effective interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than the effective interest cost
to the Company (similarly calculated) of such Secured Medium Term Note.
Notice of redemption shall be mailed to the registered owner of the Secured
Medium Term Note to be redeemed not less than thirty, but not more than ninety,
days prior to the date of redemption.
S-3
<PAGE>
SUPPLEMENTAL DESCRIPTION OF UNSECURED MEDIUM TERM NOTES
The following description of the particular terms of the Unsecured Medium
Term Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the New Notes set forth under
"Description of New Notes" in the accompanying Prospectus, to which description
reference is hereby made. Certain capitalized terms used herein are defined
under "Description of New Notes" in the accompanying Prospectus.
General
The Unsecured Medium Term Notes will be issued as a series of New Notes
under the Indenture. The Unsecured Medium Term Notes will be limited in
aggregate principal amount to $150,000,000, subject to reduction as a result of
the sale of other Debt Securities as described in this Prospectus Supplement and
the accompanying Prospectus.
The Unsecured Medium Term Notes will be issued in fully registered form
only, without coupons. Each Unsecured Medium Term Note will be issued initially
as a Book-Entry Medium Term Note. Except as set forth herein under "Book-Entry
System", the Unsecured Medium Term Notes will not be issuable as certificated
Medium Term Notes. The authorized denominations of Global Medium Term Notes will
be $1,000 and integral multiples thereof. Unsecured Medium Term Notes will be
exchangeable and transferable at the office or agency of the Company in New York
City, without payment, until further direction by the Company, of any charge
other than any tax or taxes or other government charge incident thereto. The
Indenture Trustee will act as the Company's agent for the payment, registration,
transfer and exchange of the Unsecured Medium Term Notes in New York City.
Each Unsecured Medium Term Note will mature from one year to thirty years
from its date of issue, as selected by the purchaser and agreed to by the
Company. Each Unsecured Medium Term Note may also be subject to redemption at
the option of the Company prior to its Stated Maturity (as defined below).
The Pricing Supplement relating to an Unsecured Medium Term Note will
describe the following terms: (i) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Unsecured Medium Term Note
will be issued (the "Issue Price"); (ii) the date on which such Unsecured Medium
Term Note will be issued (the "Issue Date"); (iii) the date on which such
Unsecured Medium Term Note will mature (the "Stated Maturity"); (iv) the rate
per annum at which such Unsecured Medium Term Note will bear interest; (v) any
applicable discounts or commissions; (vi) whether such Unsecured Medium Term
Note may be redeemed at the option of the Company prior to Stated Maturity and,
if so, the provisions relating to such redemption; and (vii) any other terms of
such Unsecured Medium Term Note not inconsistent with the provisions of the
Indenture.
Payment of Principal and Interest
Payment of interest on the Unsecured Medium Term Notes (other than interest
payable at Stated Maturity) will be made, except as provided below, to the
person in whose name such Unsecured Medium Term Note is registered (which, in
the case of Global Medium Term Notes representing Book-Entry Medium Term Notes,
will be a nominee of the Depository, as hereinafter defined) at the close of
business on the Record Date (as defined below) for each Interest Payment Date;
provided, however, that if the Issue Date of an Unsecured Medium Term Note
issued as a Global Medium Term Note is after a Record Date and before the
corresponding Interest Payment Date, such Unsecured Medium Term Note shall bear
interest from the Issue Date for such Unsecured Medium Term Note but payment of
interest will commence on the second Interest Payment Date succeeding the Issue
Date.
The principal of the Unsecured Medium Term Notes and any premium and
interest thereon payable at Stated Maturity will be paid upon surrender thereof
at the office of The Bank of New York, in New York, New York.
The "Record Date" with respect to an Unsecured Medium Term Notes will be
the February 15 or August 15 (whether or not a Business Day), as the case may
be, next preceding an Interest Payment Date for Unsecured Medium Term Notes.
Each Unsecured Medium Term Note issued as a Global Medium Term Note will
bear interest from its Issue Date at the fixed interest rate per annum stated on
the face thereof until the principal amount thereof is paid or made available
for payment. Interest on each Unsecured Medium Term Note will be payable
semiannually in arrears on each March 1 and September 1 (each such date, an
"Interest Payment Date") and at Stated Maturity. Each payment of interest
S-4
<PAGE>
in respect of an Interest Payment Date shall include interest accrued through
the day before such Interest Payment Date. Interest on Unsecured Medium Term
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
Redemption
To the extent, if any, provided in the Pricing Supplement relating to any
Unsecured Medium Term Note and specified on the face of such Unsecured Medium
Term Note, such Unsecured Medium Term Note is subject to Redemption at any time
on or after the Initial Redemption Date set forth in the applicable Pricing
Supplement and specified on the face of such Unsecured Medium Term Note, as a
whole or, if specified, in part, at the election of the Company, at the
applicable redemption price (as described below) plus accrued interest to the
date fixed for redemption. Unless otherwise specified in such Pricing
Supplement, such redemption price shall be the Initial Redemption Price set
forth in the applicable Pricing Supplement and specified on the face of such
Unsecured Medium Term Note for the twelve-month period commencing on the Initial
Redemption Date and shall decline for the twelve-month period commencing on each
anniversary of the Initial Redemption Date by a percentage of principal amount
equal to the Reduction Percentage set forth in the applicable Pricing Supplement
and specified on the face of such Unsecured Medium Term Note until such
redemption price is 100% of the principal amount of such Unsecured Medium Term
Note.
Notwithstanding the foregoing, the Company may not, prior to the Redemption
Limitation Date, if any, set forth in the applicable Pricing Supplement and
specified on the face of such Unsecured Medium Term Note, redeem such Unsecured
Medium Term Note, as contemplated above as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an effective interest cost to the Company (calculated in
accordance with generally accepted financial practice) of less than the
effective interest cost to the Company (similarly calculated) of such Unsecured
Medium Term Note.
Notice of redemption shall be mailed to the registered owner of the
Unsecured Medium Term Note to be redeemed not less than thirty, but not more
than ninety, days prior to the date of redemption.
BOOK-ENTRY SYSTEM
Except under the circumstances described below, the Medium Term Notes will
be issued in the form of one or more Global Medium Term Notes that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") or such other depository as may be subsequently designated (the
"Depository") and registered in the name of a nominee of the Depository.
Except under the circumstances described below, Book-Entry Medium Term
Notes represented by a Global Medium Term Note will not be exchangeable for
certificated Medium Term Notes and will not otherwise be issuable as
certificated Medium Term Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Medium Term Note, such Depository or such nominee, as the case may be,
will be considered the sole owner of the Individual Book-Entry Medium Term Notes
represented by such Global Medium Term Note for all purposes under the Mortgage
or the Indenture, as the case may be. Payments of principal of and premium, if
any, and any interest on individual Book-Entry Medium Term Notes represented by
a Global Medium Term Note will be made to the Depositary or its nominee, as the
case may be, as the registered owner of such Global Medium Term Note. Except as
set forth below, owners of beneficial interest in a Global Medium Term Note will
not be entitled to have any of the individual Book-Entry Medium Term Notes
represented by such Global Medium Term Note registered in their names, will not
receive or be entitled to receive physical delivery of any such Book-Entry
Medium Term Notes and will not be considered the registered owners thereof under
the Mortgage or the Indenture, as the case may be, including, without
limitation, for purposes of consenting to any amendment thereof or supplement
thereto.
If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed, the Company will issue
individual certificated Medium Term Notes in exchange for the Global Medium Term
Note or Medium Term Notes representing the corresponding Book-Entry Medium Term
Notes. In addition, the Company may at any time and in its sole discretion
determine not to have any Medium Term Notes represented by one or more Global
Medium Term Notes and, in such event, will issue individual certificated Medium
Term Notes in exchange for the Global Medium Term Notes representing the
corresponding Book-Entry Medium Term Notes. In any
S-5
<PAGE>
such instance, an owner of a Book-Entry Medium Term Note represented by a Global
Medium Term Note will be entitled to physical delivery of individual
certificated Medium Term Notes equal in principal amount to such BookEntry
Medium Term Note and to have such certificated Medium Term Notes registered in
its name. Individual certificated Medium Term Notes so issued will be issued as
registered Medium Term Notes in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof.
DTC has confirmed to the Company and the Agents the following information:
1. DTC will act as securities depository for the Global Medium Term
Notes. The Medium Term Notes will be issued as fully-registered securities
registered in the name of Cede & Co. (DTC's partnership nominee). One
fully-registered Global Medium Term Note will be issued for each issue of
the Medium Term Notes, each in the aggregate principal amount of such
issue, and will be deposited with DTC.
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities though
electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers,
banks, and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
3. Purchases of Medium Term Notes under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Medium
Term Notes on DTC's records. The ownership interest of each actual
purchaser of each Medium Term Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of
their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Medium Term Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their
ownership interests in Medium Term Notes, except in the event that use of
the book-entry system for the Medium Term Notes is discontinued.
4. To facilitate subsequent transfers, all Medium Term Notes deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Medium Term Notes with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Medium Term Notes; DTC's records reflect only the identify of the Direct
Participants to whose accounts such Medium Term Notes are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If less than all the
Medium Term Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with respect to the
Medium Term Notes. Under its usual procedures, DTC mails an Omnibus Proxy
to the Company as soon as possible after the record date. The Omnibus
S-6
<PAGE>
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
8. Principal and interest payments on the Medium Term Notes will be
made to DTC. DTC's practice is to credit Direct Participants' accounts on
the payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payment on such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Mortgage Trustee, the Indenture Trustee or
the Company, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Company, the Mortgage Trustee or the Indenture
Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities depository
with respect to the Medium Term Notes at any time by giving reasonable
notice to the Company, the Mortgage Trustee or the Indenture Trustee. Under
such circumstances, in the event that a successor securities depository is
not obtained, certificated Medium Term Notes are required to be printed and
delivered.
10. The Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, certificated Medium Term Notes will be printed and delivered.
11. The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
The Agents, the Mortgage Trustee and the Indenture Trustee are Direct
Participants of DTC.
None of the Company, the Mortgage Trustee, the Indenture Trustee or any
agent for payment on or registration of transfer or exchange of any Global
Medium Term Note will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in such
Global Medium Term Note or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain material United States federal
income tax consequences of the ownership of Medium Term Notes as of the date
hereof. Except where noted, it deals only with Medium Term Notes held by initial
purchasers who have purchased Medium Term Notes at the initial offering price
thereof and who hold such Medium Term Notes as capital assets and does not deal
with special situations, such as those of dealers in securities or currencies,
financial institutions, life insurance companies, persons holding Medium Term
Notes as a part of a hedging or conversion transaction or a straddle, United
States Holders (as defined below) whose "functional currency" is not the U.S.
dollar, or Non-United States Holders (as defined below) owning (actually or
constructively) ten percent or more of the combined voting power of all classes
of voting stock of the Company. Persons considering the purchase, ownership or
disposition of Medium Term Notes should consult their own tax advisors
concerning the federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other
taxing jurisdiction. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. Any
special United States federal income tax considerations relevant to a particular
series of the Medium Term Notes will be provided in the applicable Pricing
Supplement.
United States Holders
As used herein, a "United States Holder" of a Medium Term Note means a
holder that is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate the income of
which is subject to United States federal income taxation regardless of its
source, or any trust if a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the
trust. A "Non-United States Holder" is a holder that is not a United States
Holder.
S-7
<PAGE>
Payments of Interest. Except as set forth below, interest on a Medium Term
Note will generally be taxable to a United States Holder as ordinary income from
domestic sources at the time it is paid or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
Original Issue Discount. United States Holders of Medium Term Notes issued
with original issue discount ("OID") will be subject to special tax accounting
rules, as described in greater detail below. United States Holders of such Notes
should be aware that they generally must include OID in gross income in advance
of the receipt of cash attributable to that income. Medium Term Notes issued
with OID will be referred to as "Original Issue Discount Notes." Notice will be
given in the applicable Pricing Supplement when the Company determines that a
particular Note will be an Original Issue Discount Note.
This summary is based upon final Treasury regulations addressing debt
instruments issued with OID (the "OID Regulations"). A Medium Term Note with an
"issue price" that is less than its stated redemption price at maturity (the sum
of all payments to be made on the Note other than "qualified stated interest")
will be issued with OID if such difference is at least 0.25 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity. The "issue price" of each Medium Term Note in a particular offering
will be the first price at which a substantial amount of that particular
offering is sold (other than to an underwriter, placement agent or wholesaler).
The term "qualified stated interest" means stated interest that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer) at least annually at a single fixed rate or, subject to certain
conditions, based on one or more interest indices. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments. Notice will be given in the applicable Pricing
Supplement when the Company determines that a particular Medium Term Note will
bear interest that is not qualified stated interest.
In the case of a Medium Term Note issued with de minimis OID (i.e.,
discount that is not OID because it is less than 0.25 percent of the stated
redemption price at maturity multiplied by the number of complete years to
maturity), the United States Holder generally must include such de minimis OID
in income as principal payments on the Medium Term Notes are made in proportion
to the stated principal amount of the Medium Term Note. Any amount of de minimis
OID that has been included in income shall be treated as capital gain.
Certain of the Medium Term Notes may be redeemed prior to their Stated
Maturity at the option of the Company. Original Issue Discount Notes containing
such feature may be subject to rules that differ from the general rules
discussed herein. Persons considering the purchase of Original Issue Discount
Notes with such feature should carefully examine the applicable Pricing
Supplement and should consult their own tax advisors with respect to such
feature since the tax consequences with respect to OID will depend, in part, on
the particular terms and features of the Medium Term Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Medium Term Note for each day during the taxable year or portion of the
taxable year in which such United States Holder held such Medium Term Note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. The "accrual period" for an Original Issue Discount Note may be of any
length and may vary in length over the term of the Medium Term Note, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs on the first day or the final day of an accrual
period. The amount of OID allocable to any accrual period is an amount equal to
the excess, if any, of (a) the product of the Medium Term Note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period) over (b) the sum of any
qualified stated interest allocable to the accrual period. OID allocable to a
final accrual period is the difference between the amount payable at maturity
(other than a payment of qualified stated interest) and the adjusted issue price
at the beginning of the final accrual period. Special rules will apply for
calculating OID for an initial short accrual period. The "adjusted issue price"
of a Medium Term Note at the beginning of any accrual period is equal to its
issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any payments made on such Medium
Term Note (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, a United States Holder will have to
include in income increasingly greater amounts of OID in successive accrual
periods (assuming that no payment other than of qualified stated interest is
made prior to maturity). The Company is required
S-8
<PAGE>
to provide information returns stating the amount of OID accrued on Medium Term
Notes held of record by persons other than corporations and other exempt
holders.
United States Holders may elect to treat all interest on any Medium Term
Note as OID and calculate the amount includible in gross income under the
constant yield method described above. The election is to be made for the
taxable year in which the United States Holder acquired the Medium Term Note,
and may not be revoked without the consent of the Internal Revenue Service.
United States Holders should consult with their own tax advisors about this
election.
Short-Term Notes Having a Term of One Year. In the case of Medium Term
Notes having a term of one year ("Short-Term Notes"), under the OID Regulations
all payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally be
taxable on the discount in lieu of stated interest. The discount will be equal
to the excess of the stated redemption price at maturity over the issue price of
a Short-Term Note, unless the United States Holder elects to compute this
discount using tax basis instead of issue price. In general, individuals and
certain other cash method United States Holders of a Short-Term Note are not
required to include accrued discount in their income currently unless they elect
to do so. United States Holders that report income for United States federal
income tax purposes on the accrual method and certain other United States
Holders are required to accrue discount on such Short-Term Notes (as ordinary
income) on a straight-line basis, unless an election is made to accrue the
discount according to a constant yield method based on daily compounding. In the
case of a United States Holder that is not required, and does not elect, to
include discount in income currently, any gain realized on the sale, exchange or
retirement of the Short-Term Note will be ordinary income to the extent of the
discount accrued through the date of sale, exchange or retirement. In addition,
a United States Holder that does not elect to currently include accrued discount
in income may be required to defer deductions for a portion of the United States
Holder's interest expense with respect to any indebtedness incurred or continued
to purchase or carry such Notes.
Premium A United States Holder that purchases a Medium Term Note for an
amount in excess of the sum of all amounts payable on the Medium Term Note
(including any optional redemption premium) after the purchase date other than
qualified stated interest will be considered to have purchased the Medium Term
Note with "amortizable bond premium" and will not be required to include any OID
in income. A United States Holder generally may elect to amortize the premium
over the remaining term of the Medium Term Note (determined with reference to
the related redemption date, if any redemption premium is taken into account in
determining amortizable bond premium) on a constant yield method. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Medium Term Note. Amortizable bond premium on
a Medium Term Note held by a United States Holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Medium Term Note. The election to amortize premium on a
constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Proposed Treasury regulations issued on June 27, 1996 would clarify the
treatment of amortizable bond premium. Among the provisions contained in the
proposed regulations is a provision that generally provides that premium may be
amortized to offset interest income only as a United States Holder takes the
qualified stated interest into account under the holder's regular accounting
method. If adopted, the regulations would be effective for debt instruments
acquired on or after the date 60 days after the date final regulations are
published in the Federal Register. However, if a United States Holder elects to
amortize bond premium for the taxable year containing such effective date, the
proposed Treasury regulations would apply to all the United States Holder's debt
instruments held on or after the first day of that taxable year.
Sale, Exchange and Retirement of Notes. A United States Holder's tax basis
in a Medium Term Note will, in general, be the United States Holder's cost
therefor, increased by OID previously included in income by the United States
Holder and reduced by any cash payments on the Note other than qualified stated
interest. Upon the sale, exchange, retirement or other disposition of a Medium
Term Note, a United States Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, retirement or
other disposition (less any accrued qualified stated interest, which will be
taxable as such) and the adjusted tax basis of the Medium Term Note. Except as
described above with respect to certain Short-Term Notes, such gain or loss will
be capital gain or loss and will be long-term capital gain or loss if at the
time of sale, exchange, retirement or other disposition the Medium Term Note has
been held for more than one year. Under current law, net capital gains of
individuals are, under certain
S-9
<PAGE>
circumstances, taxed at lower rates than items of ordinary income. The
deductibility of capital losses is subject to limitations.
Non-United States Holders
Non-United States Holders will not be subject to United States federal
income taxes, including withholding taxes, on the interest income (including any
OID) on, or gain from the sale or disposition of, any Medium Term Note provided
that (1) the interest income or gain is not effectively connected with the
conduct by the Non-United States Holder of a trade or business within the United
States, (2) the Non-United States Holder is not a controlled foreign corporation
related to the Company through stock ownership, (3) the Non-United States Holder
is not a bank whose receipt of interest on a Medium Term Note is described in
Code Section 881(c)(3)(A), (4) with respect to any gain, the Non-United States
Holder, if an individual, is not present in the United States for 183 days or
more during the taxable year and (5) the Non-United States Holder provides the
correct certification of his status (which may generally be satisfied by
providing an Internal Revenue Service Form W-8 certifying that the beneficial
owner is not a United States Holder and providing the name and address of the
beneficial owner).
An individual holder of a Medium Term Note who is not a citizen or resident
of the United States at the time of the holder's death will not be subject to
United States federal estate tax as a result of the holder's death, as long as
any interest received on the Medium Term Note, if received by the holder at the
time of the holder's death, would not be effectively connected with the conduct
of a trade or business by such individual in the United States.
Backup Withholding
In general, if a holder other than a corporate holder fails to furnish a
correct taxpayer identification number or certification of foreign or other
exempt status, fails to report dividend and interest income in full, or fails to
certify that such holder has provided a correct taxpayer identification number
and that the holder is not subject to backup withholding, a 31 percent federal
backup withholding tax may be withheld from amounts paid to such holder. An
individual's taxpayer identification number is such individual's social security
number. The backup withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded by the
Internal Revenue Service where applicable.
PLAN OF DISTRIBUTION
The Medium Term Notes are being offered on a continuous basis by the
Company through the Agents, which have agreed to use their reasonable best
efforts to solicit offers to purchase Medium Term Notes. Initial purchasers may
propose certain terms of the Medium Term Notes, but the Company will have the
right to accept offers to purchase Medium Term Notes and may reject proposed
purchases in whole or in part. The Agents will have the right, in their
discretion reasonably exercised and without notice to the Company, to reject
offers to purchase Medium Term Notes in whole or in part. The Company will pay
each Agent a commission of from .150% to .750% of the principal amount of Medium
Term Notes sold through it, depending upon Stated Maturity. The Company also may
sell Medium Term Notes to any Agent, acting as principal, at a discount to be
agreed upon at the time of sale, for resale to one or more investors or to
another broker-dealer (acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of such resale, as
determined by such Agent. An Agent may resell a Medium Term Note purchased by it
as principal to another broker-dealer at a discount, provided such discount does
not exceed the commission or discount received by such Agent from the Company in
connection with the original sale of such Note. The Company may also sell Medium
Term Notes directly to investors on its own behalf at a price to be agreed upon
at the time of sale or through negotiated underwritten transactions with one or
more underwriters. In the case of sales made directly by the Company, no
commission or discount will be paid or allowed.
No Medium Term Note will have an established trading market when issued.
The Medium Term Notes will not be listed on any securities exchange. There can
be no assurance of a secondary market for any Medium Term Notes, or that the
Medium Term Notes will be sold.
During and after the offering, the Agents may purchase and sell the Medium
Term Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created in
connection with the offering. The Agents also may impose a penalty bid, whereby
selling concessions allowed to broker-dealers in respect of the Medium Term
Notes sold in the offering for their account may be reclaimed by the
S-10
<PAGE>
Agents if such securities are repurchased by the Agents in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Medium Term Notes which may be higher than the
price that might otherwise prevail in the open market. These transactions may be
effected in the over-the-counter market or otherwise, and these activities, if
commenced, may be discontinued at any time.
The Agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). The Company has agreed to indemnify the Agents against
certain liabilities, including certain liabilities under the Securities Act.
Goldman, Sachs & Co., First Chicago Capital Markets, Inc., and Lehman
Brothers, Lehman Brothers Inc. and certain affiliates thereof engage in
transactions with and perform services for the Company and its affiliates in the
ordinary course of business.
S-11
<PAGE>
$150,000,000
Atlantic City Electric Company
Debt Securities
------------------
[LOGO]
------------------
Atlantic City Electric Company (the "Company") intends to offer, from time
to time, up to $150,000,000 aggregate principal amount of its Debt Securities,
consisting of First Mortgage Bonds and/or First Mortgage Bonds, Designated
Secured Medium Term Notes (collectively, the "New Bonds") and/or Unsecured Notes
and/or Unsecured Medium Term Notes (collectively, the "New Notes"). (The New
Bonds and the New Notes are hereinafter collectively referred to as the "Debt
Securities"). The Debt Securities will be offered in one or more series in
amounts, at prices and on terms to be determined at the time or times of sale.
The title, aggregate principal amount, interest provisions, maturity or
maturities, initial public offering price, redemption or tender provisions, if
any, and other specific terms of each series of Debt Securities in respect of
which this Prospectus is being delivered will be set forth in an accompanying
prospectus or pricing supplement ("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.
------------------
The Company may sell the Debt Securities through underwriters, dealers or
agents, or directly to one or more institutional purchasers. A Prospectus
Supplement will set forth the names of underwriters, or agents, if any, any
applicable commissions or discounts and the net proceeds to the Company from any
such sale.
------------------
The date of this Prospectus is March 21, 1997
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus or this Prospectus as supplemented by any
Prospectus Supplement, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any other
person. Neither the delivery of this Prospectus nor this Prospectus as
supplemented by any Prospectus Supplement nor any sale made hereunder or
thereunder shall under any circumstances create an implication that there has or
has not been any change in the affairs of the Company since the date hereof or
thereof. Neither this Prospectus nor this Prospectus as supplemented by any
Prospectus Supplement constitutes an offer of any securities other than the
registered securities to which it relates, or an offer to any person in any
jurisdiction in which such offer would be unlawful.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports,
proxy statements and information statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy statements
and information statements and other information may be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C., 20549; Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site at http://www.sec.gov containing reports,
proxy statements and information statements and other information regarding
registrants that file electronically with the SEC, including the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents heretofore filed with the SEC:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Current Reports on Form 8-K dated January 6, 1997, January 27, 1997
and January 31, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus 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 (such documents, and the documents enumerated
above, being hereinafter referred to as "Incorporated Documents"). Any statement
contained in an Incorporated Document shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed Incorporated Document or in
the Prospectus as amended modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide 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 (other than exhibits to such documents)
which have been or may be incorporated by reference in this Prospectus. Requests
for such copies should be directed to Robert K. Marshall, Manager, Finance &
Treasury Operations, Atlantic City Electric Company, 6801 Black Horse Pike, Egg
Harbor Township, New Jersey 08234-4130, telephone number: 609/645-4655. The
information relating to the Company contained in this Prospectus or any
Prospectus Supplement relating hereto does not purport to be comprehensive and
should be read together with the information contained in the Incorporated
Documents.
2
<PAGE>
THE COMPANY
The Company was formed under the laws of New Jersey on April 28, 1924 by
merger and consolidation of several utility companies. The Company is engaged in
the generation, transmission, distribution, and sale of electric energy in the
southern part of New Jersey. The Company, which has a wholly owned subsidiary,
Deepwater Operating Company, is the principal subsidiary of Atlantic Energy,
Inc. ("Energy"), which is a public utility holding company as defined in the
Public Utility Holding Company Act of 1935 and which has claimed exemption from
substantially all of the provisions of such Act. The other direct subsidiaries
of Energy are Atlantic Energy Enterprises, Inc. and Atlantic Energy
International, Inc.
The Company's principal executive office is located at 6801 Black Horse
Pike, Egg Harbor Township, New Jersey, 08232-4130, telephone 609-645-4100. The
Company is subject to regulation by the New Jersey Board of Public Utilities and
the Federal Energy Regulatory Commission. At December 31, 1996, the Company had
over 477,000 customers and employed 1,466 persons, of which 633 were affiliated
with a national labor organization. With the exception of a municipal electric
system providing electric service within the municipal boundaries of the City of
Vineland, New Jersey, the Company supplies electric service to the southern
one-third of the State of New Jersey. The Company has qualified to do business
as a foreign corporation in the Commonwealth of Pennsylvania to enable it to
participate in the ownership and operation of generation and transmission
facilities located therein.
SELECTED FINANCIAL INFORMATION
The following information is qualified by the detailed information and
financial statements included elsewhere in the Prospectus, including the
documents incorporated by reference.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues (000) ......... $816,931 $865,799 $913,226 $953,779 $982,492
Net Income (000) ................. $107,446 $109,026 $ 93,174 $ 98,752 $ 75,017
Ratio of Earnings to Fixed Charges 3.55 3.37 3.05 3.16 2.58
</TABLE>
As of December 31, 1996
-----------------------
Amount Ratio
(in thousands) (%)
--------------- -------
Long Term Debt* .......................................... $ 802,420 46.3%
Cumulative Preferred Stock:
Subject to Mandatory Redemption* ........................ 53,950 3.1
Not Subject to Mandatory Redemption ..................... 30,000 1.7
Cumulative Quarterly Income Preferred Securities ........ 70,000 4.0
Common Equity ............................................ 778,425 44.9
---------- ------
Total Capitalization .................................... $1,734,795 100.00%
========== ======
* Includes current portion
3
<PAGE>
USE OF PROCEEDS
Use of the net proceeds to be received by the Company from the issuance and
sale of the Debt Securities will be set forth in the accompanying Prospectus
Supplement.
LEGAL OPINIONS
Opinions as to the legality of the Debt Securities will be rendered by
James E. Franklin, II, Esquire, General Counsel of the Company, and Simpson
Thacher & Bartlett (a partnership which includes professional corporations), New
York, New York, counsel for the Company, and by Winthrop, Stimson, Putnam &
Roberts, New York, New York, counsel for any underwriters or agents. All matters
pertaining to title, the nature and extent of the lien of the Mortgage securing
the New Bonds and all other questions of conformity to the laws of the State of
New Jersey and of the Commonwealth of Pennsylvania will be rendered to the
purchasers or underwriters only by James E. Franklin, II, Esquire, who has, to
the extent he deemed necessary, consulted with Pennsylvania counsel as to
matters of conformity to the laws of the Commonwealth of Pennsylvania and has
relied upon opinions of such counsel as to such matters.
EXPERTS
The consolidated financial statements incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated herein in reliance upon the report of such firm given upon their
authority as experts in auditing and accounting.
The legal conclusions in "Security" under the caption "Description of New
Bonds", insofar as such matters are governed by the laws of the State of New
Jersey or the Commonwealth of Pennsylvania, have been reviewed by James E.
Franklin, II, Esq., General Counsel of the Company, and have been included in
reliance upon the authority of James E. Franklin, II, Esq., as an expert.
DESCRIPTION OF NEW BONDS
The New Bonds will be issued under the Mortgage and Deed of Trust, dated
January 15, 1937, made by the Company to The Bank of New York, New York, N.Y. as
Trustee ("Mortgage Trustee"), as supplemented and amended (the "Mortgage"), and
one or more new indentures supplemental thereto (the "Supplemental Indenture").
All First Mortgage Bonds (including the New Bonds) issued and to be issued under
the Mortgage are herein sometimes referred to as "Bonds". Copies of the Mortgage
and of the forms of Supplemental Indenture are filed as exhibits to the
Registration Statement.
The statements herein concerning the New Bonds, the Bonds and the Mortgage
are merely an outline and do not purport to be complete. They are qualified in
their entirety by express reference to the cited Sections and Articles of the
Mortgage. Terms defined in the Mortgage are used in this outline.
Maturity, Interest, Redemption and Payment (see the accompanying Prospectus
Supplement)
Security
The New Bonds will be secured pari passu with Bonds of all other series now
or hereafter issued by the lien of the Mortgage which constitutes, in the
opinion of counsel for the Company, a first lien on substantially all of the
fixed physical property owned by the Company, subject only to (a) the conditions
and limitations in the instruments through which the Company claims title to its
properties and (b) "excepted encumbrances" as defined in Section 6 of the
Mortgage.
The Mortgage contains an after-acquired property clause, but property
hereafter acquired may be subject to liens, ranking prior to the Mortgage,
existing thereon at the time of acquisition. The after-acquired property clause
may not be effective as to property acquired subsequent to the filing of a case
with respect to the Company under the Federal Bankruptcy Code. The provisions of
the Mortgage, in substance, permit release of property from the lien and
withdrawal from the Mortgage Trustee of cash proceeds of property released from
the lien, not only against new property then becoming subject to the lien, but
also against property already subject to the Mortgage, unless such property was
owned at November 30, 1936, or has been made
4
<PAGE>
the basis of the issue of Bonds or a credit under Section 20 of the Mortgage.
Accordingly, any increase in the amount of the mortgaged and pledged property,
as a result of the after-acquired property clause, may be eliminated by means of
such releases and withdrawals.
Under New Jersey law, the State of New Jersey owns in fee simple for the
benefit of the public schools all lands now or formerly flowed by the tide up to
the mean high-water line, unless it has made a valid conveyance of its interests
in such property. In 1981, because of uncertainties raised as to possible claims
of State ownership, the New Jersey Constitution was amended to provide that
lands formerly tidal-flowed, but which were not then tidal-flowed at any time
for a period of 40 years, were not to be subject to State claim unless the State
has specifically defined and asserted a claim within one year period ending
November 2, 1982. As a result, the State published maps of the eastern
(Atlantic) coast of New Jersey depicting claims to portions of many properties,
including certain properties owned by the Company. The Company believes it has
good title to such properties and will vigorously defend its title, or will
obtain such grants from the State as may ultimately be required. The cost to
acquire any such grants may be covered by title insurance policies. Assuming
that all of such State claims were determined adversely to the Company, they
would relate to land, which, together with the improvements thereon, would
amount to less than 1% of net utility plant. No maps depicting State claims to
property owned by the Company on the western (Delaware River) side of New Jersey
were published within one year period mandated by the Constitutional Amendment.
Nevertheless, the Company believes it has obtained all necessary grants from the
State for its improved properties along the Delaware River.
Issuance of Additional Bonds
Additional Bonds of any series may be issued in principal amount equal to:
1. 65% of the cost or then fair value to the Company (whichever shall
be less) of property additions acquired, made or constructed subsequent to
June 30, 1950;
2. The principal amount of Bonds or prior lien bonds retired or then
to be retired; and
3. The amount of cash deposited with the Mortgage Trustee
but, except as otherwise provided in the Mortgage, in each case only if the net
earnings (as defined in Section 7 of the Mortgage) are at least twice the annual
interest charges on all outstanding indebtedness secured by any equal or prior
lien, including the additional issue. However, no Bonds may be issued against
property additions subject to prior liens, as defined in Section 6, (a) if the
principal amount of outstanding prior lien bonds secured thereby exceeds 50% of
the cost or then fair value (whichever shall be less) of such property
additions, or (b) if the principal amount of all Bonds theretofore issued and
continuing on such basis, and the amount of certain other items representing
proportions of deposited cash withdrawn, or property released or credit taken
under Section 20 on such basis, in the aggregate exceed 20% of the principal
amount of all Bonds theretofore issued, including the additional issue. (See
Sections 7, 23, 25, 26, 27, 29 and 30.)
The Company plans to authenticate the New Bonds on the basis of property
additions but may, in some cases, authenticate New Bonds on the basis of retired
Bonds. It is estimated that at January 31, 1997 unfunded property additions
amounted to more than $500,000,000.
Release and Substitution of Property
The Mortgage permits property to be released from the lien of the Mortgage
upon compliance with the provisions thereof. (See Sections 58, 59, 60 and 62.)
Such provisions require that, in certain specified cases, cash be deposited with
the Mortgage Trustee in an amount equal to the excess of the fair value of the
property to be released over the aggregate of certain computations required by
the Mortgage. The Mortgage also contains requirements relating to the withdrawal
or application of release moneys and other funds held by the Mortgage Trustee.
(See Sections 55, 61 and 62.)
Modification of the Mortgage
Article XVIII of the Mortgage provides for modifying or altering the
Mortgage with the consent of the Company and by vote of the holders of 75% in
principal amount of the outstanding Bonds which are affected by the proposed
modification or alteration, but no such modification or alteration may permit
the waiver of any completed default (as defined in Section 65) and its
consequences without the approval of at least a majority in principal amount of
all the outstanding Bonds. No
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modification or alteration without the consent of the holder of a Bond may
modify the terms of payment of the principal amount of or interest on such Bond
or create an equal or prior lien or deprive such holder of a lien on the
mortgaged property or reduce the above percentage.
Concerning the Mortgage Trustee
The Bank of New York also serves as Indenture Trustee under the Indenture
under which the New Notes are issued and as trustee under a junior subordinated
indenture under which junior subordinated deferrable interest debentures have
been issued. The Company and its affiliates utilize various of the banking
services offered by the Mortgage Trustee. Such services include acting as a
depositary and providing lines of credit.
Defaults
By Section 65 of the Mortgage, the following are defined as "completed
defaults": default in the payment of principal; default for 90 days in the
payment of interest; default in payment of principal or interest on outstanding
prior lien bonds in certain cases; certain events of bankruptcy, insolvency or
reorganization; and default for 90 days after notice in the performance of any
other covenant. By Section 53 of the Mortgage, a failure to provide money for
the redemption of Bonds called for redemption also constitutes a completed
default. The Company is required to furnish annually to the Mortgage Trustee a
certificate as to compliance with all conditions and covenants under the
Mortgage.
The Mortgage Trustee or the holders of 25% in principal amount of the Bonds
may declare the principal due upon the occurrence of a completed default, but
the holders of a majority in principal amount may annul such declaration if the
default has been cured, and the Mortgage Trustee, upon the occurrence of a
completed default, is required to declare the principal due, or to enforce
payment of the Bonds and to foreclose the Mortgage, on request of the holders of
a majority in principal amount of the Bonds. (See Sections 65, 68 and 101.) The
holders of a majority in principal amount of the Bonds may direct the time,
method and place of conducting any proceeding for the enforcement of the
Mortgage. (See Section 69.) No bondholder has the right to institute any
proceeding for the enforcement of the Mortgage unless such holder shall have
given the Mortgage Trustee written notice of a completed default, the holders of
25% in principal amount shall have offered to the Mortgage Trustee indemnity
against costs, expenses and liabilities, requested the Mortgage Trustee to take
action and have given the Mortgage Trustee reasonable opportunity to take such
action. (See Section 79.) The Mortgage Trustee is entitled to be indemnified
before taking action to enforce the lien at the request of such bondholders.
(See Section 68.)
DESCRIPTION OF NEW NOTES
General
The New Notes are to be issued under an Indenture, dated as of March 1,
1997 ("Indenture"), between the Company and The Bank of New York, as trustee
("Indenture Trustee").
The statements herein concerning the New Notes and the Indenture are merely
an outline and do not purport to be complete. They are qualified in their
entirety by express reference to the cited Sections and Articles of the
Indenture. Terms defined in the Indenture are used in this outline.
The Indenture provides that debt securities (including the New Notes and
including both interest bearing and original issue discount securities) may be
issued thereunder, without limitation as to aggregate principal amount. (See
Section 301.) All debt securities heretofore or hereafter issued under the
Indenture (including the New Notes) are collectively referred to as the
"Indenture Securities". The Indenture does not limit the amount of other debt,
secured or unsecured, which may be issued by the Company. The New Notes will
rank pari passu with all other unsecured and unsubordinated indebtedness of the
Company. Substantially all of the fixed physical property owned by the Company
is subject to the lien of the Mortgage securing the Company's Bonds. (See
"Description of New Bonds--Security" herein.)
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Maturity, Interest, Redemption and Payment (see the accompanying Prospectus
Supplement)
Events of Default and Notice Thereof
Events of Default are: default for three Business Days in payment of
principal; default for 60 days in payment of interest; certain events in
bankruptcy, insolvency or reorganization; default for 90 days after notice in
the case of a breach of any other covenant; and any other Event of Default
specified with respect to the Indenture Securities of a particular series. No
Event of Default with respect to a series of Indenture Securities necessarily
constitutes an Event of Default with respect to the Indenture Securities of any
other series. The Indenture Trustee may withhold notice of default (except in
payment of principal, interest or any funds for the retirement of Indenture
Securities) if it, in good faith, determines that withholding of such notice is
in the interest of the Holders of the Indenture Securities. (See Sections 801
and 903.)
Either the Indenture Trustee or the Holders of not less than 33% in
principal amount (or such lesser amount as may be provided in the case of
discount Indenture Securities) of the outstanding Indenture Securities of all
defaulted series, considered as one class, may declare the principal and
interest on such series due on default, but the Company may annul such default
by effecting its cure and paying overdue interest and principal. No Holder of
Indenture Securities may enforce the Indenture without having given the
Indenture Trustee written notice of default, and unless the Holders of a
majority of the Indenture Securities of all defaulted series, considered as one
class, shall have requested the Indenture Trustee to act and offered reasonable
indemnity, and for 60 days the Indenture Trustee shall have failed to act, but
each Holder has an absolute right to receive payment of principal and interest
when due and to institute suit for the enforcement of such payment. The
Indenture Trustee is not required to risk its funds or incur any financial
liability if it shall have reasonable grounds for believing that repayment is
not reasonably assured. The Holders of a majority of the Indenture Securities of
all defaulted series, considered as one class, may direct the time, method and
place of conducting any proceedings for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee,
with respect to the Indenture Securities of such series, but the Indenture
Trustee is not required to follow such direction if not sufficiently indemnified
and the Indenture Trustee may take any other action it deems proper which is not
inconsistent with such direction. (See Sections 802, 807, 808, 812 and 902.)
Evidence to be Furnished to the Indenture Trustee
Compliance with Indenture provisions will be evidenced by written
statements of the Company's officers. An annual certificate with reference to
compliance with the covenants and conditions of the Indenture and the absence of
defaults is required to be filed with the Indenture Trustee. (See Section 1004.)
Modification of the Indenture
The rights of the Holders of the Indenture Securities may be modified with
the consent of the Holders of a majority of the Indenture Securities of all
series or Tranches, as defined below, affected, considered as one class.
However, certain specified rights of the Holders of Indenture Securities may be
modified without the consent of the Holders if such modification would not be
deemed adversely to affect their interests in any material respect. In general,
no modification of the terms of payment of principal and interest, no reduction
of the percentage in principal amount of the Indenture Securities outstanding
under such series required to consent to any supplemental indenture or waiver
under the Indenture, no reduction of such percentage necessary for quorum and
voting, and no modification of certain of the provisions in the Indenture
relating to supplemental indentures, waivers of certain covenants and waivers of
past defaults is effective against any Holder of Indenture Securities without
his consent. "Tranche" means a group of Indenture Securities which are of the
same series and have identical terms except as to principal amount and/or date
of issuance. (See Article Twelve.)
The Indenture Trustee
The Bank of New York also serves as the Mortgage Trustee under the Mortgage
under which the New Bonds are issued and as trustee under a junior subordinated
indenture under which junior subordinated deferrable interest debentures of the
Company have been issued. The Company and its affiliates utilize various of the
banking services offered by the Indenture Trustee. Such services include acting
as a depositary and providing lines of credit.
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PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to a
single purchaser; or (iii) through agents. The Prospectus Supplement relating to
a series of the Debt Securities will set forth the terms of the offering of the
Debt Securities, including the name or names of any underwriters, dealers or
agents, the purchase price of such Debt Securities and the proceeds to the
Company from such sale, any underwriting discounts or agency fees and other
items constituting underwriters' or agents' compensation, any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of the sale. The
underwriters with respect to a particular underwritten offering of Debt
Securities will be named in the Prospectus Supplement relating to such offering
and, if an underwriting syndicate is used, the managing underwriters will be set
forth on the cover page of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement, the several obligations of the underwriters
to purchase the Debt Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all such Debt Securities if
any are purchased.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement will set
forth the name of any agent involved in the offer or sale of the Debt Securities
in respect of which the Prospectus Supplement will be delivered as well as any
commissions payable by the Company to such agent. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Debt Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
Subject to certain conditions, the Company may agree to indemnify any
underwriters, dealers, agents or purchasers and their controlling persons
against certain civil liabilities, including certain liabilities under the
Securities Act of 1933, as amended.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement
(including the accompanying Pricing Supplement) or the Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized. This Prospectus Supplement (including the accompanying Pricing
Supplement) and the Prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities
described in this Prospectus Supplement (including the accompanying Pricing
Supplement) or the Prospectus or an offer to sell or the solicitation of an
offer to buy such securities in any jurisdiction in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus Supplement
(including the accompanying Pricing Supplement) or the Prospectus nor any sale
made hereunder or thereunder shall, under any circumstances, create any
implication that the information contained herein or therein is correct as of
any time subsequent to the date of such information.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Use of Proceeds............................................................ S-2
Supplemental Description of Secured Medium Term
Notes.................................................................. S-2
Supplemental Description of Unsecured Medium
Term Notes............................................................. S-4
Book-Entry System.......................................................... S-5
Certain United States Federal Income Tax
Consequences........................................................... S-7
Plan of Distribution....................................................... S-10
Prospectus
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Selected Financial Information............................................. 3
Use of Proceeds............................................................ 4
Legal Opinions............................................................. 4
Experts.................................................................... 4
Description of New Bonds................................................... 4
Description of New Notes................................................... 6
Plan of Distribution....................................................... 8
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$150,000,000
Atlantic City
Electric Company
First Mortgage Bonds,
Designated Secured
Medium Term Notes, Series D
and
Unsecured Medium Term Notes,
Series A
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Goldman, Sachs & Co.
First Chicago Capital Markets, Inc.
Lehman Brothers
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