Exhibit 3-G
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF PENELEC CAPITAL II, L.P.
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated
as of , 1998, of Penelec Capital II, L.P., a Delaware limited partnership
(the "Partnership"), is made by and among Penelec Preferred Capital II, Inc., as
General Partner, T.G. Howson, as Class A Limited Partner, and the Persons (as
defined below) who become limited partners of the Partnership in accordance with
the provisions hereof.
WHEREAS, Penelec Preferred Capital II, Inc. and T.G. Howson
have heretofore formed a limited partnership pursuant to the Delaware Act (as
defined below), by filing a Certificate of Limited Partnership (as defined
below) with the Secretary of State of the State of Delaware on ,
1998, and entering into a Limited Partnership Agreement of the Partnership dated
as of , 1998 (the "Limited Partnership Agreement"); and
WHEREAS, the parties hereto desire to continue the Partnership
as a limited partnership under the Delaware Act and to amend and restate the
Limited Partnership Agreement in its entirety.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree to amend and restate the Limited Partnership Agreement in
its entirety as follows:
ARTICLE I - Definitions
-----------------------
For purposes of this Agreement, each of the following terms
shall have the meaning set forth below (such meaning to be equally applicable to
both singular and plural forms of the terms so defined).
"Action" shall have the meaning set forth in Section 13.01(b).
"Affiliate" shall mean, with respect to the Person to which it
refers, a Person that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, such subject
Person.
"Agreement" shall mean this Amended and Restated Limited
Partnership Agreement, as amended, modified, supplemented or restated from time
to time, including, without limitation, by any Action establishing a series of
Preferred Partner Interests.
"Book Entry Interests" shall mean a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 14.04.
"Business Day" shall mean any day other than a day on which
banking institutions in The City of New York are authorized or required by law
to close.
"Capital Account" shall have the meaning set forth in Section
4.01. For purposes of determining the Capital Accounts as set forth in Article
IV, partnership items shall be computed in the same manner as the Partnership
computes its income for Federal income tax purposes, rather than generally
accepted accounting principles, except that (1) a distribution in kind of
Partnership property shall be treated as a taxable disposition of such property
for its fair market value (taking into account Section 7701(g) of the Code) on
the date of distribution, and (2) adjustments shall be made in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv), which adjustments shall include
any income which is exempt from United States Federal income tax, all
Partnership losses and all expenses properly chargeable to the Partnership,
whether deductible or non-deductible and whether described in Section
705(a)(2)(B) of the Code, treated as so described pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(i), or otherwise.
"Certificate" shall mean a certificate substantially in the
form attached hereto as Exhibit A, evidencing a Preferred Partner Interest.
"Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of the Partnership and any and all amendments
thereto and restatements thereof filed with the Secretary of State of the State
of Delaware.
"Class A Limited Partner" shall mean T.G. Howson in his
capacity as a limited partner of the Partnership.
"Clearing Agency" shall mean an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Code" shall mean the United States Internal Revenue Code
of 1986 and (unless the context requires otherwise) the
2
rules and regulations promulgated thereunder, as amended from time to time.
"Commission" shall mean the Securities and Exchange Commission.
"Covered Person" shall mean any Partner, any Affiliate of a
Partner or any officers, directors, shareholders, partners, members, employees,
representatives or agents of a Partner or their respective Affiliates, or any
employee or agent of the Partnership or its Affiliates.
"Definitive Certificate" shall have the meaning set forth in
Section 14.04.
"Delaware Act" shall mean the Delaware Revised Uniform
Limited Partnership Act, 6 Del. C. Section 17-101, et seq., as amended from time
to time or any successor statute thereto.
"Economic Risk of Loss" shall mean the "economic risk of loss"
that any Partner is treated as bearing under Treasury Regulation Section 1.752-2
with respect to any Partnership liability.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fiscal Year" shall have the meaning set forth in Section 7.01.
"General Partner" shall mean Penelec Preferred, in its
capacity as general partner of the Partnership, together with any successor
thereto that becomes a general partner of the Partnership pursuant to the terms
of this Agreement.
"Global Certificate" shall mean a Certificate issued in the
form of a typewritten Certificate or Certificates representing the Book Entry
Interests to be delivered to a Clearing Agency in accordance with Section 14.04.
"Guarantee" shall mean the Payment and Guarantee Agreement to
be dated as of , 1998 of Penelec, as amended or supplemented from time
to time, and any additional Payment and Guarantee Agreements entered into by
Penelec for the benefit of the Preferred Partners.
"Indemnified Person" shall mean the General Partner, any
Affiliate of the General Partner or any officers, directors, shareholders,
partners, members, employees, representatives or agents of the General Partner,
or any employee or agent of the Partnership or its Affiliates.
3
"Indenture" shall mean the Indenture to be dated as of
, 1998, as amended or supplemented from time to time, between Penelec
and United States Trust Company of New York as Trustee, and any additional
Indentures entered into by Penelec pursuant to which Subordinated Debentures of
Penelec are to be issued.
"Interest" shall mean the entire partnership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement, together with the obligations of such Partner to comply with
all of the terms and provisions of this Agreement.
"Investment Company Act Event" shall mean the occurrence of a
change in law or regulation or a change in an official interpretation of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 40 Act Law") to the effect that the Partnership or the
Trust is or will be considered an "investment company" required to be registered
under the 1940 Act, which Change in 40 Act Law becomes effective on or after the
date of issuance of any series of Preferred Partner Interests; provided that no
Investment Company Act Event shall be deemed to have occurred if the Partnership
or the Trust, as the case may be, shall have received an opinion of counsel
(which may be regular counsel to Penelec or an Affiliate, but not an employee
thereof), to the effect that Penelec and/or the Partnership and/or the Trust
have taken reasonable measures, in their discretion, to avoid such Change in 40
Act Law so that in the opinion of such counsel, notwithstanding such Change in
40 Act Law, neither the Partnership nor the Trust is required to be registered
as an "investment company" within the meaning of the 1940 Act.
"Limited Partners" shall mean the Class A Limited Partner, if
any, and the Preferred Partners.
"Liquidating Distributions" shall mean distributions of
Partnership property made upon a liquidation and dissolution of the Partnership
as provided in Article XII.
"Liquidation Distribution" shall mean the liquidation
preference of each series of Preferred Partner Interests as set forth in the
Action for such series.
"Liquidating Trustee" shall have the meaning set forth in
Section 12.01.
"1940 Act" shall mean the Investment Company Act of 1940, as
amended.
4
"Partners" shall mean the General Partner and the Limited
Partners.
"Partnership" shall mean Penelec Capital II, L.P., a limited
partnership formed under the laws of the State of Delaware.
"Penelec" shall mean Pennsylvania Electric Company and its
successors.
"Penelec Preferred" shall mean Penelec Preferred Capital II,
Inc. and its successors.
"Person" shall mean any individual, general partnership,
limited partnership, corporation, limited liability company, joint venture,
trust, business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Preferred Partner" shall mean a limited partner of the
Partnership who holds one or more Preferred Partner Interests.
"Preferred Partner Distribution" shall have the meaning set
forth in Section 13.02(a)(i).
"Preferred Partner Interest Owner" shall mean, with respect to
a Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Partner Interests" shall mean the Interests
described in Article XIII.
"Purchase Price" shall mean the amount paid for each Preferred
Partner Interest.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Special Event" shall mean a Tax Event or an Investment
Company Act Event.
"Special Representative" shall have the meaning set forth in
Section 13.02(d).
"Subordinated Debentures" shall mean the Subordinated
Debentures of Penelec issued under the Indenture.
5
"Tax Event" shall mean, with respect to any series of
Preferred Partner Interests, that the Partnership shall have obtained an opinion
of tax counsel (which may be regular tax counsel to Penelec or an Affiliate, but
not an employee thereof) to the effect that, as a result of any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying any applicable laws or regulations, which amendment or change is
effective, or which pronouncement or decision has been issued or rendered, on or
after the date of issuance of such series of Preferred Partner Interests, there
is more than an insubstantial risk that (i) the Partnership or the Trust is
required by applicable tax laws to withhold or deduct amounts with respect to
distributions or other payments, (ii) the Partnership or the Trust will be
subject to Federal income tax with respect to interest received on the related
Subordinated Debentures or the Partnership or the Trust will otherwise not be
taxed as a partnership or a grantor trust, as the case may be, or (iii) interest
payable by Penelec to the Partnership on the related Subordinated Debentures
will not be deductible for Federal income tax purposes, or (iv) the Partnership
or the Trust is subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
"Tax Matters Partner" shall have the meaning set forth in
Section 7.05.
"Transfer" shall mean any transfer, sale, assignment, gift,
pledge, hypothecation or other disposition or encumbrance of an interest in the
Partnership.
"Treasury Regulations" shall mean the final and temporary
income tax regulations, as well as the procedural and administrative
regulations, promulgated by the United States Department of the Treasury under
the Code, as amended from time to time.
"Trust" shall mean Penelec Capital Trust, a Delaware business
trust, and any additional Trusts created by any Trust Agreements to, among other
things, acquire Preferred Partner Interests.
"Trust Agreement" shall mean the Amended and Restated Trust
Agreement of the Trust, dated , 1998, as amended or supplemented from
time to time, and any additional Trust Agreements entered into by the
Partnership as grantor.
6
"Trust Securities" shall mean preferred beneficial interests
in the Trust, each representing a Preferred Partner Interest.
"Trustee" shall mean United States Trust Company of New York
or any other trustee under the Indenture.
"Underwriting Agreement" shall mean any Underwriting Agreement
entered into by the Trust, the Partnership and/or Penelec with regard to the
sale of Trust Securities, Preferred Partner Interests and/or other securities.
ARTICLE II - Continuation; Name; Purposes; Term; Definitions
------------------------------------------------------------
Section 2.01. Formation. The parties hereto hereby join
---------
together to continue the heretofore formed limited partnership which shall exist
under and be governed by the Delaware Act. The Partnership shall make any and
all filings or disclosures required under the laws of Delaware or otherwise with
respect to its continuation as a limited partnership, its use of a fictitious
name or otherwise as may be required. The Partnership shall be a limited
partnership among the Partners solely for the purposes specified in Section 2.03
hereof, and this Agreement shall not be deemed to create a partnership among the
Partners with respect to any activities whatsoever other than the activities
within the business purposes of the Partnership as specified in Section 2.03. No
Partner shall have any power to bind any other Partner with respect to any
matter except as specifically provided in this Agreement. No Partner shall be
responsible or liable for any indebtedness or obligation of any other Partner
incurred either before or after the execution of this Agreement. The assets of
the Partnership shall be owned by the Partnership as an entity, and no Partner
individually shall own any direct interest in the assets of the Partnership.
Section 2.02. Name and Place of Business. The name of the
----------------------------
Partnership is "Penelec Capital II, L.P." The Partnership may operate under the
name of "Penelec Capital II" and such name shall be used for no purposes other
than those set forth herein. The principal place of business of the Partnership
shall be Mellon Bank Center, Second Floor, 919 N. Market Street, Wilmington,
Delaware, or at such other place as may be selected by the General Partner in
its sole and absolute discretion.
Section 2.03. Purposes.
---------
(a) The sole purposes of the Partnership are to issue and sell
Interests in the Partnership, including, without limitation, Preferred Partner
Interests, and to use the proceeds
7
of all sales of Interests in the Partnership to purchase Subordinated Debentures
issued by Penelec pursuant to the Indenture, to act as the grantor of the Trust
and to effect other similar arrangements permitted by this Agreement, and to
engage in any and all activities necessary, convenient, advisable or incidental
thereto. The Partnership shall not incur debt for borrowed money.
(b) In furtherance of the purposes set forth in Section
2.03(a) and without limiting the generality thereof, the Partnership may issue
Preferred Partner Interests for consideration other than cash, including
Subordinated Debentures, which consideration shall constitute payment for the
Preferred Partner Interests so issued.
Section 2.04. Term. The Partnership was formed on ,
----
1998 and shall continue without dissolution through June 30, 2063, unless sooner
dissolved as provided in Article XI hereof.
Section 2.05. Qualification in Other Jurisdictions. The
--------------------------------------
General Partner shall cause the Partnership to be qualified or registered under
assumed or fictitious name statutes or similar laws in any jurisdiction in which
the Partnership transacts business. The General Partner shall execute, deliver
and file any certificates (and any amendments and/or restatements thereof)
necessary for the Partnership to qualify to do business in a jurisdiction in
which the Partnership may wish to conduct business.
Section 2.06. Admission of Preferred Partners. Without
---------------------------------
execution of this Agreement, upon receipt by a Person of a Certificate and
giving of consideration for the Preferred Partner Interest being acquired by
such Person, which shall be deemed to constitute a request by such Person that
the books and records of the Partnership reflect its admission as a Preferred
Partner, such Person shall be admitted to the Partnership as a Preferred Partner
and shall become bound by this Agreement. A Person may also be admitted to the
Partnership as a Preferred Partner and become bound by this Agreement by
execution of this Agreement (by counterpart or otherwise).
Section 2.07. Records. The name and mailing address of each
-------
Partner and the amount contributed to the capital of the Partnership shall be
listed on the books and records of the Partnership. The Partnership shall keep
such other records as are required by Section 17-305 of the Delaware Act. The
General Partner shall update the books and records from time to time as
necessary to accurately reflect the information therein.
8
ARTICLE III - Capital Contributions
-----------------------------------
Section 3.01. Capital Contributions. As of the date of this
----------------------
Agreement, the General Partner has contributed the amount of $99 to the capital
of the Partnership and shall make any further contributions required to satisfy
its obligations under Section 3.04. With respect to each Person who is issued a
Preferred Partner Interest by the Partnership in connection with the initial
issuance by the Partnership of such Preferred Partner Interest, there shall be
contributed to the capital of the Partnership an amount equal to the Purchase
Price for such Preferred Partner Interest (such amount being such Person's
capital contribution to the Partnership).
Section 3.02. Additional Capital Contributions. No Partner
----------------------------------
shall be required to make any additional contributions or advances to the
Partnership except as provided in Section 3.04 or by law.
Section 3.03. No Interest or Withdrawals. No interest shall
---------------------------
accrue on any capital contribution made by or on behalf of a Partner, and no
Partner shall have the right to withdraw or to be repaid any portions of its
capital contributions so made, except as specifically provided in this
Agreement.
Section 3.04. Minimum Capital Account Balance of General
--------------------------------------------------------------
Partner. At all times throughout the term of the Partnership, the General
- -------
Partner shall maintain a Capital Account balance equal to at least 3% of the
total positive Capital Account balances for the Partnership. If necessary, the
General Partner shall immediately make additional contributions to satisfy this
requirement, which contributions shall constitute additional capital
contributions made by the General Partner.
Section 3.05. Partnership Interests. Unless otherwise provided
--------------------
herein, the percentage interests of the Partners shall be determined in
proportion to the capital contributions of the Partners.
Section 3.06. Interests. Each Preferred Partner's respective
---------
Preferred Partner Interests shall be set forth on the books and records of the
Partnership. Each Partner hereby agrees that its Interests shall for all
purposes be personal property. No Partner has an interest in specific
Partnership property. The Partnership shall not issue any additional interest in
the Partnership after the date hereof other than General Partner Interests or
Preferred Partner Interests. The immediately preceding sentence shall not be
construed to limit the effect of Section 10.04 of this Agreement.
9
ARTICLE IV - Capital Accounts
-----------------------------
Section 4.01. Capital Accounts. There shall be established on
--------------------------------------------------------------
the books of the Partnership a capital account ("Capital Account") for each
Partner that shall consist of the initial capital contribution to the
Partnership made by such Partner (or such Partner's predecessor in interest),
increased by: (a) any additional capital contributions made by such Partner (or
predecessor thereof), (b) the agreed value of any property subsequently
contributed to the capital of the Partnership by such Partner (or predecessor
thereof); and (c) items of income and gain allocated to such Partner (or
predecessor thereof). A Partner's Capital Account shall be decreased by: (a)
items of loss and deduction allocated to such Partner (or predecessor thereof);
and (b) any distributions made to such Partner (or predecessor thereof). In
addition to and notwithstanding the foregoing, Capital Accounts shall be
maintained at all times in accordance with the Capital Account maintenance rules
set forth in Treasury Regulation Section 1.704-1(b)(2)(iv).
Section 4.02. Compliance With Treasury Regulations. The
--------------------------------------
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Section 704(b) of
the Code and Treasury Regulation Section 1.704-1(b) and shall be interpreted and
applied in a manner consistent with such regulations. In the event that the
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are determined in order
to comply with such regulations, the General Partner may make such modification.
ARTICLE V - Allocations
-----------------------
Section 5.01. Profits and Losses. Each fiscal period, items of
------------------
income, gain, loss, deduction or credit of the Partnership shall be allocated
(i) first, items of income of the Partnership to the Preferred Partners, pro
rata in proportion to the number of Preferred Partner Interests held by each
Preferred Partner and at the distribution rate specified in the Action for each
series of Preferred Partner Interests, in an amount equal to the excess of (a)
the Preferred Partner Distributions accrued on such Preferred Partner Interests
since their date of issuance through and including the close of the current
fiscal period (whether or not paid) over (b) the items of income of the
Partnership allocated to the Preferred Partners pursuant to this Section 5.01(i)
in all prior fiscal periods; and (ii) thereafter, all remaining items of income,
gain, loss, deduction or credit to the General Partner; provided however, that
the percentage of
10
items of income, gain, loss, deduction or credit of the Partnership allocated to
the General Partner for any fiscal period shall at least equal three percent.
Section 5.02. Allocation Rules. For purposes of determining
-----------------
the profits, losses or any other items allocable to any period, profits, losses
and any such other items shall be determined on a daily, monthly or other basis,
as determined by the General Partner in its sole and absolute discretion using
any method that is permissible under Section 706 of the Code and the Treasury
Regulations thereunder. The Partners are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by the
provisions of this Article V in reporting their shares of Partnership income and
loss for income tax purposes.
Section 5.03. Adjustments to Reflect Changes in Interests.
----------------------------------------------
Notwithstanding the foregoing, with respect to any Fiscal Year during which any
Partner's percentage interest in the Partnership changes, whether by reason of
the admission of a Partner, the withdrawal of a Partner, a non-pro rata
contribution of capital to the Partnership or any other event described in
Section 706(d)(1) of the Code and the Treasury Regulations issued thereunder,
allocations of the items of income, gain, loss, deduction or credit of the
Partnership shall be adjusted appropriately to take into account the varying
interests of the Partners during such Fiscal Year. The General Partner shall
consult with the Partnership's accountants and other advisors and shall select
the method of making such adjustments, which method shall be used consistently
thereafter.
Section 5.04. Tax Allocations. For purposes of this Article V
---------------
and Federal, state and local income tax purposes, Partnership income, gain,
loss, deduction or credit (or any item thereof) for each Fiscal Year shall be
determined in accordance with Federal tax accounting principles rather than
generally accepted accounting principles and shall be allocated to and among the
Partners in order to reflect the allocations made pursuant to the provisions of
this Article V for such Fiscal Year (other than allocations of items which are
not deductible or are excluded from taxable income), taking into account any
variation between the adjusted tax basis and book value of Partnership property
in accordance with the principles of Section 704(c) of the Code.
Section 5.05. Qualified Income Offset. Notwithstanding any
-----------------------
other provision hereof, if any Partner unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6) which creates or increases a deficit in
the Capital Account of such Partner (and, for this purpose, the existence of a
deficit shall
11
be determined by increasing the Partner's Capital Account by any amounts that
the Partner is obligated to restore to the Partnership pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(C) and reducing the Partner's Capital
Account by the items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6)), the next available gross income of the
Partnership shall be allocated to the Partners having such deficit balances, in
proportion to the deficit balances, until such deficit balances are eliminated
as quickly as possible. The provisions of this Section 5.05 are intended to
constitute a "qualified income offset" within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and implemented as therein
provided.
ARTICLE VI - Distributions
--------------------------
Section 6.01. Distributions. Preferred Partners shall receive
periodic distributions, if any, in accordance with the applicable terms of the
applicable Action creating the series of Preferred Partner Interests held by
them, when, as and if declared by the General Partner out of funds held by the
Partnership to the extent that the Partnership has cash on hand sufficient to
permit such payments and funds legally available therefor. Subject to the rights
of the holders of the Preferred Partner Interests, the General Partner shall
receive such distributions, if any, as may be declared from time to time by the
General Partner.
Section 6.02.Certain Distributions Prohibited. Notwithstanding
----------------------------------
anything in this Agreement to the contrary, all Partnership distributions shall
be subject to the following limitations:
(a) No distribution shall be made to any Partner if, and to
the extent that, such distribution would not be permitted under Section 17-607
of the Delaware Act or other applicable law.
(b) No distribution shall be made to any Partner to the extent
that such distribution, if made, would create or increase a deficit balance in
the Capital Account of such Partner.
(c) Other than Liquidating Distributions or as otherwise
provided in an Action, no distribution of Partnership property shall be made in
kind. Notwithstanding anything in the Delaware Act or this Agreement to the
contrary, in the event of a Liquidating Distribution, a Partner may be compelled
in accordance with Section 12.01 to accept a distribution of Subordinated
Debentures, cash or any other asset in kind from the Partnership even if the
percentage of the asset distributed to it
12
exceeds a percentage of that asset which is equal to the percentage in which
such Partner shares in distributions from the Partnership.
Section 6.03. Withholding. The Partnership shall comply with
-----------
all withholding requirements under Federal, state and local law. To the extent
that the Partnership is required to withhold and pay over any amounts to any
authority with respect to distributions or allocations to or for the account of
any Partner, the amount withheld shall be deemed to be a distribution in the
amount of the withholding to or for the account of the Partner. In the event of
any claimed overwithholding, Partners shall be limited to an action against the
applicable jurisdiction. If the amount withheld was not withheld from actual
distributions, the Partnership may reduce subsequent distributions by the amount
of such withholding.
ARTICLE VII - Accounting Matters; Banking
---------------------------
Section 7.01. Fiscal Year. The fiscal year ("Fiscal Year") of
-----------
the Partnership shall be the calendar year, or such other year as is required by
the Code.
Section 7.02. Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Partnership, the
General Partner shall keep, or cause to be kept, full books of account, records
and supporting documents, which shall reflect in reasonable detail each
transaction of the Partnership. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Partnership shall use the accrual method
of accounting for United States Federal income tax purposes. The books of
account and the records of the Partnership shall be examined by and reported
upon as of the end of each Fiscal Year by a firm of independent certified public
accountants selected by the General Partner.
(b) The General Partner shall cause to be prepared, within 90
days after the end of each Fiscal Year of the Partnership, annual financial
statements of the Partnership, including a balance sheet of the Partnership as
of the end of such Fiscal Year and the related statements of income or loss. The
General Partner shall cause such financial statements to be delivered to each
Partner that so requests in writing, together with a statement indicating such
Partner's share of each item of Partnership income, gain, loss, deduction or
credit for such Fiscal Year for income tax purposes.
(c) Notwithstanding anything in this Agreement to the
contrary, the General Partner may, to the maximum extent
13
permitted by applicable law, keep confidential from the Partners for such period
of time as the General Partner deems reasonable any information which the
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the General Partner in good faith
believes is not in the best interest of the Partnership or could damage the
Partnership or its business or which the Partnership is required by law or by an
agreement with a third party to keep confidential.
(d) The General Partner may make, or revoke, in its sole and
absolute discretion, any elections for the Partnership that are permitted under
tax or other applicable laws, including elections under Section 704(c) of the
Code, provided that the General Partner shall not make any elections pursuant to
Section 754 of the Code.
Section 7.03. Banking. The Partnership shall maintain one or
-------
more bank accounts in the name and for the sole benefit of the Partnership. The
signatories for such accounts shall be designated by the General Partner.
Reserve cash, cash held pending the expenditure of funds for the business of the
Partnership or cash held pending a distribution to one or more of the Partners
may, but need not, be invested in any manner at the sole and absolute discretion
of the General Partner.
Section 7.04. Right to Rely on Authority of General Partner.
-----------------------------------------------
No Person that is not a Partner, in dealing with the General Partner, shall be
required to determine such General Partner's authority to make any commitment or
engage in any undertaking on behalf of the Partnership, or to determine any fact
or circumstance bearing upon the existence of the authority of the General
Partner.
Section 7.05. Tax Matters Partner. The "tax matters partner,"
-------------------
as defined in Section 6231 of the Code, of the Partnership shall be the General
Partner (the "Tax Matters Partner"). The Tax Matters Partner shall receive no
compensation from the Partnership for its services in that capacity. The Tax
Matters Partner is authorized to employ such accountants, attorneys and agents
as it, in its sole and absolute discretion, deems necessary or appropriate. Any
Person who serves as Tax Matters Partner shall not be liable to the Partnership
or to any Partner for any action it takes or fails to take as Tax Matters
Partner with respect to any administrative or judicial proceeding involving
"partnership items" (as defined in Section 6231 of the Code) of the Partnership.
14
Section 7.06. Taxpayer Information. Any Person who holds a
---------------------
Preferred Partner Interest as a nominee for another Person is required to
furnish to the Partnership (a) the name, address and taxpayer identification
number of the beneficial owner and the nominee; (b) information as to whether
the beneficial owner is (1) a Person that is not subject to United States
taxation on its income regardless of source, (2) a foreign government, an
international organization or any wholly owned agency or instrumentality of
either of the foregoing, or (3) a tax-exempt entity; (c) the amount and
description of Preferred Partner Interest held, acquired or transferred for the
beneficial owner; and (d) certain other information, including the dates of
acquisitions and transfers, means of acquisitions and transfers and acquisition
cost for purchases, as well as the amount of net proceeds from sales.
ARTICLE VIII - Management
-------------------------
Section 8.01. Management.
-----------
(a) The General Partner shall have full and exclusive
authority with respect to all matters concerning the conduct of the business and
affairs of the Partnership, including (without limitation) the power, without
the consent of the Limited Partners, to make all decisions it deems necessary,
advisable, convenient or appropriate to accomplish the purposes of the
Partnership. The acts of the General Partner acting alone shall serve to bind
the Partnership and shall constitute the acts of the Partners.
(b) The Limited Partners, in their capacity as such, shall not
take part in the management, operation or control of the business of the
Partnership or transact any business in the name of the Partnership. In
addition, the Limited Partners, in their capacity as such, shall not be agents
of the Partnership and shall not have the power to sign or bind the Partnership
to any agreement or document. The Limited Partners shall have the right to vote
only with respect to those matters specifically provided for in this Agreement.
Notwithstanding anything herein to the contrary, the Preferred Partners may
exercise all rights provided to them, if any, under this Agreement, the
Indenture, the Guarantee and the Delaware Act.
(c) The General Partner is authorized and directed to use its
best efforts to conduct the affairs of, and to operate, the Partnership in such
a way that the Partnership would not be deemed to be an "investment company"
required to be registered under the 1940 Act or taxed as a corporation for
Federal income tax purposes and so that the Subordinated Debentures will be
treated as indebtedness of Penelec for Federal income tax
15
purposes. In this connection, the General Partner is authorized, in its sole and
absolute discretion, to take any action not inconsistent with applicable law,
the Certificate of Limited Partnership or this Agreement that does not
materially adversely affect the interests of holders of Preferred Partner
Interests that the General Partner determines in its sole and absolute
discretion to be necessary, advisable or desirable for such purposes.
Section 8.02. Fiduciary Duty.
--------------
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Partnership or to any other Covered Person, an Indemnified Person acting
under this Agreement shall not be liable to the Partnership or to any other
Covered Person for its good faith reliance on the provisions of this Agreement
or the advice of counsel selected by the Indemnified Person in good faith. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between an Indemnified Person and any
Covered Person, or (ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the
Partnership or any Partner, the Indemnified Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices, the
advice of counsel selected by the Indemnified Person in good faith, and any
applicable generally accepted accounting practices or principles. In the absence
of bad faith by the Indemnified Person, the resolution, action or term so made,
taken or provided by the Indemnified Person shall not constitute a breach of
this Agreement or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Agreement an Indemnified Person is
permitted or required to make a decision (i) in its "discretion" or under a
grant of similar authority or latitude, the Indemnified Person shall be entitled
to consider only such interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Partnership or any other
16
Person, or (ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Agreement or other
applicable law.
Section 8.03. Specific Obligations of the General Partner.
--------------------------------------------------------------
The General Partner hereby undertakes:
(a) to devote to the affairs of the Partnership so much of its
time as shall be necessary to carry on properly the Partnership's business and
its responsibilities hereunder;
(b) subject to the terms of this Agreement, to cause the
Partnership to do or refrain from doing such acts as shall be required by
Delaware law in order to preserve the valid existence of the Partnership as a
Delaware limited partnership and to preserve the limited liability of the
Limited Partners;
(c) to pay directly (without any obligation to first exhaust
the assets of the Partnership) (i) all of the costs and expenses of the
Partnership (including, without limitation, costs and expenses relating to the
organization of, and offering of Preferred Partner Interests in, the Partnership
and costs and expenses relating to the operation of the Partnership, including
without limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and costs and
expenses incurred in connection with the acquisition, financing, and disposition
of Partnership assets) and (ii) all expenses of the Trust, any trustee thereof
and of the Partnership as grantor of the Trust;
(d) to take such action as it, in good faith, deems
appropriate and consistent with the terms of this Agreement to enforce the
Partnership's rights under the Subordinated Debentures and the Indenture; and
(e) to provide promptly to any trustee of the Trust a copy of
any notice of Default received by the General Partner pursuant to Section 7.05
of the Indenture.
Section 8.04. Powers of the General Partner. The General
----------------------------------------------
Partner shall have the right, power and authority, in the management of the
business and affairs of the Partnership, to do or cause to be done any and all
acts deemed by the General Partner to be necessary or appropriate to effectuate
the business, purposes and objectives of the Partnership. Without limiting the
generality of the foregoing, the General Partner shall have the power and
authority without any further act, approval or vote of any Partner to:
17
(a) cause the Partnership to issue Interests, including
Preferred Partner Interests, and determine classes and series thereof, in
accordance with this Agreement;
(b) act as, or appoint another Person to act as, registrar and
transfer agent for the Preferred Partner Interests;
(c) establish a record date with respect to all actions to be
taken hereunder that require a record date to be established, including with
respect to allocations, distributions and voting rights and declare
distributions and make all other required payments on General Partner, Class A
Limited Partner and Preferred Partner Interests as the Partnership's paying
agent;
(d) enter into and perform one or more Underwriting Agreements
and use the proceeds from the issuance of the Interests to purchase the
Subordinated Debentures, in each case on behalf of the Partnership;
(e) bring and defend on behalf of the Partnership actions and
proceedings at law or in equity before any court or governmental, administrative
or other regulatory agency, body or commission or otherwise;
(f) employ or otherwise engage employees and agents (who may
be designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(g) redeem each series of Preferred Partner Interests (which
shall constitute a return of capital and not a distribution of income) in
accordance with its terms and/or to the extent that the related series of
Subordinated Debentures is redeemed or reaches maturity;
(h) take such action as may be necessary or appropriate to
permit the withdrawal and redeposit of Preferred Partner Interests as provided
for in the Trust Agreement;
(i) enter into and perform one or more Trust Agreements or
other organizational documents relating to the creation of one or more Preferred
Partners that will own Preferred Partner Interests, including by entering into
and performing agreements or documents referred to in such Trust Agreements or
other organizational documents, in each case on behalf of the Partnership; and
(j) execute all documents or instruments, perform all duties
and powers and do all things for and on behalf of the Partnership in all matters
necessary, convenient, advisable or incidental to the foregoing.
18
The expression of any power or authority of the General
Partner in this Agreement shall not in any way limit or exclude any other power
or authority which is not specifically or expressly set forth in, or precluded
by, this Agreement.
Section 8.05. Independent Affairs. Any Partner or Affiliate
--------------------
thereof may engage in or possess an interest in any other business venture of
whatever nature and description, independently or with others, wherever located
and whether or not comparable to or in competition with the Partnership or the
General Partner, or any Affiliate thereof, and neither the Partnership nor any
of the Partners shall, by virtue of this Agreement, have any rights with respect
to, or interests in, such independent ventures or the income, profits or losses
derived therefrom. No Partner or Affiliate thereof shall be obligated to present
any particular investment opportunity to the Partnership even if such
opportunity is of a character that, if presented to the Partnership, could be
taken by the Partnership, and any Partner or Affiliate thereof shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment opportunity.
Section 8.06. Meetings of the Partners. Meetings of the
---------------------------
Partners of any class or series or of all classes or series of the Partnership's
Interests may be called at any time by the Partners holding 10% in liquidation
preference of such class or series of Interests, or of all classes or series of
Interests, as the case may be, or as provided in any Action establishing a
series of Preferred Partner Interests. Except to the extent otherwise provided
in any such Action, the following provisions shall apply to meetings of
Partners:
(a) Notice of any meeting shall be given to all Partners not
less than ten (10) business days nor more than sixty (60) days prior to the date
of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever a vote, consent or approval of Partners is permitted or required under
this Agreement, such vote, consent or approval may be given at a meeting of
Partners or by written consent.
(b) Each Partner may authorize any Person to act for it by
proxy on all matters in which a Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Partner executing it.
(c) Each meeting of Partners shall be conducted by the General
Partner or by such other Person that the General Partner may designate.
19
(d) Subject to the provisions of this Section 8.06, the
General Partner, in its sole and absolute discretion, shall establish all other
provisions relating to meetings of Partners, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any Partners,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote; provided, however, that unless the General Partner has established a lower
percentage, a majority of the Partners entitled to vote thereat shall constitute
a quorum at all meetings of the Partners.
Section 8.07.Net Worth of General Partner. By execution of
-----------------------------
this Agreement, the General Partner represents and covenants that (a) as of the
date hereof and at all times during the existence of the Partnership it will
maintain a fair market value net worth (determined in accordance with generally
accepted accounting principles) of at least ten percent (10%) of the total
contributions to the Partnership less any redemptions, throughout the life of
the Partnership, in accordance with Rev. Proc. 89-12, 1989-1 C.B. 798, and Rev.
Proc. 92-88, 1992-2 C.B. 496, or such other amount as may be required from time
to time pursuant to any amendment, modification or successor to Rev. Proc. 89-12
and Rev. Proc. 92-88 (such net worth being computed excluding any interest in,
or receivable due from, the Partnership and including any income tax liabilities
that would become due by the General Partner upon disposition by the General
Partner of all assets included in determining such net worth), and (b) it will
not make any voluntary dispositions of assets which would reduce the net worth
below the amount described in (a).
Section 8.08. Restrictions on General Partner. So long as any
-------------------------------
series of Subordinated Debentures are held by the Partnership, the General
Partner shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or executing any trust or
power conferred on the holders of the Subordinated Debentures or the Trustee
with respect to such series, (ii) waive any past default which is waivable under
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all of a series of Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of not less than [a majority] of the
aggregate stated liquidation preference of all series of Preferred Partner
Interests affected thereby, acting as a single class (or the Special
Representative acting on their behalf); provided, however, that where a consent
under the Indenture would require the consent of each holder affected thereby,
no such consent shall be given by the General Partner
20
without the prior consent of each holder of all series of Preferred Partner
Interests affected thereby. The General Partner shall not revoke any action
previously authorized or approved by a vote of any series of Preferred Partner
Interests. The General Partner shall notify all holders of such Preferred
Partner Interests of any notice of default received from the Trustee with
respect to such series of Subordinated Debentures. In addition, the General
Partner will not permit or cause the Partnership to file a voluntary petition in
bankruptcy without the approval of the holders of not less than [a majority] of
the aggregate stated liquidation preference of the outstanding Preferred Partner
Interests.
ARTICLE IX - Liability and Indemnification
- ------------------------------------------
Section 9.01. Partnership Expenses and Liabilities.
-------------------------------------
(a) Except as provided in the Delaware Act, the General
Partner shall have the liabilities of a partner in a partnership without limited
partners to Persons other than the Partnership and the other Partners. Except as
provided in the Delaware Act or this Agreement, the General Partner shall have
the liabilities of a partner in a partnership without limited partners to the
Partnership and to the other Partners.
(b) Except as otherwise expressly required by law, a Limited
Partner, in its capacity as such, shall have no liability in excess of (i) the
amount of its capital contributions to the Partnership, (ii) its share of any
assets and undistributed profits of the Partnership, and (iii) the amount of any
distributions wrongfully distributed to it.
Section 9.02. No Liability. Except as otherwise expressly
-------------
provided by the Delaware Act or in Section 9.01(a), no Covered Person shall be
liable to the Partnership or to any other Partner for any act or omission
performed or omitted pursuant to the authority granted to it hereunder or by
law, or from a loss resulting from any mistake or error in judgment on its part
or from the negligence, dishonesty, fraud or bad faith of any employee,
independent contractor, broker or other agent of the Partnership, provided that
such act or omission, such mistake or error in judgment or the selection of such
employee, independent contractor, broker or other agent, as the case may be, did
not result from the willful misconduct, gross negligence or fraud of such
Covered Person. Any Covered Person shall be fully protected in relying in good
faith upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership by any Person as to matters
the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
21
care by or on behalf of the Partnership, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which distributions to Partners might properly be paid.
Section 9.03. Indemnification. To the fullest extent permitted
---------------
by applicable law, except as set forth in Section 8.03(c), an Indemnified Person
shall be entitled to indemnification from the Partnership for any loss, damage
or claim incurred by such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Partnership and in a manner reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of willful
misconduct, gross negligence or fraud with respect to such acts or omissions;
provided, however, that any indemnity under this Section 9.03 shall be provided
out of and to the extent of Partnership assets only, and except as otherwise
expressly provided in Section 9.01(a) or by the Delaware Act, no Covered Person
shall have any personal liability on account thereof. To the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Partnership of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified as authorized in this Section 9.03.
ARTICLE X - Withdrawal; Transfer Restrictions
---------------------------------------------
Section 10.01. Transfer by General Partner; Admission of
--------------------------------------------------------------
Substituted General Partner. The General Partner may not Transfer its Interest
- ----------------------------
(in whole or in part) to any Person without the consent of all other Partners,
provided that the General Partner may, without the consent of any Partner,
Transfer its Interest to Penelec or any direct or indirect wholly owned
subsidiary of Penelec. Notwithstanding anything else herein, the General Partner
may merge with or into another Person, may permit another Person to merge with
or into the General Partner and may Transfer all or substantially all of its
assets to another Person if the General Partner is the survivor of such merger
or the Person into which the General Partner is merged or to which the General
Partner's assets are transferred is a Person organized under the laws of the
United States or any state thereof or the District of Columbia. The General
Partner shall have the right
22
to admit the assignee or transferee of its Interest which is permitted hereunder
as a substituted or additional general partner of the Partnership, with or
without the consent of the Limited Partners. Any such assignee or transferee of
all or a part of the Interest of a General Partner shall be deemed admitted to
the Partnership as a general partner of the Partnership immediately prior to the
effective date of such Transfer, and such additional or successor general
partner of the Partnership is hereby authorized and shall continue the business
of the Partnership without dissolution.
Section 10.02. Withdrawal of Limited Partners. A Preferred
-------------------------------
Partner may not withdraw from the Partnership prior to the dissolution and
winding up of the Partnership except upon the assignment of its Preferred
Partner Interests (including any redemption, repurchase, exchange or other
acquisition by the Partnership), as the case may be, in accordance with the
provisions of this Agreement. Any Person who has been assigned one or more
Interests shall provide the Partnership with a completed Form W-9 or such other
documents or information as are requested by the Partnership for tax reporting
purposes. A withdrawing Preferred Partner shall not be entitled to receive any
distribution and shall not otherwise be entitled to receive the fair value of
its Preferred Partner Interest except as otherwise expressly provided in this
Agreement.
Section 10.03. Withdrawal of Class A Limited Partner. Upon the
-------------------------------------
admission of at least one Preferred Partner as a Limited Partner of the
Partnership, the Class A Limited Partner shall be deemed to have withdrawn from
the Partnership as a limited partner of the Partnership, and upon such
withdrawal, the Class A Limited Partner shall have its capital contribution
returned to it without any interest or deduction and shall have no further
interest in the Partnership.
Section 10.04. Withdrawal or Redeposit of Preferred Partner
---------------------------------------------
Interests. Nothing in this Article X or elsewhere in this Agreement (including,
- ---------
without limitation, Article XIV) shall restrict or limit the right of any Person
to withdraw or redeposit Preferred Partner Interests represented by Trust
Securities and to be admitted to the Partnership as a limited partner of the
Partnership or to withdraw as a limited partner of the Partnership in connection
with such withdrawal or redeposit, as the case may be, as provided for in the
Trust Agreement.
ARTICLE XI - Dissolution of the Partnership
-------------------------------------------
Section 11.01 .No Dissolution. The Partnership shall not
---------------
be dissolved by the admission of additional or successor Partners in accordance
with the terms of this Agreement. The
23
death, withdrawal, incompetency, bankruptcy, dissolution or other cessation to
exist as a legal entity of a Limited Partner, or the occurrence of any other
event that terminates the Interest of a Limited Partner in the Partnership,
shall not in and of itself cause the Partnership to be dissolved and its affairs
wound up. To the fullest extent permitted by applicable law, upon the occurrence
of any such event, the General Partner may, without any further act, vote or
approval of any Partner, subject to the terms of this Agreement, admit any
Person to the Partnership as an additional or substitute Limited Partner, which
admission shall be effective as of the date of the occurrence of such event, and
the business of the Partnership shall be continued without dissolution.
Section 11.02. Events Causing Dissolution. The Partnership
---------------------------
shall be dissolved and its affairs shall be wound up upon the occurrence of any
of the following events:
(a) The expiration of the term of the Partnership,as provided
in Section 2.04 hereof;
(b) The withdrawal, removal or bankruptcy of the General
Partner or Transfer (other than a grant of a security interest) by the General
Partner of its entire Interest in the Partnership when the assignee is not
admitted to the Partnership as an additional or successor General Partner in
accordance with Section 10.01 hereof, or the occurrence of any other event that
results in the General Partner ceasing to be a general partner of the
Partnership under the Delaware Act, provided, the Partnership shall not be
dissolved and required to be wound up in connection with any of the events
specified in this clause (b) if (i) at the time of the occurrence of such event
there is at least one remaining general partner of the Partnership who is hereby
authorized to, and agrees to, and does carry on the business of the Partnership,
or (ii) within ninety days after the occurrence of such event, a majority in
Interest of the remaining Partners (or such greater percentage in Interest as is
required by the Delaware Act) agree in writing or by vote to continue the
business of the Partnership and to the appointment, effective as of the date of
such event, if required, of one or more additional general partners of the
Partnership;
(c) The entry of a decree of judicial dissolution under the
Delaware Act;
(d) The bankruptcy, liquidation or dissolution and winding up
of Penelec;
(e) The written consent of the General Partner and all of the
Preferred Partners;
24
(f) In the sole and absolute discretion of the General Partner
upon the happening of a Special Event (subject to any limitations set forth in
an Action); or
(g) In accordance with Section 13.02(f).
Section 11.03. Notice of Dissolution. Upon the dissolution of
---------------------
the Partnership, the General Partner shall promptly notify the Partners of such
dissolution.
ARTICLE XII - Liquidation of Partner Interests
----------------------------------------------
Section 12.01. Liquidation. Upon dissolution of the
-----------
Partnership, the General Partner, or, in the event that the dissolution is
caused by an event described in Section 11.02(b) and there is no other General
Partner, a Person or Persons who may be approved by Preferred Partners holding
not less than a majority in liquidation preference of the Preferred Partners
Interests, as liquidating trustee (the "Liquidating Trustee"), shall immediately
commence to wind up the Partnership's affairs; provided, however, that a
reasonable time shall be allowed for the orderly winding up of the Partnership
and the satisfaction of liabilities to creditors so as to enable the Partners to
minimize the normal losses attendant upon a liquidation. The Preferred Partners
shall continue to share profits and losses during liquidation in the same
proportions, as specified in Articles V and VI hereof, as before liquidation.
The proceeds of liquidation shall be distributed, as realized, in the following
order and priority:
(a) to creditors of the Partnership, including Preferred
Partners who are creditors, to the extent otherwise permitted by law, in
satisfaction of the liabilities of the Partnership (whether by payment or the
making of reasonable provision for payment thereof), other than liabilities for
which reasonable provision for payment has been made and liabilities for
distributions to Partners;
(b) to the holders of Preferred Partner Interests of each
series then outstanding in accordance with the terms of this Agreement or the
Action or Actions for such Series; and
(c) to all Partners in accordance with their respective
positive Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
25
Section 12.02. Termination. The Partnership shall terminate
-----------
when all of the assets of the Partnership have been distributed in the manner
provided for in this Article XII, and the Certificate of Limited Partnership
shall have been cancelled in the manner required by the Delaware Act.
Section 12.03. Duty of Care. The General Partner or the
--------------
Liquidating Trustee, as the case may be, shall not be liable to the Partnership
or any Partner for any loss attributable to any act or omission of the General
Partner or the Liquidating Trustee, as the case may be, taken in good faith in
connection with the liquidation of the Partnership and distribution of its
assets in belief that such course of conduct was in or not opposed to the best
interest of the Partnership. The General Partner or the Liquidating Trustee, as
the case may be, may consult with counsel and accountants with respect to
liquidating the Partnership and distributing its assets and shall be justified
in acting or omitting to act in accordance with the written opinion of such
counsel or accountants, provided they shall have been selected with reasonable
care.
Section 12.04. No Liability for Return of Capital. The General
----------------------------------
Partner and its respective officers, directors, members, shareholders,
employees, representatives, agents, partners and Affiliates shall not be
personally liable for the return of the capital contributions of any Partner to
the Partnership. No Partner shall be obligated to restore to the Partnership any
amount with respect to a negative Capital Account.
ARTICLE XIII - Preferred Partner Interests
------------------------------------------
Section 13.01. Preferred Partner Interests.
----------------------------
(a) The aggregate number of Preferred Partner Interests which
the Partnership shall have authority to issue is unlimited. Each series of
Preferred Partner Interests shall rank equally and all Preferred Partner
Interests shall rank senior to all other Interests in respect of the right to
receive distributions and the right to receive payments out of the assets of the
Partnership upon voluntary or involuntary dissolution and winding up of the
Partnership. The issuance of any Interests ranking senior to the Preferred
Partner Interest shall be deemed to materially adversely affect the rights of
the Preferred Partner Interests under this Agreement.
(b) The General Partner on behalf of the Partnership is
authorized to issue Preferred Partner Interests, in one or more series, having
such designations, rights, privileges, restrictions and other terms and
provisions, whether in regard to distributions, return of capital or otherwise,
as may from time
26
to time be established in a written action or actions (each, an "Action") of the
General Partner providing for the issue of such series. In connection with the
foregoing, the General Partner is expressly authorized, prior to issuance, to
set forth in an Action or Actions providing for the issue of such series, the
following:
(i) The distinctive designation of such series which
shall distinguish it from other series;
(ii) The number of Preferred Partner Interests
included in such series, which number may be increased or decreased
from time to time unless otherwise provided by the General Partner in
creating the series;
(iii) The Preferred Partner Distribution rate (or
method of determining such rate) for Preferred Partner Interests of
such series and the first date upon which such Preferred Partner
Distribution shall be payable;
(iv) The amount or amounts which shall be paid out of
the assets of the Partnership to the holders of such series of
Preferred Partner Interests upon voluntary or involuntary dissolution
and winding up of the Partnership;
(v) The price or prices at which, the period or
periods within which and the terms and conditions upon which the
Preferred Partner Interests of such series may be redeemed or
purchased, in whole or in part, at the option of the Partnership;
(vi) The obligation of the Partnership to purchase or
redeem Preferred Partner Interests of such series pursuant to a sinking
fund or otherwise and the price or prices at which, the period or
periods within which and the terms and conditions upon which the
Preferred Partner Interests of such series shall be redeemed, in whole
or in part, pursuant to such obligation;
(vii) The period or periods within which and the
terms and conditions, if any, including the price or prices or the rate
or rates of conversion or exchange and the terms and conditions of any
adjustments thereof, upon which the Preferred Partner Interests of such
series shall be convertible or exchangeable at the option of the
Preferred Partner, or the Partnership, into any other Interests or
securities or other property or cash or into any other series of
Preferred Partner Interests;
(viii) The voting rights, if any, of the Preferred
Partner Interests of such series in addition to those required by law
and set forth in this Agreement, and
27
any requirement for the approval by the Preferred Partner Interests, or
of the Preferred Partner Interests of one or more series, or of both,
as a condition to specified Actions or amendments to this Agreement;
and
(ix) Any other relative rights, powers, preferences
or limitations of the Preferred Partner Interests of the series not
inconsistent with this Agreement or with applicable law.
In connection with the foregoing and without limiting the
generality thereof, the General Partner is hereby expressly authorized, without
the vote or approval of any other Partner or any other Person, to take any
Action to create under the provisions of this Agreement a series of Preferred
Partner Interests that was not previously outstanding. Without the vote or
approval of any other Partner or any other Person, the General Partner may
execute, swear to, acknowledge, deliver, file and record whatever documents may
be required in connection with the issue from time to time of Preferred Partner
Interests in one or more series as shall be necessary, convenient or desirable
to reflect the issue of such series. The General Partner shall do all things it
deems to be appropriate or necessary to comply with the Delaware Act and is
authorized and directed to do all things it deems to be necessary or permissible
in connection with any future issuance, including compliance with any statute,
rule, regulation or guideline of any Federal, state or other governmental agency
or any securities exchange.
Any Action or Actions taken by the General Partner pursuant to
the provisions of this paragraph (b) shall be deemed an amendment and supplement
to and part of this Agreement.
(c) Except as otherwise provided in this Agreement or in any
Action in respect of any series of the Preferred Partner Interests and as
otherwise required by law, all rights to the management and control of the
Partnership shall be vested exclusively in the General Partner.
(d) No holder of Interests shall be entitled as a matter of
right to subscribe for or purchase, or have any preemptive or similar right with
respect to, any part of any new or additional issue of Interests of any class or
series whatsoever, or of securities convertible into any Interests of any class
or series whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of distribution. Any Person acquiring
Preferred Partner Interests shall be admitted to the Partnership as a Preferred
Partner upon compliance with Section 2.06.
28
Section 13.02. Terms of Preferred Partner Interests.
------------------------------------------
Notwithstanding anything else in any Action to the contrary, all Preferred
Partner Interests of the Partnership shall have the following voting rights,
preferences, participating, optional and other special rights and the
qualifications, limitations or restrictions of, and other matters relating to,
the Preferred Partner Interests as set forth below in this Section 13.02.
(a) Distributions.
--------------
(i) The Preferred Partners shall be entitled to
receive, when, as and if declared by the General
Partner out of funds held by the Partnership to the
extent that the Partnership has cash on hand
sufficient to permit such payments and funds legally
available therefor, cumulative cash distributions
("Preferred Partner Distributions") at a rate per
annum established by the General Partner, calculated
on the basis of a 360-day year consisting of twelve
(12) months of thirty (30) days each, and for any
shorter period, Preferred Partner Distributions will
be computed on the basis of the actual number of days
elapsed in such period, and payable in United States
dollars, in arrears, with a payment frequency
determined by the General Partner at the time of
issuance. In the event that any date on which
Preferred Partner Distributions are payable is not a
Business Day, then payment of such Preferred Partner
Distribution will be made on the next succeeding day
which is a Business Day (and without any interest or
other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with
the same force and effect as if made on such date.
Such Preferred Partner Distributions will accrue and
be cumulative from the original date of issue whether
or not they have been declared and whether or not
there are profits, surplus or other funds of the
Partnership legally available for the payment of
distributions, or whether they are deferred.
(ii) If distributions have not been paid in full on
any series of Preferred Partner Interests, the
Partnership may not:
(A) pay or declare and set aside for payment, any
distributions on any other series of Preferred
Partner Interests unless the amount of any
29
distributions paid or declared on any Preferred
Partner Interests is paid or declared on all
Preferred Partner Interests then outstanding on a pro
rata basis, on the date such distributions are paid
or declared, so that
(1) (x) the aggregate amount of
distributions paid or declared on such
series of Preferred Partner Interests bears
to (y) the aggregate amount of distributions
paid or declared on all such Preferred
Partner Interests outstanding the same ratio
as
(2) (x) the aggregate of all accumulated
arrears of unpaid distributions in respect
of such series of Preferred Partner
Interests bears to (y) the aggregate of all
accumulated arrears of unpaid distributions
in respect of all such Preferred Partner
Interests outstanding;
(B) pay or declare any distribution on any general
partner Interest; or
(C) redeem, purchase or otherwise acquire any
Preferred Partner Interests or any general partner
Interests;
until, in each case, such time as all accumulated and unpaid distributions on
all series of Preferred Partner Interests shall have been paid in full for all
distribution periods terminating on or prior to, in the case of clauses (A) and
(B), such payment and, in the case of clause (C), the date of such redemption,
purchase or acquisition.
(b) Notice of Redemption.
---------------------
(i) The Partnership may not redeem any outstanding
Preferred Partner Interests unless all accumulated
and unpaid distributions have been paid on all
Preferred Partner Interests for all distribution
periods terminating on or prior to the date of
redemption.
(ii) Notice of any redemption (a "Notice of
Redemption") of a series of Preferred Partner
Interests will be given by the Partnership by mail to
each record holder of such series of Preferred
Partner Interests to be redeemed not fewer than
thirty (30) nor more than ninety (90) days prior to
the date fixed for redemption thereof; provided
30
that not fewer than forty (40) days' notice will be
given with respect to the redemption of any Preferred
Partner Interests held by the Trust or any trustee
thereof. For purposes of the calculation of the date
of redemption and the dates on which notices are
given pursuant to this paragraph (b)(ii), a Notice of
Redemption shall be deemed to be given on the day
such notice is first mailed by first-class mail,
postage prepaid, or on the date it was delivered in
person, receipt acknowledged to the record holders of
such series of Preferred Partner Interests. Each
Notice of Redemption shall be addressed to the record
holders of such series of Preferred Partner Interests
at the address appearing in the books and records of
the Partnership. No defect in the Notice of
Redemption or in the mailing thereof or publication
of its contents shall affect the validity of the
redemption proceedings.
(iii) Notwithstanding the foregoing, however, any
Notice of Redemption in connection with an optional
redemption may state that it is subject to the
receipt by the Partnership of redemption funds on or
before such date fixed for redemption, which Notice
of Redemption shall be of no effect unless such funds
are so received on or before such date. If Notice of
Redemption shall have been given and, by 12:00 noon,
New York time, on the redemption date specified
therein, (i) if the Preferred Partner Interests are
then owned by The Depository Trust Company or its
successor securities depository, the Partnership
shall have irrevocably deposited with The Depository
Trust Company or such successor securities depository
funds sufficient to pay the applicable Redemption
Price and shall have given The Depository Trust
Company or its successor securities depository
irrevocable instructions and authority to pay the
Redemption Price to the holders of the Preferred
Partner Interests, or (ii) otherwise, if the
Partnership shall have made payment of the Redemption
Price to the holders of Preferred Partner Interests,
then on the date of such deposit or payment, all
rights of the Preferred Partner Interest Owners and
the holders of such series of Preferred Partner
Interests so called for redemption will cease, except
the right to receive the Redemption Price, but
without interest. In the event that any date fixed
for redemption of such series of Preferred Partner
31
Interests is not a Business Day, then payment of the
Redemption Price payable on such date will be made on
the next succeeding day which is a Business Day (and
without any interest or other payment in respect of
any such delay), except that, if such Business Day
falls in the next succeeding calendar year, such
payment will be made on the immediately preceding
Business Day, in each case with the same force and
effect as if made on such date. In the event that
payment of the Redemption Price in respect of a
series of Preferred Partner Interests is not made
either by the Partnership or by Penelec pursuant to
the Guarantee pertaining to the series of Preferred
Partner Interests, distributions on such series of
Preferred Partner Interests will continue to accrue
at the then applicable rate, from the original
redemption date to the date of payment, in which case
the actual payment date will be considered the date
fixed for redemption for purposes of calculating the
Redemption Price.
(iv) In the event that less than all the outstanding
series of Preferred Partner Interests are to be
redeemed, the series of Preferred Partner Interests
to be redeemed will be selected (i) if the Preferred
Partner Interests are then owned of record by The
Depository Trust Company or its successor securities
depository, according to a determination by The
Depository Trust Company or such successor securities
depository or (ii) otherwise, pro rata, by lot or by
other equitable means. Subject to applicable law,
Penelec or its subsidiaries may at any time and from
time to time purchase outstanding Preferred Partner
Interests by tender, in the open market or by private
agreement. If a partial redemption or a purchase of
outstanding Preferred Partner Interests by tender, in
the open market or by private agreement would result
in a delisting of a series of Preferred Partner
Interests from any national securities exchange on
which the series of Preferred Partner Interests are
then listed, the Partnership may then only redeem or
purchase the series of Preferred Partner Interests in
whole.
(c) Liquidation Distribution. If, upon any liquidation, the
-------------------------
Liquidation Distribution on a series of Preferred Partner Interests can be paid
only in part because the Partnership has insufficient assets available to pay in
full the
32
aggregate liquidation distributions on all Preferred Partner Interests then
outstanding, then the amounts payable directly by the Partnership on such series
of Preferred Partner Interests and on all other Preferred Partner Interests then
outstanding shall be paid on a pro rata basis, so that
(i) (A) the aggregate amount paid in respect of the
Liquidation Distribution bears to (B) the aggregate
amount paid as liquidation distributions on all other
Preferred Partnership Interests then outstanding the
same ratio as
(ii) (A) the aggregate Liquidation Distribution bears
to (B) the aggregate maximum liquidation
distributions on all other Preferred Partner
Interests then outstanding.
(d) Voting Rights. Notwithstanding anything in Section 8.01
-------------
hereof or elsewhere in this Agreement to the contrary, if (i) the Partnership
fails to pay distributions in full on a series of Preferred Partner Interests
for eighteen (18) consecutive months; (ii) an event of default as defined in the
Indenture occurs and is continuing; or (iii) Penelec is in default on any of its
payment or other obligations under the Guarantee, then the holders of such
Preferred Partner Interests, together with the holders of all other series of
Preferred Partner Interests acting as a single class, will be entitled, by a
vote of the majority of the aggregate stated liquidation preference of
outstanding Preferred Partner Interests, to appoint and authorize a special
representative of the Partnership and the Preferred Partners (the "Special
Representative") to enforce the Partnership's rights under the Subordinated
Debentures and the Indenture, including, without limitation, after failure to
pay interest for sixty (60) consecutive months, the payment of interest on the
Subordinated Debentures, and to enforce the obligations of Penelec under the
Guarantee. If a Special Representative has been appointed, the Special
Representative shall have the exclusive right to enforce, or direct the
enforcement of, the Partnership's rights under the Subordinated Debentures and
the Indenture. Notwithstanding anything in this Agreement to the contrary,
including, without limitation, the immediately preceding sentence, nothing in
this Agreement shall be deemed to adversely affect the right of a Preferred
Partner or an assignee of a Preferred Partner Interest to bring a derivative
action in accordance with and subject to Subchapter X of the Delaware Act.
In furtherance of the foregoing, and without limiting the
powers of any Special Representative so appointed and for the avoidance of any
doubt concerning the powers of the Special Representative, any Special
Representative, in its own name, in
33
the name of the Partnership, in the name of the Preferred Partners or otherwise,
may, to the fullest extent permitted by law, institute or cause to be instituted
any proceedings, including, without limitation, any suit in equity, an action at
law or other judicial or administrative proceeding, to enforce the Partnership's
or the Preferred Partners' rights directly against Penelec (including, without
limitation, the Partnership's rights under the Indenture or as a holder or
beneficial owner of the Subordinated Debentures), or any other obligor in
connection with such obligations on behalf of the Partnership or the Preferred
Partners, and may prosecute such proceeding to final judgment or decree,
including any appeals thereof, and enforce the same against Penelec or any other
obligor in connection with such obligations and collect, out of the property,
wherever situated, of Penelec or any such other obligor upon such obligations,
the monies adjudged or decreed to be payable in the manner provided by law. The
Special Representative shall not by virtue of acting in such capacity be
admitted as a general partner in the Partnership or otherwise be deemed to be a
general partner in the Partnership and shall have no liability for the debts,
obligations or liabilities of the Partnership.
For purposes of determining whether the Partnership has failed
to pay distributions in full for eighteen (18) consecutive months, distributions
shall be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative distributions have been or contemporaneously are
declared and paid with respect to all distribution periods terminating on or
prior to the date of payment of such full cumulative distributions. Subject to
requirements of applicable law, not later than thirty (30) days after such right
to appoint a Special Representative arises, the General Partner will convene a
general meeting for the above purpose. If the General Partner fails to convene
such meeting within such 30-day period, the Preferred Partners who hold 10% of
the aggregate stated liquidation preference of such outstanding series of
Preferred Partner Interests will be entitled to convene such meeting. The
provisions of this Agreement relating to the convening and conduct of meetings
of Partners will apply with respect to any such meeting. Any Special
Representative so appointed shall cease to act in such capacity immediately if
the Partnership (or Penelec pursuant to the Guarantee) shall have paid in full
all accumulated and unpaid distributions on the Preferred Partner Interests or
such default or breach by Penelec, as the case may be, shall have been cured.
Notwithstanding the appointment of any such Special Representative, Penelec
shall retain all rights under the Indenture, including the right to extend the
interest payment period on the Subordinated Debentures as provided in the
Indenture.
34
If any proposed amendment of this Agreement provides for, or
the General Partner otherwise proposes to effect any action which would
materially adversely affect the powers, preferences or special rights of such
series of Preferred Partner Interests, then holders of the outstanding series of
Preferred Partner Interests will be entitled to vote on such amendment or action
of the General Partner (but not on any other amendment or action) and, in the
case of an amendment or action which would equally materially adversely affect
the powers, preferences or special rights of any other series of outstanding
Preferred Partner Interests, all holders of all such series of Preferred Partner
Interests, will be entitled to vote together as a class on such amendment or
action of the General Partner (but not on any other amendment or action), and
such amendment or action shall not be effective except with the approval of
Preferred Partners holding not less than [a majority] of the aggregate stated
liquidation preference of such outstanding series of Preferred Partner
Interests. Except as otherwise provided under Section 11.02 or the Delaware Act,
the Partnership will be dissolved and wound up only with the consent of the
holders of all Preferred Partner Interests outstanding.
The powers, preferences or special rights of a series of
Preferred Partner Interests will be deemed not to be adversely affected by the
creation or issue of, and no vote will be required for the creation or issue of,
any further series of Preferred Partner Interests or any general partner
Interests.
Any required approval of a series of Preferred Partner
Interests may be given at a separate meeting of such holders convened for such
purpose, at a meeting of the holders of all series of Preferred Partner
Interests or pursuant to written consent. The Partnership will cause a notice of
any meeting at which holders of a series of Preferred Partner Interests are
entitled to vote to be mailed to each holder of Preferred Partner Interests.
Each such notice will include a statement setting forth (i) the date of such
meeting, (ii) a description of any matter to be voted on at such meeting, and
(iii) instructions for the delivery of proxies.
No vote or consent of the holders of a series of Preferred
Partner Interests will be required for the Partnership to redeem and cancel such
series of Preferred Partner Interests in accordance with this Agreement and the
related Action.
Notwithstanding that holders of a series of Preferred Partner
Interests are entitled to vote or consent under any of the circumstances
described above or under any other circumstances provided for in this Agreement
or under the Delaware Act, any Preferred Partner Interests that are owned by
35
Penelec or Penelec's parent, GPU, Inc., or any Person owned more than 50% by
Penelec or GPU, Inc., either directly or indirectly, shall not be entitled to
vote or consent and shall, for the purposes of such vote or consent, be treated
as if they were not outstanding.
(e) Mergers. The Partnership shall not consolidate,
-------
amalgamate, convert, merge with or into, or be replaced by, or convey, transfer
or lease its properties and assets substantially as an entirety to any
corporation, limited liability company, limited partnership, trust (including a
business trust) or other entity, except with the prior approval of the Preferred
Partners holding not less than [a majority] of the aggregate stated liquidation
preference of such outstanding Preferred Partner Interests or as described below
or under Article XII. The General Partner may, without the consent of any
Person, cause the Partnership to consolidate, amalgamate, convert, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a corporation, a limited liability company, a
limited partnership or a trust (including a business trust) or other entity
organized as such under the laws of the United States or any state thereof or
the District of Columbia (a "Successor Entity"), provided that (i) such
Successor Entity either (A) expressly assumes all of the terms and provisions of
the Preferred Partner Interests by which the Partnership is bound and the other
obligations of the Partnership or (B) substitutes for the Preferred Partner
Interests other securities (the "Successor Securities") so long as the Successor
Securities rank, with regard to participation in the profits or assets of the
Successor Entity, at least as high as the Preferred Partner Interests rank, with
regard to participation in the profits or assets of the Partnership, (ii)
Penelec confirms its obligations under the Guarantee with regard to the
Preferred Partner Interests or Successor Securities, if any are issued, (iii)
the Preferred Partner Interests or the Successor Securities will not be delisted
from, or will be listed upon notification of issuance on, any national
securities exchange on which the Preferred Partner Interests or Successor
Securities are then listed, (iv) such merger, consolidation, amalgamation,
conversion, replacement, conveyance, transfer or lease does not cause the
Preferred Partner Interests or Successor Securities to be downgraded by any
nationally recognized statistical rating organization, as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Securities Act, (v)
such consolidation, amalgamation, conversion, merger, replacement, conveyance,
transfer or lease does not adversely affect in any material respect the material
powers, preferences and special rights of the holders of the Preferred Partner
Interests or Successor Securities under the documents governing the Preferred
Partner Interests or Successor Securities, including, without limitation, the
voting rights
36
provided for in Section 13.02(d) hereof (other than with respect to any dilution
of the holders of the Preferred Partner Interests or Successor Securities in the
Successor Entity), (vi) such Successor Entity has a purpose substantially
identical to that of the Partnership and (vii) prior to such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease Penelec has received an opinion of counsel (which may be regular counsel
to the Partnership or an Affiliate, but not an employee thereof) experienced in
such matters to the effect that (A) holders of outstanding Preferred Partner
Interests or Successor Securities will not recognize any gain or loss for
Federal income tax proposes as a result of the merger, consolidation,
amalgamation, conversion, replacement, conveyance, transfer or lease, (B) such
Successor Entity will be treated as either a partnership or a grantor trust for
Federal income tax purposes, (C) following such merger, consolidation,
amalgamation, conversion, replacement, conveyance, transfer or lease, Penelec
and such Successor Entity will be in compliance with the 1940 Act without
registering thereunder as an "investment company," and (D) such merger,
consolidation, amalgamation, conversion, replacement, conveyance, transfer or
lease will not cause the holders of Preferred Partner Interests or Successor
Securities to be generally liable for the debts, obligations or liabilities of
the Partnership or the Successor Entity.
(f) Substitutions. Notwithstanding any other provision of this
-------------
Agreement to the contrary, the General Partner may, without the consent of any
Person, (i) form or cause to be formed a Successor Entity and contribute or
cause to be contributed the Subordinated Debentures (and any rights to receive
interest payments on such Subordinated Debentures) to the Successor Entity in
exchange for all of the equity or beneficial interests in the Successor Entity,
and (ii) dissolve the Partnership and, after satisfaction of liabilities to
creditors as required by the Delaware Act, cause the equity or beneficial
interests in the Successor Entity to be distributed to the General Partner and
the holders of each series of Preferred Partner Interests in liquidation of such
holders' respective Interests in the Partnership (a "Substitution Event"),
provided that a Substitution Event shall not be permitted to occur unless the
conditions set forth in the proviso in the second sentence of Section 13.02(e)
shall have been satisfied. The General Partner may, without the consent of any
Person, take any other action having similar consequences to the foregoing.
ARTICLE XIV - Transfers
-----------------------
Section 14.01. Transfers of Preferred Partner Interests.
--------------------------------------------
Preferred Partner Interests may be freely transferred by a Preferred Partner. No
Interest shall be transferred, in whole or in part, except in accordance with
the terms and conditions set forth in this Agreement. To the fullest extent
permitted by law, any transfer or purported transfer of any
37
Interest not made in accordance with this Agreement shall be null and void.
Section 14.02. Transfer of Certificates. The General Partner
----------------------------------------------
shall provide for the registration of Certificates. Upon surrender for
registration of transfer of any Certificate, the General Partner shall cause one
or more new Certificates to be issued in the name of the designated transferee
or transferees. Every Certificate surrendered for registration of transfer shall
be accompanied by a written instrument of transfer and agreement to be bound by
the provisions of this Agreement in form satisfactory to the General Partner
duly executed by the Preferred Partner or his attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
cancelled by the General Partner. A transferee of a Certificate shall provide
the Partnership with a completed Form W-8 or such other documents or information
as are requested by the Partnership for tax reporting purposes and thereafter
shall be admitted to the Partnership as a Preferred Partner and shall be
entitled to the rights and subject to the obligations of a Preferred Partner
hereunder upon the receipt by such transferee of a Certificate. The transferor
of a Certificate representing such transferor's entire Preferred Partner
Interest shall cease to be a limited partner of the Partnership at the time that
the transferee of the Certificate is admitted to the Partnership as a Preferred
Partner in accordance with this Section 14.02.
Section 14.03. Persons Deemed Preferred Partners. The
-------------------------------------
Partnership may treat the Person in whose name any Certificate shall be
registered on the books and records of the Partnership as the Preferred Partner
and the sole holder of such Certificate for purposes of receiving distributions
and for all other purposes whatsoever and, accordingly, shall not be bound to
recognize any equitable or other claims to or interest in such Certificate on
the part of any other Person, whether or not the Partnership shall have actual
or other notice thereof.
Section 14.04. Book Entry Interests. The Certificates, on
---------------------
original issuance, may, but need not, be issued in the form of a typewritten
Certificate or Certificates representing the Book Entry Interests, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Partnership. Any such Certificates shall be registered on the
books and records of the Partnership in the name of Cede & Co., the nominee of
the initial Clearing Agency, and no Preferred Partner Interest Owner will
receive a definitive Certificate representing such Preferred Partner Interest
Owner's interests in such Certificate, except as provided in Section 14.06.
Except to the extent that definitive, fully registered Certificates (the
"Definitive Certificates") have been issued to the Preferred
38
Partner Interest Owners pursuant to Section 14.06 or other Persons pursuant to
this Agreement, with respect to Global Certificates:
(a) The provisions of this Section shall be in full
force and effect;
(b) The Partnership and the General Partner shall be
entitled to deal with the
Clearing Agency for all purposes of this Agreement (including the payment of
distributions on such Global Certificates and receiving approvals, votes or
consents hereunder) as a Preferred Partner and the sole holder of such Global
Certificates and shall have no obligations to the Preferred Partner Interest
Owners;
(c) The rights of the Preferred Partner Interest
Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law and
agreements between such Preferred Partner Interest Owners and the Clearing
Agency and/or the Clearing Agency Participants. With respect to such Global
Certificates, the initial Clearing Agency will make book entry transfers among
the Clearing Agency Participants and receive and transmit payments of
distributions on such Global Certificates to such Clearing Agency Participants;
(d) Subject in all respects to Section 14.07, to the
extent that the provisions of
this Section conflict with any other provisions of this Agreement as they relate
to Global Certificates, the provisions of this Section shall control; and
(e) Whenever this Agreement requires or permits
actions to be taken based upon
approvals, votes or consents of a percentage of the Preferred Partners who hold
Global Certificates, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such effect
from the Preferred Partner Interest Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interests in such Global Certificates and has delivered such instructions to the
General Partner.
Section 14.05. Notices to Clearing Agency. Whenever a notice
--------------------------
or other communication to the Preferred Partners who hold Global Certificates is
required under this Agreement, the General Partner shall give all such notices
and communications specified herein to be given to such Preferred Partners to
the Clearing Agency, and shall have no obligations to such Preferred Partner
Interest Owners.
39
Section 14.06. Definitive Certificates. If (a) the Clearing
------------------------
Agency elects to discontinue its services as securities depository and gives
reasonable notice to the Partnership, or (b) the Partnership elects to terminate
the book entry system through the Clearing Agency, then Definitive Certificates
shall be prepared by the Partnership. Upon surrender of the typewritten
Certificate or Certificates representing the Book Entry Interests by the
Clearing Agency, accompanied by registration instructions, the General Partner
shall cause the Definitive Certificates to be delivered to the holders of
Preferred Partner Interests in accordance with the instructions of the Clearing
Agency. The General Partner shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Any Person receiving a Definitive Certificate in
accordance with this Article XIV shall be admitted to the Partnership as a
Preferred Partner upon receipt of such Definitive Certificate. The Clearing
Agency or the nominee of the Clearing Agency, as the case may be, shall cease to
be a limited partner of the Partnership, in relation to that series of Preferred
Partner Interests, under this Section 14.06 at the time that at least one
additional Person is admitted to the Partnership as a Preferred Partner in
accordance with this Section 14.06. The Definitive Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the General Partner, as evidenced by its execution
thereof.
Section 14.07. Definitive Certificates on Original Issuance.
----------------------------------------------
Notwithstanding anything in this Agreement to the contrary, including, without
limitation, Sections 14.04, 14.05 and 14.06, on original issuance, Certificates
may, but need not, be issued to The Depository Trust Company in the form of a
Global Certificate or Global Certificates in accordance with Section 14.04, and
may, but need not, be issued to any Person in the form of a Definitive
Certificate or Definitive Certificates in accordance with this Section 14.07.
Without limiting the generality of the foregoing, in connection with the
original issuance of Certificates as Definitive Certificates in accordance with
this Section 14.07, (i) a Clearing Agency or a nominee of the Clearing Agency
that is a limited partner of the Partnership in accordance with sections 14.03
and 14.04 with respect to one or more series of Preferred Partner Interests
shall continue to be a limited partner of the Partnership notwithstanding the
fact that another Person holding a Definitive Certificate issued in accordance
with this Section 14.07 has been admitted to the Partnership as a limited
partner of the Partnership with respect to one or more series of Preferred
Partner Interests, and (ii) Section 14.04, 14.05 and 14.06 shall be inapplicable
to a Person holding a Definitive Certificate issued in accordance with this
Section 14.07. The Definitive Certificates shall be printed,
40
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the General Partner, as is evidenced by its execution thereof.
Registration of transfers of Preferred Partner Interests will be effected
without charge by or on behalf of the Partnership, but upon payment of any tax
or other governmental charges which may be imposed in relation to it. The
Partnership will not be required to register or cause to be registered the
transfer of Preferred Partner Interests after such Preferred Partner Interests
have been called for redemption. Any Person receiving a Definitive Certificate
in accordance with this Section 14.07 shall be admitted to the Partnership as a
Preferred Partner pursuant to Section 2.06.
ARTICLE XV - General
--------------------
Section 15.01. Power of Attorney.
-----------------
(a) The Class A Limited Partner and each Preferred Partner
constitutes and appoints the General Partner and the Liquidating Trustee as its
true and lawful representative and attorney-in-fact, in its name, place and
stead, to make, execute, sign, acknowledge and deliver or file (i) all
instruments, documents and certificates which may from time to time be required
by any law to effectuate, implement and continue the valid and subsisting
existence of the Partnership, (ii) all instruments, documents and certificates
that may be required to effectuate the dissolution and termination of the
Partnership in accordance with the provisions hereof and Delaware law, (iii) all
other amendments of this Agreement or the Certificate of Limited Partnership and
other filings contemplated by this Agreement including, without limitation,
amendments reflecting the withdrawal of the General Partner, or the return, in
whole or in part, of the contribution of any Partner, or the addition,
substitution or increased contribution of any Partner, or any action of the
Partners duly taken pursuant to this Agreement whether or not such Partner voted
in favor of or otherwise approved such action, and (iv) any other instrument,
certificate or document required from time to time to admit a Partner, to effect
its substitution as a Partner, to effect the substitution of the Partner's
assignee as a Partner or to reflect any action of the Partners provided for in
this Agreement.
(b) The powers of attorney granted herein (i) shall be deemed
to be coupled with an interest, shall be irrevocable and shall survive the
death, insanity, incompetency or incapacity (or, in the case of a Partner that
is a corporation, association, partnership, limited liability company or trust,
shall survive the merger, consolidation, conversion, dissolution or other
termination of existence) of the Partner and (ii) shall survive the assignment
by the Partner of the whole or any portion of his Interest, except that where
the assignee of the whole or any
41
portion thereof has furnished a power of attorney, this power of attorney shall
survive such assignment for the sole purpose of enabling the General Partner and
the Liquidating Trustee to execute, acknowledge and file any instrument
necessary to effect any permitted substitution of the assignee for the assignor
as a Partner and shall thereafter terminate. In the event that the appointment
conferred in this Section 15.01 would not constitute a legal and valid
appointment by any Partner under the laws of the jurisdiction in which such
Partner is incorporated, established or resident, upon the request of the
General Partner or the Liquidating Trustee, such Partner shall deliver to the
General Partner or the Liquidating Trustee a properly authenticated and duly
executed document constituting a legal and valid power of attorney under the
laws of the appropriate jurisdiction covering the matters set forth in this
Section 15.01.
(c) The General Partner may require a power of attorney to be
executed by a transferee of a Partner as a condition of its admission as a
substitute Partner.
Section 15.02. Waiver of Partition. Each Partner hereby
----------------------
irrevocably waives any and all rights that it may have to maintain an action for
partition of any of the Partnership's property or assets.
Section 15.03. Notices. Any notice permitted or required to be
--------
given hereunder shall be in writing and shall be deemed given (i) on the day the
notice is first mailed to a Partner by first class mail, postage prepaid, or
(ii) on the date it was delivered in person to a Partner, receipt acknowledged,
at its address appearing on the books and records of the Partnership. Another
address may be designated by a Partner by such Partner giving notice of its new
address as provided in this Section 15.03.
Section 15.04. Entire Agreement. This Agreement, including the
----------------
exhibits annexed hereto and incorporated by reference herein, contains the
entire agreement of the parties hereto and supersedes all prior agreements and
understandings, oral or otherwise, among the parties hereto with respect to the
matters contained herein.
Section 15.05. Waivers. Except as otherwise expressly provided
-------
herein, no purported waiver by any party of any breach by another party of any
of his obligations, agreements or covenants hereunder, or any part thereof,
shall be effective unless made in a writing executed by the party or parties
sought to be bound thereby, and no failure to pursue or elect any remedy with
respect to any default under or breach of any provision of this Agreement, or
any part hereof, shall be deemed to be a
42
waiver of any other subsequent similar or different default or breach, or any
election of remedies available in connection therewith, nor shall the acceptance
or receipt by any party of any money or other consideration due him under this
Agreement, with or without knowledge of any breach hereunder, constitute a
waiver of any provision of this Agreement with respect to such or any other
breach.
Section 15.06. Headings. The section headings herein contained
--------
have been inserted only as a matter of convenience of reference and in no way
define, limit or describe the scope or intent of any provisions of this
Agreement nor in any way affect any such provisions.
Section 15.07. Separability. Each provision of this Agreement
------------
shall be considered to be separable, and if, for any reason, any such provision
or provisions, or any part thereof, is determined to be invalid and contrary to
any existing or future applicable law, such invalidity shall not impair the
operation of, or affect, those portions of this Agreement which are valid, and
this Agreement shall be construed and enforced in all respects as if such
invalid or unenforceable provision or provisions had been omitted.
Section 15.08. Contract Construction. Whenever the content of
---------------------
this Agreement permits, the masculine gender shall include the feminine and
neuter genders, and reference to singular or plural shall be interchangeable
with the other. References in this Agreement to particular sections of the Code
or to provisions of the Delaware Act shall be deemed to refer to such sections
or provisions as they may be amended after the date of this Agreement.
Section 15.09. Counterparts. This Agreement may be executed in
------------
one or more counterparts and each of such counterparts for all purposes shall be
deemed to be an original, but all of such counterparts, when taken together,
shall constitute but one and the same instrument, binding upon all parties
hereto, notwithstanding that all of such parties may not have executed the same
counterpart.
Section 15.10. Benefit. This Agreement shall be binding upon
-------
and inure to the benefit of the parties hereto and their respective successors
and assigns, but shall not be deemed for the benefit of creditors or any other
Persons, nor shall it be deemed to permit any assignment by a Partner of any of
its rights or obligations hereunder except as expressly provided herein.
43
Section 15.11. Further Actions. Each of the Partners hereby
----------------
agrees that it shall hereafter execute and deliver such further instruments and
do such further acts and things as may be required or useful to carry out the
intent and purposes of this Agreement and as are not inconsistent with the terms
hereof.
Section 15.12. Governing Law. This Agreement shall be governed
-------------
by and construed in accordance with the substantive laws of the State of
Delaware, without regard to conflict of laws.
Section 15.13. Amendments. Except as otherwise expressly
----------
provided herein or as otherwise required by law, this Agreement may be amended
by a written instrument executed by only the General Partner.
WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
GENERAL PARTNER:
PENELEC PREFERRED CAPITAL II, INC.
By:
-------------------------------------
Name: T.G. Howson
Title: Vice President
CLASS A LIMITED PARTNER:
--------------------------------------
T.G. Howson
PREFERRED LIMITED PARTNER:
PENELEC CAPITAL TRUST
By:
Name:
-------------------------------------
Title: Regular Trustee
44
Exhibit A
Certificate Evidencing Preferred Partner Interests
of
Penelec Capital II, L.P.
% Cumulative Preferred Partner
---
Interests, Series (liquidation preference
---
$ per Preferred Partner Interest)
---
Penelec Capital II, L.P., a Delaware limited partnership (the
"Partnership"), hereby certifies that (the "Holder") is the
registered owner of ( ) fully paid Preferred Partner
Interests of the Partnership designated the % Cumulative Preferred Partner
Interests, Series (liquidation preference $ per Preferred Partner Interest)
(the "Series Preferred Partner Interests") representing preferred limited
partner interests in the Partnership transferable on the books and records of
the Partnership, in person or by a duly authorized attorney, upon surrender of
this Certificate duly endorsed and in proper form for transfer. The powers,
preferences and special rights and limitations of the Series Preferred
Partner Interests are set forth in, and this Certificate and the Series
Preferred Partner Interests represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Limited Partnership Agreement dated as of , 1998 of the Partnership
as the same may, from time
1
to time, be amended (the "Partnership Agreement") authorizing the issuance of
the Series __ Preferred Partner Interests and determining, along with any
Actions of the General Partner of the Partnership as authorized under the
Partnership Agreement, the preferred, deferred and other special rights and
restrictions, regarding distributions, voting, redemption and otherwise and
other matters relating to the Series Preferred Partner Interests. The
Partnership will furnish a copy of the Partnership Agreement to the Holder
without charge upon written request to the Partnership at its principal place of
business. Capitalized terms used herein but not defined shall have the meaning
given them in the Partnership Agreement. The Holder is entitled to the benefits
of the Payment and Guarantee Agreement of Pennsylvania Electric Company, dated
as of , 1998, as the same may be amended from time to time,
relating to the Preferred Partner Interests (the "Guarantee") and of the
Indenture between Pennsylvania Electric Company and United States Trust Company
of New York, dated as of , 1998, as the same may be amended from time to
time (the "Indenture"), under and pursuant to which the related series of
Subordinated Debentures are issued and outstanding, in either case to the extent
provided therein. The Partnership will furnish a copy of the Guarantee and
Indenture to the Holder without charge upon written request to the Partnership
at its principal place of business or registered office.
2
The Holder, by accepting this Certificate, is deemed to have
(i) agreed that the Subordinated Debentures issued pursuant to the Indenture are
subordinate and junior in right of payment to all Senior Indebtedness of
Pennsylvania Electric Company as and to the extent provided in the Indenture and
(ii) agreed that the Guarantee is subordinate and junior in right of payment to
all general liabilities of Pennsylvania Electric Company. Upon receipt of this
Certificate, the Holder is admitted to the Partnership as a Preferred Partner,
is bound by the Partnership Agreement and is entitled to the benefits
thereunder.
IN WITNESS WHEREOF, the Partnership has executed this Certificate this
day of , 1998.
PENELEC CAPITAL II, L.P.
By: Penelec Preferred Capital II,
Inc., its General Partner
By:
-------------------------------------
Name: T.G. Howson
Title: Vice President
3