As filed with the Securities and Exchange Commission on January 11, 1999
Registration Nos. 333-62295
333-62295-01
333-62295-02
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PENNSYLVANIA ELECTRIC PENELEC CAPITAL II, L.P. PENELEC CAPITAL TRUST
COMPANY (Exact name of (Exact name of
(Exact name of registrant registrant as specified registrant as specified
as specified in its charter) in its charter)
in its charter) DELAWARE DELAWARE
PENNSYLVANIA (State or other (State or other
(State or other jurisdiction of jurisdiction of
jurisdiction of incorporation or incorporation or
incorporation or organization) organization)
organization) 22-3605258 22-3605261
25-0718085 (I.R.S. Employer (I.R.S. Employer
(I.R.S. Employer Identification No.) Identification No.)
Identification No.) c/o GPU Service, Inc. c/o GPU Service, Inc.
2800 Pottsville Pike 310 Madison Avenue 310 Madison Avenue
Reading, Pennsylvania Morristown, New Jersey Morristown, New Jersey
19605 07962 07962
(610) 929-3601 (973) 455-8200 (973) 455-8200
(Addresses, including zip codes, and telephone numbers, including
area codes, of registrants' principal executive
offices)
Terrance G. Howson
Vice President and Treasurer
GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
(973) 455-8200
(Name, address, including zip code, and telephone
number, including area code, of agent for
service for each registrant)
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Please send copies of all communications to:
DOUGLAS E. DAVIDSON, ESQ. ROBERT C. GERLACH, ESQ.
Berlack, Israels & Liberman LLP Ballard Spahr Andrews & Ingersoll, LLP
120 West 45th Street 1735 Market Street
New York, New York 10036 Philadelphia, Pennsylvania 19103
(212) 704-0100 (215) 665-8500
SCOTT L. GUIBORD, ESQ. JOHN T. HOOD, ESQ.
Secretary Thelen Reid & Priest LLP
Pennsylvania Electric Company 40 West 57th Street
2800 Pottsville Pike New York, New York 10019
Reading, Pennsylvania 19605 (212) 603-2000
(610) 929-3601
Approximate date of commencement of proposed sale to the public: At such
time or times after the effective date of this Registration Statement as the
registrants shall determine based on market conditions and other factors.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
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SUBJECT TO COMPLETION, DATED ----------, 1999
PROSPECTUS $725,000,000
PENNSYLVANIA ELECTRIC COMPANY
SENIOR NOTES
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PENELEC CAPITAL TRUST
TRUST SECURITIES
each representing a Cumulative Preferred Security of Penelec Capital II, L.P.
fully and unconditionally guaranteed to the extent Penelec Capital II, L.P.
has funds,
as set forth herein, by
Pennsylvania Electric Company
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Pennsylvania Electric Company, a Pennsylvania corporation (the "Company"),
may offer, from time to time in one or more series, up to $725,000,000 aggregate
principal amount of Senior Notes (the "Senior Notes") secured by its Senior Note
Mortgage Bonds (as defined herein) until the Release Date (as defined herein),
and in amounts, at prices and on terms to be determined at or prior to the time
or times of sale. Until the Release Date, the Senior Notes will be secured by
Senior Note Mortgage Bonds issued and delivered by the Company to the Senior
Note Trustee (as defined herein). See "Description of Senior Notes Security;
Release Date". On the Release Date, the Senior Notes will cease to be secured,
will become unsecured general obligations of the Company and will rank on a
parity with other unsecured and unsubordinated indebtedness of the Company
(unless otherwise secured under the limited circumstances described under the
caption "Description of Senior Notes Certain Covenants of the Company
Limitations on Liens").
Penelec Capital Trust (the "Trust"), a statutory business trust created
under the laws of the State of Delaware, may offer up to $125,000,000 aggregate
liquidation value of preferred beneficial interests, in the form of Trust
Securities (the "Trust Securities"), in amounts, at prices and on terms to be
determined at or prior to the time of sale. Each Trust Security represents a
cumulative preferred limited partner interest (the "Preferred Securities") of
Penelec Capital II, L.P., a limited partnership formed under the laws of the
State of Delaware ("Penelec Capital"), which will be a special purpose indirect
subsidiary of the Company.
The Trust will use the proceeds from the sale of its Trust Securities to
purchase Preferred Securities from Penelec Capital, which will be the sole
assets of the Trust. Penelec Capital will lend the proceeds from the sale of its
Preferred Securities, plus the capital contribution made by Penelec Preferred
Capital II, Inc., a Delaware special purpose corporation and the sole general
partner of Penelec Capital (the "General Partner"), to the Company, which loan
will be evidenced by Subordinated Debentures (the "Subordinated Debentures")
issued by the Company. The Company's Subordinated Debentures may be issued to
Penelec Capital in exchange for Penelec Capital's payment to the Company of an
amount representing the proceeds from the sale of the Preferred Securities to
the Trust and the capital contributions of the General Partner. Subordinated
Debentures purchased by Penelec Capital may subsequently be distributed pro rata
to the holders of the Preferred Securities and the Trust Securities in
connection with the dissolution of Penelec Capital and the Trust.
The Company will also unconditionally guarantee the payment by Penelec
Capital of (i) any accumulated and unpaid distributions on the Preferred
Securities to the extent Penelec Capital has funds on hand legally available
therefor, (ii) the applicable redemption price payable with respect to any
Preferred Securities called for redemption by Penelec Capital to the extent
Penelec Capital has funds on hand legally available therefor, and (iii) upon the
liquidation of Penelec Capital (other than in connection with a Distribution
Event (as defined herein)), the lesser of (a) the portion of the partnership
liquidation distribution applicable to the Preferred Securities and (b) the
amount of assets of Penelec Capital legally available for distribution to
holders of Preferred Securities in liquidation of Penelec Capital (the
"Guarantee").
The Trust Securities will be subject to mandatory redemption upon any
redemption of the of Preferred Securities, which will be subject to mandatory
redemption upon the maturity or prior redemption of the of Subordinated
Debentures, but will not be subject to any mandatory sinking fund. Preferred
Securities may also be subject to optional redemption upon the occurrence of
certain special events at the Special Event Redemption Price (as defined in
"Description of the Preferred Securities - Special Event Redemptions or
Distributions"). See "Description of the Preferred Securities - Mandatory
Redemption" and "--Special Event Redemptions or Distributions" and "Description
of the Subordinated Debentures and the Debenture Indenture."
The Senior Notes, Trust Securities, Preferred Securities, together with
the related Guarantee, and Subordinated Debentures are collectively referred to
as the "Offered Securities". The aggregate principal amount and liquidation
value of all Offered Securities to be offered hereunder will not exceed
$725,000,000. Risk Factors regarding the Offered Securities will be set forth in
the Prospectus Supplement or Supplements.
Certain specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement or Supplements, together with the terms of the particular Offered
Securities, the initial price thereof and the net proceeds from the sale
thereof. The Prospectus Supplement will set forth, with regard to the particular
Offered Securities, without limitation and where applicable, the following: (i)
in the case of the Senior Notes, the designation, aggregate principal amount,
maturity date or dates, interest rate or rates (or method of calculation
thereof) and times of payment of interest, the terms of any redemption, exchange
or sinking fund provisions, the purchase price and any other specific terms of
the offering, (ii) in the case of the Trust Securities, the specific title,
aggregate liquidation value, number of securities, purchase price, any listing
on a securities exchange, distribution rate (or method of calculation thereof)
on the related Preferred Securities, dates on which distributions shall be
payable and dates from which distributions shall accumulate on the related
Preferred Securities, any voting rights, any redemption, exchange or sinking
fund provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Trust Securities and the terms upon which the
proceeds of the Trust Securities shall be used to purchase a specific series of
Preferred Securities of Penelec Capital.
The Offered Securities may be sold to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
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methods. See "Plan of Distribution". The names of any underwriters, dealers or
agents involved in the sale of the Offered Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them, will be set forth in the related Prospectus Supplement.
See "Plan of Distribution" for possible indemnification and contribution
arrangements for dealers, underwriters and agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1999.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C., and at the following regional offices of the SEC: New York
Regional Office, 13th Floor, Seven World Trade Center, New York, New York and
Chicago Regional Office, 14th Floor, 500 West Madison Street, Chicago, Illinois.
Copies of such materials can also be obtained at prescribed rates from the
Public Reference Section of the SEC at its principal office at Judiciary Plaza,
450 Fifth Street, NW, Washington, D.C. 20549. Such material is also available
from the SEC's Web site at "http//www.sec.gov". Certain of the Company's
securities are listed on the New York Stock Exchange and such reports and other
information can also be inspected and copied at the office of such exchange on
the 7th Floor, 20 Broad Street, New York, New York.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company, Penelec Capital and the Trust with the SEC
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Offered Securities. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Reference is
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company, Penelec Capital, the Trust and
the Offered Securities. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
No separate financial statements of the Trust or Penelec Capital have been
included or incorporated by reference herein. The Company does not consider that
such financial statements would be material to holders of the Trust Securities
because (i) the Trust and Penelec Capital are special purpose entities, have no
independent operations and exist for the sole purpose of issuing the securities
described herein and (ii) the Company's obligations described herein and in any
accompanying Prospectus Supplement under the Guarantee, the Subordinated
Debentures purchased by Penelec Capital and the related Debenture Indenture (as
defined herein), and the General Partner's obligations under the Amended and
Restated Trust Agreement of the Trust and the Amended and Restated Limited
Partnership Agreement of Penelec Capital, taken together, constitute a full and
unconditional guarantee of payments due on the Preferred Securities which are
represented by the Trust Securities. See "Description of the Trust Securities,"
"Description of the Preferred Securities" and "Description of the Subordinated
Debentures and Debenture Indenture" and "Description of the Guarantee".
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates herein by reference the following
documents which have been filed by the Company with the SEC pursuant to the
Exchange Act:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1998.
3. The Company's Current Reports on Form 8-K, dated May 22, May 27,
June 5, July 17, July 21, August 3, October 2, October 22 and
November 12, 1998.
All documents subsequently filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated herein by
reference and to be a part hereof from the respective dates of filing thereof.
The documents incorporated or deemed to be incorporated herein by reference are
sometimes hereinafter called the "Incorporated Documents". Any statement
contained herein or in an Incorporated Document shall be deemed to be modified
or superseded for all purposes to the extent that a statement contained herein
or in any Prospectus Supplement or in any subsequently filed Incorporated
Document modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the Incorporated Documents, excluding the exhibits thereto
unless such exhibits are specifically incorporated by reference into such
documents. Requests for such documents should be directed to Pennsylvania
Electric Company, 2800 Pottsville Pike, Reading, Pennsylvania 19605, attention:
Secretary. The Company's telephone number is (610) 929-3601.
In addition to the historical information contained or incorporated by
reference herein, this Prospectus contains or incorporates by reference a number
of "forward-looking statements" within the meaning of the Exchange Act. Such
statements address future events and conditions concerning capital expenditures,
resolution and impact of litigation, regulatory matters, liquidity and capital
resources and accounting matters. Actual results in each case could differ
materially from those projected in such statements due to a variety of factors
including, without limitation, restructuring of the utility industry; future
economic conditions; earnings retention and dividend payout policies;
developments in the legislative, regulatory and competitive environments in
which the Company operates; and other circumstances that could affect
anticipated revenues and costs, such as compliance with laws and regulations.
These and other factors are discussed in the Company's filings with the SEC.
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PENNSYLVANIA ELECTRIC COMPANY
Pennsylvania Electric Company (the "Company"), a public utility furnishing
electric service within the Commonwealth of Pennsylvania and a small portion of
New York State, is a subsidiary of GPU, Inc. ("GPU"), a holding company
registered under the Public Utility Holding Company Act of 1935. The Company
provides electric service within a territory located in western, northern and
south central Pennsylvania having a population of about 1,500,000. The Company,
as lessee of the property of The Waverly Electric Light and Power Company, a
subsidiary, also serves a population of about 13,700 in Waverly, New York. The
Company's principal executive offices are located at 2800 Pottsville Pike,
Reading, Pennsylvania 19605, and its telephone number is (610) 929-3601.
For the year 1997, residential sales accounted for about 35% of the
Company's operating revenues from customers and 28% of kilowatt-hour sales to
customers; commercial sales accounted for about 33% of the Company's operating
revenues from customers and 30% of kilowatt-hour sales to customers; industrial
sales accounted for about 28% of the Company's operating revenues from customers
and 36% of kilowatt-hour sales to customers; and sale to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 4% of the Company's operating revenues from customers
and 6% of kilowatt-hour sales to customers. The revenues derived from the 25
largest customers in the aggregate accounted for approximately 13% of operating
revenues from customers for the year 1997. The Company also makes interchange
and spot market sales of electricity to other utilities.
The electric generating and transmission facilities of the Company and its
affiliates, Metropolitan Edison Company and Jersey Central Power & Light Company
(collectively doing business as "GPU Energy"), are physically interconnected and
are operated as a single integrated and coordinated system. The transmission
facilities of the integrated system are physically interconnected with
neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New
York and Ohio. The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection ("PJM") and the Mid-Atlantic Council, an organization providing
coordinated review of the planning by utilities in the PJM area. The
interconnection facilities are used for substantial capacity and energy
interchange and purchased power transactions as well as emergency assistance.
PENELEC CAPITAL TRUST
Penelec Capital Trust (the "Trust") is a statutory business trust created
in August 1998 under the laws of the State of Delaware. The Trust exists for the
sole purpose of issuing the Trust Securities representing the Preferred
Securities to be held by the Trust and performing functions directly related
thereto. The Trust cannot issue any other securities. The Preferred Securities
will be the only assets of the Trust and the only revenues of the Trust will be
distributions it receives on the Preferred Securities. All expenses and
liabilities of the Trust will be paid by the General Partner. The Trust's
mailing address is c/o GPU Service, Inc., 310 Madison Avenue, Morristown, New
Jersey 07962 and its telephone number is (973) 455-8200.
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PENELEC CAPITAL II, L.P.
Penelec Capital II, L.P. ("Penelec Capital") is a limited partnership
formed in August 1998 under the laws of the State of Delaware. All of its
general partner interests are owned by Penelec Preferred Capital II, Inc., which
will be a wholly owned subsidiary of the Company, as the general partner (the
"General Partner"). As a limited partnership, all of the business and affairs of
Penelec Capital are managed by the General Partner. Penelec Capital was created
solely for the purpose of issuing the Preferred Securities and lending the
proceeds thereof to the Company. Such loans are evidenced by the Subordinated
Debentures issued by the Company in series under the Debenture Indenture (as
hereinafter defined). The Subordinated Debentures will be the only assets of
Penelec Capital and the only revenues of Penelec Capital will be interest its
receives on the Subordinated Debentures. The General Partner pays all of Penelec
Capital's operating expenses and has general liability for all of Penelec
Capital's obligations. Penelec Capital's mailing address is c/o GPU Service,
Inc. 310 Madison Avenue, Morristown, New Jersey 07962 and its telephone number
is (973) 455-8200.
FINANCING PROGRAM
Depending upon market conditions, during the next two years the Company
and/or the Trust, as the case may be, expect to offer pursuant to one or more
separate offerings, up to $725,000,000 aggregate principal amount and
liquidation value of Offered Securities, including up to $125,000,000
liquidation value of Trust Securities. The net proceeds from the sale of the
Trust Securities will be used to purchase Preferred Securities from Penelec
Capital. Penelec Capital will, in turn, lend the proceeds from the sale of its
Preferred Securities to the Company, which loan will be evidenced by the
Company's Subordinated Debentures. The Company also expects to have short-term
borrowings outstanding from time to time during such period.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
offered hereby (i) to redeem other outstanding securities of the Company,
including first mortgage bonds, preferred stock and preferred securities, (ii)
to repay outstanding short-term bank loans or other unsecured indebtedness,
(iii) for construction purposes and (iv) for other corporate purposes, including
to reimburse the Company's treasury for funds previously expended therefrom for
the above purposes. The Trust will use the proceeds from the sale of its Trust
Securities to purchase the Preferred Securities. Penelec Capital will use the
proceeds from the sale of the Preferred Securities to purchase the Subordinated
Debentures. Any specific allocation of the proceeds to a particular purpose that
has been made at the date of any Prospectus Supplement will be described
therein.
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COMPANY COVERAGE RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
Years ended December 31, Twelve Months ended
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1993 1994 1995 1996 1997 September 30, 1998
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4.09 1.69 3.51 2.64 3.35 2.34
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income to
which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and interest portion of all rentals charged to income.
The Company's Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends for each of the periods indicated was as follows:
Years ended December 31, Twelve Months ended
------------------------
1993 1994 1995 1996 1997 September 30, 1998
---- ---- ---- ---- ---- ------------------
3.52 1.59 3.39 2.55 3.29 2.30
The Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends represents, on a pre-tax basis, the number of times earnings cover
fixed charges and preferred stock dividends. Earnings consist of net income to
which has been added fixed charges and taxes based on income of the Company.
Combined fixed charges and preferred stock dividends consist of interest on
funded indebtedness, other interest (including distribution on Company Obligated
Mandatorily Redeemable Preferred Securities), amortization of net gain on
reacquired debt and net discount on debt, preferred stock dividends (increased
to reflect the pre-tax earnings required to cover such dividend requirements)
and the interest portion of all rentals charged to income.
ACCOUNTING TREATMENT
The financial statements of Penelec Capital will be consolidated with the
Company's financial statements, with the Preferred Securities shown on the
Company's consolidated financial statements as "Company Obligated Mandatorily
Redeemable Preferred Securities of a partnership". The Company's financial
statements will include a footnote that discloses, among other things, that the
sole asset of Penelec Capital consists of the Subordinated Debentures and will
specify the principal amount, interest rate and maturity date of each series of
Subordinated Debentures.
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DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the Senior
Notes and the Senior Note Indenture (as defined below). Reference is made to the
Senior Note Indenture which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
General
The Senior Notes may be issued from time to time in one or more series in
amounts and on terms to be determined at or prior to the time or times of sale,
under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture") between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Senior Note Indenture will be secured by one or more
series of the Company's Senior Note Mortgage Bonds (as defined below) issued and
delivered by the Company to the Senior Note Trustee. See "-- Security; Release
Date". On the Release Date, the Senior Notes will cease to be secured by the
Senior Note Mortgage Bonds, will become unsecured general obligations of the
Company and will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company. The Senior Note Indenture provides that prior to
the Release Date, the principal amount of the Senior Notes that may be issued
and outstanding cannot exceed the principal amount of the Senior Note Mortgage
Bonds then held by the Senior Note Trustee. See "Description of Senior Note
Mortgage Bonds".
There is no requirement under the Senior Note Indenture that future issues
of debt securities of the Company be issued exclusively under the Senior Note
Indenture; accordingly, the Company will be free to employ other indentures or
documentation, containing provisions different from those included in the Senior
Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities. There is no limitation
on the amount of Senior Notes that may be issued under the Senior Note
Indenture. Notwithstanding the foregoing, the Senior Note Indenture contains
certain restrictive covenants, including a restriction that the Company may not
issue, assume, guarantee or permit to exist, so long as any Senior Notes are
outstanding and after the Release Date, any debt that ranks senior to the Senior
Notes, subject to certain exceptions. In addition, the Senior Note Indenture
also provides that so long as any Senior Notes are outstanding, certain
sale/leaseback arrangements are restricted.
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that otherwise protects the holders in the event that
the Company incurs substantial additional indebtedness, whether or not in
connection with a change in control of the Company.
Reference is made to the Prospectus Supplement for a description of the
following terms of the series of Senior Notes in respect of which this
Prospectus is being delivered: (i) the title of such Senior Notes; (ii) the
aggregate principal amount of such Senior Notes; (iii) the price (expressed as a
percentage of principal amount) at which such Senior Notes will be issued; (iv)
the date or dates on which the principal of such Senior Notes is payable;
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(v) the rate or rates at which such Senior Notes will bear interest, the date or
dates from which such interest will accrue, the dates on which such interest
will be payable ("Interest Payment Dates"), and the regular record dates for the
interest payable on such Interest Payment Dates; (vi) the option, if any, of the
Company to redeem such Senior Notes and the period or periods within which, or
the date or dates on which, the prices at which and the terms and conditions
upon which, such Senior Notes may be redeemed, in whole or in part, upon the
exercise of such option; (vii) the obligation, if any, of the Company to redeem
or purchase such Senior Notes at the option of the registered holder or pursuant
to any sinking fund or analogous provisions and the period or periods within
which, or the date or dates on which, the price or prices at which and the terms
and conditions upon which, such Senior Notes will be redeemed or purchased, in
whole or in part, pursuant to such obligation; (viii) the denominations in which
such Senior Notes will be issuable, if other than $1,000 and integral multiples
thereof; (ix) whether such Senior Notes are to be issued in whole or in part in
book-entry form and represented by one or more global Senior Notes and, if so,
the identity of the depository for such global Senior Notes and the specific
terms of the depository arrangements therefor; and (x) any other terms of such
Senior Notes, including with respect to any series, if applicable.
Redemption Provisions
Any terms for the optional or mandatory redemption of the Senior Notes
will be set forth in the Prospectus Supplement or Supplements. Except as shall
otherwise be provided in the applicable Prospectus Supplement or Supplements,
the Senior Notes will be redeemable only upon notice by mail not less than 30
nor more than 60 days prior to the date fixed for redemption, and, if less than
all the Senior Notes of a series, or any tranche thereof, are to be redeemed,
the particular Senior Notes to be redeemed will be selected by the Senior Note
Trustee in such a manner as it shall deem appropriate and fair.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Senior Note Trustee, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest on such Senior Notes and that if
such money has not been so received, such notice will be of no force and effect
and the Company will not be required to redeem such Senior Notes.
Security; Release Date
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds ("Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see "Description
of Senior Note Mortgage Bonds"). Upon the issuance of a series of Senior Notes
prior to the Release Date, the Company will simultaneously issue and deliver to
the Senior Note Trustee, as security for all the Senior Notes being issued, a
series of Senior Note Mortgage Bonds that will have the same stated maturity
date and corresponding redemption provisions, and will be in the same aggregate
principal amount and have the same interest rate as the corresponding series of
Senior Notes being issued. Any payment by the Company to the Senior Note Trustee
of principal of, premium, if any, and interest on, a series of Senior Note
Mortgage Bonds will be applied by the Senior Note Trustee to satisfy the
Company's obligations with respect to principal of, premium, if any, and
interest on, the respective corresponding series of Senior Notes.
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The Release Date will be the earlier of (i) the date that all First
Mortgage Bonds (as defined herein) other than the Senior Note Mortgage Bonds,
have been retired (whether at, before or after the maturity thereof) through
payment, redemption, purchase, defeasance or otherwise and (ii) the date upon
which the Senior Note Trustee holds Senior Note Mortgage Bonds constituting not
less than 80% in aggregate principal amount of all outstanding First Mortgage
Bonds. On the Release Date, the Senior Note Trustee will deliver to the Company
for cancellation all Senior Note Mortgage Bonds and, not later than 30 days
thereafter, will provide notice to all holders of the Senior Notes of the
occurrence of the Release Date. As a result, on the Release Date, the Senior
Note Mortgage Bonds shall cease to secure the Senior Notes and the Senior Notes
will become unsecured and unsubordinated general obligations of the Company.
Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of the Company. See "Description of Senior Note Mortgage Bonds
Kind and Priority of Lien". Upon the payment or cancellation of any outstanding
Senior Notes, the Senior Note Trustee shall surrender to the Company for
cancellation an equal principal amount of the related series of Senior Note
Mortgage Bonds. The Company shall not permit, at any time prior to the Release
Date, the aggregate principal amount of Senior Note Mortgage Bonds held by the
Senior Note Trustee to be less than the aggregate principal amount of the Senior
Notes outstanding. The Senior Note Indenture includes a restriction that the
Company may not issue, guarantee or permit to exist, so long as any of the
Senior Notes are outstanding and after the Release Date, any debt that ranks
senior to the Senior Notes, subject to certain exceptions. After the issuance of
the first series of the Senior Notes, no additional First Mortgage Bonds will be
issued under the Mortgage (as defined herein) other than as collateral security
for the Senior Notes.
Events of Default
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due which continues for 60 days; (c) default in the performance
or breach of any other covenant or agreement of the Company in the Senior Notes
or in the Senior Note Indenture and the continuation thereof for 90 days after
written notice thereof to the Company by the Senior Note Trustee or the holders
of at least 33% in aggregate principal amount of the outstanding Senior Notes;
(d) prior to the Release Date, the occurrence of a "completed default" (as
defined under the Mortgage); provided, however, that the waiver or cure of such
default and the recision and annulment of the consequences thereof under the
Mortgage shall constitute a waiver of the corresponding event of default under
the Senior Note Indenture and a recision and annulment of the consequences
thereof under the Senior Note Indenture; and (e) certain events of bankruptcy,
insolvency, reorganization, assignment or receivership of the Company.
If an event of default occurs and is continuing, either the Senior Note
Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes may declare the principal amount of all of the Senior
Notes to be due and payable immediately. Upon such acceleration of the Senior
Notes, the Senior Note Mortgage Bonds shall be immediately redeemable upon
demand of the Senior Note Trustee (and surrender thereof to the Mortgage
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Trustee, as defined) at a redemption price of 100% of the principal amount
thereof, together with interest to the redemption date. See "Description of
Senior Note Mortgage Bonds - Redemption Provisions of Senior Note Mortgage
Bonds". At any time after an acceleration of the Senior Notes has been obtained
(and provided the acceleration of all Senior Note Mortgage Bonds has not
occurred), if the Company pays or deposits with the Senior Note Trustee a sum
sufficient to pay all matured installments of interest and the principal and any
premium which has become due on the Senior Notes otherwise than by acceleration
and all defaults shall have been cured or waived, then such payment or deposit
will cause an automatic rescission and annulment of the acceleration of the
Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee generally
will be under no obligation to exercise any of its rights or powers under the
Senior Note Indenture at the request or direction of any of the holders of the
Senior Notes unless such holders have offered to the Senior Note Trustee
reasonable security or indemnity. Subject to such provisions for indemnity and
certain other limitations contained in the Senior Note Indenture, the holders of
a majority in aggregate principal amount of the outstanding Senior Notes
generally will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Senior Note Trustee, or of
exercising any trust or power conferred on the Senior Note Trustee. The holders
of a majority in aggregate principal amount of the outstanding Senior Notes
generally will have the right to waive any past default or event of default
(other than a payment default) on behalf of all holders of the Senior Notes. The
Senior Note Indenture provides that no holder of the Senior Notes may institute
any action against the Company under the Senior Note Indenture unless such
holder previously shall have given to the Senior Note Trustee written notice of
an event of default and continuance thereof and unless the holders of not less
than a majority in aggregate principal amount of the Senior Notes then
outstanding affected by such event of default shall have requested the Senior
Note Trustee to institute such action and shall have offered the Senior Note
Trustee reasonable indemnity, and the Senior Note Trustee shall not have
instituted such action within 60 days of such request. Furthermore, no holder of
the Senior Notes will be entitled to institute any such action if and to the
extent that such action would disturb or prejudice the rights of other holders
of the Senior Notes. Notwithstanding that the right of a holder of the Senior
Notes to institute a proceeding with respect to the Senior Note Indenture is
subject to certain conditions precedent, each holder of a Senior Note has the
right, which is absolute and unconditional, to receive payment of the principal
of, and premium, if any, and interest on such Senior Note when due and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such holders of Senior Notes. The Senior Note
Indenture provides that the Senior Note Trustee, within 90 days after the
occurrence of a default with respect to the Senior Notes, is required to give
holders of the Senior Notes notice of any default known to the Senior Note
Trustee, unless cured or waived, but, except in the case of default in the
payment of principal of, or premium, if any, or interest on, any Senior Notes,
the Senior Note Trustee may withhold such notice if it determines in good faith
that it is in the interest of such holders to do so. The Company is required to
deliver to the Senior Note Trustee each year an officer's certificate as to
whether or not the Company is in compliance with the conditions and covenants
under the Senior Note Indenture.
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Modification with Approval
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change the coin or currency of any payment of principal of, or
premium, if any, or interest on, any Senior Note; (e) change the date on which
any Senior Note may be redeemed or repaid at the option of the holder thereof or
adversely affect the rights of a holder to institute suit for the enforcement of
any payment on or with respect to any Senior Note; (f) impair the interest of
the Senior Note Trustee in the Senior Note Mortgage Bonds held by it or, prior
to the Release Date, reduce the principal amount of any series of Senior Note
Mortgage Bonds securing the Senior Notes to an amount less than the principal
amount of the related series of Senior Notes or alter the payment provisions of
such Senior Note Mortgage Bonds in a manner adverse to the holders of the Senior
Notes; or (g) modify the foregoing requirements or reduce the percentage of
outstanding Senior Notes necessary to modify or amend the Senior Note Indenture
or to waive any past default to less than a majority.
Modification without Approval
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee without the consent of the holders (a)
to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add further security for the Senior Notes; (c) to supply omissions, cure
ambiguities or correct defects, which actions, in each case, are not prejudicial
to the interest of the holders in any material respect; or (d) to make any other
change that is not prejudicial to the holders of the Senior Notes in any
material respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
Defeasance and Discharge
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for
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the benefit of the holders of Senior Notes, money or certain United States
government obligations, or any combination thereof, which will provide money in
an amount sufficient, without reinvestment, to make all payments of principal
of, premium, if any, and interest on, the Senior Notes on the dates such
payments are due in accordance with the terms of the Senior Note Indenture and
the Senior Notes; provided that unless all of the Senior Notes mature within 90
days of such deposit by redemption or otherwise, the Company shall also have
delivered to the Senior Note Trustee an opinion of counsel to the effect that
the holders of the Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or discharge of the
Senior Note Indenture. Thereafter, the holders of the Senior Notes may look only
to such deposit for payment of the principal of, and interest and any premium
on, the Senior Notes.
Consolidation, Merger and Sale or Disposition of Assets
The Company may not consolidate with or merge into any other corporation
or sell or otherwise dispose of its properties as or substantially as an
entirety unless (i) the successor or transferee corporation shall be a
corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia, (ii) the successor or transferee
corporation assumes by supplemental indenture the due and punctual payment of
the principal of and premium, if any, and interest on all the Senior Notes and
the performance of every covenant of the Senior Note Indenture to be performed
or observed by the Company; and (iii) if prior to the Release Date, the
successor or transferee corporation assumes the Company's obligations under the
Mortgage with respect to the Senior Note Mortgage Bonds. Upon any such
consolidation, merger, sale, transfer or other disposition of the properties of
the Company substantially as an entirety, the successor corporation formed by
such consolidation or into which the Company is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Senior Note Indenture with the same effect
as if such successor corporation had been named as the Company therein, and the
Company will be released from all obligations under the Senior Note Indenture.
For purposes of the Senior Note Indenture, the conveyance or other transfer by
the Company of (a) all or any portion of its facilities for the generation of
electric energy or (b) all of its facilities for the transmission of electric
energy, in each case considered alone or in any combination with properties
described in the other clause, shall in no event be deemed to constitute a
conveyance or other transfer of all the properties of the Company, as or
substantially as an entirety.
Certain Covenants of the Company
Limitation on Liens
The Senior Note Indenture provides that, so long as any such Senior Notes
are outstanding, the Company may not issue, assume, guarantee or permit to exist
after the Release Date any Debt (as defined below) that is secured by any
mortgage, security interest, pledge or lien ("Lien") of or upon any Operating
Property of the Company (as defined below), whether owned at the date of the
Senior Note Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking equally with the Senior
Notes) equally and ratably with such Debt (but only so long as such Debt is so
secured).
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The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the costs of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure indebtedness incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose, provided such
Liens are created or assumed contemporaneously with, or within 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) Liens in favor of any
state or any department, agency or instrumentality or political subdivision of
any state, or for the benefit of holders of securities issued by any such entity
(or providers of credit enhancement with respect to such securities), to secure
any Debt (including, without limitation, obligations of the Company with respect
to industrial development, pollution control or similar revenue bonds) incurred
for the purpose of financing all or any part of the purchase price or the cost
of substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Mortgage, except as provided in the Senior Note Indenture; (6) liens to
compensate the Senior Note Trustee as provided in the Senior Note Indenture; (7)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in clauses (1)
through (7), provided, however, that the principal amount of Debt secured
thereby and not otherwise authorized by said clauses (1) to (7), inclusive,
shall not exceed the principal amount of Debt, plus any premium or fee payable
in connection with any such extension, renewal or replacement, so secured at the
time of such extension, renewal or replacement. However, the foregoing
restriction will not apply to the issuance, assumption or guarantee by the
Company of Debt secured by a Lien which would otherwise be subject to the
foregoing restriction up to an aggregate amount which, together with all other
secured Debt of the Company (not including secured Debt permitted under any of
the foregoing exceptions) and the Value (as defined below) of Sale and
Lease-Back Transactions (as defined below) existing at such time (other than
Sale and Lease-Back Transactions the proceeds of which have been applied to the
retirement of certain indebtedness, Sale and Lease-Back Transactions in which
the property involved would have been permitted to be subjected to a Lien under
any of the foregoing exceptions in clauses (1) to (6) and Sale and Lease-Back
Transactions that are permitted by the first sentence of "Limitations on Sale
and Lease-Back Transactions" below), does not exceed the greater of 15% of
Tangible Assets or 15% of Capitalization (as such terms are defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist after the Release
Date any Sale and Lease-Back Transaction with respect to any Operating Property
(except for transactions involving leases for a term, including renewals, of not
more than 48 months), if the purchasers' commitment is obtained more than 18
months after the later of the completion of the acquisition, construction or
development of such Operating Property or the
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placing in operation of such Operating Property or of such Operating Property as
constructed or developed or substantially repaired, altered or improved. This
restriction will not apply if (a) the Company would be entitled pursuant to any
of the provisions described in clauses (1) to (5) of the first sentence of the
second paragraph under "Limitation on Liens" above to issue, assume, guarantee
or permit to exist Debt secured by a Lien on such Operating Property without
equally and ratably securing the Senior Notes, (b) after giving effect to such
Sale and Lease-Back Transaction, the Company could incur pursuant to the
provisions described in the second sentence of the second paragraph under
"Limitation on Liens", at least $1.00 of additional Debt secured by Liens (other
than Liens permitted by clause (a)), or (c) the Company applies within 180 days
an amount equal to, in the case of a sale or transfer for cash, the net proceeds
(not exceeding the net book value), and, otherwise, an amount equal to the fair
value (as determined by its Board of Directors) of the Operating Property so
leased, to the retirement of Senior Notes or other Debt of the Company ranking
equally with the Senior Notes, subject to reduction for Senior Notes and such
Debt retired during such 180-day period otherwise than pursuant to mandatory
sinking fund or prepayment provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing on,
or included in, the consolidated balance sheet of the Company: (i) liabilities
for indebtedness maturing more than 12 months from the date of determination;
and (ii) common stock, preferred stock, Hybrid Preferred Securities (as defined
in the Senior Note Indenture), premium on capital stock, capital surplus,
capital in excess of par value and retained earnings (however the foregoing may
be designated), less, to the extent not otherwise deducted, the cost of shares
of capital stock reacquired by the Company.
"Debt" means any outstanding debt for money borrowed evidenced by notes,
debentures, bonds or other securities, or guarantees of any thereof.
"Operating Property" means (i) any interest in real property owned by the
Company and (ii) any asset owned by the Company that is depreciable in
accordance with generally accepted accounting principles ("GAAP") excluding, in
either case, any interest of the Company as lessee under any lease (except for a
lease that results from a Sale and Lease-Back Transaction) which has been or
would be capitalized on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (i)
intangible assets including, but without limitation, such items as
goodwill, trademarks, trade names, patents, and unamortized debt discount
and expense, and (ii) appropriate adjustments, if any, on account of
minority interests. Tangible
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Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (i) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, or (ii) the net book value of such property, as
determined by the Company in accordance with GAAP, in either case multiplied by
a fraction, the numerator of which shall be equal to the number of full years of
the term of the lease that is part of such Sale and Lease-Back Transaction
remaining at the time of determination and the denominator of which shall be
equal to the number of full years of such term, without regard, in any case, to
any renewal or extension options contained in such lease.
Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee
The Senior Note Trustee, as the holder of Senior Note Mortgage Bonds, will
attend any meeting of bondholders under the Mortgage, or, at its option, will
deliver its proxy in connection therewith relating to matters with respect to
which it is entitled to vote or consent.
The Senior Note Trustee shall vote all Senior Note Mortgage Bonds then
held by it or consent with respect thereto, proportionately with the vote or
consent of the holders of all other First Mortgage Bonds outstanding under the
Mortgage, the holders of which are eligible to vote or consent; provided,
however, that the Senior Note Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were an
amendment or modification of the Senior Note Indenture, would require the
consent of the holders of Senior Notes as described under "- Modification",
without the prior consent of holders of Senior Notes which would be required for
such an amendment or modification of the Senior Note Indenture.
Resignation or Removal of Senior Note Trustee
The Senior Note Trustee may resign at any time upon written notice to the
Company specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Senior Note Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
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Concerning the Senior Note Trustee
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture, the Mortgage Trustee under the Mortgage and, as
described in "Description of the Subordinated Debentures and the Debenture
Indenture", the Debenture Trustee under the Debenture Indenture. The Senior Note
Indenture provides that the Company's obligations to compensate the Senior Note
Trustee and reimburse the Senior Note Trustee for expenses, disbursements and
advances will constitute indebtedness which will be secured by a lien generally
prior to that of the Senior Notes upon all property and funds held or collected
by the Senior Note Trustee as such. The Senior Note Indenture provides that the
Senior Note Trustee shall be subject to and shall comply with the provisions of
Section 310(b) of the Trust Indenture Act of 1939, as amended, and that nothing
in the Senior Note Indenture shall be deemed to prohibit the Senior Note Trustee
or the Company from making any application permitted pursuant to such section.
Governing Law
The Senior Note Indenture and each Senior Note will be governed by New
York law.
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DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
General
The Senior Note Mortgage Bonds are first mortgage bonds ("First Mortgage
Bonds") to be issued under and secured by the Company's Mortgage and Deed of
Trust dated as of January 1, 1942 between the Company and United States Trust
Company of New York, as successor trustee (the "Mortgage Trustee"), as
heretofore amended and supplemented, and to be further amended and supplemented
by one or more Supplemental Indentures with respect to the Senior Note Mortgage
Bonds (collectively, the "Mortgage"). The statements herein concerning the First
Mortgage Bonds and the Mortgage are summaries and do not purport to be complete.
They may make use of defined terms and are subject to, and qualified in their
entirety by, all of the provisions of the Mortgage, which is incorporated herein
by reference.
The Senior Note Mortgage Bonds will be issued as security for the
Company's obligations under the Senior Note Indenture and will be immediately
delivered to and registered in the name of the Senior Note Trustee. The Senior
Note Indenture provides that the Senior Note Trustee shall not transfer any
Senior Note Mortgage Bonds except to a successor trustee, to the Company (as
provided in the Senior Note Indenture) or in compliance with a court order in
connection with a bankruptcy or reorganization proceeding of the Company. The
Senior Note Trustee shall generally vote the Senior Note Mortgage Bonds
proportionately with what it believes to be the vote of the holders of all other
First Mortgage Bonds then outstanding, as described under "Description of Senior
Notes - Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee".
The Senior Note Mortgage Bonds will correspond to the corresponding series
of Senior Notes in respect of principal amount, interest rate, maturity date and
redemption provisions. Upon payment of the principal or premium, if any, or
interest on the Senior Notes, Senior Note Mortgage Bonds of the corresponding
series in a principal amount equal to the principal amount of such Senior Notes
will, to the extent of such payment of principal, premium or interest, be deemed
fully paid and the obligation of the Company to make such payment shall be
discharged.
Redemption Provisions of Senior Note Mortgage Bonds
The Senior Note Mortgage Bonds will be redeemed on the respective dates
and in the respective principal amounts which correspond to the redemption dates
for and the principal amounts to be redeemed of the corresponding series of
Senior Notes. The Senior Note Mortgage Bonds are not redeemable by operation of
the improvement fund or the maintenance provisions of the Mortgage, or with the
proceeds of released property.
In the event of an event of default under the Senior Note Indenture and
acceleration of the Senior Notes, the Senior Note Mortgage Bonds will be
immediately redeemable in whole, upon demand of the Senior Note Trustee, at a
redemption price of 100% of the principal amount thereof, together with accrued
interest to the redemption date. See "Description of Senior Notes - Events of
Default".
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Kind and Priority of Lien
The Senior Note Mortgage Bonds will rank equally as to security with all
First Mortgage Bonds outstanding under the Mortgage, which is a direct first
lien on substantially all of the Company's property and franchises (except cash,
securities, judgments, contracts, accounts and chooses in action not
specifically subjected to its lien, certain personal property, including
merchandise, materials or supplies held or acquired for sale or consumption,
automobiles and trucks), and subject only to (1) the Mortgage Trustee's prior
lien for its compensation and reimbursement and (2) excepted encumbrances
specified in the Mortgage. The Mortgage contains provisions for subjecting to
its lien, subject to existing liens, property and franchises (except such as are
excluded as above-mentioned from the lien of the Mortgage) which may be
hereafter acquired by the Company, and contains certain restrictions upon the
acquisition of property with respect to which certain prior lien bonds are
outstanding. No prior lien bonds are presently outstanding.
Release and Substitution of Property
The Company, without notice to or action by the Mortgage Trustee, may,
with limitation, change or substitute contracts, leases and rights-of-way,
surrender or assent to the modification of any right, license, franchise or
permit, or dispose of property of a limited nature; and may obtain a release of
certain mortgaged property from the lien of the Mortgage upon depositing not
less than the fair value thereof or, in certain cases, the consideration
received therefor, with the Mortgage Trustee or a prior lien holder. Such
deposited cash may (1) be withdrawn against an equal amount of bondable value of
property additions, or equal principal amounts of refundable prior lien bonds
and First Mortgage Bonds previously issued and theretofore or then retired; or
(2) be used for the purchase, payment or redemption of First Mortgage Bonds. If
any such deposited cash is not so withdrawn, used or applied within three years
after deposit with the Mortgage Trustee, it shall be used or applied by the
Mortgage Trustee to purchase, pay at maturity or redeem First Mortgage Bonds.
Dividend Restrictions
The Mortgage restricts cash dividends payable by the Company on its common
stock to the amount of the Company's accumulated earned surplus less
$10,084,106. The amount available for the declaration and payment of dividends
on the Company's common stock pursuant to this restriction will be contained in
a Prospectus Supplement.
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Issuance of Additional First Mortgage Bonds
So long as the Company is not in default in the performance of any
covenant to be performed by it under the Mortgage and obtains all requisite
authority of governmental bodies, it may issue additional First Mortgage Bonds
to the extent of (1) 60% of bondable value of property additions; (2) the
principal amount of refundable prior lien bonds deposited, retired or to be
retired; (3) the principal amount of First Mortgage Bonds then or theretofore
retired; and (4) the amount of cash deposited with the Mortgage Trustee against
the issuance of First Mortgage Bonds. First Mortgage Bonds may be issued
pursuant to (1) and (4), and in certain cases pursuant to (2) and (3), above,
only if net earnings (calculated before income taxes but after deduction of an
amount equal to the greater of the actual book provision for depreciation or the
"minimum provision for depreciation") shall be at least two times the annual
interest requirements on First Mortgage Bonds and prior lien bonds to be
outstanding. Cash deposited against the issuance of First Mortgage Bonds may be
withdrawn by the Company in an amount equal to the principal amount of First
Mortgage Bonds which it would otherwise be entitled to have authenticated and
delivered; and such cash may be applied to the purchase, payment at maturity or
redemption of First Mortgage Bonds.
The principal amount of additional First Mortgage Bonds issuable pursuant
to these provisions will be contained in a Prospectus Supplement.
Improvement Fund
The Company is required to deposit with the Mortgage Trustee by April 30
of each year cash equal to 1% of the aggregate principal amount of First
Mortgage Bonds issued prior to January 1 of such year (certain First Mortgage
Bonds excepted) less (1) 60% of the amount of bondable value of property
additions and/or (2) the principal amount of refundable prior lien bonds and
First Mortgage Bonds previously issued and theretofore or then retired, which
the Company then elects to take as a credit. Cash so deposited may be (a)
withdrawn within three years upon the same basis as such a credit may be taken,
or (b) used by the Mortgage Trustee for the purchase, payment at maturity or
redemption of First Mortgage Bonds. The Company has heretofore utilized bondable
value of property additions to satisfy this requirement and expects to continue
to do so in the future.
Maintenance Fund
The Company is required to make expenditures for property additions and/or
to deposit with the Mortgage Trustee, cash (less, at the option of the Company,
credit for refundable prior lien bonds and First Mortgage Bonds theretofore or
then retired) in amounts equal to the minimum provision for depreciation,
computed cumulatively at the end of each year. Cash so deposited with the
Mortgage Trustee may, during the next succeeding three years, be withdrawn by
the Company to the extent that the amount theretofore expended for property
additions, as aforesaid, exceeds the minimum provision for depreciation. The
Company has, in the past, made sufficient expenditures for property additions to
meet its obligations with respect to the minimum provision for depreciation, and
no deposits with the Mortgage Trustee have been required in this connection. The
Company expects that this pattern will continue in the future.
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So long as any of the First Mortgage Bonds shall be outstanding, the term
"minimum provision for depreciation" with reference to any period after 1948
means an amount equal to the greater of (1) 15% of gross operating revenues
during such period from the operation of bondable property after deducting the
aggregate cost of electric energy purchased for resale during such period in
connection with the operation of such property, less an amount equal to charges
for current repairs and maintenance of such property, or (2) an amount computed
at the rate of 2.4% per annum of the depreciable utility property of the Company
as of January 1 of each year or portion thereof embraced within such period.
Modification of Mortgage
With the consent of the holders of not less than 75% in principal amount
of the First Mortgage Bonds affected, the Company and the Mortgage Trustee are
empowered to change the Mortgage in any way except (a) to reduce the amount or
extend the due dates of the principal of or interest on the First Mortgage
Bonds, or (b) to reduce the percentage of bondholders required to effect changes
in the Mortgage.
Defaults and Notice Thereof
"Completed defaults" under the Mortgage include default in the payment of
principal and premium, if any, of any of the First Mortgage Bonds or any prior
lien bonds; default, for 60 days, in payment of interest on any of the First
Mortgage Bonds or beyond the period of grace on any prior lien bonds; default,
for 60 days after notice, in the performance of any covenant in the Mortgage;
and bankruptcy, insolvency or reorganization (under certain circumstances) of
the Company. The Mortgage Trustee may withhold notice to bondholders of default
(except default in payment of principal, premium, interest or sinking and
improvement fund installments) if its responsible officers think it is in the
interest of the bondholders to do so.
A majority in aggregate principal amount of the First Mortgage Bonds is
necessary to require the Mortgage Trustee to take action to enforce the lien of
the Mortgage. The Mortgage Trustee may require reasonable indemnification before
being required to enforce the lien of the Mortgage. Holders of not less than 25%
in aggregate principal amount of outstanding First Mortgage Bonds or the
Mortgage Trustee may declare the principal and interest of all outstanding First
Mortgage Bonds due upon the occurrence of a completed default, but the holders
of a majority in principal amount of the outstanding First Mortgage Bonds may,
under certain circumstances, including the curing of such default, annul any
such declaration. No holder shall have the right to institute action, unless
holders of 25% in aggregate principal amount of First Mortgage Bonds shall have
made written request to the Mortgage Trustee to institute such action.
Concerning the Mortgage Trustee
The Mortgage Trustee, United States Trust Company of New York, is
permitted to engage in other transactions with the Company, except that if the
Mortgage Trustee acquires any conflicting interest, as defined, it must
eliminate it or resign and is required in certain cases to share with the
bondholders the benefits of payments received within four months prior to
default. United States Trust Company of New York is also the Senior Note Trustee
under the Senior Note Indenture and the Debenture Trustee under the Debenture
Indenture and a
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depository of the Company and certain of the Company's affiliates and has in the
past made, and may in the future make, loans to the Company and certain of the
Company's affiliates.
Satisfaction and Discharge of Mortgage
Upon the Company's making due provision for the payment of all of the
First Mortgage Bonds and paying all other sums due under the Mortgage, the
Mortgage shall cease to be of further effect and may be satisfied and discharged
of record. Holders of First Mortgage Bonds may wish to consult with their own
tax advisers regarding possible tax effects in the event of a defeasance of the
Mortgage.
Evidence as to Compliance with Mortgage Provisions
While the Mortgage does not require that evidence be furnished at stated
intervals to the Mortgage Trustee as to the absence of a default or as to
compliance with each of the terms of the Mortgage, the Company furnishes the
Mortgage Trustee annually with a compliance certificate required by the Trust
Indenture Act of 1939, as amended. The Mortgage does require that the Company
furnish a certificate to the Mortgage Trustee that the Company is not in default
under the Mortgage only in connection with certain applications under the
Mortgage made to the Mortgage Trustee, such as for the authentication of
additional First Mortgage Bonds, certain withdrawals of cash and certain
releases of property. In addition, the improvement fund, maintenance fund and
recording provisions of the Mortgage require that the Company furnish an annual
filing to the Mortgage Trustee that the Company is in compliance with these
provisions. The Mortgage also requires that each certificate or opinion
furnished under the Mortgage contain a statement as to compliance with the
condition or covenant of the Mortgage to which the certificate or opinion
relates.
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DESCRIPTION OF THE TRUST SECURITIES
The following is a summary of certain terms and provisions of the Trust
Securities and the Amended and Restated Trust Agreement of the Trust (the "Trust
Agreement"). Reference is made to the Trust Agreement, which is an exhibit to
the Registration Statement of which this Prospectus forms a part.
General
The Trust Securities may be issued in amounts, at prices and on terms to
be determined at or prior to the time of sale. Reference is made to the
Prospectus Supplement relating the Trust Securities for specific terms,
including (i) the distinctive designation of such Trust Securities; (ii) the
number of Trust Securities issued; (iii) the annual distribution rate or rates
(or method of calculation thereof) for the Preferred Securities, which are
represented by the Trust Securities and the date or dates upon which such
distributions shall be payable; (iv) the date or dates (or method of determining
the date or dates) from which distributions on the Preferred Securities, which
are represented by the Trust Securities, shall be cumulative; (v) the obligation
or option, if any, of the Trust to purchase or redeem Trust Securities and the
price or prices at which, the period or periods within which, and the terms and
conditions upon which, the Preferred Securities, which are represented by the
Trust Securities shall be purchased or redeemed, in whole or in part, pursuant
to such obligation or option; (vi) the terms and conditions, if any, upon which
the Subordinated Debentures may be distributed to holders of Trust Securities
("Distribution Event"); (vii) if applicable, any securities exchange upon which
the Trust Securities shall be listed; (viii) whether the Trust Securities are to
be issued in whole or in part in book-entry form and represented by one or more
global certificates, and if so, the identity of the depository for such global
certificates and the specific terms of the depository arrangements therefor; and
(ix) any other relevant rights, preferences, privileges, limitations or
restrictions of Trust Securities, including any rights to defer distributions on
the Trust Securities, not inconsistent with the Trust Agreement or with
applicable law.
The Trust Securities will be issued by the Trust pursuant to the Trust
Agreement. Each Trust Security will represent a Preferred Security of Penelec
Capital. The Preferred Securities will be guaranteed by the Company to the
extent set forth below under "Description of the Guarantee". The Guarantee of
the Company, when taken together with the Company's obligations under the
Subordinated Debentures and the Debenture Indenture, and the General Partner's
obligations under the Trust Agreement and the Partnership Agreement (as defined
below"), including obligations to pay costs, expenses, debts and liabilities of
the Trust and Penelec Capital (other than with respect to the Trust Securities),
would provide a full and unconditional guarantee of amounts due on the Preferred
Securities, which are represented by Trust Securities.
The Trust is a statutory business trust created under the Delaware
Business Trust Act. A trustee of the Trust will hold the Preferred Securities
deposited in the Trust for the benefit of the holders of the Trust Securities.
The Trust Agreement provides that, to the fullest extent permitted by law,
without the need for any other action of any person, including any trustee of
the Trust and any other holder of Trust Securities, each holder of Trust
Securities shall be entitled to enforce in the name of the Trust the Trust's
rights under the Preferred Securities represented by the Trust Securities held
by such holder.
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It is anticipated that the assets of the Trust available for distribution
to the holders of the Trust Securities will be limited to payments from Penelec
Capital under the Preferred Securities, the source of which payments by Penelec
Capital will be limited to payments from the Company on the Subordinated
Debentures. See "Description of the Subordinated Debentures and the Debenture
Indenture". If the Company fails to make a payment on the Subordinated
Debentures or if Penelec Capital fails to make a distribution on the Preferred
Securities, the Trust will not have sufficient funds to make related payments on
the Trust Securities.
Certain United States federal income tax considerations applicable to any
offering of Trust Securities will be described in the Prospectus Supplement
relating thereto.
Distributions
Each Trust Security will represent a Preferred Security of Penelec Capital
issued to and held by the Trust, and distributions on the Trust Securities will
be made concurrently with distributions on the Preferred Securities.
Distributions on the Preferred Securities will be cumulative and will accumulate
from the date and at the annual rate or rates described in the Prospectus
Supplement.
Redemption of Trust Securities
The Trust Securities will be subject to mandatory redemption upon
redemption of the Preferred Securities at the redemption price set forth in the
Prospectus Supplement.
Payments on Liquidation of Penelec Capital
Upon receipt by the Trust of any distribution, in cash or in kind, from
Penelec Capital upon liquidation of Penelec Capital (or payment by the Company
under the Guarantee in respect thereof), after satisfaction of creditors of the
Trust as required by applicable law, a trustee of the Trust shall distribute to
the holders of the Trust Securities such distributions, in cash or in kind, in
proportion to the respective number of Preferred Securities represented by such
Trust Securities.
Withdrawal of Preferred Securities
Any beneficial owner of Trust Securities may withdraw all, but not less
than all, of the Preferred Securities represented by such Trust Securities by
providing a written notice and agreement to be bound by the terms of the
Partnership Agreement to a trustee of the Trust, with evidence of beneficial
ownership in form satisfactory to such trustee. The Preferred Securities will
only be issued in certificated form.
Any holder of Preferred Securities may redeposit withdrawn Preferred
Securities by delivery to a trustee of the Trust of a certificate or
certificates for the Preferred Securities to be deposited, properly endorsed or
accompanied, if required by such trustee, by a properly executed instrument of
transfer or endorsement in form satisfactory to such trustee and in compliance
with the terms of the Partnership Agreement, together with all such
certifications as may be required by such trustee in its sole discretion and in
accordance with the provisions of the Trust Agreement.
-25-
Voting Rights
If the holders of the Preferred Securities, acting as a single class, are
entitled to appoint and authorize a Special Representative (as defined below)
pursuant to the Partnership Agreement, a trustee of the Trust shall notify the
holders of the Trust Securities of such right, request direction of each holder
of a Trust Security as to the appointment of a Special Representative and vote
the Preferred Securities represented by such Trust Security in accordance with
such direction.
Upon receipt of notice of any meeting at which the holders of the
Preferred Securities are entitled to vote, a trustee of the Trust shall, as soon
as practicable thereafter, mail to the holders of the Trust Securities a notice,
which shall be provided by the General Partner and which shall contain (i) such
information as is contained in such notice of meeting, (ii) a statement that the
holders of Trust Securities at the close of business on a specified record date
will be entitled, subject to any applicable provision of law, to instruct such
trustee as to the exercise of the voting rights pertaining to the amount of
Preferred Securities represented by their respective Trust Securities, and (iii)
a brief statement as to the manner in which such instructions may be given. Upon
the written request of a holder of a Trust Security, such trustee shall vote or
cause to be voted the number of Preferred Securities represented by such Trust
Securities in accordance with the instructions set forth in such request.
Expenses of the Trust
All charges or expenses of the Trust, including the charges and expenses
of the trustees of the Trust, will be paid by the General Partner.
-26-
DESCRIPTION OF THE PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the
Preferred Securities represented by the Trust Securities. Reference is made to
the Amended and Restated Limited Partnership Agreement of Penelec Capital (the
"Partnership Agreement"), which is an exhibit to the Registration Statement of
which this Prospectus forms a part.
General
The Preferred Securities will be issued from time to time in one or more
series and shall have the terms described in the Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to any series of
Preferred Securities of Penelec Capital for specific terms, including (i) the
distinctive designation of such Preferred Securities; (ii) the number of
Preferred Securities issued; (iii) the annual distribution rate or rates (or
method of determining such rate or rates) for Preferred Securities and the date
or dates upon which such distributions shall be payable; (iv) the date or dates
(or method of determining the date or dates) from which distributions on
Preferred Securities shall be cumulative; (v) the obligation or option, if any,
of Penelec Capital to purchase or redeem Preferred Securities and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which, Preferred Securities shall be purchased or redeemed, in
whole or in part, pursuant to such obligation or option; (vi) the terms and
conditions, if any, upon which the Subordinated Debentures may be distributed to
holders of Preferred Securities; and (vii) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities,
including any rights to defer distributions on the Preferred Securities, not
inconsistent with the Partnership Agreement or with applicable law.
The Preferred Securities will be guaranteed by the Company to the extent
set forth below under "Description of the Guarantee". The Guarantee of the
Company, when taken together with the Company's obligations under the
Subordinated Debentures and the Debenture Indenture and the General Partner's
obligations under the Partnership Agreement, would provide a full and
unconditional guarantee of amounts due on Preferred Securities issued by Penelec
Capital.
All of the general partner interests of Penelec Capital are owned by the
General Partner, which is a wholly owned subsidiary of the Company. The
Preferred Securities represent preferred limited partner interests of Penelec
Capital. All of the Preferred Securities issued by Penelec Capital will be of
equal rank in participation in the profits and assets and income of Penelec
Capital. The Partnership Agreement authorizes the General Partner to establish
series of Preferred Securities having such designations, rights, privileges,
restrictions and other terms and provisions as the General Partner may
determine. Distributions on all series of Preferred Securities must be paid in
full before the General Partner may participate in the profits or assets of
Penelec Capital.
Certain United States federal income tax considerations applicable to any
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto.
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Distributions
The General Partner may make distributions on the general partner
interests of Penelec Capital only after payment in full of all distributions
accumulated on all outstanding Preferred Securities of Penelec Capital.
Distributions on the Preferred Securities must be paid by Penelec Capital
to the extent that Penelec Capital has funds on hand legally available therefor.
The funds available for distribution by Penelec Capital will be limited to
payments received by Penelec Capital in respect of the Subordinated Debentures.
See "Description of the Subordinated Debentures and the Debenture Indenture".
Mandatory Redemption
A series of Preferred Securities will be subject to mandatory redemption
upon the repayment at maturity or prior redemption of the corresponding series
of the Subordinated Debentures.
Liquidation Distribution
In the event of any voluntary or involuntary dissolution or winding up of
Penelec Capital, the holders of Preferred Securities will be entitled to receive
out of the assets of Penelec Capital, after satisfaction of liabilities to
creditors and before any distribution of assets is made to the General Partner,
the lesser of (i) the sum of their stated liquidation preference and all
accumulated and unpaid distributions to the date of payment of the Preferred
Securities, and (ii) the amount of assets of Penelec Capital legally available
for distribution to the holders of Preferred Securities. All assets of Penelec
Capital remaining after payment of the liquidation distribution to the holders
of Preferred Securities will be distributed to the General Partner.
Voting Rights
Except as provided in a Prospectus Supplement and as otherwise required by
law and the Partnership Agreement, the holders of the Preferred Securities have
no voting rights.
If (i) Penelec Capital fails to pay distributions in full on a series of
Preferred Securities for a period as set forth in the Prospectus Supplement,
(ii) an Event of Default (as defined in the Debenture Indenture) occurs and is
continuing, or (iii) the Company is in default on any of its payment obligations
under the related Guarantee, then the holders of the Preferred Securities,
acting as a single class, will be entitled by a vote of the majority of the
aggregate stated liquidation preference of the outstanding Preferred Securities
to appoint a special representative (the "Special Representative") to enforce
Penelec Capital's rights against the Company under the Subordinated Debentures
and the Debenture Indenture and the obligations undertaken by the Company under
the Guarantee issued in conjunction with the issuance of such Preferred
Securities. The Special Representative shall not be admitted as a partner of
Penelec Capital or otherwise be deemed a partner of Penelec Capital and shall
have no liability for the debts, obligations or liabilities of Penelec Capital.
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If any proposed amendment to the Partnership Agreement provides for, or
the General Partner otherwise proposes to effect, any action which would
materially adversely affect the powers, preferences or special rights attached
to any series of Preferred Securities, whether by way of amendment to the
Partnership Agreement or otherwise, then the holders of such series of Preferred
Securities will be entitled to vote on such amendment or action of the General
Partner.
So long as any series of Subordinated Debentures are held by Penelec
Capital, the General Partner may not, except as directed to do so by the Special
Representative, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the holder of the Subordinated Debentures
or the Trustee under the Debenture Indenture (the "Debenture Trustee"), or
executing any trust or power conferred on the Debenture Trustee, (ii) waive any
past default under the Debenture Indenture, (iii) exercise any right to rescind
or annul a declaration that the principal of all the Subordinated Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Debenture 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 Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of Preferred
Securities. The General Partner shall notify all holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to any series of Subordinated Debentures.
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DESCRIPTION OF THE GUARANTEE
The following is a summary of certain provisions of the Guarantee which
will be executed and delivered by the Company concurrently with the issuance of
each series of the Preferred Securities. Reference is made to the Guarantee,
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
General
Under the Guarantee, the Company will agree to pay (i) any accumulated and
unpaid distributions on the Preferred Securities to the extent that Penelec
Capital has funds on hand legally available therefor, (ii) the applicable
redemption price payable with respect to any Preferred Securities called for
redemption by Penelec Capital to the extent that Penelec Capital has funds on
hand legally available therefor, and (iii) upon a liquidation of Penelec
Capital, other than in connection with a Distribution Event, the lesser of (a)
the portion of the partnership liquidation distribution applicable to the
Preferred Securities and (b) the amount of assets of Penelec Capital legally
available for distribution to holders of Preferred Securities in liquidation of
Penelec Capital (collectively, the "Guarantee Payments"). The Company will agree
to pay the Guarantee Payments, as and when due (except to the extent paid by
Penelec Capital), to the fullest extent permitted by law, regardless of any
defense, right of setoff or counterclaim which the Company may have or assert
against Penelec Capital, the General Partner, the Trust or a trustee of the
Trust. The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of
Preferred Securities or by causing Penelec Capital to pay such amounts to such
holders.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all general liabilities
of the Company, except trade accounts payable arising in the ordinary course of
business.
The Guarantee will constitute a guarantee of payment and not of
collection. The Guarantee will be held by the General Partner for the benefit of
the holders of the Preferred Securities. In the event of the appointment of a
Special Representative, the Special Representative may enforce the Guarantee. If
no Special Representative has been appointed to enforce the Guarantee, the
General Partner will have the right to enforce the Guarantee on behalf of the
holders of the Preferred Securities. The holders of Trust Securities, together
with the holders of the Preferred Securities other than the Trust, representing
not less than 10% in aggregate stated liquidation preference of the Preferred
Securities, will have the right to direct the time, method and place of
conducting any proceeding to enforce any remedy available in respect of the
Guarantee, including the giving of directions to the General Partner or the
Special Representative, as the case may be. If the General Partner or the
Special Representative fails to enforce the Guarantee as above provided, any
holder of Trust Securities representing Preferred Securities, and any holder of
Preferred Securities other than the Trust, may institute a legal proceeding
directly against the Company to enforce the
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Company's obligations under the Guarantee without first instituting a legal
proceeding against Penelec Capital or any other person or entity. The Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by Penelec Capital and by complete performance of all
obligations of the Company contained in the Guarantee.
Relationship Among Guarantee, Subordinated Debentures and Preferred Securities
In addition to the obligations of the Company under the Guarantee, the
Debenture Indenture provides that the Company shall cause the General Partner to
remain the general partner of Penelec Capital and timely perform all its duties
as such (including the duty to pay distributions on the Preferred Securities),
which include, among other things, the General Partner's duties under the
Partnership Agreement to directly pay all costs and expenses of Penelec Capital
(for the purpose of insuring that payment of principal and interest by the
Company on the Subordinated Debentures will be sufficient to allow payment in
full to the holders of the Preferred Securities). While the assets of the
General Partner will not be available for making distributions on the Preferred
Securities, they will be available for payment of the expenses of Penelec
Capital. Accordingly, the Guarantee and the Debenture Indenture, together with
the related covenants contained in the Partnership Agreement and the Company's
obligations under the Subordinated Debentures, provide for the Company's full
and unconditional guarantee of the Preferred Securities as set forth above.
Certain Covenants of the Company
Under the Guarantee, the Company will covenant that, so long as any
Preferred Securities remain outstanding, neither the Company nor any majority
owned subsidiary of the Company shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock (other than dividends by a wholly owned subsidiary) if at such
time the Company shall be in default with respect to its payment obligations
under the Guarantee or there shall have occurred any event that, with the giving
of notice or the lapse of time or both, would constitute an event of default
under the Debenture Indenture.
Amendments
Except with respect to any changes which do not materially adversely
affect the rights of holders of Preferred Securities (in which case no vote will
be required), the Guarantee may be amended only with the prior approval of the
holders of Trust Securities, together with the holders of Preferred Securities
other than the Trust, representing not less than a majority of the aggregate
stated liquidation preference of the outstanding Preferred Securities.
Merger of the Company
So long as the Preferred Securities remain outstanding, the Company will
maintain its corporate existence; provided that the Company may consolidate with
or merge with or into any other person or sell, convey, transfer or lease all or
substantially all its assets (either in one transaction or a series of
transactions) to any person if the successor person
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shall be organized and existing under the laws of the United States or any state
thereof or the District of Columbia and shall expressly assume the obligations
of the Company under the Guarantee.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable redemption price of all Preferred Securities or
upon full payment of the amounts payable with respect to the Preferred
Securities upon liquidation of Penelec Capital or upon the occurrence of a
Distribution Event. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payments of any sums paid under the Preferred Securities
or the Guarantee.
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DESCRIPTION OF THE SUBORDINATED DEBENTURES
AND THE DEBENTURE INDENTURE
The following is a summary of certain terms and provisions of the
Subordinated Debentures and the Debenture Indenture. Reference is made to the
Debenture Indenture, which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
General
The Subordinated Debentures will be unsecured, subordinated obligations of
the Company issued under the Debenture Indenture (the "Debenture Indenture").
The Subordinated Debentures will be in a principal amount equal to the aggregate
stated liquidation preference of the corresponding series of Preferred
Securities plus the General Partner's capital contribution in Penelec Capital,
will bear interest at a rate equal to the distribution rate on the Preferred
Securities payable on the distribution dates for the Preferred Securities, will
have maturity and redemption provisions corresponding to the redemption
provisions of the Preferred Securities and will be subject to mandatory
redemption upon the dissolution and liquidation of Penelec Capital other than in
connection with a Distribution Event.
The Company will deliver the Subordinated Debentures to the General
Partner to be held on behalf of the holders of the Preferred Securities. The
Subordinated Debentures will be delivered by the Company to evidence the loan by
Penelec Capital to the Company of an amount equal to the proceeds received from
the sale of the Preferred Securities, plus the General Partner's concurrent
capital contribution in Penelec Capital.
Redemption
The Subordinated Debentures will be subject to mandatory redemption upon
the liquidation and dissolution of Penelec Capital other than in connection with
a Distribution Event or upon redemption of the Preferred Securities and as
described in the Prospectus Supplement.
If the Company gives a notice of redemption in respect of Subordinated
Debentures, then, except as set forth below, on or prior to the redemption date,
the Company shall deposit with the paying agent funds sufficient to pay the
applicable redemption price and will give irrevocable instructions and authority
to pay the applicable redemption price. If notice of redemption shall have been
given, if required, and the funds so deposited, then the Subordinated Debentures
called for redemption shall become due and payable on the redemption date and
upon the redemption date, interest will cease to accrue on the Subordinated
Debentures called for redemption and such Subordinated Debentures will no longer
be deemed to be outstanding.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Debenture Trustee, on or
prior to the date fixed for such redemption, of money sufficient to pay the
applicable redemption price on such Subordinated Debentures and, that if such
money has not been so received, such notice will be of no force and effect and
the Company will not be required to redeem such Subordinated Debentures.
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Additional Interest
If at any time Penelec Capital would be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company also will pay as additional interest such amounts as
shall be required so that the net amounts received and retained by Penelec
Capital after paying any such taxes, duties, assessments or governmental charges
will not be less than the amounts Penelec Capital would have received had no
such taxes, duties or governmental charges been imposed.
Subordination
The Debenture Indenture provides that all payments by the Company in
respect of the Subordinated Debentures shall be subordinated to the prior
payment in full of all amounts payable on Senior Indebtedness. The term "Senior
Indebtedness" means (i) the principal of and premium, if any, in respect of (a)
indebtedness of the Company for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds or other similar instruments; including purchase
money obligation, for payment of which the Company is responsible or liable;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) certain obligations of the
Company for the reimbursement of any obligor on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) of other persons
for the payment of which the Company is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other persons secured by any lien on any property or
asset of the Company (whether or not such obligation is assumed by the Company),
except for any such indebtedness that is by its terms subordinated to or pari
passu with the Subordinated Debentures.
Upon any payment or distribution of assets or securities of the Company,
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts payable
on Senior Indebtedness (including any interest accruing on such Senior
Indebtedness subsequent to the commencement of a bankruptcy, insolvency or
similar proceeding) shall first be paid in full before Penelec Capital (as
holder of the Subordinated Debentures), the Debenture Trustee on behalf of such
holder or any Special Representative appointed by the holders of the Preferred
Securities shall be entitled to receive from the Company any payment of
principal of or interest on or any other amounts in respect of the Subordinated
Debentures or distribution of any assets or securities.
No direct or indirect payment by or on behalf of the Company of principal
of or interest on the Subordinated Debentures, whether pursuant to the terms of
the Subordinated Debentures or upon acceleration or otherwise, shall be made if,
at the time of such payment, there exists (i) a default in the payment of all or
any portion of any Senior Indebtedness or (ii) any other
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default pursuant to which the maturity of Senior Indebtedness has been
accelerated and, in either case, requisite notice has been received by the
Debenture Trustee and such default shall not have been cured or waived by or on
behalf of the holders of such Senior Indebtedness.
If the Debenture Trustee, Penelec Capital (as holder of the Subordinated
Debentures) or any Special Representative appointed by the holders of the
Preferred Securities, shall have received any payment on account of the
principal of or interest on the Subordinated Debentures when such payment is
prohibited and before all amounts payable on, under or in connection with Senior
Indebtedness are paid in full, then such payment shall be received and held in
trust for the holders of Senior Indebtedness and shall be paid over or delivered
first to the holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full.
Nothing in the Debenture Indenture shall limit the right of the Debenture
Trustee, Penelec Capital (as holder of the Subordinated Debentures) or the
Special Representative to take any action to accelerate the maturity of the
Subordinated Debentures or to pursue any rights or remedies against the Company;
provided that all Senior Indebtedness shall be paid before Penelec Capital (as
holder of the Subordinated Debentures) is entitled to receive any payment from
the Company of principal of or interest on the Subordinated Debentures.
Upon the payment in full of all Senior Indebtedness, Penelec Capital (as
holder of the Subordinated Debentures) (and any Special Representative appointed
by the holders of the Preferred Securities) shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
assets of the Company made on such Senior Indebtedness until the Subordinated
Debentures shall be paid in full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which the Company may issue.
Certain Covenants of the Company
The Company will covenant that it and any majority owned subsidiary
will not declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than
dividends to the Company by a wholly-owned subsidiary of the Company) (i) during
an Extension Period (as defined in the accompanying Prospectus Supplement or
Supplements), (ii) if there shall have occurred any event that, with the giving
of notice or the lapse of time or both, would constitute an Event of Default
under the Debenture Indenture or (iii) if the Company shall be in default with
respect to its payment obligations under any Guarantee. The Company will also
covenant (i) to maintain direct or indirect 100% ownership of the General
Partner and will cause the General Partner to maintain 100% ownership of the
general partner interests of Penelec Capital, (ii) to cause the General Partner
to at all times maintain "fair market net worth " of at least 10% of the total
capital contributions (less redemptions) to Penelec Capital and to maintain
General Partner interests representing 3% of all interests in the capital,
income, gain, loss, deduction and credit of Penelec Capital, (iii) to cause the
General Partner to timely perform all of its duties as general partner of
Penelec Capital (including the duty to pay distributions on the Preferred
Securities), and (iv) to use its reasonable
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efforts to cause Penelec Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for federal income tax purposes.
Penelec Capital may not waive compliance or waive any default in
compliance by the Company with any covenant or other term in the Debenture
Indenture without the approval of the Special Representative or without the
direction of the holders of a majority of the aggregate stated liquidation
preference of the Preferred Securities.
Modification of the Debenture Indenture without Approval
The Debenture Indenture contains provisions permitting the Company and the
Debenture Trustee, without the consent of the Special Representative or Penelec
Capital (as holder of the Subordinated Debentures), to modify the Debenture
Indenture or any supplemental indenture: (i) to cure any ambiguity, defect or
inconsistency; (ii) to comply with the provisions of the Debenture Indenture
regarding a successor to the Company; (iii) to provide for uncertificated
Subordinated Debentures in addition to or in place of certificated Subordinated
Debentures; (iv) to make any other change that does not adversely affect the
rights of any holder of the Subordinated Debentures; (v) to comply with any
requirement for qualification of the Debenture Indenture under the Trust
Indenture Act of 1939, as amended; and (vi) to set forth the terms and
conditions of any series of Subordinated Debentures.
Modifications of the Debenture Indenture with Approval
The Debenture Indenture contains provisions permitting the Company the
Debenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the Subordinated Debentures which are affected by the
amendment or waiver, to amend the Debenture Indenture or the Subordinated
Debentures or to waive compliance by the Company by the Company with any
provisions of the Debenture Indenture or the Subordinated Debentures; provided
that no such amendment or waiver may, without the consent of the holder of each
outstanding Subordinated Debenture affected thereby, (a) reduce the principal
amount of the Subordinated Debentures, (b) reduce the percentage of principal
amount of outstanding Subordinated Debentures of any series, the consent of
holders of which is required for amendment of the Debenture Indenture or for
waiver of compliance with certain provisions of the Debenture Indenture or for
waiver of certain defaults, (c) change the stated maturity date of the principal
of, or the interest or the rate of interest on, the Subordinated Debentures, (d)
change the redemption provisions applicable to the Subordinated Debentures
adversely to the holders thereof, (e) impair the right to institute suit for the
enforcement of any payment with respect to the Subordinated Debentures, (f)
change the currency in which payment with respect to the Subordinated Debentures
are to be made, (g) change the subordination provisions applicable to the
Subordinated Debentures adversely to the holders thereof, or (h) waive a default
in the payment of the principal of, or interest on, any Subordinated Debenture.
Events of Default
The following are Events of Default under the Debenture Indenture: (i)
default for 15 days in payment of any interest on any series of the Subordinated
Debentures (other than as may be permitted by the terms thereof
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and as described in a Prospectus Supplement); (ii) default in payment of
principal of (or premium, if any, on) any Subordinated Debentures; (iii) default
for 60 days after notice in the performance of any other covenant or agreement
in the Debenture Indenture or any series of Subordinated Debentures, or (iv)
certain events of bankruptcy, insolvency or reorganization of the Company. In
case an Event of Default under the Debenture Indenture shall occur and be
continuing (other than an Event of Default relating to bankruptcy, insolvency or
reorganization of the Company, in which case principal and interest on all of
the Subordinated Debentures shall become immediately due and payable), the
Debenture Trustee, Penelec Capital (as holder of the Subordinated Debentures) or
the Special Representative may declare the principal of all the Subordinated
Debentures to be due and payable. Under certain circumstances, a declaration of
acceleration with respect to Subordinated Debentures may be rescinded and past
defaults (except, unless theretofore cured, a default in the payment of
principal of or interest on the Subordinated Debentures) may be waived only by
the Special Representative or by Penelec Capital at the direction of the holders
of a majority in aggregate principal amount of the Subordinated Debentures
outstanding liquidation preference of Preferred Securities. The Company is
required to furnish to the Debenture Trustee annually a statement as to the
performance by the Company of its obligations under the Debenture Indenture and
as to any default in such performance.
Enforcement of Certain Rights of Holders of Preferred Securities
So long as any Subordinated Debentures are held by Penelec Capital, the
holders of the Preferred Securities will have the rights referred to under
"Description of the Preferred Securities--Voting Rights," including the right to
appoint a Special Representative authorized to exercise the rights of Penelec
Capital, as the holder of the Subordinated Debentures, to declare the principal
of and interest on the Subordinated Debentures due and payable and to enforce
the obligations of the Company under the Subordinated Debentures and the
Debenture Indenture directly against the Company, without first proceeding
against Penelec Capital or any other person or entity.
Consolidation, Merger, Sale or Conveyance
The Debenture Indenture provides that the Company may not consolidate with
or merge with or into, or sell, convey, transfer or lease all or substantially
all its assets (either in one transaction or a series of transactions) to any
person unless, among other things (i) the successor person shall be organized
and existing under the laws of the United States or any state thereof or the
District of Columbia, and shall expressly assume by a supplemental indenture all
of the obligations of the Company under the Subordinated Debentures and the
Debenture Indenture and (ii) immediately prior to and after giving effect to
such transaction, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have happened and be
continuing. Upon any such consolidation, merger, sale, transfer or other
disposition of the assets of the Company substantially as an entirety, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Debenture
Indenture with the same effect as if such successor corporation had been named
as the Company therein and the Company will be released from all obligations
under the Debenture Indenture.
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For purposes of the Debenture Indenture, the conveyance or other transfer by the
Company of (a) all or any portion of its facilities for the generation of
electric energy, or (b) all of its facilities for the transmission of electric
energy, in each case considered alone or in combination with properties
described in the other clause, shall in no event be deemed to constitute a
conveyance or other transfer of all the assets of the Company, as or
substantially as an entirety.
Defeasance And Discharge
Under the terms of the Debenture Indenture, the Company will be deemed to
have paid and discharged the entire indebtedness of the Subordinated Debentures
if the Company irrevocably deposits with the Debenture Trustee or other paying
agent, in trust (i) cash and/or (ii) United States Government Obligations (as
defined in the Debenture Indenture), which through the payment of interest
thereon and principal thereof in accordance with their terms will provide cash
in an amount sufficient to pay all the principal of, premium, if any, and
interest on, the Subordinated Debentures then outstanding on the dates such
payments are due in accordance with the terms of the Subordinated Debentures. A
condition to any such discharge is the delivery by the Company to the Debenture
Trustee of either a private Internal Revenue Service Ruling or an opinion of
counsel to the effect that the holders of the Subordinated Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance or discharge of the Debenture Indenture.
Information Concerning the Debenture Trustee
Subject to the provisions of the Debenture Indenture relating to its
duties, the Debenture Trustee will be under no obligation to exercise any of its
rights or powers under the Debenture Indenture, unless the Debenture Trustee
receives security and indemnity reasonably satisfactory to it. Subject to such
provision for indemnification, the holders of a majority in principal amount of
the Subordinated Debentures then outstanding thereunder or the Special
Representative will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee
thereunder, or exercising any trust or power conferred on the Debenture Trustee.
The Debenture Indenture contains limitations on the right of the Debenture
Trustee, as a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. In addition, the Debenture Trustee may be deemed to
have a conflicting interest and may be required to resign as Debenture Trustee
if at the time of default under the Debenture Indenture it is a creditor of the
Company. The United States Trust Company of New York also acts as the Senior
Note Trustee and the Mortgage Trustee.
PLAN OF DISTRIBUTION
The Company and/or the Trust may sell the Senior Notes and Trust
Securities: (i) directly to purchasers; (ii) to or through underwriters; or
(iii) through agents or dealers. The Prospectus Supplement with respect to the
each series of Senior Notes and Trust Securities will set forth the terms of the
offering thereof, including the name or names of any such underwriters,
-38-
agents or dealers; the purchase price of and the net proceeds to the Company
and/or the Trust from such sale; any underwriting discounts and commissions or
agency fees and other items constituting underwriters' or agents' compensation;
the initial public offering price; any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchange on which such series of
Senior Notes or Trust Securities may be listed. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are used in any sale, the Senior Notes or Trust
Securities, as the case may be, will be acquired by such underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Senior Notes and Trust
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering will be named in the Prospectus Supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Senior
Notes or Trust Securities, as the case may be, will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such series of Senior Notes or Trust Securities if any are purchased.
If dealers are utilized in a sale of Senior Notes or Trust Securities, the
Company and/or the Trust will sell such securities to the dealers as principal.
The dealers may then resell such Senior Notes or Trust Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Senior Notes and Trust Securities may be sold directly by the Company
and/or the Trust or through agents designated by the Company and/or the Trust
from time to time. Any agent involved in the offer or sale of the Senior Notes
or Trust Securities with respect to which this Prospectus is delivered will be
named, and any commissions payable by the Company and/or the Trust to such agent
will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
Agents, dealers and underwriters may be entitled under agreements with the
Company and/or the Trust to indemnification by the Company and/or the Trust
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments which such agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for the Company and/or the Trust in the ordinary course of business.
-39-
LEGAL MATTERS
Certain legal matters will be passed upon for the Company, the Trust and
Penelec Capital by Berlack, Israels & Liberman LLP, New York, New York and
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania and for the
underwriters by Thelen Reid & Priest LLP, New York, New York. Certain matters of
Delaware law relating to the validity of the Trust Securities and Preferred
Securities will be passed upon on behalf of the Company, the Trust, Penelec
Capital and the General Partner by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Company, the Trust, Penelec Capital
and the General Partner. Berlack, Israels & Liberman LLP, Ballard Spahr Andrews
& Ingersoll, LLP and Thelen Reid & Priest LLP may rely on the opinion of
Richards, Layton & Finger, P.A. as to matters of Delaware law. Berlack, Israels
& Liberman LLP and Thelen Reid & Priest LLP may rely on the opinion of Ballard
Spahr Andrews & Ingersoll, LLP as to matters of Pennsylvania law. Attorneys of
Berlack, Israels & Liberman LLP own an aggregate of 14,560 shares of the Common
Stock of the Company's parent, GPU, Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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======================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE
HEREBY EXCEPT AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, NO SUCH INFORMATION OR REPRESENTATIONS SHOULD BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, PENELEC CAPITAL OR THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE TRUST SECURITIES OR THE SENIOR NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
PAGE
Available Information............... 4
Incorporation Of Certain Documents
By Reference...................... 5
Pennsylvania Electric Company....... 6
Penelec Capital Trust............... 6
Penelec Capital II, L.P............. 7
Financing Program................... 7
Use Of Proceeds..................... 7
Company Coverage Ratios............. 8
Accounting Treatment................ 8
Description Of Senior Notes......... 9
Description Of Senior Note Mortgage
Bonds............................. 19
Description Of The Trust Securities. 24
Description Of The Preferred Securities 27
Description Of The Guarantee........ 30
Description Of The Subordinated
Debentures And The Debenture Indenture 33
Plan Of Distribution ............... 39
Legal Matters....................... 40
Experts............................. 40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Registration Fee... $213,875
NYSE Listing Fee...................................... $ 50,000
Blue Sky Fees......................................... $ 5,000
* Accountants' Fees and Expenses........................ $ 25,000
* Company Counsel's Fees and Expenses................... $300,000
* Trustees' Fees and Expenses, including Counsel and
Authentication Fees................................... $ 30,000
* Printing of Registration Statement, Prospectus, Prospectus
Supplements, Supplemental Indentures, etc............. $ 25,000
* Rating Agencies' Fees................................. $ 50,000
* Miscellaneous......................................... $ 41,125
----------
*Total Expenses........................................ $740,000
- - ------------------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of the Company provide, in part, as follows:
"32. A director shall not be personally liable for monetary damages as
such for any action taken, or any failure to take any action, on or after
January 27, 1987 unless the director has breached or failed to perform the
duties of his office under Section 1721 of the Pennsylvania Business Corporation
Law, and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. The provisions of this subsection (a) shall not
apply to the responsibility or liability of a director pursuant to any criminal
statute, or the liability of a director for the payment of taxes pursuant to
local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
whether formal or informal, and whether brought by or in the right of the
corporation or otherwise, by reason of the fact that he was a director, officer
or employee of the corporation (and may indemnify any person who was an agent of
the corporation), or a person serving at the request of the corporation as a
director, officer, partner, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise to
the fullest extent permitted by law, including without limitation
indemnification against expenses (including attorneys' fees and disbursements),
damages, punitive damages, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such proceeding unless the act or failure to act giving rise to the claim for
indemnification is finally determined by a court to have constituted willful
misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys' fees and
disbursements) actually and reasonably incurred in defending a civil or criminal
action, suit or proceeding on behalf of any person entitled to
II-2
indemnification under subsection (b) in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation, and may pay such expenses in advance on
behalf of any agent on receipt of a similar undertaking. The financial ability
of such person to make such repayment shall not be a prerequisite to the making
of an advance.
(d) For purposes of this Section: (i) the corporation shall be deemed to
have requested an officer, director, employee or agent to serve as fiduciary
with respect to an employee benefit plan where the performance by such person of
duties to the corporation also imposes duties on, or otherwise involves services
by, such person as a fiduciary with respect to the plan; (ii) excise taxes
assessed with respect to any transaction with an employee benefit plan shall be
deemed "fines"; and (iii) action taken or omitted by such person with respect to
an employee benefit plan in the performance of duties for a purpose reasonably
believed to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the best interests
of the corporation.
(e) To further effect, satisfy or secure the indemnification obligations
provided herein or otherwise, the corporation may maintain insurance, obtain a
letter of credit, act as self-insurer, create a reserve, trust, escrow, cash
collateral or other fund or account, enter into indemnification agreements,
pledge or grant a security interest in any assets or properties of the
corporation, or use any other mechanism or arrangement whatsoever in such
amounts, at such costs, and upon such other terms and conditions as the Board of
Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be deemed a
contract between the corporation and the person entitled to indemnification
under this Section pursuant to which the corporation and each such person intend
to be legally bound. Any repeal, amendment or modification hereof shall be
prospective only and shall not limit, but may expand, any rights or obligations
in respect of any proceeding whether commenced prior to or after such change to
the extent such proceeding pertains to actions or failures to act occurring
prior to such change.
(g) The indemnification, as authorized by this Section, shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in any
official capacity and as to action in any other capacity while holding such
office. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section shall continue as to a person who has ceased to be an
officer, director, employee or agent in respect of matters arising prior to such
time, and shall inure to the benefit of the heirs, executors and administrators
of such person."
The Partnership Agreement provides, in part, as follows:
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
II-3
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.
"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.
"Covered Person" shall mean any Partner, any Affiliate of a Partner or any
officers, directors, shareholders, partners, their respective Affiliates, or any
employee or agent of the Partnership or its Affiliates.
"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.
"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.
"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.
"Partnership" shall mean Penelec Capital II, L.P., a limited partnership
formed under the laws of the State of Delaware.
In addition, applicable Delaware partnership law provides authority for
limited partnerships to indemnify under certain circumstances any partner or
other person from and against any and all claims and demands.
Section 1741 of the Pennsylvania Business Corporation Law authorizes a
corporation to provide in its by-laws for indemnification to be granted under
certain circumstances to its officers, directors and other agents against
expenses and liabilities incurred in connection with proceedings arising out of
such persons having taken action or failed to take action on behalf of the
corporation.
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The Trust Agreement provides, in part, as follows:
Section 10.4 Indemnification.
(a) (i) To the fullest extent permitted by applicable law, the Grantor
shall indemnify and hold harmless any Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was an Indemnified Person against expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Grantor shall indemnify, to the fullest extent permitted by
law, any Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Trust to procure a judgment in its favor by reason of the fact that he is
or was an Indemnified Person against expenses (including reasonable attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust
and except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Indemnified Person shall have been adjudged to
be liable to the Trust unless and only to the extent that the Court of Chancery
of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(iii) To the extent that an Indemnified Person shall be successful
on the merits or otherwise (including dismissal of an action without prejudice
or the settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (i) and (ii) of this
Section 10.4(a), or in defense of any claim, issue or matter therein, he shall
be indemnified, to the fullest extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Grantor only as
authorized in the specific case upon a determination that indemnification of the
Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) and (ii).
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(v) To the fullest extent permitted by law, expenses (including
attorneys' fees) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Grantor
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Grantor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Grantor if a
determination is reasonably and promptly made that, based upon the facts known
to the Grantor at the time such determination is made, such Indemnified Person
acted in bad faith or in a manner that such Person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to any criminal
proceeding, that such Indemnified Person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Grantor, independent legal counsel or Holder of the Trust
Securities reasonably determine that such Person deliberately breached his duty
to the Trust.
(vi) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger or conversion, so that any Person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.
(vii) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a person.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to
time, or any successor legislation.
"Company Indemnified Person" means: (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any partners, employees,
representatives or agents of any Regular Trustee; or (d) any officer,
director, shareholder, member, partner, employee, representative or agent
of the Trust or its Affiliates.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b) of the
Trust Agreement.
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"General Partner" means Penelec Preferred Capital II, Inc., a Delaware
corporation, as general partner of the Grantor, and any successor thereto
pursuant to the terms of the Partnership Agreement.
"Grantor" means Penelec Capital II, L.P., a Delaware limited partnership
formed pursuant to the Partnership Agreement, and any successor entity thereto.
"Holder" means the Person in whose name a certificate representing one or
more Trust Securities is registered on the Register maintained by the Registrar
for such purposes, such Person being a beneficial owner within the meaning of
the Business Trust Act.
"Indemnified Person" means: a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of the Grantor dated as of ---------, 1999, as amended from time to
time, together with any Action (as defined in the Partnership Agreement)
established by the General Partner.
"Person" means any natural person, general partnership, limited
partnership, corporation, limited liability company, joint venture, trust,
business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Preferred Securities" means the cumulative preferred securities,
representing preferred limited partner interests of the Grantor, or any
Successor Securities issued to the Trust and held by the Trustee from time to
time under this Trust Agreement for the benefit of the Holders.
"Property Trustee" has the meaning set forth in Section 7.3 of the
Trust Agreement.
"Register" has the meaning set forth in Section 5.3 of the Trust Agreement.
"Registrar" means any bank or trust company appointed to register Trust
Security certificates and to register transfers thereof as herein provided.
"Regular Trustee" has the meaning set forth in Section 7.5 of the
Trust Agreement.
"Successor Securities" has the meaning set forth in Section 13.02(e)
of the Partnership Agreement.
"Trust" means the trust governed by the Trust Agreement.
"Trust Security" or "Trust Securities" means a Trust Security issued
hereunder representing a beneficial interest in the Trust equal to and
representing a Preferred Security and evidenced by a certificate executed by the
Property Trustee pursuant to Article V of the Trust Agreement.
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In addition, applicable Delaware trust law provides authority for trusts
to indemnify under certain circumstances any person from and against any and all
claims and demands.
ITEM 16. EXHIBITS.
1-A - Form of Underwriting Agreement relating to the Trust
Securities - to be filed by Form 8-K.
1-B - Form of Underwriting Agreement for the Senior Notes -
to be filed by Form 8-K.
3-A - Restated Articles of Incorporation of the Company
Incorporated by reference to Exhibit 3A to the Company's
Annual Report on Form 10-K for the year 1991, SEC File No.
1-3522.
3-B - Amended By-Laws of the Company - Incorporated by reference
to Exhibit B-45 to GPU, Inc.'s Annual Report on Form U5S for
the year 1997, SEC File No. 30-126.
3-C* - Certificate of Incorporation of General Partner.
3-D* - By-Laws of General Partner.
3-E* - Certificate of Limited Partnership of Penelec Capital.
3-F* - Form of Limited Partnership Agreement of Penelec Capital.
3-G* - Form of Amended and Restated Limited Partnership
Agreement of Penelec Capital.
3-H* - Form of Action Creating Series A Preferred Securities.
4-A* - Form of Subordinated Debenture Indenture.
4-A(1) - Cross-reference sheet showing location in the Subordinated
Debenture Indenture of provisions of Sections 310(a) through
318(a) of the Trust Indenture Act of 1939 - included in
Exhibit 4-A hereto.
4-B* - Form of Note Indenture for the Senior Notes.
4-B(a) - Cross-reference sheet showing location in the Note Indenture
of provisions of Sections 310(a) through 318(a) of the Trust
Indenture Act of 1939 - included in Exhibit 4 -B hereto.
4-C - Form of Supplemental Indenture for the First Mortgage Bonds.
4-E* - Form of Preferred Security Certificate -
Incorporated by reference to
Exhibit A to Exhibit 3-G hereto.
4-F* - Form of Subordinated Debenture - Incorporated by reference
to form of Subordinated Debenture contained in Exhibit 4-A.
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4-G* - Form of Senior Notes - Incorporated by reference to Exhibits
A through D of Exhibit 4-B hereto.
4-H* - Form of First Mortgage Bonds- Incorporated by reference to
Exhibit A of Exhibit 4-C hereto.
4-I* - Form of Payment and Guarantee Agreement.
4-J* - Certificate of Trust for the Trust.
4-K* - Trust Agreement for the Trust.
4-L* - Form of Amended and Restated Trust Agreement for the Trust.
4L(A)* - Cross-reference sheet showing location in the Amended and
Restated Trust Agreement of Sections 310(a) through 318(a) of
the Trust Indenture Act of 1939 - included in Exhibit 4-L
hereto.
4-M - Form of Certificate representing the Trust Securities
incorporated by reference to Exhibit A to Exhibit 4-K hereto.
4-N - Mortgage and Deed of Trust, dated January 1, 1942 with
United States Trust Company of New York, Successor Trustee,
as amended and supplemented by fourteen supplemental
indentures - Incorporated by reference to the Company's
Instruments of Indebtedness Nos. 1 to 20, inclusive, filed
as part of Amendment No. 1 to the Annual Report of General
Public Utilities Corporation on Form U-5-S for the year
1959, SEC File Nos. 30-126 and 1-3292.
4-N(1) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated May 1, 1961 through December 1, 1977 - Incorporated by
reference to Exhibit 2-D(1) through 2-D(19), Registration No.
2-61502.
4-N(2) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated June 1, 1978 through May 1, 1989 - Incorporated by
reference to Exhibits 4-A(2) through 4-A(7), Registration No.
33-49669.
4-N(3) - Supplemental Indentures to the Mortgage and Deed of Trust,
dated December 1, 1990 and March 1, 1992 - Incorporated by
reference to Exhibits 4-A(8) and 4-A(9), Registration No.
33-45312.
4-N(4) - Supplemental Indenture, dated June 1, 1993 - Incorporated by
reference to Exhibit C-73, Annual Report of General Public
Utilities Corporation on Form U-5-S for the year 1993, SEC
File No. 30-126.
4-N(5) - Supplemental Indenture, dated November 1, 1995 Incorporated
by reference to Exhibit 4-C-11 to the Company's Annual Report
on Form 10-K for the year 1995, SEC File No.
1-3522.
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4-N(6) - Supplemental Indenture, dated August 15, 1996 - Incorporated
by reference to Exhibit 4-C-12 to the Company's Annual Report
on Form 10-K for the year 1996, SEC File No. 1-3522.
5-A - Opinion of Berlack, Israels & Liberman LLP.
5-B - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
5-C - Opinion of Richards, Layton & Finger, P.A.
8 - Opinion of Carter,Ledyard & Milburn- to be filed by Form 8-K.
12-A* - Statement Showing Computation of Ratio of Earnings to Fixed
Charges and Statement Showing Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends.
Incorporated by reference to Exhibit 12D to the Company's
Annual Report on Form 10-K for the year 1997, SEC File No.
1-3522.
12-B - Statement Showing Computation of Ratio of Earnings to Fixed
Charges and Statement Showing Computation of Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
13 - The Company's Annual Report on Form 10-K for the year 1997 -
incorporated by reference to SEC File No 1-3522.
23-A - Consent of Berlack, Israels & Liberman LLP (included in
their opinion filed as Exhibit 5-A).
23-B - Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in their opinion filed as Exhibit 5-B).
23-C - Consent of Richards, Layton & Finger, P.A.
(included in their opinion filed as Exhibit 5-C).
23-D - Consent of Carter, Ledyard & Milburn (to be included in
their opinion filed as Exhibit 8).
23-E* - Consent of PricewaterhouseCoopers, LLP
24* - Power of Attorney-included in signature pages.
24-A - Power of Attorney of B.L. Levy.
25-A* - Statement of Eligibility under the Trust Indenture Act of
1939 of United States Trust Company of New York, as Trustee
under the Senior Note Indenture and the Debenture Indenture.
25-B* - Statement of Eligibility under the Trust Indenture Act of
1939 of The Bank of New York, as Property Trustee under the
Trust Agreement.
26-A - Form of Invitation for Competitive Proposals for the Senior Notes.
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26-B - Form of Statement of Terms and Conditions Relating to the
Proposals for the Senior Notes.
26-C - Form of Proposal for the Senior Notes.
- ---------
*Previously filed.
The Exhibits listed above which have heretofore been filed with the
Securities and Exchange Commission and which are designated in prior filings as
noted above, are hereby incorporated by reference and made a part hereof with
the same effect as if filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "1933 Act");
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrants pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-11
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the 1933 Act,
each filing of the Registrants annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(7) The Trust and Penelec Capital hereby undertake to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Registrants
pursuant to the provisions under Item 15 above, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ D. Baldassari
---------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities with respect to Pennsylvania Electric
Company and on the date indicated:
Signature Title Date
* Chairman, Chief January 11, 1999
- ------------------------
(F.D. Hafer) Executive Officer (Principal
Executive Officer) and Director
/s/ D. Baldassari President and Director January 11, 1999
- ------------------------
(D. Baldassari)
/s/ B.L. Levy Vice President and January 11, 1999
(B.L. Levy) Chief Financial Officer
(Principal Financial Officer)
* Vice President, January 11, 1999
- ------------------------
(D.W. Myers) Comptroller (Principal
Accounting Officer)
and Director
* Director January 11, 1999
- ------------------------
(C. B. Snyder)
*By:/s/T.G. Howson
----------------------
T.G. Howson, attorney-in-fact
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENELEC CAPITAL II, L.P.
By: Penelec Preferred Capital II, Inc.
Its General Partner
By: /s/ D. Baldassari
--------------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 1 to the Registration Statement has been signed below by the following
person in the capacity on behalf of Penelec Preferred Capital II, Inc., as the
general partner of Penelec Capital II, L.P., and on the date indicated:
Signature Title Date
/s/ D. Baldassari Sole Director January 11, 1999
- -------------------
(D. Baldassari)
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Morristown, County of Morris, New Jersey, on the
11th day of January, 1999.
PENELEC CAPITAL TRUST
By: Penelec Capital II, L.P.,
as grantor
By: Penelec Preferred Capital II, Inc.,
as general partner
By: /s/ D. Baldassari
---------------------------
Name: D. Baldassari
Title: President
Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 1 to the Registration Statement has been signed below by the following
person in the capacity on behalf of Penelec Preferred Capital II, Inc., as
general partner of Penelec Capital II, L.P., as grantor of Penelec Capital
Trust, on the date indicated:
Signature Title Date
/s/ D. Baldassari Sole Director January 11, 1999
- -------------------
(D. Baldassari)
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