Exhibit 1
ATLANTIC CAPITAL II
Cumulative Trust Preferred Capital Securities
(Liquidation Amount $25.00 per Preferred Security)
UNDERWRITING AGREEMENT
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October , 1998
To the Representative named in Schedule I hereto
of the Underwriters named in Schedule II hereto
Ladies and Gentlemen:
The undersigned, Atlantic Capital II (the "Trust"), a statutory business
trust created under the Business Trust Act (the "Delaware Act") of the state of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (S)(S) 3801 et
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seq.) and Atlantic City Electric Company, a New Jersey corporation (the
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"Company"), hereby confirm their agreement with each of the Underwriters
hereinafter named as follows:
The term "Underwriters" as used herein shall be deemed to mean the firm or
corporation or the several firms or corporations named in Schedule II hereto and
any underwriter substituted as provided in Section 3 and the term "Underwriter"
shall be deemed to mean one of such Underwriters. If the firm or firms listed
in Schedule I hereto (the "Representative") are the same as the firm or firms
listed in Schedule II hereto, then the terms "Underwriters" and
"Representative", as used herein, shall each be deemed to refer to such firm or
firms. The Representative represents that it has been authorized by the Under
writers to execute this Agreement on their behalf and to act for them in the
manner herein provided. All obligations of the Underwriters hereunder are
several and not joint. If more than one firm is named in Schedule I hereto, any
action under or in respect of this Agreement may be taken by such firms jointly
as the Representative or by one of the firms acting on behalf of the
Representative and such action will be binding upon all the Underwriters.
1. Description of Securities. The Trust and the Company, as depositor of
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the Trust and as guarantor, propose, subject to the terms and conditions stated
herein, that the Trust issue and sell to the Underwriters the Cumulative Trust
Preferred Capital Securities specified above (each a "Security" and collectively
the "Securities") representing undivided preferred beneficial interests in the
assets of the Trust in the amount specified in Schedule 1 hereto. The Securities
are guaranteed on a subordinated basis by the Company as to the payment of
distributions, and as to payments on liquidation or redemption, to the extent
set forth in a Guarantee Agreement (the "Guarantee") between the Company and The
Bank of
New York, as trustee (the "Guarantee Trustee"). The Trust is to invest the
proceeds of the sale of the Securities and its Common Securities (liquidation
amount $25 per common security) (the "Common Securities") in the amount
specified in Schedule I in the Company's Junior Subordinated Debentures of the
Series designated in Schedule I (the "Debentures") to be issued pursuant to an
Indenture (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Debenture Trustee").
2. Representations, Warranties and Agreements of the Company. The
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Company represents and warrants to, and agrees with, the several Underwriters
that:
(a) A registration statement (identified in Schedule I hereto),
including a preliminary prospectus, together with amendments thereto, if
any, with respect to the Securities, the Debentures and certain obligations
of the Company under the Guarantee, the Indenture has been prepared by the
Trust and the Company and filed with the Securities and Exchange Commission
(the "Commission") in conformity with the rules, regulations and releases
of the Commission (the "Rules and Regulations") under the Securities Act of
1933, as amended (the "Act"). Such registration statement has been
declared effective by the Commission and the Trust Agreement (hereinafter
defined), the Guarantee and the Indenture have been qualified under the
Trust Indenture Act of 1939, as amended (the "1939 Act"). Copies of said
registration statement, together with all amendments thereto, if any,
including the exhibits filed therewith, have heretofore been delivered to
the Representative, and copies of any amendments thereto, including the
exhibits filed therewith, which shall be subsequently filed will be so
delivered to the Representative. As used in this Agreement, the term
"Registration Statement" means said registration statement, including the
exhibits, financial statements and all documents incorporated therein by
reference, as amended to the date hereof, and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective. As used in the Agreement, the term "Prospectus" means
the prospectus in the form included in the Registration Statement completed
to reflect the terms of the offering, proposed to be filed on or about the
date hereof with the Commission pursuant to Rule 424(b), including all
documents incorporated in such prospectus by reference (the "Incorporated
Documents"). In the event of any amendment to the Registration Statement
after the date hereof, the term "Registration Statement" also shall mean
such Registration Statement as so amended. In the event of any supplement
to the Prospectus, after the date of the filing with the Commission of the
Prospectus pursuant to Rule 424(b), the term "Prospectus" also shall mean
such Prospectus as so amended or supplemented. Any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the Registration
Statement or the Prospectus shall be deemed to refer to and include the
filing of any document under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), deemed to be incorporated therein after the
date hereof and prior to the termination of the offering of the Securities
by the Underwriters.
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(b) No stop order suspending the effectiveness of the Registration
Statement, nor any order preventing or suspending use of the Prospectus nor
any order directed to the adequacy or accuracy of any Incorporated Document
has been issued by the Commission, and no proceeding for any such purpose
has been initiated or is pending or, to the knowledge of the Company, is
contemplated by the Commission.
(c) On the date of this Agreement and at all times subsequent hereto
up to and at the Closing Date (as defined in Section 3), (i) the
Registration Statement and the Prospectus do and will, contain all
statements and information which are required to be included therein by the
Act and the Rules and Regulations and will conform, in all material
respects, to the requirements of the Act and the Rules and Regulations;
(ii) the Registration Statement does not and will not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and (iii) the Prospectus does not and will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, in reliance upon and in conformity with
written information furnished to the Company by any Underwriter expressly
for use in the preparation thereof. There are no contracts or documents of
the Company or of any Subsidiary (as defined below) of the Company which
are required to be filed as exhibits to the Registration Statement by the
Act or by the Rules and Regulations which have not been filed as required.
(d) The Company has filed timely all reports and all definitive proxy
and information statements required to be filed by the Company with the
Commission pursuant to the Exchange Act and the rules and regulations of
the Commission thereunder. Each of the Incorporated Documents, when it and
any amendment thereto was filed with the Commission, complied as to form in
all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder, and any Incorporated Document
and any amendment thereto, when filed with the Commission will comply as to
form in all material respects to the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder; and none of such
documents includes or will include any untrue statement of a material fact
or omits or will omit to state any material fact required to be stated
therein, or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(e) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Delaware Act with the
power and authority (trust and other) to own property and conduct its
business as described in the Registration Statement and Prospectus, and has
conducted and will conduct no business other than the transactions
contemplated by this Agreement and described in
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the Prospectus; the Trust is not a party to or bound by any agreement or
instrument other than this Agreement, the trust agreement (as amended and
restated from time to time, the "Trust Agreement") between the Company and
the trustees named therein (the "Trustees") and the agreements and
instruments contemplated by the Trust Agreement and described in the
Prospectus; the Trust has no liabilities or obligations other than those
arising out of the transactions contemplated by this Agreement and the
Trust Agreement and described in the Prospectus; and the Trust is not a
party to or subject to any action, suit or proceeding of any nature.
(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of New Jersey, with all
corporate authority, including franchises, necessary to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus; the Company is duly qualified to do business
as a foreign corporation in good standing in Pennsylvania, being the only
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, with all corporate
authority, including franchises necessary to own or lease its properties
and conduct its business as described in the Registration Statement and
Prospectus.
(g) The performance of this Agreement and the consummation of the
transactions contemplated by this Agreement and described in the Prospectus
and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which the Trust or the Company is a party
or by which either of them is bound or to which any of their property is
subject, or the Trust Agreement or the Company's Restated Certificate and
Articles of Incorporation, as amended, or By-Laws, as amended, or any
order, rule or regulation of any court or other governmental body
applicable to the Trust or the Company or any of their property.
(h) The Company has full power and lawful authority to authorize,
issue and sell or exchange the Debentures and to enter into the Indenture
and the Guarantee as described in the Prospectus; has taken all corporate
action necessary therefor; and has obtained every consent, approval,
authorization or other order of any regulatory body which is required
therefor, except as may be required under state securities laws; and such
consents, approvals, authorizations or other orders are not subject to
appeal.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth
in or contemplated by the Registration Statement and the Prospectus: (1)
neither the Company nor the Trust have incurred any material liabilities or
obligations, direct or contingent, or have entered into any material
transaction, not in the ordinary course of business; (2) there has not been
any material change in the capital stock or long-term debt of the Company
or any material adverse change, or development involving a prospective
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material adverse change, in the condition, financial or otherwise, or in
the earnings, business, net worth or results of operations of the Trust or
the Company; (3) no material loss or damage (whether or not insured) to the
property of the Company has been sustained; and (4) no legal or
governmental proceeding, domestic or foreign, materially affecting the
Trust or the Company, or the transactions contemplated by this Agreement
and described in the Prospectus, has been instituted or, to the knowledge
of the Trust or the Company, threatened.
(j) The financial statements set forth in or incorporated by
reference into the Registration Statement and the Prospectus fairly present
the financial condition of the Company and the results of its operations as
of the dates and for the periods therein specified; and said financial
statements (including the related notes) have been prepared in accordance
with generally accepted accounting principles which have been consistently
applied throughout the periods involved.
(k) Deloitte & Touche LLP, which has reported on certain financial
statements filed with the Commission and incorporated by reference into the
Registration Statement and the Prospectus, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(l) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, there is not pending any action, suit or
other proceeding to which the Trust or the Company is a party or of which
any property of either of them is the subject, before or by any court or
other governmental body, which might result in any material adverse change
in the condition, business or prospects of the Trust or the Company, or
might materially adversely affect the properties or assets of the Trust or
the Company; and no such action, suit or proceeding is known by the Trust
or the Company to be threatened or contemplated.
(m) The Securities have been duly and validly authorized by the
Trust, and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued and fully paid and non-assessable
undivided beneficial interests in the assets of the Trust and will conform
to the description thereof contained in the Registration Statement and the
Prospectus; the issuance of the Securities is not subject to preemptive or
other similar rights.
(n) The Common Securities have been duly and validly authorized by
the Trust, and, when issued and delivered to the Company by the Trust
against payment therefor as provided in the Prospectus, will be duly and
validly issued and fully paid and non-assessable undivided beneficial
interests in the assets of the Trust and will conform to the description
thereof contained in the Registration Statement and Prospectus; the
issuance of the Common Securities is not subject to preemptive or other
similar rights; on the Closing Date, all of the issued and outstanding
Common Securities of the Trust will be directly owned by the Company, free
and clear of all
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liens, encumbrances, equities or claims; and the Common Securities and the
Securities are the only interests authorized to be issued by the Trust;
(o) Neither the Trust nor the Company is or, after giving effect to
the offering and sale of the Securities, will be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
(p) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) has received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) is in compliance with all terms and conditions of any
such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals are disclosed in the financial statements
set forth in or incorporated by reference into the Registration Statement
and Prospectus or would not, singly or in the aggregate, have a material
adverse effect on the Company.
(q) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company, in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or
any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the basis
of such review, the Company has reasonably concluded that, other than as
disclosed in the financial statements set forth in or incorporated by
reference into the Registration Statement and Prospectus, such associated
costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the Company.
3. Sale, Purchase, and Delivery of Securities; Substitution of
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Underwriters. On the basis of the representations, warranties and agreements
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herein contained, and subject to the terms and conditions herein set forth, the
Trust and the Company agree that the Trust will sell to each of the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Trust, the respective principal amount of Securities set forth
opposite the name of such Underwriter in Schedule II hereto at the purchase
price set forth in Schedule I hereto.
As compensation to the Underwriters for their commitments hereunder,
and in view of the fact that the proceeds from the sale of the Securities will
be used by the Trust to purchase the Debentures, the Company on the Closing Date
will pay by wire transfer of
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immediately available funds to the Representative, for the accounts of the
several Underwriters, an amount per Security set forth in Schedule I hereto for
the Securities to be delivered by the Trust hereunder on the Closing Date.
Payment for and delivery of the Securities (the "Closing") shall be
made at the place, time and date specified in Schedule I hereto or at such other
time and date as the Representative, the Trust and the Company may agree in
writing, such time and date for payment being herein referred to as the "Closing
Date". The Securities to be purchased by each Underwriter hereunder will be
represented by one global Security in book-entry form which will be deposited by
or on behalf of the Trust with The Depository Trust Company ("DTC") or its
designated custodian. The Trust will deliver the Securities to the
Representative, for the account of each Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer of
immediately available funds to an account or accounts designated in writing by
the Trust, by causing DTC to credit the Securities to the account of the
Representative at DTC. The Trust will cause the certificates representing the
Securities to be made available to the Representative for checking at least
twenty-four hours prior to the Closing Date. Time shall be of the essence, and
delivery at the time determined as set forth above is a further condition of the
obligation of each Underwriter, the Trust and the Company.
It is understood that the several Underwriters propose to offer the
Securities for sale as set forth in the Prospectus.
In the event of default by one or more Underwriters in respect of
their obligations under this Agreement to take up and pay for the Securities
pursuant to this Section, and if the aggregate of such defaults shall not exceed
10% of the Securities, the remaining Underwriters shall be obligated severally
(in proportion to their respective commitments hereunder or in such other
proportion as may be agreed upon by the Representative) to purchase the
Securities which such defaulting Underwriter or Underwriters agreed but failed
to purchase. If any Underwriter or Underwriters shall for any reason permitted
under this Agreement cancel their obligations to take up and pay for the
Securities pursuant to this Section, or in the event of a default by one or more
Underwriters in respect of their obligations under this Agreement to take up and
pay for the Securities pursuant to this Section, and if the aggregate of such
cancellations or defaults shall exceed 10% of the aggregate principal amount of
the Securities, the remaining Underwriters shall have the right to take up and
pay for (in such proportion as may be agreed upon by the Representative) the
Securities, which the canceling or defaulting Underwriter or Underwriters agreed
but failed to purchase. If such remaining Underwriters do not, at the Closing
Date, take up and pay for the aggregate principal amount of the Securities which
the canceling or defaulting Underwriter or Underwriters failed to purchase, the
time for delivery of the Securities shall be extended for twenty-four hours, and
the several Underwriters shall have the privilege of substituting within such
twenty-four hours another underwriter or underwriters satisfactory to the
Company. If no such underwriter or underwriters shall have been substituted as
aforesaid, prior to the termination of such extended time for delivery, the time
for delivery of the
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Securities shall be extended for a further twenty-four hours, during which the
Trust and the Company shall have the privilege of finding another underwriter or
underwriters, satisfactory to the Representative, to purchase the aggregate
principal amount of the Securities which the canceling or defaulting Underwriter
or Underwriters failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriters to take up the Securities of the
canceling or defaulting Underwriter or Underwriters as provided in this Section,
(i) the Representative or the Company shall have the right to postpone the time
of delivery of the Securities, for a period of not more than five full business
days, in order to effect whatever changes that such arrangements may make
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Trust and the Company agree promptly to file
any amendment to the Registration Statement or any supplement to the Prospectus
which such arrangements may make necessary, and (ii) the Securities to be
purchased by the remaining Underwriters or substituted underwriters shall be
taken as the basis of their respective underwriting obligations for all purposes
of this Agreement.
If, in the event of a default by one or more Underwriters, the
remaining Underwriters shall not take up and pay for all of the Securities
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid and the Trust and the Company shall not
find another underwriter or underwriters for such Securities, as aforesaid, then
this Agreement may be terminated by the Trust and the Company by giving prompt
notice to the remaining Underwriters.
If the Trust and the Company shall not so elect to terminate this
Agreement, they shall have the right to require such remaining Underwriters,
irrespective of the default as aforesaid, to purchase the aggregate principal
amount of the Securities which they have agreed to purchase hereunder. In such
event the Trust and the Company shall, within twenty-four hours after such
second twenty-four hour period, give notice thereof in writing or by facsimile
transmission to such remaining Underwriters and thereupon the time for delivery
of the Securities may be postponed for a period of not more than five full
business days in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Trust and the Company agree promptly to file any amendment
to the Registration Statement or any supplement to the Prospectus which may
thereby be made necessary. In the absence of such notice from the Trust and the
Company, this Agreement shall terminate without further action on the part of
the Trust, the Company or the Underwriters.
In the event of any such termination, the Trust and the Company shall
not be under any liability to any Underwriter (except to the extent provided in
Sections 4(e) and 7 hereof) nor shall any Underwriter (other than an Underwriter
who shall have failed to purchase Securities otherwise than for some reason
permitted under this Agreement) be under any liability to the Trust and the
Company (except to the extent provided in Section 7 hereof).
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Any action taken by the non-defaulting Underwriters or by the Trust or
the Company under this Section shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
4. Covenants of the Company. The Trust and the Company, jointly and
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severally, further covenant and agree with the several Underwriters that:
(a) The Trust and the Company shall comply with the provisions of,
and make all requisite filings with the Commission pursuant to, Rule 424(b)
and notify the Representative promptly of all such filings. Neither the
Trust nor the Company will at any time file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representative shall not previously have been advised and furnished with a
copy or to which the Representative or Thelen Reid & Priest LLP, counsel
for the several Underwriters, shall have reasonably and promptly objected
in writing or which is not in compliance with the Act or the Rules and
Regulations. The Trust and the Company will prepare and file with the
Commission, promptly upon the Representative's request, any amendment to
the Registration Statement or supplement to the Prospectus which, in the
opinion of counsel for the several Underwriters and counsel for the
Company, may be necessary or advisable in connection with the offering of
the Securities by the Underwriters. The Company will file timely all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to the Exchange Act and
the rules and regulations of the Commission thereunder subsequent to the
date hereof and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Securities.
(b) The Trust and the Company will notify the Representative promptly
and confirm in writing (i) the issuance of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of the Prospectus or any order directed to the adequacy
or accuracy of any Incorporated Document or of the initiation of any
proceedings for any such purpose and (ii) the receipt of any comments from
the Commission in respect of the Registration Statement or the Prospectus,
or requesting additional information or the amendment or supplementation of
the Registration Statement or the Prospectus. If the Commission shall
issue a stop order or any order preventing or suspending the use of the
Prospectus or any order directed to the adequacy or accuracy of any
Incorporated Document at any time, or shall initiate any proceedings for
any such purpose, the Trust and the Company will make every reasonable
effort to prevent the issuance of such order and, if issued, to obtain the
lifting thereof.
(c) Within the time during which a prospectus relating to the
Securities is required to be delivered under the Act, the Company will
comply so far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations, as
from time to time in force, so far as necessary to
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permit the continuance of sales of or dealings in the Securities as
contemplated by the provisions hereof; and if during such period any event
occurs as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if during such period it is
necessary to amend or supplement the Prospectus to comply with the Act or
the Rules and Regulations or to file under the Exchange Act or the rules
and regulations of the Commission thereunder any document incorporated by
reference into the Prospectus in order to comply with the Act, the Rules
and Regulations, the Exchange Act or the rules and regulations of the
Commission thereunder, the Trust and the Company will promptly notify the
Representative and will amend or supplement the Prospectus or file such
document (in form satisfactory to counsel for the Underwriters and counsel
for the Trust and the Company and at the expense of the Company) so as to
correct such statement or omission or effect such compliance.
(d) The Trust and the Company will cooperate with the Underwriters in
qualifying and registering the Securities for sale under the securities
laws and legal investment laws of such jurisdictions as the Representative
may designate, and in continuing such qualifications in effect so long as
required for the distribution of the Securities; provided, however, that
neither the Trust nor the Company shall be obligated to file any general
consent to service of process or to submit to any requirements which it
deems unduly burdensome. The Trust and the Company will advise the
Representative promptly of any order or communication of any public
authority addressed to it suspending or threatening to suspend
qualification of the Securities for sale in any jurisdiction.
(e) Whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, the Company will pay, or
reimburse the Underwriters on demand for, all reasonable costs and expenses
incident to the performance of the Company's obligations under this
Agreement, including all expenses incident to the authorization of the
Securities and their issue and delivery by the Trust, all expenses incident
to listing the Securities on any stock exchange, any necessary stamp taxes
in connection with the foregoing, the reasonable fees and expenses of the
Company's counsel and accountants and Special Counsel to the Company and
the Trust, the costs and expenses incident to the preparation and filing
under the Act of the Registration Statement (including all exhibits and
amendments thereto), the Prospectus and this Agreement, all fees and
disbursements (including reasonable fees and disbursements of counsel)
incurred by the Trust, the Company or the Underwriters in connection with
the qualification of the Securities for sale under state securities laws
and the preparation of Blue Sky Memoranda and Legal In vestment Surveys,
the cost of furnishing to the Underwriters copies of Blue Sky Memoranda and
Legal Investment Surveys, the Registration Statement and the Prospectus,
and each amended or supplemented Registration Statement or Prospectus and
each Prospectus prepared to permit compliance with Section 10(a)(3) of the
Act and the cost of preparing copies of this
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Agreement, the Trust Agreement, the Indenture, the Guarantee and the
Expense Agreement, any fees charged by securities ratings services for
rating the Securities, the cost and charges of any transfer agent or
registrar, the cost and charges of qualifying the Securities with DTC, the
fees and expenses of the Trustees, the Debenture Trustee and the Guarantee
Trustee and any agent thereof and the fees and disbursements of their
counsel. The Company shall not, however, be required to pay for any of the
Representative's expenses or those of any of the other Underwriters, other
than as hereinabove set forth and the costs of preparing copies of the
legal opinion referred to in subparagraph (f) of Section 5 hereof, the
Underwriters' Questionnaires and the Agreement Among Underwriters;
provided, however, that, if this Agreement shall not be consummated because
it is (i) terminated by the Representative pursuant to Section 5 or Section
6 hereof, (ii) terminated pursuant to Section 3 hereof, or (iii) terminated
by reason of any failure, refusal or inability on the part of the Trust or
the Company to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure, refusal or inability be due to the default
or omission of the Underwriters, then and in any such case, the Company
shall reimburse the several Underwriters (but not defaulting Underwriters
in the event of termination pursuant to Section 3 hereof) for all out-of-
pocket expenses (including reasonable fees and disbursements of counsel for
the several Underwriters) reasonably incurred in connection with
investigating, marketing and proposing to market the Securities or in
contemplation of performing their obligations hereunder, but the Company
shall not in any event be liable to any of the several Underwriters for
damages on account of loss of anticipated profits or commissions from the
sale by them of the Securities.
(f) The Trust will apply the proceeds from the sale of the
Securities, and the Company will apply the proceeds from the sale of the
Debentures, in each case substantially as set forth under the caption "Use
of Proceeds" in the Prospectus.
(g) The Trust and the Company will deliver to the Representative, as
promptly as practicable, a signed copy of the Registration Statement and
all amendments thereto including all exhibits filed therewith and signed
consents, certificates and opinions of accountants and of any other persons
named in the Registration Statement as having prepared, certified or
reviewed any part thereof, and will deliver to the Representative such
number of unsigned copies of the Registration Statement, without exhibits,
and of all amendments thereto, as the Representative may reasonably
request. The Trust and the Company will deliver to or upon the order of the
Representative, from time to time, as many copies of the Prospectus
(excluding Incorporated Documents) as the Representative may reasonably
request.
(h) The Company will make generally available to its security holders
and deliver to the Representative as soon as it is practicable to do so, an
earnings statement (which need not be audited) covering a period of at
least twelve months beginning not later than the first day of the month
next succeeding the month in which
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occurred the effective date of the Registration Statement (as defined in
Rule 158 under the Act), which shall satisfy the requirements of Section
11(a) of the Act.
(i) For a period of five years from the Closing Date, the Company
will deliver to the Representative and, upon request, to each of the other
Underwriters (i) as soon as available, a copy of each report of the Company
mailed to security holders or filed with the Commission and (ii) from time
to time such other information concerning the Company as the Representative
shall reasonably request. If at any time, the Company shall have a
majority-owned subsidiary or subsidiaries which is or are "significant"
within the meaning of Regulation S-X of the Commission, the financial
statements contained in the documents referred to in (i) shall be furnished
in consolidated form, if such consolidation is required under such
Regulation S-X, for the Company and such subsidiary or subsidiaries.
(j) During the period beginning on the date hereof and continuing
through [ ], neither the Trust nor the Company will offer, sell
or otherwise alienate, without the Representative's prior consent, any
other Securities of the Trust or the Company as the case may be, that are
substantially similar to the Securities (including any guarantee of such
Securities) or any securities that are convertible into or exchangeable
for, or that represent the right to receive, any such substantially similar
securities of either the Trust or the Company.
(k) The Trust and the Company will use best efforts to effect the
listing of the Securities on the New York Stock Exchange.
5. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the accuracy, as of the date hereof and as of the Closing
Date (as if made on such Date), of the representations and warranties of the
Trust and Company herein, to the accuracy of statements of the Trustees and
Company officers made in certificates delivered pursuant to the provisions
hereof, to the performance by the Trust and the Company of their obligations
hereunder and to the following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, or order preventing or suspending the use of the Prospectus,
shall have been issued; no order of the Commission directed to the adequacy
or accuracy of any Incorporated Document shall be in effect; and no
proceedings for any such purpose shall have been instituted or be pending
or, to the knowledge of the Trust, the Company or the Representative, shall
be contemplated or threatened by the Commission; any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to
the reasonable satisfaction of Thelen Reid & Priest LLP, counsel for the
several Underwriters; no amendment to the Registration Statement or
Prospectus shall have been filed hereafter to which the Representative or
Thelen Reid & Priest LLP, counsel
12
for the several Underwriters, shall have reasonably and promptly objected
in writing after having received reasonable notice and a copy thereof;
there shall be in full force and effect on the date of this Agreement
appropriate orders of the New Jersey Board of Public Utilities permitting
the transactions contemplated by this Agreement and described in the
Prospectus substantially in accordance with the terms and conditions set
forth herein and therein; such order shall contain no condition
inconsistent with the provisions hereof or unacceptable to the
Representative and shall be issued under circumstances that in the
Representative's reasonable judgment are appropriate for the protection of
the Underwriters; and on or prior to the Closing Date, such order shall not
have been rescinded, modified or stayed, or the right of the Company to
operate thereunder restrained, or be subject to any litigation or
proceeding pending, or to the knowledge of the Representative, the Trust or
the Company, threatened; and there shall not have occurred any decrease in
the ratings of any of the securities of the Company or of the Securities by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the 1933 Act Regulations) and such
organization shall not have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the securities of the Company or of the Securities.
(b) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth
in or contemplated by the Prospectus, there shall not have been any change
in the capital stock, short-term debt or long-term debt of the Company, or
any adverse change or any development involving a prospective adverse
change in the condition, financial or otherwise, or in the earnings,
business, net worth or results of operations of the Trust or the Company,
all or any of which, in the Representative's reasonable judgment,
materially impairs the investment quality of the Securities; and no
Underwriter shall have disclosed in writing to the Company on or prior to
the Closing Date that the Registration Statement or Prospectus contained an
untrue statement of fact which, in the opinion of Thelen Reid & Priest LLP,
counsel for the Underwriters, is material, or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) The authorization and issuance of the Securities, the Guarantee,
the Debentures, the Registration Statement, the Prospectus and all
corporate proceedings and other legal matters incident thereto shall be
satisfactory in all material respects to Thelen Reid & Priest LLP, and the
Trust and the Company shall have furnished to Thelen Reid & Priest LLP such
documents as they reasonably may request to enable them to be satisfied
with respect to the matters referred to in this subparagraph and to furnish
to the Representative an opinion, dated as of the Closing Date, as required
by subparagraph (f) of this Section 5.
(d) On the Closing Date, the Representative shall have received the
favorable opinions of (a) Peter F. Clark, General Counsel of the Company,
(b) Simpson, Thacher
13
& Bartlett, Counsel for the Company, and (c) Richards, Layton & Finger,
P.A., Special Delaware Counsel for the Company and the Trust, each dated as
of such date, in substantially the forms attached hereto as Exhibits A, B
and C hereto.
(e) On the Closing Date, the Representative shall have received the
favorable opinion of Thelen Reid & Priest LLP, counsel for the several
Underwriters, dated as of such date, satisfactory in form, scope and
substance to the Representative with respect to the sufficiency of all
corporate proceedings and other legal matters relating to the Securities,
the form of the Registration Statement and the Prospectus, and as to the
execution and authorization of this Agreement and the transactions
contemplated hereby as the Representative may reasonably require, and the
Company shall have furnished to such counsel such documents as they may
have requested for the purpose of enabling them to pass upon such matters.
In rendering such opinion, Thelen Reid & Priest LLP may rely as to certain
matters of Delaware law relating to the Trust, the Securities and the Trust
Agreement upon the opinion of Richards, Layton & Finger, P.A., Special
Delaware Counsel for the Trust and the Company, which shall be delivered in
accordance with Section 5(d) hereto, and as to matters governed by New
Jersey law upon the opinion of [ ].
(f) On the Closing Date, the Representative shall have received the
letter of PricewaterhouseCoopers L.L.P., dated as of such date, to the
effect set forth in Schedule III annexed hereto and with respect to such
other matters as to which the Representative shall have inquired.
(g) On the Closing Date, the Representative shall have received the
letter of Deloitte & Touche LLP, dated as of such date, to the effect set
forth in Schedule IV annexed hereto and with respect to such other matters
as to which the Representative shall have inquired.
(h) On the Closing Date, the Representative shall have received
certificates, dated as of such date, of the President or a Vice President
or the principal accounting officer of the Company and a Trustee, on behalf
of the Trust, respectively, to the effect that, to the best of his or her
knowledge based on a reasonable investigation:
(i) the representations and warranties of the Trust or the
Company, as the case may be, in this Agreement are true and correct, as
though made on and as of the Closing Date, and the Trust or the Company, as
the case may be, has complied with all the agreements and satisfied all the
conditions required by this Agreement to be performed or satisfied by the
Trust or the Company, as the case may be, on or prior to the Closing Date;
and
(ii) he or she has examined the Registration Statement and the
Prospectus, and, in his or her opinion, the Registration Statement, when it
became effective and at all times subsequent thereto up to and including
the Closing Date, did
14
not and does not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Prospectus, when the
Prospectus Supplement was filed with the Commission and at all times
subsequent thereto up to and including the Closing Date, did not and does
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended Registration Statement or a supplemented Prospectus which had not
been so set forth.
All the opinions, letters, certificates and documents mentioned above
or elsewhere in this Agreement will be in compliance with the provisions hereof
only if they are reasonably satisfactory to Thelen Reid & Priest LLP. The
Company will furnish the Representative with such conformed copies of such
opinions, letters, certificates and documents as the Representative may
reasonably request.
If any condition to the Underwriters' obligations hereunder to be
satisfied on or prior to the Closing Date is not so satisfied, the
Representative may terminate this Agreement without liability on the part of any
Underwriter or the Company, except for the expenses to be paid or reimbursed by
the Company pursuant to Section 4(e) and except for any liability under Section
7 hereof.
6. Termination of Agreement. (a) The Representative, by notice to
------------------------
the Company, may terminate this Agreement, at any time after the date of this
Agreement and on or prior to the Closing Date, if during such period (i) trading
on the New York Stock Exchange or the American Stock Exchange shall have been
wholly suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York Stock Exchange or the American Stock Exchange, by the New York
Stock Exchange or the American Stock Exchange or by order of the Commission or
any other governmental authority having jurisdiction, or trading of the
Company's securities on any exchange or in any over-the-counter market shall
have been suspended, or (ii) a banking moratorium shall have been declared by
Federal or New York authorities, or (iii) an outbreak of hostilities or an
escalation thereof, a declaration of war by Congress, another substantial
calamity or crisis or another event or occurrence of a similar character which,
in the Representative's reasonable judgment, makes it impracticable or
inadvisable to proceed with the completion of the sale of and payment for the
Securities, or to enforce contracts for the sale of the Securities shall have
occurred, or (iv) the Trust or the Company shall have sustained a substantial
loss by fire, flood, accident or other calamity which in the Representative's
reasonable judgment renders it inadvisable to consummate the sale of the
Securities to, and the delivery of the Securities by, the several Underwriters,
regardless of whether or not such loss shall have been insured. This Agreement
may also be terminated at any time prior to the Closing Date if, in the
reasonable judgment of the Representative, the subject matter of any amendment
or supplement to the Registration
15
Statement or the Prospectus renders it either inadvisable to proceed with such
offering or inadvisable to proceed with the delivery of the Securities to be
purchased hereunder.
(b) In the event of the termination pursuant to this Section, the
Company shall not be under any liability to any Underwriter, except for the
expenses to be paid by it pursuant to the provisions of Section 4(e) and except
for any liability under Section 7, nor shall any Underwriter be under any
liability to the Company, except for any liability under Section 7.
(c) If the Representative elects to terminate this Agreement as
provided in this Section, the Company shall be notified promptly by the
Representative by telephone, confirmed in writing.
7. Indemnification. (a) The Trust and the Company, jointly and
---------------
severally, will indemnify and hold harmless each Underwriter and each person, if
any, who controls such Underwriter within the meaning of the Act against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or allegedly untrue statement of any material fact contained in
the Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and will reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigation or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
neither the Trust nor the Company will be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or allegedly untrue statement or omission or alleged omission
made in the Registration Statement, any preliminary prospectus, or the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Trust or the Company may otherwise
have.
(b) Each Underwriter will indemnify and hold harmless the Trust and
the Company, each of their directors, each of their officers who has signed the
Registration Statement, and each person, if any, who controls the Trust or the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which the Trust or the Company or any such
director, officer or controlling person may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or allegedly untrue statement of any material fact contained in
the Registration
16
Statement, any preliminary prospectus, or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or allegedly untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Trust or the Company by such Underwriter
specifically for use in the preparation thereof; and will reimburse the Trust
and the Company for any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, (except in the
circumstances set forth in clause (i) and (ii) of this sentence) to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless, (i) the employment
of additional counsel has been authorized in writing by the indemnifying party
in connection with defending such action, or (ii) representation of both the
indemnifying party and the indemnified party by the same counsel is
inappropriate by applicable standards of professional conduct for attorneys in
the jurisdiction where suit is instituted due to actual or potential conflicting
interests between them (it being understood that the indemnifying party shall
not be liable for the expense of more than one separate counsel (in addition to
local counsel) representing the indemnified parties in such action). No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) No indemnity by the Trust or the Company hereunder shall apply in
respect of (i) any preliminary prospectus furnished to a person to whom any of
the Securities are sold unless a copy of the Prospectus is furnished by an
Underwriter or securities dealer to
17
such person at or prior to the furnishing of the written confirmation of such
sale or mailed to such person with such confirmation or (ii) any preliminary
prospectus or Prospectus used by an Underwriter or securities dealer after the
same has been superseded by an amended or supplemented preliminary prospectus or
Prospectus supplied by the Trust or the Company to the Representative for the
use of the Underwriters and securities dealers. As used in this Section 9, the
terms "preliminary prospectus" and "Prospectus" do not include any documents
incorporated by reference thereto.
(e) If the indemnification provided for in subparagraph (a) or (b)
above should not be available to an indemnified party in respect of any losses,
claims, damages, liabilities and expenses referred to therein, then the
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and such indemnified party on the other from the offering
of the Securities, and also the relative fault of the indemnifying party on the
one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities and expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Trust, the Company and
the Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Trust and
the Company bears to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Trust, the Company and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Trust, the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(f) The parties hereto agree that it would not be just and equitable
if contribution were to be determined by pro rata allocation (even if the
Underwriters were to be treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
action or claim (which shall be limited as provided in subparagraph (c) above if
the indemnifying party shall have assumed the defense of any such action in
accordance with the provisions thereof). No person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(g) The Company agrees to indemnify and hold harmless the Trust from
and against any and all losses, claims, damages and liabilities whatsoever, as
due from the Trust under this Section.
18
8. Representations and Indemnities to Survive. All representations
------------------------------------------
and warranties of the Trust and the Company contained herein and in the
certificate or certificates delivered pursuant to Section 5(h) and the indemnity
agreements contained in Section 7 shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or controlling person, or by or on behalf of the Trust and the Company or any
officer, director or controlling person, and shall survive delivery of and
payment for the Securities and, in the case of the indemnity agreements
contained in Section 7, any termination of this Agreement.
9. Notices. All communications hereunder shall be in writing and if
-------
sent to the Underwriters shall be mailed, delivered or transmitted by facsimile
and confirmed to the Representative at the address set forth in Schedule I
hereto, or if sent to the Trust or the Company shall be mailed, delivered or
transmitted by facsimile and confirmed to it, c/o Senior Vice President,
Treasurer and Chief Financial Officer, 800 King Street, P.O. Box 231,
Wilmington, Delaware 19899, facsimile no. (302) 429-3367. Any such address may
be changed from time to time by notice as aforesaid.
10. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the several Underwriters, the Trust and the Company and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto, their respective successors and assigns and the
controlling persons, officers and directors referred to in Section 7, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto, their respective successors and assigns and said controlling
persons, officers and directors, and for the benefit of no other person or
corporation. No purchaser of any of the Securities through or from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
11. Underwriters Not Agents of the Company. Nothing herein contained
--------------------------------------
shall constitute the Underwriters, or any of them, agents or representatives of
the Trust or the Company, or authorize them to act for or on behalf of the Trust
or the Company in any capacity.
12. Controlling Law. Although the place of performance of certain
---------------
obligations under this Agreement is stated to be outside of New York, it is the
express intention of the parties hereto that this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to choice of laws principles.
19
If the foregoing correctly sets forth the understanding among the
Trust, the Company and the Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Trust, the Company and the Underwriters severally.
Very truly yours,
ATLANTIC CAPITAL II
By
-----------------------------------
Title: Administrative Trustee
ATLANTIC CITY ELECTRIC COMPANY
By
-----------------------------------
Title: Senior Vice President, Treasurer
and Chief Financial Officer
ACCEPTED as of the date first
above written, as Underwriters
and as Representatives of the
other Underwriters named in
Schedule II.
MORGAN STANLEY & CO. INCORPORATED
WHEAT FIRST UNION
LEGG MASON WOOD WALKER, INC.
By: MORGAN STANLEY & CO.
INCORPORATED
By:
-----------------------------
Title: Principal
20
SCHEDULE I
----------
Underwriting Agreement dated October , 1998
Registration Statement No. 333-________ and 333-________
Representatives and Address:
MORGAN STANLEY & CO. INCORPORATED
WHEAT FIRST UNION
LEGG MASON WOOD WALKER, INC.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Securities:
Designation: Cumulative Trust Preferred Capital Securities
(Liquidation Amount $25.00 per Preferred Security)
Amount of Securities: $____________
Amount of Common Securities: $____________
Purchase Price per Preferred Security: $__________
Public Offering Price per Preferred Security: $__________
Underwriters' Compensation per
Preferred Security: $_______ ($______ per Preferred Security
sold to certain institutions)
Closing Date, Time and Location:
October , 1998
9:00 a.m.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
21
SCHEDULE II
-----------
Underwriter Number of Securities
----------- --------------------
MORGAN STANLEY & CO. INCORPORATED ....................
WHEAT FIRST UNION ....................................
LEGG MASON WOOD WALKER, INC. .........................
---------------
Total .............................................
===============
22
SCHEDULE III
------------
(i) They are independent public accountants with the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) On the basis of procedures performed specified by the American
Institute of Public Accountants for a review of interim financial information as
described in SAS No. 71 (but not an examination in accordance with generally
accepted auditing standards) on the unaudited interim consolidated financial
statements of the Company as set forth in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, if any, a reading of the
latest available unaudited interim consolidated financial statements, if any, of
the Company subsequent to the financial statements incorporated by reference in
the Prospectus and the minutes of meetings of the Board of Directors and
stockholders of the Company and inquiries of officers and other employees of the
Company responsible for accounting matters and other specified procedures,
nothing has come to their attention which causes them to believe that (A) the
unaudited consolidated financial statements incorporated by reference in the
Prospectus, if any, do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies to Form 10-
Q and the related published rules and regulations thereunder or that any
material modifications should be made to such unaudited consolidated financial
statements for them to be in conformity with generally accepted accounting
principles; (B) the unaudited interim consolidated financial statements, if any,
for periods subsequent to the financial statements incorporated by reference in
the Prospectus are not fairly stated on a basis substantially consistent with
that of the audited consolidated financial statements; (C) at a specified date
not more than three days prior to the date of such letter, there was any change
in the capital stock of the Companies or in their long-term debt, any increase
in their short-term debt or any decrease in their consolidated net assets, in
each case as compared with amounts shown in their most recent unaudited interim
consolidated balance sheet incorporated by reference in the Prospectus; or (D)
for the period from the date of the most recent audited or unaudited
consolidated financial statements incorporated by reference in the Prospectus to
a subsequent date not more than three days prior to the date of such letter,
there were any decreases, as compared with the corresponding period in the
preceding year, in consolidated operating revenues, operating income, net income
earnings applicable to common stock and earnings per average share of common
stock of the Company; except in all instances for changes or decreases which the
Prospectus discloses have occurred or may occur or which (i) are described in
such letter and (ii) as so described, are determined by the Representative in
its discretion, not to be material; and
(iii) They have compared the dollar amounts (or percentages derived
from such dollar amounts), ratios and other financial information as agreed upon
contained in (A) the Prospectus, (B) the Company's latest Annual Report on Form
10-K incorporated by reference
-2-
into the Prospectus, and (C) the Company's latest Quarterly Report on Form 10-Q
incorporated by reference into the Prospectus (in each case to the extent that
such dollar amounts, percentages, ratios and other financial information are
derived from the general accounting records of the Company subject to the
internal controls of the Company's accounting system, or are derived directly
from such records by analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and other procedures
specified in such letter, and have found such dollar amounts, percentages,
ratios and other financial information to be in agreement with such results
except as otherwise specified in such letter.
SCHEDULE IV
-----------
(i) They are independent public accountants with the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements of the Company
("Company") examined by them and incorporated by reference in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the published rules
and regulations thereunder;
(iii) They have compared the dollar amounts (or percentages derived
from such dollar amounts), ratios and other financial information as agreed upon
contained in the Company's latest Annual Report on Form 10-K incorporated by
reference into the Prospectus (in each case to the extent that such dollar
amounts, percentages, ratios and other financial information are derived from
the general accounting records of the Company subject to the internal controls
of the Company's accounting system, or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such letter,
and have found such dollar amounts, percentages, ratios and other financial
information to be in agreement with such results except as otherwise specified
in such letter.