AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 2002
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMONWEALTH EDISON COMPANY ILLINOIS 36-0938600
COMED FINANCING III DELAWARE 81-6104665
(Exact name of the registrants as specified in (State or other jurisdiction of (I.R.S. Employer Identification No.)
their respective charters) incorporation or organization)
10 SOUTH DEARBORN STREET - 37TH FLOOR ROBERT E. BERDELLE
P.O. BOX 805379 VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
CHICAGO, ILLINOIS 60680-5379 10 SOUTH DEARBORN STREET - 37TH FLOOR
(312) 394-4321 CHICAGO, ILLINOIS 60680-5379
(312) 394-4321
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone number,
including area code, of each registrant's including area code, of agent for service for each registrant)
principal executive offices)
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COPIES TO:
RICHARD W. ASTLE, ESQ. CARTER C. CULVER, ESQ.
SIDLEY AUSTIN BROWN & WOOD ASSOCIATE GENERAL COUNSEL - CORPORATE & COMMERCIAL
BANK ONE PLAZA EXELON BUSINESS SERVICES COMPANY
10 SOUTH DEARBORN STREET 10 SOUTH DEARBORN STREET, 35TH FLOOR
CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60603
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed
Maximum
Offering Proposed Maximum
Title of Each Class of Securities to Be Amount to be Price Per Aggregate Offering Amount of
Registered Registered (1) Unit (2) Price (2) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative Preference Stock, without par value..
Debt Securities.................................
Trust Preferred Securities of ComEd Financing III
Guarantee of Trust Preferred Securities of ComEd
Financing III by Commonwealth Edison Company (4)
Trust Debentures (5)............................
Total........................................... $2,100,000,000(3) 100% $2,100,000,000(3) $193,200
=============================================================================================================================
(1) There are being registered hereunder a presently indeterminate principal
amount of Cumulative Preference Stock, Debt Securities, Trust Preferred
Securities and Trust Debentures. The amount registered is in United States
dollars or the equivalent thereof in foreign currency or currency units.
Pursuant to Rule 457(o) under the Securities Act of 1933, and General
Instruction II.D. of Form S-3, which permits the registration fee to be
calculated on the basis of the maximum aggregate offering price of all the
securities listed, the table does not specify by each class information as
to the amount to be registered, proposed maximum offering price per unit or
proposed maximum aggregate offering price.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act. The aggregate public
offering price of the securities registered hereby will not exceed
$2,100,000,000 in United States dollars or the equivalent thereof in
foreign currency or currency units.
(3) Such amount represents the principal amount of any Debt Securities or Trust
Debentures issued to the public at their principal amount, the issue price
rather than the principal amount of any Debt Securities issued to the
public at an original issue discount and the liquidation preference of any
Cumulative Preference Stock or Trust Preferred Securities.
(4) Commonwealth Edison Company is also registering under this Registration
Statement all other obligations that it may have with respect to the Trust
Preferred Securities of ComEd Financing III. No separate consideration will
be received for the Guarantee or any other such obligations.
(5) The Trust Debentures will be purchased by, and constitute assets of, ComEd
Financing III. No separate consideration will be received therefor.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 2002
PROSPECTUS
[COM ED LOGO]
$2,100,000,000
COMMONWEALTH EDISON COMPANY
DEBT SECURITIES
CUMULATIVE PREFERENCE STOCK
TRUST DEBENTURES
GUARANTEE OF THE TRUST PREFERRED SECURITIES
COMED FINANCING III
TRUST PREFERRED SECURITIES
(GUARANTEED BY COMMONWEALTH EDISON COMPANY)
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Commonwealth Edison Company may offer and sell, from time to time:
- debt securities, consisting of one or more series of first mortgage
bonds or unsecured notes;
- cumulative preference stock, without par value, in one or more series;
- trust debentures to be purchased by ComEd Financing III; and
- a guarantee of trust preferred securities sold by ComEd Financing III.
ComEd Financing III may offer and sell, from time to time, trust preferred
securities that will be guaranteed by Commonwealth Edison Company.
The aggregate initial offering prices to the public of the securities
offered by Commonwealth Edison Company and ComEd Financing III will not exceed
$2,100,000,000. We may offer the securities separately or together, in separate
series, in amounts, at prices and on terms to be determined at or prior to the
time or times of sale.
We will describe the specific terms of the securities, together with the
terms of the offering of those securities, the initial offering price and our
net proceeds from their sale, in supplements to this prospectus. You should read
both this prospectus and any applicable supplements carefully before you invest.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------
We may sell the securities directly to purchasers, through agents we may
designate from time to time or to or through underwriters. If any agents or
underwriters are involved in the sale of the securities, we will specify the
names of those agents or underwriters and any applicable commission or discount
in the applicable prospectus supplement. Our net proceeds from the sale of
securities will be the initial public offering price of those securities less
the applicable discount, in the case of an offering through an underwriter, or
the purchase price of those securities less the applicable commission, in the
case of an offering through an agent, and, in each case, less other expenses
payable by us in connection with the issuance and distribution of those
securities.
The date of this prospectus is _________, 2002.
2
TABLE OF CONTENTS
About this Prospectus......................................................3
Where You Can Find More Information........................................4
Commonwealth Edison Company................................................5
Exelon Corporation.........................................................5
The Trust..................................................................6
Summary Financial Information..............................................7
Use of Proceeds...........................................................11
Description of Bonds......................................................12
Description of Notes......................................................18
Description of Capital Stock..............................................22
Description of Trust Preferred Securities.................................26
Description of Trust Debentures...........................................36
Description of Guarantee..................................................45
Relationship Among the Trust Preferred Securities,
the Trust Debentures and the Guarantee...................................48
Book-Entry System.........................................................50
Plan of Distribution......................................................53
Legal Matters.............................................................54
Experts...................................................................54
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, utilizing a "shelf" registration
process. Under this shelf registration process, we may, from time to time, sell
any combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $2,100,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will describe in a supplement to this prospectus
specific information about the terms of that offering. The applicable prospectus
supplement may also add, update or change information contained in this
prospectus. Please carefully read both this prospectus and the applicable
prospectus supplement, together with the additional information referred to
under the caption "Where You Can Find More Information," before investing in our
securities.
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "our company," "we," "us," "our" or similar
references mean Commonwealth Edison Company.
We are not offering the securities in any state where the offer is not
permitted.
You should rely only on the information contained or incorporated by
reference in this prospectus and the applicable prospectus supplement. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus or any prospectus supplement
is accurate as of any date other than the date on the front of each of those
documents.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, information statements and
other information with the SEC. You may read and copy any document that we file
with the SEC at the Public Reference Room of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet on the SEC's web site at
http://www.sec.gov. You can also inspect reports and other information we file
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to previously filed documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the following documents we have filed
with the SEC (file number 1-1839) and any future filings that we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 until we or any underwriters sell all of the securities:
- Our Annual Report on Form 10-K for the year ended December 31, 2001;
- Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2002 and June 30, 2002; and
- Our Current Reports on Form 8-K dated January 29, 2002, April 2, 2002,
April 22, 2002, May 17, 2002, July 16, 2002, July 31, 2002, August
27, 2002 and September 3, 2002.
Some of the filings incorporated by reference above contain financial
statements audited by and reports of Arthur Andersen LLP. Arthur Andersen LLP
has not consented to the incorporation by reference of their reports contained
in those filings. See "Experts" below for more information.
In addition to the resources maintained by the SEC, you may also obtain
these filings at no cost by writing us at Commonwealth Edison Company, 10 South
Dearborn Street, 36th Floor, P.O. Box 805379, Chicago, Illinois 60680-5379;
Attention: Director, Investor Relations.
We have not included separate financial statements for the trust in this
prospectus. They were omitted because the trust is our wholly-owned subsidiary
with no independent operations and we guarantee the payments and distributions
relating to the trust preferred securities. Although the trust would normally be
required to file information with the SEC on an ongoing basis, we expect the SEC
to exempt the trust from this filing obligation for as long we continue to file
information with the SEC.
4
COMMONWEALTH EDISON COMPANY
We are a subsidiary of Exelon Corporation and are engaged principally in
the purchase, transmission, distribution and sale of electricity to a diverse
base of residential, commercial, industrial and wholesale customers in northern
Illinois. Our traditional retail service territory covers approximately 11,300
square miles and an estimated population of approximately 8 million as of
December 31, 2001. The service territory includes the City of Chicago, an area
of about 225 square miles with an estimated population of approximately 3
million. We delivered electricity to approximately 3.6 million customers at
December 31, 2001.
During January, 2001, Exelon undertook a corporate restructuring to
separate its non-regulated, generation and other competitive businesses from its
regulated energy delivery businesses. As part of the corporate restructuring,
effective January 1, 2001, our assets and liabilities unrelated to energy
delivery were transferred to separate subsidiaries of Exelon. The transferred
assets and liabilities are related to nuclear generation and wholesale energy
services and administrative functions for other business activities of Exelon
and its subsidiaries. In connection with the restructuring, we entered into a
power purchase agreement with Exelon Generation Company, LLC, a wholly owned
subsidiary of Exelon, to supply us with all of our electric load requirements
for customers through 2004. As a result of the restructuring, our transmission
and distribution assets are the principal properties subject to the lien of our
Mortgage.
As a public utility under the Illinois Public Utilities Act, we are subject
to regulation by the Illinois Commerce Commission, or ICC, including regulation
as to rates and charges, issuance of most of our securities, services and
facilities, classification of accounts, transactions with affiliated interests,
as defined in the Illinois Public Utilities Act, and other matters. As a
subsidiary of Exelon, a registered holding company under the Public Utility
Holding Company Act of 1935, we are subject to a number of restrictions under
that Act. As an electric utility under the Federal Power Act, we are also
subject to regulation by the Federal Energy Regulatory Commission, or FERC, as
to transmission rates and certain other aspects of our business, including
interconnections and sales of transmission related assets.
Our principal executive offices are located at 10 South Dearborn Street,
Chicago, Illinois 60603 and our telephone number is (312) 394-4321.
EXELON CORPORATION
Exelon Corporation became the parent corporation for each of us and PECO
Energy Company, or PECO, as a result of the completion on October 20, 2000 of
the transactions contemplated by an Agreement and Plan of Exchange and Merger,
as amended, among PECO, Unicom Corporation and Exelon. Unicom was our former
parent corporation. Exelon, through its subsidiaries, operates in three business
segments:
- Energy Delivery, consisting of our retail electricity distribution,
transmission and sale businesses in northern Illinois and that of PECO
in southeastern Pennsylvania and the natural gas distribution and sale
business of PECO in the Pennsylvania counties surrounding the City of
Philadelphia.
- Generation, consisting of electric generating facilities, power
marketing operations and equity interests in Sithe Energies, Inc. and
AmerGen Energy Company, LLC.
- Enterprises, consisting of competitive retail energy sales, energy and
infrastructure services, communications and related investments.
5
Exelon's principal executive offices are located at 10 South Dearborn
Street, Chicago, Illinois 60603 and its telephone number is (312) 394-4321.
THE TRUST
ComEd Financing III, which we refer to in this prospectus as the "trust,"
is a Delaware statutory trust that was formed on September 5, 2002. The trust's
business is defined in a declaration of trust, dated as of September 5, 2002,
executed by us, as sponsor, and the trustees specified below. The declaration of
trust will be amended and restated in its entirety as of the date trust
preferred securities are initially issued. The declaration, as amended and
restated, is referred to in this prospectus as the "trust agreement." The trust
agreement will be qualified under the Trust Indenture Act of 1939, as amended.
The trust exists for the exclusive purposes of:
- issuing and selling its trust preferred securities and trust common
securities;
- using the proceeds from the sale of the trust preferred securities and
the trust common securities to acquire the trust debentures from us;
and
- engaging in only those other activities necessary or incidental to
these purposes.
The trust will have no assets other than the trust debentures. The trust
will have no revenue other than payments under the trust debentures. The trust
has a term of 45 years, but may dissolve earlier as provided in the trust
agreement.
We will, directly or indirectly, acquire all of the trust common
securities, which will have an aggregate liquidation amount equal to at least 3%
of the total capital of the trust.
The trust's business and affairs will be conducted by its trustees, as
provided in the trust agreement. At the time of the issuance of the trust
preferred securities, the trustees for the trust will be initially Wilmington
Trust Company, as the property trustee and the Delaware trustee, and three of
our employees as administrative trustees. We, as holder of the trust common
securities, or, if an event of default under the trust agreement has occurred
and is continuing, the holders of not less than a majority in liquidation amount
of the trust preferred securities, will be entitled to appoint, remove or
replace the property trustee and the Delaware trustee. In no event will the
holders of the trust preferred securities have the right to vote to appoint,
remove or replace the administrative trustees. Those voting rights will be
vested exclusively in the holder of the trust common securities.
For so long as the trust preferred securities remain outstanding, we will:
- maintain directly or indirectly 100% ownership of the trust common
securities;
- use our reasonable efforts to cause the trust to remain a statutory
trust and not to voluntarily dissolve, wind-up, liquidate or be
terminated, except as permitted by the trust agreement; and
- use our reasonable efforts to cause the trust to continue to be
treated as a grantor trust and not an association taxable as a
corporation for United States federal income tax purposes.
We will pay all of the trust's fees and expenses, including those related
to the offering of the trust preferred securities. In addition, we guarantee
payments on the trust preferred securities to the extent that the trust has
funds to make payments on the trust preferred securities. See "Description of
Guarantee" below.
The rights of the holders of the trust preferred securities are set forth
in the trust agreement and the Delaware Statutory Trust Act.
The location of the trust's principal executive office is 10 South Dearborn
Street, Chicago, Illinois 60603 and the telephone number is (312) 394-4321.
6
SUMMARY FINANCIAL INFORMATION
We have provided the following summary financial information for your
reference. We have derived the summary information presented here from the
financial statements we have incorporated by reference into this prospectus. You
should read it together with our historical consolidated financial statements
and the related notes incorporated by reference in this prospectus. See "Where
You Can Find More Information" above.
Our financial statements for the year ended December 31, 2001 and for the
periods from January 1, 2000 to October 19, 2000 and October 20, 2000 to
December 31, 2000 were audited by PricewaterhouseCoopers LLP. Our consolidated
financial statements for the year ended December 31, 1999 were audited by Arthur
Andersen LLP. Arthur Andersen LLP has not consented to our incorporation by
reference of their reports contained in the filings we have incorporated by
reference in this prospectus. See "Experts" below for more information.
The merger transaction in which we became a subsidiary of Exelon was
accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles. The effects of the purchase method are
reflected in our financial statements as of the merger date, October 20, 2000.
Accordingly, our financial information presented for the period after the merger
reflects a new basis of accounting. Financial information for 2000, separated by
a black line, is presented for periods prior to and subsequent to the merger.
In addition, effective January 1, 2001, our assets and liabilities
unrelated to energy delivery were transferred to separate subsidiaries of Exelon
as part of Exelon's restructuring. Thus, beginning in January 2001, our
operations consist of our retail electricity distribution and transmission
business in northern Illinois. The restructuring has had a significant impact on
our assets, liabilities and equity and our results of operations. Our results of
operations and assets and liabilities prior to January 2001 do not reflect the
restructuring.
SIX MONTHS ENDED
YEAR ENDED JAN 1- OCT. 20- YEAR ENDED JUNE 30,
DECEMBER 31, OCT. 19, DEC. 31, DECEMBER 31, ------------------
1999 2000 2000 2001 2001 2002
---- ---- ---- ---- ---- ----
($ IN MILLIONS)
INCOME STATEMENT DATA
Operating revenues................. $ 6,793 $ 5,702 $ 1,310 $ 6,206 $2,976 $2,796
Operating income................... 1,549 1,048 338 1,594 840 834
Net income on common stock......... 599 596 133 607 329 360
Adjusted net income (a)............ 599 596 156 733 393 360
CASH FLOW DATA
EBITDA (b)......................... $ 2,451 $ 2,060 $ 512 $ 2,259 $1,174 $1,102
Cash interest paid (c)............. 588 418 88 451 247 217
Investment in plant ............... 1,337 1,210 196 839 451 357
Cash flows from operations......... 1,243 1,074 524 1,352 705 740
Cash flows (used in) provided by
investing activities............... 1,146 (827) (800) (441) (58) (352)
Cash flows used in financing
activities......................... (1,161) (956) (129) (1,029) (322) (57)
7
AS OF DECEMBER 31, AS OF JUNE 30,
1999 2000 2001 2002
---- ---- ---- ----
($ IN MILLIONS)
BALANCE SHEET DATA
Property, plant and equipment, net........ $ 11,993 $ 7,657 $ 7,351 $ 7,522
Total assets.............................. 22,576 20,198 15,716 16,198
Long-term debt(d)......................... 6,962 6,882 5,850 6,095
Preferred securities ..................... 9 7 7 7
Common shareholders' equity .............. 5,303 6,176 5,076 5,253
(a) We adopted Statement of Accounting Standard (SFAS) No. 142, "Goodwill and
Other Intangible Assets," as of January 1, 2002. SFAS No. 142 establishes
new accounting and reporting standards for goodwill and intangible assets.
We do not have significant other intangible assets recorded on our balance
sheet. Under SFAS No. 142, goodwill is no longer subject to amortization;
however, goodwill is subject to an assessment for impairment using a
two-step fair value based test. We have performed both steps and have
determined that there is no impairment of our goodwill.
The following table sets forth our net income, adjusted to exclude
amortization expense related to goodwill that is no longer being
amortized.
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED JAN. 1- OCT. 20, YEAR ENDED JUNE 30,
DECEMBER 31, OCT. 19, DEC. 31, DECEMBER 31, ------------------
1999 2000 2000 2001 2001 2002
---- ---- ---- ---- ---- ----
($ IN MILLIONS)
Reported net income...................... $ 599 $ 596 $ 133 $ 607 $329 $360
Goodwill amortization.................... - - 23 126 64 -
Adjusted net income...................... $ 599 $ 596 $ 156 $ 733 $393 $360
</Table>
(b) EBITDA is defined as operating income plus depreciation and amortization as
reported in the consolidated statements of cash flows. EBITDA is not a
measure of performance under generally accepted accounting principles, or
GAAP. While EBITDA should not be considered as a substitute for net income,
cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity, management understands that EBITDA is
customarily used as a measure in evaluating companies.
(c) Includes cash interest paid of $186 million, $162 million, $143 million,
$74 million and $65 million in connection with the ComEd Transitional
Funding Trust notes for the years ended December 31, 1999, 2000 and 2001
and for the six months ended June 30, 2001 and 2002, respectively.
(d) Excludes current maturities of $732 million, $348 million, $849 million and
$848 million as of December 31, 1999, 2000 and 2001, and June 30, 2002,
respectively.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
12 MONTHS ENDED SIX MONTHS
DECEMBER 31, JAN. 1- OCT. 20- 12 MONTHS ENDED JUNE 30,
----------------------------- OCT. 19, DEC. 31, ENDED DEC. 31, --------------
1997 1998 1999 2000 2000 2001 2001 2002
---- ---- ---- ---- ---- ---- ---- ----
Earnings to Fixed Charges (d)...... (e) 2.59 2.45 2.62 2.69 2.89 2.99 3.20
Earnings to Fixed Charges and
Preferred and Preference Stock
Dividend Requirements (d)..........
(e) 2.24 2.32 2.60 2.69 2.89 2.99 3.20
(d) For purposes of computing the ratios of earnings to fixed charges and the
ratios of earnings to fixed charges and preferred and preference stock
dividend requirements: (i) earnings consist of net income before deducting
net provisions for income taxes (including deferred taxes and current
income taxes applicable to nonoperating activities), investment tax credits
deferred and fixed charges; (ii) fixed charges consist of interest on debt,
amortization of debt discount, premium and expense, and the estimated
interest component of nuclear fuel and other lease payments and rentals;
and (iii) preferred and preference stock dividend requirements represent an
amount equal to income, before income taxes, which would be required to
meet the dividends on preferred and preference stocks.
(e) Our earnings for 1997 were inadequate to cover fixed charges by
approximately $259 million and fixed charges and preferred and preference
stock dividend requirements by approximately $359 million. This inadequacy
was principally caused by charges related to the closure of our Zion
Nuclear Generating Station and our discontinuation of regulatory accounting
practices for the generation portion of our business and other charges
recorded as a result of the electric utility restructuring legislation
adopted in Illinois in 1997.
NOTES TO SUMMARY FINANCIAL INFORMATION
Under electric utility restructuring legislation known as the Electric
Service Customer Choice and Rate Relief Law of 1997, or the Restructuring
Legislation, adopted in Illinois, all of our customers have the choice to
purchase energy from other suppliers and non-residential customers can also
elect a power purchase option. The power purchase option allows the purchase of
electric energy from us at market-based prices. On May 1, 2002, all of our
residential customers became eligible to choose their supplier of electricity.
However, as of June 30, 2002, no alternative electric supplier had sought
approval from the ICC to serve residential customers, nor has any electric
utility chosen to enter our residential market for the supply of electricity. As
of June 30, 2002, approximately 22,600 retail customers, representing
8
approximately 25% of our retail kilowatt-hour sales for the six months ended
June 30, 2002, had elected to receive their electric energy from an alternative
electric supplier or chose the power purchase option.
On April 1, 2002, the ICC issued an interim order in our Delivery Services
Rate Case. The interim order is subject to an audit of test year expenditures
that is anticipated to be completed by the end of 2002, with a final order to be
issued in 2003. The purpose of the audit is to analyze and establish the
reasonableness of past investments and expenditures, which we believe we have
shown and will be shown in the audit. The order sets delivery rates for
residential customers choosing a retail electric supplier. The rates became
effective on May 1, 2002 when residential customers became eligible to choose
their electricity supplier. Traditional bundled rates - rates paid by customers
that retain us as their electricity supplier - are not affected by this order.
As a result of amendments made on June 6, 2002 to the Restructuring Legislation,
bundled rates will remain frozen through 2006. Delivery service rates for
non-residential customers are not affected by this order. The potential revenue
impact of the interim order is not expected to be material in 2002.
In addition to retail competition for generation services, the
Restructuring Legislation also provided a 15% residential base rate reduction
effective August 1, 1998 and an additional 5% residential base rate reduction in
October 2001. Our operating revenues were reduced by approximately $78 million
for the six months ended June 30, 2002 and $24 million in 2001 due to the 5%
residential base rate reduction. Notwithstanding the rate reductions and subject
to certain earnings tests, a rate freeze will generally be in effect until
January 1, 2007. The rate freeze period was extended to January 1, 2007 as a
result of amendatory legislation enacted on June 6, 2002. A utility may request
a base rate increase during the rate freeze period only when necessary to ensure
the utility's financial viability.
On July 19, 2002, we filed a request with the ICC to revise the provider of
last resort obligation we have in Illinois to be the back-up energy supplier to
certain businesses. We are seeking permission from the ICC to limit availability
by June 2006 of Rate 6L for 370 of our largest energy customers with energy
demands of at least three megawatts, totaling approximately 2,500 megawatts.
Rate 6L is a bundled fixed rate offered to large customers including heavy
industrial plants, large office buildings, government facilities and a variety
of other businesses. The ICC has 120 days from the date of the filing to act on
our request or it will be deemed approved.
Under the Restructuring Legislation, if the earned return on common equity
of a utility during the rate freeze period exceeds an established threshold,
one-half of the excess earnings must be refunded to customers. The threshold
rate of return on common equity is currently based on the 30-year Treasury Bond
rate plus 8.5% in the years 2000 through 2006; although the Monthly Treasury
Long-Term Average (25 years and above) will be used when the 30-year Treasury
Bond rate is no longer included in the Federal Reserve System's H.15 Statistical
Release. Earnings for purposes of our threshold include our net income
calculated in accordance with GAAP and reflect the amortization of regulatory
assets and goodwill. At December 31, 2001, we had a regulatory asset with an
unamortized balance of $277 million that we expect to fully recover and amortize
through the transition period. Consistent with the provisions of the
Restructuring Legislation, regulatory assets may be recovered at amounts which
provide us an earned return on common equity within the threshold. The utility's
earned return on common equity and our threshold return on common equity are
each calculated on a two-year average basis. We did not trigger the earnings
sharing provision in 2000. Subject to the satisfactory resolution of the matter
discussed in the next paragraph, we did not trigger the earnings sharing
provision in 2001 and do not currently expect to trigger that provision in the
years 2002 through 2006.
On August 27, 2002, we received a letter order from the Staff of the
Federal Energy Regulatory Commission directing us to remove from our
FERC-required books the amount of goodwill associated with the generating assets
and power marketing business that we transferred in January 2001 as part of an
Exelon corporate restructuring to separate generation assets from transmission
and distribution assets. At the time of the transfer, we had on our books
approximately $4.8 billion of goodwill that was recognized in connection with
the October 2000 merger transaction that resulted in the formation of Exelon.
The letter order was in response to a request that we made in July 2001 for
approval by FERC of our accounting entries related to that corporate
restructuring. We filed a petition with FERC requesting a stay and rehearing on
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the matter. If the FERC letter order stands and it is ultimately determined that
a significant portion of our recorded goodwill is attributable to the
transferred assets, then we could be required to amend our financial statements
filed with FERC accordingly. Although we believe that none of the $4.8 billion
of goodwill relates to the transferred generation or power marketing assets, the
FERC letter order does not indicate how much goodwill FERC believes should be
removed from our books, or how such an amount should be determined, and as a
result we cannot estimate what the impact of such an amendment might be. Because
the above-described earnings sharing provision is based on our FERC financial
statements, an amendment to those financial statements could have a material
adverse effect on our financial results, including refunds to our customers in
respect of our earnings during 2001, and could affect our cost of capital.
The Restructuring Legislation also provided for the collection of a
competitive transition charge, or CTC, from customers who choose to purchase
electric energy from an alternative supplier or elect the power purchase option
during a transition period that extends through 2006. The CTC was established as
of October 1, 1999 and is applied on a cents per kilowatt-hour basis. It
considers the revenue that would have been collected from a customer under
tariffed rates, reduced by the revenue the utility will receive for providing
delivery services to the customer, the market price for electricity and a
defined mitigation factor, which represents the utility's opportunity to develop
new revenue sources and achieve cost savings. The CTC allows us to recover some
of our costs that might otherwise be unrecoverable under market-based rates.
As part of a settlement agreement between us and the City of Chicago
relating to our Chicago franchise agreement, we agreed with the City of Chicago
to a revised combination of ongoing work under the franchise agreement and new
initiatives that total approximately $1 billion in defined transmission and
distribution expenditures by us to improve electric service in Chicago. The
Illinois legislation also committed us to spend at least $2 billion during the
period 1999 through 2004 on transmission and distribution facilities outside of
Chicago. We have substantially completed these expenditures inside and outside
of Chicago. In addition, we conducted an extensive evaluation of the reliability
of our transmission and distribution systems in response to several outages in
the summer of 1999. As a result of the evaluation, we increased our capital and
operating and maintenance expenditures on our transmission and distribution
facilities in order to improve their reliability.
As a result of our commitments to improve the reliability of our
transmission and distribution system, we expect our capital expenditures will
exceed depreciation on our rate base assets through at least 2003. The base rate
freeze will generally preclude rate recovery of and on those investments prior
to January 1, 2007 from customers who receive service from us under bundled
rates. Unless we can offset the additional carrying costs against cost savings,
our return on investment will be reduced during the period of the rate freeze
and until rate increases are approved authorizing a return of and on this new
investment.
In addition, the Restructuring Legislation provides that an electric
utility, such as us, will be liable for actual damages suffered by customers in
the event of a continuous power outage of four hours or more affecting 30,000 or
more customers and provides for reimbursement of governmental emergency and
contingency expenses incurred in connection with any such outage. That
legislation bars recovery of consequential damages. The Restructuring
Legislation also allows an affected utility to seek relief from these provisions
from the ICC where the utility can show that the cause of the outage was
unpreventable damage due to weather events or conditions, customer tampering or
third party causes.
The Restructuring Legislation also allows a portion of our future revenues
to be segregated and used to support the issuance of securities by ComEd or a
special purpose financing subsidiary. The proceeds, net of transaction costs,
from those securities issuances must be used to refinance outstanding debt or
equity or for certain other limited purposes. The total amount of those
securities that may be issued is approximately $6.8 billion. In December 1998,
our special purpose financing subsidiaries issued $3.4 billion of notes.
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In December 1999, FERC issued Order No. 2000 requiring jurisdictional
utilities, such as ComEd, to file a proposal to form a regional transmission
organization, or RTO, meeting certain governance, operational, and scope and
scale requirements articulated in the order or, alternatively, to describe
efforts to participate in or work toward participating in an RTO or explain why
they were not participating in an RTO. Order No. 2000 is generally designed to
separate the governance and operation of the transmission system from generation
companies and other market participants. PECO is already a member of PJM
Interconnection, LLC, an existing independent system operator that is seeking to
be approved as an RTO. We initially joined the Midwest Independent System
Operator, but withdrew in order to help form the proposed Alliance RTO. FERC
rejected the Alliance RTO proposal in December 2001 and directed the Alliance
companies to reconsider their RTO development plans.
On May 28, 2002, we filed a notice with FERC indicating our intention to
join PJM. FERC conditionally approved our decision to join PJM in late July
2002. On August 30, 2002, we, along with several subsidiaries of American
Electric Power Service Corporation (AEP), Dayton Power and Light Company and
National Grid USA (Grid), filed a non-binding letter of intent and transaction
term sheet with FERC regarding the proposed formation of an independent
transmission company, or ITC, within PJM. Grid is a subsidiary of National Grid
plc, a company which owns and operates transmission assets in Great Britain.
Under the letter of intent, Grid will make specified capital contributions to
the ITC and will, for an initial term of three years, be the ITC's managing
member responsible for directing its business and affairs. Grid will receive an
annual management fee for serving as managing member together with incentive
compensation tied to the efficiency of operations and enhanced transmission
operations. We, along with AEP and Dayton, will transfer operation of our
respective transmission systems to the ITC and PJM. The ITC and PJM will
allocate responsibilities between them consistent with FERC requirements. The
transmission owners participating in the ITC will have the right to contribute
transmission facilities to the ITC in exchange for passive ownership interests
in the ITC. Grid, AEP, Dayton and we have rights to withdraw from or dissolve
the ITC or to terminate Grid as managing member at the end of the initial three
year term of the managing member or any renewal period.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for general
corporate purposes, including to discharge or refund (by redemption, by purchase
on the open market, by purchase in private transactions, by tender offer or
otherwise) outstanding long-term debt and preference stock, to finance capital
improvements and to supplement working capital. Any proceeds of securities
issued by the trust will be used to purchase trust debentures from us. We will
describe in the applicable prospectus supplement any specific allocation of the
proceeds to a particular purpose that we have made at the date of that
prospectus supplement. Please refer to our Quarterly Report for the
quarter-ended June 30, 2002 for information concerning our outstanding long-term
debt and preference stock. See "Where You Can Find More Information."
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DESCRIPTION OF BONDS
We will issue each series of bonds under the Mortgage dated as of July 1,
1923, as supplemented from time to time, between us and BNY Midwest Trust
Company, as the successor mortgage trustee, and D.G. Donovan, as the co-trustee.
We refer to this Mortgage in this prospectus as the "Mortgage" and to BNY
Midwest Trust Company as the "Mortgage Trustee." We have summarized selected
provisions of the Mortgage below. However, because this summary is not complete,
it is subject to and is qualified in its entirety by reference to the Mortgage,
a copy of which we have incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part. The terms "lien of
Mortgage," "mortgage date of acquisition," "permitted lien," "prior lien,"
"prior lien bonds," "property additions," and "utilized under the Mortgage" are
used in this prospectus with the meanings given to those terms in the Mortgage.
The Mortgage contains provisions under which substantially all of the
properties of our electric utility subsidiary, Commonwealth Edison Company of
Indiana, Inc., or the Indiana Company, might be subjected to the lien of the
Mortgage, if we should so determine, as additional security for our bonds,
whereupon that subsidiary would become a "mortgaged subsidiary," as defined in
the Mortgage. Since we have not as yet made any determination as to causing the
Indiana Company to become a mortgaged subsidiary, those provisions of the
Mortgage that are summarized below that discuss a mortgaged subsidiary as well
as us, relate to us only.
The following sets forth certain general terms and provisions of the bonds.
The particular terms of the series of bonds offered by any prospectus supplement
will be described in that prospectus supplement. Any terms of the bonds that are
not summarized herein will be described in the applicable prospectus supplement.
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, we will
initially issue each series of bonds in the form of one or more global bonds, in
registered form, without coupons, as described under the caption "Book-Entry
System." The bonds will be issued in denominations of $1,000 and authorized
multiples of $1,000. No service charge will be made for any transfer or exchange
of any bond, but we may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection with any transfer of a bond.
We anticipate that The Depository Trust Company, New York, New York, or
DTC, will act as securities depository for the bonds. See "Book-Entry System."
We will describe any differing depository arrangement in the applicable
prospectus supplement. For so long as the bonds are issued in book-entry form,
payments of principal and interest will be made in immediately available funds
by wire transfer to DTC or its nominee. If the bonds are issued in certificated
form to a holder other than DTC, payments of principal and interest will be made
by check mailed to that holder at that holder's registered address. Payment of
principal of the bonds in certificated form will be made against surrender of
those bonds at the office or agency of our company in the City of Chicago,
Illinois and an office or agency in the Borough of Manhattan, City of New York.
Payment of interest on the bonds will be made to the person in whose name those
bonds are registered at the close of business on the record date for the
relevant interest payment date. Default interest will be paid in the same manner
to holders as of a special record date established in accordance with the
Mortgage.
REDEMPTION PROVISIONS
We will specify in the applicable prospectus supplement any redemption
provisions applicable to the series of bonds being offered by that prospectus
supplement.
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SECURITY
The Bonds will rank equally with all bonds, irrespective of series, now or
hereafter outstanding under our Mortgage. The Mortgage is a direct first
mortgage lien on substantially all property and franchises currently owned by
us, subject only to permitted liens (other than expressly excepted property and
property which may be acquired by us subsequent to the filing of a bankruptcy
proceeding with respect to us under the Bankruptcy Reform Act of 1978). Our
transmission and distribution assets are the principal properties subject to the
lien of the Mortgage. In addition, any property and franchises hereafter
acquired by us (other than expressly excepted property and property which may be
acquired by us subsequent to the filing of a bankruptcy proceeding with respect
to us under the Bankruptcy Reform Act of 1978) will also become subject to the
lien of the Mortgage, subject only to permitted liens and liens, if any,
existing or placed on that after-acquired property at the time of acquisition
thereof.
There are expressly excepted from the lien of our Mortgage, whether now
owned or hereafter acquired, certain real estate not used in the public utility
business, real estate held by us in the name of a nominee, cash and securities
not specifically pledged under the Mortgage, receivables, contracts (other than
leases), materials and supplies not included in utility plant accounts,
merchandise, automobiles, trucks and other transportation equipment and office
furniture and equipment.
ACQUISITIONS OF PROPERTY SUBJECT TO PRIOR LIENS
We covenant in the Mortgage that we will not acquire any property subject
to a prior lien (other than a permitted lien):
- if the principal amount of prior lien bonds outstanding thereunder and
under other prior liens upon such prior lien property exceeds 66-2/3%
of the fair value of such part of such property as shall consist of
property of the character of property additions; and
- unless the net earnings of such property for any twelve-month period
within the immediately preceding fifteen-month period shall have been
at least two and one-half times the annual interest on all prior lien
bonds secured by prior liens on such property.
We also covenant that we will not transfer all or substantially all of our
property to any other corporation, the property of which is subject to a prior
lien, unless the property of such other corporation could be acquired by us
under the provisions of such covenant with respect to the acquisition of
property subject to a prior lien.
We covenant in the Mortgage that we will not issue additional prior lien
bonds under any prior lien, and that as soon as all prior lien bonds shall cease
to be outstanding under any prior lien, we will promptly procure or cause to be
procured the cancellation and discharge of that prior lien. We further covenant
that upon the discharge of a prior lien we will cause any cash on deposit with
the prior lien trustee (other than cash deposited for the payment or redemption
of outstanding prior lien bonds) to be deposited with the Mortgage Trustee,
except to the extent required to be deposited with the trustee under another
prior lien.
RELEASE OF PROPERTY FROM MORTGAGE
Provided that we are not in default under the Mortgage, the Mortgage allows
us to release property from the lien of the Mortgage in connection with its sale
or other disposition. Under these provisions, we may obtain the release of
mortgaged property by:
- delivering to the Mortgage Trustee specified certificates describing
the property to be sold or disposed and the consideration to be
received and stating its fair value;
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- delivering an opinion of counsel as to compliance with the provisions
of the Mortgage governing such release; and
- depositing cash with the Mortgage Trustee in an amount equal to the
fair value of the property to be released, subject to reduction or
elimination as hereinafter described.
"Fair value" is defined as the fair value to us of the property in question.
Fair value is determined by one of our engineers; however, a determination by an
independent engineer is also required if the fair value of the property in
question exceeds 1% or more of the outstanding principal amount of the bonds
under the Mortgage. The required cash deposit may be reduced, or eliminated
entirely, by utilizing net property additions or bondable bond retirements not
previously utilized under the Mortgage.
We have used these provisions from time to time to release substantial
amounts of property from the lien of the Mortgage. In December 1999, we obtained
the release of our fossil generation assets in connection with their sale to a
third party. In January 2001, we obtained the release of, among other things,
our nuclear generation assets in connection with their transfer to our
affiliate, Exelon Generation Company, LLC, as part of the restructuring
undertaken by Exelon. In both cases, the releases were accomplished without the
deposit of cash due to the availability of sufficient amounts of unutilized
bondable bond retirements and net property additions. In the event that our
transmission assets were to be divested as part of our RTO efforts, we would
expect to use these provisions to obtain the release of those assets from the
lien of the Mortgage.
ISSUANCE OF ADDITIONAL BONDS
The Mortgage provides that no bonds may be issued which, as to security,
will rank ahead of the bonds that may be sold pursuant to this prospectus but,
as hereinafter indicated, we may, subject to certain limitations, acquire
property subject to prior liens. Nonetheless, subject to the limitations
discussed below, we may issue additional bonds under the Mortgage with the same
priority as the bonds that may be sold pursuant to this prospectus, including
bonds having the same series designation and terms as the bonds that may be sold
pursuant to this prospectus, without the approval of the holders of outstanding
bonds under the Mortgage, including the holders of any outstanding bonds issued
pursuant to this prospectus.
The aggregate principal amount of other bonds that may be issued under the
Mortgage and that, as to security, will rank equally with the bonds that may be
sold pursuant to this prospectus is not limited except as indicated below.
Additional bonds of any series may be issued, subject to the provisions of the
Mortgage, in principal amount equal to:
- 66-2/3% of net property additions not previously utilized under the
Mortgage;
- the amount of cash deposited with the Mortgage Trustee as the basis
for the issuance of those bonds; and
- the amount of bondable bond retirements not previously utilized under
the Mortgage;
provided, however, that no bonds may be issued on the basis of net property
additions or deposited cash, or on the basis of bondable bond retirements if the
bonds to be issued bear a higher rate of interest than that borne by the bonds
retired or being retired (except when the bonds retired or being retired mature
within two years), unless our net earnings for any twelve-month period within
the immediately preceding fifteen-month period shall have been equal to at least
two and one-half times the annual interest on all bonds then outstanding under
the Mortgage, including the bonds then proposed to be issued but not including
any bonds then being retired. The net earnings calculation under the Mortgage is
not affected by certain accounting write-offs related to plant costs.
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The Mortgage provides that cash deposited with the Mortgage Trustee as a
basis for the issuance of bonds shall be:
- paid over to us in an amount, certified to the Mortgage Trustee, equal
to 66-2/3% of the amount of net property additions not previously
utilized under the Mortgage, or in an amount equal to the amount of
bondable bond retirements not previously utilized under the Mortgage,
or both, or
- applied to the purchase or redemption of bonds.
"Net Earnings" means our earnings as defined in the Mortgage after
deducting all charges except:
- charges for the amortization, write-down or write-off of acquisition
adjustments or intangibles;
- property losses charged to operations;
- provisions of income and excess or other profits taxes imposed on
income after the deduction of interest charges, or charges made in
lieu of those taxes;
- interest charges; and
- amortization of debt and stock discount and expense or premium.
Any net profit or net loss from merchandising and jobbing is to be deducted from
operating expenses or added to operating expenses, as the case may be. Net
nonoperating income from property and securities not subject to the lien of the
Mortgage may be included in revenues but only to the extent of not more than 10%
of the total of such net earnings. No profits or losses on the disposition of
property or securities or on the reacquisition of securities shall be included
in net earnings. The net earnings calculation under the Mortgage is not affected
by certain accounting write-offs related to plant costs.
Except as set forth above, the Mortgage does not limit the amount of
additional bonds which can be issued and it does not contain any restrictions on
the issuance of unsecured indebtedness. In addition, the Mortgage does not
prohibit a merger or sale of substantially all of our assets or a comparable
transaction, unless the lien of the Mortgage is impaired, and does not address
the effect on bondholders of a highly leveraged transaction.
PROPERTY ADDITIONS/BONDABLE BOND RETIREMENTS
The amount of net property additions not utilized under the Mortgage is
approximately $2.141 billion. The amount of bondable bond retirements not
previously utilized under the Mortgage are approximately $0.997 billion. Unless
otherwise stated in the applicable prospectus supplement, we will issue the
bonds on the basis of bondable bond retirements.
"Bondable bond retirements" means an amount equal to the principal amount
of bonds retired by application of funds deposited with the Mortgage Trustee for
cancellation, whether or not such deposit of funds or surrender of bonds is
pursuant to a sinking fund or purchase fund.
"Net property additions" means the amount of $50,000,000, plus the cost or
fair market value as of the mortgage date of acquisition thereof, whichever is
less, of property additions, less all "current provisions for depreciation" made
by us after December 1, 1944, after deducting from those current provisions for
depreciation the amount of the "renewal fund requirement," if any, for the year
1945 and subsequent years.
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"Current provisions for depreciation" for any period means the greater of:
- the total of the amounts appropriated by us for depreciation during
that period on all property of the character of property additions not
subject to a prior lien, increased or decreased, as the case may be,
by net salvage value for that period, such amounts not to include,
however, provisions for depreciation charged to surplus, charges to
income or surplus for the amortization, write-down or write-off of
acquisition adjustments or intangibles, property losses charged to
operations or surplus, or charges to income in lieu of income and
excess or other profits taxes; and
- an amount equal to one-twelfth of 2% for each calendar month of that
period (or such lesser percentage, as may, at stated intervals, be
certified by an independent engineer as adequate) of the original
cost, as of the beginning of that month, of all depreciable property
of the character of property additions not subject to a prior lien.
RENEWAL FUND REQUIREMENT
We covenant in the Mortgage that we will, for each year, pay or cause to be
paid to the Mortgage Trustee an amount of cash, as and for a renewal fund, equal
to the excess, if any, of current provisions for depreciation for that year over
the cost or fair market value as of the mortgage date of acquisition thereof,
whichever is less, of property additions for that year, that amount, which will
be the renewal fund requirement for that year, to be subject to reduction by an
amount equal to the amount, certified to the Mortgage Trustee, of net property
additions or bondable bond retirements, or both, not previously utilized under
the Mortgage. There was no renewal fund requirement for any of the years 1945
through 1988, 1991, 1992 or 1997 through 2001. There was a $140.7 million
renewal fund requirement for 1989, a $1 million requirement for 1990, a $50.9
million requirement for 1993, a $193.6 million requirement for 1994, a $15.0
million requirement for 1995 and a $139.9 million requirement for 1996. In 1989,
1990, 1993 and 1994, the renewal fund requirement was satisfied by certifying an
equivalent amount of net property additions. In 1995 and 1996, the renewal fund
requirement was satisfied by certifying an equivalent amount of bondable bond
retirements.
MODIFICATION OF MORTGAGE
In general, modifications or alterations of the Mortgage and of the rights
and obligations of us and of the bondholders, and waivers of compliance with the
Mortgage, may, with our approval, be made at a meeting of bondholders upon the
affirmative vote of bondholders owning 80% of the principal amount of the bonds
entitled to vote at the meeting with respect to the matter involved, but no such
modifications or alterations or waivers of compliance shall be made which will
permit the extension of time or times of payment of the principal of or the
interest or the premium, if any, on any bonds or the reduction in the principal
amount thereof or in the rate of interest or the amount of any premium thereon,
or any other modification in the terms of such principal, interest or premium,
which terms of payment are unconditional, or, otherwise than as permitted by the
Mortgage, the creation of any lien ranking prior to or on a parity with the lien
of the Mortgage with respect to any of the mortgaged property, all as more fully
provided in the Mortgage.
CONCERNING THE MORTGAGE TRUSTEE AND THE CO-TRUSTEE
The Mortgage Trustee, BNY Midwest Trust Company, provides general banking
services, including those as a depository, for us and certain of our affiliates.
D. G. Donovan, Co-Trustee under the Mortgage, is an officer of the Mortgage
Trustee.
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RIGHTS UPON DEFAULT
The Mortgage provides that in case any one or more of certain specified
events (defined as "completed defaults") shall occur and be continuing, the
Mortgage Trustee or the holders of not less than 25% in principal amount of the
bonds may declare the principal of all bonds, if not already due, together with
all accrued and unpaid interest thereon, to be immediately due and payable. The
Mortgage Trustee, upon request of the holders of a majority in principal amount
of the outstanding bonds, shall waive such default and rescind any such
declaration if such default is cured.
The Mortgage further provides that upon the occurrence of one or more
completed defaults, the Mortgage Trustee and the Co-Trustee may proceed by such
suits of law or in equity to foreclose the lien of the Mortgage or to enforce
any other appropriate remedy as the Mortgage Trustee and the Co-Trustee, being
advised by counsel, shall determine.
Holders of bonds have no right to enforce any remedy under the Mortgage
unless the Mortgage Trustee and the Co-Trustee have first had a reasonable
opportunity to do so following notice of default to the Mortgage Trustee and
request by the holders of not less than 25% in principal amount of the bonds for
action by the Mortgage Trustee and the Co-Trustee with offer of indemnity
satisfactory to the Mortgage Trustee and the Co-Trustee against costs, expenses
and liabilities that may be incurred thereby, but such provision does not impair
the absolute right of any bondholder to enforce payment of the principal of and
interest on such bondholder's bonds when due.
DEFAULT AND NOTICE THEREOF TO BONDHOLDERS
The Mortgage provides that the following shall constitute completed
defaults:
- default shall be made by us in the payment of any installment of
interest on any of the bonds when due and such default shall continue
for 60 days;
- default shall be made by us in the payment of the principal of any of
the bonds when due, whether at maturity or by declaration or
otherwise;
- default shall be made by us in the payment of any installment of
interest on any prior lien bonds when due, and such default shall
continue for 30 days after written notice given to us (following the
expiration of the period of grace, if any, specified in the prior lien
securing such prior lien bonds) by the Mortgage Trustee or to us and
the Mortgage Trustee by the holders of not less than 5% in principal
amount of the bonds;
- default shall be made by us in the payment of the principal of any
prior lien bonds when due, whether at maturity or by declaration or
otherwise, and such default shall continue for 30 days after written
notice to us by the Mortgage Trustee or to us and the Mortgage Trustee
by the holders of not less than 5% in principal of the bonds;
- bankruptcy, receivership or similar proceedings shall be initiated by
us, or any judgment entered in such proceedings initiated against us
shall not have been vacated, set aside or stayed within 45 days after
the entry thereof; and
- default shall be made in the observance or performance of any other of
our covenants, conditions or agreements contained in the Mortgage or
in the bonds or in any prior lien or prior lien bonds, and such
default shall continue for 90 days after written notice to us and the
Mortgage Trustee by the holders of not less than 25% in principal
amount of the bonds.
Within 90 days after the occurrence of any default which is known to the
Mortgage Trustee and the Co-Trustee, the Mortgage Trustee and the Co-Trustee
shall give to the bondholders notice of such
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default unless it shall have been cured; except, in case of defaults in the
payment of principal of or interest on the bonds, or in the payment of any
sinking fund or purchase fund installment, if the Mortgage Trustee shall in good
faith determine that the withholding of such notice is in the interests of the
bondholders and the Co-Trustee shall in good faith determine that the
withholding of such notice is in the interests of the bondholders.
CERTIFICATES AND OPINIONS
Officers' certificates evidencing compliance with the covenants in the
Mortgage relating to the payment of taxes and the maintenance of insurance on
our properties subject to the lien of the Mortgage must be filed as exhibits to
our certificate filed annually with the Mortgage Trustee. In connection with the
taking of various actions by the Mortgage Trustee and the Co-Trustee, or the
Mortgage Trustee upon our application, including the authentication and delivery
of additional bonds, the release of property, the reduction or withdrawal of
cash and other matters, the Mortgage requires that we furnish to the Mortgage
Trustee orders, requests, resolutions, certificates of the officers, engineers,
accountants and appraisers, and opinions of counsel and other documents, the
particular documents to be furnished in each case being dependant upon the
nature of the application.
DESCRIPTION OF NOTES
We will issue each series of notes under the Indenture dated as of
September 1, 1987, as amended and supplemented from time to time, between us and
Citibank, N.A., as trustee. We refer to this Indenture in this prospectus as the
"Senior Indenture" and to Citibank as the "Senior Indenture Trustee." We have
summarized selected provisions of the Senior Indenture below. We suggest that
you read the Senior Indenture for the complete text of those provisions as well
as for the provisions that are not summarized but may be important to you. A
copy of the Senior Indenture is incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part.
The following sets forth certain general terms and provisions of the notes.
The particular terms of the series of notes offered by any prospectus supplement
will be described in that prospectus supplement. Any terms of the notes that are
not summarized herein will be described in the applicable prospectus supplement.
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, we will
initially issue each series of notes in the form of one or more global notes, in
registered form, without coupons, as described under the caption "Book-Entry
System." The notes will be issued in denominations of $1,000 and authorized
multiples of $1,000. No service charge will be made for any transfer or exchange
of any note, but we may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection with any transfer of a note.
We anticipate that DTC will act as securities depository for the notes. See
"Book-Entry System." We will describe any differing depository arrangement in
the applicable prospectus supplement. For so long as the notes are issued in
book-entry form, payments of principal and interest will be made in immediately
available funds by wire transfer to DTC or its nominee. If the notes are issued
in certificated form to a holder other than DTC, payments of principal and
interest will be made by check mailed to that holder at that holder's registered
address. Payment of principal of the notes in certificated form will be made
against surrender of those notes at the office or agency of our company in the
City of Chicago, Illinois and an office or agency in the Borough of Manhattan,
City of New York. Payment of interest on the notes will be made to the person in
whose name those notes are registered at the close of business on the record
date for the relevant interest payment date.
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The notes will be unsecured and will rank equally with our outstanding
unsecured indebtedness. The lien of the Mortgage covers substantially all of our
properties and franchises. See "Description of Bonds-Security."
SINKING FUND AND REDEMPTION PROVISIONS
We will specify in the applicable prospectus supplement any sinking fund
and redemption provisions applicable to the series of notes being offered by
that prospectus supplement.
ISSUANCE OF ADDITIONAL SECURITIES
The Senior Indenture does not limit the aggregate principal amount of notes
that we may issue thereunder, nor does it afford holders of the notes protection
in the event of a highly leveraged or similar transaction involving our company.
Currently, notes having an aggregate principal amount of approximately $1.37
billion are outstanding under the Senior Indenture. Neither the Senior Indenture
nor any of our other indentures under which we now have series of debentures
outstanding limits our ability to issue securities, whether secured or
unsecured.
In addition to the series of bonds currently outstanding under the
Mortgage, we may from time to time issue additional series of bonds under the
Mortgage, subject to certain net earnings and other requirements of the
Mortgage. See "Description of Bonds-Issuance of Additional Bonds."
MODIFICATION OF INDENTURE
We may, except as described below, enter into supplemental indentures with
the Senior Indenture Trustee for the purpose of amending or modifying, in any
manner, the provisions of the Senior Indenture or of any supplemental indenture
thereto:
- with the consent of:
- the holders of a majority in principal amount of the notes at the
time outstanding under the Senior Indenture; and
- all series of notes which are affected by the proposed amendment
or modification; or
- without consent if the proposed amendment or modification does not
affect the rights of any noteholder.
Without the consent of the holder of each outstanding note affected, we may
not enter into a supplemental indenture that would, among other things:
- change the stated maturity of the principal of, or any installment of
interest on, any note, or reduce the principal amount thereof or the
interest thereon or any premium payable upon the redemption thereof;
or
- reduce the percentage in principal amount of the outstanding notes.
CONCERNING THE SENIOR INDENTURE TRUSTEE
The Senior Indenture Trustee, Citibank, N.A., provides general banking
services, including those as a depository, for us and certain of our affiliates.
We, along with Exelon, PECO and Exelon Generation, also have a $1.5 billion
unsecured revolving credit facility with a group of banks which includes
Citibank. We can borrow up to $300 million under this facility.
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EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT
The Senior Indenture provides that the following constitute "Events of
Default" with respect to the notes of any series:
- default by us in the payment of any interest upon any note of that
series when it becomes due and payable, and continuance of that
default for a period of 60 days;
- default by us in the payment of the principal of, or premium, if any,
on, any note of that series at its maturity;
- default by us in the deposit of any installment of any sinking fund or
similar payment with respect to notes of that series when and as
payable, and continuance of that default for a period of 60 days;
- the entry of a decree or order in bankruptcy, receivership or similar
proceedings initiated against us, and the continuance of any such
decree or order for a period of 45 consecutive days;
- our institution of, or our consent to the institution of, bankruptcy,
insolvency or similar proceedings against us; and
- default by us in the performance, or breach, of any other of our
covenants or warranties contained in the Senior Indenture, and
continuance of that default or breach for a period of 90 days after
notice:
- to us by the Senior Indenture Trustee; or
- to us and the Senior Indenture Trustee by the holders of at least
25% in principal amount of the outstanding notes of that series.
The Senior Indenture provides that within 90 days after the occurrence of
any default which is known to the Senior Indenture Trustee, the Senior Indenture
Trustee shall give to the noteholders notice of that default, unless that
default shall have been cured or waived; except:
- in the case of a default in the payment of the principal of, or
premium, if any, or interest on any note of that series, or in the
payment of any sinking or purchase fund installment, if the Senior
Indenture Trustee shall in good faith determine that the withholding
of such notice is in the interests of the holders of notes of that
series; and
- in the case of any default in the performance, or breach, of any
covenant or warranty referred to in the last bullet point in the
immediately preceding paragraph, no notice of default to holders shall
be given until at least 60 days after the occurrence thereof.
If an Event of Default occurs with respect to notes of any series and is
continuing, the Senior Indenture Trustee or the holders of 25% in principal
amount of the outstanding notes of that series may declare the principal of all
the notes of that series due and payable. The holders of a majority in principal
amount of the outstanding notes of that series may rescind and annul such
declaration if the default has been cured.
The holders of a majority in principal amount of the outstanding notes of
all series affected by an Event of Default may waive any past default under the
Senior Indenture and its consequences, except a default in the payment of the
principal of, or premium, if any, or interest on any note or in respect of a
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covenant or provision of the Senior Indenture which cannot be modified or
amended without the consent of the holder of each outstanding note affected.
If an Event of Default occurs and is continuing, the Senior Indenture
Trustee may in its discretion proceed to protect and enforce its rights and the
rights of the holders of notes by any appropriate judicial proceedings as the
Senior Indenture Trustee shall deem most effectual.
The Senior Indenture provides that the holders of a majority in principal
amount of the outstanding notes issued under the Senior Indenture have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Senior Indenture Trustee or exercising any trust or power
conferred on the Senior Indenture Trustee. The Senior Indenture Trustee is not
obligated to comply with any request or direction of noteholders pursuant to the
Senior Indenture unless it has been offered indemnity against costs and
liabilities which it might incur in complying with that request or direction.
We are required to file with the Senior Indenture Trustee, annually, an
officers' certificate specifying any defaults we know to exist under the Senior
Indenture.
SATISFACTION AND DISCHARGE OF THE NOTES AND THE INDENTURE
Unless otherwise provided in the supplemental indenture creating a series
of notes, we will be deemed to have paid and discharged the entire indebtedness
on all the outstanding notes of that series when:
- either,
- we have deposited with the Senior Indenture Trustee for such
purpose an amount sufficient to pay and discharge the entire
indebtedness on all outstanding notes of that series for
principal, and premium, if any, and interest to the stated
maturity or any redemption date thereof, or we have deposited
with the Senior Indenture Trustee for such purpose that amount of
direct obligations of, or obligations the principal of and
interest on which are fully guaranteed by, the United States of
America and which are not callable at the option of the issuer
thereof as will, together with the income to accrue thereon
without consideration of any reinvestment thereof, be sufficient
to pay and discharge the entire indebtedness on all outstanding
notes of that series for principal, and premium, if any, and
interest to the stated maturity or any redemption date thereto;
or
- we have properly fulfilled any other means of satisfaction and
discharge as are specified in the supplemental indenture
applicable to the notes of that series;
- we have paid or caused to be paid all other sums payable with respect
to the outstanding notes of that series; and
- we have delivered certain certificates and an opinion of counsel.
The Senior Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of notes) when:
- either all notes have been delivered to the Senior Indenture Trustee
for cancellation, or all notes not delivered to the Senior Indenture
Trustee for cancellation,
- have become due and payable,
- will become due and payable at their stated maturity within one
year, or
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- are to be called for redemption within one year under
arrangements satisfactory to the Senior Indenture Trustee,
and we have deposited with the Senior Indenture Trustee for such
purpose an amount sufficient to pay and discharge the entire
indebtedness on the notes for principal, and premium, if any, and
interest to the date of such deposit (in the case of notes which have
become due and payable), or to their stated maturity or redemption
date, as the case may be;
- we have paid or caused to be paid all other sums payable by us under
the Senior Indenture; and
- we have delivered certain certificates and an opinion of counsel.
For United States federal income tax purposes, the deposit described in the
preceding paragraphs may be treated as a taxable exchange of the related notes
for an issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case, holders of those notes would
recognize gain or loss as if the trust obligations or the cash or securities
deposited, as the case may be, had actually been received by them in exchange
for their notes. Thereafter, such holders would be required to include in income
a share of the income, gain or loss of the trust. The amount so required to be
included in income could be a different amount than would be includable in the
absence of that deposit. You should consult your own tax advisor as to the
specific consequences to you of that deposit.
DESCRIPTION OF CAPITAL STOCK
As of the date of this prospectus, our authorized capital stock consists of
three classes:
- 850,000 authorized shares of prior preferred stock, par value $100 per
share, of which no shares were outstanding as of August 30, 2002;
- 6,810,451 authorized shares of preference stock, without par value, of
which no shares were outstanding as of August 30, 2002; and
- 250,000,000 authorized shares of common stock, par value $12.50 per
share, of which approximately 127,016,400 shares were outstanding as
of August 30, 2002.
At August 30, 2002, we also had outstanding 76,336 warrants to purchase our
common stock. These warrants entitle the holders to convert the warrants into
our common stock at a conversion rate of one share of common stock for three
warrants.
We have summarized below some of the provisions of our Restated Articles of
Incorporation relating to our capital stock. We suggest that you read our
Restated Articles of Incorporation for the complete text of those provisions as
well as for the provisions that are not summarized but may be important to you.
A copy of our Restated Articles is incorporated by reference as an exhibit to
the registration statement of which this prospectus is a part.
ISSUANCE IN SERIES
Our board of directors is authorized to provide for the issuance of shares
of our prior preferred stock and cumulative preference stock, from time to time,
in series. Under that authority, our board may, as to each series, fix the
designation, dividend rate, redemption price or prices, voluntary and
involuntary liquidation prices, sinking fund provisions, if any, and conversion
provisions, if any, applicable to the shares of that series.
22
We will describe the particular terms of the series of cumulative
preference stock offered by any prospectus supplement in that prospectus
supplement, including:
- the series designation;
- the number of shares being offered and the initial offering price;
- the per share liquidation price;
- the dividend rate;
- the date from which dividends will accumulate, if applicable;
- any sinking fund provisions;
- whether the offered shares will be redeemable, at our option or the
option of the holder, and if so, when and at what price;
- the securities exchange, if any, on which the offered shares will be
listed; and
- a discussion of the United States federal income tax considerations,
if any, that may be applicable to the offered shares.
DIVIDENDS
Dividends on our capital stock, are payable in the following order of
priority, if and when shares thereof are issued and outstanding:
- dividends are payable on our prior preferred stock prior to the
payment of any dividends on our cumulative preference stock and our
common stock; and
- dividends are payable on our cumulative preference stock prior to the
payment of any dividends on our common stock.
If and when shares thereof are issued and outstanding, we pay dividends on
our prior preferred stock and each series of our cumulative preference stock
quarterly on the first day of February, May, August and November of each year.
Dividends are cumulative with respect to the shares of our prior preferred stock
and each series of our cumulative preference stock, if and when shares thereof
are issued and outstanding. Accumulations of dividends do not bear interest.
The title of each series of cumulative preference stock will indicate the
dividend rate for that series and will be specified in the applicable prospectus
supplement for that series.
REDEMPTION AND REPURCHASE PROVISIONS
Except as described in the next paragraph, in any applicable prospectus
supplement, or as otherwise provided by our board of directors in respect of the
shares of a particular series of our prior preferred stock or our cumulative
preference stock, we may, at our option, redeem, in whole at any time or in part
from time to time, shares of any one or more of those series, on not more than
60 nor less than 30 days' notice by mail. We may also redeem shares of any one
or more series of our prior preferred stock or our cumulative preferred stock in
part from time to time pursuant to any sinking fund or funds created for any one
or more of those series. In each case, we will redeem those shares by payment of
their then applicable redemption price. Subject to specified conditions, all
rights of the holders of shares called for redemption, other than the right to
exercise any then effective privilege of conversion and the right to
23
receive the redemption moneys, will terminate before the redemption date, upon
our deposit with a bank or trust company of the funds necessary for redemption.
If and so long as we are in default in the payment of any quarterly
dividend on shares of any series of our cumulative preference stock, or in the
making or setting aside of any payment under any sinking fund for any of those
series, we may not (other than by the use of unapplied sinking fund moneys):
- redeem any shares of our cumulative preference stock unless all shares
are redeemed; or
- purchase or otherwise acquire for a consideration any shares of our
cumulative preference stock, except pursuant to offers of sale made by
holders of our cumulative preference stock in response to our
invitation for tenders given simultaneously by mail to the holders of
record of all shares of our cumulative preference stock then
outstanding.
Our Restated Articles of Incorporation contain corresponding provisions
applicable to our prior preferred stock.
SINKING FUNDS
Our board of directors may, in its discretion, provide a sinking fund for
any series of our prior preferred stock and cumulative preference stock. The
prospectus supplement for any offered series of cumulative preference stock will
specify whether that series has a sinking fund.
CONVERSION
The prospectus supplement for any offered series of cumulative preference
stock will specify whether shares of that series are convertible into other
securities of ours.
LIQUIDATION PREFERENCES
In the event we dissolve, liquidate or wind-up our affairs, either
voluntarily or involuntarily:
- holders of our prior preferred stock, if any shares are then issued
and outstanding, will be entitled to payment of their applicable
liquidation price or prices, out of our assets, prior to any payment
being made to the holders of our cumulative preference stock and our
common stock;
- holders of our cumulative preference stock, if any shares are then
issued and outstanding, will be entitled to payment of their
applicable liquidation price or prices, out of our assets, prior to
any payment being made to the holders of our common stock; and
- holders of our common stock will be entitled to receive, ratably, any
of our assets remaining for payment to our stockholders after payment
in full of the aforementioned amounts to holders of our prior
preferred stock and our cumulative preference stock.
The prospectus supplement for any offered series of cumulative preference
stock will specify the liquidation price applicable to that series.
VOTING RIGHTS
Holders of outstanding shares of our capital stock, regardless of class,
are entitled to one vote for each share held on each matter submitted to a vote
at a meeting of shareholder, with the right to cumulate votes in all elections
for directors.
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Without the vote or consent of the holders of at least two-thirds of the
outstanding shares of our prior preferred stock or our cumulative preferred
stock, as applicable, we may not:
- create a class of stock ranking prior to or on parity with that class,
other than, in the case of our cumulative preference stock, the prior
preferred stock; or
- amend our Restated Articles of Incorporation so as to affect any of
the preferences or rights of that class.
An amendment to our Restated Articles of Incorporation that affects a
single series of either our prior preference stock or our cumulative preference
stock, when more than one series of that class is outstanding, or to the
resolution of our board of directors establishing that series which affects any
preferences or rights of the holders of the shares of that series, requires the
vote or consent of the holders of at least two-thirds of the outstanding shares
of that series, but does not require the vote or consent of the any other series
or of the class.
Without the vote or consent of the holders of a majority of the outstanding
shares, if any, of our prior preferred stock, we may not issue:
- shares of that class over the 850,000 shares now authorized, or
- shares of any class ranking prior to or on a parity with the prior
preferred stock,
other than for the retirement of a like amount of stock of such class or
classes, if, after that issue, the aggregate stated capital (including paid-in
surplus) represented by the outstanding shares of such class or classes, after
giving effect to any retirement of shares of such class or classes made in
connection with that issue, would exceed:
- 75% of the aggregate stated capital (including paid-in surplus)
represented by the then outstanding shares of all subordinate classes,
plus
- our and our subsidiaries' consolidated retained earnings as of the end
of the preceding fiscal year.
Without the vote or consent of the holders of a majority of the outstanding
shares, if any, of our prior preferred stock and our cumulative preference
stock, each voting as a class, we may not, except where the parties are in a
parent-subsidiary relationship, or when ordered by a governmental commission or
agency, consolidate with or merge into any other corporation or sell all or
substantially all of our property and business.
PREEMPTIVE RIGHTS
Holders of our prior preferred stock, our cumulative preference stock and
our common stock have no preemptive rights to purchase any of our securities.
MISCELLANEOUS
The outstanding shares of our common stock are, and the shares of our
cumulative preference stock offered hereby will be, when issued, fully paid and
nonassessable. Our prior preferred stock, when issued, will be fully paid and
nonassessable.
The transfer agent and registrar for our cumulative preference stock will
be EquiServe Trust Company, N.A., 1 North State Street, Eleventh Floor, Chicago,
Illinois 60670.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
The trust may issue trust preferred securities and trust common securities
under the terms of the trust agreement. A form of the trust agreement has been
filed as an exhibit to the registration statement of which this prospectus is a
part. We suggest that you read the trust agreement for the complete text of the
provisions that are summarized below as well as for the provisions that are not
summarized but may be important to you. The trust agreement has been qualified
as an indenture under the Trust Indenture Act. That Act contains provisions that
apply to the trust preferred securities, and you may wish to refer to it as
well. Wherever particular defined terms of the trust agreement are referred to
in this prospectus, those defined terms are incorporated herein by reference.
GENERAL
Both the trust preferred securities and the trust common securities will
represent undivided beneficial interests in the assets of the trust. If there is
an event of default under the trust agreement, as described below, the rights of
the holders of the trust preferred securities will be entitled to priority in
right of payment over the holders of trust common securities. All of the trust
common securities will be owned by us.
The trust will invest the proceeds from any issuance of its trust preferred
securities, together with the consideration we pay for the trust common
securities, to purchase trust debentures from us. Legal title in the trust
debentures will be held by the property trustee in trust for the benefit of
holders of the trust securities.
In accordance with the trust agreement, the trust may not:
- acquire any investments or engage in any activities not authorized by
the trust agreement;
- take any action that would cause the trust to fail or cease to qualify
as a grantor trust for United States federal income tax purposes;
- issue debt or any securities other than the trust securities;
- incur indebtedness for borrowed money;
- pledge any of its assets;
- sell, assign, transfer, exchange or otherwise dispose of trust
property or interests except as provided in the trust agreement; or
- take any action that would vary the investment by the trust.
We will guarantee distributions on the trust preferred securities on a
limited basis to the extent described under the caption "Description of
Guarantee." The guarantee will not guarantee payment of distributions or amounts
payable on redemption of the trust preferred securities or liquidation of the
trust when the trust does not have funds on hand legally available for those
payments. In that event, a remedy of a holder of trust preferred securities is
to direct the property trustee to enforce its rights under the trust debentures
held by the trust. If the property trustee fails to enforce its rights with
respect to the trust debentures held by the trust, any record holder of the
trust preferred securities may, to the fullest extent permitted by law,
institute legal proceedings directly against us to enforce the property
trustee's rights under those trust debentures without first instituting any
legal proceedings against the property trustee or any other person or entity. In
addition, a holder of the trust preferred securities may institute a legal
proceeding directly against us for enforcement of payment to that holder of
principal of, premium, if any,
26
or interest on the trust debentures having a principal amount equal to the
aggregate liquidation amount of the trust preferred securities of that holder on
or after the due date specified in the trust debentures.
Holders of the trust preferred securities have no preemptive or similar
rights.
DISTRIBUTIONS
Distributions on the trust preferred securities will be payable on the
dates and at the rates set forth in a prospectus supplement. The distribution
rate and the relevant distribution date for the trust securities will correspond
to the payments and payment dates on the associated trust debentures held by the
trust. The revenue of the trust available for distribution to holders of the
trust preferred securities will be limited to payments under the trust
debentures in which the trust will invest the proceeds from the issuance and
sale of the trust securities. If we fail to make interest payments on the trust
debentures held by the trust, the property trustee will not have funds available
to pay distributions on the trust preferred securities.
We may, on one or more occasions, defer the payment of interest on the
trust debentures for a period not exceeding 20 consecutive quarterly periods,
unless an event of default under the Debenture Indenture has occurred and is
continuing. See "Description of Trust Debentures-Debenture Events of Default."
However, no deferral period shall end on a date other than an interest payment
date or extend beyond the stated maturity date. Quarterly distributions on the
trust preferred securities will be deferred by the trust during any such
deferral period. Distributions to which holders of the trust preferred
securities are entitled during any such deferral period will accumulate
additional distributions at the rate per annum set forth in the prospectus
supplement.
Upon the termination of any deferral period and the payment of all amounts
then due on any interest payment date, we may elect to begin a new deferral
period, subject to the requirements described above. No interest shall be due
and payable during any deferral period, except at the end of the period.
We must give the trust, as the holder of the trust debentures and the
Debenture Trustee notice of our election to defer the payment of interest on the
trust debentures at least the number of business days specified in the Debenture
Indenture prior to the earlier of:
- the date the distributions on the trust preferred securities would
have been payable except for the election to begin such deferral
period; or
- the date we or the trust are required to give notice to any securities
exchange or any other applicable self-regulatory organization or to
the holders of trust preferred securities of the record date or the
date such distributions are payable.
There is no limitation on the number of times that we may elect to begin a
deferral period. Accordingly, there could be multiple deferral periods of
varying lengths throughout the term of the trust preferred securities. See
"Description of Trust Debentures-Option to Extend Interest Payment Date."
During any deferral period, we may not:
- declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to,
any of our capital stock;
- make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any of our debt securities (including
guarantees) which rank pari passu with or junior to the trust
debentures; or
27
- make any guarantee payments with respect to the securities described
in the previous two bullet points, other than pursuant to the
guarantee.
PAYMENT OF ADDITIONAL SUMS
If the trust is required to pay any taxes, duties, or other governmental
charges imposed by the United States or any other taxing authority, we will be
required to pay additional sums as necessary so that the amount of distributions
then due and payable by the trust on the outstanding trust preferred securities
and trust common securities will not be reduced as a result of those taxes,
duties and other governmental charges.
REDEMPTION
Whenever trust debentures are repaid (other than following the distribution
of the trust debentures to the holders of the trust securities), whether at
maturity or earlier redemption, the property trustee will apply the proceeds to
redeem a Like Amount (as defined below) of the trust securities, upon not less
than 30 nor more than 60 days' notice of the date of redemption to the holders
of the trust securities, at the applicable redemption price, which shall be
equal to:
- in the case of the payment of the trust debentures on their stated
maturity date, a redemption price equal to the principal amount of,
plus accrued and unpaid interest on, the trust debentures;
- in the case of an optional prepayment of the trust debentures, upon
the occurrence and continuation of a Special Event, a redemption price
equal to the special event prepayment price in respect of the trust
debentures; and
- in the case of the optional prepayment of the trust debentures, a
redemption price equal to the optional prepayment price in respect of
the trust debentures.
See "Description of Trust Debentures-Optional Redemption" and "-Special Event
Redemption" below for more information as well as for the definition of the term
"Special Event" as used in this prospectus. If less than all of the trust
debentures are to be prepaid on a redemption date, then the proceeds of such
prepayment shall be allocated pro rata among the trust securities.
The term "Like Amount" means:
- with respect to a redemption of the trust securities, trust securities
having a liquidation amount equal to the principal amount of the trust
debentures that are to be paid in accordance with their terms; and
- with respect to a distribution of trust debentures upon the
dissolution and liquidation of the trust, trust debentures having a
principal amount equal to the liquidation amount of the trust
securities of the holder to whom such trust debentures are being
distributed.
We will have the option to prepay the trust debentures:
- in whole at any time or in part from time to time on or after the date
indicated in the prospectus supplement at the optional prepayment
price; and
- in whole or in part, at any time within 90 days of the occurrence of a
Special Event, at the special event prepayment price.
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See "Description of Trust Debentures-Optional Redemption" and "-Special Event
Redemption."
REDEMPTION PROCEDURES
If applicable, trust securities will be redeemed at the applicable
redemption price with the proceeds from the contemporaneous repayment or
prepayment of the trust debentures. Any redemption of trust securities will be
made and the applicable redemption price will be payable on the redemption date
only to the extent that the trust has funds legally available for the payment of
the applicable redemption price. See also "-Subordination of Trust Common
Securities."
If the trust gives a notice of redemption in respect of the trust preferred
securities, then, by 2:00 p.m., New York City time, on the redemption date, to
the extent funds are legally available to the trust, with respect to the trust
preferred securities held by DTC, or its nominees, the property trustee will
deposit with DTC funds sufficient to pay the applicable redemption price. See
"Book-Entry System." With respect to the trust preferred securities that are
held in certificated form, the property trustee, to the extent funds are legally
available, will deposit with the paying agent for those trust preferred
securities funds sufficient to pay the applicable redemption price and will give
that paying agent irrevocable instructions to pay the applicable redemption
price to the holders of those trust preferred securities upon surrender of their
certificates evidencing those trust preferred securities. See "-Payment and
Paying Agency." Notwithstanding the foregoing, distributions payable on or prior
to the redemption date shall be payable to the holders of those trust preferred
securities on the relevant record dates for the related distribution dates. If
notice of redemption has been given and funds are deposited as required, then
upon the date of that deposit, all rights of the holders of the trust preferred
securities called for redemption will cease, except the right of those holders
to receive the applicable redemption price, and those trust preferred securities
will cease to be outstanding.
If any redemption date of trust preferred securities is not a business day,
then the redemption price will be paid on the next succeeding day that is a
business day. If the next succeeding business day falls in the next calendar
year, then the required payment will be made on the immediately preceding
business day. If payment of the redemption price is improperly withheld or
refused and not paid either by the trust or by us pursuant to the guarantee:
- distributions on the trust preferred securities will continue to
accumulate at the then applicable rate, from the redemption date
originally established by the trust to the date the redemption price
is actually paid; and
- the actual payment date will be the redemption date for purposes of
calculating the applicable redemption price.
We or our affiliates may, subject to applicable law, from time to time purchase
outstanding trust preferred securities by tender, in the open market or by
private agreement.
If less than all of the outstanding trust preferred securities and trust
common securities are to be redeemed on a redemption date, then the aggregate
amount of those trust preferred securities and trust common securities to be
redeemed shall be allocated pro rata among the trust preferred securities and
the trust common securities. The property trustee will select on a pro rata
basis the particular outstanding trust preferred securities to be redeemed not
more than 60 days prior to the redemption date, by such method as the property
trustee shall deem fair and appropriate. The property trustee will promptly
notify the trust registrar in writing of the trust preferred securities selected
for redemption and, in the case of any trust preferred security selected for
partial redemption, the liquidation amount to be redeemed. For all purposes of
the trust agreement, unless the context otherwise requires, all provisions
relating to the redemption of the trust preferred securities will relate, in the
case of any trust preferred security redeemed
29
or to be redeemed only in part, to the portion of the aggregate liquidation
amount of trust preferred securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust securities that are
to be redeemed at its registered address. Unless we default in payment of the
applicable redemption price on, or in the repayment of, the trust debentures, on
and after the redemption date distributions will cease to accrue on the trust
securities called for redemption.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF THE TRUST DEBENTURES
The trust shall automatically dissolve upon the first to occur of:
- our bankruptcy, dissolution or liquidation;
- the distribution of a Like Amount of the trust debentures to the
holders of the trust securities, if we have directed the property
trustee in writing to dissolve the trust;
- the expiration of the term of the trust;
- redemption of all of the trust preferred securities as described under
"-Redemption"; and
- the entry of an order for dissolution of the trust by a court of
competent jurisdiction.
We have the right at any time to dissolve the trust and, after satisfaction of
liabilities to creditors of the trust, cause the trust debentures held by the
trust to be distributed to the holders of the trust securities in liquidation of
the trust.
If a dissolution occurs as described in the first or last bullet points in
the preceding paragraph, the trust will be liquidated by the administrative
trustees as expeditiously as possible. After satisfaction of liabilities to the
trust's creditors, the property trustee will distribute to the holders of trust
securities a Like Amount of the trust debentures held by the trust, unless that
distribution is determined by the administrative trustees not to be practicable.
In that case, the holders will be entitled to receive pro rata out of the assets
of the trust legally available for distribution to holders an amount equal to
the aggregate of the liquidation amount plus accumulated and unpaid
distributions thereon to the date of payment. If this liquidation distribution
can be paid only in part because the trust has insufficient assets on hand
legally available to pay in full the aggregate liquidation distribution, then
the amount payable directly by the trust on the trust securities will be paid on
a pro rata basis, except that if a debenture event of default has occurred and
is continuing, the trust preferred securities shall have a priority over the
trust common securities. See "-Subordination of Trust Common Securities."
If we elect not to prepay the trust debentures before maturity in
accordance with their terms and either elect not to or are unable to dissolve
and liquidate the trust and distribute the trust debentures to holders of the
trust securities, the trust securities will remain outstanding until the
repayment of the trust debentures on the stated maturity date.
After the liquidation date is fixed for any distribution of trust
debentures to holders of the trust securities:
- the trust securities will no longer be deemed to be outstanding;
- any holders who provide certificates representing trust securities
will receive certificates representing a Like Amount of trust
debentures;
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- any certificates for trust securities not surrendered for exchange
will be deemed to represent a Like Amount of trust debentures; and
- all rights of holders of trust securities will cease except the right
to receive a Like Amount of trust debentures.
SUBORDINATION OF TRUST COMMON SECURITIES
Payment of distributions on, and the redemption price of, the trust
securities will be made pro rata based on the liquidation amount of the trust
securities. However, if on any distribution date or redemption date a debenture
event of default has occurred and is continuing, no payment of any distribution
on, or applicable redemption price of, any of the trust common securities, and
no other payment on account of the redemption, liquidation or other acquisition
of the trust common securities, will be made unless payment in full in cash of
all accumulated and unpaid distributions on all of the outstanding trust
preferred securities for all distribution periods terminating on or prior
thereto, or in the case of payment of the applicable redemption price the full
amount of such redemption price, shall have been made or provided for, and all
funds available to the property trustee shall first be applied to the payment in
full in cash of all distributions on, or redemption price of, the trust
preferred securities then due and payable.
In the case of any event of default under the Debenture Indenture, we, as
holder of the trust common securities, will be deemed to have waived any right
to act with respect to that event of default until its effect on the trust
preferred securities is cured, waived or otherwise eliminated. Until that event
of default is so cured, waived or otherwise eliminated, the property trustee
will act solely on behalf of the holders of the trust preferred securities and
not on behalf of us, as the holder of the trust common securities, and only the
holders of the trust preferred securities will have the right to direct the
property trustee to act on their behalf.
TRUST AGREEMENT EVENTS OF DEFAULT; NOTICE
The trust agreement provides that any one or more of the following
constitute an event of default with respect to the trust securities:
- an event of default under the trust agreement;
- default in the payment of any distribution when due and payable if
continuing for 30 days;
- default in the payment of any redemption payment when due and payable;
- default in the performance, breach, covenant or warranty of the
trustees if continuing for 60 days after a written notice by holders
of at least 10% in liquidation amount of the preferred securities has
been provided; or
- a bankruptcy event with respect to the trust.
See "Description of Trust Debentures-Debenture Events of Default."
Within ninety days after the occurrence of any trust agreement event of
default actually known to the property trustee, the property trustee will
transmit notice of that default to the holders of the trust securities, unless
the default is cured or waived. We are required to file annually with the
property trustee a certificate as to whether or not we are in compliance with
all the conditions and covenants under the trust agreement.
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Upon the occurrence of a trust agreement event of default, the Debenture
Trustee or the property trustee as the holder of the trust debentures will have
the right under the Debenture Indenture to declare the principal of and interest
on the trust debentures to be immediately due and payable.
If a trust agreement event of default occurs and is continuing, then the
holders of a majority in aggregate liquidation amount of the trust preferred
securities have the right to direct the exercise of any trust or power conferred
upon the property trustee under the trust agreement, including the right to
direct the property trustee to exercise the remedies available to it as holder
of the trust debentures. If the property trustee fails to enforce its rights
with respect to the trust debentures held by the trust, any record holder of the
trust preferred securities may, to the fullest extent permitted by law,
institute legal proceedings directly against us to enforce the property
trustee's rights under those trust debentures without first instituting any
legal proceedings against the property trustee or any other person or entity. In
addition, if a trust agreement event of default has occurred and is continuing
and that event is attributable to our failure to pay interest, principal or
other required payments on the trust debentures issued to the trust on the date
that interest, principal or other payment is otherwise payable, then a record
holder of the trust preferred securities may, on or after the respective due
dates specified in the trust debentures, institute a proceeding directly against
us for enforcement of payment on those trust debentures having a principal
amount equal to the aggregate liquidation amount of the trust preferred
securities held by that holder. In connection with such an action, we will be
subrogated to the rights of that record holder of trust preferred securities to
the extent of any payment made by us to that record holder of trust preferred
securities.
If a debenture event of default has occurred and is continuing, the trust
preferred securities shall have a preference over the trust common securities as
described above under "-Liquidation of the Trust and Distribution of Trust
Debentures" and "-Subordination of Trust Common Securities."
REMOVAL OF THE TRUST'S TRUSTEES
Unless a debenture event of default occurs and is continuing, any trustee
of the trust may be removed at any time by us, as the holder of the trust common
securities. If a debenture event of default has occurred and is continuing, the
property trustee and the Delaware trustee may be removed at that time by the
holders of a majority in liquidation amount of the outstanding trust preferred
securities. In no event will the holders of the trust preferred securities have
the right to vote to appoint, remove or replace the administrative trustees,
which voting rights are vested exclusively in the holder of the trust common
securities. No resignation or removal of a trustee of the trust and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
trust agreement.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any corporation or
other person, except as described below or as otherwise described under
"-Liquidation of the Trust and Distribution of Trust Debentures." The trust may,
at our request and with the consent of the administrative trustees but without
the consent of the holders of the trust preferred securities, the Delaware
trustee or the property trustee, merge with or into, convert into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to a trust organized as
such under the laws of any State; provided that:
- such successor entity either:
- expressly assumes all of the obligations of the trust with
respect to the trust securities; or
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- substitutes for the trust preferred securities other securities
having substantially the same terms as the trust preferred
securities (referred to in this prospectus as the "Successor
Securities") so long as the Successor Securities rank the same as
the trust preferred securities rank in priority with respect to
distributions and payments upon liquidation, redemption and
otherwise;
- we expressly appoint a trustee of that successor entity possessing the
same powers and duties as the property trustee as the holder of the
trust debentures;
- the Successor Securities are listed, or any Successor Securities will
be listed upon notification of issuance, on any national securities
exchange or other organization on which the trust preferred securities
are then listed or quoted, if any;
- if the trust preferred securities (including any Successor Securities)
are rated by any nationally recognized statistical rating organization
prior to such transaction, such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause those trust
preferred securities (including any Successor Securities) to be
downgraded by any such nationally recognized statistical rating
organization;
- such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the trust securities
(including any Successor Securities) in any material respect;
- the successor entity has a purpose substantially identical to the
purpose of the trust;
- prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we and the property trustee have
received an opinion from counsel to the effect that:
- such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the trust
securities (including any Successor Securities) in any material
respect; and
- following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease neither the trust nor
the successor entity will be required to register as an
investment company under the Investment Company Act; and
- we or any permitted successor or assignee own all of the trust common
securities of that successor entity and guarantee the obligations of
that successor entity under the Successor Securities at least to the
extent provided by the guarantee and the common guarantee.
Notwithstanding the foregoing, the trust will not, except with the consent
of holders of 100% in liquidation amount of the trust securities, consolidate,
amalgamate, merge with or into, convert into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if that consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
trust or the successor entity not to be classified as a grantor trust for United
States federal income tax purposes.
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VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided above under "-Mergers, Consolidations, Amalgamations or
Replacements of the Trust" and below under "Description of Guarantee-Amendments
and Assignment" and as otherwise required by law and the trust agreement, the
holders of the trust preferred securities will have no voting rights.
The trust agreement may be amended from time to time by us and the
trustees, without the consent of the holders of the trust securities:
- to cure any ambiguity, correct or supplement any provisions in the
trust agreement that may be inconsistent with any other provision, or
to make any other provisions with respect to matters or questions
arising under the trust agreement, which shall not be inconsistent
with the other provisions of the trust agreement; or
- to modify, eliminate or add to any provisions of the trust agreement
to such extent as shall be necessary to ensure that the trust will be
classified for United States federal income tax purposes as a grantor
trust at all times that any trust securities are outstanding;
provided, however, that in each such case the interests of the holders of the
trust securities shall not be adversely affected in any material respect. Any
amendments of the trust agreement pursuant to the first bullet above shall
become effective once notice is given to the holders of the trust securities.
The trustees may amend the trust agreement:
- with the consent of holders representing not less than 66-2/3% (based
upon liquidation amount) of the outstanding trust securities; and
- upon receipt by the trustees of an opinion of counsel to the effect
that the amendment or the exercise of any power granted to the
trustees in accordance with the amendment will not affect the trust's
status as a grantor trust for United States federal income tax
purposes or the trust's exemption from status as an "investment
company" under the Investment Company Act.
However, without the consent of each holder of trust securities, the trust
agreement may not be amended to:
- change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the trust securities as
of a specified date;
- restrict the right of a holder of the trust securities to institute
suit for the enforcement of any such payment on or after such date; or
- change the level of consent required from the holders of the trust
securities as described above.
The trustees may not enter into or consent to any amendment to the trust
agreement which would cause the trust to fail or lease to qualify for the
exemption from status of an "investment company" under the Investment Company
Act.
So long as any trust debentures are held by the trust, the trustees will
not:
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- direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or execute any trust or
power conferred on the Debenture Trustee with respect to the trust
debentures;
- waive any past defaults under the Debenture Indenture;
- exercise any right to rescind or annul a declaration of acceleration
of the maturity of the principal of the trust debentures; or
- consent to any amendment, modification or termination of the Debenture
Indenture or the trust debentures, where that consent shall be
required, or to any other action as the holder of the trust
debentures,
without, in each case, obtaining the prior approval of the holders of at least
66-2/3% in liquidation amount of all outstanding trust preferred securities.
However, where a consent under the Debenture Indenture would require the consent
of each holder of trust debentures affected thereby, no such consent shall be
given by the trustees without the prior consent of each holder of the trust
preferred securities. The trustees will not revoke any action previously
authorized or approved by a vote of the holders of the trust preferred
securities except pursuant to a subsequent vote of those holders. The property
trustee shall notify each holder of the trust preferred securities of any notice
of default that it receives with respect to the trust debentures held by the
trust. In addition to obtaining the foregoing approvals of the holders of the
trust preferred securities, prior to taking any of the foregoing actions, the
trustees shall obtain an opinion of counsel experienced in such matters to the
effect that the trust will not fail to be classified as a grantor trust for
United States federal income tax purposes on account of such action.
Any required approval of holders of trust preferred securities may be given
at a meeting of those holders convened for that purpose or pursuant to written
consent (without prior notice). The administrative trustees will cause a notice
of any meeting at which holders of the trust preferred securities are entitled
to vote to be given to each holder of record of trust preferred securities in
the manner set forth in the trust agreement.
No vote or consent of the holders of trust preferred securities will be
required for the trust to redeem and cancel the trust preferred securities in
accordance with the trust agreement.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement, the
trust preferred securities will be issued in registered, global form. See
"Book-Entry System."
PAYMENT AND PAYING AGENCY
Payments in respect of trust preferred securities held in global form will
be made to the depository, which shall credit the relevant accounts at the
depository on the applicable distribution dates, or in respect of trust
preferred securities that are not held by the depository, those payments shall
be made by check mailed to the address of the holder entitled thereto as that
address shall appear on the register. The paying agent for the trust will
initially be the property trustee or an affiliate of the property trustee and
any co-paying agent chosen by the property trustee and acceptable to the
administrative trustees and us. The paying agent will be permitted to resign as
paying agent upon 30 days' written notice to the property trustee and
administrative trustees and us. If the property trustee or an affiliate of the
property trustee is no longer the paying agent for the trust, the administrative
trustees will appoint a successor (which will be a bank or trust company
acceptable to the administrative trustees and us) to act as paying agent.
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REGISTRAR AND TRANSFER AGENT
The property trustee will act as registrar and transfer agent for the trust
preferred securities.
Registration of transfers of the trust preferred securities will be
effected without charge by or on behalf of the trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The trust will not be required to register or cause to be
registered the transfer of the trust preferred securities after they have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, other than during the occurrence and continuance of a
trust agreement event of default, will perform only such duties as are
specifically set forth in the trust agreement and, during the existence of a
trust agreement event of default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. The property trustee is under no obligation to exercise any of the
powers vested in it by the trust agreement at the request of any holder of trust
securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If the property trustee is
required to decide between alternative courses of action, construe ambiguous
provisions in the trust agreement or is unsure of the application of any
provision of the trust agreement, and the matter is not one on which holders of
the trust preferred securities are entitled under the trust agreement to vote,
then the property trustee shall take such action as is directed by us and, if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the trust securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Wilmington Trust Company will serve as the property trustee, the Delaware
trustee and the guarantee trustee. See "Description of Guarantee." Wilmington
Trust Company also serves as the trustee for the trust debentures. See
"Description of Trust Debentures."
MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that the trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the trust debentures
will be treated as our indebtedness for United States federal income tax
purposes. In this connection, we and the administrative trustees are authorized
to take any action, not inconsistent with applicable law, the certificate of
trust or the trust agreement, that we and the administrative trustees determine
in our discretion is necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
trust securities.
The trust agreement and the trust preferred securities will be governed by
and construed in accordance with the internal laws of the State of Delaware.
DESCRIPTION OF TRUST DEBENTURES
We will issue the trust debentures under a supplement to the Indenture
dated as of September 1, 1995, as amended and supplemented from time to time,
between us and Wilmington Trust Company, as debenture trustee. We refer to this
Indenture, as so supplemented, in this prospectus as the "Debenture Indenture"
and to Wilmington Trust Company, in its capacity as trustee under the Debenture
Indenture, as the "Debenture Trustee." The Debenture Indenture has been
qualified under the Trust Indenture Act. We have summarized selected provisions
of the Debenture Indenture below. We suggest that you read the Debenture
Indenture for the complete text of those provisions as well as for the
provisions that are not
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summarized but may be important to you. A copy of the Debenture Indenture is
incorporated by reference as an exhibit to the registration statement of which
this prospectus is a part.
The trust debentures may be distributed to the holders of trust securities
in liquidation of the trust. See "Description of Trust Preferred
Securities-Liquidation of the Trust and Distribution of the Trust Debentures."
If that occurs, we will use our best efforts to have the trust debentures listed
on the New York Stock Exchange or on the exchange on which the trust preferred
securities are then listed.
GENERAL
The trust will invest the proceeds obtained from any issuance of trust
preferred securities, together with the consideration paid by us for the trust
common securities, in trust debentures issued by us. The trust debentures will
bear interest from the same date and at the same rate as the trust preferred
securities. It is anticipated that, until the liquidation, if any, of the trust,
each trust debenture will be held in the name of the property trustee in trust
for the benefit of the holders of the trust securities.
Unless otherwise specified in the accompanying prospectus supplement, we
will initially issue each the trust debentures in the form of one or more global
securities, in registered form, as described under "-Form, Registration and
Transfer" below and "Book-Entry System." Unless otherwise provided in the
applicable prospectus supplement, the trust debentures will be issued in
denominations of $25 and integral multiples thereof. Payments with respect to
global trust debentures will be made to the depository as described under
"Book-Entry System." In the event the trust debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
trust debentures will be registrable and the trust debentures may be exchanged
for trust debentures of other denominations for a like aggregate principal
amount at the corporate trust office of the Debenture Trustee in Wilmington,
Delaware. See "-Payment and Paying Agents."
The trust debentures will rank equally with all other debentures and will
be unsecured, subordinate, and junior in right of payment to all Senior
Indebtedness to the extent and in the manner set forth in the Debenture
Indenture. The trust debentures will mature on the date provided in the
applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, the
trust debentures will not be subject to a sinking fund provision.
SUBORDINATION
In the Debenture Indenture, we have covenanted and agreed that any trust
debentures issued under the Debenture Indenture will be subordinate and junior
in right of payment to all Senior Indebtedness (the meaning of which is set
forth below). Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, or in connection with any
insolvency, receivership or bankruptcy proceeding with respect to us, all Senior
Indebtedness must be paid in full before the holders of trust debentures will be
entitled to receive or retain any payment in respect thereof.
No payments on account of principal, or premium, or interest, if any, in
respect of the trust debentures may be made if a default in any payment with
respect to Senior Indebtedness has occurred and is continuing, or an event of
default with respect to any Senior Indebtedness resulting in the acceleration of
the maturity thereof, or if any judicial proceeding shall be pending with
respect to any such default.
The term "Senior Indebtedness" means:
- all of our obligations for borrowed money;
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- all of our obligations evidenced by securities, bonds, notes,
debentures issued under indentures other than the Debenture Indenture
or other similar instruments, including the bonds issued under our
Mortgage and the notes issued under our Senior Indenture;
- all of our capital lease obligations;
- all of our obligations issued or assumed as the deferred purchase
price of property, all of our conditional sale obligations and our
obligations under any title retention agreement, but excluding our
trade accounts payable arising in the ordinary course of business;
- all of our reimbursement obligations with respect to any letter of
credit, banker's acceptance, security purchase facility or similar
credit transactions;
- all obligations of the type referred to in the preceding five bullet
points of another person that we have guaranteed or are responsible or
liable for as obligor or otherwise; and
- all obligations of the type referred to in the preceding bullet points
of another person secured by any lien on any of our property or assets
(whether or not that obligation has been assumed by us), except for
- those obligations that, by their terms, rank equally with or
junior to the trust debentures, including all of our obligations
and associated guarantees to our other trusts, partnerships or
entities that act as our financing vehicle for the issuance of
preferred securities that rank equally with or junior to the
trust preferred securities, and
- obligations between us and our affiliates.
Senior Indebtedness continues to be Senior Indebtedness and to be entitled
to the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of that Senior Indebtedness.
The Debenture Indenture does not limit the aggregate amount of Senior
Indebtedness that we may issue, nor does it afford holders of the trust
debentures protection in the event of a highly leveraged or similar transaction
involving our company. As of September 5, 2002, our Senior Indebtedness was
approximately $6.92 billion.
CERTAIN COVENANTS
We covenant that we will not, and will not permit any subsidiary to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock (subject to certain exceptions),
- make any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any of our debt securities (including
other guarantees) that rank pari passu with or junior in right of
payment to the trust debentures, or
- make any guarantee payments (other than payments under the guarantee)
with respect to any guarantee by us of the debt securities of any of
our subsidiaries (including under other guarantees) if that guarantee
ranks pari passu or junior in right of payment to the trust
debentures,
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if at such time there shall have occurred any event that would constitute a
debenture event of default or we are in default with respect to payments of any
of our obligations under the guarantee.
If we have given notice of our election to defer interest payments on the
trust debentures as provided in the Debenture Indenture and the deferral period,
or any extension thereof, is continuing, we covenant not to:
- declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to,
any of our capital stock;
- make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any of our debt securities (including
guarantees) which rank pari passu with or junior to the trust
debentures; and
- make any guarantee payments with respect to the securities described
in the previous two bullet points, other than pursuant to the
guarantee.
So long as the trust preferred securities remain outstanding, we also
covenant:
- to maintain 100% direct or indirect ownership of the trust common
securities; provided, however, that any successor to us is permitted
under the Debenture Indenture to succeed to our ownership of the trust
common securities;
- to not cause or permit the dissolution, winding-up or termination of
the trust, except in connection with the distribution of trust
debentures in connection with certain mergers, consolidations or
amalgamations, each as permitted by the trust agreement; and
- to use our reasonable efforts to cause the trust:
- to remain a statutory trust, except in connection with the
distribution of trust debentures to the holders of trust
securities in liquidation of the trust, the redemption of all of
the trust securities, or certain mergers, consolidations or
amalgamations as permitted by the trust agreement; and
- to continue otherwise to be treated as a grantor trust for United
States federal income tax purposes.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable prospectus supplement, we may
redeem the trust debentures, at our option, in whole at any time or in part from
time to time, on or after the date indicated in the prospectus supplement.
Unless the applicable prospectus supplement states otherwise, the redemption
price for such an optional redemption will be equal to 100% of the principal
amount of trust debentures to be redeemed plus any accrued and unpaid interest,
including Additional Interest as described under "Description of Trust
Debentures-Additional Interest," to the redemption date.
Unless otherwise specified in the applicable prospectus supplement, upon
the occurrence of a Tax Event as described under "-Special Event Redemption"
below, we may, at our option in certain circumstances redeem the trust
debentures upon not less than 30 nor more than 60 days' notice at a redemption
price equal to 100% of the principal amount of trust debentures to be redeemed
plus any accrued and unpaid interest to the redemption date. If a partial
redemption of the trust debentures would result in the delisting of the trust
preferred securities from any national securities exchange or other organization
on which those securities are then listed, we may only redeem the trust
debentures in whole.
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CANCELLATION
All trust debentures surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any person, other than the Debenture Trustee,
be delivered to the Debenture Trustee, and any of those debentures and
debentures surrendered directly to the Debenture Trustee for any such purpose
shall be promptly canceled by it. Our acquisition at any time of any trust
debentures shall not operate as a redemption or satisfaction of the indebtedness
represented by those trust debentures unless and until we deliver the same to
the Debenture Trustee for cancellation.
OPTION TO EXTEND INTEREST PAYMENT DATE
We may, on one or more occasions, defer the payment of interest on the
trust debentures for a period not exceeding 20 consecutive quarters. However, we
may not extend our obligation to pay Additional Interest as described under
"Description of Trust Debentures-Additional Interest." No deferral period may
end on a date other than an interest payment date or extend beyond the stated
maturity date of the trust debentures. At the end of any deferral period, we
will pay all interest then accrued and unpaid (including Additional Interest, if
any).
During any interest deferral period, we may not:
- declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to,
any of our capital stock;
- make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any of our debt securities (including
guarantees) which rank pari passu with or junior to the trust
debentures; or
- make any guarantee payments with respect to the securities described
in the previous two bullet points, other than pursuant to the
guarantee.
Prior to the termination of any deferral period, we may further extend that
deferral period, so long as the extension does not cause that deferral period to
exceed 20 consecutive quarters or extend beyond the stated maturity date of the
trust debentures. Upon the termination of any deferral period and the payment of
all amounts then due, we may elect to begin a new deferral period, subject to
the above requirements. No interest shall be due and payable during a deferral
period, except at the end thereof.
We will give the trust, as the holder of the trust debentures, notice of
our selection or extension of a deferral period at least the number of business
days specified in the applicable prospectus supplement prior to:
- the record date relating to the interest payment date on which the
extension is to commence or relating to the interest payment date on
which the extension period that is being extended would otherwise
terminate; or
- the date we or the trust are required to give notice to any securities
exchange or other applicable self-regulatory organization of the
record date or the date such distributions are payable.
We will cause the trust to give notice of our election to begin or extend a
deferral period to the holders of the trust preferred securities.
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There is no limitation in the Debenture Indenture on the number of times
that we may elect to begin a deferral period. Accordingly, there could be
multiple deferral periods of varying lengths throughout the term of the trust
debentures.
ADDITIONAL INTEREST
The trust will be required to pay additional interest, or Additional
Interest, as follows:
- any additional amounts as may be required so that the net amounts
received and retained by the trust, as the holder of the trust
debentures, after paying taxes, duties, assessments or governmental
charges of whatever nature (other than withholding taxes) imposed by
the United States or any taxing authority will not be less than the
amounts the trust would have received had those taxes, duties,
assessments or other governmental charges not been imposed; and
- any interest due and not paid on an interest payment date, together
with interest thereon from that interest payment date to the date of
payment, compounded quarterly, on each interest payment date.
SPECIAL EVENT REDEMPTION
Unless otherwise specified in the applicable prospectus supplement, if a
Special Event occurs and is continuing, we may, at our option, redeem the trust
debentures in whole or in part at any time within 90 days of the occurrence of
that Special Event, at a prepayment price equal to 100% of the principal amount
of the trust debentures to be redeemed plus accrued and unpaid interest thereon
(including Additional Interest, if any) to the date of redemption.
A "Special Event" means a Tax Event or an Investment Company Event.
"Investment Company Event" means the receipt by us of an opinion of counsel
to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, which change or prospective change
becomes effective on or after the date of the original issuance of the trust
preferred securities.
A "Tax Event" means the receipt by us of an opinion of counsel experienced
in such matters to the effect that, as a result of:
- any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or
therein, or
- any amendment to, or change in, any interpretation or application of
such laws or regulations,
which change or amendment becomes effect on or after the date of the
original issuance of the trust preferred securities, there is more than an
insubstantial risk that:
- the trust would be subject to United States federal income tax with
respect to income received or accrued on the trust debentures,
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- interest payable by us to the trust on the trust debentures would not
be deductible by a member of our consolidated tax group for United
States federal income tax purposes, or
- the trust would be subject to more than a de minimus amount of other
taxes, duties or other governmental charges.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust debentures to be
prepaid at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest ceases to accrue on
such those debentures called for redemption.
MODIFICATION OF INDENTURE
From time to time we and the Debenture Trustee may, without the consent of
the holders of trust debentures, amend the Debenture Indenture for specified
purposes, including, among other things, to cure any ambiguity, defect or
inconsistency contained in the Debenture Indenture or the trust preferred
securities and to create any new series of subordinated debt securities.
The Debenture Indenture contains provisions permitting us and the Debenture
Trustee, with the consent of the holders of at least a majority in aggregate
principal amount of the trust debentures, to modify the Debenture Indenture or
any supplemental indenture in a manner affecting the rights of the holders of
trust debentures. However, no such modification may, without the consent of the
holders of each outstanding trust debenture so affected:
- extend the fixed maturity, or reduce the rate of interest or extend
the time of payment of interest on, or reduce the principal amount of,
the trust debentures or reduce the amount payable on redemption
thereof; or
- reduce the percentage of principal amount of trust debentures, the
holders of which are required to consent to any such modification of
the Debenture Indenture.
DEBENTURE EVENTS OF DEFAULT
The Debenture Indenture provides that any one or more of the following
constitute an event of default with respect to the trust debentures, each of
which are referred to in this prospectus as a "debenture event of default":
- failure to pay any interest, including Additional Interest, on the
trust debentures when due for 30 days, subject to the deferral of any
due date in the case of an extension period;
- failure to pay any principal or premium, if any, on the trust
debentures when due whether at maturity, upon redemption, by
declaration of acceleration of maturity or otherwise, subject to the
deferral of any due date in the case of an extension period;
- failure to observe or perform any of our other covenants contained in
the indenture for 90 days after written notice to us from the
Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of trust debentures;
- our bankruptcy, insolvency or reorganization, in certain cases; or
- the voluntary or involuntary dissolution, winding-up or termination of
the trust, except in connection with the distribution of trust
debentures to the holders of trust securities in
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liquidation of the trust, the redemption of all of the trust
securities, or certain mergers, consolidations or amalgamations as
permitted by the trust agreement.
The holders of a majority in aggregate outstanding principal amount of the
trust debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. If
a debenture event of default has occurred and is continuing, the Debenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the trust debentures may declare the principal amount on all trust
debentures due and payable immediately upon a debenture event of default. The
holders of a majority in aggregate outstanding principal amount of the trust
debentures may annul such declaration and waive the default if the default has
been cured and a sum sufficient to pay all matured installments of interest and
principal of, and premium, if any, due otherwise than by acceleration has been
deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
trust debentures affected thereby may, on behalf of the holders of all the trust
debentures, waive any past default or debenture event of default and its
consequences, except:
- a default in the payment of principal, premium, if any, on or interest
(unless such a default has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration and any applicable premium has been deposited with the
Debenture Trustee); or
- a default in our covenant not to declare or pay dividends on, or make
distributions with respect to, or redeem, purchase or acquire any of
our capital stock during any interest deferral period.
In case a debenture event of default shall occur and be continuing, the
property trustee will have the right to declare the principal of and the
interest on the trust debentures (including Additional Interest, if any), and
any other amounts payable under the Debenture Indenture, to be forthwith due and
payable and to enforce its other rights as a creditor with respect to the trust
debentures.
A debenture event of default also constitutes an event of default under the
trust agreement. The holders of trust preferred securities in certain
circumstances have the right to direct the property trustee to exercise its
rights as the holder of the trust debentures. See "Description of Trust
Preferred Securities-Trust Agreement Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Debenture Indenture does not contain any covenant which restricts our
or the trust's ability to:
- merge or consolidate with or into any corporation;
- sell or convey all or substantially all of our or the trust's assets
to any person, firm or corporation; or
- or otherwise engage in restructuring transactions.
SATISFACTION AND DISCHARGE
We may be discharged from all of our obligations under the Debenture
Indenture (except as otherwise provided in the Indenture) when:
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- either (1) all of the trust debentures have been delivered to the
Debenture Trustee for cancellation, or (2) all trust debentures not
delivered to the Debenture Trustee for cancellation
- have become due and payable,
- will become due and payable by their terms within one year, or
- are to be called for redemption within one year under
arrangements satisfactory to the Debenture Trustee for the giving
of notice of redemption,
and we, in the case of clause (2), have deposited or caused to be
deposited with the Debenture Trustee, in trust, an amount in moneys or
Governmental Obligations, or any combination of the foregoing,
sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
delivered to the Debenture Trustee to pay all principal, premium, if
any, and interest on those trust debentures due or to become due;
- we have paid or caused to be paid all other sums payable by us under
the Debenture Indenture; and
- we have delivered to the Debenture Trustee an opinion of counsel to
the effect that, based upon our receipt from, or the publication by
the Internal Revenue Service of a ruling or change in law, the holders
of trust debentures will not recognize income, gain or loss for United
States federal income tax purposes as a result of the deposit,
defeasance and discharge and will be subject to United States federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if the deposit, defeasance and
discharge had not occurred.
FORM, REGISTRATION AND TRANSFER
If the trust debentures are distributed to the holders of the trust
securities, the trust debentures may be represented by one or more global
certificates registered in the name of DTC or its nominee. Under those
circumstances, the depository arrangements for the trust debentures would be
expected to be substantially similar to those in effect for the trust preferred
securities. For a description of DTC and the terms of the depository
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Book-Entry System."
PAYMENT AND PAYING AGENTS
Payment of principal of, premium, if any, and interest on the trust
debentures will be made at the office of the Debenture Trustee or at the office
of any other paying agent or paying agents as we may designate from time to
time, except that, at our option, payment of any interest may be made, except in
the case of trust debentures in global form, by check mailed to the address of
the holder thereof as such address shall appear in the register for trust
debentures.
Payment of any interest on any trust debenture will be made to the person
in whose name that trust debenture is registered at the close of business on the
record date for that interest. We may at any time designate additional paying
agents or rescind the designation of any paying agent; however, we will at all
times be required to maintain a paying agent in each place of payment for the
trust debentures.
Any monies deposited with the Debenture Trustee or any paying agent for the
payment of the principal of, and premium, if any, or interest on any trust
debenture and remaining unclaimed for two years after that principal, and
premium, if any, or interest has become due and payable shall, at our
44
request, be repaid to us and the holder of that trust debenture shall thereafter
look only to us for payment thereof.
GOVERNING LAW
The Debenture Indenture and the trust debentures will be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflicts of laws principles thereof.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee will be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to those provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Debenture Indenture
at the request of any holder of trust debentures, unless offered reasonable
indemnity by that holder against the costs, expenses and liabilities which might
be incurred thereby. However, the foregoing shall not relieve the Debenture
Trustee, upon the occurrence of a debenture event of default, from exercising
the rights and powers vested in it by the Debenture Indenture. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Debenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. Wilmington Trust Company will serve as Debenture
Trustee. See "Description of Trust Preferred Securities-Information Concerning
the Property Trustee."
MISCELLANEOUS
We have the right at all times to assign any of our rights or obligations
under the Debenture Indenture to a direct or indirect wholly-owned subsidiary of
us; provided that, in the event of any such assignment, we will remain liable
for all of our obligations under the Debenture Indenture. Subject to the
foregoing, the Debenture Indenture will be binding upon and inure to the benefit
of the parties thereto and their respective successors and assigns. The
Debenture Indenture provides that it may not otherwise be assigned by the
parties thereto.
We have covenanted in the Debenture Indenture to pay all fees and expenses
related to:
- the offering of the trust preferred securities and the trust
debentures;
- the organization, maintenance and dissolution of the trust;
- the retention of the trust's trustees; and
- the enforcement by the property trustee of the rights of holders of
trust preferred securities.
DESCRIPTION OF GUARANTEE
Set forth below is a summary of information concerning the guarantee, which
will be executed and delivered by us for the benefit of the holders from time to
time of the trust preferred securities. The guarantee has been qualified under
the Trust Indenture Act. Wilmington Trust Company, the guarantee trustee, will
hold the guarantee for the benefit of the holders of the trust preferred
securities. The following summary is not necessarily complete, and reference is
hereby made to the copy of the form of the guarantee (including the definitions
therein of certain terms), which is filed as an exhibit to the registration
statement of which this prospectus forms a part, and to the Trust Indenture Act.
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GENERAL
We will irrevocably and unconditionally agree to pay in full on a
subordinated basis guarantee payments to the holders of the trust preferred
securities, as and when due, regardless of any defense, right of setoff or
counterclaim that we, in our capacity as guarantor, may have or assert other
than the defense of payment. The following payments with respect to the trust
preferred securities, to the extent not paid by or on behalf of the trust, will
be subject to the guarantee:
- any accrued and unpaid distributions required to be paid on the trust
preferred securities, to the extent that the trust has funds on hand
legally available therefor at that time;
- the applicable redemption price with respect to the trust preferred
securities called for redemption, to the extent that the trust has
funds on hand legally available therefor at that time; and
- upon a voluntary or involuntary dissolution, winding-up or liquidation
of the trust (other than in connection with the distribution of the
trust debentures held by the trust to holders of the trust preferred
securities), the lesser of:
- the aggregate of the liquidation amount and all accrued and
unpaid distributions on the trust preferred securities, to the
extent the trust has funds legally available therefor at the
time; and
- the amount of assets of the trust remaining available for
distribution to holders of the trust preferred securities after
satisfaction of liabilities to creditors of the trust as required
by applicable law.
Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the trust preferred
securities or by causing the trust to pay those amounts to those holders.
The guarantee will be a guarantee of the guarantee payments with respect to
the trust preferred securities from the time of issuance of the trust preferred
securities, but will not apply to distributions and other payments on the trust
preferred securities when the trust does not have sufficient funds legally and
immediately available to make such distributions or other payments. Therefore,
if we do not make interest payments on the trust debentures held by the property
trustee, the trust will not make distributions on the trust preferred
securities.
Through the guarantee, the trust agreement, the trust debentures and the
Debenture Indenture, taken together, we will fully, irrevocably and
unconditionally guarantee all of the trust's obligations under the trust
preferred securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the trust preferred securities. See "Relationship
Among the Trust Preferred Securities, the Trust Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The guarantee will constitute our unsecured obligation and will rank:
- subordinate and junior in right of payment to all of our other
liabilities, including the trust debentures, except those obligations
or liabilities made pari passu or subordinate by their terms;
46
- pari passu with the most senior preferred or preference stock now or
hereinafter issued by us and with any guarantee now or hereafter
entered into by us in respect of any preferred or preference
securities of any affiliate of ours; and
- senior to all of our common stock.
Our obligations under the guarantee effectively will be subordinated to all
existing and future liabilities of our subsidiaries and all liabilities of any
of our future subsidiaries. Claimants should look only to us for payments under
the guarantee. See "Description of Trust Debentures-Subordination." The
guarantee does not limit us or any of our subsidiaries from incurring or issuing
other secured or unsecured debt, including Senior Indebtedness, whether under
the Debenture Indenture, any other indenture that we may enter into in the
future or otherwise.
The guarantee will constitute a guarantee of payment and not of collection.
The guarantee will be held for the benefit of the holders of the trust preferred
securities. It will not be discharged except by payment of the guarantee
payments in full to the extent not paid by the trust or upon distribution to the
holders of the trust preferred securities of the trust debentures. The guarantee
does not limit the amount of additional Senior Indebtedness that we may incur.
GUARANTEE EVENTS OF DEFAULT
An event of default under the guarantee will occur upon our failure to
perform any of our payment obligations thereunder. The holders of more than 50%
in liquidation amount of the trust preferred securities will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee in respect of the guarantee or to direct the
exercise of any trust or power conferred upon the guarantee trustee under the
guarantee.
If the guarantee trustee fails to enforce the guarantee, any holder of the
trust preferred securities may institute a legal proceeding directly against us
to enforce its rights under the guarantee without first instituting a legal
proceeding against the trust, the guarantee trustee or any other person or
entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the trust preferred securities (in which case no
consent will be required), the guarantee may be amended only with the prior
approval of the holders of not less than 66-2/3% of the liquidation amount of
the outstanding trust preferred securities. The manner of obtaining that
approval will be as set forth under "Description of Trust Preferred
Securities-Voting Rights; Amendment of the Trust Agreement." All guarantees and
agreements contained in the guarantee shall bind our successors, assigns,
receivers, trustees and representatives and shall inure to the benefit of the
holders of the trust preferred securities then outstanding. Except in connection
with our consolidation or merger or a conveyance, transfer or lease by us, we
may not assign our obligations 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 the trust preferred
securities; or
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- upon liquidation of the trust, the full payment of the liquidation
distribution or the distribution of the trust debentures to the
holders of the trust preferred securities.
The guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of the trust preferred securities must restore
payment of any sums paid under the trust preferred securities or the guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
Other than during the occurrence and continuance of a default by us in
performance of the guarantee, the guarantee trustee will undertake to perform
only those duties as are specifically set forth in the guarantee and, in case a
default with respect to the guarantee has occurred, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the guarantee
trustee will be under no obligation to exercise any of the powers vested in it
by the guarantee at the request of any holder of the trust preferred securities
unless it is offered indemnity satisfactory to it against the costs, expenses
and liabilities that might be incurred thereby.
GOVERNING LAW
The guarantee will be governed by and construed in accordance with the laws
of the State of New York, without regard to conflict of laws principles thereof.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
TRUST DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the trust preferred
securities (to the extent the trust has funds on hand legally available for the
payment of such distributions) are irrevocably guaranteed by us as and to the
extent set forth under "Description of Guarantee." Taken together, our
obligations under the trust debentures, the Debenture Indenture, the trust
agreement and the guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the trust preferred securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the trust preferred securities. If and to the extent
that we do not make the required payments on the trust debentures held by the
trust, the trust will not have sufficient funds to make the related payments,
including distributions, on the trust preferred securities. The guarantee will
not cover any such payment when the trust does not have sufficient funds on hand
legally available therefor. In that event, the remedy of a holder of trust
preferred securities is to institute a direct action against us. Our obligations
under the guarantee are subordinate and junior in right of payment to all Senior
Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
trust debentures, such payments will be sufficient to cover distributions and
other payments due on the trust securities, primarily because:
- the aggregate principal amount or redemption price of the trust
debentures is equal to the sum of the liquidation amount or redemption
price, as applicable, of the trust securities;
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- the interest rate and interest and other payment dates on the trust
debentures will match the distribution rate and distribution and other
payment dates for the trust securities;
- we will pay for all and any costs, expenses and liabilities of the
trust except the trust's obligations to holders of trust securities
under the trust securities; and
- the trust agreement will provide that the trust is not authorized to
engage in any activity that is not consistent with the limited
purposes thereof.
Notwithstanding anything to the contrary in the Debenture Indenture, we
have the right to set-off any payment we are otherwise required to make with and
to the extent we have theretofore made, or are concurrently on the date of such
payment making, a payment under the guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
A holder of any trust preferred security may institute a legal proceeding
directly against us to enforce its rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee, the trust or any
other person or entity.
LIMITED PURPOSE OF THE TRUST
The trust preferred securities represent preferred undivided beneficial
interests in the assets of the trust, and the trust exists for the sole purpose
of:
- issuing and selling the trust securities;
- using the proceeds from the sale of the trust securities to acquire
the trust debentures; and
- engaging in only those other activities necessary or incidental to
these purposes.
A principal difference between the rights of a holder of a trust preferred
security and a holder of a trust debenture is that a holder of a trust debenture
will be entitled to receive from us the principal amount of, and premium, if
any, and interest on trust debentures held, while a holder of trust preferred
securities is entitled to receive distributions from the trust (or, in certain
circumstances, from us under the guarantee) if and to the extent the trust has
funds on hand legally available for the payment of those distributions.
RIGHTS UPON DISSOLUTION
Unless the trust debentures are distributed to holders of the trust
securities, upon any voluntary or involuntary dissolution and liquidation of the
trust, after satisfaction of liabilities to creditors of the trust as required
by applicable law, the holders of the trust securities will be entitled to
receive, out of assets held by the trust, the liquidation distribution in cash.
See "Description of Trust Preferred Securities-Liquidation of the Trust and
Distribution of Trust Debentures." Upon our voluntary or involuntary liquidation
or bankruptcy, the property trustee, as holder of the trust debentures, would be
our subordinated creditor, subordinated in right of payment to all Senior
Indebtedness as set forth in the Debenture Indenture, but entitled to receive
payment in full of principal, and premium, if any, and interest, before any of
our stockholders receive payments or distributions. Since we will be the
guarantor under the guarantee and will agree to pay for all costs, expenses and
liabilities of the trust (other than the trust's obligations to the holders of
the trust securities), the positions of a holder of trust preferred securities
and a holder of trust debentures relative to other creditors and to our
shareholders in the event of our liquidation or bankruptcy are expected to be
substantially the same.
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BOOK-ENTRY SYSTEM
Unless otherwise indicated in the applicable prospectus supplement, each
series of bonds, notes, cumulative preference stock and trust preferred
securities will initially be issued in the form of one or more global
securities, in registered form, without coupons (as applicable). The global
security will be deposited with, or on behalf of, a depository, and registered
in the name of that depository or a nominee of that depository. Unless otherwise
indicated in the applicable prospectus supplement, the depository for any global
securities will be DTC.
The global securities will be issued as fully-registered securities
registered in the name of Cede & Co., DTC's partnership nominee. One
fully-registered global security certificate will be issued for each issue of
the global securities, each in the aggregate principal amount of that issue and
will be deposited with DTC. So long as the depository, or its nominee, is the
registered owner of a global security, that depository or such nominee, as the
case may be, will be considered the owner of that global security for all
purposes under the Senior Indenture, the Debenture Indenture, the Mortgage or
the trust agreement, as applicable, including for any notices and voting. Except
as otherwise provided below, the owners of beneficial interests in a global
security will not be entitled to have securities registered in their names, will
not receive or be entitled to receive physical delivery of any such securities
and will not be considered the registered holder thereof under the Senior
Indenture, the Debenture Indenture, the Mortgage or the trust agreement, as
applicable. Accordingly, each person holding a beneficial interest in a global
security must rely on the procedures of the depository and, if that person is
not a direct participant, on procedures of the direct participant through which
that person holds its interest, to exercise any of the rights of a registered
owner of such security.
A global security may not be transferred as a whole except by DTC to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global securities shall be transferred and exchanged through
the facilities of DTC. Beneficial interests in the global securities may not be
exchanged for securities in certificated form except in the circumstances
described in the following paragraph.
We will be obligated to exchange global securities in whole for
certificated securities only if:
- the depository notifies us that it is unwilling or unable to continue
as depository for the global securities or the depository has ceased
to be a clearing agency registered under applicable law and, in either
case, we thereupon fail to appoint a successor depository within 90
days;
- we, at our option, notify the applicable trustee in writing that we
elect to cause the issuance of certificated securities; or
- there shall have occurred and be continuing an event of default with
respect to the applicable securities of any series.
In all cases, certificated securities delivered in exchange for any global
security or beneficial interest therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depository (in accordance with customary procedures).
The descriptions of operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within DTC's control and are subject to changes by DTC from time to time.
We take no responsibility for these operations and procedures and urge you to
contact DTC or its participants directly to discuss these matters. DTC has
advised us as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the
50
Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing corporation"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934.
- DTC holds securities that its direct participants deposit with DTC.
DTC also facilitates the settlement among direct participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
direct participants' accounts, thereby eliminating the need for
physical movement of securities certificates.
- Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other
organizations.
- DTC is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc.
- Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct
participant, either directly or indirectly, which are referred to as
indirect participants and, together with the direct participants, the
participants.
- The rules applicable to DTC and its participants are on file with the
SEC.
Purchases of global securities under the DTC system must be made by or
through direct participants, who will receive a credit for such purchases of
global securities on DTC's records. The ownership interest of each actual
purchaser of each global security, or beneficial owner, is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
or indirect participant through which the beneficial owner entered into the
transaction. Transfers of ownership interests in the global securities are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates representing
their ownership interests in the global securities, except in the event that use
of the book-entry system for the global securities is discontinued.
To facilitate subsequent transfers, all global securities deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of global securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the global securities; DTC's
records reflect only the identity of the direct participants to whose accounts
such global securities are credited which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. If the global securities are redeemable,
redemption notices shall be sent to Cede & Co. If less than all of the global
securities are being redeemed, DTC's practice is to determine by lot the amount
of the interest of each direct participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the global
securities. Under its usual procedures, DTC mails an omnibus proxy to us as soon
as possible after the record date. The
51
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants whose accounts the global securities are credited on the record
date, identified in a listing attached to the omnibus proxy.
Principal, interest and premium payments, if any, on the global securities
will be made to DTC in immediately available funds. DTC's practice is to credit
direct participants' accounts on the date on which interest is payable in
accordance with the respective holdings shown on DTC's records, unless DTC has
reason to believe that it will not receive payment on that date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of that participant and not of DTC, the trustee for those
securities, or us, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal, interest and premium, if any,
on any of the aforementioned securities represented by global securities to DTC
is the responsibility of the appropriate trustee and us. Disbursement of those
payments to direct participants shall be the responsibility of DTC, and
disbursement of those payments to the beneficial owners shall be the
responsibility of the participants.
DTC may discontinue providing its services as securities depositary with
respect to the global securities at any time by giving us reasonable notice.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global securities among
participants, it is under no obligation to perform or continue to perform those
procedures, and those procedures may be discontinued at any time.
The underwriters, dealers or agents of any of the securities may be direct
participants of DTC.
None of the trustees, us or any agent for payment on or registration of
transfer or exchange of any global security will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial interests in that global security or for maintaining, supervising
or reviewing any records relating to those beneficial interests.
52
PLAN OF DISTRIBUTION
We may sell the securities to underwriters or dealers, through agents,
directly to purchasers or through a combination of these methods. The applicable
prospectus supplement will contain specific information relating to the terms of
the offering, including:
- the name or names of any underwriters, dealers or agents;
- the purchase price of the securities and the net proceeds to us from
the sale;
- any underwriting discounts and other items constituting underwriters'
compensation; and
- the initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers.
The initial public offering price and any discounts or concessions allowed
or re-allowed or paid to dealers may be changed from time to time.
BY UNDERWRITERS
If underwriters are used in an offering, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
those firms. The specific managing underwriter or underwriters, if any, will be
named in the prospectus supplement relating to the particular securities
together with the members of the underwriting syndicate, if any. Unless
otherwise set forth in the applicable prospectus supplement, the obligations of
the underwriters to purchase the particular securities will be subject to
specified conditions precedent and the underwriters will be obligated to
purchase all of the securities being offered if any are purchased.
BY DEALERS
If dealers are used in the sale, unless otherwise specified in the
applicable prospectus supplement, we will sell the securities to the dealers as
principals. The dealers may then resell the securities to the public at varying
prices to be determined by the dealers at the time of resale. The applicable
prospectus supplement will contain more information about the dealers, including
the names of the dealers and the terms of our agreement with them.
BY AGENTS AND DIRECT SALES
We may sell the securities directly to the public, without the use of
underwriters, dealers or agents. We may also sell the securities directly or
through agents we designate from time to time. The applicable prospectus
supplement will set forth the name of any agent involved in the offer or sale of
the securities in respect of which that prospectus supplement is delivered and
any commissions payable by us to that agent. Unless otherwise indicated in the
applicable prospectus supplement, any agent will be acting on a best efforts
basis for the period of its appointment.
GENERAL INFORMATION
Any underwriters, dealers or agents participating in the distribution of
the securities may be deemed to be underwriters as defined in the Securities Act
of 1933, and any discounts or commissions received by them on the sale or resale
of the securities may be deemed to be underwriting discounts and
53
commissions under the Securities Act. Any underwriters, dealers or agents will
be identified and their compensation from us will be described in the applicable
prospectus supplement.
We may agree with the underwriters, dealers and agents to indemnify them
against certain civil liabilities, including liabilities under the Securities
Act or to contribute with respect to payments which the underwriters, dealers or
agents may be required to make in respect of these liabilities.
Underwriters, dealers and agents may be customers of, engage in
transactions with or perform services for, us in the ordinary course of their
businesses.
Unless otherwise specified in a prospectus supplement, the securities will
not be listed on a national securities exchange. We cannot assure that any
broker-dealer will make a market in any series of the securities or the
liquidity of the trading market for any of the securities. The prospectus
supplement will state, if known, whether any broker-dealer intends to make a
market in the securities.
LEGAL MATTERS
Sidley Austin Brown & Wood, Chicago, Illinois, will render an opinion as to
the validity of the securities (other than the trust preferred securities) for
us, and Winston & Strawn, Chicago Illinois, will render an opinion as to the
validity of the securities (other than the trust preferred securities) for any
underwriters, dealers, purchasers or agents. Richards, Layton & Finger, P.A.,
special Delaware counsel to the trust, will render an opinion as to the validity
of the trust preferred securities. Winston & Strawn provides legal services to
Exelon and its subsidiaries, including us, from time to time.
EXPERTS
The financial statements of Commonwealth Edison Company for the year ended
December 31, 2001 and for the periods from January 1, 2000 to October 19, 2000
and October 20, 2000 to December 31, 2000 incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Commonwealth Edison Company for
the year ended December 31, 2001 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of income, cash flows, comprehensive
income and changes in shareholders' equity of us and consolidated subsidiaries,
included in our Annual Report on Form 10-K for the year ended December 31, 1999,
incorporated by reference in this prospectus, have been audited by Arthur
Andersen LLP, independent accountants as stated in their report included in that
Annual Report. Arthur Andersen LLP has not consented to the incorporation by
reference of their report in this prospectus, and we have dispensed with the
requirement to file their consent in reliance on Rule 437a promulgated under the
Securities Act of 1933, as amended. Because Arthur Andersen LLP has not
consented to the inclusion of its report in this prospectus, your ability to
assert claims against Arthur Andersen LLP may be limited. In particular, because
of this lack of consent, you will not be able to sue Arthur Andersen LLP under
Section 11 of the Securities Act of 1933 for any untrue statements of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated in those financial
statements and therefore your right of recovery under that section may be
limited.
54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities, other than underwriting discounts and agency fees or commissions,
are set forth in the following table. All amounts except the SEC registration
fee are estimated.
SEC registration fee........................................... $ 193,200
Listing fees................................................... 50,000
Accounting fees and expenses................................... 130,000
Printing expenses.............................................. 80,000
Trustee fees and expenses...................................... 30,000
Legal fees and expenses........................................ 200,000
Rating agency fees............................................. 150,000
Miscellaneous.................................................. 26,800
---------
Total................................................. $ 860,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Certain provisions of the Illinois Business Corporation Act of 1983, as
amended (the "BCA"), provide that Commonwealth Edison Company ("ComEd") may, and
in some circumstances must, indemnify the directors and officers of ComEd and of
each subsidiary company against liabilities and expenses incurred by such person
by reason of the fact that such person was serving in such capacity, subject to
certain limitations and conditions set forth in the statute. ComEd's Restated
Articles of Incorporation and By-Laws provide that ComEd will indemnify its
directors and officers, and may indemnify any person serving as director or
officer of another business entity at ComEd's request, to the extent permitted
by the statute. In addition, ComEd's Restated Articles of Incorporation provide,
as permitted by the BCA, that directors shall not be personally liable for
monetary damages for breach of fiduciary duty as a director, except (i) for
breaches of their duty of loyalty to ComEd or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the BCA, and (iv) for transactions
from which a director derived an improper personal benefit.
ComEd maintains liability insurance policies which indemnify ComEd's
directors and officers, the directors and officers of subsidiaries of ComEd, and
the trustees of the Commonwealth Edison Company Service Annuity Fund and the
Commonwealth Edison Company of Indiana, Inc. Service Annuity Fund, against loss
arising from claims by reason of their legal liability for acts as such
directors, officers or trustees, subject to limitations and conditions as set
forth in the policies.
The forms of Underwriting Agreements filed as Exhibits 1-1 through 1-4 to
this Registration Statement provide for indemnification of directors, officers,
employees and agents by the underwriters against certain liabilities under the
Securities Act of 1933, as amended, in certain instances.
II-1
ITEM 16. EXHIBITS.*
Exhibit No. Description
- ----------- -----------
1-1** Form of Underwriting Agreement for the First Mortgage Bonds.
1-2** Form of Underwriting Agreement for the Notes.
1-3** Form of Underwriting Agreement for the Cumulative Preference Stock.
1-4** Form of Underwriting Agreement for the Trust Preferred Securities.
3-1 Restated Articles of Incorporation of Commonwealth Edison
Company effective February 20, 1985, including Statements of
Resolution Establishing Series, relating to the establishment
of three new series of Commonwealth Edison Company preference
stock known as the "$9.00 Cumulative Preference Stock," the
"$6.875 Cumulative Preference Stock" and the "$2.425
Cumulative Preference Stock," is incorporated herein by
reference to Exhibit 3-2 to Commonwealth Edison Company's 1994
Form 10-K (File No. 1-1839).
3-2 By-Laws of Commonwealth Edison Company, effective September 2,
1998, as amended through October 20, 2000, is incorporated
herein by reference to Exhibit 3-6 to Commonwealth Edison
Company's 2000 Form 10-K (File No. 1-1839).
4-1 Mortgage of Commonwealth Edison Company to Illinois Merchants
Trust Company, Trustee (BNY Midwest Trust Company, as current
successor Trustee), dated July 1, 1923, as supplemented and
amended by Supplemental Indenture thereto dated August 1,
1994, is incorporated herein by reference to Exhibit 2-1 to
Commonwealth Edison Company's Form S-7 (File No. 2-60201).
4-1-1 Supplemental Indentures to the aforementioned Commonwealth
Edison Mortgage are incorporated herein by reference or filed
herewith as follows:
Dated as of File Reference Exhibit No.
--------------------------------------------------------------
August 1, 1946 2-60201, Form S-7 2-1
April 1, 1953 2-60201, Form S-7 2-1
March 31, 1967 2-60201, Form S-7 2-1
April 1, 1967 2-60201, Form S-7 2-1
February 28, 1969 2-60201, Form S-7 2-1
May 29, 1970 2-60201, Form S-7 2-1
June 1, 1971 2-60201, Form S-7 2-1
April 1, 1972 2-60201, Form S-7 2-1
May 31, 1972 2-60201, Form S-7 2-1
June 15, 1973 2-60201, Form S-7 2-1
May 31, 1974 2-60201, Form S-7 2-1
June 13, 1975 2-60201, Form S-7 2-1
May 28, 1976 2-60201, Form S-7 2-1
June 3, 1977 2-60201, Form S-7 2-1
May 17, 1978 2-99665, Form S-3 4-3
August 31, 1978 2-99665, Form S-3 4-3
June 18, 1979 2-99665, Form S-3 4-3
June 20, 1980 2-99665, Form S-3 4-3
April 16, 1981 2-99665, Form S-3 4-3
April 30, 1982 2-99665, Form S-3 4-3
April 15, 1983 2-99665, Form S-3 4-3
April 13, 1984 2-99665, Form S-3 4-3
April 15, 1985 2-99665, Form S-3 4-3
April 15, 1986 33-6879, Form S-3 4-9
II-2
June 15, 1990 33-38232, Form S-3 4-12
June 1, 1991 33-40018, Form S-3 4-12
October 1, 1991 33-40018, Form S-3 4-13
October 15, 1991 33-40018, Form S-3 4-14
February 1, 1992 1-1839, 1991 Form 10-K 4-18
May 15, 1992 33-48542, Form S-3 4-14
July 15, 1992 33-53766, Form S-3 4-13
September 15, 1992 33-53766, Form S-3 4-14
February 1, 1993 1-1839, 1992 Form 10-K 4-14
April 1, 1993 33-64028, Form S-3 4-12
April 15, 1993 33-64028, Form S-3 4-13
June 15, 1993 1-1839, Form 8-K dated
May 21, 1993 4-1
July 15, 1993 1-1839, Form 10-Q for
quarter ended June 30,
1993 4-1
January 15, 1994 1-1839, 1993 Form 10-K 4-15
December 1, 1994 1-1839, 1994 Form 10-K 4-16
June 1, 1996 1-1839, 1996 Form 10-K 4-16
March 1, 2002 1-1839, 2001 Form 10-K 4-4-1
May 20, 2002**
June 1, 2002**
4-1-2 Instrument of Resignation, Appointment and Acceptance dated as of
February 20, 2002, under the provisions of the Mortgage dated July
1, 1923, and Indentures Supplemental thereto, regarding corporate
trustee is incorporated by reference to Exhibit 4-4-2 to
Commonwealth Edison Company's 2001 Form 10-K (File No. 1-1839).
4-1-3 Instrument dated as of January 31, 1996, under the provisions of
the Mortgage dated July 1, 1923 and Indentures Supplemental
thereto, regarding individual trustee is incorporated herein by
reference to Exhibit 4-29 to Commonwealth Edison Company's 1995
Form 10-K (File No. 1-1839).
4-2 Indenture dated as of September 1, 1987 between Commonwealth Edison
Company and Citibank, N.A., as Trustee relating to Notes, is
incorporated herein by reference to Exhibit 4-13 to Commonwealth
Edison Company's Form S-3 (File No. 1-1839).
4-2-1 Supplemental Indentures to the aforementioned Commonwealth Edison
Indenture are incorporated herein by reference as follows:
Dated as of File Reference Exhibit No.
-------------------------------------------------------------------
September 1, 1987 33-32929, Form S-3 4-16
January 1, 1997 1-1839, 1999 Form 10-K 4-21
September 1, 2000 1-1839, 2000 Form 10-K 4-7-3
4-3 Indenture dated as of September 1, 1995 between Commonwealth Edison
Company and Wilmington Trust Company, as trustee, is incorporated
herein by reference to Exhibit 4-3 to Commonwealth Edison Company's
Form S-3 Registration Statement (Registration No. 333-61343).
4-3-1 Supplemental Indentures to the aforementioned Commonwealth Edison
Indenture are incorporated herein by reference as follows:
Dated as of File Reference Exhibit No.
-------------------------------------------------------------------
September 25, 1995 333-61343, Form S-3 4-4
II-3
January 24, 1997 333-28369, Form S-4 4-3
4-4** Form of Supplemental Indenture relating to the First Mortgage
Bonds.
4-5** Form of Supplemental Indenture relating to the Notes.
4-6** Form of Supplemental Indenture relating to the Trust Debentures
(including form of Trust Debenture).
4-7** Certificate of Trust of ComEd Financing III dated as of
September 5, 2002.
4-8** Declaration of Trust of ComEd Financing III dated as of
September 5, 2002.
4-9** Form of Amended and Restated Declaration of Trust of ComEd
Financing III (including form of Trust Preferred Security
certificate).
4-10** Form of Guarantee Agreement of Commonwealth Edison Company for
ComEd Financing III Trust Preferred Securities.
5-1** Opinion of Sidley Austin Brown & Wood as to the validity of the
Securities (other than the Trust Preferred Securities).
5-2** Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the Trust Preferred Securities to be
issued by ComEd Financing III.
8-1*** Opinion of Sidley Austin Brown & Wood as to certain federal income
tax matters.
12-1** Statement re Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges and Preferred and Preference
Stock Dividend Requirements.
23-1** Consent of PricewaterhouseCoopers LLP.
23-2** Consent of Sidley Austin Brown & Wood (included in Exhibit 5.1).
23-3** Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5-2).
24-1** Powers of Attorney (included on signature page).
25-1** Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of BNY Midwest Trust Company, as trustee
under the Mortgage.
25-2** Form T-2 Statement of D.G. Donovan, as co-trustee under the
Mortgage.
25-3** Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Citibank, N.A., as trustee under the
Senior Indenture.
25-4** Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as trustee under
the Debenture Indenture.
25-5** Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as property
trustee under the Amended and Restated Declaration of Trust.
25-6** Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as guarantee
trustee under the Guarantee Agreement.
- ------------
* Certain other instruments which would otherwise be required to be listed
have not been so included because such instruments do not authorize
securities in an amount which exceeds 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis and the Registrant
agrees to furnish a copy of any such instrument to the Commission upon
request.
** Filed herewith.
*** To be filed subsequent to the effectiveness of this Registration Statement
by an amendment to the Registration Statement or incorporated by reference
pursuant to a Current Report on Form 8-K in connection with the offering of
securities.
II-4
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(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;
(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 and 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 percent 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 (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and 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 Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that:
(1) 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 Registrant 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.
(2) 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.
II-5
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 Registrant 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 Act and will
be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 10th day of
September, 2002.
COMMONWEALTH EDISON COMPANY
By: /s/ Robert E. Berdelle
----------------------
Robert E. Berdelle
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Each person whose signature appears below constitutes and appoints Robert
E. Berdelle and Scott Peters, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all pre-effective and post-effective amendments to this Registration Statement,
including any filings pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying all that such attorneys-in-fact
and agents, or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Frank M. Clark President and Director September 10, 2002
- ------------------------------- (Principal Executive Officer)
Frank M. Clark
/s/ Robert E. Berdelle Vice President and Chief Financial Officer September 10, 2002
- ------------------------------- (Principal Financial Officer and Principal
Robert E. Berdelle Accounting Officer)
/s/ Ruth Ann M. Gillis Director September 10, 2002
- -------------------------------
Ruth Ann M. Gillis
/s/ Kenneth G. Lawrence Director September 10, 2002
- -------------------------------
Kenneth G. Lawrence
/s/ John W. Rowe Director September 10, 2002
- -------------------------------
John W. Rowe
/s/ Pamela B. Strobel Chairman of the Board and Director September 10, 2002
- -------------------------------
Pamela B. Strobel
II-7
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 10th day of
September, 2002.
COMED FINANCING III
By: /s/ Charles S. Walls
--------------------
Charles S. Walls
Trustee
II-8
INDEX TO EXHIBITS*
Exhibit No. Description
- ----------- -----------
1-1** Form of Underwriting Agreement for the First Mortgage Bonds.
1-2** Form of Underwriting Agreement for the Notes.
1-3** Form of Underwriting Agreement for the Cumulative Preference
Stock.
1-4** Form of Underwriting Agreement for the Trust Preferred
Securities.
3-1 Restated Articles of Incorporation of Commonwealth Edison
Company effective February 20, 1985, including Statements of
Resolution Establishing Series, relating to the establishment
of three new series of Commonwealth Edison Company preference
stock known as the "$9.00 Cumulative Preference Stock," the
"$6.875 Cumulative Preference Stock" and the "$2.425
Cumulative Preference Stock," is incorporated herein by
reference to Exhibit 3-2 to Commonwealth Edison Company's 1994
Form 10-K (File No. 1-1839).
3-2 By-Laws of Commonwealth Edison Company, effective September 2,
1998, as amended through October 20, 2000, is incorporated
herein by reference to Exhibit 3-6 to Commonwealth Edison
Company's 2000 Form 10-K (File No. 1-1839).
4-1 Mortgage of Commonwealth Edison Company to Illinois Merchants
Trust Company, Trustee (BNY Midwest Trust Company, as current
successor Trustee), dated July 1, 1923, as supplemented and
amended by Supplemental Indenture thereto dated August 1,
1994, is incorporated herein by reference to Exhibit 2-1 to
Commonwealth Edison Company's Form S-7 (File No. 2-60201).
4-1-1 Supplemental Indentures to the aforementioned Commonwealth
Edison Mortgage are incorporated herein by reference or filed
herewith as follows:
Dated as of File Reference Exhibit No.
--------------------------------------------------------------
August 1, 1946 2-60201, Form S-7 2-1
April 1, 1953 2-60201, Form S-7 2-1
March 31, 1967 2-60201, Form S-7 2-1
April 1, 1967 2-60201, Form S-7 2-1
February 28, 1969 2-60201, Form S-7 2-1
May 29, 1970 2-60201, Form S-7 2-1
June 1, 1971 2-60201, Form S-7 2-1
April 1, 1972 2-60201, Form S-7 2-1
May 31, 1972 2-60201, Form S-7 2-1
June 15, 1973 2-60201, Form S-7 2-1
May 31, 1974 2-60201, Form S-7 2-1
June 13, 1975 2-60201, Form S-7 2-1
May 28, 1976 2-60201, Form S-7 2-1
June 3, 1977 2-60201, Form S-7 2-1
May 17, 1978 2-99665, Form S-3 4-3
August 31, 1978 2-99665, Form S-3 4-3
June 18, 1979 2-99665, Form S-3 4-3
June 20, 1980 2-99665, Form S-3 4-3
April 16, 1981 2-99665, Form S-3 4-3
April 30, 1982 2-99665, Form S-3 4-3
April 15, 1983 2-99665, Form S-3 4-3
April 13, 1984 2-99665, Form S-3 4-3
April 15, 1985 2-99665, Form S-3 4-3
April 15, 1986 33-6879, Form S-3 4-9
June 15, 1990 33-38232, Form S-3 4-12
June 1, 1991 33-40018, Form S-3 4-12
October 1, 1991 33-40018, Form S-3 4-13
October 15, 1991 33-40018, Form S-3 4-14
February 1, 1992 1-1839, 1991 Form 10-K 4-18
May 15, 1992 33-48542, Form S-3 4-14
July 15, 1992 33-53766, Form S-3 4-13
September 15, 1992 33-53766, Form S-3 4-14
February 1, 1993 1-1839, 1992 Form 10-K 4-14
April 1, 1993 33-64028, Form S-3 4-12
April 15, 1993 33-64028, Form S-3 4-13
June 15, 1993 1-1839, Form 8-K dated
May 21, 1993 4-1
July 15, 1993 1-1839, Form 10-Q for
quarter ended June 30,
1993 4-1
January 15, 1994 1-1839, 1993 Form 10-K 4-15
December 1, 1994 1-1839, 1994 Form 10-K 4-16
June 1, 1996 1-1839, 1996 Form 10-K 4-16
March 1, 2002 1-1839, 2001 Form 10-K 4-4-1
May 20, 2002**
June 1, 2002**
4-1-2 Instrument of Resignation, Appointment and Acceptance dated as
of February 20, 2002, under the provisions of the Mortgage
dated July 1, 1923, and Indentures Supplemental thereto,
regarding corporate trustee is incorporated by reference to
Exhibit 4-4-2 to Commonwealth Edison Company's 2001 Form 10-K
(File No. 1-1839).
4-1-3 Instrument dated as of January 31, 1996, under the provisions
of the Mortgage dated July 1, 1923 and Indentures Supplemental
thereto, regarding individual trustee is incorporated herein
by reference to Exhibit 4-29 to Commonwealth Edison Company's
1995 Form 10-K (File No. 1-1839).
4-2 Indenture dated as of September 1, 1987 between Commonwealth
Edison Company and Citibank, N.A., as Trustee relating to
Notes, is incorporated herein by reference to Exhibit 4-13 to
Commonwealth Edison Company's Form S-3 (File No. 1-1839).
4-2-1 Supplemental Indentures to the aforementioned Commonwealth
Edison Indenture are incorporated herein by reference as
follows:
Dated as of File Reference Exhibit No.
--------------------------------------------------------------
September 1, 1987 33-32929, Form S-3 4-16
January 1, 1997 1-1839, 1999 Form 10-K 4-21
September 1, 2000 1-1839, 2000 Form 10-K 4-7-3
4-3 Indenture dated as of September 1, 1995 between Commonwealth
Edison Company and Wilmington Trust Company, as trustee, is
incorporated herein by reference to Exhibit 4-3 to
Commonwealth Edison Company's Form S-3 Registration Statement
(Registration No. 333-61343).
4-3-1 Supplemental Indentures to the aforementioned Commonwealth
Edison Indenture are incorporated herein by reference as
follows:
Dated as of File Reference Exhibit No.
--------------------------------------------------------------
September 25, 1995 333-61343, Form S-3 4-4
January 24, 1997 333-28369, Form S-4 4-3
4-4** Form of Supplemental Indenture relating to the First Mortgage
Bonds.
4-5** Form of Supplemental Indenture relating to the Notes.
4-6** Form of Supplemental Indenture relating to the Trust
Debentures (including form of Trust Debenture).
4-7** Certificate of Trust of ComEd Financing III dated as of
September 5, 2002.
4-8** Declaration of Trust of ComEd Financing III dated as of
September 5, 2002.
4-9** Form of Amended and Restated Declaration of Trust of ComEd
Financing III (including form of Trust Preferred Security
certificate).
4-10** Form of Guarantee Agreement of Commonwealth Edison Company for
ComEd Financing III Trust Preferred Securities.
5-1** Opinion of Sidley Austin Brown & Wood as to the validity of
the Securities (other than the Trust Preferred Securities).
5-2** Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the Trust Preferred Securities
to be issued by ComEd Financing III.
8-1*** Opinion of Sidley Austin Brown & Wood as to certain federal
income tax matters.
12-1** Statement re Computation of Ratios of Earnings to Fixed
Charges and Ratios of Earnings to Fixed Charges and Preferred
and Preference Stock Dividend Requirements.
23-1** Consent of PricewaterhouseCoopers LLP.
23-2** Consent of Sidley Austin Brown & Wood (included in Exhibit
5.1).
23-3** Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5-2).
24-1** Powers of Attorney (included on signature page).
25-1** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of BNY Midwest Trust Company, as
trustee under the Mortgage.
25-2** Form T-2 Statement of D.G. Donovan, as co-trustee under the
Mortgage.
25-3** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Citibank, N.A., as trustee
under the Senior Indenture.
25-4** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wilmington Trust Company, as
trustee under the Debenture Indenture.
25-5** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wilmington Trust Company, as
property trustee under the Amended and Restated Declaration of
Trust.
25-6** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wilmington Trust Company, as
guarantee trustee under the Guarantee Agreement.
- -------------
* Certain other instruments which would otherwise be required to be listed
have not been so included because such instruments do not authorize
securities in an amount which exceeds 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis and the Registrant
agrees to furnish a copy of any such instrument to the Commission upon
request.
** Filed herewith.
*** To be filed subsequent to the effectiveness of this Registration Statement
by an amendment to the Registration Statement or incorporated by reference
pursuant to a Current Report on Form 8-K in connection with the offering of
securities.