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REGISTRATION NO. 333-05277
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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OHIO EDISON COMPANY
(Exact name of Registrant as specified in its charter)
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OHIO 34-0437786
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
76 SOUTH MAIN STREET, AKRON, OHIO 44308
(Address of principal executive offices)
Registrant's Telephone Number Including Area Code: (330) 384-5100
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N.C. ASHCOM, CORPORATE SECRETARY
76 SOUTH MAIN STREET
AKRON, OHIO 44308
(330) 384-5504
(Name, address and telephone number of agent for service)
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The Commission is requested to mail signed copies of all orders, notices and
communications to:
MICHAEL F. CUSICK VINCENT PAGANO, JR.
WINTHROP, STIMSON, PUTNAM & ROBERTS SIMPSON THACHER & BARTLETT
ONE BATTERY PARK PLAZA 425 LEXINGTON AVENUE
NEW YORK, NY 10004-1490 NEW YORK, NY 10017-3954
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 26, 1998
PROSPECTUS
$50,000,000
OHIO EDISON COMPANY
MORTGAGE BONDS
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Ohio Edison Company (the "Company") intends from time to time to offer its
mortgage bonds (the "New Bonds") in an aggregate principal amount not to exceed
$50,000,000, in amounts, at prices and on terms to be determined at the time or
times of sale. For each issue of New Bonds for which this Prospectus is being
delivered (the "Offered Bonds") there is an accompanying Prospectus Supplement
(the "Prospectus Supplement") that sets forth, as applicable, the aggregate
principal amount, maturity, rate and time of payment of interest, purchase
price, any terms for redemption and any other special terms of the Offered
Bonds.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Company may sell the New Bonds through underwriters, dealers or agents,
or directly to one or a limited number of purchasers. The initial public
offering price, if any, and the net proceeds to Ohio Edison Company from the
sale of any Offered Bonds, together with the names of any underwriters, dealers
or agents relating to such sale and any applicable commissions or discounts,
will be set forth in the applicable Prospectus Supplement.
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March , 1998
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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND ANY INFORMATION
OR REPRESENTATION NOT CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY OHIO EDISON COMPANY OR ANY UNDERWRITER OR AGENT.
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, IMPLY THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF OR THEREOF.
AVAILABLE INFORMATION
Ohio Edison Company (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is disclosed in proxy
statements distributed to stockholders of the Company and filed with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, New York,
New York 10048. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a Website that
contains reports, proxy and information statements and other information
regarding reporting companies under the Exchange Act. The address of such
Internet Website is http://www.sec.gov. Such material may also be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005, on which certain of the Company's securities are listed.
Information relating to The Depository Trust Company ("DTC") and DTC's
book-entry only system is based upon information furnished by DTC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have heretofore been filed by the Company
with the Commission pursuant to the Exchange Act, are incorporated by reference
in this Prospectus and shall be deemed to be a part hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
4. Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
5. Current Report on Form 8-K filed on November 12, 1997.
6. Current Report on Form 8-K filed on March 23, 1998.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the New Bonds hereunder shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of the filing of such documents (such
documents, and the documents enumerated above, being hereinafter referred to as
"Incorporated Documents"; provided, however, that all documents filed by the
Company pursuant to Section 13, 14 or 15 of the Exchange Act in each year during
which the offering made by this Prospectus is in effect prior to the filing with
the Commission of the Company's Annual Report on Form 10-K covering such year
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shall not be incorporated by reference in this Prospectus or be a part hereof
from and after such filing of such Annual Report on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY
AND ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE
INCORPORATED BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO OHIO EDISON COMPANY, INVESTOR
SERVICES, 76 SOUTH MAIN STREET, AKRON, OHIO 44308, TELEPHONE NUMBER
1-800-736-3402. THE INFORMATION RELATING TO THE COMPANY CONTAINED IN THIS
DOCUMENT DOES NOT PURPORT TO BE COMPREHENSIVE AND SHOULD BE READ TOGETHER WITH
THE INFORMATION CONTAINED IN THE INCORPORATED DOCUMENTS.
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SUMMARY INFORMATION
The following is qualified in its entirety by the information and financial
statements (including notes thereto) appearing elsewhere herein, in documents
incorporated herein by reference and in any Prospectus Supplement.
THE OFFERING
SECURITIES
Mortgage bonds in an aggregate principal amount not to exceed $50,000,000.
REDEMPTION PROVISIONS
To be determined at the time of sale of the Offered Bonds and set forth in
the related Prospectus Supplement.
USE OF PROCEEDS
Proceeds are expected to be used for general corporate purposes. The use of
the proceeds from any particular Offered Bonds will be set forth in the related
Prospectus Supplement.
PRIORITY AND SECURITY
The New Bonds will be secured primarily by the First Mortgage Bonds (as
defined herein) held by the New Mortgage Trustee (as defined herein) and by the
lien of the New Mortgage (as defined herein) on the Company's properties used in
the generation, production, transmission or distribution of electric energy.
Substantially all of such property, while subject to the lien of the New
Mortgage, will be also subject to the prior lien of the First Mortgage (as
defined herein) which is, in the opinion of the Company's counsel, a direct
first lien on substantially all of the Company's physical property and
franchises, subject only to excepted encumbrances as defined in the First
Mortgage.
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CERTAIN CONSOLIDATED FINANCIAL INFORMATION
(THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
YEAR ENDED DECEMBER 31,(1)
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1993(2) 1994 1995 1996 1997(3)
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INCOME SUMMARY:
Operating Revenues............... $2,369,940 $2,368,191 $2,465,846 $2,469,785 $2,473,582
Net Income....................... $ 82,724 $ 303,531 $ 317,241 $ 315,170 293,194
Earnings on Common Stock......... $ 59,017 $ 281,852 $ 294,747 $ 302,673 280,802
Ratio of Earnings to Fixed
Charges(4).................... 1.12 2.24 2.32 2.38 2.29
DECEMBER 31, 1997
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OUTSTANDING RATIO
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CAPITALIZATION SUMMARY:
Common Stockholder's Equity............................... $2,724,319 48.2%
Preferred Stock Not Subject to Mandatory Redemption....... 211,870 3.8%
Preferred Stock Subject to Mandatory Redemption(5)........ 30,000 0.5%
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Company
subordinated debentures................................ 120,000 2.1%
Long-Term Debt(6)......................................... 2,569,802 45.4%
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Total Capitalization.............................. $5,655,991 100.0%
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(1) Derived from audited financial information.
(2) Net Income and Earnings on Common Stock includes net after tax charges of
$218,377,000 relating primarily to the termination of Perry Unit 2,
partially offset by the cumulative effect of a change in accounting for
unbilled revenues.
(3) Net Income and Earnings on Common Stock includes net after tax charges of
$26,434,000 relating to a voluntary retirement program and estimated
severance expenses.
(4) "Earnings" for purposes of these calculations have been computed by adding
to "income before extraordinary items" all taxes based on income or profits,
total interest charges and the estimated interest element of rentals charged
to income. "Fixed charges" include total interest charges, the estimated
interest element of rentals and subsidiaries' preferred stock dividend
requirements, determined on a "pre-income tax" basis (computed, where
applicable, at the effective income tax rates for the applicable periods).
These ratios exclude fixed charges applicable to the guarantee of the debt
of a coal supplier aggregating $8,565,000, $7,424,000, $6,315,000,
$5,093,000 and $3,828,000 for each of the five years in the period ended
December 31, 1997.
(5) Excludes $5,000,000 of preferred stock subject to mandatory redemption
within one year.
(6) Excludes $273,492,000 of long-term debt due to be repaid or subject to put
options within one year.
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OHIO EDISON COMPANY
The Company was organized under the laws of the State of Ohio in 1930 and
owns property and does business as an electric public utility in that state. The
Company became a wholly owned subsidiary of FirstEnergy Corp. on November 8,
1997. The Company also has ownership interests in certain facilities located in
the Commonwealth of Pennsylvania. The Company's principal executive offices are
located at 76 South Main Street, Akron, Ohio 44308, telephone number
1-800-736-3402.
The Company furnishes electric service to communities in a 7,500 square
mile area of central and northeastern Ohio. It also provides transmission
services and electric energy for resale to certain municipalities in the
Company's service area and transmission services to certain rural cooperatives.
The Company also engages in the sale, purchase and interchange of electric
energy with other electric companies. The area it serves has a population of
approximately 2,542,000.
The Company owns all of the outstanding common stock of Pennsylvania Power
Company ("Penn Power"), a Pennsylvania corporation, which furnishes electric
service to communities in a 1,500 square mile area of western Pennsylvania. Penn
Power also provides transmission services and electric energy for resale to
certain municipalities in Pennsylvania. The area served by Penn Power has a
population of approximately 343,000.
Sources of generation for the Company and Penn Power (the "Companies")
during the twelve months ended December 31, 1997 were 76.1% coal and 23.9%
nuclear.
On November 8, 1997, the merger of the Company and Centerior Energy
Corporation ("Centerior") became effective pursuant to the Merger Agreement,
dated September 13, 1996 (the "Merger Agreement"). Under the Merger Agreement,
the Company and Centerior formed FirstEnergy Corp., an Ohio holding company,
which holds directly all of the issued and outstanding common shares of the
Company and all of the issued and outstanding common shares of Centerior's
direct subsidiaries, which include, among others, The Cleveland Electric
Illuminating Company and The Toledo Edison Company. The Company continues to own
all of the issued and outstanding common shares of Penn Power. As a result of
the merger, the former common shareholders of the Company and Centerior now own
all of the outstanding shares of FirstEnergy Common Stock. FirstEnergy's common
shares are registered pursuant to Section 12(b) of the Securities Exchange Act
of 1935. All other classes of capital stock of the Company and its subsidiaries
and of the former subsidiaries of Centerior are unaffected by the merger and
remain outstanding.
USE OF PROCEEDS
The Company proposes to use the proceeds from the sale of the New Bonds for
general corporate purposes. The specific uses to which the proceeds may be
applied will be set forth in the related Prospectus Supplement. Pending
application of the proceeds, the Company may make short-term cash investments.
FINANCING AND CONSTRUCTION PROGRAMS
The Companies' construction costs, include expenditures for the betterment
of existing facilities and for the construction of transmission lines,
distribution lines, substations and other additions. The Companies currently
forecast expenditures of approximately $600 million for property additions and
improvements for 1998-2002, of which approximately $165 million is applicable to
1998. Various Federal, state and local authorities regulate the Companies with
regard to air and water quality and other environmental matters. The Companies
have estimated additional capital expenditures for environmental compliance of
approximately $27 million for the period 1998 through 2002, which is included in
the construction forecast.
During the 1998-2002 period, maturities of, and sinking fund requirements
for, long-term debt and preferred stock will require expenditures by the
Companies of approximately $1.01 billion, of which approximately $167 million is
applicable to 1998. Approximately $165 million was paid by the Companies during
the year ended December 31, 1997 for sinking fund requirements and maturing
long-term debt and preferred stock. In addition, the Companies optionally
redeemed or refinanced approximately $43 million of long-term debt during the
year ended December 31, 1997.
Nuclear fuel purchases are financed through OES Fuel, Incorporated ("OES
Fuel," a wholly owned subsidiary of the Company) commercial paper and loans,
both of which are supported by a $225,000,000
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long-term bank credit agreement. The Companies' investments for additional
nuclear fuel during the 1998-2002 period are estimated to be approximately $206
million, of which approximately $26 million applies to 1998. During the same
periods, the Companies' nuclear fuel investments are expected to be reduced by
approximately $182 million and $41 million, respectively, as the nuclear fuel is
consumed. Also, the Companies have operating lease commitments (net of PNBV
Capital Trust income) of approximately $442 million for the 1998-2002 period, of
which approximately $83 million relates to 1998. The Companies recover the cost
of nuclear fuel consumed and operating leases through their electric rates.
Short-term borrowings outstanding at December 31, 1997 consisted of $182.2
million of bank borrowings and $120 million of OES Capital, Incorporated ("OES
Capital") commercial paper. OES Capital, is a wholly owned subsidiary of the
Company whose borrowings are secured by customer accounts receivable. OES
Capital can borrow up to $120 million under a receivables financing agreement at
rates based on certain bank commercial paper. The Companies also had $37 million
available under revolving lines of credit as of December 31, 1997. In addition,
$26 million was available through bank facilities that provide for borrowings on
a short-term basis at the banks' discretion. The Company had the capability to
borrow $61 million as of December 31, 1997 through unused OES Fuel credit
facilities.
Based on their present plans, the Companies could provide for their cash
requirements during the remainder of 1998 from the following sources: funds to
be received from operations; available cash and temporary cash investments
(approximately $4.7 million as of December 31, 1997); the issuance of long-term
debt (for refunding purposes); and funds available under the short-term bank
credit arrangements.
For the period 1998-2002, external financings may be used to provide a
portion of the Companies' cash requirements. The extent and type of future
financings will depend on the need for external funds as well as market
conditions, the maintenance of an appropriate capital structure and the ability
of the Companies to comply with coverage requirements in order to issue first
mortgage bonds and preferred stock. The Companies will continue to monitor
financial market conditions and, where appropriate, may take advantage of
economic opportunities to refund debt and preferred stock to the extent that
their financial resources permit.
DESCRIPTION OF THE NEW BONDS
GENERAL
The New Bonds will be authenticated and delivered under a General Mortgage
Indenture and Deed of Trust, between the Company and The Bank of New York (the
"New Mortgage Trustee"), dated as of January 1, 1998. The New Mortgage Trustee
will act as indenture trustee for the purposes of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Such General Mortgage and Deed of
Trust, as supplemented by various supplemental indentures, including one or more
supplemental indentures relating to the New Bonds, is hereinafter referred to as
the "New Mortgage." The summaries herein do not purport to be complete and are
subject to the detailed provisions of the New Mortgage. Capitalized terms used
herein which are not otherwise defined in this Prospectus shall have the
meanings ascribed thereto in the New Mortgage. Wherever particular provisions of
the New Mortgage or terms defined therein are referred to, such provisions or
definitions are incorporated by reference as a part of the statements made
herein and such statements are qualified in their entirety by such reference.
References to article and section numbers in this description of the New Bonds,
unless otherwise indicated, are references to article and section numbers of the
New Mortgage or the First Mortgage (as defined herein), as the case may be.
The New Mortgage provides that additional bonds may be issued thereunder on
the basis of Pledged Bonds (as hereinafter defined), property additions, retired
bonds and cash. (See "Issuance of Additional Mortgage Bonds" below.) The New
Bonds and all other bonds heretofore or hereafter issued under the New Mortgage
are collectively referred to herein as the "Mortgage Bonds."
Reference is made to the Prospectus Supplement for a description of the
following terms of the series of New Bonds in respect of which this Prospectus
is being delivered (the "Offered Bonds"): (i) the title (series designation) of
the Offered Bonds; (ii) the limit, if any, upon the aggregate principal amount
of the Offered Bonds; (iii) the date or dates on which the principal of the
Offered Bonds, or any Tranche thereof, is payable;
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(iv) the rate or rates at which the Offered Bonds, or any Tranche thereof, will
bear interest, if any, the date or dates from which such interest will accrue,
the dates on which any such interest will be payable ("Interest Payment Dates")
and the regular record dates for any interest payable on the Interest Payment
Dates; (v) the basis on which the Offered Bonds will be issued; (vi) the option,
if any, of the Company to redeem the Offered Bonds and the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which, the Offered Bonds, or any Tranche thereof, may be redeemed, in whole or
in part, upon the exercise of such option; (vii) the obligation, if any, of the
Company to redeem or purchase the Offered Bonds pursuant to any sinking fund or
analogous provisions or at the option of the Holder and the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which the Offered Bonds, or any Tranche thereof, will be redeemed, in whole or
in part, pursuant to such obligation; (viii) the denominations in which the
Offered Bonds, or any Tranche thereof, will be issuable; (ix) whether the
Offered Bonds will be originally issued in book-entry only form as discussed
below under "Book-Entry Only System"; and (x) any other terms of the Offered
Bonds not inconsistent with the provisions of the New Mortgage.
While the New Mortgage contains provisions for the maintenance of the
Mortgaged Property, it does not contain any provisions for a maintenance or
sinking fund and, except as may be provided in a Supplemental Indenture (and
described in the applicable Prospectus Supplement), there will be no provisions
for any such funds for the New Bonds.
FORM AND EXCHANGE
New Bonds in definitive form will be issued only as registered bonds
without coupons in denominations of $1,000 or any multiple thereof authorized by
the Company. New Bonds will be exchangeable for a like aggregate principal
amount of New Bonds of the same series of other authorized denominations and
will be transferable at the office of the Company in New York, New York, without
service charge in either case other than for any taxes or other governmental
charge imposed in connection with such exchange or transfer. See "Transfer or
Exchange."
REDEMPTION OF THE NEW BONDS
Any terms for the optional or mandatory redemption of any Offered Bonds
will be set forth in the applicable Prospectus Supplement. Except as shall
otherwise be provided in the applicable Prospectus Supplement with respect to
any Offered Bonds redeemable at the option of the Holder, New Bonds will be
redeemable only upon notice by mail not less than 30 days nor more than 180 days
prior to the date fixed for redemption, and, if less than all the New Bonds of a
series, or any Tranche thereof, are to be redeemed, the particular New Bonds to
be redeemed will be selected by such method as shall be provided for the
particular series or Tranche, or in the absence of any such provision, by such
method as the Bond Registrar deems fair and appropriate. (Sections 5.03 and
5.04.)
Any notice of redemption at the option of the Company may state that such
redemption shall be conditioned upon receipt by the New Mortgage Trustee or
Paying Agent, on or prior to the date fixed for such redemption, of money
sufficient to pay the principal of and premium, if any, and interest, if any, on
such New Bonds and that if such money has not been so received, such notice will
be of no force and effect and the Company will not be required to redeem such
New Bonds. (Section 5.04.)
SECURITY
General. Except as discussed below, Mortgage Bonds now or hereafter issued
under the New Mortgage will be secured primarily by:
(a) bonds ("First Mortgage Bonds") issued under the Company's
Indenture dated August 1, 1930 (the "First Mortgage"), to The Bank of New
York (successor trustee to Bankers Trust Company), as trustee (the "First
Mortgage Trustee"), and delivered to the New Mortgage Trustee under the New
Mortgage, which First Mortgage Bonds will be secured, equally and ratably
with all other bonds issued under the First Mortgage, by a valid first lien
on substantially all of the Company's physical property and franchises,
subject only to excepted encumbrances as defined in the First Mortgage
(Article I, Section 2); and
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(b) the lien of the New Mortgage on the Company's properties used or
to be used in or in connection with the generation, production,
transmission or distribution of electric energy, which lien is junior to
the lien of the First Mortgage.
The First Mortgage permits, with certain limitations, the acquisition of
property subject to prior liens and, under certain conditions, permits the
issuance of additional indebtedness under such prior liens to the extent of 60%
of net property additions made by the Company to the property subject to such
prior liens.
As discussed below under "Pledged Bonds," following a merger or
consolidation of another corporation into the Company, the Company could deliver
to the New Mortgage Trustee bonds issued under an existing mortgage on the
properties of such other corporation in lieu of or in addition to bonds issued
under the First Mortgage. In such event, the Mortgage Bonds would be secured,
additionally, by such bonds and by the lien of the New Mortgage on the
properties of such other corporation, which would be junior to the liens of such
existing mortgage and the First Mortgage. The First Mortgage and all such other
mortgages are hereinafter, collectively, called the "Class "A" Mortgages," and
all bonds issued under the Class "A" Mortgages and delivered to the New Mortgage
Trustee are hereinafter collectively called the "Pledged Bonds." If and when no
Class "A" Mortgages are in effect, the New Mortgage will constitute a first
mortgage lien on the Company's properties used or to be used in or in connection
with the generation, production, transmission or distribution of electric
energy.
Pledged Bonds. The Pledged Bonds will be issued and delivered to, and
registered in the name of, the New Mortgage Trustee or its nominee and will be
owned and held by the New Mortgage Trustee, subject to the provisions of the New
Mortgage, for the benefit of the Holders of all Mortgage Bonds Outstanding from
time to time, and the Company will have no interest in such Pledged Bonds.
Except as may be otherwise set forth in the supplemental indenture or board
resolution or officer's certificate pursuant to a supplemental indenture or a
board resolution pursuant to which any Mortgage Bonds are to be issued, Pledged
Bonds issued as the basis for the authentication and delivery of such Mortgage
Bonds (a) will mature on the same dates, and in the same principal amounts, as
such Mortgage Bonds, and (b) will contain, in addition to any mandatory
redemption provisions applicable to all Pledged Bonds Outstanding under the
related Class "A" Mortgage, mandatory redemption provisions correlative to
provisions for mandatory redemption, or for redemption at the option of the
Holder, of such Mortgage Bonds. Pledged Bonds issued as the basis for
authentication and delivery of a series or Tranche of Mortgage Bonds (x) may,
but need not, bear interest, any such interest to be payable at the same times
as interest on the Mortgage Bonds of such series or Tranche, and (y) may, but
need not, contain provisions for the redemption thereof at the option of the
Company, any such redemption to be made at a redemption price or prices not less
than the principal amount of such Pledged Bonds. (Sections 4.02 and 7.01.)
Any payment by the Company of principal of or premium or interest on the
Pledged Bonds held by the New Mortgage Trustee will be applied by the New
Mortgage Trustee to the payment of any principal, premium or interest, as the
case may be, in respect of the Mortgage Bonds which is then due, and, to the
extent of such application, the obligation of the Company under the New Mortgage
to make such payment in respect of the Mortgage Bonds will be deemed satisfied
and discharged. If, at the time of any such payment of principal of Pledged
Bonds, there shall be no principal then due in respect to the Mortgage Bonds,
the proceeds of such payment will be deemed to constitute Funded Cash and will
be held by the New Mortgage Trustee as part of the New Mortgaged Property, to be
withdrawn, used or applied as provided in the New Mortgage. If, at the time of
any such payment of premium or interest on Pledged Bonds, there shall be no
premium or interest, as the case may be, then due in respect of the Mortgage
Bonds, the proceeds of such payment will be remitted to the Company at its
request. Any payment by the Company of principal of or premium or interest on
Mortgage Bonds authenticated and delivered on the basis of the deposit with the
New Mortgage Trustee of Pledged Bonds (other than by application of the proceeds
in respect of such Pledged Bonds) will, to the extent thereof, be deemed to
satisfy and discharge the obligation of the Company, if any, to make a payment
of principal, premium or interest, as the case may be, in respect of such
Pledged Bonds which is then due. (Section 7.02; and see "Withdrawal of Cash"
below.)
The New Mortgage Trustee may not sell, assign or otherwise transfer any
Pledged Bonds except to a successor trustee under the New Mortgage. (Section
7.04.) At the time any Mortgage Bonds of any series, or any Tranche thereof,
which have been authenticated and delivered upon the basis of Pledged Bonds
cease to be
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Outstanding (other than as a result of the application of the proceeds of the
payment or redemption of such Pledged Bonds), the New Mortgage Trustee shall
surrender to or upon the order of the Company an equal principal amount of such
Pledged Bonds having the same Stated Maturity and mandatory redemption
provisions as such Mortgage Bonds. (Section 7.03.)
At the date of this Prospectus, the only Class "A" Mortgage is the First
Mortgage and the only Pledged Bonds issuable at this time are First Mortgage
Bonds issuable thereunder. The New Mortgage provides that in the event of the
merger or consolidation of another company with or into the Company, an existing
mortgage constituting a lien on properties of such other company prior to the
lien of the New Mortgage may be designated by the Company as an additional Class
"A" Mortgage. Bonds thereafter issued under such additional mortgage would be
Pledged Bonds and could provide the basis for the authentication and delivery of
Mortgage Bonds under the New Mortgage. (Section 7.06.) When no Pledged Bonds are
Outstanding under a Class "A" Mortgage except for Pledged Bonds held by the New
Mortgage Trustee, then, at the request of the Company and subject to
satisfaction of certain conditions, the New Mortgage Trustee will surrender such
Pledged Bonds for cancellation, and the related Class "A" Mortgage will be
satisfied and discharged, the lien of such Class "A" Mortgage on the Company's
property will cease to exist and the priority of the lien of the New Mortgage
will be increased. (Section 7.07.)
The New Mortgage provides that, so long as any Mortgage Bonds are
Outstanding, the Company will not issue any additional bonds under any Class "A"
Mortgage except (i) to replace mutilated, destroyed, lost or stolen bonds issued
under such Class "A" Mortgage or (ii) Pledged Bonds issued to the New Mortgage
Trustee as the basis for the authentication and delivery of Mortgage Bonds.
First Mortgage Bonds may currently be issued under the First Mortgage on the
basis of property additions, retirements of bonds previously issued under the
First Mortgage and cash deposited with the First Mortgage Trustee. As of
December 31, 1997, $1,115,225,000 of First Mortgage Bonds (other than Pledged
Bonds) were outstanding.
Lien of the New Mortgage. The properties of the Company used or to be used
in or in connection with the generation, production, transmission or
distribution of electric energy are subject to the lien of the New Mortgage.
Substantially all of such property, while subject to the lien of the New
Mortgage, will be also subject to the prior lien of the First Mortgage. The
Mortgage Bonds will have the benefit of the prior lien of the First Mortgage on
such property, and the benefit of the prior lien of any additional Class "A"
Mortgage on any property subject thereto, to the extent of the aggregate
principal amount of Pledged Bonds, issued under the respective Class "A"
Mortgages, held by the New Mortgage Trustee.
The lien of the New Mortgage is subject to Permitted Liens which include
tax liens and other governmental charges which are not delinquent and which are
being contested, construction and materialmen's liens, certain judgment liens,
easements, reservations and rights of others (including governmental entities)
in, and defects of title in, certain property of the Company, certain leasehold
interests, liens on the Company's pollution control and sewage and solid waste
facilities and certain other liens and encumbrances. (Section 1.01.)
There are excepted from the lien of the New Mortgage, among other things,
cash and securities not paid to, deposited with or held by the New Mortgage
Trustee under the New Mortgage; contracts, leases and other agreements of all
kinds, contract rights, bills, notes and other instruments, accounts receivable,
claims, certain intellectual property rights and other general intangibles;
permits, licenses and franchises; automobiles, other vehicles, movable
equipment, aircraft and vessels; all goods, wares and merchandise held for sale
or lease in the ordinary course of business or for use by or for the benefit of
the Company; fuel, materials, supplies and other personal property consumable in
the operations of the Company's business; computers, machinery, and equipment;
coal, ore, gas, oil, minerals and timber mined or extracted from the land; gas
transmission lines connecting wells with main or branch trunk lines or field
gathering lines connecting wells with main or branch trunk lines; electric
energy, gas, steam, water and other products generated, produced or purchased;
leasehold interests; and all books and records. (Granting Clauses.) The First
Mortgage contains similar, but not identical, exceptions.
Without the consent of the Holders, the Company and the New Mortgage
Trustee may enter into supplemental indentures to subject to the lien of the New
Mortgage additional property, whether or not used in the electric utility
business (including property which would otherwise be excepted from such lien).
(Sec-
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tion 14.01.) Such property, so long as the same would otherwise constitute
Property Additions (as described below), would thereupon constitute Property
Additions and be available as a basis for the issuance of Mortgage Bonds. (See
"Issuance of Additional Mortgage Bonds" below.)
The New Mortgage contains provisions subjecting after-acquired property to
the lien thereof, subject to the prior lien of the First Mortgage and any other
Class A Mortgage. These provisions are limited in the case of consolidation or
merger (whether or not the Company is the surviving corporation) or sale of
substantially all of the Company's assets. In the event of consolidation or
merger of the Company with or into another corporation and such other
corporation is the surviving corporation or the transfer of all the mortgaged
property as or substantially as an entirety, the New Mortgage will not be
required to be a lien upon any of the properties then owned or thereafter
acquired by the surviving corporation, except properties acquired from the
Company in or as a result of such transaction and improvements, extensions and
additions to such properties and renewals, replacements and substitutions of or
for any part or parts of such properties. In the event of a merger or
consolidation of a corporation with or into the Company and the Company is the
surviving corporation, unless a supplemental indenture to the New Mortgage shall
otherwise provide, the New Mortgage will not be required to be a lien upon any
of the properties acquired by the Company in or as a result of such transaction
or any improvements, extensions or additions to such properties or any renewals,
replacements or substitutions of or for any part or parts of such properties.
(Article Thirteen; and see "Consolidation, Merger, Conveyance, Transfer or
Lease" below.) In addition, after-acquired property may be subject to vendors'
liens, purchase money mortgages and other liens thereon at the time of
acquisition thereof, including the lien of any Class "A" Mortgage.
The New Mortgage provides that the New Mortgage Trustee will have a lien,
prior to the lien on behalf of the holders of Mortgage Bonds, upon Mortgaged
Property and any money collected by the New Mortgage Trustee as proceeds of the
Mortgaged Property, for the payment of its reasonable compensation and expenses
and for indemnity against certain liabilities. (Section 11.07.)
ISSUANCE OF ADDITIONAL MORTGAGE BONDS
The principal amount of Mortgage Bonds which may be issued under the New
Mortgage (Section 3.01) is not limited. Mortgage Bonds of any series may be
issued from time to time under Article Four of the New Mortgage on the basis of,
and in an aggregate principal amount not exceeding:
(1) the aggregate principal amount of Pledged Bonds issued and
delivered to the Trustee;
(2) 70% of the Cost or Fair Value to the Company (whichever is less)
of Property Additions (as described below) which do not constitute Bonded
Property Additions (being, generally, Property Additions which have been
made the basis of the authentication and delivery of Mortgage Bonds, the
release of mortgaged property or cash withdrawals) after certain deductions
and additions, primarily including adjustments to offset property
retirements;
(3) the aggregate principal amount of Retired Bonds (which consist of
Mortgage Bonds no longer Outstanding under the New Mortgage (including
Mortgage Bonds deposited under any sinking or analogous funds) which have
not been used for certain other purposes under the New Mortgage and which
are not to be paid, redeemed or otherwise retired by the application of
Funded Cash), but if Pledged Bonds have been made the basis for the
authentication and delivery of such Retired Bonds, only if the related
Class "A" Mortgage has been discharged; and
(4) an amount of cash deposited with the Trustee.
In general, the issuance of Mortgage Bonds is subject to Adjusted Net
Earnings of the Company for 12 consecutive months within the preceding 18 months
being at least two times the Annual Interest Requirements on all Mortgage Bonds
at the time Outstanding, Mortgage Bonds then applied for, all outstanding bonds
issued under a Class A Mortgage other than Pledged Bonds held by the New
Mortgage Trustee under the New Mortgage, and all other indebtedness (with
certain exceptions) secured by a lien prior to the lien of the New Mortgage,
except that no such net earnings requirement need be met if the additional
Mortgage Bonds to be issued are to have no Stated Interest Rate prior to
Maturity. The Company is not required to satisfy the net earnings requirement
prior to issuance of Mortgage Bonds as provided in (1) above if the Pledged
Bonds issued
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and delivered to the New Mortgage Trustee as the basis for such issuance have
been authenticated and delivered under the related Class "A" Mortgage on the
basis of retired Class A Bonds. In addition, the Company is not required to
satisfy the net earnings requirement prior to issuance of Mortgage Bonds as
provided in (3) above unless (a) the Stated Maturity of the Retired Bonds is a
date less than five years after the date of the Company Order requesting the
authentication and delivery of such Mortgage Bonds and (b) the maximum Stated
Interest Rate, if any, on such Retired Bonds at the time of their authentication
and delivery is less than the maximum Stated Interest Rate, if any, on such
Mortgage Bonds to be in effect upon the initial authentication and delivery of
such Mortgage Bonds. In general, the interest requirement with respect to
variable interest rate indebtedness, if any, is determined with reference to the
rate or rates in effect on the date immediately preceding such determination or
the rate to be in effect upon initial authentication. (Section 1.03 and Article
Four).
Adjusted Net Earnings are calculated before, among other things, provisions
for income taxes; depreciation or amortization of property; interest on any
indebtedness and amortization of debt discount and expense; any non-recurring
charge to income of whatever kind or nature (including without limitation the
recognition of expense or impairment due to the non-recoverability of assets or
expense), whether or not recorded as a non-recurring item in the Company's books
of account; and any refund of revenues previously collected or accrued by the
Company subject to possible refund. With respect to Mortgage Bonds of a series
subject to a Periodic Offering (such as a medium-term note program), the New
Mortgage Trustee may be entitled to receive a certificate evidencing compliance
with the net earnings requirements only once, at or prior to the time of the
first authentication and delivery of the Mortgage Bonds of such series (unless
the Company Order requesting the authentication and delivery of such Mortgage
Bonds is delivered on or after the date which is two years after the most recent
Net Earnings Certificate was delivered, in which case an updated certificate
would be required to be delivered). (Sections 1.03 and 4.01.)
Property Additions generally include any property which is owned by the
Company and is subject to the lien of the New Mortgage, except any property the
cost of acquisition or construction of which is properly chargeable to an
operating expense account of the Company. (Section 1.04.)
Unless otherwise provided in the applicable Prospectus Supplement, the
Company will issue the Mortgage Bonds on the basis of Pledged Bonds (i.e., First
Mortgage Bonds) issued under its First Mortgage.
RELEASE OF PROPERTY
The Company may obtain the release from the lien of the New Mortgage of any
Mortgaged Property if the Fair Value, after deducting the principal amount of
indebtedness secured by any Prior Liens thereon other than generally Permitted
Liens, of all of the Mortgaged Property (excluding the Mortgaged Property to be
released but including any Mortgaged Property to be acquired by the Company with
the proceeds of, or otherwise in connection with, such release) equals or
exceeds an amount equal to twenty-fourteenths (20/14ths) of the aggregate
principal amount of Mortgage Bonds Outstanding and bonds issued under Class "A"
Mortgages outstanding (other than Pledged Bonds).
The New Mortgage provides simplified procedures for the release of property
which has been released from the lien of a Class "A" Mortgage, minor properties
and property taken by eminent domain, and provides for dispositions of certain
obsolete property and grants or surrender of certain rights without any release
or consent by the New Mortgage Trustee.
If any property released from the lien of the New Mortgage continues to be
owned by the Company after such release, the New Mortgage will not become a lien
on any improvement, extension or addition to such property or renewals,
replacements or substitutions of or for any part or parts of such property.
(Article Eight.)
WITHDRAWAL OF CASH
Subject to certain limitations, cash held by the New Trustee may (1) be
withdrawn by the Company (a) to the extent of the Cost or Fair Value to the
Company (whichever is less) of Unbonded Property Additions, after certain
deductions and additions primarily including adjustments to offset retirements,
or (b) in an amount equal to twenty-fourteenths (20/14ths) of the aggregate
principal amount of Mortgage Bonds that the Company would
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be entitled to issue on the basis of Retired Bonds (with the entitlement to such
issuance being waived by operation of such withdrawal), or (c) in an amount
equal to twenty-fourteenths (20/14ths) of the aggregate principal amount of any
Outstanding Mortgage Bonds delivered to the New Trustee, or (2) upon the request
of the Company, be applied to (a) the purchase of Mortgage Bonds (at prices not
exceeding twenty-fourteenths (20/14ths) of the principal amount thereof) or (b)
the redemption or payment at Stated Maturity of Mortgage Bonds (with any
Mortgage Bonds received by the New Trustee pursuant to these provisions being
canceled by the New Trustee) (Section 8.06); provided, however, that cash
deposited with the New Mortgage Trustee as the basis for the authentication and
delivery of Mortgage Bonds, as well as cash representing a payment of principal
of Pledged Bonds, may only be withdrawn in an amount equal to the aggregate
principal amount of Mortgage Bonds the Company would be entitled to issue on any
basis (with the entitlement to such issuance being waived by operation of such
withdrawal), or may, upon the request of the Company, be applied to the
purchase, redemption or payment of Mortgage Bonds at prices not exceeding, in
the aggregate, the principal amount thereof (Sections 4.05 and 7.02).
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company may not consolidate with or merge into any other corporation or
convey, transfer or lease the Mortgaged Property as or substantially as an
entirety to any person unless (a) such transaction is on such terms as will
fully preserve the lien and security of the New Mortgage and the rights and
powers of the New Mortgage Trustee and Holders, (b) the corporation formed by
such consolidation or into which the Company is merged or the person which
acquires by conveyance or transfer, or which leases, the Mortgaged Property as
or substantially as an entirety is a corporation organized and existing under
the laws of the United States of America or any state or territory thereof or
the District of Columbia, and such corporation executes and delivers to the New
Mortgage Trustee a supplemental indenture, which contains an assumption by such
corporation of the due and punctual payment of the principal of and premium, if
any, and interest, if any, on the Mortgage Bonds and the performance of all of
the covenants of the Company under the New Mortgage and which contains a grant,
conveyance, transfer and mortgage by the corporation confirming the lien of the
New Mortgage on the Mortgaged Property and subjecting to such lien all property
thereafter acquired by the corporation which shall constitute an improvement,
extension or addition to the Mortgaged Property or a renewal, replacement or
substitution of or for any part thereof, and, at the election of the
corporation, subjecting to the lien of the New Mortgage such other property then
owned or thereafter acquired by the corporation as the corporation shall
specify, and (c) in the case of a lease, such lease will be made expressly
subject to termination by the Company or the New Mortgage Trustee at any time
during the continuance of an Event of Default. (Section 13.01.)
Other than the security afforded by the lien of the First Mortgage and the
New Mortgage and the restrictions on the issuance of additional First Mortgage
Bonds and Mortgage Bonds, there are no provisions of the First Mortgage or the
New Mortgage which afford the holders of the Mortgage Bonds protection in the
event of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction involving the Company. Neither the First Mortgage nor the
New Mortgage contain provisions requiring the repurchase of the Mortgage Bonds
upon a change in control of the Company.
MODIFICATION OF NEW MORTGAGE
Without the consent of any Holders, the Company and the New Mortgage
Trustee may enter into one or more supplemental indentures for any of the
following purposes:
(a) to evidence the succession of another person to the Company and
the assumption by any such successor of the covenants of the Company in the
New Mortgage and in the Mortgage Bonds ("Consolidation, Merger, Conveyance,
Transfer or Lease" above); or
(b) to add one or more covenants of the Company or other provisions
for the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Mortgage Bonds
of one or more specified series, or one or more specified Tranches thereof,
or to surrender any right or power conferred upon the Company by the New
Mortgage; or
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(c) to correct or amplify the description of any property at any time
subject to the lien of the New Mortgage, or better to assure, convey and
confirm to the New Mortgage Trustee any property subject or required to be
subjected to the lien of the New Mortgage, or to subject to the lien of the
New Mortgage additional property; or
(d) to convey, transfer and assign to the New Mortgage Trustee and to
subject to the lien of the New Mortgage with the same force and effect as
if included in the New Mortgage, property of subsidiaries of the Company
used or to be used for one or more purposes which if owned by the Company
would constitute property used or to be used for one or more of the Primary
Purposes of the Company's Business, which property shall for all purposes
of the New Mortgage be deemed to be property of the Company, together with
such other provisions as may be appropriate to express the respective
rights of the New Mortgage Trustee and the Company in regard thereto; or
(e) to change or eliminate any provision of the New Mortgage or to add
any new provision to the New Mortgage, provided that if such change,
elimination or addition adversely affects the interests of the Holders of
the Mortgage Bonds of any series or Tranche in any material respect, such
change, elimination or addition will become effective with respect to such
series or Tranche only when no Mortgage Bond of such series or Tranche
remains outstanding under the New Mortgage; or
(f) to establish the form or terms of the Mortgage Bonds of any series
or Tranche as permitted by the New Mortgage; or
(g) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and
replacement thereof and for the giving of notice to, and the solicitation
of the vote or consent of, the holders thereof, and for any and all other
matters incidental thereto; or
(h) to evidence and provide for the acceptance of appointment by a
successor trustee or by a co-trustee or separate trustee; or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all,
or any series or Tranche of, the Mortgage Bonds; or
(j) to change any place where (1) the principal of and premium, if
any, and interest, if any, on the Mortgage Bonds of any series, or any
Tranche thereof, will be payable, (2) any Mortgage Bonds of any series, or
any Tranche thereof, may be surrendered for registration of transfer, (3)
any Mortgage Bonds of any series, or any Tranche thereof, may be
surrendered for exchange, and (4) notices and demands to or upon the
Company in respect of the Mortgage Bonds of any series, or any Tranche
thereof, and the New Mortgage may be served; or
(k) to cure any ambiguity, to correct or supplement any provision
therein which may be defective or inconsistent with any other provision
therein, or to make any changes to the provisions thereof or to add other
provisions with respect to matters and questions arising under the New
Mortgage, so long as such other changes or additions do not adversely
affect the interests of the Holders of Mortgage Bonds of any series or
Tranche in any material respect; or
(l) to reflect changes in Generally Accepted Accounting Principles; or
(m) to provide the terms and conditions of the exchange or conversion,
at the option of the holders of Mortgage Bonds of any series, of the
Mortgage Bonds of such series for or into Mortgage Bonds of other series or
stock or other securities of the Company or any other corporation; or
(n) to change the words "Mortgage Bonds" to "First Mortgage Bonds" in
the descriptive title of all Outstanding Bonds at any time after the
discharge of the First Mortgage; or
(o) to comply with the rules or regulations of any national securities
exchange on which any of the Mortgage Bonds may be listed. (Section 14.01.)
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Without limiting the generality of the foregoing, if the Trust Indenture
Act is amended after the date of the New Mortgage in such a way as to require
changes to the New Mortgage or the incorporation therein of additional
provisions or so as to permit changes to, or the elimination of, provisions
which, at the date of the New Mortgage or at any time thereafter, were required
by the Trust Indenture Act to be contained in the New Mortgage, the Company and
the New Mortgage Trustee may, without the consent of any Holders, enter into one
or more supplemental indentures to evidence or effect such amendment. (Section
14.01.)
Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Mortgage Bonds of all series then
Outstanding, considered as one class, is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the New Mortgage pursuant to one or more supplemental indentures; provided,
however, if less than all of the series of Mortgage Bonds Outstanding are
directly affected by a proposed supplemental indenture, then the consent only of
the Holders of a majority in aggregate principal amount of Outstanding Mortgage
Bonds of all series so directly affected, considered as one class, will be
required; and provided further that if the Mortgage Bonds of any series have
been issued in more than one Tranche and if the proposed supplemental indenture
directly affects the rights of the Holders of one or more, but less than all, of
such Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Mortgage Bonds of all Tranches so directly
affected, considered as one class, will be required; and provided further that
no such amendment or modification may, without the consent of each Holder of the
Outstanding New Mortgage of each series or Tranche directly affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Mortgage Bond, or reduce the principal amount
thereof or the rate of interest thereon (or the amount of any installment of
interest thereon) or change the method of calculating such rate or reduce any
premium payable upon the redemption thereof, or reduce the amount of the
principal of a Discount Bond (i.e., Bond which by its terms pays less than the
principal amount thereof upon an acceleration of the maturity) that would be due
and payable upon a declaration of acceleration of maturity or change the coin or
currency (or other property) in which any Mortgage Bond or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the redemption date), (b) permit the
creation of any lien ranking prior to the lien of the New Mortgage with respect
to all or substantially all of the Mortgaged Property or terminate the lien of
the New Mortgage on all or substantially all of the Mortgaged Property, or
deprive such Holder of the benefit of the security of the lien of the New
Mortgage, (c) reduce the percentage in principal amount of the Outstanding
Mortgage Bonds of such series or Tranche, the consent of the Holders of which is
required for any such supplemental indenture, or the consent of the Holder of
which is required for any waiver of compliance with any provision of the New
Mortgage or any default thereunder and its consequences, or reduce the
requirements for quorum or voting, or (d) modify certain of the provisions of
the New Mortgage relating to supplemental indentures, waiver of certain
covenants and waivers of past defaults. A supplemental indenture which changes
or eliminates any covenant or other provision of the New Mortgage which has
expressly been included solely for the benefit of the Holders of, or which is to
remain in effect only so long as there shall be Outstanding Mortgage Bonds of
one or more specified series, or one or more Tranches thereof, or modifies the
rights of the Holders of Mortgage Bonds of such series or Tranches with respect
to such covenant or other provision, will be deemed not to affect the rights
under the New Mortgage of the Holders of the Mortgage Bonds of any other series
or Tranche. (Section 14.02.)
WAIVER
The Holders of at least a majority in aggregate principal amount of all
Mortgage Bonds may waive the Company's obligations to comply with certain
covenants, including the Company's obligation to maintain its corporate
existence and properties, pay taxes and discharge liens, maintain certain
insurance and to make such recordings and filings as are necessary to protect
the security of the Holders and the rights of the New Mortgage Trustee, provided
that such waiver occurs before the time such compliance is required. The Holders
of at least a majority of the aggregate principal amount of Outstanding Mortgage
Bonds of all affected series or Tranches, considered as one class, may waive,
before the time for such compliance, compliance with the Company's obligation to
maintain an office or agency where the Mortgage Bonds of such series or Tranches
may be surrendered for payment, registration, transfer or exchange, and
compliance with any other covenant specified in a supplemental indenture
respecting such series or Tranches. (Section 6.09.)
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EVENTS OF DEFAULT
Each of the following events constitutes an Event of Default under the New
Mortgage:
(1) failure to pay interest on any Mortgage Bond within 60 days after
the same becomes due;
(2) failure to pay principal or premium, if any, on any Mortgage Bond
within 15 days after its Maturity;
(3) failure to perform or breach of any covenant or warranty of the
Company in the New Mortgage (other than a covenant or a warranty a default
in the performance of which or breach of which is dealt with elsewhere
under this paragraph) for a period of 60 days after there has been given to
the Company by the New Mortgage Trustee, or to the Company and the New
Mortgage Trustee by the Holders of at least 50% in principal amount of
Outstanding Mortgage Bonds, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default," unless the New Mortgage Trustee, or the New Mortgage
Trustee and the Holders of a principal amount of Mortgage Bonds not less
than the principal amount of Mortgage Bonds the Holders of which gave such
notice, as the case may be, agree in writing to an extension of such period
prior to its expiration; provided, however, that the New Mortgage Trustee,
or the New Mortgage Trustee and such Holders, as the case may be, will be
deemed to have agreed to an extension of such period if corrective action
has been initiated by the Company within such period and is being
diligently pursued;
(4) certain events relating to reorganization, bankruptcy and
insolvency of the Company and appointment of a receiver or trustee for its
property; or
(5) the occurrence of an Event of Default under any Class "A" Mortgage
such that the maturity of amounts due thereunder may be accelerated;
provided that the waiver or cure of any such Event of Default and the
rescission and annulment of the consequences thereof shall constitute a
waiver of the corresponding Event of Default under the New Mortgage and a
rescission and annulment of the consequences thereof. (Section 10.01.)
REMEDIES
If an Event of Default occurs and is continuing, then the New Mortgage
Trustee or the Holders of not less than a majority in principal amount of
Mortgage Bonds then Outstanding may declare the principal amount (or if the
Mortgage Bonds are Discount Bonds, such portion of the principal amount as may
be provided for such Discount Bonds pursuant to the terms of the New Mortgage)
of all of the Mortgage Bonds together with premium, if any, and interest
accrued, if any, thereon to be immediately due and payable. At any time after
such declaration of the maturity of the Mortgage Bonds then Outstanding, but
before the sale of any of the Mortgaged Property and before a judgment or decree
for payment of money shall have been obtained by the New Mortgage Trustee as
provided in the New Mortgage, the Event or Events of Default giving rise to such
declaration of acceleration will, without further act, be deemed to have been
waived, and such declaration and its consequences will, without further act, be
deemed to have been rescinded and annulled, if:
(a) the Company has paid or deposited with the New Mortgage Trustee a
sum sufficient to pay:
(1) all overdue interest, if any, on all Mortgage Bonds then
Outstanding;
(2) the principal of and premium, if any, on any Mortgage Bonds
then Outstanding which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Mortgage Bonds; and
(3) all amounts due to the New Mortgage Trustee as compensation and
reimbursement as provided in the New Mortgage; and
(b) any other Event or Events of Default other than the non-payment
of the principal of Mortgage Bonds which shall have become due solely by
such declaration of acceleration, shall have been cured or waived as
provided in the New Mortgage. (Sections 10.02 and 10.17.)
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The New Mortgage provides that, under certain circumstances and to the
extent permitted by law, if an Event of Default occurs and is continuing, the
New Mortgage Trustee has the power to take possession of, and to hold, operate
and manage, the Mortgaged Property, or with or without entry, sell the Mortgaged
Property. If the Mortgaged Property is sold, whether by the New Mortgage Trustee
or pursuant to judicial proceedings, the principal of the Outstanding Mortgage
Bonds, if not previously due, will become immediately due, together with
premium, if any, and any accrued interest. (Sections 10.03, 10.04 and 10.05.)
If an Event of Default occurs and is continuing, the Holders of a majority
in principal amount of the Mortgage Bonds then Outstanding will have the right
to direct the time, method and place of conducting any proceedings for any
remedy available to the New Mortgage Trustee or exercising any trust or power
conferred on the New Mortgage Trustee, provided that (a) such direction does not
conflict with any rule of law or with the New Mortgage, and could not involve
the New Mortgage Trustee in personal liability in circumstances where indemnity
would not, in the New Mortgage Trustee's sole discretion, be adequate, (b) such
direction is not unduly prejudicial to the rights of the nonassenting Holders,
and (c) the New Mortgage Trustee may take any other action deemed proper by the
New Mortgage Trustee which is not inconsistent with such discretion. (Section
10.16.)
The New Mortgage provides that no Holder of any Mortgage Bond will have any
right to institute any proceeding, judicial or otherwise, with respect to the
New Mortgage, or for the appointment of a receiver or trustee, or for any other
remedy thereunder, unless (a) such Holder has previously given to the New
Mortgage Trustee written notice of a continuing Event of Default; (b) the
Holders of not less than a majority in aggregate principal amount of the
Mortgage Bonds then Outstanding have made written request to the New Mortgage
Trustee to institute proceedings in respect of such Event of Default and have
offered the New Mortgage Trustee reasonable indemnity against cost and
liabilities incurred in complying with such request; and (c) for 60 days after
receipt of such notice, the New Mortgage Trustee has failed to institute any
such proceeding and no direction inconsistent with such request has been given
to the New Mortgage Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of Mortgage Bonds then Outstanding.
Furthermore, no Holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
Holders. (Section 10.11.) Notwithstanding that the right of a Holder to
institute a proceeding with respect to the New Mortgage is subject to certain
conditions precedent, each Holder of a Mortgage Bond has the right, which is
absolute and unconditional, to receive payment of the principal of and premium,
if any, and interest, if any, on such Mortgage Bond when due and to institute
suit for the enforcement of any such payment, and such rights may not be
impaired without the consent of such Holder. (Section 10.12.) The New Mortgage
provides that the New Mortgage Trustee give the Holders notice of any default
under the New Mortgage to the extent required by the Trust Indenture Act, unless
such default shall have been cured or waived, except that no such notice to
Holders of a default of the character described in paragraph (3) under "Events
of Default" shall be given until at least 45 days after the occurrence thereof.
(Section 11.02.) The Trust Indenture Act currently permits the New Mortgage
Trustee to withhold notice of default (except for certain payment defaults) if
the New Mortgage Trustee in good faith determines the withholding of such notice
to be in the interests of the Holders.
As a condition precedent to certain actions by the New Mortgage Trustee in
the enforcement of the lien of the New Mortgage and institution of action on the
Mortgage Bonds, the New Mortgage Trustee may require adequate indemnity against
costs, expense and liabilities to be incurred in connection therewith. (Sections
10.11 and 11.01.)
In addition to every other right and remedy provided in the New Mortgage,
the New Mortgage Trustee may exercise any right or remedy available to the New
Mortgage Trustee in its capacity as owner and holder of Pledged Bonds which
arises as a result of a default or Matured Event of Default under any Class "A"
Mortgage, whether or not an Event of Default under the New Mortgage has then
occurred and is continuing. (Section 10.20.)
DEFEASANCE
Any Mortgage Bond or Bonds, or any portion of the principal amount thereof,
will be deemed to have been paid for purposes of the New Mortgage, and the
entire indebtedness of the Company in respect thereof will be deemed to have
been satisfied and discharged, if there has been irrevocably deposited with the
New Mortgage
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Trustee, in trust: (a) money (including Funded Cash) in the amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepayment thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which will
be sufficient, or (c) a combination of (a) and (b) which will be sufficient, to
pay when due the principal of and premium, if any, and interest, if any, due and
to become due on such Mortgage Bond or Bonds or portions thereof. (Section
9.01.) For this purpose, Eligible Obligations include direct obligations of, or
obligations unconditionally guaranteed by, the United States of America,
entitled to the benefit of the full faith and credit thereof, and certificates,
depositary receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or principal payments
due in respect thereof.
While there is no legal precedent directly on point, it is possible that,
for federal income tax purposes, any deposit contemplated in the preceding
paragraph could be treated as a taxable exchange of the related Mortgage Bonds
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 such Mortgage Bonds 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 Mortgage Bonds. Such Holders thereafter 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 different from the amount that would
be includible in the absence of such deposit. Prospective investors are urged to
consult their own tax advisors as to the specific consequences to them of such
deposit.
RESIGNATION OF THE NEW MORTGAGE TRUSTEE
The New Mortgage Trustee may resign at any time by giving written notice
thereof to the Company or may be removed at any time by Act of the Holders of a
majority in principal amount of Mortgage Bonds then Outstanding delivered to the
New Mortgage Trustee and the Company. No resignation or removal of the New
Mortgage Trustee and no appointment of a successor trustee will become effective
until the acceptance of appointment by a successor trustee in accordance with
the requirements of the New Mortgage. In addition, so long as no Event of
Default or event which, after notice or lapse of time, or both, would become an
Event of Default has occurred and is continuing, under certain circumstances, if
the Company has delivered to the New Mortgage Trustee a resolution of its Board
of Directors appointing a successor trustee and such successor has accepted such
appointment in accordance with the terms of the New Mortgage, the New Mortgage
Trustee will be deemed to have resigned and the successor will be deemed to have
been appointed as trustee in accordance with the New Mortgage. (Section 11.10.)
CONCERNING THE NEW MORTGAGE TRUSTEE
The Bank of New York, the Trustee under the New Mortgage, has been a
regular depositary of funds of the Company. As trustee under both the New
Mortgage and the First Mortgage, The Bank of New York may have a conflicting
interest for purposes of the Trust Indenture Act if an Event of Default were to
occur under either Mortgage. In that case, the New Mortgage Trustee may be
required to eliminate such conflicting interest by resigning either as New
Mortgage Trustee or as First Mortgage Trustee. There are other instances under
the Trust Indenture Act which would require the resignation of the New Mortgage
Trustee, such as an affiliate of the New Mortgage Trustee acting as underwriter
with respect to any of the Mortgage Bonds.
The Company and certain of its subsidiaries maintain deposit accounts and
conduct other banking transactions with The Bank of New York in the ordinary
course of their businesses. The Bank of New York also acts as trustee under
certain indentures relating to borrowings by or for the benefit of the lessors
to finance their acquisition of the Company's interest in the Perry Nuclear
Power Plant and Beaver Valley Power Station in connection with the sale and
leaseback of certain undivided interests in those plants. Under the
sale/leaseback documents, the Company is ultimately responsible for the payment
of this indebtedness. The Bank of New York also acts as trustee under the trust
agreement, guarantee and indenture relating to a series of preferred securities
issued by a trust subsidiary of the Company.
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TRANSFER OR EXCHANGE
The transfer of the Mortgage Bonds may be registered, and Mortgage Bonds
may be exchanged for other Mortgage Bonds of the same series and Tranche, of
authorized denominations and of like tenor and aggregate principal amount, at
the office of the Company, as Bond Registrar for the Mortgage Bonds, in New
York, New York. The Company may change the place for registration of transfer of
the Mortgage Bonds, may appoint one or more additional Bond Registrars
(including the Company) and may remove any Bond Registrar, all at its
discretion. (Section 6.02.) The applicable Prospectus Supplement will identify
any new place for registration of transfer and additional Bond Registrar
appointed, and will disclose the removal of any Bond Registrar effected, prior
to the date of such Prospectus Supplement. Except as otherwise provided in the
applicable Prospectus Supplement, no service charge will be made for any
transfer or exchange of the Mortgage Bonds, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of the
Mortgage Bonds. The Company will not be required to issue, and no Bond Registrar
will be required to register, the transfer of or to exchange (a) Mortgage Bonds
of any series (including the Mortgage Bonds) during a period of 15 days prior to
giving any notice of redemption, or (b) any Mortgage Bond selected for
redemption in whole or in part, except the unredeemed portion of any Mortgage
Bond being redeemed in part. (Section 3.05.)
BOOK-ENTRY ONLY SYSTEM
A particular series of Offered Bonds may be issued initially under a
book-entry only system, registered in the name of Cede & Co., as registered
bondholder and nominee for DTC. DTC will act as securities depository for such
Offered Bonds. Individual purchases of Book-Entry Interests (as defined herein)
in any Offered Bonds will be made in book-entry form. Purchasers of Book-Entry
Interests will not receive certificates representing their interests in such
Offered Bonds. So long as Cede & Co., as nominee of DTC, is the bondholder,
references herein to the bondholders or registered owners of Offered Bonds will
mean Cede & Co., rather than the owners of Book-Entry Interests in such Offered
Bonds.
DTC is a limited purpose trust company organized under the banking laws of
the State of New York and a "banking organization" within the meaning of that
law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act, as
amended. DTC holds securities deposited by its participants (the "DTC
Participants") and facilitates the settlement of securities transactions among
DTC Participants in such securities through electronic computerized book-entry
changes in accounts of the DTC Participants, thereby eliminating the need for
physical movement of securities certificates. Direct DTC Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom, together with the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. own DTC. Access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a DTC Participant, either directly or
indirectly (the "Indirect Participants").
DTC Participants purchasing Book-Entry Interests (as defined below) in any
Offered Bonds will not receive certificates. Each DTC Participant will receive a
credit balance in the records of DTC in the amount of such DTC Participant's
interest in such Offered Bonds, which will be confirmed in accordance with DTC's
standard procedures. The ownership interest of each actual purchaser of a
Book-Entry Interest in an Offered Bond (the "Book-Entry Interests") will be
recorded through the records of the DTC Participant or through the records of
the Indirect Participant. Owners of Book-Entry Interests should receive from the
DTC Participant or Indirect Participant a written confirmation of their purchase
providing details of the Book-Entry Interests acquired. Transfers of Book-Entry
Interests will be accomplished by book entries made by the DTC Participants or
Indirect Participants who act on behalf of the owners of Book-Entry Interests.
Owners of Book-Entry Interests will not receive certificates representing their
ownership of Book-Entry Interests with respect to any related Offered Bonds
except as described below upon the resignation of DTC.
Under the New Mortgage, payments made to DTC or its nominee with respect to
the Offered Bonds will satisfy the Company's obligations under the New Mortgage
to the extent of the payments so made. Owners of
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Book-Entry Interests in the Offered Bonds will not be or be considered by the
Company or the New Mortgage Trustee to be, and will not have any rights as,
holders of Offered Bonds under the New Mortgage.
NEITHER THE COMPANY NOR THE NEW MORTGAGE TRUSTEE NOR ANY OF THEIR AGENTS
WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT
PARTICIPANT OR ANY OWNER OF A BOOK-ENTRY INTEREST OR ANY OTHER PERSON NOT SHOWN
ON THE REGISTRATION BOOKS OF THE NEW MORTGAGE TRUSTEE OR ANY BOND REGISTRAR AS
BEING A BONDHOLDER WITH RESPECT TO: (1) ANY OFFERED BONDS; (2) THE ACCURACY OF
ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT;
(3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY
AMOUNT DUE TO ANY OWNER OF A BOOK-ENTRY INTEREST IN RESPECT OF THE PRINCIPAL OR
REDEMPTION PRICE OF OR INTEREST ON ANY OFFERED BONDS; (4) THE DELIVERY BY DTC OR
ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY OWNER OF A
BOOK-ENTRY INTEREST WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE NEW
MORTGAGE TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE OWNERS OF A
BOOK-ENTRY INTEREST TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF
ANY OFFERED BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS
NOMINEE AS THE HOLDER OF ANY OFFERED BONDS.
Principal and redemption price of, and interest on, Offered Bonds
registered in the name of DTC or its nominee will be made to DTC or such
nominee, as registered owner of such Offered Bonds. DTC is responsible for
disbursing such payments to the appropriate DTC Participants and such DTC
Participants, and any Indirect Participants, are in turn responsible for
disbursing the same to the owners of Book-Entry Interests. Unless it has reason
to believe it will not receive payment, DTC's current practice is to credit the
accounts of the DTC Participants on a payment date in accordance with their
respective holdings shown on the records of DTC. Payments by DTC Participants
and Indirect Participants to owners of Book-Entry Interests will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such DTC Participant or
Indirect Participant and not of DTC, the Company or the New Mortgage Trustee,
subject to any statutory and regulatory requirements as may be in effect from
time to time.
DTC Participants and Indirect Participants carry the "position" of the
ultimate Book-Entry Interest owner on their records, and will be responsible for
providing information to the ultimate Book-Entry Interest owner as to the
Offered Bonds in which the Book-Entry Interest is held, debt service payments
received, and other information. Each person for whom a DTC Participant or
Indirect Participant acquires an interest in Offered Bonds, as nominee, may
desire to make arrangements with such DTC Participant or Indirect Participant to
receive a credit balance in the records of such DTC Participant or Indirect
Participant, to have all notices of redemption or other communications to or by
DTC which may affect such persons forwarded in writing by such DTC Participant
or Indirect Participant, and to have notification made of all debt service
payments.
Purchases, transfers and sales of Book-Entry Interests by the ultimate
Book-Entry Interest owners may be made through book entries made by DTC
Participants or Indirect Participants or others who act for the ultimate
Book-Entry Interest owner. The New Mortgage Trustee, the Company and the
underwriters have no role in those purchases, transfers or sales.
Owners of Book-Entry Interests may be charged a sum sufficient to cover any
tax, fee, or other governmental charge that may be imposed in relation to any
transfer or exchange of a Book-Entry Interest.
The Company, any Bond Registrar, any Paying Agent and the New Mortgage
Trustee will recognize and treat DTC (or any successor securities depository) or
its nominee as the holder of Offered Bonds registered in its name or the name of
its nominee for all purposes, including payment of debt service, notices,
enforcement of remedies and voting. Under DTC's current practice, a proxy will
be given to the DTC Participants holding Book-Entry Interests in Offered Bonds
in connection with any matter on which holders of such Offered Bonds are asked
to vote or give their consent. Crediting of debt service payments and
transmittal of notices and other communications by DTC to DTC Participants, by
DTC Participants to Indirect Participants and by DTC Participants and Indirect
Participants to the ultimate Book-Entry Interest owners are the responsibility
of those
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persons and will be handled by arrangements among them and are not the
responsibility of the New Mortgage Trustee, the Company or the underwriters
involved in the sale of the Offered Bonds.
The Company, any Bond Registrar or the New Mortgage Trustee, so long as a
book-entry system is used for any series of Offered Bonds, will send any notice
of redemption and any other notices required by the New Mortgage to be sent to
holders of such Offered Bonds only to DTC (or such successor securities
depository) or its nominee. Any failure of DTC to advise any DTC Participant, or
of any DTC Participant or Indirect Participant to notify the Book-Entry Interest
owner, of any such notice and its content or effect will not affect the validity
of the redemption of the Offered Bonds called for redemption, or any other
action premised on that notice. In the event of a call for redemption, the
Company's, any Bond Registrar's or the New Mortgage Trustee's notification to
DTC will initiate DTC's standard call process, and, in the event of a partial
call, its lottery process by which the call will be randomly allocated to DTC
Participants holding positions in the Offered Bonds to be redeemed. When DTC and
DTC Participants allocate the call for redemption, the owners of the Book-Entry
Interests that have been called should be notified by the broker or other person
responsible for maintaining the records of those interests and subsequently
credited by that person with the proceeds once such Offered Bonds are redeemed.
The Company, any Paying Agent, the New Mortgage Trustee and any underwriter
or agent cannot and do not give any assurances that DTC, DTC Participants or
others will distribute debt service on Offered Bonds made to DTC or its nominee
as the registered owner, or any redemption or other notices, to the Book-Entry
Interest owners, or that they will do so on a timely basis, or that DTC will
serve and act in the manner described in this Prospectus.
The Company understands that the current "Rules" applicable to DTC are on
file with the Commission, and that the current "Procedures" of DTC to be
followed in dealing with DTC Participants are on file with DTC.
If DTC is at any time unwilling or unable to continue as depository, and a
successor depository is not appointed by the Company within 90 days, the Company
will issue individual certificates to owners of Book-Entry Interests in exchange
for the Offered Bonds held by DTC or its nominee. In such instance, an owner of
a Book-Entry Interest will be entitled to physical delivery of certificates
equal in principal amount to such Book-Entry Interest and to have such
certificates registered in its name. Individual certificates of Offered Bonds so
issued will be issued in denominations of $1,000 or any multiple thereof.
LEGAL OPINIONS
Anthony J. Alexander, Esq., Akron, Ohio, who is Executive Vice President
and General Counsel of the Company, has rendered an opinion to the Company as to
the legality of the Mortgage Bonds offered hereby. Mr. Alexander and Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, N.Y. 10004-1490,
also counsel for the Company, will render opinions to any underwriters or agents
as to the legality of any Offered Bonds. Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425 Lexington Avenue, New
York, N.Y. 10017-3954, will act as counsel for any underwriters or agents and
will render an opinion to them as to certain legal matters.
EXPERTS
The audited consolidated financial statements and related schedule
incorporated by reference or included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports dated February 7, 1997 with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
The audited consolidated financial statements for the year ended December
31, 1997, included in the Form 8-K filed on March 23, 1998, and incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report dated February 13,
1998 with respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said reports.
With respect to the unaudited interim consolidated financial information
for the quarterly periods ended March 31, 1996 and 1997, June 30, 1996 and 1997
and September 30, 1996 and 1997 incorporated by reference herein, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for
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reviews of that information. However, their separate reports thereon state that
they did not audit and they do not express an opinion on that interim
consolidated financial information. Accordingly, the degree of reliance on their
reports on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim consolidated financial information
because that report is not a "report" or "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Act.
The statements as to matters of law and legal conclusions included in the
Company's Annual Report on Form 10-K and Form 10-Q Report incorporated herein by
reference, and such statements included herein, have been prepared under the
supervision of, and reviewed by, Anthony J. Alexander, Esq., Akron, Ohio, who is
Executive Vice President and General Counsel of the Company, and such statements
have been incorporated by reference or included herein upon his authority as an
expert.
PLAN OF DISTRIBUTION
The Company may sell the Mortgage Bonds (i) through underwriters or
dealers, (ii) directly to a limited number of institutional purchasers or to a
single purchaser, (iii) through agents or (iv) through any combination of the
above. An accompanying Prospectus Statement will set forth the terms of the
offering of the Offered Bonds, including the name or names of any underwriters,
the purchase price of the Offered Bonds and the net proceeds to the Company from
such sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers.
If underwriters are used in the sale, the Mortgage Bonds 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 Mortgage
Bonds may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
underwriting firms. The underwriter or underwriters with respect to a particular
underwritten offering of Offered Bonds will be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover page of
such Prospectus Supplement. Unless otherwise set forth in the Prospectus
Supplement, the several obligations of the underwriters to purchase the Offered
Bonds will be subject to certain conditions precedent and the underwriters will
be obligated to take and pay for all of the Offered Bonds if any are taken.
The Mortgage Bonds may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Offered Bonds will be named, and any commissions payable by the
Company to such agent will be set forth, in an accompanying Prospectus
Supplement. Unless otherwise indicated in such Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or dealers to solicit offers by certain specified institutions to
purchase Mortgage Bonds from the Company at the public offering price set forth
in the Prospectus Supplement pursuant to delayed delivery contracts providing
for payment and delivery on a specified date in the future. Such contracts will
be subject to those conditions set forth in the Prospectus Supplement, and the
Prospectus Supplement will set forth the commission payable for solicitation of
such contracts.
Agents, dealers and underwriters may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
The place and time of delivery for the Offered Bonds in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER
- --------
(4)(g) -- Form of General Mortgage Indenture and Deed of Trust dated
as of January 1, 1998 between the Company and The Bank of
New York, as Trustee.
(12)(b) -- Computation of Consolidated Ratio of Earnings to Fixed
Charges.
(15)(b) -- Letter of Arthur Andersen LLP regarding unaudited interim
financial information.
23 (c) -- Consent of Arthur Andersen LLP.
These Exhibits are in addition to any document previously
listed or incorporated by reference as an Exhibit listed or
referred to in Item 16 of the Registration Statement filed
June 5, 1996.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED, IN THE CITY OF AKRON AND STATE OF OHIO ON THE 26TH
DAY OF MARCH, 1998.
OHIO EDISON COMPANY
By: /s/ H. P. BURG
------------------------------------
H. P. Burg
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
---- ----- ----
H. P. BURG
- ------------------------------------------
(H. P. Burg) President and Director March 26, 1998
W. R. HOLLAND
- ------------------------------------------
(W. R. Holland) Director March 26, 1998
ANTHONY J. ALEXANDER
- ------------------------------------------
(Anthony J. Alexander) Director March 26, 1998
R. H. MARSH
- ------------------------------------------ Vice President (Principal
(R. H. Marsh) Financial Officer) March 26, 1998
HARVEY L. WAGNER
- ------------------------------------------ Controller (Principal
(Harvey L. Wagner) Accounting Officer) March 26, 1998
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EXHIBIT INDEX
EXHIBIT
NUMBER
- --------
(4)(g) -- Form of General Mortgage Indentures and Deed of Trust dated
as of January 1, 1998 between the Company and The Bank of
New York, as Trustee.
(12)(b) -- Computation of Consolidated Ratio of Earnings to Fixed
Charges.
(15)(b) -- Letter of Arthur Andersen LLP regarding unaudited interim
financial information.
23 (c) -- Consent of Arthur Andersen LLP.
II-3