View:
As filed with the Securities and Exchange Commission on January 13, 2004
Registration Statement No. 333-108546
Registration Statement No. 333-108546-01
Registration Statement No. 333-108546-02
Registration Statement No. 333-108546-03
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
Exelon Corporation Exelon Capital Trust I
(Exact name of registrant as Exelon Capital Trust II
specified in its charter) Exelon Capital Trust III
(Exact name of registrant
Pennsylvania as specified in its
(State or other jurisdiction of Certificate of Trust)
incorporation or organization)
Delaware
23-2990190 (State or other jurisdiction
(I.R.S. Employer Identification No.) of incorporation or organization)
16-6545508
10 South Dearborn Street - 37th Floor 16-6545509
P.O. Box 805379 16-6545510
Chicago, Illinois 60680-5379 (I.R.S. Employer Identification No.)
(312) 394-4321
(Address, including zip code, and
telephone number, including area c/o Wachovia Trust Company,
code, of registrant's National Association
principal executive offices) One Rodney Square
920 King Street, Suite 102
Wilmington, DE 19801
(302) 888-7536
(Address, including zip code, and
telephone number, including area
code, of registrant's
principal executive offices)
Robert S. Shapard
Executive Vice President and Chief Financial Officer
10 South Dearborn Street - 37th Floor
Chicago, Illinois 60680-5379
(312) 394-4321
http://www.exeloncorp.com
(Name, address, including zip code, and telephone number, including area
code, of agent for service for each registrant)
---------------------------------
With copies to:
Randall E. Mehrberg, Esquire Todd D. Cutler, Esquire
Exelon Corporation Exelon Corporation
10 South Dearborn Street - 37th Floor 2301 Market Street
P.O. Box 805379 P.O. Box 8699
Chicago, Illinois 60680 Philadelphia, Pennsylvania 19101
(312) 394-4321 (215) 841-4694
Robert C. Gerlach, Esquire
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
(215) 665-8500
---------------------------------
Approximate date of commencement of proposed sale to public: From time
to time after the Registration Statement becomes effective, as determined by
market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [X]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
---------------------------------------------
Pursuant to Rule 429, under the Securities Act of 1933, the prospectus
included in this registration statement is a combined prospectus relating also
to registration statement no. 333-57640 previously filed by the registrant on
Form S-3 and declared effective on May 1, 2001. This registration statement,
which is a new registration statement, also constitutes post-effective amendment
no. 2 to registration statement 333-57640, and such post-effective amendment no.
2 shall hereafter become effective concurrently with the effectiveness of this
registration statement and in accordance with Section 8(c) of the Securities Act
of 1933.
We hereby amend this registration statement on such date or dates as
may be necessary to delay its effective date until we shall file a further
amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Commission acting pursuant to Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated January __, 2004
$2,000,000,000
[INSERT LOGO]
EXELON CORPORATION
Debt Securities
Common Stock
Stock Purchase Contracts
Stock Purchase Units
Preferred Stock
Subordinated Debt Securities
Guarantee of Trust Preferred Securities
EXELON CAPITAL TRUST I
EXELON CAPITAL TRUST II
EXELON CAPITAL TRUST III
Trust Preferred Securities
(guaranteed by Exelon Corporation as described in this prospectus)
--------------------------------
Exelon Corporation may use this prospectus to offer and sell from time
to time:
o unsecured senior debt securities;
o common stock;
o stock purchase contracts;
o stock purchase units;
o preferred stock in one or more series;
o subordinated debt securities to be purchased by Exelon Capital
Trust I, Exelon Capital Trust II and/or Exelon Capital Trust
III; and
o guarantees of trust preferred securities sold by Exelon
Capital Trust I, Exelon Capital Trust II and Exelon Capital
Trust III.
Exelon Capital Trust I, Exelon Capital Trust II and Exelon Capital
Trust III may use this prospectus to offer and sell from time to time trust
preferred securities that will be guaranteed by Exelon Corporation.
We will provide the specific terms of these securities in supplements
to this prospectus prepared in connection with each offering. The securities
offered will contain other significant terms and conditions. Please read this
prospectus and the applicable prospectus supplement carefully before you invest.
This prospectus may not be used to consummate sales of the offered securities
unless accompanied by a prospectus supplement.
Our common shares are listed on the New York, Chicago and Philadelphia
Stock Exchanges, under the symbol "EXC."
Please see "Risk Factors" beginning on page 4 for a discussion of
factors you should consider in connection with a purchase of the securities
offered in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------------------
The date of this prospectus is .
TABLE OF CONTENTS
Page
ABOUT THIS PROSPECTUS..........................................................1
WHERE YOU CAN FIND MORE INFORMATION............................................2
DOCUMENTS INCORPORATED BY REFERENCE............................................2
RISK FACTORS...................................................................4
EXELON CORPORATION............................................................13
EXELON CAPITAL TRUST I, EXELON CAPITAL TRUST II AND EXELON CAPITAL
TRUST III...................................................................13
FORWARD-LOOKING STATEMENTS....................................................14
USE OF PROCEEDS...............................................................16
RATIO OF EARNINGS TO FIXED CHARGES............................................16
DESCRIPTION OF DEBT SECURITIES................................................17
DESCRIPTION OF COMMON STOCK...................................................25
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS..............26
DESCRIPTION OF PREFERRED STOCK................................................27
DESCRIPTION OF TRUST PREFERRED SECURITIES.....................................28
DESCRIPTION OF SUBORDINATED DEBT SECURITIES...................................40
DESCRIPTION OF GUARANTEES.....................................................49
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE SUBORDINATED
DEBT SECURITIES AND THE GUARANTEES..........................................52
BOOK-ENTRY SYSTEM.............................................................54
PLAN OF DISTRIBUTION..........................................................57
LEGAL MATTERS.................................................................58
EXPERTS 58
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission (SEC) using a "shelf" registration
process. Under this shelf registration process, we may, from time to time, sell
the securities described in this prospectus or combinations thereof in one or
more offerings with a maximum aggregate initial offering price of up to
$2,000,000,000, which includes $1,000,000,000 of debt securities that were
registered on a prior registration statement. This prospectus provides a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under "Where You Can Find More Information."
Unless otherwise indicated, all references in this prospectus or a
prospectus supplement to "Exelon Corporation," "Exelon," "we," "our," "us," or
similar terms mean Exelon Corporation, and all references to "the trusts" mean
Exelon Capital Trust I, Exelon Capital Trust II and Exelon Capital Trust III.
We are not offering the securities in any state where the offer is not
permitted.
You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front cover of this document.
You should rely only on information contained in this prospectus or the
documents to which we have referred you. We have not authorized anyone to
provide you with information that is different. This prospectus and related
prospectus supplement may be used only where it is legal to sell these
securities. The information in this prospectus and any prospectus supplement may
only be accurate on the date of this document. Our business, financial
condition, results of operations and prospects may have changed since that date.
Please see "Risk Factors" beginning on page 4 for a discussion of
factors you should consider in connection with a purchase of the securities
offered in this prospectus.
1
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. The public may
read and copy any reports or other information that we file with the SEC at the
SEC's public reference room, Room 1024 at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information on the operation
of the public reference room by calling the SEC at 1-800-SEC-0330. These
documents are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at http://www.sec.gov.
Reports, proxy statements and other information concerning us may also be
inspected at the offices of the New York Stock Exchange, which is located at 20
Broad Street, New York, New York 10005. You may also obtain a copy of the
registration statement at no cost by writing us at the following address:
Exelon Corporation
Attn: Investor Relations
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, IL 60680-5379
This prospectus is one part of a registration statement filed on Form
S-3 with the SEC under the Securities Act of 1933, as amended, known as the
Securities Act. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. For further information concerning us and the
securities, you should read the entire registration statement including this
prospectus and any related prospectus supplements, and the additional
information described under the sub-heading "Documents Incorporated By
Reference" below. The registration statement has been filed electronically and
may be obtained in any manner listed above. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the registration statement or otherwise filed with the SEC. Each such
statement is qualified in its entirety by such reference.
Information about us is also available on our web site at
http://www.exeloncorp.com. This URL and the SEC's URL above are intended to be
inactive textual references only. Such information on our or the SEC's web site
is not a part of this prospectus.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information that we
file with them, which means that we can disclose important information to you by
referring you to those other documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information.
This incorporation by reference does not include documents that are furnished
but not filed with the SEC. We incorporate by reference the documents listed
below and any future documents that we file with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act but prior to the termination of any
offering of securities made by this prospectus:
o Our Annual Report on Form 10-K for the year ended December 31,
2002, as amended by the Form 10-K/A filed on December 15,
2003;
o Our Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2003, June 30, 2003, and September 30, 2003,
in each case as amended by the Form 10-Q/A filed on December
15, 2003;
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o Our Current Reports on Form 8-K filed January 15, 2003,
January 30, 2003, February 21, 2003, March 6, 2003, March 7,
2003, March 31, 2003, May 6, 2003, May 8, 2003, May 30, 2003,
June 6, 2003, June 13, 2003, June 17, 2003, June 18, 2003,
June 18, 2003, June 26, 2003, July 11, 2003, July 29, 2003,
July 30, 2003, August 6, 2003, August 13, 2003, September 2,
2003, September 12, 2003, September 25, 2003, September 29,
2003, October 1, 2003, October 3, 2003, October 31, 2003,
November 3, 2003, November 10, 2003, November 24, 2003,
December 3, 2003, December 18, 2003 and December 22, 2003; and
o the description of our common stock contained in the
registration statement on Form 8-A filed under the Securities
Exchange Act of 1934, as amended, including any amendment
thereto or report filed for the purpose of updating such
description.
Upon written or oral request, we will provide without charge to each
person, including any beneficial owner, to whom this prospectus is delivered, a
copy of any or all of such documents which are incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this prospectus incorporates).
Written or oral requests for copies should be directed to Exelon Corporation,
Attn: Investor Relations, 10 South Dearborn Street, 37th Floor, P.O. Box 805379,
Chicago, IL 60680-5379.
Any statement contained in this prospectus, or in a document all or a
portion of which is incorporated by reference, shall be modified or superseded
for purposes of this prospectus to the extent that a statement contained in this
prospectus, any supplement or any document incorporated by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not, except as so modified or superseded, constitute a part of this prospectus.
All reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment, which indicates that all of a class of securities
offered hereby have been sold or which deregisters all of a class of securities
then remaining unsold, shall be deemed incorporated by reference herein and to
be a part hereof from the date of filing of such documents.
We have not included or incorporated by reference any separate
financial statements of the trusts. We do not consider the financial statements
of the trusts to be material to holders of the trust preferred securities
because each trust (1) is a newly formed special purpose entity that has no
operating history or independent operations and (2) is not engaged in and does
not propose to engage in any activity other than holding our subordinated debt
securities and issuing the trust preferred securities. We do not expect the
trusts to file periodic reports under Sections 13 and 15(d) of the Exchange Act.
3
RISK FACTORS
Our business is affected by the various factors discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated into this prospectus by reference to our Annual Report
on Form 10-K. In addition, the various other factors described in this section
could affect our business, results of operations or the price of our securities.
We believe the risks and uncertainties described below and in our Annual Report
on Form 10-K are the material risks and uncertainties known or currently
anticipated by us that effect our business. Additional risks relating to any
offered securities will be included in the prospectus supplement for those
securities.
o Our holding company structure could limit our ability to pay
debt service or dividends.
We are a holding company with no material assets other than the stock
of our subsidiaries. Accordingly, all of our operations are conducted by our
subsidiaries. Our ability to pay principal and interest on our debt and
dividends on our common and preferred stock depends on the payment to us of
dividends by our operating subsidiaries, namely Commonwealth Edison Company
(ComEd), PECO Energy Company (PECO) and Exelon Generation Company, LLC
(Generation). These subsidiaries' payments of dividends to us in turn depend on
their results of operations and cash flows. PECO and ComEd also are subject to
regulatory restrictions that generally permit the payment of dividends solely
from the amount of retained or current earnings and preclude any payment if the
subsidiary's equity is less than 30% of its capitalization.
o Fluctuations in our operating results may affect the market
prices of our securities.
The market price of our common stock and other securities may fluctuate
because our operating results may vary. Variations in our operating results can
result from many factors, including factors beyond our control, such as weather
and economic conditions. Our results of operations may also vary significantly
from quarter to quarter because of the timing of certain events and other
factors, including the other risks factors set forth in this prospectus.
Therefore, you should not rely on our results of operations during any
particular quarter as an indication of our results for a full year or any other
quarter.
o Our financial performance will be affected by our ability to
achieve the targeted cash savings under our new Exelon Way
business model.
We have begun to implement our new business model referred to as The
Exelon Way, which is focused on improving operating cash flows while meeting
service and financial commitments through improved integration of operations and
consolidation of support functions. We may, however, not be able to attain the
improvements in operating cash flow presently targeted by The Exelon Way
business model. We anticipate incurring expenses associated with reaching these
annual cash savings levels in the near future. Our inability to achieve targeted
annual cash savings levels in the targeted timeframes could adversely affect our
future financial performance.
o The price of our securities may be affected by the general
perception of the energy and utility sectors of the economy.
Events, such as the August 14, 2003 blackout, those involving Enron
Corporation, political unrest in oil-producing countries and the California
energy crisis, in addition to the fact that the energy industry is changing and
subject to greater risk, could adversely affect investors' perception of the
energy and utility sectors and could adversely affect the equity prices of
companies in those sectors. We cannot predict what news or event will affect the
public or how any news or event affects the market price of our securities, but
4
fluctuations due to such news and events could be severe and any negative
effects could be long lasting.
o Our businesses are subject to extensive regulation that
affects our operations and our costs.
Our businesses are extensively regulated. We are subject to regulation
by the SEC under the Public Utility Holding Company Act (PUHCA), by the Federal
Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC)
under energy legislation, by federal, state and local authorities under
environmental laws and by state public utility commissions under laws regulating
our distribution and transmission businesses. Regulation affects almost every
aspect of our businesses, from our fundamental business management actions to
our ability to:
o determine the terms and rates of our Energy Delivery
businesses' services;
o make acquisitions;
o issue equity or debt securities;
o engage in transactions among our affiliates; and
o pay dividends.
Changes in regulation can cause delays in or affect business planning and
transactions and can increase our costs.
As part of retail deregulation initiatives in Illinois and Pennsylvania
and other regulatory proceedings, ComEd's and PECO's rates are currently subject
to limitations, including:
o a freeze on ComEd's rates through 2006;
o a limitation on ComEd's return on equity through 2006;
o a cap on PECO's electric transmission and distribution rates
through 2006;
o a cap on PECO's overall rates through 2010; and
o scheduled recovery of PECO's electric stranded costs that will
increase amortization expenses through 2010.
These rate provisions substantially limit the ability of ComEd and PECO
to recover cost increases or the costs of new investments. As a result, ComEd
and PECO must effectively manage their costs to maintain their current
profitability.
o Our financial performance will be affected by the amortization
and eventual termination of stranded cost recovery for ComEd
and PECO.
Both ComEd's and PECO's current retail electric rates include charges
to recover stranded costs that might not otherwise be recoverable in a fully
competitive market. The amount of stranded cost recovery by ComEd varies
annually depending on wholesale market prices and other factors, with stranded
cost recovery ending at the end of 2006. Stranded cost recovery by PECO
continues through 2010. Although the annual amount of stranded cost recovery is
scheduled to increase during that period, annual increases in amortization of
5
PECO's stranded cost recovery and the corresponding reductions in the return on
the unamortized portion of stranded cost recovery will adversely affect PECO's
results through 2010. Further, the termination of stranded cost recovery at the
end of 2006 for ComEd and at the end of 2010 for PECO could significantly
adversely affect their future results of operation.
o Failure to provide reliable service to our customers could
adversely affect our operating results.
Our Energy Delivery businesses remain obligated to provide safe and
reliable service to their customers within their franchised service territories.
Meeting this commitment requires significant capital and other resources.
Failure to provide safe and reliable service, including from equipment failures
in electric and gas delivery systems, could adversely affect our operating
results through reduced revenues and increased maintenance and capital costs. In
addition, under Illinois law, ComEd can be required to pay damages to its
customers in the event of extended outages affecting large numbers of its
customers. While we were not affected directly by the failure in the
transmission grid that affected a large portion of the northeastern United
States and Canada on August 14, 2003, the North American transmission grid is
highly interconnected and, in extraordinary circumstances, disruptions at a
point within the grid can cause a systemic response that results in an extensive
power outage on our delivery systems. Power outages in ComEd or PECO's service
territories could occur even if the disruptions originate outside of those
territories.
o Impairment of ComEd's goodwill could adversely affect our
results of operation and could restrict ComEd's ability to pay
dividends to us.
At June 30, 2003, ComEd had recorded goodwill of $4.7 billion. This
goodwill was recognized and recorded in connection with the merger of Unicom
Corporation and PECO. Under generally accepted accounting principles, the
goodwill will remain at its recorded amount unless it is determined to be
impaired, which is based upon an analysis of ComEd's expected future cash flows.
If an impairment is determined at ComEd, the amount of the impaired goodwill
will be written off and expensed at ComEd. However, a goodwill impairment charge
at ComEd may not affect our results of operations. Our goodwill impairment test
would include assessing the expected future cash flows of the entire Energy
Delivery business segment (a single reporting unit, which includes PECO, as
defined under current accounting guidance), not just ComEd's expected future
cash flows. ComEd's cash flows include competitive transition charges, which
will cease at the end of 2006, unless there is a legislative or regulatory
change and collections from traditional bundled customers at tariffed rates.
ComEd's cash flows will be affected by other factors, including the
restructuring of the power purchase agreement (PPA) with Generation. Absent
another source of revenues to replace the loss of competitive transition charge
revenue or changes in its cost structure, all or a portion of the goodwill may
become impaired. Under current regulations, a significant goodwill impairment
may restrict ComEd's ability to pay dividends to us.
o Energy Delivery is obligated as the provider-of-last-resort to
provide energy to all retail customers in its service
territories, which makes it difficult to predict and plan for
load requirements.
Energy Delivery continues to serve as the provider-of-last-resort
(POLR) for energy for all customers in its electric and gas service territories.
As long as the POLR obligation remains unchanged, Energy Delivery could be
mandated to secure load requirements sufficient to serve 100% of its service
territories under the assumption that all customers in these territories may
return to Energy Delivery as their electricity supplier. Because the choice of
electricity generation supplier or natural gas supplier lies with the customer,
planning has a higher level of uncertainty than that traditionally experienced
due to weather and the economy, and it is difficult to predict and plan for the
number of customers and their associated energy demand. The POLR obligation also
6
affects Generation because it provides electricity to Energy Delivery. The
uncertainty regarding the amount of Energy Delivery load that Generation must
prepare for increases Generation's costs. The load requirements of the POLR
obligation may affect pricing, competitive market development and planning by
Energy Delivery, Generation, alternate electricity generation suppliers,
alternate natural gas suppliers and customers. A significant under-estimation of
Energy Delivery's electric-load requirements could result in Generation not
having enough power to cover its load obligation, in which case it would be
required to buy power from third parties at prevailing market prices. Those
prices may not be as favorable or as manageable as Generation's long-term supply
costs and thus could increase its costs.
o Energy Delivery and Generation may not be able to manage costs
to operate profitably under current rate caps and freezes and
fixed priced PPAs.
ComEd and PECO are subject to electric rate caps and freezes and the
PPAs between them and Generation are at fixed prices. These supply contracts are
a substantial portion of our business and so our profitability depends on
Generation's ability to manage its costs and produce or procure electricity
efficiently, at costs less than the prices at which it sells under the PPAs. Our
businesses' ability to manage costs also may be affected by the other risk
factors described in this prospectus, inflation and other factors outside of
their control. We cannot assure you that we can maintain current cost levels or
operational efficiency to sustain our current levels of profitability.
o Energy Delivery's revenues are affected by factors beyond our
control.
Energy Delivery's revenues are affected by the demand for electricity
and natural gas. That demand can vary greatly based upon:
o weather conditions, seasonality and temperature
extremes;
o availability of competitively priced alternative
energy sources; and
o fluctuations in economic activity and growth in our
service territories.
Weather conditions, accidents and other catastrophic events can disrupt
or limit Energy Delivery's ability to deliver electricity and natural gas. Very
warm and very cold temperatures, especially for prolonged periods, can
dramatically increase the demand for electricity and natural gas for cooling and
heating. The pricing of alternative energy sources may affect the demand of
customers, such as commercial and industrial customers, who have the ability to
use alternative energy sources in their operations.
o Generation may incur substantial costs and liabilities due to
its ownership and operation of nuclear facilities.
The ownership and operation of nuclear facilities involve risks,
including:
o mechanical or structural problems;
o inadequacy or lapses in maintenance protocols;
o impairment of reactor operation and safety systems
due to human error;
o costs of storage, handling and disposal of nuclear
materials;
o limitations on the amounts and types of insurance
coverage commercially available; and
7
o uncertainties regarding both technological and
financial aspects of decommissioning nuclear
facilities.
The material risks known or currently anticipated by us that could
affect Generation's ability to sustain its current levels of profitability are:
Capacity Factors. Generation's nuclear fleet must operate at
consistently high capacity factors in order for it to produce efficient,
low-cost energy and sustain its current profitability levels.
Life Extensions. Generation's nuclear facilities are currently
operating under 40-year NRC licenses. Generation has applied for 20-year
extensions to those licenses, but it cannot predict whether any of the pending
extensions will be granted. If the extensions are granted, Generation cannot be
sure that it will be able to operate the facilities for all or any portion of
the extended license.
Regulatory Risk. The NRC may modify, suspend or revoke licenses, shut
down a nuclear facility and impose civil penalties for failure to comply with
the Atomic Energy Act, related regulations or the terms of the licenses for
nuclear facilities. A change in the Atomic Energy Act or the applicable
regulations or licenses may require a substantial increase in capital
expenditures or may result in increased operating or decommissioning costs.
Operational Risk. Operations at any of our nuclear generation plants
could degrade to the point where Generation has to shut down the plant. If this
were to happen, identifying and correcting the causes may require significant
time and expense. Generation may choose to close a plant rather than incur the
expense of restarting it. In either event, Generation may lose revenue and incur
increased fuel and purchased power expense to meet its supply commitments. For
plants operated by Generation but not wholly owned by it, Generation may also
incur liability to the co-owners.
Nuclear Accident Risk. Although the safety record of nuclear reactors
generally, including Generation's, has been very good, accidents and other
unforeseen problems have occurred both in the United States and elsewhere. The
consequences of an accident can be severe and include loss of life and property
damage. Any resulting liability from a nuclear accident may exceed Generation's
resources, including insurance coverages.
Nuclear fuel quality may affect costs. The quality of nuclear fuel
utilized by Generation can affect the efficiency and costs of its operations.
Certain Generation nuclear units have recently identified a limited number of
fuel performance issues. Remediation actions, including those required to
address public, personnel and safety issues, have resulted in increased costs
due to accelerated fuel amortization and/or increased outage costs and could
continue to do so. It is difficult to predict the total cost of these
remediation procedures.
o Generation is exposed to price fluctuations and other risks of
the wholesale power markets.
Generation sells electricity in both the wholesale bilateral markets
and spot markets. These sales expose it to the risks of rising and falling
prices in those markets, and its cash flows may vary accordingly. To the extent
Generation does not supply power to serve the needs of ComEd and PECO at fixed
rates mandated by state regulatory commissions, its cash flows will largely be
determined by wholesale prices of electricity and its ability to successfully
market energy, capacity and ancillary services.
8
At any given time, the wholesale spot-market price of electricity for
each hour is generally determined by the cost of supplying the next unit of
electricity to the market during that hour. Many times the next unit of
electricity supplied would be supplied from generating stations fueled by fossil
fuels, primarily natural gas. Consequently, the open market wholesale price of
electricity may reflect the cost of natural gas plus the spark spread, the cost
to convert natural gas to electricity. Therefore, changes in the supply and cost
of natural gas may impact the open market wholesale price of electricity.
Credit Risk. In the bilateral markets, Generation is exposed to the
risk that counterparties that owe it money or energy as a result of market
transactions will not perform their obligations. For example, energy supplied by
third-party generators under long-term agreements represents a significant
portion of Generation's overall capacity. These generators face operational
risks, such as those that Generation faces, and their ability to perform depends
on their financial condition. In the event the counterparties to these
arrangements fail to perform, Generation might be forced to honor the underlying
commitment at then-current market prices and incur additional losses, to the
extent of amounts, if any, already paid to the counterparties. In the spot
markets, Generation is exposed to the risks of whatever default mechanisms exist
in that market, some of which attempt to spread the risk across all
participants, which may or may not be an effective way of lessening the severity
of the risk and the amounts at stake.
Immature Markets. The wholesale spot markets are new and evolving
markets that vary from region to region and are still developing practices and
procedures. While FERC has proposed an initiative to standardize wholesale spot
markets, Generation cannot predict whether that initiative will be successful,
what form any of these markets will eventually take or what roles it will play
in them. Problems in or the failure of any of these markets, as was experienced
in California in 2000, could adversely affect Generation's business.
Hedging. The Power Team buys and sells energy and other products in the
wholesale markets and enters into financial contracts to manage risk and hedge
various positions in our power generation profiles. This activity, along with
the effects of any specialized accounting for the trading contracts, may cause
volatility in Generation's future results of operations and affect the payment
of dividends.
o The ongoing transformation of the energy industry could have a
negative effect on our businesses.
The energy industry is undergoing major transformations. Increased
competition from new or restructured suppliers could have a negative impact on
our wholesale and retail sales. Additionally, the changing industry exposes our
Generation and Energy Delivery businesses to marketplace volatility that they
have not historically been called upon to manage. These changes have
significantly affected the whole industry and the manner in which its
participants conduct their businesses. These changes are ongoing, and we cannot
predict the future course of changes in laws and regulations, including changes
resulting from market volatility and increased security concerns, or the
ultimate effect that this changing regulatory environment will have on our
businesses.
o Our businesses depend on access to the capital markets.
Our businesses are capital intensive and we depend on access to the
capital markets to meet our capital resource requirements to the extent not
provided by internally generated funds. We also may need to access the capital
markets to finance acquisitions. When necessary, we secure funds from external
sources by issuing commercial paper and, as required, long-term debt securities.
We actively manage our exposure to changes in interest rates through
interest-rate swap transactions and our balance of fixed- and floating-rate
instruments. We currently anticipate primarily using internally generated cash
flows and short-term financing through commercial paper to fund our operations
as well as long-term external financing sources to fund capital requirements as
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the need arises. The ability to arrange debt financing, to refinance current
maturities and early retirements of debt, and the costs of issuing new debt are
dependent on:
o credit availability from banks and other financial
institutions;
o maintenance of acceptable credit ratings;
o investor confidence in us and our subsidiaries;
o general economic and capital market conditions; and
o the success of current projects.
o We may make acquisitions that do not achieve the intended
financial results.
We continue to opportunistically pursue investments that fit our
strategic objectives and improve our financial performance. Our future financial
performance will depend in part upon a variety of factors related to these
investments, including our ability to successfully integrate them into existing
operations. These new investments, as well as our existing investments, may not
achieve the financial performance that we anticipate.
o Our results of operations may be affected by our ability to
divest ourself of unprofitable or under-performing businesses.
We are actively pursing opportunities to dispose of businesses, such as
Sithe Energies, Inc., which are either unprofitable or do not meet our goals. We
may incur significant disposition costs or expenses in divesting these
businesses. We also may be unable to successfully implement our divestiture
strategy of certain businesses for a number of reasons, including an inability
to locate appropriate buyers or to negotiate acceptable terms for the
transactions. In addition, the amounts that we may realize from a divestiture
are subject to fluctuating market conditions that may contribute to pricing and
other terms that are materially different than expected and could result in a
loss on the sale. Timing of any divestitures may positively or negatively affect
our results of operations.
o Market performance affects our decommissioning trust funds and
benefit plan asset values.
The performance of the capital markets affects the value of the assets
that are held in trust to satisfy our future obligations under our pension and
post-retirement benefit plans and to decommission nuclear generating plants. A
decline in the market value of those assets, as was experienced from 2000 to
2002, may increase our funding requirements for these obligations.
o Competition from other electric generation companies could
affect our stock price, results of operations and ability to
pay dividends.
Restructuring of the energy markets in the United States and elsewhere
in the world, including the privatization of government-owned utilities and the
sale of utility-owned assets, is creating opportunities for, and competition
from, well-capitalized competitors, which may affect our ability to achieve our
objectives. Increased competition also could erode the price of power and result
in lower revenues, which in turn could affect our results of operations.
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o We may be unable to respond effectively to competition or new
technologies.
We may be unable to respond in a timely or effective manner to the many
changes in the power industry that may occur as a result of regulatory
initiatives to increase competition. Increased competition may create additional
competitors in our industry, and we may be unable to maintain our revenues and
earnings levels or pursue our growth strategy. In addition, new technologies may
be developed that affect the competitiveness of our generation facilities. To
the extent that competition increases, our profit margins may be negatively
affected.
o War and acts and threats of terrorism may adversely affect our
results of operations, our ability to raise capital and our
future growth.
We do not fully know the impact that any future terrorist attacks may
have on our industry in general and on us in particular. In addition, any
retaliatory military strikes or sustained military campaign may affect our
operations in unpredictable ways, such as changes in insurance markets and
disruptions of fuel supplies and markets, particularly oil. The possibility
alone that infrastructure facilities, such as electric generation, electric and
gas transmission and distribution facilities, would be direct targets of, or
indirect casualties of, an act of terror may affect our operations.
Additionally, the continuing military activity in Iraq and other wars may have
an adverse effect on the economy in general. A lower level of economic activity
might result in a decline in energy consumption, which may adversely affect our
revenues or restrict our future growth. Instability in the financial markets as
a result of terrorism or war may affect our stock price and our ability to raise
capital.
o Our financial performance is affected by our ability to manage
costs for security and liability insurance.
Security. In connection with the events of September 11, 2001, the
electric industry has developed additional security guidelines. The electric
industry, through the North American Electric Reliability Council (NERC),
developed physical security guidelines, which were accepted by the U.S.
Department of Energy and which may become mandatory through regulation or
legislation. The gas industry, through the American Gas Association, developed
physical security guidelines that were accepted by the U.S. Department of
Transportation.
Generation has also initiated security measures to safeguard its
employees and critical operations and is actively participating in industry
initiatives to identify methods to maintain the reliability of its energy
production and delivery systems. These security measures have resulted in and
are expected to continue to result in increased costs. On a continuing basis,
Generation is evaluating enhanced security measures at certain critical
locations, enhanced response and recovery plans and assessing long-term design
changes and redundancy measures. Additionally, the energy industry is working
with governmental authorities to ensure that emergency plans are in place and
critical infrastructure vulnerabilities are addressed in order to maintain the
reliability of the country's energy systems. These measures will involve
additional expense to develop and implement.
Insurance. Any claim resulting from a nuclear accident exceeding the
amounts available under our nuclear liability insurance and other sources for
payment of claims would have a negative effect on our results of operations and
our financial condition. As a result of significant changes in the insurance
marketplace, due in part to the September 11, 2001 terrorist acts, the coverage
available and the limits under property damage and liability insurance that we
buy may be less than those that we could obtain in the past, and the recovery
for losses due to terrorists acts may be limited. We are self-insured for losses
that exceed the amount of insurance we maintain. A claim that exceeds the
amounts available under our property damage and liability insurance would
negatively affect our results of operations.
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We do not carry any form of business interruption insurance other than
replacement power coverage for Generation's nuclear operations. Damage to
ComEd's or PECO's delivery facilities may disrupt their distribution services
and significantly and adversely affect our results of operations.
o We may incur substantial cost to fulfill our obligations
related to environmental matters.
ComEd, PECO and Generation are subject to extensive environmental
regulation by local, state and Federal authorities. These laws and regulations
affect the manner in which our subsidiaries conduct their operations and make
capital expenditures. ComEd, PECO and Generation are subject to liability under
these laws for the costs of remediating environmental contamination of property
now or formerly owned by them and of property contaminated by hazardous
substances they generated. We believe that ComEd, PECO and Generation have
responsible environmental management and compliance programs; however, each has
incurred and expects to incur significant costs related to environmental
compliance and site remediation and clean-up. Remediation activities associated
with manufactured gas plant operations for ComEd and PECO will be one source of
such costs. Also, ComEd, PECO and Generation are currently involved in a number
of proceedings relating to sites where hazardous substances have been deposited
and may be subject to additional proceedings in the future.
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EXELON CORPORATION
Exelon Corporation is a registered public utility holding company that
operates through its subsidiaries in three business segments:
o Energy Delivery, consisting of the retail electricity
distribution and transmission businesses of ComEd in northern
Illinois and PECO in southeastern Pennsylvania and the natural
gas distribution business of PECO in the Pennsylvania counties
surrounding the City of Philadelphia.
o Generation, consisting of the owned and contracted for
electric generating facilities and energy marketing operations
of Generation and interests in Sithe Energies, Inc. (Sithe)
and AmerGen Energy Company, LLC (AmerGen).
o Enterprises, consisting of competitive retail energy sales,
energy and infrastructure services, communications and other
investments (weighted towards the communications, energy
services and retail services industries).
Our principal executive offices are located at 10 South Dearborn
Street, 37th Floor, P.O. Box 805379, Chicago, Illinois 60680-5379, and our
telephone number is (312) 394-4321.
EXELON CAPITAL TRUST I, EXELON CAPITAL TRUST II AND
EXELON CAPITAL TRUST III
Each of Exelon Capital Trust I, Exelon Capital Trust II and Exelon
Capital Trust III is a Delaware statutory trust that was formed on August 25,
2003. Each of the trust's businesses is defined in a declaration of trust, dated
as of August 25, 2003, executed by us, as sponsor, and certain of the trustees
specified below. The declaration of trust for a trust will be amended and
restated in its entirety as of the date trust preferred securities are initially
issued by the applicable trust. Each declaration, as amended and restated, is
referred to in this prospectus individually as the "trust agreement," and
collectively as the "trust agreements." The trust agreements will be qualified
under the Trust Indenture Act of 1939, as amended.
The trusts exist for the exclusive purposes of:
o issuing and selling their trust preferred securities and trust
common securities;
o using the proceeds from the sale of the trust common
securities and trust preferred securities to acquire the
subordinated debt securities from us; and
o engaging in only those other activities necessary or
incidental to these purposes.
The trusts will have no assets other than the subordinated debt
securities. The trusts will have no revenue other than payments under the
subordinated debt securities. Each trust has a term of 30 years, but may
dissolve earlier as provided in the trust agreements.
We will, directly or indirectly, acquire all of the trust common
securities of each trust, which will have an aggregate liquidation amount equal
to at least 3% of the total capital of the issuing trust.
Each trust's business and affairs will be conducted by its trustees, as
provided in the trust agreements. At the time of the issuance of the trust
preferred securities, the trustees for the issuing trust will be Wachovia Trust
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Company, National Association, as the property trustee and the Delaware trustee,
and three of our employees as administrative trustees. We, as holder of the
trust common securities, or, if an event of default under the applicable trust
agreement has occurred and is continuing, the holders of not less than a
majority in liquidation amount of the trust preferred securities, will be
entitled to appoint, remove or replace the property trustee and the Delaware
trustee. In no event will the holders of the trust preferred securities have the
right to vote to appoint, remove or replace the administrative trustees. Only
the holder of the trust common securities will be entitled to do that.
For so long as the trust preferred securities remain outstanding, we
will:
o maintain directly or indirectly 100% ownership of the trust
common securities;
o use our reasonable efforts to cause the issuing trust to
remain a statutory trust and not to voluntarily dissolve,
wind-up, liquidate or be terminated, except as permitted by
the applicable trust agreement; and
o use our reasonable efforts to cause the issuing trust to
continue to be treated as a grantor trust and not an
association taxable as a corporation for United States federal
income tax purposes.
We will pay all of the issuing trust's fees and expenses, including
those related to the offering of the trust preferred securities. In addition, we
will guarantee payments on the trust preferred securities to the extent that the
issuing trust has funds to make payments on the trust preferred securities. See
"Description of Guarantees" below.
The rights of the holders of the trust preferred securities are set
forth in the trust agreements and the Delaware Statutory Trust Act.
The location of each trust's principal executive office is 10 South
Dearborn Street, 37th Floor, P.O. Box 805379, Chicago, Illinois 60680-5379, and
the telephone number is (312) 394-4321.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have filed with the SEC, which we
have referenced under "Where You Can Find More Information" and "Documents
Incorporated by Reference" contain forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical facts, included in
this prospectus that address activities, events or developments that we expect
or anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. These statements
are based on assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the
circumstances. These statements involve a number of risks and uncertainties,
many of which are beyond our control. The following are among the most important
factors that could cause actual results to differ materially from the
forward-looking statements:
o the significant considerations and risks discussed in this
prospectus;
o general and local economic, market or business conditions;
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o fluctuations in demand for electricity, capacity and ancillary
services in the markets in which we operate;
o uncertain obligations due to customers' right to choose
generation suppliers;
o changes in laws or regulations that are applicable to us;
o environmental constraints on construction and operation; and
o access to capital.
Consequently, all of the forward-looking statements made in this
prospectus are qualified by these cautionary statements and we cannot assure you
that the results or developments anticipated by us will be realized or, even if
realized, will have the expected consequences to or effects on us or our
business prospects, financial condition or results of operations. You should not
place undue reliance on these forward-looking statements in making your
investment decision. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to these forward-looking statements to
reflect events or circumstances that occur or arise or are anticipated to occur
or arise after the date hereof. In making an investment decision regarding the
shares of common stock described in this prospectus, we are not making, and you
should not infer, any representation about the likely existence of any
particular future set of facts or circumstances.
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USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement,
we intend to use the net proceeds from the sale of the securities for general
corporate purposes, including to discharge or refund (by redemption, by purchase
on the open market, by purchase in private transactions, by tender offer or
otherwise) outstanding long-term debt, to invest in our operating subsidiaries,
to finance capital improvements and to supplement working capital. Any proceeds
of securities issued by the trusts will be used by the trusts to purchase
subordinated debt securities from us. We will describe in the applicable
prospectus supplement any specific allocation of the proceeds to a particular
purpose that we have made at the date of that prospectus supplement. Please
refer to our annual and quarterly reports incorporated by reference into this
prospectus and any prospectus supplement for information concerning our
outstanding long-term debt. See "Where You Can Find More Information."
RATIO OF EARNINGS TO FIXED CHARGES
The following are our consolidated ratios of earnings to fixed charges
and ratios of earnings to combined fixed charges and preferred stock dividends
for each of the periods indicated:
Years Ended December 31, Six Months Ended
1998 1999 2000 2001 2002 June 30, 2003
--------------------------------------------------------------------
Ratio of earnings to fixed charges 3.07 3.11 2.39 2.86 3.39 2.91
The ratio of earnings to fixed charges represents, on a pre-tax basis,
the number of times earnings cover fixed charges. Earnings consist of pre-tax
net income from continuing operations after adjustment for income from equity
investees and capitalized interest or allowance for funds used during
construction (AFUDC), to which has been added fixed charges. Fixed charges
consist of interest costs and amortization of debt discount and premium on all
indebtedness and the interest portion of all rental expense.
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DESCRIPTION OF DEBT SECURITIES
The debt securities will be our direct, unsecured obligations and may
be issued from time to time in one or more offerings of one or more series. The
debt securities will be issued under an Indenture to be entered into between us
and Chase Manhattan Trust Company, N.A., as trustee, dated as of May 1, 2001
(Indenture). The form of Indenture has been filed as exhibit to the registration
statement of which this prospectus is a part. Selected provisions of the
Indenture have been summarized below. The summary is not complete and many of
the terms contained in the following summary may be modified in the accompanying
prospectus supplement. You should read the Indenture for provisions that may be
important to you. In the summary below, we include references to section numbers
of the Indenture so that you can easily locate these provisions and, when
appropriate, we also included references to sections of the Trust Indenture Act.
General Provisions of the Indenture
The debt securities will be our direct, unsecured obligations and will
rank equally with all of our other unsecured and unsubordinated indebtedness.
Because we are a holding company that conducts all of our operations
through our subsidiaries, holders of debt securities will generally have a
junior position to claims of creditors of those subsidiaries, including trade
creditors, debt holders, secured creditors, taxing authorities, guarantee
holders and any preferred stockholders other than, in each case, where we are
the creditor or stockholder. Our subsidiaries have ongoing corporate debt
programs used to finance their business activities. As of June 30, 2003, our
subsidiaries had approximately $14.9 billion of outstanding debt. We do not have
any preferred stock outstanding, but our subsidiary PECO has outstanding
preferred stock with an aggregate value of $87 million. ComEd, another of our
subsidiaries, has less than 1% of its shares of common stock held by
non-affiliates. Finance subsidiaries of each of PECO and ComEd have preferred
securities outstanding, with an aggregate value of $178 million and $344
million, respectively. If distributions are not timely made on any of these
preferred securities, PECO or ComEd, as the case may be, may not pay dividends
on its common stock, which may adversely affect our ability to make payment on
these debt securities.
The Indenture provides that any debt securities proposed to be sold by
this prospectus and the accompanying prospectus supplement, as well as other of
our unsecured debt securities, may be issued under the Indenture in one or more
series, in each case as authorized by us from time to time. The particular terms
of any series of debt securities and any modifications of or additions to the
general terms of the debt securities described in this prospectus will be
described in the prospectus supplement for that series. Accordingly, for a
description of the terms of any series of debt securities, you should refer to
both the prospectus supplement relating to that series and the description of
debt securities, set forth in this prospectus.
The applicable prospectus supplement for a series of debt securities
that we issue will describe, among other things, the following terms of the
offered debt securities:
o the title;
o any limit on the aggregate principal amount;
o whether issued in the form of one or more global securities
and whether all or a portion of the principal amount of the
debt securities is represented thereby;
o the price or prices at which the debt securities will be
issued;
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o the date or dates on which principal is payable, which may
range from nine months to 30 years for medium-term debt
securities and more than 30 years for long-term debt
securities;
o interest rates, which may be fixed or floating rates, and the
dates from which interest, if any, will accrue, and the dates
when interest is payable;
o the right, if any, to extend the interest payment periods and
the duration of the extensions;
o additional covenants for the benefit of the holders of debt
securities;
o our rights or obligations to redeem or purchase the debt
securities;
o any sinking fund provisions;
o the terms applicable to any debt securities issued at a
discount from their stated principal amount;
o the portion of the principal amount payable upon acceleration
of maturity as a result of a default on our obligations, if
other than the entire principal amount of the debt securities
when issued;
o whether and under what circumstances we will pay additional
amounts on our debt securities to any holder who is not a
United States person in respect of any tax, assessment or
governmental charge attributable to that person and, if so,
whether we will have the option to redeem those debt
securities rather than pay those additional amounts; and
o any other specific terms of any debt securities.
If applicable, the prospectus supplement will also include a discussion
of federal income tax considerations relevant to the debt securities being
offered.
We may issue debt securities that provide for less than the entire
principal amount to be payable upon declaration of acceleration of the maturity
of those debt securities, which are commonly referred to as "original issue
discount securities." Federal income tax and other considerations pertaining to
any original issue discount securities will be discussed in the applicable
prospectus supplement.
We are not restricted by the Indenture from incurring indebtedness and
you are not protected from a highly leveraged or similar transaction involving
us. You should refer to the prospectus supplement for information with respect
to any deletions from, modifications of or additions to the events of default or
the covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Denominations, Registration and Transfer
Debt securities of a series may be issuable solely as registered
securities (registered in our books in the name of the holder thereof). The
Indenture also provides that debt securities of a series may be issuable in
global form. See "Book-Entry System." Unless otherwise provided in the
prospectus supplement, debt securities denominated (other than global
securities, which may be of any denomination) are issuable in United States
18
dollars in denominations of $1,000 or any integral multiples of $1,000. (Section
2.7 of the Indenture).
Debt securities will be exchangeable for other debt securities of the
same series and maturity. (Section 2.8 of the Indenture).
Debt securities of a series may be presented for registration of
transfer, and debt securities of a series may be presented for exchange, (1) at
each office or agency required to be maintained by us for payment of that series
as described in "Payment and Paying Agents," and (2) at each other office or
agency that we may designate from time to time for that purpose. No service
charge will be made for any transfer of debt securities, but we may require
payment of any tax or other governmental charge payable in connection therewith.
(Section 2.8 of the Indenture).
We will not be required to:
o issue, register the transfer of, or exchange debt securities
during a period beginning at the opening of business 15 days
preceding the first mailing of notice of redemption of debt
securities of that series to be redeemed; or
o register the transfer of or exchange any debt security, or
portion thereof, called for redemption, except the unredeemed
portion of any debt security being redeemed in part.
(Section 2.8 of the Indenture).
Payment and Paying Agents
Principal, premium, if any, and interest, if any, on debt securities
will be payable at any office or agency to be maintained by us in New York, New
York, except that at our option, interest may be paid (1) by check mailed to the
address of the person entitled thereto as that address appears in our security
register or (2) by wire transfer to an account maintained by the person entitled
thereto as specified in our security register. (Section 3.1 of the Indenture).
Payment of any installment of interest on debt securities will be made to the
person in whose name the debt security is registered at the close of business on
the regular record date for interest. (Section 2.7 of the Indenture).
We may from time to time designate additional offices or agencies,
approve a change in the location of any office or agency and, except as provided
above, rescind the designation of any office or agency.
Events of Default
Unless otherwise provided for in the prospectus supplement, we will be
subject to an "event of default" under the Indenture if any of the following
occurs:
o failure to pay interest for 30 days after the date payment is
due and payable; provided, that if we extend an interest
payment period in accordance with the terms of the debt
securities, the extension will not be a failure to pay
interest;
o failure to pay principal or premium, if any, on any debt
security when due, either at maturity, upon any redemption, by
declaration or otherwise;
o failure to make any sinking fund payments when due;
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o failure to perform other covenants under the Indenture for 60
days after the trustee has notified us that performance was
required;
o bankruptcy, insolvency or reorganization of our company; or
o any other event of default provided in the applicable
resolution of our board of directors under which we issue a
series of debt securities.
(Section 5.1 of the Indenture).
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under the Indenture. If an event of default relating to the
payment of interest, principal or any sinking fund installment involving any
series of debt securities has occurred and is continuing, the trustee or the
holders of not less than 25% in aggregate principal amount of outstanding debt
securities of each affected series may declare the entire principal amount of
all the debt securities of that series (or, if the debt securities of that
series are original issue discount securities, that portion of the principal
amount as may be specified in the terms thereof) to be due and payable
immediately. (Section 5.1 of the Indenture).
Where an event of default has occurred and is continuing with respect
to the outstanding debt securities of a series, the trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of the holders of the outstanding debt securities of
that series, unless those holders have offered the trustee reasonable indemnity
against the expenses and liabilities that it might incur in compliance with the
request that the trustee take action in response to an event of default. Subject
to these provisions for the indemnification of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of a series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or power
conferred on the trustee with respect to the debt securities of that series.
(Section 5.9 of the Indenture).
The holders of a majority in principal amount of the outstanding debt
securities of a series may, on behalf of the holders of all debt securities of
that series, waive any past default under the Indenture with respect to that
series and its consequences, except a default (1) in payment of the principal of
(or premium, if any) or interest, or any additional amounts payable in respect
of any debt security of that series or (2) in respect of a covenant or provision
that cannot be modified or amended without the consent of the holder of each
affected outstanding debt security of that series. (Section 5.10 of the
Indenture)
The Indenture imposes limitations on suits brought by holders of debt
securities against us. Except for actions for payment of overdue principal or
interest, no holder of debt securities of any series may institute any action
against us under the Indenture unless:
o the holder has previously given to the trustee written notice
of default and continuance of that default;
o the holders of at least 25% in principal amount of the
affected outstanding debt securities have requested that the
trustee institute the action;
o the requesting holders have offered the trustee reasonable
indemnity for expenses and liabilities that may be incurred by
bringing the action;
o the trustee has not instituted the action within 60 days of
the request; and
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o the trustee has not received inconsistent direction by the
holders of a majority in principal amount of the outstanding
debt securities of that series.
(Sections 5.6 and 5.7 of the Indenture).
We will be required to file annually with the trustee a certificate,
signed by an officer of our company, stating whether or not the officer knows of
any default by us in the performance, observance or fulfillment of any condition
or covenant of the Indenture. (Section 3.5 of the Indenture). The Indenture
provides that the trustee may withhold notice of a default (except payment
defaults) to the holders of debt securities of the series to which the default
applies if the trustee considers it in the interests of those holders of those
debt securities to do so. (Section 5.11 of the Indenture).
Covenants
The Indenture provides that we comply with the following covenants:
o punctually pay principal and interest on the debt securities;
o if the debt securities are no longer in book-entry form,
maintain an office in New York, New York where debt securities
may be presented for payment, exchange and transfer;
o appoint a trustee to fill any vacancy;
o issue a certificate to the trustee on January 31 each year
indicating whether we have complied with all covenants and
conditions in the Indenture;
o maintain our corporate existence; and
o pay our taxes and other assessments and claims as they become
due, unless they are being contested in good faith.
Merger or Consolidation
The Indenture provides that we may not consolidate with or merge with
or into any other corporation or other person or convey or transfer our
properties or assets in their entirety or substantially in their entirety to any
corporation or other person, unless we are the continuing corporation or the
other corporation or other person is organized under the laws of the United
States or any state or is organized under the laws of a foreign jurisdiction and
consents to the jurisdiction of the United States or a state and assumes by
supplemental indenture all of our obligations under the Indenture and the debt
securities issued thereunder and immediately after the transaction no default
exists.
Modification or Waiver
The Indenture provides that the trustee and we may modify and amend the
Indenture and enter into supplemental indentures without the consent of any
holders of debt securities to:
o evidence the assumption by a successor corporation of our
obligations;
o add covenants for the protection of the holders of debt
securities;
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o cure any ambiguity or correct any inconsistency in the
Indenture, provided that this action does not adversely affect
the interests of holders of any series of debt securities in
any material respect; and
o evidence and provide for the acceptance of appointment by a
successor trustee.
(Section 8.1 of the Indenture).
The Indenture also provides that the trustee and we may, with the
consent of the holders, add, eliminate or modify in any way the provisions of
the Indenture or modify in any manner the rights of the holders of the debt
securities. Consent of the holders means holders of not less than a majority in
aggregate principal amount of debt securities of all affected series then
outstanding, voting as one class. (Section 8.2 of the Indenture). We cannot do
this, however, for those matters requiring the consent of each holder as
described below.
The trustee and we may not without the consent of the holder of each
outstanding debt security affected thereby:
o extend the final maturity of any debt security;
o reduce the principal amount or premium, if any;
o reduce the rate or extend the time of payment of interest;
o reduce any amount payable on redemption;
o reduce the amount of the principal of any debt security issued
with an original issue discount that is payable upon
acceleration or provable in bankruptcy;
o impair the right to sue for the enforcement of any payment on
any debt security when due; or
o reduce the percentage of holders of debt securities of any
series whose consent is required for any modification of the
Indenture.
In determining whether the holders of the requisite principal amount of
outstanding debt securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, (1) the principal
amount of an original issue discount security that will be deemed to be
outstanding will be the amount of the principal thereof that would then be due
and payable upon acceleration of the maturity thereof and (2) debt securities
owned by us or any other obligor upon the debt securities or any affiliate of
ours or of any other obligor will be disregarded. (Section 7.4 of the
Indenture).
Satisfaction and Discharge, Defeasance and Covenant Defeasance
We can discharge or defease our obligations under the Indenture as
stated below or as provided in the prospectus supplement.
We may discharge obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that have either become due and payable or are to become due and payable, or
are scheduled for redemption, within one year. We may discharge these
22
obligations by irrevocably depositing with the trustee cash or "U.S. Government
Obligations" (as defined below), as trust funds, in an amount certified to be
enough to pay when due, whether at maturity, upon redemption or otherwise, the
principal of and interest on the debt securities and any mandatory sinking fund
payments. (Section 9.1 of the Indenture).
We may also discharge any and all of our obligations to holders of any
series of debt securities at any time, referred to as "defeasance." We may also
be released from the obligations imposed by any covenants of any outstanding
series of debt securities and provisions of the Indenture, and we may avoid
complying with those covenants without creating an event of default under the
Indenture, referred to as "covenant defeasance." We may effect defeasance and
covenant defeasance only if, among other things:
o we irrevocably deposit with the trustee cash or U.S.
Government Obligations, as trust funds, in an amount certified
to be enough to pay at maturity, or upon redemption, the
principal, and interest on all outstanding debt securities of
that series; and
o we deliver to the trustee an opinion of counsel from a
nationally recognized law firm to the effect that (1) in the
case of covenant defeasance, the holders of the series of debt
securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of that defeasance,
and will be subject to tax in the same manner and at the same
time as if no covenant defeasance had occurred and (2) in the
case of defeasance, either we have received from, or there has
been published by, the Internal Revenue Service a ruling or
there has been a change in applicable U.S. federal income tax
law, and based thereon, the holders of the series of debt
securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of that defeasance,
and will be subject to tax in the same manner as if no
defeasance had occurred.
(Section 9.1 of the Indenture).
Although we may discharge or decrease our obligations under the
Indenture as described in the two preceding paragraphs, we may not avoid, among
other things, the rights and obligations of the trustee under the Indenture, to
register the transfer or exchange of any series of debt securities, to replace
any temporary, mutilated, destroyed, lost or stolen series of debt securities or
to maintain an office or agency in respect of any series of debt securities.
(Section 9.1 of the Indenture).
If we effect covenant defeasance with respect to any debt securities
and those debt securities are declared due and payable because of the occurrence
of any event of default other than the event of default resulting from a failure
to comply with any covenant in the Indenture after the notice served therefor
has elapsed, the amount of U.S. Government Obligations and funds on deposit with
the trustee will be sufficient to pay amounts due on those debt securities at
the time of their stated maturity but may not be sufficient to pay amounts due
on those debt securities at the time of the acceleration resulting from that
event of default. In that case, we would remain liable to make payment of those
amounts due at the time of acceleration. (Section 9.1 of the Indenture).
If the trustee or any paying agent is prevented by a court or
governmental authority from applying any money deposited with the trustee in
accordance with the Indenture, then our obligations under the Indenture and the
debt securities shall be revived and reinstated as though no deposit had
occurred pursuant to the Indenture. Thereafter, our obligation will continue
until such time as the trustee or paying agent is permitted to apply all money
in accordance with the Indenture. Any payment of principal of (or premium, if
any) or interest that we make on any debt security following the reinstatement
of our obligations will be subrogated to the rights of the holders of those debt
securities to receive such payment from the money held by the trustee or paying
agent.
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As used above, "U.S. Government Obligations" means securities that are
(1) direct obligations of the United States or (2) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States, the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States, which are not callable or
redeemable at the option of the issuer thereof (Section 9.1 of the Indenture).
Book-Entry Debt Securities
Unless otherwise specified in the applicable prospectus supplement, the
debt securities will be issued in registered, global form. See "Book-Entry
System."
Information About the Trustee
The Indenture provides that there may be more than one trustee under
the Indenture, each for one or more series of debt securities. If there are
different trustees for different series of debt securities, each trustee will be
a trustee under the Indenture separate and apart from the trust administered by
any other trustee under the Indenture. Except as otherwise indicated in this
prospectus or any prospectus supplement, any action permitted to be taken by a
trustee may be taken by that trustee only on the one or more series of debt
securities for which it is the trustee under the Indenture. All payments of
principal of, premium, if any, and interest on, and all registration, transfer,
exchange, authentication and delivery of, the debt securities of a series will
be made by the trustee for that series at an office designated by the trustee.
The trustee may resign at any time and if the trustee resigns, we will
appoint a successor trustee. We may remove the trustee if the trustee fails to
satisfy the eligibility requirements of the Trust Indenture Act, fails to comply
with the Trust Indenture Act, is incapable of acting or if the trustee becomes
bankrupt or insolvent and, upon removal, we will appoint a successor trustee.
The holders of a majority in aggregate principal amount of the debt securities
of each series may remove the trustee for that series at any time and, upon
removal, we will appoint a successor trustee. (Section 6.11 of the Indenture).
If the trustee becomes our creditor, the Indenture places limitations
on the rights of the trustee to obtain payment of claims directly or from
property received in respect of that claim as security or otherwise. The trustee
may engage in other transactions. If the trustee acquires any conflicting
interest relating to any duties concerning the debt securities, however, it must
eliminate the conflict or resign as trustee. (Section 6.9 of the Indenture).
The Indenture provides that if an event of default occurs and is not
cured or waived, the trustee must use the same degree of care and skill as a
prudent person would use in the conduct of his or her own affairs in the
exercise of the trustee's power. (Section 6.1 of the Indenture). The trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the holders of the debt securities, unless
that trustee has been offered security and indemnity satisfactory to that
trustee. (Section 6.2 of the Indenture).
We maintain ordinary banking relationships with Chase Manhattan Trust
Company, N.A., including credit facilities and lines of credit.
Governing Law
The Indenture is governed by Pennsylvania law.
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DESCRIPTION OF COMMON STOCK
The description below is a summary of certain provisions of our common
stock. The Pennsylvania Business Corporation Law and our Amended and Restated
Articles of Incorporation and Bylaws determine the rights and privileges of
holders of our common stock. We encourage you to read such documents, which have
been filed with the SEC and are incorporated herein by reference, and the
Pennsylvania law for more information regarding such common stock.
Authorized Capital
Our authorized capital consists of 600,000,000 shares of common stock,
no par value, and 100,000,000 shares of Preferred Stock, no par value.
Common Stock
As of June 30, 2003, 325,848,491 shares of our common stock were issued
and outstanding. The outstanding common stock is, and the common stock offered
hereby, when issued and paid for, will be, fully paid and non-assessable.
Dividends
Dividends on the common stock will be paid if, when and as determined
by our Board of Directors out of funds legally available for this purpose. The
rate and timing of future dividends will depend upon our future earnings and
financial condition and upon other relevant factors affecting our dividend
policy, which we cannot presently determine. As a practical matter, our ability
to pay dividends will be governed by the ability of our operating subsidiaries
to pay dividends to us. To date, the funds that we require to enable us to pay
dividends on our common stock have been derived predominantly from dividends
paid by PECO and ComEd. To date, Generation has not declared or paid dividends.
Our subsidiaries' ability to pay dividends to us will be subject to the
prior rights of the holders of such subsidiaries' outstanding debt and preferred
securities, the availability of earnings and the needs of their businesses.
Neither ComEd nor PECO may declare dividends on any shares of their respective
capital stock in the event that: (1) it exercises its right to extend the
interest payment periods on the subordinated debt securities which were issued
to its financing trusts; (2) it defaults on its guarantee of the payment of
distributions on the preferred trust securities of the financing trusts; or (3)
an event of default occurs under the indenture under which the subordinated debt
securities are issued. The restrictions on the payment of dividends contained in
PECO's Amended and Restated Articles of Incorporation do not currently limit the
amount of regular quarterly dividends PECO pays on its common stock. In
addition, under PUHCA, ComEd, PECO and Generation can pay dividends only from
retained, undistributed or current earnings. Similar restrictions also apply to
ComEd under the Illinois Public Utilities Act.
Voting Rights
Holders of common stock are entitled to one vote for each share held of
record by them on all matters presented to shareholders. Pursuant to our Amended
and Restated Articles of Incorporation, the holders of common stock do not have
cumulative voting rights in the election of directors. Our Bylaws provide for a
classified board of directors consisting of three classes as nearly equal in
number as may be. Each class holds office until the third year following the
election of such class, and no director may be removed except for cause upon a
majority vote of all outstanding shares. Our Bylaws also provide for certain
notice requirements for shareholder nominations and proposals at annual meetings
and preclude shareholders from bringing business before any special meeting. Our
Amended and Restated Articles of Incorporation and certain provisions of
25
Pennsylvania law would require a supermajority vote of holders or a majority
vote of disinterested directors to approve certain business combinations and
other major transactions involving us.
Liquidation Rights
After satisfaction of the preferential liquidation rights of any
preferred stock, the holders of the common stock are entitled to share, ratably,
in the distribution of all remaining net assets.
Preemptive and Other Rights
The holders of common stock do not have preemptive rights as to
additional issues of common stock or conversion rights. The shares of common
stock are not subject to redemption or to any further calls or assessments and
are not entitled to the benefit of any sinking fund provisions.
Listing
The outstanding shares of common stock are, and the shares offered
hereby will be, listed on the New York, Chicago and Philadelphia Stock
Exchanges.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common stock is EquiServe
Trust Company, N.A.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of our common stock (or a range of numbers of shares pursuant to a
predetermined formula) at a future date or dates. The price per share of common
stock and the number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either:
o our debt securities; or
o debt obligations of third parties, including U.S. Treasury
securities,
securing the holders' obligations to purchase the common stock under the stock
purchase contracts.
The stock purchase contracts may require us to make periodic payments
to the holders of the stock purchase units or vice versa, and such payments may
be unsecured or prefunded on some basis. The stock purchase contracts may
require holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid stock purchase contracts,
often known as prepaid securities, upon release to a holder of any collateral
securing such holder's obligations under the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any
stock purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
contain all of the information that you may find useful. For more information,
you should review the stock purchase contracts, the collateral arrangements and
depositary arrangements, if applicable, relating to such stock purchase
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contracts or stock purchase units and, if applicable, the prepaid securities and
the document pursuant to which the prepaid securities will be issued. These
documents will be filed with the SEC promptly after the offering of the stock
purchase contracts or stock purchase units. Material United States federal
income tax considerations applicable to the stock purchase contracts and the
stock purchase units will also be discussed in the applicable prospectus
supplement.
DESCRIPTION OF PREFERRED STOCK
General.
As of June 30, 2003, our authorized capital stock included 100,000,000
shares of preferred stock, no par value. As of June 30, 2003, there were no
shares of preferred stock outstanding.
Our Board of Directors is authorized, without further shareholder
action, to divide the preferred stock into one or more series and to determine
the following designations, preferences, limitations and special rights of any
series (which for any series will be set forth in the related prospectus
supplement):
o the annual dividend rate or rates;
o the rights, if any, of the holders of shares of the series
upon voluntary or involuntary liquidation, dissolution or
winding up of our company;
o the terms and conditions upon which shares may be converted
into shares of other series or other capital stock, if issued
with the privilege of conversion;
o the price at and the terms and conditions upon which shares
may be redeemed;
o the terms and amount of any sinking fund for the purchase or
redemption of shares of a series; and
o the exchange or exchanges on which the preferred stock will be
listed, if any.
Dividend Rights.
The annual dividend rate for each new series of preferred stock and
whether such dividends will be cumulative from the date of issuance will be set
forth in the applicable prospectus supplement. Dividends will be payable, when
declared, quarterly on the first day of February, May, August and November. Any
limitations on our rights to pay dividends will be described in the applicable
prospectus supplement.
Voting Rights.
The voting rights for each new series of preferred stock will be set
forth in the applicable prospectus supplement.
Liquidation Rights.
The amount per share payable on each series of preferred stock in the
event of any voluntary or involuntary liquidation will be set forth in the
applicable prospectus supplement.
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Redemption Provisions.
The redemption provisions, if any, with respect to each series of
preferred stock will be set forth in the applicable prospectus supplement.
Sinking Fund.
The sinking fund provisions, if any, with respect to each series of
preferred stock will be set forth in the applicable prospectus supplement.
Miscellaneous.
Holders of our preferred stock will not have any preemptive rights to
subscribe for or purchase any additional shares of our capital stock, or other
securities or other right or option to purchase shares of capital stock. The new
preferred stock, when issued and paid for, will be fully paid and nonassessable.
There is no provision restricting us from purchasing shares of
preferred stock in the event of an arrearage in the payment of dividends or
sinking fund obligations.
Listing.
The prospectus supplement will indicate whether and where the preferred
stock to be issued will be listed.
DESCRIPTION OF TRUST PREFERRED SECURITIES
Each trust may issue trust preferred securities and trust common
securities under the terms of its respective trust agreement. A form of the
trust agreement has been filed as an exhibit to the registration statement of
which this prospectus is a part. We suggest that you read the trust agreement
for the complete text of the provisions that are summarized below as well as for
the provisions that are not summarized but may be important to you. The trust
agreement has been qualified as an indenture under the Trust Indenture Act. The
Trust Indenture Act contains provisions that apply to the trust preferred
securities, and you may wish to refer to it as well. Wherever particular defined
terms of the trust agreement are referred to in this prospectus, those defined
terms are incorporated by reference into this prospectus and any related
prospectus supplement.
General Information.
Both the trust preferred securities and the trust common securities
will represent undivided beneficial interests in the assets of the issuing
trust. If there is an event of default under a trust agreement, as described
below, the rights of the holders of the trust preferred securities at issue will
be entitled to priority in right of payment over the holders of trust common
securities. We will own all of the trust common securities.
Prohibited Actions of the Trust.
Each trust will invest the proceeds from any issuance of trust
preferred securities, together with the consideration we pay for the trust
common securities, to purchase subordinated debt securities from us. Legal title
in the subordinated debt securities will be held by the property trustee in
trust for the benefit of the trust and the holders of the trust securities.
In accordance with the trust agreements, each trust may not:
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o acquire any investments or engage in any activities not
authorized by the applicable trust agreement;
o take or consent to any action that would cause the trust to
fail or cease to qualify as a grantor trust for United States
federal income tax purposes;
o issue debt or any securities other than the trust securities;
o incur indebtedness for borrowed money;
o pledge any of its assets;
o sell, assign, transfer, exchange or otherwise dispose of trust
property or interests except as provided in the applicable
trust agreement; or
o take any action that would vary the investment by the trust.
We will guarantee distributions on the trust preferred securities on a
limited basis to the extent described under the caption "Description of
Guarantees." The guarantees will not guarantee payment of distributions or
amounts payable on redemption of the trust preferred securities or liquidation
of the trust when the trust does not have funds on hand legally available for
those payments. In that event, a remedy of a holder of trust preferred
securities is to direct the property trustee to enforce its rights under the
subordinated debt securities held by the issuing trust. If the property trustee
fails to enforce its rights with respect to the subordinated debt securities
held by the issuing trust, any record holder of the trust preferred securities
of that trust may, to the fullest extent permitted by law, institute legal
proceedings directly against us to enforce the property trustee's rights under
those subordinated debt securities without first instituting any legal
proceedings against the property trustee or any other person or entity. In
addition, a holder of the trust preferred securities may institute a legal
proceeding directly against us for enforcement of payment to that holder of
principal of, premium, if any, or interest on the subordinated debt securities
having a principal amount equal to the aggregate liquidation amount of the trust
preferred securities of that holder on or after the due date specified in the
subordinated debt securities.
Holders of the trust preferred securities have no preemptive or similar
rights.
Distributions.
Distributions on the trust preferred securities of a trust will be
payable on the dates and at the rates set forth in the applicable prospectus
supplement. The distribution rate and the relevant distribution date for the
trust securities will correspond to the payments and payment dates on the
associated subordinated debt securities held by the issuing trust. The revenue
of the issuing trust available for distribution to holders of the trust
preferred securities will be limited to payments under the subordinated debt
securities in which the issuing trust will invest the proceeds from the issuance
and sale of the trust securities. If we fail to make interest payments on the
subordinated debt securities held by the issuing trust, the property trustee
will not have funds available to pay distributions on the trust preferred
securities.
Unless an event of default under the subordinated debt indenture has
occurred and is continuing, we may, on one or more occasions, defer the payment
of interest on the subordinated debt securities. The applicable prospectus
supplement will specify the length of time for which such interest deferral
period may last. See "Description of Subordinated Debt Securities - Events of
Default."
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However, no deferral period shall end on a date other than an interest
payment date or extend beyond the stated maturity date. Distributions on the
trust preferred securities will be deferred by the issuing trust during any such
deferral period. Distributions to which holders of the trust preferred
securities are entitled during any such deferral period will accumulate
additional distributions at the rate per annum set forth in the applicable
prospectus supplement.
Upon the termination of any deferral period and the payment of all
amounts then due on any interest payment date, we may elect to begin a new
deferral period, subject to the requirements described above. No interest shall
be due and payable during any deferral period, except at the end of the period,
except as permitted by the subordinated debt indenture.
We must give the trust holding the subordinated debt securities at
issue and the subordinated debt trustee notice of our election to defer the
payment of interest on the subordinated debt securities at least the number of
business days specified in the subordinated debt indenture prior to the earlier
of:
o the date the distributions on the trust preferred securities
would have been payable except for the election to begin such
deferral period; or
o the date we or the trust are required to give notice to any
securities exchange or any other applicable self-regulatory
organization or to the holders of trust preferred securities
of the record date or the date such distributions are payable.
There is no limitation on the number of times that we may elect to
begin a deferral period. Accordingly, there could be multiple deferral periods
of varying lengths throughout the term of the trust preferred securities. See
"Description of Subordinated Debt Securities - Option to Extend Interest Payment
Date."
During any deferral period, we may not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of our capital stock.
Payment of Additional Amounts.
If a Tax Event (the meaning of which can be found under "Description of
Subordinated Debt Securities - Special Event Redemption") has occurred and is
continuing at any time while the property trustee holds any subordinated debt
securities, and a trust or the property trustee in respect of that trust is
required to pay any taxes, duties, assessments or other governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other taxing authority, then, in any case, we will pay any additional
amounts as may be required so that the net amounts received and retained by the
trust and the property trustee, after paying those taxes, duties, assessments or
other governmental charges, will be equal to the amounts the trust and the
property trustee would have received had those taxes, duties, assessments or
other governmental charges not been imposed as a result of the Tax Event. We
refer to these payments in this prospectus as "Additional Amounts." Our payments
of Additional Amounts on the subordinated debt securities will ensure that the
distributions then due and payable by the trust at issue on the trust's
outstanding trust preferred securities and trust common securities will not be
reduced as a result of such taxes, duties, assessments or governmental charges
imposed as a result of a Tax Event.
Redemption.
Whenever subordinated debt securities are repaid (other than following
the distribution of subordinated debt securities to the holders of the trust
securities), whether at maturity or earlier redemption, the property trustee
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will apply the proceeds to redeem a Like Amount (as defined below) of the
related trust securities, upon not less than 30 nor more than 60 days notice of
the date of redemption to the holders of the trust securities, at a redemption
price equal to the liquidation amount of the trust securities to be redeemed
plus accrued and unpaid interest to the redemption date. See "Description of
Subordinated Debt Securities - Optional Redemption" and "- Special Event
Redemption." If less than all of the subordinated debt securities are to be
redeemed on a redemption date, then the proceeds of such redemption shall be
allocated pro rata among the related trust securities, unless an event of
default with respect to the subordinated debt securities has occurred and is
continuing. See "- Subordination of Trust Common Securities."
The term "Like Amount" means:
o with respect to a redemption of the trust securities, trust
securities having a liquidation amount equal to the principal
amount of the subordinated debt securities that are to be
contemporaneously paid in accordance with their terms; and
o with respect to a distribution of subordinated debt securities
upon the dissolution and liquidation of the trust,
subordinated debt securities having a principal amount equal
to the liquidation amount of the trust securities of the
holder to whom such subordinated debt securities are being
distributed.
We will have the option to redeem the subordinated debt securities:
o in whole at any time or in part from time to time on or after
the date indicated in the prospectus supplement; and
o in whole, but not in part, at any time within 90 days of the
occurrence of a Special Event.
See "Description of Subordinated Debt Securities - Optional Redemption
and - Special Event Redemption."
Redemption Procedures.
If applicable, trust securities will be redeemed at the applicable
redemption price with the proceeds from the contemporaneous repayment or
redemption of the related subordinated debt securities. Any redemption of trust
securities will be made and the applicable redemption price will be payable on
the redemption date only to the extent that a trust has funds legally available
for the payment of the applicable redemption price. See also "- Subordination of
Trust Common Securities."
If a trust gives a notice of redemption in respect of its trust
preferred securities, then, by 2:00 p.m., New York City time, on the redemption
date, to the extent funds are legally available to the trust, with respect to
the trust preferred securities held by DTC, or its nominees, the property
trustee will deposit with DTC funds sufficient to pay the applicable redemption
price. See "Book-Entry System." With respect to the trust preferred securities
that are held in certificated form, the property trustee, to the extent funds
are legally available, will deposit with the paying agent for those trust
preferred securities funds sufficient to pay the applicable redemption price and
will give that paying agent irrevocable instructions to pay the applicable
redemption price to the holders of those trust preferred securities upon
surrender of their certificates evidencing those trust preferred securities. See
"- Payment and Paying Agency." Notwithstanding the foregoing, distributions
payable on or prior to the redemption date shall be payable to the holders of
those trust preferred securities on the relevant record dates for the related
distribution dates. If notice of redemption has been given and funds are
deposited as required, then upon the date of that deposit, all rights of the
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holders of the trust preferred securities called for redemption will cease,
except the right of those holders to receive the applicable redemption price,
and those trust preferred securities will cease to be outstanding.
If any redemption date of trust preferred securities is not a business
day, then the redemption price will be paid on the next succeeding day that is a
business day. If the next succeeding business day falls in the next calendar
year, then the required payment will be made on the immediately preceding
business day. If payment of the redemption price is improperly withheld or
refused and not paid either by the trust or by us pursuant to the guarantees:
o distributions on the trust preferred securities will continue
to accumulate at the then applicable rate, from the redemption
date originally established by the issuing trust to the date
the redemption price is actually paid; and
o the actual payment date will be the redemption date for
purposes of calculating the applicable redemption price.
We or our affiliates may, subject to applicable law, from time to time
purchase outstanding trust preferred securities by tender, in the open market or
by private agreement.
If less than all of a trust's outstanding trust preferred securities
and trust common securities are to be redeemed on a redemption date, then the
aggregate amount of those trust preferred securities and trust common securities
to be redeemed shall be allocated pro rata among such trust's trust preferred
securities and trust common securities. The property trustee will select on a
pro rata basis the particular outstanding trust preferred securities to be
redeemed not more than 60 days prior to the redemption date, by such method as
the property trustee shall deem fair and appropriate. The property trustee will
promptly notify the trust registrar in writing of the trust preferred securities
selected for redemption and, in the case of any trust preferred security
selected for partial redemption, the liquidation amount to be redeemed. For all
purposes of the trust agreements, unless the context otherwise requires, all
provisions relating to the redemption of the trust preferred securities will
relate, in the case of any trust preferred security redeemed or to be redeemed
only in part, to the portion of the aggregate liquidation amount of trust
preferred securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of trust securities that
are to be redeemed at its registered address. Unless we default in payment of
the applicable redemption price on, or in the repayment of, the subordinated
debt securities, on and after the redemption date, distributions will cease to
accrue on the trust securities called for redemption.
Dissolution of a Trust and Distribution of the Subordinated Debt
Securities.
Each trust shall automatically dissolve upon the first to occur of:
o our bankruptcy, dissolution or liquidation;
o delivery by us to the property trustee of a direction in
writing to dissolve the trust and distribute the subordinated
debt securities to the holders of the trust's trust
securities;
o the expiration of the term of the trust;
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o the payment at maturity or redemption of the applicable
subordinated debt securities and the consequent payment of all
of the trust preferred securities as described under "-
Redemption"; and
o the entry of an order for dissolution of the trust by a court
of competent jurisdiction.
We have the right at any time to dissolve the trusts and, after
satisfaction of liabilities to creditors of the trusts, cause the subordinated
debt securities held by the trusts to be distributed to the holders of the trust
securities in liquidation of the trusts.
If a dissolution occurs as described in the first or last bullet points
in the preceding paragraph, the trust at issue will be wound up by the
administrative trustees as expeditiously as possible. After satisfaction
(whether by payment or reasonable provision for payment) of liabilities to the
trust's creditors, except in connection with a dissolution of the trust
resulting from the redemption of trust securities, the property trustee will
distribute to the holders of trust securities a Like Amount of the subordinated
debt securities held by the trust, unless that distribution is determined by the
administrative trustees not to be practicable. In that case, the holders will be
entitled to receive pro rata out of the assets of the trust legally available
for distribution to holders an amount equal to the aggregate of the liquidation
amount plus accumulated and unpaid distributions thereon to the date of payment.
If this liquidation distribution can be paid only in part because the trust has
insufficient assets on hand legally available to pay in full the aggregate
liquidation distribution, then the amount payable directly by the trust on the
trust securities will be paid on a pro rata basis, except that if an event of
default has occurred and is continuing, the trust preferred securities shall
have a priority over the trust common securities. See "- Subordination of Trust
Common Securities."
If we elect not to prepay the subordinated debt securities before
maturity in accordance with their terms and either elect not to or are unable to
dissolve and wind up a trust and distribute the subordinated debt securities to
holders of the trust securities, the trust securities will remain outstanding
until the repayment of the subordinated debt securities on the stated maturity
date.
After the liquidation date is fixed for any distribution of
subordinated debt securities to holders of the trust securities:
o the trust securities will no longer be deemed to be
outstanding;
o any holders who provide certificates representing trust
securities will receive certificates representing a Like
Amount of subordinated debt securities;
o any certificates for trust securities not surrendered for
exchange will be deemed to represent a Like Amount of
subordinated debt securities; and
o all rights of holders of trust securities will cease except
the right to receive a Like Amount of subordinated debt
securities.
Subordination of Trust Common Securities.
Payment of distributions on, and the redemption price of, the trust
securities will be made pro rata based on the liquidation amount of the trust
securities. However, if on any distribution date or redemption date, an event of
default has occurred and is continuing, no payment of any distribution on, or
applicable redemption price of, any of the trust common securities, and no other
payment on account of the redemption, liquidation or other acquisition of the
trust common securities, will be made unless payment in full in cash of all
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accumulated and unpaid distributions on all of the outstanding trust preferred
securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the applicable redemption price the full amount of such
redemption price, shall have been made or provided for, and all funds available
to the property trustee shall first be applied to the payment in full in cash of
all distributions on, or redemption price of, the trust preferred securities
then due and payable.
In the case of any event of default under the subordinated debt
indenture, we, as holder of the trust common securities, will be deemed to have
waived any right to act with respect to that event of default until its effect
on the trust preferred securities is cured, waived or otherwise eliminated.
Until that event of default is so cured, waived or otherwise eliminated, the
property trustee will act solely on behalf of the holders of the trust preferred
securities and not on behalf of us, as the holder of the trust common
securities, and only the holders of the trust preferred securities will have the
right to direct the property trustee to act on their behalf.
Trust Agreement Events of Default; Notice.
Each trust agreement provides that an event of default under the
subordinated debt indenture with respect to the series of subordinated debt
securities held by that trust constitutes an event of default with respect to
the trust securities. See "Description of Subordinated Debt Securities - Events
of Default."
Within ninety days after the occurrence of any trust agreement event of
default actually known to the property trustee, the property trustee will
transmit notice of that default to the holders of the trust securities and the
other persons entitled to such notice under the trust agreement, unless the
default is cured or waived. We are required to file annually with the
subordinated debt trustee a certificate as to whether or not we are in
compliance with all the conditions and covenants under the subordinated debt
indenture.
Upon the occurrence of a trust agreement event of default, the
subordinated debt trustee or the property trustee as the holder of the
subordinated debt securities will have the right under the subordinated debt
indenture to declare the principal of and interest on the subordinated debt
securities held by the trust to be immediately due and payable.
If a trust agreement event of default occurs and is continuing, then
the holders of a majority in aggregate liquidation amount of the trust preferred
securities have the right to direct the exercise of any trust or power conferred
upon the property trustee under the trust agreement, including the right to
direct the property trustee to exercise the remedies available to it as holder
of the subordinated debt securities. If the property trustee fails to enforce
its rights with respect to the subordinated debt securities held by the trust at
issue, any record holder of the trust preferred securities issued by that trust
may, to the fullest extent permitted by law, institute legal proceedings
directly against us to enforce the property trustee's rights under those
subordinated debt securities without first instituting any legal proceedings
against the property trustee or any other person or entity. In addition, if a
trust agreement event of default has occurred and is continuing and that event
is attributable to our failure to pay interest, principal or other required
payments on the subordinated debt securities issued to the trust on the date
that interest, principal or other payment is otherwise payable, then a record
holder of the trust preferred securities may, on or after the respective due
dates specified in the subordinated debt securities, institute a proceeding
directly against us for enforcement of payment on those subordinated debt
securities having a principal amount equal to the aggregate liquidation amount
of the trust preferred securities held by that holder. In connection with such
an action, we will be subrogated to the rights of that record holder of trust
preferred securities to the extent of any payment made by us to that record
holder of trust preferred securities.
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If a trust agreement event of default has occurred and is continuing,
the trust preferred securities shall have a preference over the trust common
securities as described above under " - Liquidation of the Trust and
Distribution of Subordinated Debt Securities" and " - Subordination of Trust
Common Securities."
Removal of a Trust's Trustees.
Unless a trust agreement event of default occurs and is continuing, we
may remove any trustee of a trust at any time, as the holder of the trust common
securities. If a trust agreement event of default has occurred and is
continuing, the property trustee and the Delaware trustee may be removed at that
time by the holders of a majority in liquidation amount of the outstanding trust
preferred securities. In no event will the holders of the trust preferred
securities have the right to vote to appoint, remove or replace the
administrative trustees, which voting rights are vested exclusively in the
holder of the trust common securities. No resignation or removal of a trustee of
a trust and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable trust agreement.
Under the trust agreement, if the property trustee has or shall acquire
a conflicting interest within the meaning of the Trust Indenture Act, the
property trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and the trust agreement. To the extent permitted by the Trust
Indenture Act, the property trustee shall not be deemed to have a conflicting
interest by virtue of being trustee under the guarantee.
Mergers, Consolidations, Amalgamations or Replacements of a Trust.
A trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any corporation or
other person, except as described below or as otherwise described under "-
Liquidation of the Trust and Distribution of Subordinated Debt Securities." Each
trust may, at our request and with the consent of the administrative trustees
but without the consent of the holders of the trust preferred securities, the
Delaware trustee or the property trustee, merge with or into, convert into,
consolidate, amalgamate, or be replaced by a trust organized as such under the
laws of any State; provided that:
o such successor entity either:
- expressly assumes all of the obligations of the trust
with respect to the trust securities; or
- substitutes for the trust preferred securities other
securities having substantially the same terms as the
trust preferred securities (successor securities) so
long as the successor securities rank the same as the
trust preferred securities rank in priority with
respect to distributions and payments upon
liquidation, redemption and otherwise;
o we expressly appoint a trustee of that successor entity
possessing the same powers and duties as the property trustee
as the holder of the subordinated debt securities;
o the trust preferred securities or any successor securities are
listed, or any successor securities will be listed upon
notification of issuance, on any national securities exchange
or other organization on which the trust preferred securities
are then listed or quoted, if any;
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o if the trust preferred securities (including any successor
securities) are rated by any nationally recognized statistical
rating organization prior to such transaction, such merger,
consolidation, amalgamation or replacement does not cause
those trust preferred securities (including any successor
securities) to be downgraded by any such nationally recognized
statistical rating organization;
o such merger, conversion, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the holders of the trust securities
(including any successor securities) in any material respect;
o the successor entity has a purpose substantially identical to
the purpose of the trust;
o prior to such merger, consolidation, amalgamation or
replacement, we and the property trustee have received an
opinion from counsel to the effect that:
- the merger, consolidation, amalgamation or
replacement does not adversely affect the rights,
preferences and privileges of the holders of the
trust securities (including any successor securities)
in any material respect;
- following the merger, conversion, consolidation,
amalgamation or replacement, neither the trust nor
the successor entity will be required to register as
an investment company under the Investment Company
Act;
- following such merger, consolidation, amalgamation or
replacement, the trust or the successor entity will
continue to be classified as a grantor trust for U.S.
federal income tax purposes; and
o we guarantee the obligations of that successor entity under
the Successor Securities at least to the extent provided by
the guarantees.
Notwithstanding the foregoing, a trust will not, except with the
consent of holders of 100% in liquidation amount of its trust securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if that consolidation, amalgamation, merger or
replacement would cause the trust or the successor entity not to be classified
as a grantor trust for United States federal income tax purposes.
Voting Rights.
Except as provided above under "- Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and below under "Description of
Guarantees - Amendments and Assignment" and as otherwise required by law and the
trust agreements, the holders of the trust preferred securities will have no
voting rights.
Amendment of the Trust Agreements.
We and the administrative trustees, without the consent of the holders
of the trust securities issued pursuant to the trust agreement or the other
trustees, may amend each trust agreement from time to time:
o to cure any ambiguity, correct or supplement any provisions in
the trust agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to
matters or questions arising under the trust agreement, which
shall not be inconsistent with the other provisions of the
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trust agreement, provided, however, that the interests of the
holders of the trust securities shall not be adversely
affected in any material respect; or
o to modify, eliminate or add to any provisions of the trust
agreement to such extent as shall be necessary to ensure that
the trust will be classified for United States federal income
tax purposes as a grantor trust at all times that any trust
securities are outstanding.
Any amendments of the trust agreement pursuant to the bullets above shall become
effective once notice is given to the holders of the trust securities issued
pursuant to the trust agreement at issue.
The sponsor and the administrative trustees may amend a trust
agreement:
o with the consent of holders representing not less than 66 2/3%
(based upon liquidation amount) of the outstanding trust
securities issued pursuant to the trust agreement; and
o upon receipt by the trustees of an opinion of counsel to the
effect that the amendment or the exercise of any power granted
to the trustees in accordance with the amendment will not
affect the trust's status as a grantor trust for United States
federal income tax purposes or the trust's exemption from
status as an "investment company" under the Investment Company
Act.
However, without the consent of each holder of trust securities issued
pursuant to the trust agreement, a trust agreement may not be amended to:
o change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the trust
securities as of a specified date;
o restrict the right of a holder of the trust securities to
institute suit for the enforcement of any such payment on or
after such date; or
o change the level of consent required from the holders of the
trust securities to amend a trust agreement.
The trustees may not enter into or consent to any amendment to a trust
agreement which would cause the trust to fail or cease to qualify for the
exemption from status of an "investment company" under the Investment Company
Act or to not be characterized for U.S. federal income tax purposes as a grantor
trust and each holder of trust securities not to be treated as owning an
undivided beneficial interest in the subordinated debt securities.
So long as any subordinated debt securities are held by a trust, the
trustees will not:
o direct the time, method and place of conducting any proceeding
for any remedy available to the subordinated debt trustee, or
execute any trust or power conferred on the subordinated debt
trustee with respect to the subordinated debt securities held
by the trust;
o waive any past defaults under the subordinated debt indenture
held by the trust;
37
o exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the
subordinated debt securities held by the trust; or
o consent to any amendment, modification or termination of the
subordinated debt indenture or the subordinated debt
securities, where that consent shall be required, or to any
other action as the holder of the subordinated debt securities
held by the trust,
without, in each case, obtaining the prior approval of the holders of at least
66 2/3% in liquidation amount of all outstanding trust preferred securities
issued by the trust. However, where a consent under the subordinated debt
indenture would require the consent of each holder of subordinated debt
securities affected thereby, no such consent shall be given by the trustees
without the prior consent of each holder of the trust preferred securities. The
trustees will not revoke any action previously authorized or approved by a vote
of the holders of the trust preferred securities except pursuant to a subsequent
vote of those holders. The property trustee shall notify each holder of the
trust preferred securities of any notice of default that it receives with
respect to the subordinated debt securities held by the trust. In addition to
obtaining the foregoing approvals of the holders of the trust preferred
securities, prior to taking any of the foregoing actions, the trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
trust will not fail to be classified as a grantor trust for United States
federal income tax purposes on account of such action.
Any required approval of holders of trust preferred securities may be
given at a meeting of those holders convened for that purpose or pursuant to
written consent. The administrative trustees will cause a notice of any meeting
at which holders of the trust preferred securities are entitled to vote to be
given to each holder of record of trust preferred securities in the manner set
forth in the trust agreement.
No vote or consent of the holders of trust preferred securities will be
required for a trust to redeem and cancel trust preferred securities in
accordance with its trust agreement.
Form, Denomination, Book-Entry Procedures and Transfer.
Unless otherwise specified in the applicable prospectus supplement, the
trust preferred securities will be issued in registered, global form. See
"Book-Entry System."
Payment and Paying Agent.
Payments in respect of trust preferred securities held in global form
will be made to the depository, which shall credit the relevant accounts at the
depository on the applicable distribution dates, or in respect of trust
preferred securities that are not held by the depository, those payments shall
be made by check mailed to the address of the holder entitled thereto as that
address shall appear on the register. The paying agent for the trusts will
initially be the property trustee or an affiliate of the property trustee and
any co-paying agent chosen by the property trustee and acceptable to the
administrative trustees and us. The paying agent will be permitted to resign as
paying agent upon 30 days' written notice to the administrative trustees and us.
If the paying agent resigns or is removed, the administrative trustees will
appoint a successor (which will be a bank or trust company acceptable to the
administrative trustees and us) to act as paying agent.
Registrar and Transfer Agent.
The property trustee will act as registrar and transfer agent for the
trust preferred securities.
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Registration of transfers of the trust preferred securities will be
effected without charge by or on behalf of the issuing trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The issuing trust will not be required to register or
cause to be registered the transfer of the trust preferred securities after they
have been called for redemption.
Information Concerning the Property Trustee.
The property trustee, other than during the occurrence and continuance
of a trust agreement event of default, will perform only such duties as are
specifically set forth in the trust agreement and, during the existence of a
trust agreement event of default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. The property trustee is under no obligation to exercise any of the
powers vested in it by the trust agreement at the request of any holder of trust
securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If the property trustee is
required to decide between alternative courses of action, construe ambiguous
provisions in the trust agreement or is unsure of the application of any
provision of the trust agreement, and the matter is not one on which holders of
the trust preferred securities are entitled under the trust agreement to vote,
then the property trustee shall take such action as is directed by us and, if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the trust securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Wachovia Trust Company, National Association, will serve as the
property trustee, the Delaware trustee and the guarantee trustee. See
"Description of Guarantees." Wachovia Bank, National Association, serves as the
trustee for the subordinated debt securities. See "Description of Subordinated
Debt Securities."
Miscellaneous.
The administrative trustees are authorized and directed to conduct the
affairs of and to operate each trust in such a way that the trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the subordinated debt
securities will be treated as our indebtedness for United States federal income
tax purposes. In this connection, we and the administrative trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust or the trust agreement, that we and the administrative
trustees determine in our discretion is necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the holders of the trust securities.
The trust agreements and the trust preferred securities will be
governed by and construed in accordance with the internal laws of the State of
Delaware.
United States Federal Income Tax Consequences.
We will include a discussion of the material United States federal
income tax considerations generally applicable to the purchase, ownership and
disposition of a trust preferred security in the prospectus supplement related
to the issuance of that trust preferred security. Please refer to any discussion
of the taxation of the trusts, subordinated debt securities or trust preferred
securities provided in the applicable prospectus supplement.
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In connection with each issuance of trust preferred securities, Ballard
Spahr Andrews & Ingersoll LLP, special tax counsel to us and to the trusts, will
render its opinion that, under then current law and subject to certain
assumptions, each of the trusts will be characterized for United States federal
income tax purposes as a "grantor trust" and not as an association or publicly
traded partnership taxable as a corporation. If a trust is properly
characterized as a grantor trust, the trust will not be subject to United States
federal income taxes and each beneficial owner of trust preferred securities
will be treated for such purposes as owning a pro rata undivided interest in the
subordinated debt securities, and will be required to include in income any
income with respect to the owner's allocable share of those subordinated debt
securities.
Potential purchasers of trust preferred securities should be aware that
a subordinated debt security might be treated as having been issued with
original issue discount (OID). In general, a subordinated debt security will be
treated as having been issued with OID if, among other possibilities:
o the subordinated debt security has an issue price (determined
under applicable regulations) that is less than the
subordinated debt security's principal amount, or
o interest on the subordinated debt security is not considered
to be unconditionally payable at least annually during the
entire term of the subordinated debt security at a single
fixed rate or, subject to certain exceptions, at one or more
variable rates.
Our ability to defer interest payments on the subordinated debt
securities, described in "Distributions" and "Description of Subordinated Debt
Securities - Option to Extend Interest Payment Date" might result in the
subordinated debt securities having OID. A beneficial owner of a trust preferred
security evidencing an interest in a subordinated debt security with OID
generally will be required to include that OID in income as it accrues,
regardless of the owner's method of accounting for United States federal income
tax purposes, before receipt of cash payments attributable to that income.
If relevant, the applicable prospectus supplement will contain a more
complete discussion of the rules governing the treatment of OID, including a
discussion of the consequences under those rules of our ability to defer
interest payments on the subordinated debt securities.
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
We will issue the subordinated debt securities under an Indenture
between us and Wachovia Bank, National Association, as subordinated debt
trustee. We refer to this Indenture, as amended and supplemented, in this
prospectus as the "subordinated debt indenture" and to Wachovia Bank, National
Association, in its capacity as trustee under the subordinated debt indenture,
as the "subordinated debt trustee." The subordinated debt indenture will be
qualified under the Trust Indenture Act. We have summarized selected provisions
of the subordinated debt indenture below. We suggest that you read the form of
subordinated debt indenture for the complete text of those provisions as well as
for the provisions that are not summarized but may be important to you. A copy
of the form of subordinated debt indenture is incorporated by reference as an
exhibit to the registration statement of which this prospectus is a part.
The subordinated debt securities may be distributed to the holders of
trust securities in liquidation of the issuing trust. See "Description of Trust
Preferred Securities - Liquidation of the Trust and Distribution of the
Subordinated Debt Securities." If that occurs, we will use our best efforts to
have the subordinated debt securities listed on the New York Stock Exchange or
on the exchange on which the trust preferred securities are then listed.
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General Information.
Each trust will invest the proceeds obtained from any issuance of its
trust preferred securities, together with the consideration paid by us for its
trust common securities, in subordinated debt securities issued by us. The
subordinated debt securities will bear interest from the same date and at the
same rate as the trust preferred securities. It is anticipated that, until the
liquidation, if any, of the issuing trust, each subordinated debt security will
be held in the name of the property trustee in trust for the benefit of the
holders of the trust securities.
Unless otherwise specified in the accompanying prospectus supplement,
we will initially issue each of the subordinated debt securities in the form of
one or more global securities, in registered form, as described under "- Form,
Registration and Transfer" below and "Book-Entry System." The subordinated debt
securities will be issued in denominations and integral multiples as provided in
the applicable prospectus supplement. Payments with respect to global
subordinated debt securities will be made to the depository as described under
"Book-Entry System." In the event the subordinated debt securities are issued in
certificated form, principal and interest will be payable, the transfer of the
subordinated debt securities will be registrable and the subordinated debt
securities may be exchanged for subordinated debt securities of other
denominations for a like aggregate principal amount at the corporate trust
office of the subordinated debt trustee in Philadelphia, Pennsylvania. See "-
Payment and Paying Agents."
Ranking.
The subordinated debt securities will rank equally with all other
subordinated debt and will be unsecured, subordinate, and junior in right of
payment to all Senior Indebtedness to the extent and in the manner set forth in
the subordinated debt indenture. The subordinated debt securities will mature on
the date provided in the applicable prospectus supplement.
Unless otherwise specified in the applicable prospectus supplement, the
subordinated debt securities will not be subject to a sinking fund provision.
Subordination.
In the subordinated debt indenture, we will covenant and agree that any
subordinated debt securities issued under the subordinated debt indenture will
be subordinate and junior in right of payment to all Senior Indebtedness (the
meaning of which is set forth below). Upon any payment or distribution of assets
to creditors upon any liquidation, dissolution, winding up, reorganization, or
in connection with any insolvency, receivership or bankruptcy proceeding with
respect to us, all Senior Indebtedness must be paid in full before the holders
of subordinated debt securities will be entitled to receive or retain any
payment in respect thereof.
No payments on account of principal, or premium, or interest, if any,
in respect of the subordinated debt securities may be made if a default in any
payment with respect to Senior Indebtedness has occurred and is continuing, or
an event of default with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof has occurred and is continuing, or if any
judicial proceeding shall be pending with respect to any such default.
The term "Senior Indebtedness" means:
o all of our obligations for borrowed money;
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o all of our obligations evidenced by securities, bonds, notes,
debentures issued under indentures other than the subordinated
debt indenture or other similar instruments;
o all of our capital lease obligations;
o all of our obligations issued or assumed as the deferred
purchase price of property, all of our conditional sale
obligations and our obligations under any title retention
agreement, but excluding our trade accounts payable arising in
the ordinary course of business;
o all of our reimbursement obligations with respect to any
letter of credit, banker's acceptance, security purchase
facility or similar credit transactions;
o all obligations of the type referred to in the preceding
bullet points of another person that we have guaranteed or are
responsible or liable for as obligor or otherwise; and
o all obligations of the type referred to in the preceding
bullet points of another person secured by any lien on any of
our property or assets (whether or not that obligation has
been assumed by us),
except for:
- those obligations that, by their terms, rank equally
with or junior to the subordinated debt securities,
including all of our obligations and associated
guarantees to our other trusts, partnerships or
entities that act as our financing vehicle for the
issuance of preferred securities that rank equally
with or junior to the trust preferred securities; and
- obligations between our affiliates and us.
Senior Indebtedness continues to be Senior Indebtedness and to be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of that Senior Indebtedness.
The subordinated debt indenture does not limit the aggregate amount of
Senior Indebtedness that we may issue, nor does it afford holders of the
subordinated debt securities protection in the event of a highly leveraged or
similar transaction involving our company.
Certain Covenants.
We covenant that we will not, and will not permit any subsidiary to
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of our capital stock (subject
to certain exceptions) if at such time there shall have occurred any event that
would constitute an event of default under the subordinated debt indenture or we
are in default with respect to payments of any of our obligations under the
guarantees.
If we have given notice of our election to defer interest payments on
the subordinated debt securities as provided in the subordinated debt indenture
and the deferral period, or any extension thereof, is continuing, we covenant
not to declare or pay any dividend on, make any distributions with respect to,
or redeem, purchase or make a liquidation payment with respect to, any of our
capital stock.
So long as an issuing trust's trust preferred securities remain
outstanding, we also covenant:
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o to maintain 100% direct or indirect ownership of the issuing
trust's trust common securities; provided, however, that any
successor to us is permitted under the subordinated debt
indenture to succeed to our ownership of the trust common
securities;
o to not cause or permit the dissolution, winding-up or
termination of the issuing trust, except in connection with
the distribution of subordinated debt securities or in
connection with certain mergers, consolidations or
amalgamations, each as permitted by the applicable trust
agreement; and
o to use our reasonable efforts to cause the issuing trust:
- to remain a statutory trust, except in connection
with the distribution of subordinated debt securities
to the holders of trust securities in liquidation of
the trust, the redemption of all of the trust
securities, or certain mergers, consolidations or
amalgamations as permitted by the applicable trust
agreement; and
- to continue otherwise to be treated as a grantor
trust for United States federal income tax purposes.
Optional Redemption.
Unless otherwise specified in the applicable prospectus supplement, we
may redeem a series of subordinated debt securities, at our option, in whole at
any time or in part from time to time, on or after the date indicated in the
prospectus supplement. Unless the applicable prospectus supplement states
otherwise, the redemption price for such an optional redemption will be equal to
100% of the principal amount of subordinated debt securities to be redeemed plus
any accrued and unpaid interest, including Additional Amounts and Compounded
Interest, if any, as described under "- Interest," to the redemption date.
If a partial redemption of a series of subordinated debt securities
would result in the delisting of the trust preferred securities from any
national securities exchange or other organization on which those securities are
then listed, we may only redeem a series of subordinated debt securities in
whole.
Unless otherwise specified in the applicable prospectus supplement,
upon the occurrence of a Tax Event as described under "- Special Event
Redemption" below, we may, at our option in certain circumstances redeem the
subordinated debt securities in whole, but not in part, within 90 days following
the occurrence of the Special Event at a redemption price equal to 100% of the
principal amount of subordinated debt securities to be redeemed plus any accrued
and unpaid interest to the redemption date.
Cancellation.
All subordinated debt securities surrendered for payment, redemption,
transfer or exchange shall, if surrendered to any person, other than the
subordinated debt trustee, be delivered to the subordinated debt trustee, and
any of those subordinated debt securities surrendered directly to the
subordinated debt trustee for any such purpose shall be promptly canceled by it.
Our acquisition at any time of any subordinated debt securities shall not
operate as a redemption or satisfaction of the indebtedness represented by those
subordinated debt securities unless and until we deliver the same to the
subordinated debt trustee for cancellation.
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Option to Extend Interest Payment Date.
The applicable prospectus supplement will set forth the length of time
for which we may defer the payment of interest on a series of subordinated debt
securities. No deferral period may end on a date other than an interest payment
date or extend beyond the stated maturity date of the subordinated debt
securities. At the end of any deferral period, we will pay all interest then
accrued and unpaid (including Additional Amounts and Compounded Interest, if
any).
During any interest deferral period at any time when a trust is the
holder of subordinated debt securities, we will not make specified payments on
our capital stock. See "- Certain Covenants."
Prior to the termination of any deferral period, we may further extend
that deferral period, so long as the extension does not cause that deferral
period to exceed the time period specified in the applicable prospectus
supplement or extend beyond the stated maturity date of the subordinated debt
securities. Upon the termination of any deferral period and the payment of all
amounts then due, we may elect to begin a new deferral period, subject to the
above requirements. No interest shall be due and payable during a deferral
period, except at the end thereof, but we have the option to prepay at any time
all or a portion of the interest accrued during any deferral period.
We will give the trust holding the subordinated debt securities at
issue notice of our selection or extension of a deferral period at least the
number of business days specified in the applicable prospectus supplement prior
to:
o the next date on which distributions on the applicable trust
securities are payable; or
o the date on which we or the trust are required to give notice
to any securities exchange or other applicable self-regulatory
organization of the record date or the date such distributions
are payable, but in any event at least one business day before
that record date.
There is no limitation in the subordinated debt indenture on the number
of times that we may elect to begin a deferral period. Accordingly, there could
be multiple deferral periods of varying lengths throughout the term of the
subordinated debt securities.
Interest.
We will pay interest on the subordinated debt securities as set forth
in the applicable prospectus supplement. We will also pay the following amounts
on the subordinated debt securities:
o Additional Amounts, in the circumstances described under
"Description of Trust Preferred Securities - Payment of
Additional Amounts"; and
o interest on interest payments that are deferred because of an
interest deferral period, which we refer to in this prospectus
as Compounded Interest.
Special Event Redemption.
Unless otherwise specified in the applicable prospectus supplement, if
a Special Event occurs and is continuing, we may, at our option, redeem the
subordinated debt securities in whole or in part at any time within 90 days of
the occurrence of that Special Event, at a redemption price to be specified in
the applicable prospectus supplement.
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A "Special Event" means a Tax Event or an Investment Company Event.
An "Investment Company Event" means the receipt by us of an opinion of
counsel to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, which change or prospective change
becomes effective on or after the date of the original issuance of the trust
preferred securities.
A "Tax Event" means the receipt by us of an opinion of counsel
experienced in such matters to the effect that, as a result of:
o any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision
or taxing authority thereof or therein, or
o any amendment to, or change in, any interpretation or
application of such laws or regulations,
which change or amendment becomes effective on or after the date of the original
issuance of the trust preferred securities, there is more than an insubstantial
risk that:
o a trust would be subject to United States federal income tax
with respect to income received or accrued on the subordinated
debt securities;
o interest payable by us to a trust on the subordinated debt
securities would not be deductible by a member of our
consolidated tax group for United States federal income tax
purposes; or
o a trust would be subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of subordinated debt
securities to be redeemed at its registered address. Unless we default in
payment of the redemption price, on and after the redemption date interest
ceases to accrue on such those subordinated debt securities called for
redemption.
Modification of Subordinated Debt Indenture.
From time to time we and the subordinated debt trustee may, without the
consent of the holders of subordinated debt securities, amend the subordinated
debt indenture for specified purposes, including, among other things, to cure
any ambiguity, defect or inconsistency contained in the subordinated debt
indenture or the trust preferred securities and to create any new series of
subordinated debt securities.
The subordinated debt indenture contains provisions permitting us and
the Subordinated Debt Trustee, with the consent of the holders of at least 66
2/3% in aggregate principal amount of the subordinated debt securities, to
modify the subordinated debt indenture or any supplemental indenture in a manner
affecting the rights of the holders of subordinated debt securities. However, no
such modification may, without the consent of the holders of each outstanding
subordinated debt security so affected:
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o extend the fixed maturity, or reduce the rate of interest or
extend the time of payment of interest on, or reduce the
principal amount of, the subordinated debt securities or
reduce the amount payable on redemption thereof; or
o reduce the percentage of principal amount of subordinated debt
securities, the holders of which are required to consent to
any such modification of the subordinated debt indenture.
Events of Default.
The subordinated debt indenture provides that any one or more of the
following constitute an event of default with respect to the subordinated debt
securities:
o failure to pay any interest on the subordinated debt
securities when due for 30 days, subject to the deferral of
any due date in the case of an extension period;
o failure to pay any principal or premium, if any, on the
subordinated debt securities when due whether at maturity,
upon redemption, by declaration of acceleration of maturity or
otherwise, subject to the deferral of any due date in the case
of an extension period;
o failure to observe or perform any of our other covenants
contained in the subordinated debt indenture for 90 days after
written notice to us from the subordinated debt trustee or the
holders of at least 25% in aggregate outstanding principal
amount of subordinated debt securities;
o our bankruptcy, insolvency or reorganization, in certain
cases; or
o the voluntary or involuntary dissolution, winding-up or
termination of the trust, except in connection with the
distribution of subordinated debt securities to the holders of
trust securities in liquidation of the trust, the redemption
of all of the trust securities, or certain mergers,
consolidations or amalgamations as permitted by the applicable
trust agreement.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debt securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the subordinated
debt trustee. If an event of default has occurred and is continuing, the
subordinated debt trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the subordinated debt securities may declare the
principal amount on all subordinated debt securities due and payable immediately
upon an event of default. The holders of a majority in aggregate outstanding
principal amount of the subordinated debt securities may annul such declaration
and waive the default if the default has been cured and a sum sufficient to pay
all matured installments of interest and principal of, and premium, if any, due
otherwise than by acceleration has been deposited with the subordinated debt
trustee.
The holders of a majority in aggregate outstanding principal amount of
the subordinated debt securities affected thereby may, on behalf of the holders
of all the subordinated debt securities, waive any past default or event of
default and its consequences, except:
o a default in the payment of principal, premium, if any, on or
interest (unless such a default has been cured and a sum
sufficient to pay all matured installments of interest and
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principal due otherwise than by acceleration and any
applicable premium has been deposited with the subordinated
debt trustee); or
o a default in our covenant not to declare or pay dividends on,
or make distributions with respect to, or redeem, purchase or
acquire any of our capital stock during any interest deferral
period.
In case an event of default shall occur and be continuing, the property
trustee will have the right to declare the principal of and the interest on the
subordinated debt securities, and any other amounts payable under the
subordinated debt indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the subordinated debt securities.
An event of default under the subordinated debt indenture also
constitutes an event of default under the related trust agreement. The holders
of trust preferred securities in certain circumstances have the right to direct
the property trustee to exercise its rights as the holder of the subordinated
debt securities. See "Description of Trust Preferred Securities - Trust
Agreement Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions.
The subordinated debt indenture does not contain any covenant which
restricts our or the trusts' ability to:
o merge or consolidate with or into any corporation;
o sell or convey all or substantially all of our or the trust's
assets to any person, firm or corporation; or
o otherwise engage in restructuring transactions;
provided that the due and punctual performance and observance of all the
covenants and conditions of the subordinated debt indenture is expressly assumed
by any successor to us.
Satisfaction and Discharge.
We may be discharged from all of our obligations under the subordinated
debt indenture (except as otherwise provided in the subordinated debt indenture)
when:
o either (1) all of the subordinated debt securities have been
delivered to the subordinated debt trustee for cancellation,
or (2) all subordinated debt securities not delivered to the
subordinated debt trustee for cancellation
- have become due and payable,
- will become due and payable by their terms within one
year, or
- are to be called for redemption within one year under
arrangements satisfactory to the subordinated debt
trustee for the giving of notice of redemption,
and we, in the case of clause (2), have deposited or caused to
be deposited with the subordinated debt trustee, in trust, an
amount in moneys or Governmental Obligations, or any
combination of the foregoing, sufficient in the opinion of a
nationally recognized firm of independent public accountants
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expressed in a written certification delivered to the
subordinated debt trustee to pay all principal, premium, if
any, and interest on those subordinated debt securities due or
to become due;
o we have paid or caused to be paid all other sums payable by us
under the subordinated debt indenture; and
o we have delivered to the subordinated debt trustee an opinion
of counsel to the effect that, based upon our receipt from, or
the publication by the Internal Revenue Service of a ruling or
change in law, the holders of subordinated debt securities
will not recognize income, gain or loss for United States
federal income tax purposes as a result of the deposit,
defeasance and discharge and will be subject to United States
federal income tax on the same amount and in the same manner
and at the same times as would have been the case if the
deposit, defeasance and discharge had not occurred.
Form, Registration and Transfer.
If the subordinated debt securities are distributed to the holders of
the trust securities, the subordinated debt securities may be represented by one
or more global certificates registered in the name of DTC or its nominee. Under
those circumstances, the depository arrangements for the subordinated debt
securities would be expected to be substantially similar to those in effect for
the trust preferred securities. For a description of DTC and the terms of the
depository arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry System."
Payment and Paying Agents.
Payment of principal of, premium, if any, and interest on the
subordinated debt securities will be made at the office of the subordinated debt
trustee or at the office of any other paying agent or paying agents as we may
designate from time to time, except that, at our option, payment of any interest
may be made, except in the case of subordinated debt securities in global form,
by check mailed to the address of the holder thereof as such address shall
appear in the register for subordinated debt securities.
Payment of any interest on any subordinated debt security will be made
to the person in whose name that subordinated debt security is registered at the
close of business on the record date for that interest. We may at any time
designate additional paying agents or rescind the designation of any paying
agent; however, we will at all times be required to maintain a paying agent in
each place of payment for the subordinated debt securities.
Any monies deposited with the subordinated debt trustee or any paying
agent for the payment of the principal of, and premium, if any, or interest on
any subordinated debt security and remaining unclaimed for two years after that
principal, and premium, if any, or interest has become due and payable shall, at
our request, be repaid to us and the holder of that subordinated debt security
shall thereafter look only to us for payment thereof.
Governing Law.
The subordinated debt indenture and the subordinated debt securities
will be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, without regard to conflicts of laws principles
thereof.
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Information Concerning the Subordinated Debt Trustee.
The subordinated debt trustee will be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to those provisions, the subordinated debt trustee is
under no obligation to exercise any of the powers vested in it by the
subordinated debt indenture at the request of any holder of subordinated debt
securities, unless offered reasonable indemnity by that holder against the
costs, expenses and liabilities which might be incurred thereby. However, the
foregoing shall not relieve the subordinated debt trustee, upon the occurrence
of an event of default under the subordinated debt indenture, from exercising
the rights and powers vested in it by the subordinated debt indenture. Under the
subordinated debt indenture, if the subordinated debt trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the subordinated debt trustee and we shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act. The
subordinated debt trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the subordinated debt trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it. Wachovia Bank, National Association,
will serve as subordinated debt trustee. See "Description of Trust Preferred
Securities - Information Concerning the Property Trustee."
Miscellaneous.
We have the right at all times to assign any of our rights or
obligations under the subordinated debt indenture to a direct or indirect wholly
owned subsidiary of us; provided that, in the event of any such assignment, we
will remain liable for all of our obligations under the subordinated debt
indenture. Subject to the foregoing, the subordinated debt indenture will be
binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. The subordinated debt indenture provides that
it may not otherwise be assigned by the parties thereto.
We have covenanted in the subordinated debt indenture to pay all fees
and expenses related to:
o the offering of the trust preferred securities and the
subordinated debt securities;
o the organization, maintenance and dissolution of the trusts;
o the retention of the trusts' trustees; and
o the enforcement by the property trustee of the rights of
holders of trust preferred securities.
DESCRIPTION OF GUARANTEES
Set forth below is a summary of information concerning the guarantees,
which will be executed and delivered by us for the benefit of the holders from
time to time of the trust preferred securities. The guarantee has been qualified
under the Trust Indenture Act. Wachovia Trust Company, National Association, the
guarantee trustee, will hold the guarantees for the benefit of the holders of
the trust preferred securities. The following summary is not necessarily
complete, and reference is hereby made to the copy of the form of the guarantee
(including the definitions therein of certain terms), which is filed as an
exhibit to the registration statement of which this prospectus forms a part, and
to the Trust Indenture Act.
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General Information.
We will irrevocably and unconditionally agree to pay in full on a
subordinated basis guarantee payments to the holders of the trust preferred
securities, as and when due, regardless of any defense, right of setoff or
counterclaim that we, in our capacity as guarantor, may have or assert other
than the defense of payment. The following payments with respect to the trust
preferred securities, to the extent not paid by or on behalf of the trust, will
be subject to the guarantee:
o any accrued and unpaid distributions required to be paid on
the trust preferred securities, to the extent that the issuing
trust has funds on hand legally available therefor at that
time;
o the applicable redemption price with respect to the trust
preferred securities called for redemption, to the extent that
the issuing trust has funds on hand legally available therefor
at that time; and
o upon a voluntary or involuntary dissolution, winding-up or
liquidation of the issuing trust (other than in connection
with the distribution of the subordinated debt securities held
by the issuing trust to holders of its trust preferred
securities), the lesser of:
- the aggregate of the liquidation amount and all
accrued and unpaid distributions on the trust
preferred securities, to the extent the trust has
funds legally available therefor at the time; and
- the amount of assets of the trust remaining available
for distribution to holders of the trust preferred
securities after satisfaction of liabilities to
creditors of the trust as required by applicable law.
Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the trust preferred
securities or by causing the trust to pay those amounts to those holders.
Each guarantee will be a guarantee of the guarantee payments with
respect to the trust preferred securities at issue from the time of issuance of
the trust preferred securities, but will not apply to distributions and other
payments on the trust preferred securities when the issuing trust does not have
sufficient funds legally and immediately available to make such distributions or
other payments. Therefore, if we do not make interest payments on the
subordinated debt securities held by the property trustee, the issuing trust
will not make distributions on the trust preferred securities.
Through the guarantees, the trust agreements, the subordinated debt
securities and the subordinated debt indenture, taken together, we will fully,
irrevocably and unconditionally guarantee all of the issuing trust's obligations
under its trust preferred securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the trust preferred securities. See "Relationship
Among the Trust Preferred Securities, the Subordinated Debt Securities and the
Guarantee."
Status of the Guarantees.
Each guarantee will constitute our unsecured obligation and will rank
(x) subordinate and junior in right of payment to all of our other liabilities,
including the subordinated debt securities, except those obligations or
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liabilities made pari passu or subordinate by their terms, (y) pari passu with
any guarantee in respect of any preferred stock of any affiliate of ours and (z)
senior to all of our preferred and common stock.
Our obligations under each guarantee effectively will be subordinated
to all existing and future liabilities of our subsidiaries and all liabilities
of any of our future subsidiaries. Claimants should look only to us for payments
under the guarantees. See "Description of Subordinated Debt Securities
- -Subordination." The guarantees do not limit us or any of our subsidiaries from
incurring or issuing other secured or unsecured debt, including Senior
Indebtedness, whether under the subordinated debt indenture, any other indenture
that we may enter into in the future or otherwise.
Each guarantee will constitute a guarantee of payment and not of
collection. Each guarantee will be held for the benefit of the holders of the
trust preferred securities and will not be discharged except by payment of the
guarantee payments in full to the extent not paid by the trust or upon
distribution to the holders of the trust preferred securities of the
subordinated debt securities. The guarantees do not limit the amount of
additional Senior Indebtedness that we may incur.
Guarantee Events of Default.
An event of default under a guarantee will occur upon our failure to
perform any of our payment obligations thereunder. The holders of more than 50%
in liquidation amount of the trust preferred securities affected by such an
event of default will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of the guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under the guarantee.
If the guarantee trustee fails to enforce the guarantee at issue, any
holder of the trust preferred securities at issue may institute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against the issuing trust, the guarantee
trustee or any other person or entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
Amendments and Assignment.
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the trust preferred securities (in which case no
consent will be required), each guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% of the liquidation amount of
the outstanding trust preferred securities at issue. The manner of obtaining
that approval will be as set forth under "Description of Trust Preferred
Securities, - Voting Rights, - Amendment of the Trust Agreement." All guarantees
and agreements contained in the guarantee shall bind our successors, assigns,
receivers, trustees and representatives and shall inure to the benefit of the
holders of the trust preferred securities then outstanding. Except in connection
with our consolidation or merger or a conveyance, transfer or lease by us, we
may not assign our obligations under the guarantee.
Termination of the Guarantees.
Each guarantee will terminate and be of no further force and effect
upon:
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o full payment of the applicable redemption price of the trust
preferred securities covered by the guarantee; or
o upon liquidation of the issuing trust, the full payment of the
liquidation distribution or the distribution of the
subordinated debt securities to the holders of the trust
preferred securities.
Each guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the trust preferred securities
covered by the guarantee must restore payment of any sums paid under the trust
preferred securities or the guarantee.
Information Concerning the Guarantee Trustee.
Other than during the occurrence and continuance of a default by us in
performance of the guarantee, the guarantee trustee will undertake to perform
only those duties as are specifically set forth in the guarantee and, in case
default with respect to the guarantee has occurred, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the guarantee
trustee will be under no obligation to exercise any of the powers vested in it
by the guarantee at the request of any holder of the trust preferred securities
unless it is offered indemnity satisfactory to it against the costs, expenses
and liabilities that might be incurred thereby. If the guarantee trustee has or
shall acquire a "conflicting interest" within the meaning of Section 301(b) of
the Trust Indenture Act, the guarantee trustee and we shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
Governing Law.
The guarantee will be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to conflict of laws
principles thereof.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE SUBORDINATED
DEBT SECURITIES AND THE GUARANTEES
Full and Unconditional Guarantee.
Payments of distributions and other amounts due on the trust preferred
securities (to the extent the issuing trust has funds on hand legally available
for the payment of such distributions) are irrevocably guaranteed by us as and
to the extent set forth under "Description of Guarantees." Taken together, our
obligations under the subordinated debt securities, the subordinated debt
indenture, the trust agreements and the guarantees provide, in the aggregate, a
full, irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the trust preferred securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the issuing trust's obligations under the trust preferred securities. If and
to the extent that we do not make the required payments on the subordinated debt
securities held by the trust, the trust will not have sufficient funds to make
the related payments, including distributions, on the trust preferred
securities. The guarantees will not cover any such payment when the trust does
not have sufficient funds on hand legally available therefor. In that event, the
remedy of a holder of trust preferred securities is to institute a direct action
against us. Our obligations under the guarantees are subordinate and junior in
right of payment to all Senior Indebtedness.
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Sufficiency of Payments.
As long as payments of interest and other payments are made when due on
the subordinated debt securities, such payments will be sufficient to cover
distributions and other payments due on the trust securities, primarily because:
o the aggregate principal amount or redemption price of the
subordinated debt securities is equal to the sum of the
liquidation amount or redemption price, as applicable, of the
trust securities;
o the interest rate and interest and other payment dates on the
subordinated debt securities will match the distribution rate
and distribution and other payment dates for the trust
securities;
o we will pay for all and any costs, expenses and liabilities of
the trusts except the trusts' obligations to holders of trust
securities under the trust securities; and
o each trust agreement will provide that the trust is not
authorized to engage in any activity that is not consistent
with the limited purposes thereof.
Notwithstanding anything to the contrary in the subordinated debt
indenture, we have the right to set-off any payment we are otherwise required to
make with and to the extent we have theretofore made, or are concurrently on the
date of such payment making, a payment under the guarantee.
Enforcement Rights of Holders of Trust Preferred Securities.
A holder of any trust preferred security may institute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against the applicable guarantee trustee,
trust or any other person or entity.
Limited Purpose of the Trusts.
The trust preferred securities represent preferred undivided beneficial
interests in the assets of the issuing trust, and the issuing trust exists for
the sole purpose of:
o issuing and selling its trust securities;
o using the proceeds from the sale of its trust securities to
acquire the subordinated debt securities; and
o engaging in only those other activities necessary or
incidental to these purposes.
A principal difference between the rights of a holder of a trust
preferred security and a holder of a subordinated debt security is that a holder
of a subordinated debt security will be entitled to receive from us the
principal amount of, and premium, if any, and interest on subordinated debt
securities held, while a holder of trust preferred securities is entitled to
receive distributions from the trust (or, in certain circumstances, from us
under the guarantee) if and to the extent the issuing trust has funds on hand
legally available for the payment of those distributions.
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Rights Upon Dissolution.
Unless the subordinated debt securities are distributed to holders of
the related trust securities or if the trust securities have been redeemed, upon
any voluntary or involuntary dissolution and liquidation of the issuing trust,
after satisfaction of liabilities to creditors of the issuing trust as required
by applicable law, the holders of the trust securities will be entitled to
receive, out of assets held by the issuing trust, the liquidation distribution
in cash. See "Description of Trust Preferred Securities - Liquidation of the
Trust and Distribution of Subordinated Debt Securities." Upon our voluntary or
involuntary liquidation or bankruptcy, each property trustee, as holder of the
subordinated debt securities, would be our subordinated creditor, subordinated
in right of payment to all Senior Indebtedness as set forth in the subordinated
debt indenture, but entitled to receive payment in full of principal, and
premium, if any, and interest, before any of our stockholders receive payments
or distributions. Since we will be the guarantor under the guarantees and will
agree to pay for all costs, expenses and liabilities of the trusts (other than
the trusts' obligations to the holders of the trust securities), the positions
of a holder of trust preferred securities and a holder of subordinated debt
securities relative to other creditors and to our shareholders in the event of
our liquidation or bankruptcy are expected to be substantially the same.
BOOK-ENTRY SYSTEM
Unless otherwise indicated in the applicable prospectus supplement,
each series of debt securities, common stock, preferred stock and trust
preferred securities will initially be issued in the form of one or more global
securities, in registered form, without coupons (as applicable). The global
security will be deposited with, or on behalf of, a depository, and registered
in the name of that depository or a nominee of that depository. Unless otherwise
indicated in the applicable prospectus supplement, the depository for any global
securities will be DTC.
The global securities will be issued as fully registered securities
registered in the name of Cede & Co., DTC's partnership nominee. One fully
registered global security certificate will be issued for each issue of the
global securities, each in the aggregate principal amount of that issue and will
be deposited with DTC. So long as the depository, or its nominee, is the
registered owner of a global security, that depository or such nominee, as the
case may be, will be considered the owner of that global security for all
purposes under the Indenture, the subordinated debt indenture or the trust
agreement, as applicable, including for any notices and voting. Except as
otherwise provided below, the owners of beneficial interests in a global
security will not be entitled to have securities registered in their names, will
not receive or be entitled to receive physical delivery of any such securities
and will not be considered the registered holder thereof under the indenture,
subordinated debt indenture or the trust agreement, as applicable. Accordingly,
each person holding a beneficial interest in a global security must rely on the
procedures of the depository and, if that person is not a direct participant, on
procedures of the direct participant through which that person holds its
interest, to exercise any of the rights of a registered owner of such security.
A global security may not be transferred as a whole except by DTC to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global securities shall be transferred and exchanged through
the facilities of DTC. Beneficial interests in the global securities may not be
exchanged for securities in certificated form except in the circumstances
described in the following paragraph.
We will be obligated to exchange global securities in whole for
certificated securities only if:
o the depository notifies us that it is unwilling or unable to
continue as depository for the global securities or the
depository has ceased to be a clearing agency registered under
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applicable law and, in either case, we thereupon fail to
appoint a successor depository within 90 days;
o we, at our option, notify the applicable trustee in writing
that we elect to cause the issuance of certificated
securities; or
o there shall have occurred and be continuing an event of
default with respect to the applicable securities of any
series.
In all cases, certificated securities delivered in exchange for any
global security or beneficial interest therein will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
depository (in accordance with customary procedures).
The descriptions of operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within DTC's control and are subject to changes by DTC from time to time.
We take no responsibility for these operations and procedures and urge you to
contact DTC or its participants directly to discuss these matters. DTC has
advised us as follows:
o DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing corporation"
registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934.
o DTC holds securities that its direct participants deposit with
DTC. DTC also facilitates the settlement among direct
participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic
computerized book-entry changes in direct participants'
accounts, thereby eliminating the need for physical movement
of securities certificates.
o Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain
other organizations.
o DTC is owned by a number of its direct participants and by the
New York Stock Exchange, Inc., the American Stock Exchange,
Inc. and the National Association of Securities Dealers, Inc.
o Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly, which are
referred to as indirect participants and, together with the
direct participants, the participants.
o The rules applicable to DTC and its participants are on file
with the SEC.
Purchases of global securities under the DTC system must be made by or
through direct participants, who will receive a credit for such purchases of
global securities on DTC's records. The ownership interest of each actual
purchaser of each global security, or beneficial owner, is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
55
or indirect participant through which the beneficial owner entered into the
transaction. Transfers of ownership interests in the global securities are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates representing
their ownership interests in the global securities, except in the event that use
of the book-entry system for the global securities is discontinued.
To facilitate subsequent transfers, all global securities deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of global securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the global securities; DTC's
records reflect only the identity of the direct participants to whose accounts
such global securities are credited which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. If the global securities are redeemable,
redemption notices shall be sent to Cede & Co. If less than all of the global
securities are being redeemed, DTC's practice is to determine by lot the amount
of the interest of each direct participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
global securities. Under its usual procedures, DTC mails an omnibus proxy to us
as soon as possible after the record date. The omnibus proxy assigns Cede &
Co.'s consenting or voting rights to those direct participants whose accounts
the global securities are credited on the record date, identified in a listing
attached to the omnibus proxy.
Payments of distributions, dividends, principals, interests, premiums
and liquidation amounts, if any, on the global securities will be made to DTC in
immediately available funds. DTC's practice is to credit direct participants'
accounts on the date on which interest is payable in accordance with the
respective holdings shown on DTC's records, unless DTC has reason to believe
that it will not receive payment on that date. Payments by participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
that participant and not of DTC, the trustee for those securities, or us,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions, dividends, principals, interests,
premiums and liquidation amounts, if any, on any of the aforementioned
securities represented by global securities to DTC is the responsibility of the
appropriate trustee and us. Disbursement of those payments to direct
participants shall be the responsibility of DTC, and disbursement of those
payments to the beneficial owners shall be the responsibility of the
participants.
DTC may discontinue providing its services as securities depositary
with respect to the global securities at any time by giving us reasonable
notice. Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of beneficial ownership interests in the global securities
among participants, it is under no obligation to perform or continue to perform
those procedures, and those procedures may be discontinued at any time.
The underwriters, dealers or agents of any of the securities may be
direct participants of DTC.
56
None of the trustees, us or any agent for payment on or registration of
transfer or exchange of any global security will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial interests in that global security or for maintaining, supervising
or reviewing any records relating to those beneficial interests.
PLAN OF DISTRIBUTION
We may sell the securities offered pursuant to this prospectus through
agents, through underwriters or dealers or directly to one or more purchasers.
Underwriters, dealers and agents that participate in the distribution
of the securities offered pursuant to this prospectus may be underwriters as
defined in the Securities Act of 1933 and any discounts or commissions received
by them from us and any profit on the resale of the offered securities by them
may be treated as underwriting discounts and commissions under the Securities
Act. Any underwriters or agents will be identified and their compensation,
including underwriting discount, will be described in the applicable prospectus
supplement. The prospectus supplement will also describe other terms of the
offering, including any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which the offered securities may be
listed.
The distribution of the securities offered under this prospectus may
occur from time to time in one or more transactions at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
If the applicable prospectus supplement indicates, we will authorize
dealers or our agents to solicit offers by certain institutions to purchase
offered securities from us pursuant to contracts that provide for payment and
delivery on a future date. We must approve all institutions, but they may
include, among others:
o commercial and savings banks;
o insurance companies;
o pension funds;
o investment companies; and
o educational and charitable institutions.
The institutional purchaser's obligations under the contract are only
subject to the condition that the purchase of the offered securities at the time
of delivery is allowed by the laws that govern the purchaser. The dealers and
our agents will not be responsible for the validity or performance of the
contracts.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make as a result of those
certain civil liabilities.
When we issue the securities offered by this prospectus, except for
shares of our common stock, they may be new securities without an established
trading market. If we sell a security offered by this prospectus to an
underwriter for public offering and sale, the underwriter may make a market for
57
that security, but the underwriter will not be obligated to do so and could
discontinue any market making without notice at any time. Therefore, we cannot
give any assurances to you concerning the liquidity of any security offered by
this prospectus.
Underwriters and agents and their affiliates may be customers of,
engage in transactions with, or perform services for us or our subsidiaries in
the ordinary course of their and/or our businesses.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania,
will render an opinion as to the validity of the securities (other than the
trust preferred securities) for us, and Winston & Strawn LLP, Chicago, Illinois,
will render an opinion as to the validity of the securities (other than the
trust preferred securities) for any underwriters, dealers, purchasers or agents.
Richards, Layton & Finger, P.A., special Delaware counsel to us and the trusts,
will render an opinion as to the validity of the trust preferred securities.
Winston & Strawn LLP provides legal services to Exelon and its subsidiaries from
time to time.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2002 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities are set forth in the following table. All amounts except the SEC
registration fee are estimated.
SEC registration fee.................................... $ 80,900
Listing fees and expenses............................... $ 25,000
Accounting fees and expenses............................ $ 25,000
Printing and engraving expenses......................... $ 85,000
Legal fees and expenses................................. $ 100,000
Trustee fee..............................................$ 17,500
Miscellaneous............................................$ 1,000
--------------
Total....................................................$ 334,400
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Exelon Corporation
Chapter 17, Subchapter D of the Pennsylvania Business Corporation Law
of 1988, as amended (the PBCL) contains provisions permitting indemnification of
officers and directors of a business corporation incorporated in Pennsylvania.
Sections 1741 and 1742 of the PBCL provide that a business corporation may
indemnify directors and officers against liabilities and expenses he or she may
incur in connection with a threatened, pending or completed civil,
administrative or investigative proceeding by reason of the fact that he or she
is or was a representative of the corporation or was serving at the request of
the corporation as a representative of another enterprise, provided that the
particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In general, the power to indemnify under these
sections does not exist in the case of actions against a director or officer by
or in the right of the corporation if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the corporation, unless
it is judicially determined that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnification for the expenses the court deems proper. Section
1743 of the PBCL provides that the corporation is required to indemnify
directors and officers against expenses they may incur in defending these
actions if they are successful on the merits or otherwise in the defense of such
actions.
Section 1746 of the PBCL provides that indemnification under the other
sections of Subchapter D is not exclusive of other rights that a person seeking
indemnification may have under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, whether or not the corporation would have
the power to indemnify the person under any other provision of law. However,
Section 1746 prohibits indemnification in circumstances where the act or failure
to act giving rise to the claim for indemnification is determined by a court to
have constituted willful misconduct or recklessness.
Section 1747 of the PBCL permits a corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
representative of another enterprise, against any liability asserted against
such person and incurred by him or her in that capacity, or arising out of his
59
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under Subchapter D.
Exelon's Bylaws provide that it is obligated to indemnify directors and
officers and other persons designated by the board of directors against any
liability, including any damage, judgment, amount paid in settlement, fine,
penalty, cost or expense (including, without limitation, attorneys' fees and
disbursements) including in connection with any proceeding. Exelon's Bylaws
provide that no indemnification shall be made where the act or failure to act
giving rise to the claim for indemnification is determined by arbitration or
otherwise to have constituted willful misconduct or recklessness or attributable
to receipt from Exelon of a personal benefit to which the recipient is not
legally entitled.
As permitted by PBCL Section 1713, Exelon's Bylaws provide that
directors generally will not be liable for monetary damages in any action,
whether brought by shareholders directly or in the right of Exelon or by third
parties, unless they fail in the good faith performance of their duties as
fiduciaries (the standard of care established by the PBCL), and such failure
constitutes self-dealing, willful misconduct or recklessness.
Exelon has purchased directors' and officers' liability insurance.
Exelon Capital Trust I, Exelon Capital Trust II and Exelon Capital
Trust III
Section 3817 of the Delaware Statutory Trust Act, 12 Del. C. Section
3801, et seq., provides that, subject to such standards and restrictions, if
any, as set forth in the governing instrument of the trust, a statutory trust
shall have the power to indemnify and hold harmless any trustee or beneficial
owner or other person from and against any and all claims and demands
whatsoever. The trust agreements provide that Exelon Corporation, as the sponsor
of the trusts, will indemnify the trustees for, and to hold the trustees
harmless against, any and all loss, damage, claims, liability or expense
incurred without willful misconduct, gross negligence (ordinary negligence in
the case of the Property Trustee) or bad faith on their part, arising out of or
in connection with the acceptance or administration of the trust agreements,
including the costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their powers
or duties thereunder.
ITEM 16. EXHIBITS.
Exhibit No. Description
- -------------- ---------------
1.1** Form of Underwriting Agreement relating to common stock,
preferred stock, debt securities, stock purchase contracts and
stock purchase units.
1.2** Form of Underwriting Agreement relating to trust preferred
securities.
4.1 Articles of Incorporation of Exelon Corporation (incorporated
herein by reference to Exhibit 3.1 of Exelon's Registration
Statement on Form S-4, Registration Statement No. 333-37082).
4.2 Bylaws of Exelon Corporation (incorporated herein by reference
to Exhibit 3.2 of Exelon's Registration Statement on Form S-4,
Registration Statement No. 333-37082).
60
4.3** Indenture dated as of May 1, 2001 between Exelon Corporation
and Chase Manhattan Trust Company, N.A., as trustee, relating
to debt securities.
4.4** Form of Indenture between Exelon Corporation and Wachovia
Bank, National Association, relating to subordinated debt
securities.
4.5** Certificate of Trust of Exelon Capital Trust I dated as of
August 25, 2003
4.6** Certificate of Trust of Exelon Capital Trust II dated as of
August 25, 2003
4.7** Certificate of Trust of Exelon Capital Trust III dated as of
August 25, 2003
4.8** Declaration of Trust of Exelon Capital Trust I dated as of
August 25, 2003
4.9** Declaration of Trust of Exelon Capital Trust II dated as of
August 25, 2003
4.10** Declaration of Trust of Exelon Capital Trust III dated as of
August 25, 2003
4.11** Form of Amended and Restated Declaration of Trust (including
form of trust preferred security certificate)
4.12** Form of Guarantee Agreement of Exelon Corporation
4.13** Form of Statement with Respect to Shares for Exelon
Corporation preferred stock
5.1** Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding
the legality of the shares of common stock, stock purchase
contracts and stock purchase units, preferred stock, debt
securities, subordinated debt securities and guarantees.
5.2** Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the trust preferred securities
to be issued by Exelon Capital Trust I, Exelon Capital Trust
II and Exelon Capital Trust III.
8.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to
certain federal income tax matters
12.1** Statement regarding computation of ratio of earnings to fixed
charges.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1).
23.3** Consent of Richards, Layton & Finger, P.A., special Delaware
counsel (included in Exhibit 5.2).
24.1** Powers of Attorney (included on signature page).
25.1** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Chase Manhattan Trust Company,
N.A., as trustee under the Indenture relating to debt
securities.
61
25.2** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Trust Company,
National Association, as property trustee under the Amended
and Restated Declaration of Trust.
25.3** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Bank, National
Association, as trustee under the Indenture relating to
subordinated debt securities.
25.4** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Trust Company,
National Association, as guarantee trustee under the Guarantee
Agreement.
----------------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement.
Notwithstanding the foregoing, any increase
or decrease in volume of shares of common
stock offered (if the total dollar value of
shares of common stock offered would not
exceed that which was registered) and any
deviation from the low or high and of the
estimated maximum offering range may be
reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume
and price represent no more than a 20
percent change in the maximum aggregate
offering price set forth in the "Calculation
of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form
S-8 or Form F-3, and the information
required to be included in a post-effective
amendment by those paragraphs is contained
in periodic reports filed with or furnished
to the Commission by the Registrant pursuant
to Section 13 or 15(d) of the Securities
62
Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) Each of the undersigned Registrants hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions referred to in Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the shares of common stock being registered,
the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) Each of the Registrants hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the
Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
63
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 13th day of
January, 2004.
EXELON CORPORATION
By: /s/ John W. Rowe
----------------------------------------
John W. Rowe
Chairman, Chief Executive Officer
and Director
By: /s/ Robert S. Shapard
----------------------------------------
Robert S. Shapard
Executive Vice President and Chief
Financial Officer
By: /s/ Matthew F. Hilzinger
----------------------------------------
Matthew F. Hilzinger
Vice President and Corporate Controller
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Director January 13, 2004
- -----------------------------
Edward A. Brennan
* Director January 13, 2004
- -----------------------------
M. Walter D'Alessio
* Director January 13, 2004
- -----------------------------
Nicholas DeBenedictis
* Director January 13, 2004
- -----------------------------
Bruce DeMars
* Director January 13, 2004
- -----------------------------
G. Fred DiBona, Jr.
* Director January 13, 2004
- -----------------------------
Rosemarie B. Greco
64
* Director January 13, 2004
- -----------------------------
Edgar D. Jannotta
* Director January 13, 2004
- -----------------------------
John M. Palms, Ph.D.
* Director January 13, 2004
- -----------------------------
John W. Rogers, Jr.
* Director January 13, 2004
- -----------------------------
Ronald Rubin
* Director January 13, 2004
- -----------------------------
Richard L. Thomas
*By: /s/ John W. Rowe
-----------------------------------
John W. Rowe, Attorney-in-Fact
65
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 13th day of
January, 2004.
EXELON CAPITAL TRUST I
By: /s/ Thomas R. Miller
---------------------------------
Name: Thomas R. Miller
Title: Administrative Trustee
EXELON CAPITAL TRUST II
By: /s/ Thomas R. Miller
---------------------------------
Name: Thomas R. Miller
Title: Administrative Trustee
EXELON CAPITAL TRUST III
By: /s/ Thomas R. Miller
--------------------------------
Name: Thomas R. Miller
Title: Administrative Trustee
66
INDEX TO EXHIBITS
Exhibit No. Description
- -------------- ---------------
1.1** Form of Underwriting Agreement relating to common stock,
preferred stock, debt securities, stock purchase contracts and
stock purchase units.
1.2** Form of Underwriting Agreement relating to trust preferred
securities.
4.1 Articles of Incorporation of Exelon Corporation (incorporated
herein by reference to Exhibit 3.1 of Exelon's Registration
Statement on Form S-4, Registration Statement No. 333-37082).
4.2 Bylaws of Exelon Corporation (incorporated herein by reference
to Exhibit 3.2 of Exelon's Registration Statement on Form S-4,
Registration Statement No. 333-37082).
4.3** Indenture dated as of May 1, 2001 between Exelon Corporation
and Chase Manhattan Trust Company, N.A., as trustee, relating
to debt securities.
4.4** Form of Indenture between Exelon Corporation and Wachovia
Bank, National Association, relating to subordinated debt
securities.
4.5** Certificate of Trust of Exelon Capital Trust I dated as of
August 25, 2003
4.6** Certificate of Trust of Exelon Capital Trust II dated as of
August 25, 2003
4.7** Certificate of Trust of Exelon Capital Trust III dated as of
August 25, 2003
4.8** Declaration of Trust of Exelon Capital Trust I dated as of
August 25, 2003
4.9** Declaration of Trust of Exelon Capital Trust II dated as of
August 25, 2003
4.10** Declaration of Trust of Exelon Capital Trust III dated as of
August 25, 2003
4.11** Form of Amended and Restated Declaration of Trust (including
form of trust preferred security certificate)
4.12** Form of Guarantee Agreement of Exelon Corporation
4.13** Form of Statement with Respect to Shares for Exelon
Corporation preferred stock
5.1** Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding
the legality of the shares of common stock, stock purchase
contracts and stock purchase units, preferred stock, debt
securities, subordinated debt securities and guarantees.
5-2** Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the trust preferred securities
to be issued by Exelon Capital Trust I, Exelon Capital Trust
II and Exelon Capital Trust III.
8.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to
certain federal income tax matters
67
12.1** Statement regarding computation of ratio of earnings to fixed
charges.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2** Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1).
23.3** Consent of Richards, Layton & Finger, P.A., special Delaware
counsel (included in Exhibit 5.2).
24.1** Powers of Attorney (included on signature page).
25.1** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Chase Manhattan Trust Company,
N.A., as trustee under the Indenture relating to debt
securities.
25.2** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Trust Company,
National Association, as property trustee under the Amended
and Restated Declaration of Trust.
25.3** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Bank, National
Association, as trustee under the Indenture relating to
subordinated debt securities.
25.4** Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Wachovia Trust Company,
National Association, as guarantee trustee under the Guarantee
Agreement.
----------------------
* Filed herewith.
** Previously filed.
68
LAW OFFICES
Ballard Spahr Andrews & Ingersoll, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
LAWYERS@BALLARDSPAHR.COM WILMINGTON, DE
January 13, 2004
Exelon Corporation
Exelon Capital Trust I
Exelon Capital Trust II
Exelon Capital Trust III
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680
Dear Ladies and Gentlemen:
We have acted as United States tax counsel to Exelon Corporation, a
Pennsylvania corporation (the "Company"), and Exelon Capital Trust I, Exelon
Capital Trust II and Exelon Capital Trust III, each a statutory trust formed
under the laws of the State of Delaware (each a "Trust" and, collectively, the
"Trusts"), in connection with the preparation of a Registration Statement on
Form S-3 (such Registration Statement, including the prospectus supplement
relating to the Trusts' trust preferred securities that was a part thereof, is
referred to herein as the "Registration Statement") which was filed by the
Company and the Trust with the Securities and Exchange Commission (the
"Commission") on September 5, 2003, under the Securities Act of 1933, as amended
(the "Securities Act"), relating to the registration of (i) debt securities,
common stock, stock purchase contracts and stock purchase units, preferred stock
and subordinated debt securities of the Company and (ii) trust preferred
securities of the Trusts and related guarantees of the Company.
We are familiar with the proceedings to date with respect to the
Registration Statement and have examined such records, documents and questions
of law, and satisfied ourselves as to such matters of fact, as we have
considered relevant and necessary as a basis for this opinion. In addition, we
have assumed that (i) each Trust will be operated strictly in accordance with
the terms of the form of Amended and Restated Declaration of Trust attached as
Exhibit 4.11 to the Registration Statement, (ii) there will be no change in the
laws or regulations currently applicable to the Company and the Trusts, (iii)
such laws and regulations will be the only laws and regulations applicable to
the Company and the Trusts and (iv) there will be no change in the
administrative or judicial interpretations of such laws and regulations.
Exelon Corporation
Exelon Capital Trust I
Exelon Capital Trust II
Exelon Capital Trust III
January 9, 2004
Page 2 of 2
Based upon and subject to the foregoing, the statements set forth in
the Registration Statement under the headings "Description of Trust Preferred
Securities - United States Federal Income Tax Consequences," to the extent they
constitute matters of federal income tax law or legal conclusions with respect
thereto, set forth our opinion that under then current law and subject to the
assumptions noted above, each of the trusts will be characterized for United
States federal income tax purposes as a "grantor trust" and not as an
association or publicly traded partnership taxable as a corporation. If a trust
is properly characterized as a grantor trust, the trust will not be subject to
United States federal income taxes and each beneficial owner of trust preferred
securities will be treated for such purposes as owning a pro rata undivided
interest in the subordinated debt securities, and will be required to include in
income any income with respect to the owner's allocable share of those
subordinated debt securities.
In giving the foregoing opinion, we express no opinion as to the laws
of any jurisdiction other than the law of the United States of America.
This opinion letter is limited to the matters stated herein and no
opinion is implied or may be inferred beyond the matters expressly stated
herein. This opinion is rendered as of the date hereof based on the law and
facts in existence on the date hereof, and we do not undertake, and hereby
disclaim, any obligation to advise you of any changes in law or fact, whether or
not material, which may be brought to our attention at a later date.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 8-1 to the Registration Statement. We also consent to the use of our
name under the heading "Legal Matters" in the Registration Statement. In giving
this consent, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules or regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Amendment No. 2 to Form S-3 of our report dated January 29, 2003,
except for Note 23 as to which the date is February 20, 2003, relating to the
financial statements, which appears in the 2002 Annual Report to Shareholders,
which is incorporated by reference in Exelon Corporation's Annual Report on Form
10-K for the year ended December 31, 2002. We also consent to the incorporation
by reference of our report dated January 29, 2003, relating to the financial
statement schedule of Exelon Corporation, which appears in such Annual Report on
Form 10-K. We also consent to the references to us under the heading "Experts"
in such Registration Statement.
/s/ Pricewaterhouse Coopers LLP
January 13, 2004