POTOMAC ELECTRIC POWER COMPANY
First Mortgage Bonds
UNDERWRITING AGREEMENT
To the Representatives named in
Schedule I hereto of the Underwriters
named in Schedule II hereto
Ladies and Gentlemen:
The undersigned Potomac Electric Power Company (the "Company") hereby
confirms its agreement with the several underwriters named in Schedule II
hereto (the "Underwriters") as set forth below to sell its First Mortgage
Bonds of the designation, with the terms and in the amount, specified in
Schedule I hereto (the "Bonds"). If the firm or firms listed in Schedule I
hereto (the "Representatives") are the same as the firm or firms listed in
Schedule II hereto, then the terms "Underwriters" and "Representatives," as
used herein, shall each be deemed to refer to such firm or firms.
SECTION I. Description of Bonds. The Company has authorized by
appropriate corporate action and proposes to issue and sell the Bonds, to be
issued under and secured by its Mortgage and Deed of Trust dated July 1, 1936
to The Bank of New York, as successor trustee (the "Trustee"), and the
indentures supplemental thereto including the Supplemental Indenture relating
to the Bonds (herein collectively called the "Indenture"). Certain of the
terms and provisions relating to the Bonds and the Indenture are summarized in
the Registration Statement and Prospectus hereinafter referred to.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") two registration statements on Form S-3
(No. 33-61379 and No. 33- ), including prospectuses, for the
registration of the Bonds under the Securities Act of 1933, as amended
(the "1933 Act"), and the qualification of the Indenture under the Trust
Indenture Act of 1939 (the "1939 Act"), which registration statements
have been declared effective by the Commission and which Indenture has
been qualified under the 1939 Act. Such registration statements, as
amended to the date of this Agreement, including the documents
incorporated by reference but excluding the Form T-1 Statement of
Eligibility and Qualification of the Trustee, and the prospectus
contained in the registration statement on Form S-3 (No. 33- ) as
supplemented either by a prospectus supplement, dated the date hereof,
relating to the terms and offering of the Bonds to be filed pursuant to
Rule 424 ("Rule 424") of the rules and regulations of the Commission
under the 1933 Act (the "1933 Act Regulations") and/or by a term sheet
or abbreviated term sheet, if any, sent or given in reliance upon Rule
434 of the 1933 Act Regulations and to be filed pursuant to Rule 424
(including, in each case, the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the ▇▇▇▇ ▇▇▇) are
hereinafter called the "Registration Statement" and the "Prospectus,"
respectively; any reference herein to the terms "amend," or "amendment"
with respect to the Registration Statement or the Prospectus shall be
deemed to include any document incorporated by reference therein after
the date hereof and prior to the termination of the offering of the
Bonds by the Underwriters; provided, however, that any prospectus
supplement, term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424 under the 1933 Act with respect to an
offering of first mortgage bonds other than the Bonds shall not be
deemed to be a supplement to, or a part of, the Prospectus. If any
revised prospectus shall be provided to the Underwriters by the Company
for use in connection with the offering of the Bonds (whether or not
such revised prospectus is required to be filed by the Company pursuant
to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall
refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use.
(b) At the time the Registration Statement became effective, the
Registration Statement, the prospectus included therein and the
Indenture fully complied, and at the Closing Date, as hereinafter
defined, the Registration Statement and the Prospectus, as they may be
amended or supplemented, and the Indenture will fully comply, in all
material respects with the applicable provisions of the 1933 Act, the
1933 Act Regulations, and the 1939 Act; on said dates the Registration
Statement did not, and the Registration Statement, as it may be amended
or supplemented, will not, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; when the
Registration Statement became effective, the prospectus included therein
did not, and at the Closing Date and on the date it is filed with, or
transmitted for filing to, the Commission pursuant to Rule 424 the
Prospectus, as it may be amended or supplemented, will not, contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that
the foregoing representations and warranties in this subparagraph (b)
shall not apply to statements or omissions made in reliance upon and in
conformity with information furnished herein or in writing to the
Company by the Representatives or by or on behalf of any Underwriter
through the Representatives expressly for use in the Registration
Statement or the Prospectus.
(c) The documents incorporated by reference in the Registration
Statement and the Prospectus pursuant to Item 12 of Form S-3 under the
1933 Act, when they were filed with the Commission, complied in all
- 2 -
material respects with the applicable requirements of the 1933 Act and
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations of the Commission thereunder, and any
documents so filed and incorporated by reference subsequent to the date
hereof will, when they are filed with the Commission, comply in all
material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission thereunder; and none of such documents
included or includes or will include any untrue statement of a material
fact or omitted or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(d) The financial statements incorporated by reference in the
Registration Statement and the Prospectus present fairly the financial
condition and operations of the Company and its consolidated
subsidiaries at the respective dates or for the respective periods to
which they apply; such financial statements have been prepared in each
case in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set
forth therein; and the supporting schedules incorporated by reference in
the Registration Statement and the Prospectus present fairly the
information required to be stated therein and Price Waterhouse LLP
("Price Waterhouse"), who have examined certain of the financial
statements, are independent accountants as required by the 1933 Act, and
the rules and regulations of the Commission.
(e) Except as reflected in, or contemplated by, the Registration
Statement and the Prospectus, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
and prior to the Closing Date, (i) there has not been any material,
adverse change in the business, property or financial condition of the
Company and its subsidiaries considered as one enterprise and (ii) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered
as one enterprise. The Company has no material contingent obligation
which is not disclosed in or contemplated by the Registration Statement
and the Prospectus.
(f) The sale by the Company to the Underwriters, severally, of
the Bonds for the consideration herein specified and upon the terms and
conditions herein contained will not result in a breach of any of the
terms or provisions of or constitute a default under the Company's
Charter or By-Laws, each as amended, or any indenture or other agreement
or instrument which the Company has assumed or to which it is now a
party or any applicable law, administrative regulation or administrative
court decree.
- 3 -
(g) There are no contracts or documents of the Company or any of
its subsidiaries which are required to be filed as exhibits to the
Registration Statement by the 1933 Act or by the 1933 Act Regulations
which have not been so filed.
SECTION 3. Sale of the Bonds. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each of the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase from the Company,
at the purchase price set forth in Schedule I hereto, the respective principal
amounts of Bonds set forth opposite the name of such Underwriter in Schedule
II hereto.
SECTION 4. Time and Place of Closing. Payment for the Bonds shall be
made at the place, date and time specified in Schedule I hereto (or such other
place, date and time as the Representatives and the Company may agree upon),
against delivery of the Bonds, at the office of Bankers Trust Company, ▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, N.Y., to the Representatives for the respective
accounts of the several Underwriters. The hour and date of such delivery and
payment are herein called the "Closing Date." Payment for the Bonds shall be
in immediately available funds. Certificates for the Bonds shall be delivered
to the Representatives for the respective accounts of the several Underwriters
in such names and denominations as the Representatives shall specify not later
than the beginning of business on the third full business day before the
Closing Date. For the purpose of expediting the checking of the certificates
by the Representatives, the Company agrees to make the certificates for the
Bonds available to the Representatives not later than 1:00 p.m., New York
Time, on the last full business day prior to the Closing Date at said office
of Bankers Trust Company.
SECTION 5. Covenants of the Company. The Company agrees that:
(a) As soon as possible after the execution and delivery of this
Agreement, the Company will file the Prospectus with the Commission
pursuant to Rule 424 setting forth, among other things, the necessary
information with respect to the terms of offering of the Bonds.
(b) The Company will give the Representatives notice of its
intention to file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus, will furnish the
Representatives and counsel for the Underwriters copies of any such
amendment or supplement a reasonable time in advance of filing, and will
not file any such amendment or supplement to which the Representatives
or counsel for the Underwriters shall reasonably object prior to such
filing.
- 4 -
(c) The Company will promptly deliver to the Representatives one
fully executed copy of the registration statement as originally filed
with the Commission and of each amendment or supplement thereto,
heretofore or hereafter made, including any post-effective amendment (in
each case including all exhibits filed therewith not previously
furnished to the Representatives) and signed copies of each consent and
certificate included therein or filed as an exhibit thereto. The
Company will also send to the Representatives as soon as practicable
after the date of this Agreement and thereafter from time to time not
later than nine months after the date of this Agreement, as many copies
of the Prospectus (excluding documents incorporated by reference under
Item 12 of Form S-3) as the Representatives may reasonably request for
the purposes contemplated by the 1933 Act, the 1934 Act and the rules
and regulations of the Commission thereunder.
(d) The Company will pay or cause to be paid all expenses in
connection with (i) the preparation and filing by it of the Registration
Statement and Prospectus and the preparation and delivery of this
Agreement, (ii) the preparation, rating, issue and delivery of the Bonds
to be sold by it as provided herein, (iii) the printing and delivery to
the Underwriters in reasonable quantities of copies of the Registration
Statement, each preliminary prospectus and the Prospectus, (iv) all
filing fees and fees and disbursements not to exceed $5,000 of Winthrop,
Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ incurred in connection with the qualification
of the Bonds under securities laws and the determination of the legality
of the Bonds in accordance with the provisions of Section 5(i), and (v)
the printing and delivery to the Underwriters of copies of the Blue Sky
Survey; and will pay all taxes, if any (but not including any transfer
taxes), on the issue of said Bonds; provided, however, that the
Underwriters shall pay all of their own costs and expenses, including
the fees and expenses of their counsel (subject however to the
provisions of this subparagraph requiring the payment by the Company of
certain fees and expenses, not to exceed $5,000), any transfer taxes on
the Bonds which they may sell.
(e) If, during the period when delivery of the Prospectus is
required under the 1933 Act, any event relating to or affecting the
Company, or of which the Company shall be advised in writing by the
Representatives, shall occur which, in the Company's opinion, should be
set forth in an amendment to the Prospectus, including an appropriate
filing pursuant to Section 13(a) or (c) or Section 14 of the 1934 Act,
in order to make the Prospectus not misleading in the light of the
circumstances when it is delivered to a purchaser, or if it is necessary
to amend the Prospectus to comply with the 1933 Act, the Company will
forthwith at its expense prepare and file with the Commission (in form
and substance satisfactory to counsel for the Underwriters) and furnish
- 5 -
to the Representatives a reasonable number of copies of such amendment
or amendments to the Prospectus, including any filing pursuant to
Section 13(a) or (c) or Section 14 of the 1934 Act, which will amend the
Prospectus so that as amended it will comply with the 1933 Act and will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading. In case any of the several Underwriters is
required to deliver a Prospectus after the expiration of nine months
after the date of this Agreement, the Company, upon such Underwriter's
request, will furnish to such Underwriter, at the expense of such
Underwriter, a reasonable quantity of an amended prospectus, or
amendments to the Prospectus, complying with Section 10(a) of the 1933
Act.
(f) The Company will advise the Representatives promptly
(confirming such advice in writing) (i) of the filing of the Prospectus
pursuant to Rule 424 and of any amendment to the Prospectus or
Registration Statement, (ii) of the receipt of any comments from the
Commission, (iii) of any official request made by the Commission for
amendments to the Registration Statement or Prospectus or for additional
information with respect thereto or (iv) of official notice of
institution of proceedings for, or the entry of, a stop order suspending
the effectiveness of the Registration Statement. The Company will make
every reasonable effort to prevent the issuance of any stop order and,
if such a stop order should be entered by the Commission, will make
every reasonable effort to obtain the lifting or removal thereof as soon
as possible.
(g) For a period of five years, the Company will (i) furnish to
the Representatives as soon as practicable after the close of each
fiscal year a consolidated balance sheet of the Company as of the close
of such fiscal year, in reasonable detail, together with consolidated
statements of earnings and of cash flows, in reasonable detail, of the
Company, for such fiscal year, such consolidated balance sheet,
statements of earnings and of cash flows, to be accompanied by an
opinion thereon rendered by independent accountants, who may be the
regular auditors for the Company; (ii) upon request, will furnish to the
Representatives as soon as practicable after the close of each of the
first three quarters of each fiscal year an interim earnings statement
of the Company for the twelve months ended with the close of such
quarter, which need not be audited, similar to that furnished pursuant
to clause (i) of this subparagraph; and (iii) will furnish to the
Representatives copies of all such financial statements as it shall file
with the Commission or any governmental agency substituted therefor, and
from time to time, copies of any reports or other communications which
it shall send to stockholders generally.
- 6 -
(h) The Company will make generally available to its security
holders, as soon as reasonably practicable, but in any event not later
than 16 months after the end of the fiscal quarter in which the filing
of the Prospectus pursuant to Rule 424 occurs, an earning statement (in
form complying with the provisions of Section 11(a) of the 1933 Act and
the 1933 Act Regulations, which need not be certified by independent
public accountants) covering a period of twelve months beginning not
later than the first day of the Company's fiscal quarter next following
the filing of the Prospectus pursuant to Rule 424.
(i) The Company will use its best efforts to qualify the Bonds
for offer and sale under the applicable securities and legal investment
laws of such jurisdictions as the Representatives may designate, and
will file and make such statements or reports as are or may be
reasonably required by the laws of such jurisdictions; provided,
however, that the Company shall not be required to qualify as a foreign
corporation or dealer in securities, or to file any general consents to
service of process under the laws of any jurisdiction. The fees and
disbursements of Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, who are acting as
counsel for the Underwriters for the purposes of this Agreement, shall
be paid by the Underwriters (subject however to provisions of
subparagraph (d) hereof requiring payment by the Company of counsel fees
and disbursements not to exceed $5,000), provided, however, that if this
Agreement is terminated in accordance with the provisions of Section 6,
7 or 9, the Company shall reimburse the Underwriters for the amount of
such fees and disbursements. The Company shall not be required to pay
any amount for any expenses of the Underwriters except as provided in
this Section 5. The Company shall not in any event be liable to the
Underwriters for damages on account of the loss of anticipated profits.
(j) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file promptly all
documents required to be filed with the Commission pursuant to Section
13(a) or (c) or Section 14 of the 1934 Act subsequent to the time of
execution of this Agreement.
(k) Between the date hereof and the Closing Date, the Company
will not, without prior written consent of the Representatives, offer or
sell, or enter into any agreement to sell, any additional First Mortgage
Bonds of the Company.
(l) The Company will use the net proceeds received from the sale
of the Bonds in the manner specified in the Prospectus under "Use of
Proceeds".
- 7 -
SECTION 6. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase and pay for the Bonds shall be
subject to the accuracy of the representations and warranties on the part of
the Company, to the substantial accuracy of the statements of Company officers
made pursuant to the provisions hereof, to the performance by the Company of
its obligations to be performed hereunder prior to the Closing Date, and to
the following further conditions:
(a) That, at the Closing Date, the Representatives shall receive
the signed opinions of the following counsel, substantially in the
respective forms attached hereto: Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for the Underwriters, and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, Esq., counsel for the Company.
(b) That no amendment to the Registration Statement or
Prospectus, filed subsequent to the execution of this Agreement, shall
be unsatisfactory in substance to the Representatives or unsatisfactory
in form to counsel for the Underwriters.
(c) That, at or prior to 6:00 p.m., New York Time, on the date
hereof or at such later time and date as the Representatives may have
from time to time consented to in writing or by telephone, confirmed in
writing, all orders of the Public Service Commission of the District of
Columbia necessary to permit the issue and sale of the Bonds shall be in
effect; that at or prior to the Closing Date the certificate of such
Public Service Commission permitting the issue of the Bonds shall have
been recorded on the books of the Company; that prior to the Closing
Date no stop order with respect to the effectiveness of the Registration
Statement shall have been issued under the 1933 Act by the Commission
and that at the Closing Date no proceedings therefor shall be pending or
threatened; and that at the Closing Date the Prospectus shall not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, other than any statement contained in, or any
matter omitted from, the Registration Statement or the Prospectus in
reliance upon, and in conformity with, information furnished to the
Company in writing by the Representatives or by or on behalf of any of
the several Underwriters through the Representatives expressly for use
in the Registration Statement or the Prospectus.
- 8 -
(d) That, subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus and
prior to the Closing Date, no material and adverse change in the
condition of the Company and its subsidiaries, taken as a whole,
financial or otherwise, shall have taken place (other than as referred
to in or contemplated by the Registration Statement and Prospectus) and
that the Company shall, at the Closing Date, deliver to the
Representatives, a signed certificate of its President or a Vice
President and its Treasurer or an Assistant Treasurer to the effect that
(i) there has been no material adverse change, (ii) the representations
and warranties in Section 2 are true and correct with the same force and
effect as though expressly made at and as of the Closing Date, (iii) the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Date, and
(iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission.
(e) That at the Closing Date the Representatives shall have
received a letter from Price Waterhouse in form and substance
satisfactory to the Representatives, dated the Closing Date, confirming
that they are independent accountants within the meaning of the 1933
Act, the 1934 Act and published rules and regulations thereunder and to
the effect that (1) in their opinion the audited consolidated financial
statements included in the Company's Annual Report to the Commission on
Form 10-K, incorporated by reference in the Registration Statement (the
"Form 10-K"), comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act, the 1934 Act and the
published rules and regulations of the Commission issued thereunder with
respect to Form 10-K and registration statements on Form S-3, and (2) on
the basis of a reading of the unaudited consolidated financial data
included in the Company's Quarterly Reports to the Commission on Form
10-Q, if any (the "Forms 10-Q"), incorporated by reference in the
Registration Statement, and on the basis of the following procedures
(but not on the basis of an audit in accordance with generally accepted
auditing standards) to be performed by Price Waterhouse: (A) a reading
of the minutes of the Board of Directors of the Company and the
Executive Committee thereof as set forth in the minute books to a
specified date not more than three business days prior to the date of
such letter, (B) a reading of the latest available unaudited interim
consolidated financial data (if any), and (C) inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters, nothing has come to their attention which in their
judgment would indicate that (a) the unaudited consolidated financial
data included in the Forms 10-Q (if any) do not comply as to form in all
material respects with the applicable accounting requirements of the
1934 Act and the published rules and regulations of the Commission
- 9 -
thereunder, or that any material modifications should be made to such
unaudited consolidated financial data for such unaudited consolidated
financial data to be in conformity with generally accepted accounting
principles; (b) the unaudited amounts of operating revenue, net income,
earnings applicable for common stock and earnings per share of common
stock and unaudited amounts for property and plant -- net, long-term
debt, preferred and preference stock and common equity outstanding, as
included in the Registration Statement, were not determined on a basis
substantially consistent with that of the corresponding amounts in the
audited consolidated statements of earnings and consolidated balance
sheets incorporated by reference in the Registration Statement; (c) the
ratios of earnings to fixed charges, actual and (if any) pro forma, as
set forth in the Registration Statement were not arithmetically correct;
(d) at the date of the latest available unaudited interim financial data
there was any change in the common stock outstanding or long-term debt
of the Company or any decrease in the common equity of the Company
(before giving effect to dividends declared on common stock) as compared
with amounts shown in the most recent consolidated balance sheet
incorporated by reference in the Registration Statement; or for the
period from the date of such consolidated balance sheet to the date of
the latest available unaudited interim consolidated financial data there
were any decreases, as compared with the corresponding period in the
preceding year, in operating revenue or in net income or earnings per
share; or (e) at a specified date not more than three business days
prior to the date of such letter there was any change in the common
stock outstanding or long-term debt of the Company, in each case as
compared with amounts shown in the most recent consolidated balance
sheet incorporated by reference in the Registration Statement; except in
all instances for (i) changes or decreases which the Registration
Statement discloses have occurred or may occur or (ii) changes or
decreases not in excess of $500,000 of (iii) changes occasioned by the
issuance of common stock pursuant to the Company's Shareholder Dividend
Reinvestment Plan, Savings Plan for Exempt Employees, Savings Plan for
Bargaining Unit Employees and Savings Plan for Non-Bargaining Unit, Non-
Exempt Employees, or Long-Term Incentive Plan or upon the conversion of
the Company's Serial Preferred Stock, $2.44 Convertible Series of 1966,
or the 7% Convertible Debentures and the 5% Convertible Debentures. The
letter of Price Waterhouse also shall be to the effect that they have
carried out certain specified procedures, not constituting an audit,
with respect to certain amounts, percentages and financial information
which are derived from the general accounting records of the Company,
which appear in the Registration Statement and Prospectus and which are
specified by the Representatives, and have compared such amounts,
percentages and financial information with the accounting records of the
Company and have found them to be in agreement.
- 10 -
(f) That the Company shall have performed such of its obligations
under this Agreement as are to be performed by the terms hereof at or
before the Closing Date.
(g) At the Closing Date counsel for the Underwriters shall have
been furnished with such certificates, documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Bonds as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the
representations and warranties, or the fulfillment of any of the
conditions herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Bonds as herein
contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representatives by notice to the Company at any time at or prior to the
Closing Date and such termination shall be without liability of any party to
any other party except as provided in Section 5 and Section 8.
SECTION 7. Conditions of Company's Obligations. The obligations of the
Company with respect to the issue, sale and delivery of the Bonds shall be
subject to the following conditions:
(a) That, at or before 6:00 p.m., New York Time, on the date
hereof, or such later time and day as the Company may have from time to
time consented to in writing or by telegram, confirmed in writing, all
orders of the Public Service Commission of the District of Columbia
necessary to permit the issue, sale and delivery of the Bonds shall be
in effect; and that, prior to the Closing Date, no stop order with
respect to the effectiveness of the Registration Statement shall have
been issued under the 1933 Act by the Commission and that at the Closing
Date no proceedings therefor shall be pending or threatened.
(b) That no order of the Public Service Commission of the
District of Columbia relating to the issue or sale of the Bonds or to
the application of the proceeds thereof, which may be entered after the
execution of this Agreement and prior to the Closing Date, shall contain
any conditions which are not acceptable to the Company.
In case any of the conditions specified above in this Section shall not
have been fulfilled, this Agreement may be terminated by the Company, upon
notice thereof to the Representatives, at any time prior to Closing Date, and
such termination shall be without liability of any party to any other party
except as provided in Section 5 and Section 8.
- 11 -
SECTION 8. Indemnification. (a) The Company agrees to indemnify and
hold harmless the several Underwriters and each person who controls any of the
several Underwriters within the meaning of Section 15 of the 1933 Act against
any and all losses, claims, damages or liabilities, as incurred, joint or
several, to which they or any of them may become subject under the 1933 Act or
under any other statute or common law, and to reimburse each such Underwriter
and each such controlling person for any legal or other expenses (including,
to the extent hereinafter provided, reasonable counsel fees) incurred by them
in connection with investigating any such losses, claims, damages or
liabilities or in connection with defending or settling (if settled with the
written consent of the Company) any actions, insofar as such losses, claims,
damages, liabilities, expenses or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
the registration statement as originally filed or as subsequently amended or
in the Registration Statement or any amendment thereto, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of any
untrue statement or alleged untrue statement of a material fact contained in
the preliminary prospectus or the prospectus as originally filed or as
subsequently amended or the Prospectus, as amended or supplemented if there
shall have been any amendment or supplement thereto, or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnity agreement contained in
this Section shall not apply to any such losses, claims, damages, liabilities,
expenses or actions arising out of, or based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with
information furnished herein or in writing to the Company by the
Representatives or by or on behalf of any of the several Underwriters through
the Representatives expressly for use in the registration statement as
originally filed or as subsequently amended or in the preliminary prospectus
as originally filed or as subsequently amended or in the Registration
Statement or the Prospectus or any amendment or supplement to either thereof;
and provided, further, that the indemnity agreement contained in this Section
shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any such losses, claims, damages,
liabilities, expenses or actions arising from the sale of Bonds to any person
if such Underwriter failed to send or give a copy of the Prospectus (as it may
have been amended) (excluding documents incorporated by reference) to such
person with or prior to the written confirmation of the sale involved. The
indemnity agreement of the Company contained in this Section and the
representations and warranties of the Company contained in Section 2 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, or any such controlling
person, and shall survive the delivery of the Bonds. The Underwriters agree
to notify the Company promptly of the commencement of any litigation or
proceedings against them or any of them or against any such controlling person
in connection with the sale of Bonds.
- 12 -
(b) Each Underwriter agrees to indemnify and hold harmless the Company,
its officers and directors, and each person who controls any thereof within
the meaning of Section 15 of the 1933 Act against any and all losses, claims,
damages or liabilities, as incurred, joint or several, to which they or any of
them may become subject under the 1933 Act or under any other statute or
common law, and to reimburse each of them for any legal or other expenses
(including, to the extent hereinafter provided, reasonable counsel fees)
incurred by them in connection with investigating any such losses, claims,
damages or liabilities, or in connection with defending or settling (if
settled with the Underwriters' written consent) any actions, insofar as such
losses, claims, damages, liabilities, expenses or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement as originally filed or as subsequently
amended or in the Registration Statement or any amendment thereto, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the preliminary prospectus or the prospectus as originally
filed or as subsequently amended or the Prospectus, as amended or supplemented
if there shall have been any amendment or supplement thereto, or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished herein or in writing to the
Company by the Representatives or by or on behalf of the several Underwriters
through the Representatives expressly for use in the registration statement as
originally filed or as subsequently amended or in the preliminary prospectus
as originally filed or as subsequently amended or in the Registration
Statement or the Prospectus or any amendment or supplement to either thereof.
The indemnity agreement contained in this Section shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of the Company, or any such controlling person, and shall survive the receipt
of the proceeds of the sale of the Bonds. The Company agrees promptly to
notify the Representatives of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of Bonds. The foregoing indemnity agreement is in
addition to any further liability which any Underwriter may otherwise have to
the Company or any of its directors, officers or controlling persons.
(c) The Company and each of the several Underwriters agree that, upon
the receipt of notice of the commencement of any action against it, its
officers and directors, or any person controlling it as aforesaid in respect
of which indemnity may be sought on account of any indemnity agreement
contained herein, it will promptly give written notice of the commencement
- 13 -
thereof to the party or parties against whom indemnity shall be sought
hereunder. The omission so to notify such indemnifying party or parties of
any such action shall relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party on account of any
indemnity agreement contained in (a) or (b) above, but shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party otherwise than on account of such indemnity agreement.
In case such notice of any such action shall be so given, such indemnifying
party shall be entitled to participate at its own expense in the defense or,
if it so elects, to assume (in conjunction with any other indemnifying
parties) the defense of such action, in which event such defense shall be
conducted by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties who shall be
defendant or defendants in such action, and such defendant or defendants shall
bear the fees and expenses of any additional counsel retained by them; but if
the indemnifying party shall elect not to assume the defense of such action,
such indemnifying party will reimburse such indemnified party or parties for
the reasonable fees and expenses of any counsel retained by them. In the
event that the parties to any such action (including impleaded parties)
include both the indemnified party or parties and the indemnifying party and
any of the indemnified parties shall have been advised by counsel chosen by it
and reasonably satisfactory to the Company that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party
or parties and will reimburse the indemnified party or parties as aforesaid
for the reasonable fees and expenses of any counsel retained by such
indemnified party or parties, it being understood that the indemnifying party
shall not, in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for all such indemnified parties,
which firm shall, in connection with indemnification provided for in (a)
above, be designated in writing by the Representatives, and, in connection
with indemnification provided for in (b) above, be designated in writing by
the Company.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 8
is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, liabilities,
claims, damages and expenses of the nature contemplated in said indemnity
agreement in such proportion as is equitable and as shall reflect both the
relative benefits received by the Company on the one hand and the Underwriter
or Underwriters, as the case may be, on the other hand from the offering of
the Bonds, and the relative fault, if any, of the Company on the one hand and
of the Underwriter or Underwriters, as the case may be, on the other hand in
- 14 -
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriter or Underwriters, as the case may be, on the
other hand in connection with the offering of the Bonds shall be deemed to be
in the same proportion as the total net proceeds from the offering of such
Bonds (before deducting expenses) received by the Company bear to the total
commissions and underwriting discounts received by the Underwriter or
Underwriters, as the case may be. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand
or the Underwriter or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Subsection (d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, liabilities, claims, damages and
expenses referred to above shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇
▇▇▇) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
SECTION 9. Termination. This Agreement may be terminated any time
prior to the Closing Date by the Representatives by giving notice thereof to
the Company, if at or prior to such time (i) there shall have occurred any
general suspension of trading in securities on the New York Stock Exchange or
there shall have been established by the New York Stock Exchange or by the
Commission or by any federal or state agency or by the decision of any court
any limitation on prices for such trading, or (ii) if a banking moratorium has
been declared by any Federal, New York, District of Columbia or Virginia
authority, or (iii) there shall have occurred any new outbreak or escalation
of hostilities or other national or international calamity or crisis, the
effect of which on the financial markets of the United States shall be such as
to make it impracticable for the Underwriters to enforce contracts for the
sale of the Bonds, or (iv) the Company shall have sustained a substantial loss
by fire, flood, accident or other calamity which renders it impracticable to
- 15 -
consummate the sale of the Bonds and the delivery of the Bonds by the several
Underwriters at the initial public offering price. Any termination hereof
pursuant to this Section 9 shall be without liability of any party to any
other party except as otherwise provided in Section 5 and Section 8.
SECTION 10. Default. If one or more of the Underwriters shall fail on
the Closing Date to purchase the Bonds which it or they are obligated to
purchase hereunder (the "Defaulted Bonds"), then the remaining Underwriters
(the "Non-Defaulting Underwriters") shall have the right, within 24 hours
after such date, to make arrangements for one or more of the Non-Defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Bonds in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, during such 24 hours such arrangements
shall not have been completed for the purchase of all of the Defaulted Bonds,
then:
(a) If the principal amount of the Defaulted Bonds does not
exceed 10% of the principal amount of the Bonds, the Non-Defaulting
Underwriters shall be obligated to purchase the total number of such
Defaulted Bonds in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all Non-
Defaulting Underwriters.
(b) If the principal amount of the Defaulted Bonds exceeds 10% of
the principal amount of the Bonds, this Agreement shall terminate
without any liability on the part of the Company or any Non-Defaulting
Underwriter.
Nothing in this Section 10 and no action taken pursuant to this Section
10 shall relieve any defaulting party from liability in respect of its
default.
In the event of a default by one or more Underwriters as set forth in
this Section 10 which does not result in a termination of this Agreement,
either the Non-Defaulting Underwriters or the Company shall have the right to
postpone the Closing Date for a period of not exceeding 7 days in order that
any required changes in the Registration Statement or the Prospectus or in any
other documents or arrangements may be effected.
SECTION 11. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Bonds to the Underwriters.
- 16 -
SECTION 12. Miscellaneous. This Agreement shall inure to the benefit
of the several Underwriters and the Company and with respect to the provisions
of Section 8, the officers and directors and each controlling person referred
to in Section 8, and their respective successors. Nothing in this Agreement
is intended or shall be construed to give to any other person, firm or
corporation, other than the Underwriters and the Company and their respective
successors and the controlling persons and officers and directors referred to
in Section 8 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors" as used in this Agreement shall not
include any purchaser, as such purchaser, of any Bonds from the Underwriters.
In all dealings hereunder, the Representatives shall act on behalf of
the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by the Representatives (or by any one of the Representatives
authorized by the agreement among the Underwriters relating to the Bonds to
act on behalf of all the Underwriters).
SECTION 13. Notices. All communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representatives at the address set forth in Schedule I hereto,
and notices to the Company shall be directed to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇. ▇., ▇▇▇▇▇▇▇▇▇▇, D. C. 20068, Attention of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Associate General Counsel, Secretary and Assistant Treasurer.
SECTION 14. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
- 17 -
SECTION 15. Counterparts. This Agreement may be simultaneously
executed in counterparts, each of which when so executed shall be deemed to be
an original. Such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed duplicate
hereof, whereupon it will become a binding agreement between the Company and
the several Underwriters in accordance with its terms.
Very truly yours,
POTOMAC ELECTRIC POWER COMPANY
By
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
By____________________________
- 18 -
SCHEDULE I
Underwriting Agreement dated
Registration Statements No. 33-61379 and No. 33-
Representative and Address:
Bonds:
Designation: First Mortgage Bonds, % Series
due
Principal Amount: $
Supplemental Indenture dated as of
Date of Maturity:
Interest Rate: % per annum, payable
_________ and __________ of
each year, commencing
_________
Purchase Price: % of the principal
amount thereof, plus accrued
interest, if any, from
________________ to the date
of payment and delivery
Public Offering Price: % of the principal amount thereof, plus
accrued interest, if any, from the ____________
to the date of payment and delivery
Closing Date and Location:
- 19 -
SCHEDULE II
Principal
Amount
Name of Underwriter of Bonds
$
Total $
- 20 -
[LETTERHEAD OF WINTHROP, STIMSON, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇]
Ladies and Gentlemen:
We have acted as counsel for you in connection with your several
purchases from Potomac Electric Power Company (the "Company") of $
aggregate principal amount of its First Mortgage Bonds, %
Series due (the "Bonds") pursuant to the Underwriting Agreement,
dated , 19 , between you and the Company (the
"Underwriting Agreement"). The Bonds have been issued under the
Mortgage and Deed of Trust, dated July 1, 1936, between the Company
and The Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, including a Supplemental
Indenture dated as of , 19 (said Mortgage and Deed of Trust as
so supplemented and amended being hereinafter referred to collectively
as the "Indenture").
We are members of the New York Bar and do not hold ourselves out
as experts on the laws of the District of Columbia, the State of
Maryland or the Commonwealths of Pennsylvania or Virginia. We
understand that you are relying and, in rendering this opinion, we
have, with your consent, relied upon the opinion of even date herewith
addressed to you by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., Senior Vice President
and General Counsel of the Company, with respect to legal matters
regarding the corporate authority of the Company and other matters
covered in such opinion relating to the laws of the District of
Columbia, the State of Maryland and the Commonwealths of Pennsylvania
and Virginia. We do not pass upon the organization of the Company or
the lien of the Indenture. As to such matters, it is our
understanding that you are relying on the above-mentioned opinion. We
have reviewed such opinion and believe it is satisfactory and that you
and we are justified in relying thereon.
We have examined the documents described in the list of closing
papers as having been delivered to you at the closing and such other
documents and have satisfied ourselves as to such other matters as we
have deemed necessary in order to enable us to express this opinion.
We have not examined the Bonds, except for a specimen thereof, and we
have relied upon a certificate of the Trustee as to the authentication
and delivery thereof. As to various questions of fact material to
this opinion, we have relied upon representations of the Company and
statements in the Registration Statements and the Prospectus
hereinafter mentioned. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents
submitted to us and the genuineness and conformity to original
documents of documents submitted to us as certified or photostatic
copies. As used herein, the term "Registration Statements" means the
Company's registration statement on Form S-3 (No. 33-61379) (the
"First Registration Statement") and the Company's registration
statement on Form S-3 (No. 33- ) (the "Second Registration
Statement") and the term "Prospectus" has the same meaning as the same
word in the Underwriting Agreement.
Based on the foregoing, we are of the opinion that:
1. The Bonds have been duly and validly authorized by all
necessary corporate action of the Company, have been duly and validly
issued in accordance with the provisions of the Indenture, and
constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except
as may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or other laws affecting the enforcement of mortgagees'
and other creditors' rights and by general principles of equity, and
the Bonds are entitled to the benefits and security afforded by the
Indenture.
2. The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
3. The Indenture has been qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act"), has been duly and
validly authorized, executed and delivered by the Company and is a
legal, valid and binding instrument, enforceable against the Company
in accordance with its terms, except as limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization or other laws
affecting the enforcement of mortgagees' and other creditors' rights
and by general principles of equity.
4. The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"), and to the best
of our knowledge, no stop order suspending the effectiveness of either
of the Registration Statements has been issued and no proceedings for
that purpose are pending or threatened under Section 8(d) of the 1933
Act; each of the Registration Statements, at the time it became
effective, and the Prospectus, at the time it was filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule
424(b) under the 1933 Act (except as to the financial statements and
other financial or statistical data constituting a part thereof or
incorporated by reference therein, or as to the parts of the
Registration Statements that constitute the statements of eligibility
of the Trustee, upon which we express no opinion), complied as to form
in all material respects with the applicable requirements of the 1933
Act and the 1939 Act and the applicable instructions, rules and
regulations of the Commission thereunder. The documents or portions
thereof filed with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and incorporated by
reference in the Registration Statement and the Prospectus pursuant
to Item 12 of Form S-3 (except as to the financial statements and
other financial or statistical data constituting a part thereof or
incorporated by reference therein, upon which we express no opinion),
at the time they were filed with the Commission, complied as to form
in all material respects with the applicable requirements of the 1934
Act and the applicable instructions, rules and regulations of the
Commission thereunder.
5. The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and the Prospectus fairly
describes the provisions thereof required to be described by the
registration statement form, except that we express no opinion as to
the statements contained under "Description of Bonds and Mortgage -
Security."
6. The approval of the Public Service Commission of the
District of Columbia that is required for the valid authorization,
issuance and sale of the Bonds by the Company in accordance with the
Underwriting Agreement has been obtained; to the best of our
knowledge, such approval is in full force and effect; no approval by
the State Corporation Commission of the Commonwealth of Virginia is
necessary for the valid authorization, issuance and sale of the Bonds
by the Company in accordance with the Underwriting Agreement; and we
do not know of any other approvals of any governmental body required
in that connection (other than in connection or in compliance with the
provisions of the securities or blue-sky laws of any jurisdiction,
upon which we express no opinion).
All legal proceedings and legal opinions rendered in connection
with the issuance and sale of the Bonds, including the opinion of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. of even date herewith, are satisfactory in
form to us.
In passing upon the forms of the Registration Statements and the
form of the Prospectus, we necessarily assume the correctness and
completeness of the statements made and information included therein
by the Company and take no responsibility therefor, except insofar as
such statements relate to us and as set forth in paragraph 5 above.
In connection with the Company's preparation of the Registration
Statements and the Prospectus, we have had conferences with certain of
its officers and representatives, with counsel for the Company, with
Price Waterhouse LLP, the Company's independent public accountants,
and with your representatives. We did not participate in the
preparation of the documents incorporated by reference in the
Registration Statements and the Prospectus. Our examination of the
Registration Statements and the Prospectus, and our discussions in the
above-mentioned conferences, did not disclose to us any information
that gives us reason to believe that either the First Registration
Statement, at the time the Company filed its Annual Report on Form 10-
K for the year ended December 31, 1996, or the Second Registration
Statement, at the time the Second Registration Statement became
effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, at
the time it was filed with the Commission pursuant to Rule 424(b)
under the 1933 Act or at the date hereof, contained or contains any
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. We do not express any opinion or belief as to the
financial statements or other financial or statistical data
constituting a part of, or incorporated by reference in, the
Registration Statements or the Prospectus, or as to the parts of the
Registration Statements that constitute the statement of eligibility
of the Trustee.
This opinion is given to you solely for your use in connection
with the Underwriting Agreement and the transactions contemplated
thereunder and may not be relied upon in any manner by any other
person or for any other purpose, without our prior written consent.
Very truly yours,
[LETTERHEAD OF ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇]
Ladies and Gentlemen:
We have acted as special counsel to Potomac Electric Power
Company (the "Company") in connection with the issuance and sale by
the Company of $_______ principal amount of First Mortgage Bonds,
% Series due ____ (the "Bonds"), which are being issued under the
Mortgage and Deed of Trust dated July 1, 1936 between the Company and
The Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, and as now further supplemented
by a Supplemental Indenture dated as of , 19 (the
"Supplemental Indenture"; said Mortgage and Deed of Trust as so
further supplemented and amended being hereinafter referred to as the
"Indenture"), and which are being purchased by the Underwriters named
in the Underwriting Agreement dated ____________, 19__ between the
Underwriters and the Company with respect to the Bonds (the
"Underwriting Agreement"). As used herein, the term "Registration
Statements" means the registration statements of the Company on Form
S-3, with file numbers 33-61379 and 33- . All other terms used
herein which are not defined herein but which are defined, either
directly or by cross-reference, in the Underwriting Agreement are used
herein with the respective meanings assigned to such terms therein.
As counsel for the Company, we have examined originals (or copies
certified or otherwise identified to our satisfaction) of such
instruments, certificates and documents and have reviewed such
questions of law as we have deemed necessary or appropriate for the
purpose of the opinion rendered below. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies and the
conformity of the Bonds to the specimen thereof attached as Exhibit A
to the certificate of the Trustee of even date herewith regarding the
due authentication and delivery of the Bonds. As to any facts
material to our opinion we have, when relevant facts were not
independently established, relied upon the aforesaid certificates.
Based on the foregoing, and subject to the following limitations
and qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
District of Columbia and under the laws of the Commonwealth of
Virginia, and has the corporate power and authority to execute the
Underwriting Agreement and the Indenture and to issue and sell the
Bonds.
2. The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
3. The Supplemental Indenture has been duly and validly
authorized by all necessary corporate action of the Company, has been
duly and validly executed and delivered by the Company, and, as
amended by the Supplemental Indenture, the Indenture constitutes a
valid and legally binding instrument of the Company enforceable
against the Company in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights or by general principles of equity;
the Indenture has been qualified under the Trust Indenture Act of
1939, as amended (the "1939 Act").
4. The Bonds have been duly and validly authorized by all
necessary corporate action of the Company, have been duly and validly
issued in accordance with the provisions of the Indenture, and
constitute the valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms, except
as limited by bankruptcy, insolvency, reorganization or other laws
affecting enforcement of creditors' rights or by general principles of
equity, and are entitled to the benefit and security afforded by the
Indenture.
5. The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"), and to the best
of our knowledge no stop order suspending the effectiveness of either
of the Registration Statements has been issued and no proceedings for
that purpose are pending or threatened under Section 8(d) of the 1933
Act. Each of the Registration Statements, at the time it became
effective, and the Prospectus, at the time it was filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule
424(b) under the 1933 Act (except for the financial statements and
other financial and statistical data constituting a part thereof, as
to which we express no opinion), complied as to form in all material
respects with the applicable requirements of the 1933 Act and the 1939
Act, and the applicable rules and regulations of the Commission
thereunder, except that we express no opinion on the Forms T-1 filed
as exhibits to the Registration Statements. The documents or portions
thereof filed with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and incorporated by
reference in the Registration Statements and the Prospectus, at the
- 2 -
times they were filed with the Commission, complied as to form in all
material respects with the 1934 Act, and the rules and regulations of
the Commission thereunder.
6. The approval of the Public Service Commission of the
District of Columbia which is required for the valid authorization,
issuance and sale of the Bonds by the Company in accordance with the
Underwriting Agreement has been obtained; to the best of our
knowledge, such approval is in full force and effect; no approval by
the State Corporation Commission of the Commonwealth of Virginia is
necessary for the valid authorization, issuance and sale of the Bonds
by the Company in accordance with the Underwriting Agreement; and we
do not know of any other approvals, consents or orders of any
governmental body that are legally required as a condition to the
valid authorization and issuance of the Bonds (other than in
connection or in compliance with the provisions of the securities or
"blue sky" laws of any jurisdiction, as to which we express no
opinion).
7. The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and the Prospectus fairly
describes the provisions thereof required to be described by the
registration statement form.
8. The Indenture constitutes a valid first lien or charge,
to the extent that it purports to be such, upon the interest held by
the Company in its property covered by the Indenture, subject only to
such exceptions, defects, qualifications and other matters as may be
permitted by the Indenture and to such other matters as do not
materially affect the security for the Bonds; and the Supplemental
Indenture has been recorded or filed for recording in the only
counties in which any real property subject to the lien of the
Indenture is located, and all requisite steps have been taken to
perfect the security interest of the Indenture in personal property of
the Company.
With respect to the opinion set forth in paragraph 8, we have
relied on the opinion to you of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., General
Counsel of the Company, dated the date hereof.
In passing upon the forms of the Registration Statements and the
form of the Prospectus, we necessarily assume the correctness and
completeness of the statements made and information included therein
by the Company and take no responsibility therefor, except insofar as
such statements relate to us and as set forth in paragraph 7 above.
In connection with the Company's preparation of the Registration
Statements and the Prospectus, we had discussions with certain of its
officers and representatives. Our examination of the Registration
- 3 -
Statements and the Prospectus and our discussions did not disclose to
us any information which gives us reason to believe that, at the time
the respective Registration Statements became effective, they
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, at the time
it was filed with the Commission pursuant to Rule 424(b) or at the
date hereof, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
We do not express any opinion or belief as to the financial statements
and other financial and statistical data constituting a part of the
Registration Statements or the Prospectus.
Very truly yours,
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
- 4 -
[LETTERHEAD OF POTOMAC ELECTRIC POWER COMPANY]
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
issuance and sale by Potomac Electric Power Company (the "Company") of
$ aggregate principal amount of its First Mortgage Bonds,
% Series due (the "Bonds"), which are being issued under the
Mortgage and Deed of Trust dated July 1, 1936 between the Company and
The Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, and as now further supplemented
by a Supplemental Indenture dated as of , 19 (said
Supplemental Indenture being hereinafter referred to as the
"Supplemental Indenture" and said Mortgage and Deed of Trust as so
further supplemented and amended being hereinafter referred to as the
"Indenture") and which are being purchased by you pursuant to the
Underwriting Agreement dated , 19 between you and the Company
with respect to the Bonds (the "Underwriting Agreement"). As used
herein, the term "Registration Statements" means the registration
statements of the Company on Form S-3 filed with the Securities and
Exchange Commission, with file numbers 33-61379 and 33- . Terms
used in this opinion letter which are not defined herein but which are
defined, either directly or by cross-reference, in the Underwriting
Agreement are used herein with the respective meanings assigned to
such terms therein.
As counsel for the Company, I have examined such corporate
records, certificates and other documents and such questions of law as
I have considered necessary or appropriate for the purpose of this
opinion. I have not examined the Bonds, except for the specimen
thereof attached as Exhibit A to the certificate of the Trustee of
even date herewith as to due authentication and delivery of the Bonds,
have assumed that the Bonds conform in all respects to such specimen,
and have relied on such certificate as to the due authentication and
delivery of the Bonds. On the basis of my examinations as aforesaid,
I advise you that, in my opinion:
(1) The Company has been duly incorporated and is now
validly existing as a corporation in good standing under the laws of
the District of Columbia; is also now validly existing and in good
standing as a domestic corporation of the Commonwealth of Virginia;
has charter power to carry on the business in which it is now engaged
as set forth in the Prospectus; is legally qualified to carry on in
the State of Maryland the business in which it is now engaged in said
State; and is legally qualified to carry on business within the
Commonwealth of Pennsylvania, limited, however, to its participation
in the construction, ownership and operation of the Conemaugh
generating station and certain related transmission lines.
(2) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
(3) The Indenture has been duly and validly authorized,
executed and delivered by the Company and is a valid and legally
binding instrument of the Company enforceable against the Company in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, or
other laws of general application relating to the enforcement of
creditors' rights.
(4) The Bonds have been duly and validly authorized by all
necessary corporate action of the Company, have been duly and validly
issued in accordance with the provisions of the Indenture, and
constitute the valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms, except
as the same may be limited as set forth in paragraph (3) above, and
are entitled to the benefit and security afforded by the Indenture.
(5) The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"); no stop order
suspending the effectiveness of either Registration Statement has been
issued and to the best of my knowledge no proceedings for that purpose
are pending or threatened under Section 8(d) of the 1933 Act; the
approval of the Public Service Commission of the District of Columbia
which is required for the valid authorization, issuance and sale of
the Bonds by the Company in accordance with the Underwriting Agreement
has been obtained and is in full force and effect; no approval by the
State Corporation Commission of Virginia is necessary for the valid
authorization, issuance and sale of the Bonds by the Company in
accordance with the Underwriting Agreement; and I do not know of any
other approvals of any governmental body required in that connection
(other than in connection or in compliance with the securities or
"blue sky" laws of any jurisdiction, as to which I express no opinion
herein). No approval, consent or order of the Maryland Public Service
Commission or any other regulatory authority of the State of Maryland
is required for the valid authorization, issuance and sale of the
Bonds by the Company in accordance with the Underwriting Agreement
(other than any applicable requirements of the Maryland Securities
Law, as to which I am not required to express an opinion).
(6) The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and Prospectus fairly
- 2 -
describes the provisions thereof required to be described by the
registration form.
(7) The Indenture constitutes a valid first lien or charge,
to the extent that it purports to be such, upon the interest held by
the Company in its property covered by the Indenture, subject only to
such exceptions, defects, qualifications and other matters as may be
permitted by the Indenture and to such other matters as in my opinion
do not materially affect the security for the Bonds; the Mortgage and
Deed of Trust dated July 1, 1936, and the supplements and amendments
thereto other than the Supplemental Indenture have been duly recorded
and filed for record in the only counties in which any real property
subject to the lien of the Indenture is located, and the Supplemental
Indenture has also been so recorded or filed for recording, and all
requisite steps have been taken to perfect the security interest of
the Indenture in personal property of the Company.
(8) The Company holds valid franchises, permits and other
rights adequate for the business of the Company in the territory which
it serves, and such franchises, permits and other rights contain no
unduly burdensome restrictions.
(9) There are no material pending legal proceedings (other
than ordinary routine litigation incidental to the business or as
disclosed in the Prospectus) to which the Company is a party or of
which any of its property is the subject.
(10) The Company has good and valid title in and to all of
the real property reflected in its most recent audited balance sheet,
incorporated by reference in the Registration Statements (except real
property disposed of in the ordinary course of business since that
date), free and clear of all liens, charges and encumbrances against
the same, except for the lien of the Indenture and for such liens,
charges, encumbrances, defects, qualifications and other matters
affecting title, possession or use as may be permitted by the
Indenture.
I also advise you that, in my opinion, each Registration
Statement and the prospectus contained therein, as of the effective
date of such Registration Statement, appeared on its face to be
appropriately responsive in all material respects to the requirements
of the 1933 Act, and to the extent applicable, the Securities Exchange
Act of 1934, as amended, and the applicable rules and regulations of
the Securities and Exchange Commission thereunder and that the
Supplemental Indenture appears on its face to be appropriately
responsive in all material respects to the requirements of the 1939
Act and the applicable rules and regulations of the Securities and
Exchange Commission thereunder. I believe, moreover, that the
statements made in the Registration Statements and the Prospectus in
- 13 -
the section thereof entitled "Description of Bonds and Mortgage"
fairly present the information respecting the same required to be set
forth therein. Except as specifically noted in the preceding
sentence, I am not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained
in the Registration Statements and Prospectus and make no
representations that I have independently verified the accuracy,
completeness or fairness of such statements, except insofar as such
statements relate to me. However, based on my examination of the
Registration Statements and Prospectus and of the documents
specifically referred to in the section thereof entitled "Description
of Bonds and Mortgage," on my general familiarity with the affairs of
the Company and on my participation in conferences with officials and
other representatives of, and other counsel for, the Company, with
Price Waterhouse LLP, the independent accountants of the Company, and
with your representatives and your counsel, I do not believe that the
Registration Statements at the time of their effectiveness, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus at the time it was filed
with, or transmitted for filing to, the Commission pursuant to Rule
424 or at the date hereof contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. I am
expressing no opinion or belief, however, as to the financial
statements or other financial data constituting a part of the
Registration Statements or the Prospectus.
I have assumed, with your approval, but not independently
verified, that the signatures on all documents examined by me are
genuine.
This opinion is given to you solely for your use in connection
with the Underwriting Agreement and the transactions contemplated
thereunder and may not be relied upon for any manner by any other
person or for any other purpose, without my prior written consent,
except that ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may rely on this opinion with respect
to paragraph 8 above, and Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may rely
on this opinion with respect to the application of the laws of the
District of Columbia, the State of Maryland and the Commonwealths of
Pennsylvania and Virginia that are relevant to its opinion, in
connection with the delivery of their opinions required to be
delivered under the Underwriting Agreement.
Very truly yours,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
- 4 -