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POTOMAC ELECTRIC POWER COMPANY
(a District of Columbia and Virginia corporation) and
POTOMAC ELECTRIC POWER COMPANY TRUST I
(a Delaware statutory business trust)
5,000,000 Preferred Securities
[_]% Trust Originated Preferred Securities(SM)
(Liquidation Amount $25 Per Preferred Security)
PURCHASE AGREEMENT
Dated: ___________, 1998
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(SM) "Trust Originated Preferred Securities" is a service ▇▇▇▇ of ▇▇▇▇▇▇▇ ▇▇▇▇▇
& Co.
Table of Contents
PURCHASE AGREEMENT.............................................................1
SECTION 1. Representations and Warranties.....................................4
(a) Representations and Warranties by the Company and the Trust........4
(i) Compliance with Registration Requirements..............4
(ii) Incorporated Documents.................................5
(iii) Independent Accountants................................5
(iv) Financial Statements...................................5
(v) No Material Adverse Change in Business.................5
(vi) Good Standing of the Company...........................6
(vii) Existence of Trust.....................................6
(viii) Common Securities......................................6
(ix) Authorization of Declaration...........................6
(x) Guarantee Agreement....................................7
(xi) Preferred Securities...................................7
(xii) Authorization of Indenture.............................7
(xiii) Authorization of Debentures............................7
(xiv) Authorization of Agreement.............................8
(xv) Absence of Defaults and Conflicts......................8
(xvi) Absence of Proceedings.................................8
(xvii) Possession of Licenses and Permits.....................9
(xviii) Compliance with Cuba Act...............................9
(xix) Investment Company Act.................................9
(xx) Contracts..............................................9
(xxi) Environmental Laws.....................................9
(b) Officer's Certificates.............................................9
SECTION 2. Sale and Delivery to Underwriters; Closing.........................9
(a) Preferred Securities...............................................9
(b) Payment...........................................................10
(c) Denominations; Registration.......................................10
SECTION 3. Covenants of the Company and the Trust............................10
(a) Compliance with Securities Regulations and Commission Requests....10
(b) Filing of Amendments..............................................11
(c) Delivery of Registration Statement................................11
(d) Delivery of Prospectuses..........................................11
(e) Continued Compliance with Securities Laws.........................12
(f) Blue Sky Qualifications...........................................12
(g) Rule 158..........................................................13
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(h) Restriction on Sale of Securities.................................13
(i) Reporting Requirements............................................13
(j) Listing...........................................................13
SECTION 4. Payment of Expenses...............................................13
(a) Expenses..........................................................13
(b) Termination of Agreement..........................................14
SECTION 5. Conditions of Underwriters' Obligations...........................14
(a) Effectiveness of Registration Statement...........................14
(b) Opinions of Counsel for Company...................................14
(c) Opinion of Special Delaware Counsel for the Trust.................14
(d) Opinion of Counsel for Underwriters...............................15
(e) Officers' Certificates............................................15
(f) Accountant's Comfort Letter.......................................16
(g) Regulatory Approval...............................................16
(h) Maintenance of Rating.............................................16
(i) Additional Documents..............................................16
(j) Termination of Agreement..........................................16
SECTION 6. Indemnification...................................................17
(a) Indemnification of Underwriters...................................17
(b) Indemnification of Trust by Company...............................18
(c) Indemnification of Trust, Company, Directors and Officers.........18
(d) Actions against Parties; Notification.............................18
SECTION 7. Contribution......................................................19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery....20
SECTION 9. Termination of Agreement..........................................20
(a) Termination; General..............................................20
(b) Liabilities.......................................................21
SECTION 10. Default by One or More of the Underwriters........................21
SECTION 11. Notices...........................................................22
SECTION 12. Parties...........................................................22
SECTION 13. GOVERNING LAW AND TIME............................................22
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SECTION 14. Effect of Headings................................................22
SCHEDULES
Schedule A - List of Underwriters.................................Sch A-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel........................A-1
Exhibit B - Form of Opinion of General Counsel of the Company...........B-1
Exhibit C - Form of Opinion of Trust's Special Delaware Counsel.........C-1
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POTOMAC ELECTRIC POWER COMPANY
(a District of Columbia and Virginia corporation)
POTOMAC ELECTRIC POWER COMPANY TRUST I
(a Delaware statutory business trust)
5,000,000 Preferred Securities
[_]% Trust Originated Preferred Securities
(Liquidation Amount $25 Per Preferred Security)
PURCHASE AGREEMENT
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____________, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated
Prudential Securities Incorporated
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
as Representatives of the several Underwriters
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Potomac Electric Power Company Trust I (the "Trust"), a statutory business
trust organized under the Business Trust Act of the State of Delaware (Chapter
38, Title 12 of the Delaware Code, 12 Del. C. (S) (S) 3801 et seq.) (the
-- ---
"Delaware Act"), confirms its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇"), and each of the
Underwriters named in Schedule A hereto (collectively the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., ▇▇▇▇▇
▇▇▇▇▇▇ Incorporated, Prudential Securities Incorporated and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
are acting as Representatives (in such capacity, the "Representatives") with
respect to the issue and sale by the Trust and the purchase by the Underwriters,
acting severally
and not jointly, of the respective numbers of [_]% Trust Originated Preferred
Securities (liquidation amount $25 per Preferred Security) ("Preferred
Securities") set forth in said Schedule A hereto. The Preferred Securities are
more fully described in the Prospectus (as defined below).
The Preferred Securities will be guaranteed by Potomac Electric Power
Company, a District of Columbia and Virginia corporation (the "Company"), with
respect to distributions and amounts payable upon liquidation or redemption (the
"Preferred Securities Guarantee"), pursuant to the Preferred Securities
Guarantee Agreement (the "Preferred Securities Guarantee Agreement") to be dated
as of Closing Time (as defined below), executed and delivered by the Company and
The Bank of New York (the "Guarantee Trustee"), a New York banking corporation,
not in its individual capacity but solely as trustee, for the benefit of the
holders from time to time of the Preferred Securities. The Company and the
Trust each understand that the Underwriters propose to make a public offering of
the Preferred Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered, and the Declaration (as defined
herein), the Indenture (as defined herein), and the Preferred Securities
Guarantee Agreement have been qualified under the Trust Indenture Act of 1939,
as amended (the "1939 Act"). The entire proceeds from the sale of the Preferred
Securities will be combined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities") guaranteed by
the Company, with respect to distributions and amounts payable upon liquidation
or redemption (the "Common Securities Guarantee" and, together with the
Preferred Securities Guarantee, the "Guarantees") pursuant to the Common
Securities Guarantee Agreement (the "Common Securities Guarantee Agreement" and,
together with the Preferred Securities Agreement, the "Guarantee Agreements"),
to be dated as of Closing Time, executed and delivered by the Company for the
benefit of the holders from time to time of the Common Securities, and will be
used by the Trust to purchase the [_]% Junior Subordinated Deferrable Interest
Debentures due 2038 (the "Debentures") issued by the Company. The Preferred
Securities and the Common Securities will be issued pursuant to the Amended and
Restated Declaration of Trust of the Trust, to be dated as of Closing Time (the
"Declaration"), among the Company, as Sponsor, The Bank of New York, as
institutional trustee (the "Institutional Trustee"), The Bank of New York
(Delaware), as Delaware trustee (the "Delaware Trustee"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as regular trustees (the "Regular
Trustees" and together with the Institutional Trustee and the Delaware Trustee,
the "Trustees"), and the holders from time to time of undivided beneficial
interests in the assets of the Trust. The Debentures will be issued pursuant to
an Indenture, dated as of ________, 1998 (the "Indenture"), between the Company
and The Bank of New York, as trustee (the "Indenture Trustee"), as supplemented
by a Supplemental Indenture to be dated as of Closing Time (the "Supplemental
Indenture"), between the Company and the Indenture Trustee. The Preferred
Securities, the Preferred Securities Guarantee and the Debentures are
collectively referred to herein as the "Securities." Capitalized terms used
herein without definition have the respective meanings specified in the
Prospectus.
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a shelf registration statement on Form S-3 (No.
333-____), including the preliminary prospectus, covering the registration of
the Securities under the Securities Act of 1933, as amended
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(the "1933 Act"), which permits the delayed or continuous offering of securities
pursuant to Rule 415 of the rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations"). Promptly after execution and delivery of
this Agreement, the Company will either (i) prepare and file a prospectus
(including a prospectus supplement relating to the Securities) in accordance
with the provisions of paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act
Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule
434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Such registration statement, including
all amendments thereto, the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, in the form first furnished to the Underwriters for
use in connection with the offering of the Preferred Securities is herein called
the "Prospectus." For purposes of this Agreement, all references to the
Registration Statement, the Prospectus or any Term Sheet or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement or the Prospectus (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which is incorporated by reference in the Registration
Statement or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement or the
Prospectus shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (the "1934 Act") which is
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and the Trust. The
Company and the Trust jointly and severally represent and warrant to each
Underwriter as of the date hereof, as applicable, and as of the Closing Time
referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
3
(i) Compliance with Registration Requirements. The Company meets the
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requirements for use of Form S-3 under the ▇▇▇▇ ▇▇▇. The Company and the
Trust have filed with the Commission a shelf registration statement on Form
S-3 (No. 333-_____), including a prospectus, for the registration of the
Securities under the 1933 Act and the qualification of the Indenture under
the 1939 Act. The Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company and the Trust, are contemplated by the Commission,
and any request made to the Company or the Trust by the Commission for
additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective, at the date hereof, and at the Closing Time, the Registration
Statement, any Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and the 1939
Act and the rules and regulations of the Commission under the 1939 Act (the
"1939 Act Regulations") and did not and 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. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement was
issued and at the Closing Time, included or will include an untrue
statement of a material fact or omitted or will 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. If Rule 434 is
used, the Company and the Trust will comply with the requirements of Rule
434. The representations and warranties in this subsection shall not apply
(A) to statements in or omissions from the Registration Statement, any Rule
462(b) Registration Statement and any supplements or amendments thereto or
the Prospectus and any supplements or amendments thereto made in reliance
upon and in conformity with information furnished to the Trust or the
Company in writing by any Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for
use therein or (B) to that part of the Registration Statement that
constitutes the Statements of Eligibility and Qualification on Form T-1
(the "Forms T-1") under the 1939 Act of the Indenture Trustee, the
Institutional Trustee and the Guarantee Trustee.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and the
Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copy thereof filed
with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
4
(ii) Incorporated Documents. The documents incorporated or deemed
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to be incorporated by reference in the Registration Statement and the
Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations") and, when read together
with the other information in the Prospectus, at the time the Registration
Statement became effective, at the date hereof, at the time the Prospectus
was issued and at the Closing Time, did not and will not contain an untrue
statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading.
(iii) Independent Accountants. The accountants who certified the
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financial statements and supporting schedules included in the Registration
Statement, are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
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Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries at the respective dates to which they
apply and the statement of operations, stockholders' equity and cash flows
of the Company and its consolidated subsidiaries for the periods specified;
said financial statements have been prepared in each case in accordance
with generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, except as set forth therein. The
supporting schedules, if any, incorporated by reference in the Registration
Statement and the Prospectus present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data and
the summary financial information included in the Prospectus present fairly
the information shown therein.
(v) No Material Adverse Change in Business. Since the respective
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dates as of which information is given in the Registration Statement and
the Prospectus, and prior to the Closing Time, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) 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, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock, except for dividends paid by the Company
in the ordinary course of business consistent with past practice. The
Company has no material contingent obligation which is not disclosed in or
contemplated by the Registration Statement and the Prospectus.
5
(vi) Good Standing of the Company. The Company has been duly
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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 corporate power to carry on the business in which it is now
engaged as described 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.
(vii) Existence of Trust. The Trust has been duly created and is
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validly existing in good standing as a business trust under the Delaware
Act, is and under current law will be treated as a "grantor trust" for
federal income tax purposes under existing law, has the business trust
power and authority to own property and conduct its business as presently
conducted and as described in the Prospectus and to enter into and perform
its obligations under this Agreement, the Preferred Securities, the Common
Securities and the Declaration, and is not required to be authorized to do
business in any other jurisdiction. The Trust is not a party to or
otherwise bound by any agreement other than those described in the
Prospectus as agreements to which the Trust is or will become a party.
(viii) Common Securities. The Common Securities have been duly
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authorized by the Declaration and, when issued and delivered by the Trust
to the Company in accordance with the terms of the Declaration and against
payment therefor as described in the Prospectus, will be validly issued and
(subject to the terms of the Declaration) fully paid and nonassessable
undivided beneficial interests in the assets of the Trust; the issuance of
the Common Securities is not subject to preemptive or other similar rights;
no holder thereof will be subject to personal liability by reason of being
such a holder; and at the Closing Time, all of the issued and outstanding
Common Securities of the Trust will be directly owned by the Company free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(ix) Authorization of Declaration. The Declaration has been duly
----------------------------
authorized by the Company and duly qualified under the 1939 Act and, when
validly executed and delivered by the Company and the Regular Trustees, and
assuming the due authorization, execution and delivery of the Declaration
by the Delaware Trustee and the Institutional Trustee, the Declaration will
constitute a valid and binding obligation of the Company and the Regular
Trustees, enforceable against the Company and the Regular Trustees in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
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(x) Guarantee Agreement. The Preferred Securities Guarantee
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Agreement has been duly authorized by the Company and duly qualified under
the 1939 Act and, when validly executed and delivered by the Company, and
assuming due authorization, execution and delivery of the Preferred
Securities Guarantee Agreement by the Guarantee Trustee, will constitute a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
(xi) Preferred Securities. The Preferred Securities have been duly
--------------------
authorized by the Declaration and, when authenticated in the manner
provided for in the Declaration and issued and delivered pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and (subject to the terms of the Declaration) fully paid and
nonassessable undivided beneficial interests in the assets of the Trust;
the issuance of the Preferred Securities is not subject to preemptive or
other similar rights; and holders of Preferred Securities will be entitled
to the same limitation of personal liability extended to stockholders of
private corporations for profit incorporated under the General Corporation
Law of the State of Delaware.
(xii) Authorization of Indenture. The Indenture has been duly
--------------------------
authorized by the Company and duly qualified under the 1939 Act and, when
duly executed and delivered by the Company, and assuming the due
authorization, execution and delivery of the Indenture by the Indenture
Trustee, will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xiii) Authorization of Debentures. The Debentures have been duly
---------------------------
authorized by the Company, and when executed, authenticated, issued and
delivered in the manner provided for in the Indenture and sold and paid for
as provided in this Agreement, the Debentures will constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
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(xiv) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company and the Trust.
(xv) Absence of Defaults and Conflicts. The Company is not in
---------------------------------
violation of its Articles of Incorporation or by-laws and the Trust is not
in violation of the Declaration. The execution and delivery by the Company
and the Trust of, and the performance by the Company and the Trust of their
respective obligations under, this Agreement, the execution and delivery by
the Company of, and the performance by the Company of its obligations
under, the Declaration, the Preferred Securities Guarantee Agreement and
the Indenture, the issuance and delivery by the Trust of the Common
Securities and Preferred Securities and the consummation of the sale of the
Preferred Securities and the fulfillment of the terms herein contemplated
will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under (in each case material to the
Company and its subsidiaries (including the Trust) considered as a whole or
as to the Trust separately), any indenture, mortgage, deed of trust, loan
agreement, guarantee, lease, financing agreement or other similar agreement
or instrument to which the Company or the Trust is a party or by which the
Company or the Trust is bound or to which any of the property or assets of
the Company or the Trust is subject, nor will such actions result in any
violation of the provisions of the certificate of incorporation or by-laws
of the Company or the Declaration, nor will such actions result in any
violation (in each case material to the Company and its subsidiaries
(including the Trust) considered as a whole or as to the Trust separately)
of any statute or any order, rule or regulation of any court or regulatory
authority or other governmental body having jurisdiction over the Trust or
the Company or any of its properties; and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency that has not been obtained is required for, and the absence of which
would materially affect, the performance by the Company and the Trust of
their obligations under this Agreement and the issuance and delivery of the
Preferred Securities, except such approvals as will be obtained under the
1933 Act, the 1934 Act or the 1939 Act and as may be required by the
securities or Blue Sky laws of the various states or the securities laws of
non-U.S. jurisdictions in connection with the sale of the Preferred
Securities.
(xvi) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company or the Trust, threatened, against or affecting the Company or
any subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement or the performance by the
Company or the Trust of its obligations hereunder; the aggregate of all
pending legal or governmental proceedings to which the Company or any
subsidiary
8
is a party or of which any of their respective property or assets is the
subject and which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xvii) Possession of Licenses and Permits. 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.
(xviii) Compliance with Cuba Act. The Company and the Trust have
------------------------
complied with, and is and will be in compliance with, the provisions of
that certain Florida act relating to disclosure of doing business with
Cuba, codified as Section 517.075 of the Florida statutes, and the rules
and regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) Investment Company Act. Neither the Company nor the Trust
----------------------
is, and upon the issuance and sale of the Preferred Securities as herein
contemplated and the application of the net proceeds therefrom as described
in the Prospectus neither will be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Contracts. There are no contracts or documents of the
---------
Company or any of its subsidiaries that 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.
(xxi) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor the Trust is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and the Trust have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or the Trust and (D) there are no events or circumstances that
might reasonably be expected to form
9
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or any of its subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or the Trust delivered to Underwriters or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company or the
Trust, respectively, to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) Preferred Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Trust agrees to sell to each Underwriter, severally and not jointly,
and each Underwriter, severally and not jointly, agrees to purchase from the
Company, at the purchase price of $25 per Preferred Security, the number of
Preferred Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Preferred Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, subject, in each case, to such adjustments among the
Underwriters as they in their sole discretion shall make to eliminate any sales
or purchases of fractional securities. As compensation to the Underwriters for
their commitments hereunder and in view of the fact that the proceeds of the
sale of the Preferred Securities will be used to purchase the Debentures, the
Company hereby agrees to pay at the Closing Time to the Underwriters a
commission of $[ ] per Preferred Security purchased by the Underwriters.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Preferred Securities shall be made at the offices of
Potomac Electric Power Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇, or at such other place as shall be agreed upon by the Underwriters,
the Company and the Trust, at 9:00 A.M. (Eastern time) on the third (fourth, if
the pricing occurs after 4:30 p.m. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Underwriters, the Company and the Trust (such
time and date of payment and delivery being herein called "Closing Time").
Payment shall be made to the Trust by wire transfer of immediately
available funds to the order of the Trust, against delivery to the Underwriters
of certificates for the Preferred Securities to be purchased by them. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for the Preferred Securities which it has agreed to purchase. ▇▇▇▇▇▇▇
▇▇▇▇▇, individually and not as representative of the Underwriters, may (but
shall not be obligated to) make payment of the purchase price for the Preferred
Securities to be purchased by any Underwriter whose funds have not been received
by the Closing Time, but such payment shall not relieve such Underwriter from
its obligations hereunder.
10
At Closing Time the Company will pay, or cause to be paid, the commission
payable at such time under this Section 2 to ▇▇▇▇▇▇▇ ▇▇▇▇▇ on behalf of the
Underwriters by wire transfer of immediately available funds.
(c) Denominations; Registration. Certificates for the Preferred
Securities shall be in such denominations and registered in such names as the
Representatives may request in writing at least two full business days before
the Closing Time. The certificates for the Preferred Securities will be made
available for examination and packaging by the Representatives in The City of
New York not later than 10:00 A.M. (Eastern time) on the business day prior to
the Closing Time.
SECTION 3. Covenants of the Company and the Trust. The Company and the
--------------------------------------
Trust jointly and severally covenant with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company and the Trust, subject to Section 3(b), will comply
with the requirements of Rule 424 or Rule 434, as applicable, and will
notify the Representatives immediately, and confirm the notice in writing,
(i) when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from
the Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the Prospectus
or for additional information, and (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any
prospectus, or of the suspension of the qualification of the Preferred
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Company and
the Trust will promptly effect the filings necessary pursuant to Rule
424(b) and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company and the Trust will make
every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) Filing of Amendments. The Company and the Trust will give
the Representatives notice of their intention to file or prepare any
amendment to the Registration Statement (including any filing under Rule
462(b), any Term Sheet or any amendment, supplement or revision to either
the prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Representatives with copies of any such
documents to, and consult with, the Representatives and their counsel
within a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the
Representatives or counsel for the Representatives shall reasonably object
in writing; provided, however, that the foregoing shall not apply to any of
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the Company's filings with the Commission required to be filed pursuant to
Section 13(a), 13(c), 14 or 15(d)
11
of the Exchange Act, copies of which such filings the Company will cause to
be delivered to the Representatives promptly after being transmitted for
filing with the Commission.
(c) Delivery of Registration Statement. The Company has furnished or
will deliver to the Representatives and counsel for the Representatives,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and, upon request, documents incorporated
or deemed to be incorporated by reference therein), and will also deliver
to the Representatives, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Representatives. The copies of the
Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copy
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company will deliver to each
Underwriter, without charge, as many copies of the Prospectus as such
Underwriter reasonably requests, and the Company and the Trust hereby
consent to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to each Underwriter, without charge, during the
period when the Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The Prospectus
and any amendments or supplements thereto furnished to the Underwriters
will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company and the
Trust will comply with the 1933 Act and the 1933 Act Regulations and the
1934 Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement and in the
Prospectus. If at any time when a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Preferred Securities, any
event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters and for the
Company or Trust, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include any
untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at
any such time to amend the Registration Statement or amend or supplement
the Prospectus in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Company and the Trust will promptly prepare
and file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectus comply with such
requirements, and the Company will furnish to the
12
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company and the Trust will each
use its best efforts, in cooperation with the Underwriters, to qualify the
Preferred Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions (domestic or foreign) as the
Underwriters may designate and to maintain such qualifications in effect
for a period of not less than one year from the date hereof; provided,
however, that neither the Company nor the Trust shall be obligated to file
any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Preferred Securities have been so qualified,
the Company and the Trust will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for so long as is necessary to complete the offering of the
Securities contemplated hereby. The Company and the Trust will also supply
the Underwriters with such information as is necessary for the
determination of the legality of the Preferred Securities for investment
under the laws of such jurisdictions as the Underwriters may request.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Restriction on Sale of Securities. During a period of 30 days
from the date of the Prospectus, neither the Company nor the Trust will,
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, directly or indirectly,
issue, sell, offer or contract to sell, grant any option entitling the
holder thereof to purchase or otherwise transfer or dispose of, any
Preferred Securities or Debentures (or any equity or debt securities
substantially similar to the Preferred Securities or Debentures,
respectively) of the Company or Trust. The foregoing sentence shall not
apply to the Preferred Securities or Debentures to be sold hereunder.
(i) Reporting Requirements. The Company and the Trust, during the
period when the Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by the
1934 Act and the 1934 Act Regulations.
(j) Listing. The Company will use its best efforts to effect the
listing of the Preferred Securities on the New York Stock Exchange.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay
-------------------
all expenses incident to the performance of its and the Trust's obligations
under this Agreement, including (i) the
13
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Preferred Securities, (iii) the preparation, issuance and delivery of the
certificates for the Preferred Securities to the Underwriters, including any
stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Preferred Securities to the Underwriters, (iv)
the fees and disbursements of the Company's and the Trust's counsel, accountants
and other advisors, (v) the qualification of the Preferred Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters (not to exceed $5,000) in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, if any, (vi) the printing and delivery to the Underwriters of copies of
each preliminary prospectus, any Term Sheets and of the Prospectus and any
amendments or supplements thereto, (vii) the printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, if
any, (viii) the fees and expenses of any transfer agent or registrar for the
Preferred Securities, (ix) the fees and expenses of the Indenture Trustee,
including the fees and disbursements of counsel for the Indenture Trustee in
connection with the Indenture and the Debentures, (x) the fees and expenses of
the Delaware Trustee, the Institutional Trustee and the Guarantee Trustee,
including the fees and disbursements of counsel for the Delaware Trustee, the
Institutional Trustee and the Guarantee Trustee, (xi) any fees payable in
connection with the rating of the Preferred Securities and the Debentures, (xii)
the cost and charges associated with the approval of the Preferred Securities by
the Depositary Trust Company for "book-entry" transfer and (xiii) the fees and
expenses incurred in connection with the listing of the Preferred Securities on
the New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 5(j) or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Trust contained in Section
1 hereof or in certificates of any officer of the Company or any Trustee
delivered pursuant to the provisions hereof, to the performance by the Company
and the Trust of their respective covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus
14
shall have been filed with the Commission in accordance with Rule 424(b)
(or a post-effective amendment providing such information shall have been
filed and declared effective) or, if the Company has elected to rely upon
Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinions of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of each of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President and General Counsel of the
Company, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letters for
each of the other Underwriters substantially to the effect set forth in
Exhibits A and B, respectively, hereto and to such further effect as
counsel to the Underwriters may reasonably request. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of
the Company and its subsidiaries and certificates of public officials.
(c) Opinion of Special Delaware Counsel for the Trust. At Closing
Time, the Representatives shall have received the favorable opinion, dated
as of the Closing Time, of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
special Delaware counsel to the Trust, together with signed or reproduced
copies of such letter for each of the Underwriters to the effect set forth
in Exhibit C hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel for the
Underwriters, together with signed or reproduced copies of such letter for
each of the other Underwriters with respect to the validity of the
Preferred Securities, the Registration Statement, the Prospectus and other
related matters as the Underwriters may reasonably request. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law
of the United States, the Delaware Act and the General Corporation Law of
the State of Delaware, upon the opinions of counsel satisfactory to the
Underwriters. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(e) Officers' Certificates. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, (A) any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Representatives shall have received a certificate of the Chairman, the
President, a Vice Chairman or a Vice President of the Company and of the
chief financial or chief accounting officer or the
15
Treasurer of the Company, dated as of Closing Time, to the effect that (i)
there has been no such material adverse change, (ii) the representations
and warranties in Section 1(a) hereof are true and correct with the same
force and effect as though expressly made at and as of Closing Time (except
for representations or warranties of the Company which by their terms speak
as of a different date or dates), (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 Time, and (iv) no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or are, to
the best of the Company's knowledge, threatened by the Commission; or (B)
any material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Trust, and the
Representatives shall have received a certificate of a Regular Trustee of
the Trust, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties of
the Trust in Section 1(a) hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time (except for
representations or warranties which by their terms speak as of a different
date or dates), (iii) the Trust has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are, to the best of the
Trust's knowledge, threatened by the Commission.
(f) Accountant's Comfort Letter. At the Closing Time, the
Representatives shall have received from Price Waterhouse LLP a letter
dated such date, in form and substance satisfactory to the Representatives,
together with signed or reproduced copies of such letter for each of the
Underwriters containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(g) Regulatory Approval. At Closing Time, the Company shall have
received all consents, approvals, authorizations or orders of, or
qualifications with, any governmental body or agency, required for the
performance by the Company and the Trust of their obligations under this
Agreement and the issuance and delivery of the Preferred Securities (except
such approvals that may be required under the securities or "blue sky" laws
of any jurisdiction).
(h) Maintenance of Rating. At Closing Time, the Preferred Securities
shall be rated at least a1 by ▇▇▇▇▇'▇ Investors Service, Inc. and A- by
Standard & Poor's Ratings Group, a division of ▇▇▇▇▇▇-▇▇▇▇, Inc., and the
Company shall have delivered to the Underwriters a letter dated the Closing
Time, from each such rating agency, or other evidence satisfactory to the
Representatives, confirming that the Preferred Securities have such
ratings; and since the date of this Agreement, there shall not have
occurred a downgrading in the rating assigned to the Preferred Securities
or any of the Company's
16
securities by any "nationally recognized statistical rating agency," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the 1933 Act, and no such organization shall have publicly announced that
it has under surveillance or review its rating of the Securities or any of
the Company's securities.
(i) Additional Documents. At Closing Time counsel for the
Underwriters shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance
and sale of the Preferred Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and Trust in connection with the issuance and sale of
the Preferred Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and counsel for
the Underwriters.
(j) Termination of Agreement. 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 Underwriters by notice to the
Company at any time at or prior to Closing Time, and if any condition
specified in Section 5(h) shall not have been fulfilled when and as
required to be fulfilled, this Agreement may be terminated by the Company
by notice to the Representatives at any time prior to the Closing Time, and
in either case such termination shall be without liability of any party to
any other party, except as provided in Section 4 and except that Sections
1, 6, 7 and 8 shall survive any such termination and remain in full force
and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters. Each of the Company and the Trust
jointly and severally agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, 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 any preliminary prospectus or the Prospectus (or 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 the
light of the circumstances under which they were made, not misleading;
17
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that any such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
-------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Trust by Company. The Company agrees to indemnify
the Trust against all loss, liability, claim, damage and expense whatsoever
incurred by the Trust under Section 6(a) hereunder.
(c) Indemnification of Trust, Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company and the
Trust, the Company's directors, each of the Company's officers and the Trustee
of the Trust who signed the Registration Statement, and each person, if any, who
controls the Company and the Trust within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in such Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying
18
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 6(a) above, counsel to the indemnified parties shall be selected by
▇▇▇▇▇▇▇ ▇▇▇▇▇, and, in the case of parties indemnified pursuant to Section 6(c)
above, counsel to the indemnified parties shall be selected by the Company, in
each case reasonably acceptable to the indemnifying party. An indemnifying party
may participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties 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. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein; then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Trust on the one hand and the Underwriters on the other hand
from the offering of the Preferred Securities pursuant to this Agreement or (ii)
if the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Trust on the one hand and of the Underwriters on the other hand in
connection
19
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 and the Trust on the one hand
and the Underwriters on the other hand in connection with the offering of the
Preferred Securities pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Preferred Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting commission received by the
Underwriters, in each case as set forth on the cover of the Prospectus, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate price to the public price of the Securities as set forth on such
cover.
The relative fault of the Company and the Trust on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Trust and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 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 in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
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 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company
20
and the Trustee of the Trust who signed the Registration Statement, and each
person, if any, who controls the Company or the Trust within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Underwriters' respective obligations
to contribute pursuant to this Section 7 are several in proportion to the number
of Preferred Securities set forth opposite their respective names in Schedule A
hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
--------
Agreement or in certificates of officers of the Company or the Trustees of the
Trust or any of its other subsidiaries 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, the Trust or controlling person, and shall survive delivery of the
Preferred Securities to the Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Trust, at any time at or prior to
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business which renders it impracticable to
consummate the sale of the securities, or (ii) if there has occurred, since the
time of execution of this Agreement, any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representatives, impracticable to market the Preferred
Securities or to enforce contracts for the sale of the Preferred Securities, or
(iii) if, since the time of execution of this Agreement, trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited and such suspension or
limitation is continuing, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said exchanges
or by such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
------------------------------------------
of the Underwriters shall fail at Closing Time to purchase the Preferred
Securities which it or they are
21
obligated to purchase under this Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, 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
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Preferred Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Preferred Securities to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement either the Representatives or the Company shall have the right to
postpone Closing Time, for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other 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
Representatives shall be directed to ▇▇▇▇▇▇▇ ▇▇▇▇▇ at North Tower, World
Financial Center, New York, New York 10281-1201, Attention of Syndicate
Operations; notices to the Company and to the Trust shall be directed to Potomac
Electric Power Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
Attention: Treasurer.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
-------
be binding upon the Underwriters, the Company and the Trust and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Company and the Trust and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
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. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Company and
the Trust and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No
22
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
23
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Trust a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters, the Company and the Trust in accordance with
its terms.
Very truly yours,
POTOMAC ELECTRIC POWER COMPANY
By:
--------------------------------------------
Name:
Title:
POTOMAC ELECTRIC POWER COMPANY
TRUST I
By:
--------------------------------------------
Name:
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇.▇. ▇▇▇▇▇▇▇ & SONS, INC.
▇▇▇▇▇ ▇▇▇▇▇▇ INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
▇▇▇▇▇▇▇ ▇▇▇▇▇ BARNEY
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By
----------------------------------------
Authorized Signatory
SCHEDULE A
Number of
Name of Underwriter Preferred Securities
------------------- --------------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated...................... [ ]
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.......................... [ ]
▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated......................... [ ]
Prudential Securities Incorporated................ [ ]
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney.............................. [ ]
Total............................................. [ ]
===
Sch A-1
Exhibit A
Form of opinion, dated as of Closing Time, of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel
for the Company and the Trust, substantially to the effect 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 Purchase Agreement and the Indenture and
to issue and sell the Debentures.
(2) The Purchase Agreement has been duly authorized, executed and
delivered by each of the Company and the Trust.
(3) The Indenture and the Supplemental Indenture have been duly and
validly authorized by all necessary corporate action of the Company, have
been duly and validly executed and delivered by the Company, and, as
amended by the Supplemental Indenture, the Indenture, and assuming the due
authorization, execution and delivery of the Indenture and the Supplemental
Indenture by The Bank of New York, 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.
(4) The Debentures 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 the
Supplemental 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 afforded
by the Indenture.
(5) The Declaration has been duly authorized, executed and delivered
by the Company; and, assuming the due authorization, execution and delivery
of the Declaration by Bank of New York and Bank of New York (Delaware), the
Declaration constitutes a valid and binding obligation 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.
(6) The Preferred Securities Guarantee Agreement has been duly
authorized, executed and delivered by the Company; and, assuming the due
authorization, execution and delivery of the Preferred Securities Guarantee
Agreement by The Bank of New York, constitutes a valid and binding
agreement of the Company enforceable against the Company
A-1
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.
(7) Each of the Indenture, Preferred Securities Guarantee Agreement
and the Declaration has been duly qualified under the Trust Indenture Act
of 1939, as amended (the "1939 Act").
(8) The Registration Statement, including any Rule 462(b)
Registration Statement, is effective under the Securities Act of 1933, as
amended (the "1933 Act"); any required filing or the Prospectus pursuant to
Rule 424(b) has been made in the manner and within the time period required
by Rule 424(b); and to the best of our knowledge no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending or threatened under Section 8(d)
of the 1933 Act. The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to the
Registration Statement and Prospectus, excluding the documents incorporated
by reference therein, as of their respective effective or issue dates
(except for the financial statements and other financial 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 Securities
and Exchange Commission (the "Commission") thereunder, except that we
express no opinion on the Forms T-1 filed as exhibits to the Registration
Statement. 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, at the 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.
(9) The approval of the Public Service Commission of the District of
Columbia which is required for the valid authorization, issuance and sale
of the Preferred Securities and the Debentures in accordance with the
Purchase 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 Preferred Securities and the
Debentures in accordance with the Purchase 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 valid authorization, issuance and sale
of the Preferred Securities and the Debentures in accordance with the
Purchase Agreement (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).
(10) The summary of the terms of the Preferred Securities, the Common
Securities, the Debentures, the Preferred Securities Guarantee, the
Indenture, the Declaration and the Preferred Securities Guarantee Agreement
contained in the Registration Statement and the
Prospectus fairly describes the provisions thereof required to be described
by the registration statement form. The opinion of such counsel set forth
under "United States Federal Income Taxation" in the Registration Statement
and the Prospectus is confirmed.
(11) The holders of outstanding shares of capital stock of the Company
are not entitled to any preemptive rights under the Articles of
Incorporation or By-Laws of the Company or the laws of the District of
Columbia or the Commonwealth of Virginia to subscribe for the Preferred
Securities or the Debentures.
(12) Neither the Company nor the Trust is, and upon the issuance and
sale of the Preferred Securities as contemplated by the Purchase Agreement
and the application of the net proceeds therefrom as described in the
Prospectus, will be, an "investment company" or an entity "controlled" by
an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
Additionally, in giving its opinion, such counsel shall state that in
passing upon the form of the Registration Statement and the form of the
Prospectus, such counsel necessarily assumes the correctness and completeness of
the statements made and information included therein by the Company and takes no
responsibility therefor, except insofar as such statements relate to such
counsel, and as set forth in paragraph 10 above. Such counsel shall state that
in connection with the Company's preparation of the Registration Statement and
the Prospectus, such counsel had discussions with certain of its officers and
representatives and that such counsel's examination of the Registration
Statement and the Prospectus and discussions did not disclose to them any
information which gave such counsel reason to believe that the Registration
Statement or any amendment thereto, including the Rule 430A Information and Rule
434 Information, if applicable, (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom and the Form T-1, as to which such counsel need make no
statement), at the time such Registration Statement or any such amendment became
effective, it 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 or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom and the Form T-1, as to which such counsel need make no statement), at
the time it was filed with the Commission pursuant to Rule
A-3
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.
A-4
Exhibit B
Form of opinion, dated as of Closing Time, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice
President and General Counsel of the Company and the Trust, substantially to
the effect that:
(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 the corporate power to carry on
the business in which it is now engaged as described 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 Purchase 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, assuming the due authorization, execution and delivery
of the Indenture by The Bank of New York, 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 Debentures 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 the Supplemental 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 afforded by the Indenture.
(5) The Registration Statement, including any Rule 462(b)
Registration Statement, is effective under the Securities Act of 1933, as
amended (the "1933 Act"); any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); no stop order suspending the effectiveness of the 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 Preferred Securities and the
Debentures in accordance with the Purchase 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
Preferred Securities and the Debentures in accordance with the Purchase
Agreement; and such counsel does 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
B-1
"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 Preferred Securities and the Debentures
in accordance with the Purchase 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 Preferred Securities, the Common
Securities, the Debentures, the Preferred Securities Guarantee, the Indenture,
the Declaration and the Preferred Securities Guarantee Agreement contained in
the Registration Statement and the Prospectus fairly describes the provisions
thereof required to be described by the registration statement form.
(7) 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.
(8) To the best of such counsel's knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or the Trust, or to which the property of the Company or the Trust is
subject, before or brought by any court or governmental agency or body, domestic
or foreign, not described in the Registration Statement which might reasonably
be expected to result in a Material Adverse Effect, or that questions the
validity of the transactions contemplated in the Purchase Agreement.
(9) There is no pending or, to the best knowledge of such counsel,
threatened action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving the Trust, the Company or any of
its subsidiaries, of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Prospectus, and there is no
franchise, contract or other document of a character required to be described in
the Registration Statement or Prospectus, or to be filed as an exhibit, which is
not described or filed as required.
(10) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.
Such counsel shall also state that, in such counsel's opinion, the
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.
B-2
Except as specifically noted in the preceding sentence, such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus and make no representations that he has independently
verified the accuracy, completeness or fairness of such statements, except
insofar as such statements relate to such counsel. However, based on such
counsel's examination of the Registration Statement and Prospectus and of the
documents specifically referred to therein and on his general familiarity with
the affairs of the Company and on his 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
Underwriters' representatives and Underwriters' counsel, such counsel does not
believe that the Registration Statement at the time of its 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. Such counsel need not express an opinion or belief, however, as to
the financial statements or other financial data constituting a part of the
Registration Statement or the Prospectus.
Such counsel may assume, with Underwriters' approval, but not
independently verified, that the signatures on all documents examined by such
counsel are genuine.
Such counsel's opinion may state that it is given to the Underwriters
solely for their use in connection with the Purchase 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 his prior written consent.
B-3
Exhibit C
Form of opinion, dated as of Closing Time, of Skadden, Arps, Slate, ▇▇▇▇▇▇▇
& ▇▇▇▇ LLP, special Delaware counsel for the Trust, substantially to the effect
that:
(i) the Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act; all filings required under
the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a business trust have been made; and the Trust has the
trust power and authority to conduct its business, as described in the
Prospectus.
(ii) the Amended and Restated Declaration is a valid and binding
obligation of the Company and the Trustees, enforceable against the Company and
the Trustees in accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency (including without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law) and
except to the extent that the rights to indemnity and contribution contained
therein may be limited by state or securities laws or the public policy
underlying such laws.
(iii) the Preferred Securities have been duly authorized for issuance
in accordance with the Amended and Restated Declaration and, subject to the
qualifications set forth below, when certificates therefor in the form examined
by us are issued, executed and authenticated in accordance with the Amended and
Restated Declaration and delivered and paid for in accordance with the Purchase
Agreement, will be validly issued, fully paid and non-assessable undivided
beneficial interests in the assets of the Trust and will entitle the holders of
the Preferred Securities to the benefits of the Amended and Restated Declaration
except to the extent that enforcement of the Amended and Restated Declaration
may be limited by (i) bankruptcy, insolvency (including without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and except to the extent that
the rights to indemnity and contribution contained therein may be limited by
state or securities laws or the public policy underlying such laws; and the
holders of the Preferred Securities will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware. We bring
to your attention, however, that the holders of Preferred Securities may be
obligated, pursuant to the Amended and Restated Declaration, to make payments,
including (i) to provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers of Preferred Securities and
the issuance of replacement Preferred Securities, and (ii) to provide security
and indemnity in connection with requests of or directions to the Institutional
Trustee to exercise its rights and powers under the Amended and Restated
Declaration.
C-1
(iv) the issuance of the Preferred Securities is not subject to
preemptive or other similar rights under the Delaware Act or the Amended and
Restated Declaration.
(v) under the Amended and Restated Declaration and the Delaware Act,
the Trust has the requisite trust power and authority to execute and deliver the
Purchase Agreement, and to perform its obligations under the Purchase Agreement
and to consummate the transactions contemplated thereby. The Purchase Agreement
has been duly authorized, executed and delivered by the Trust.
(vi) the statements made in the Prospectus under the caption
"Description of the Preferred Securities" insofar as such statements constitute
summaries of Delaware law are accurate in all material respects.
C-2