-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EaKueR9foUmWIwRrnMgnlFaeEbCfh2XfW3XtsutsstVI5eJ0Z/SCjEOJneoSgcph PBkxirG+4Rhsdb+2OvrM0g== 0000079732-98-000069.txt : 19980615 0000079732-98-000069.hdr.sgml : 19980615 ACCESSION NUMBER: 0000079732-98-000069 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980612 EFFECTIVENESS DATE: 19980612 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POTOMAC ELECTRIC POWER CO CENTRAL INDEX KEY: 0000079732 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 530127880 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-56683 FILM NUMBER: 98647093 BUSINESS ADDRESS: STREET 1: 1900 PENNSYLVANIA AVE NW STREET 2: C/O M T HOWARD RM 841 CITY: WASHINGTON STATE: DC ZIP: 20068 BUSINESS PHONE: 2028722456 S-8 1 Registration No. ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM S-8 REGISTRATION STATEMENT under THE SECURITIES ACT OF 1933 -------------------- POTOMAC ELECTRIC POWER COMPANY (Exact name of registrant as specified in its charter) District of Columbia and Virginia 53-0127880 - --------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1900 Pennsylvania Avenue, N.W. Washington, D.C. 20068 202-872-2000 ------------------------------ (Address of registrant's Executive Offices) POTOMAC ELECTRIC POWER COMPANY LONG-TERM INCENTIVE PLAN ELLEN SHERIFF ROGERS Potomac Electric Power Company 1900 Pennsylvania Avenue, N.W. Washington, D.C. 20068 ------------------------------ (Name and address of agent for service) (202) 872-3526 -------------- Telephone number, including area code, of agent for service) -------------------- CALCULATION OF REGISTRATION FEE ==============================================================================
Proposed Proposed maximum maximum Amount offering aggregate Amount of Title of Securities to be price offering Registration to be registered registered per unit (1) price Fee - ------------------------------------------------------------------------------ Common Stock, $1 par value . . . .750,000 shares $25.0625/sh $18,796,875 $5,545 ============================================================================== (1) This registration fee has been calculated pursuant to Rule 457(h) on the basis of the average high and low prices of the Company's common stock on the New York Stock Exchange on June 10, 1998.
In addition, pursuant to Rule 416(c) under the Securities act of 1933, this Registration Statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein. PART II. INFORMATION REQUIRED IN REGISTRATION STATEMENT ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by Potomac Electric Power Company ("PEPCO" or the "Company") with the Securities and Exchange Commission are incorporated in this Registration Statement by reference and made a part of this Registration Statement: (a) The Company's latest annual report on Form 10-K for the year ended December 31, 1997, filed pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act"); (b) The Company's Form 10-Q for the quarter ended March 31, 1998; (c) All other reports filed by the Company pursuant to Sections 13(a) or 15(d) of the 1934 Act since the end of the fiscal year covered by the annual report on Form 10-K referred to above; and (d) The description of the Company's Common Stock set forth in the Company's Registration Statement filed pursuant to Section 12 of the 1934 Act, including any amendments or reports updating such description. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act on or subsequent to the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this Registration Statement shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained in this Registration Statement or in any other contemporaneously or subsequently filed document which also is or is deemed to be incorporated by reference in this Registration Statement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under Section 29-304(1b) of the District of Columbia Business Corporation Act, a corporation may indemnify against expenses any directors or officers made party to a proceeding by reason of his service as such, except in relation to matters as to which any such director or officer shall be adjudged to be liable for negligence or misconduct in the performance of duty. Such indemnification is not exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of shareholders or otherwise. Under Section 13.1-697 of the Virginia Stock Corporation Act ("VSCA"), a Virginia corporation may indemnify a director who was, is or is threatened to be made a party to any proceeding if the director acted in good faith and (i) he believed, in the case of conduct in his official capacity with the corporation, that his conduct was in the best interests of the corporation or, in the case of other conduct, that his conduct was at least not opposed to the best interests of the corporation, or (ii) in the case of a criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. A corporation may not indemnify a director in connection with (i) a proceeding by or in the right of the corporation in which the director was found liable to the corporation or (ii) any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received. Indemnification permitted under this section of the VSCA in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. Under VSCA Section 13.1-698, unless limited by its Articles of Incorporation, a corporation must indemnify against reasonable expenses a director who entirely prevails in the defense of any proceeding to which he was a party because he is or was a director of the corporation. Under VSCA Section 13.1-700.1, a court of appropriate jurisdiction, upon the application of a director, may order a corporation to advance or reimburse expenses or provide indemnification if the court determines that the director is so entitled. With respect to a proceeding by or in the right of the corporation, a court may order indemnification of the director to the extent of his reasonable expenses even though he was adjudged liable to the corporation. Under VSCA Section 13.1-699, a corporation may advance reasonable expenses to a director made a party to a proceeding under certain circumstances, including the furnishing by the director of (i) a written statement of his good faith belief that he has met the standard of conduct necessary to obtain indemnification and (ii) a written undertaking to repay the advance if it is ultimately determined that he did not meet that standard. Under VSCA Section 13.1-702, a corporation may indemnify an officer, employee or agent of a corporation to the same extent as a director. Under VSCA Section 13.1-704, a corporation may provide indemnification in addition to that provided by statute if authorized by its Articles of Incorporation, a bylaw made by the shareholders, or any resolution adopted by the shareholders, except indemnification against willful misconduct or a knowing violation of the criminal law. The By-Laws of the Company provide that the Company shall indemnify each director or officer and each former director and officer of the Company against expenses actually and reasonably incurred in connection with the defense of any action, suit or proceeding by reason of his or her being or having been such director or officer, including liabilities incurred under the Securities Act of 1933, as amended, except in relation to matters as to which such director or officer shall be finally adjudged in such action, suit or proceeding to have knowingly violated the criminal law or to be liable for willful misconduct in the performance of his or her duty to the Company; and that such indemnification shall be in addition to, and not exclusive of, any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders, or otherwise. The Company also has policies of insurance which insure officers and directors against certain liabilities and expenses incurred by them in such capacities. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. Exhibit No. Description of Exhibits - ----------- ----------------------- 3 Articles of Incorporation of the Company (incorporated by reference to the Company's Form 10-K for the fiscal year ended December 31, 1997. SEC File No. 1-1072) 4 Potomac Electric Power Company Long-Term Incentive Plan 5 Opinion of William T. Torgerson, Esquire 15 Letter re unaudited financial information 23.1 Consent of Price Waterhouse LLP 23.2 Consent of William T. Torgerson, Esquire (included in Exhibit No. 5) 24 Power of Attorney and Board Resolutions ITEM 9. UNDERTAKINGS. (a) Rule 415 offering. The Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by references in this registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Filing incorporating subsequent Exchange Act Documents by Reference. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. -------------------- Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "1933 Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing Form S-8 and had duly caused this registration statement to be signed on its behalf by the undersigned, who is duly authorized to sign, in the City of Washington, District of Columbia, on the 12th day of June, 1998. POTOMAC ELECTRIC POWER COMPANY /s/ D. R. WRAASE By __________________________ Dennis R. Wraase Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated. Signature: Title: Date: Edward F. Mitchell* Chairman of the Board - ----------------------- Edward F. Mitchell and Director June 12, 1998 John M. Derrick, Jr.* President, Chief Executive - ----------------------- John M. Derrick, Jr. Officer and Director June 12, 1998 Dennis R. Wraase* Senior Vice President, - ----------------------- Dennis R. Wraase Chief Financial Officer and Director June 12, 1998 Roger R. Blunt, Jr.* Director June 12, 1998 - ----------------------- Roger R. Blunt, Jr. Edmund B. Cronin, Jr.* Director June 12, 1998 - ----------------------- Edmund B. Cronin, Jr. Richard E. Marriott* Director June 12, 1998 - ----------------------- Richard E. Marriott David O. Maxwell* Director June 12, 1998 - ----------------------- David O. Maxwell Floretta D. McKenzie* Director June 12, 1998 - ----------------------- Floretta D. McKenzie Ann D. McLaughlin* Director June 12, 1998 - ----------------------- Ann D. McLaughlin Peter F. O'Malley* Director June 12, 1998 - ----------------------- Peter F. O'Malley _______________________ Director Louis A. Simpson A. Thomas Young* Director June 12, 1998 - ----------------------- A. Thomas Young /s/ ELLEN SHERIFF ROGERS *By __________________________ Ellen Sheriff Rogers Attorney-in-Fact Exhibit No. Description of Exhibits - ----------- ----------------------- 3 Articles of Incorporation of the Company (incorporated by reference to the Company's Form 10-K for the fiscal year ended December 31, 1997. SEC File No. 1-1072) 4 Potomac Electric Power Company Long-Term Incentive Plan 5 Opinion of William T. Torgerson, Esquire 15 Letter re unaudited financial information 23.1 Consent of Price Waterhouse LLP 23.2 Consent of William T. Torgerson, Esquire (included in Exhibit No. 5) 24 Power of Attorney and Board Resolutions EX-4 2 LONG-TERM INCENTIVE PLAN Exhibit 4 POTOMAC ELECTRIC POWER COMPANY LONG-TERM INCENTIVE PLAN This document provides information about 5,000,000 shares of the common stock, $1.00 par value ("Common Stock"), of Potomac Electric Power Company (the "Company"), issuable to officers, key employees and directors of the Company and its subsidiaries under the Company's Long-Term Incentive Plan (the "Plan"). ____________________ THIS DOCUMENT RELATES TO CERTAIN SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. No person is authorized to give any information or make any representation in connection with the offer described in this document, other than those contained herein or in another document specifically identified as part of the information statement of which this document is a part. Any information or representation not contained herein or in such other document must not be relied upon as having been so authorized. This document does not constitute an offer to sell, or a solicitation of any offer to buy, the securities described in this document in any State or other jurisdiction in which, or to any person to whom, it is unlawful to make such an offer or solicitation. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR A STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ____________________ April 22, 1998 The Board of Directors of the Company (the "Board") adopted a Long-Term Incentive Plan (the "Plan" or "LTIP") for key employees (including officers) and directors of the Company and its subsidiaries. The shareholders of the Company approved the Plan on April 22, 1998, effective May 1, 1998. Awards may be made under the Plan until April 30, 2008. The Plan will continue in effect until all matters relating to the payment of awards have been settled. A summary of the principal provisions of the Plan is set forth below. OBJECTIVE The objective of the LTIP is to increase shareholder value by providing a long-term incentive to reward officers, key employees and directors of the Company and its subsidiaries for the profitable performance of the Company and its subsidiaries, and to increase the ownership of Common Stock by such individuals. SHARES AVAILABLE UNDER THE PLAN The number of shares of Common Stock that may be granted to participants under the proposed LTIP is 5,000,000. If an award lapses or the participant's rights with respect to an award otherwise terminate, any shares of Common Stock subject to such award will again be available for future awards under the LTIP. ADMINISTRATION The LTIP will be administered by the Board. The LTIP gives the Board broad authority to determine the persons to whom, and the times at which, awards will be granted or lapse under the LTIP, the types of awards to be granted, the number of shares of Common Stock to be covered by each award, and all other terms and conditions for awards granted under the LTIP. PARTICIPATION Each officer or key employee of the Company or its subsidiaries designated by the Board will be eligible to participate in the LTIP. Non-employee directors will receive a non-qualified stock option for 1,000 shares of Common Stock on or about May 1 of each year. AWARDS Under the LTIP, the following types of awards may be granted from time to time by the Board: RESTRICTED STOCK. The Board may grant awards of Common Stock bearing restrictions ("Restricted Stock") prohibiting a participant's transfer of the Restricted Stock until the lapse of a restriction period. No consideration is payable by the participant as a result of the grant. The Board may establish the terms and conditions of each grant, including the restriction period (which will be not less than one and not more than 10 years), whether dividends will be paid currently or accumulated and the form of any dividend payment, and may also condition the awards on the completion of a specified period of service or on attainment, during a performance period established by the Board, of one or more performance objectives established by the Board. Performance objectives, which may vary from participant to participant, are determined by the Board and may include, but are not limited to, the performance of the participant, the Company, one or more of its subsidiaries, or any combination thereof. On completion of the restriction period and attainment of any performance objectives, the restrictions will expire with respect to one or more shares of Restricted Stock. If target performance objectives are exceeded, the Board may award additional Common Stock to a participant. OPTIONS. The Board may grant either incentive stock options ("ISO") that are qualified under Section 422 of the Code or options not intended to qualify under Section 422 of the Code ("Nonqualified Options"). No consideration is payable by the participant as a result of the grant. The Board may establish the terms and conditions of each grant; PROVIDED, HOWEVER, that an option to purchase a share of Common Stock may not be granted with an exercise price of less than 100% of the fair market value of a share of Common Stock on the grant date. Further, the period during which the options are exercisable will not exceed 10 years from the date of grant. In the Board's discretion, the exercise price may be paid in cash, shares of Common Stock, or both. PERFORMANCE UNITS. The Board may make performance awards payable in cash, Common Stock or both, upon attainment during a performance period established by the Board, of one or more performance objectives established by the Board. Performance objectives, which may vary from participant to participant, are determined by the Board and may include, but are not limited to, the performance of the participant, the Company, one or more of its subsidiaries, or any combination thereof. STOCK APPRECIATION RIGHTS. The Board may grant awards of stock appreciation rights in conjunction with an option or as a separate award. No consideration is payable by the participant as a result of the grant. The Board may establish the terms and conditions of each grant; PROVIDED, HOWEVER, the period during which the rights are exercisable may not exceed 10 years. Stock appreciation rights provide the right to receive a payment in cash, Common Stock, or both in the Board's discretion. If a grant is in conjunction with an option, the option must be surrendered, and the amount of the payment will be determined, in the Board's sole discretion, based on (i) the excess of the fair market value of the Common Stock at the date of exercise over the option price or (ii) the excess of the book value of the Common Stock at the date of exercise over the book value of the Common Stock at the date the underlying option was granted. If a grant is not in conjunction with an option, the payment will be determined, in the Board's sole discretion, based on (i) the excess of the fair market value of the Common Stock at the date of exercise over the fair market value of the Common Stock at the date of grant of the stock appreciation right or (ii) the excess of the book value of the Common Stock at the date of exercise over the book value of the Common Stock at the date of grant of the stock appreciation right. DIVIDEND EQUIVALENTS. The Board may grant awards of dividend equivalents in conjunction with an option, a separately awarded stock appreciation right, performance units or awards of additional Common Stock if performance-based Restricted Stock target performance objectives are exceeded. No consideration is payable by the participant as a result of the grant. Each dividend equivalent entitles the participant to receive an amount, at such times and in a form and manner in the Board's discretion, equal to the dividend actually paid with respect to a share of Common Stock on each dividend payment date from the date of grant until the dividend equivalent lapses. Dividend equivalents will lapse at a date no later than the date the underlying award lapses or is exercised. ACCELERATED AWARD If a participant is terminated as an employee or director or suffers a diminution of responsibility, authority, position or salary following a change in control of the Company, a participant with an outstanding restricted stock or performance unit award will be entitled to an accelerated, prorated payout, and any outstanding option or stock appreciation right award will be immediately exercisable. If the original award provided for payment in Common Stock, any required payout will be made in Common Stock. For purposes of the LTIP, the term "change in control" means (i) the purchase or acquisition by any person, entity or group of persons (within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the combined voting power of the Company's then outstanding shares of voting securities, or (ii) the approval by the shareholders of the Company of a merger or consolidation with respect to which persons who were shareholders of the Company immediately prior to such merger or consolidation do not, immediately thereafter, own more than 70% of the combined voting power of the merged or consolidated entity's then outstanding securities, or (iii) a liquidation of the Company or the sale of substantially all of its assets, or (iv) within a 24-month period, a change of more than one-half of the members of the Board whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least 2/3 of the directors who were directors at the beginning of the period or whose election or nomination was previously so approved. TAX WITHHOLDING The Company or its subsidiaries may withhold any applicable federal, state or local taxes upon payment under an award. Subject to any applicable law, if payment under an award is to be made in Common Stock, the Board may in its discretion permit or require a participant to satisfy any withholding or other taxes payable through (i) the payment of cash by the participant to the Company or its subsidiaries, (ii) the retention by the Company or its subsidiaries of shares of Common Stock or (iii) the delivery by the participant to the Company or its subsidiaries of Common Stock owned by the participant. Special rules apply to participants subject to the reporting requirements of Section 16(a) of the Exchange Act. FEDERAL INCOME TAX CONSEQUENCES The federal income tax consequences of an award under the LTIP depend on the type of award. The following is a summary of the Federal income tax consequences of each type of award. There may also be state and local income taxes applicable to these transactions. Plan participants are urged to consult their own tax advisors regarding the tax consequences of an award under the LTIP. The Plan does not qualify for special tax treatment under Section 401(a) of the Internal Revenue Code of 1986. RESTRICTED STOCK. The grant of Restricted Stock does not result in taxable income to a participant or a tax deduction for the Company. At the time the restrictions expire, however, a participant will realize ordinary taxable income in an amount equal to the fair market value of the Common Stock on the date the restrictions expire, and the Company will be entitled to a corresponding deduction. In addition, during or after the restriction period (depending on whether the dividends are paid to the individuals or accumulated), a participant will be taxed on the dividends paid with respect to Restricted Stock as compensation, and the Company will be entitled to a corresponding deduction. INCENTIVE STOCK OPTIONS. ISOs under the Plan are intended to meet the requirements of Section 422 of the Code. The grant of an ISO does not result in taxable income to the participant or a tax deduction for the Company. The exercise of an ISO will not result in ordinary taxable income to the participant (although the difference between the exercise price and the fair market value of the Common Stock subject to the option may result in alternative minimum tax liability to the participant) and the Company will not be allowed a deduction at any time in connection with such award, if the following conditions are met: (i) at all times during the period beginning with the date of grant and ending on the day three months before the date of exercise, the participant is an employee of the Company or of a subsidiary; and (ii) the participant makes no disposition of Common Stock within two years from the date of grant nor within one year after the Common Stock is transferred to the participant. The three-month period is extended to one year in the event of disability and is waived in the event of death of the participant. If the Common Stock is sold by the participant after meeting these conditions, any gain realized over the exercise price ordinarily will be treated as long-term capital gain, and any loss will be treated as long-term capital loss, in the year of the sale. If the participant fails to comply with the employment or holding period requirements discussed above, the participant will recognize ordinary taxable income in an amount equal to the lesser of (i) the excess of the fair market value of the Common Stock on the date of exercise over the exercise price or (ii) the excess of the amount realized upon such disposition over the exercise price. If the participant realizes ordinary taxable income on account of such a disqualifying disposition (described above), a corresponding deduction will be allowed to the Company for the same year. NONQUALIFIED STOCK OPTIONS. The grant of a Nonqualified Option does not result in taxable income to the participant or a tax deduction for the Company. Upon exercise of a nonqualified stock option, the participant will realize compensation taxable as ordinary income in an amount equal to the difference between the exercise price and the fair market value of the Common Stock on the date of exercise, and the Company will be entitled to a corresponding deduction for the same year. The participant's basis in such shares will be the fair market value on the date income is realized, and when the participant disposes of the shares he or she will recognize capital gain or loss, either long-term or short-term, depending on the holding period of the shares. STOCK APPRECIATION RIGHTS. The grant of a stock appreciation right does not result in taxable income to the participant or a tax deduction for the Company. Upon exercise of a stock appreciation right, the participant will realize ordinary taxable income in an amount equal to the excess of the fair market value of the Common Stock or cash received over any amount paid by the participant upon exercise, and the Company will be entitled to a corresponding deduction for the same year. PERFORMANCE UNITS. The grant of a performance unit does not result in taxable income to the participant or a tax deduction for the Company. Upon the expiration of the applicable award cycle and receipt of the Common Stock distributed in payment of the award or an equivalent amount of cash, the participant will realize ordinary taxable income equal to the full fair market value of the shares delivered or the amount of cash paid. At that time, the Company generally will be allowed a corresponding tax deduction equal to the compensation taxable to participant. Accounting principles require that restricted share awards be charged against earnings on a pro rata basis over the restriction period and will be based on the value of the stock at the date of grant. Under the terms of the LTIP, the granting of ISOs or Nonqualified Options, without accompanying stock appreciation rights, will not require a charge against earnings. The granting of stock appreciation rights, however, will require that earnings be charged over the specified award period for any appreciation in the value of the underlying stock subsequent to the date of grant. SOURCE OF SHARES Shares to satisfy awards made under the Plan will be purchased either from the Company or on the open market. Shares acquired from the Company will be legally authorized but unissued shares of Common Stock of the Company. Shares acquired on the open market will be purchased through a registered broker-dealer. Open market purchases may be made on any securities exchange where shares of the Company's Common Stock are traded, in the over-the-counter markets or in negotiated transactions. The Company bears all of the costs of administering the Plan, including the payment of all brokerage commissions incurred in the purchase of Common Stock to satisfy awards under the Plan. FORFEITURE In the event a participant ceases to be a director or ceases employment, an award will lapse, become exercisable or be forfeited in accordance with the Plan and the terms of the award granted under the Plan. NONTRANSFERABILITY Participants may not assign or transfer any benefits under the Plan, except by will or by the laws of descent and distribution. Benefits are not subject to attachment or other legal process except as specifically mandated by statute, and, as requested by the participant and approved by the Board, to satisfy income tax withholding. Upon the death of a participant, his designated personal representative or beneficiary may exercise his rights to the extent permitted by the Plan and the award granted under the Plan. AMENDMENT AND TERMINATION OF THE PLAN AND AWARDS The Board may amend, suspend, alter or terminate the Plan; provided that, the shareholders of the Company must approve any amendment that would (i) materially increase the benefits accruing to participants under the Plan, (ii) materially increase the number of securities that may be issued under the Plan, (iii) extend the period for granting options under the Plan or (iv) materially modify the requirements of eligibility for participation in the Plan. Awards granted under the Plan may be amended with the consent of the recipient so long as the amended award is consistent with the terms of the Plan under which the award was made, except that the Plan may be terminated or amended as required by law. However, the Board may amend the Plan as it deems appropriate to ensure compliance with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and to address issues concerning the deductibility by the Company of executive compensation under Section 162(m) of the Internal Revenue Code. RESALE RESTRICTIONS Shares of Common Stock acquired under the Plan by participants who are affiliates of the Company (generally, officers at the level of vice president and above and directors) will be subject to certain resale restrictions under Rule 144 promulgated by the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the "Securities Act"). Sales under Rule 144 must comply with certain manner of sale requirements and, unless qualifying for an exception based on a limited number of shares to be sold, must be preceded by the filing of a Form 144 with the SEC. In addition, the number of shares sold by an affiliate under Rule 144 during any three-month period may not exceed the greater of (i) one percent of the outstanding Common Stock or (ii) the average weekly trading volume of the Common Stock during the four-week period prior to the filing of the Form 144 with the SEC. Plan participants who are or become directors of the Company and policy- making officers of the Company will be subject to certain reporting requirements and trading restrictions under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules promulgated by the SEC pursuant thereto. ERISA The Company believes the Plan is neither currently qualified under the Internal Revenue Code nor subject to the Employee Retirement Income Security Act of 1974, as amended. ADDITIONAL INFORMATION For additional information about the Plan and its administrators, you may contact the Secretary of the Company at the Company's principal offices at 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068 (telephone number (202) 872-3526). The following documents filed with the Securities and Exchange Commission are hereby incorporated by reference: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1997. (b) All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 1997. (c) The description of the Company's Common Stock included in registration statements and reports filed under the 1934 Act including any amendment or report filed for the purposes of updating such description. Each document or report subsequently filed by the Company with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of the Registration Statement on Form S-8 to which this document relates (the "Registration Statement"), but prior to the filing of a post effective amendment to the Registration Statement which indicates that all securities offered by the Registration have been sold or which deregisters all such securities then remaining unsold, shall be deemed to be incorporated by reference therein. Any statement contained in this document or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded to the extent that a statement contained herein or in any subsequent document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this document. The Company will provide without charge to each person to whom this document is delivered a copy of its Annual Report for its latest fiscal year, copies of each document that is incorporated by reference in this document (but not including any exhibit to such documents unless such exhibit is specifically incorporated by reference in such document) and copies of all reports, proxy statements and other communications distributed to the Company's shareholders generally. Persons desiring copies of these documents should direct requests, orally or in writing to the Secretary of the Company at the address or telephone number listed above. EX-5 3 OPINION OF W. T. TORGERSON Exhibit 5 June 12, 1998 Securities and Exchange Commission 450 - 5th Street, N.W. Washington, D.C. 20549 Dear Sirs: This opinion is given in connection with the Registration Statement on Form S-8 filed by Potomac Electric Power Company (the Company) with the Securities and Exchange Commission for registration under the Securities Act of 1933, as amended, of up to 750,000 shares of Common Stock (Shares) and interests in the Company's Long-Term Incentive Plan (Plan). Based upon my review and knowledge of applicable regulatory and corporate action authorizing issuance of the Shares and interests in the Plan, it is my opinion that: (1) The Company is duly organized and validly existing under the laws of the District of Columbia and Virginia; (2) The Shares and interests in the Plan will, when issued pursuant to the Plan, be legally issued, fully paid and non-assessable. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, /S/ WILLIAM T. TORGERSON William T. Torgerson EX-15 4 LETTER RE UNAUDITED FINANCIAL INFORMATION Exhibit 15 June 12, 1998 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen: We are aware that Potomac Electric Power Company has incorporated by reference our report dated May 13, 1998 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in its Registration Statement on Form S-8 to be filed on or about June 12, 1998. We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /s/ Price Waterhouse LLP EX-23 5 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 Consent of Independent Accountants ---------------------------------- We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated January 16, 1998, which appears on page 32 of the 1997 Annual Report to Shareholders of Potomac Electric Power Company, which is incorporated by reference in Potomac Electric Power Company's Annual Report on Form 10-K for the year ended December 31, 1997. We also consent to the incorporation by reference of our report on the Consolidated Financial Statement Schedule, which appears on page 49 of such Annual Report on Form 10-K. /s/ PRICE WATERHOUSE LLP Washington, DC June 12, 1998 EX-24 6 POWER OF ATTORNEY AND BOARD RESOLUTIONS Exhibit 24 P O T O M A C E L E C T R I C P O W E R C O M P A N Y POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers of POTOMAC ELECTRIC POWER COMPANY (the "Company") hereby constitute and appoint John M. Derrick, Jr., Dennis R. Wraase, William T. Torgerson, Anthony J. Kamerick, Ellen Sheriff Rogers, Peyton G. Middleton, Jr. and Karen G. Almquist, and each of them, their true and lawful attorneys and agents with full power and authority, in their names and on their behalf, to do any and all acts and things and to execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable Potomac Electric Power Company to comply with the Securities Exchange Act of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission thereunder, and to comply with the securities laws of any state of the United States or any other jurisdiction, in connection with a Registration Statement on Form S-8 to be filed under the Act for the public offering and sale of up to 1,000,000 shares of the Common Stock of the Company, $1 par value, in connection with the Long-Term Incentive Plan and the Director Stock Plan of the Company, including specifically, but without limiting the generality of the foregoing, power and authority to sign the names of the undersigned directors and officers, in the respective capacities indicated below, to of said Registration Statements and to any instruments or documents filed as a part of or in connection with said Registration Statements or amendment thereto; and each of the undersigned hereby ratifies and confirms all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has subscribed, or caused to be subscribed, these presents this 22nd day of April, 1998. Signature /s/ JOHN M. DERRICK Principal Executive Officer: JOHN M. DERRICK, JR. President, Chief Executive Officer and Director Principal Financial Officer and /s/ D. R. WRAASE Principal Accounting Officer: DENNIS R. WRAASE Senior Vice President, Chief Financial Officer and Director /s/ ROGER R. BLUNT Director ___________________________________ ROGER R. BLUNT, SR. /s/ EDMUND B. CRONIN, JR. Director ___________________________________ EDMUND B. CRONIN, JR. /s/ R. E. MARRIOTT Director ___________________________________ RICHARD E. MARRIOTT /s/ DAVID O. MAXWELL Director ___________________________________ DAVID O. MAXWELL /s/ FLORETTA D. McKENZIE Director ___________________________________ FLORETTA D. McKENZIE /s/ ANN D. McLAUGHLIN Director ___________________________________ ANN D. McLAUGHLIN /s/ EDWARD F. MITCHELL Director __________________________________ EDWARD F. MITCHELL /s/ PETER F. O'MALLEY Director ___________________________________ PETER F. O'MALLEY Director ___________________________________ LOUIS A. SIMPSON /s/ A. T. YOUNG Director ___________________________________ A. THOMAS YOUNG SECRETARY'S CERTIFICATE I, Ellen Sheriff Rogers, Secretary of Potomac Electric Power Company, hereby certify that the folowing resolutions were adopted by the Board of Directors of the Company on April 22, 1998, and they remain in full force and effect this 12th day of June, 1998. /s/ ELLEN SHERIFF ROGERS _________________________ Ellen Sheriff Rogers RESOLVED, that original issue shares of Common Stock of the Company when issued and sold in accordance with the terms of the Long-Term Incentive Plan or the Director Stock Plan (collectively "the Plans"), if any, be, and hereby are, declared to be fully paid and non-assessable; and further RESOLVED, that appropriate officers of the Company be, and hereby are, authorized to engage the services of a broker for the purpose of acquiring shares of the Company's Common Stock for use under the Plans; and further RESOLVED, that the officers of the Company be, and hereby are, authorized and empowered to prepare, execute and file, in the name and on behalf of the Company, with the Securities and Exchange Commission, the Public Service Commission of the District of Columbia, and the New York Stock Exchange, Inc., any and all such registration statements, listing applications and other applications and documents, and any and all such subsequent amendments thereto, for the registration, listing, or authorization of up to 1,000,000 shares of the Common Stock of the Company, as said officers, acting with the advice of counsel, may deem necessary or desirable in connection with the issuance and sale of such shares of Common Stock of the Company under the Long-Term Incentive Plan and the Director Stock Plan; and further RESOLVED, that William T. Torgerson and Ellen Sheriff Rogers be, and hereby are, designated as the persons authorized to receive notices and communications from the Securities and Exchange Commission with respect to the registration statements filed under the Securities Act of 1933 and Securities Exchange Act of 1934; and further RESOLVED, that the officers of the Company be, and hereby are, authorized and empowered to prepare, execute and deliver, in the name and on behalf of the Company, powers of attorney in favor of John M. Derrick, Jr., Dennis R. Wraase, William T. Torgerson, Anthony J. Kamerick, Ellen Sheriff Rogers, Karen G. Almquist and Peyton G. Middleton, Jr., and each of them, authorizing said attorneys-in-fact, among other things, to sign on behalf of the Company such registration statements, listing applications and other applications and documents, and any and all subsequent amendments thereto, filed in connection therewith; and further RESOLVED, that, if shares of the Common Stock of the Company proposed to be issued and sold, are listed on the New York Stock Exchange, Inc., the officers of the Company be, and hereby are, authorized by the Company to appear before the Exchange, with authority to make such changes in the application or applications for such listings or in any agreements relating thereto, as may be necessary to conform with the requirements for listing; and further RESOLVED, that the officers of the Company be, and hereby are, authorized and empowered to execute and file, in the name and on behalf of the Company or otherwise, all such applications, consents to service of process, powers of attorney and other instruments, notices and documents, and to do any and all such other acts and things as they may, with the advice of counsel, deem necessary or desirable to obtain the approval of any regulatory commission or authority whose approval of the issuance and sale of the shares of Common Stock of the Company is or may be required, or to qualify the Company for the sale of the shares of Common Stock of the Company under the Securities or Blue Sky Laws of such states of the United States as the officers of the Company may deem advisable; and further RESOLVED, that the officers of the Company are authorized and directed, on behalf of the Company, to take or cause to be taken all such actions as they may deem necessary or desirable in order to carry into effect the purposes and intent of these resolutions. -----END PRIVACY-ENHANCED MESSAGE-----