-----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, QVuM67RLBJqUWdHlAJZsov8hDAkmPhgR5lm05T+x9jatIjETX4+9ElkUs0yIENNA z3TPmujxseg5U3tDlxjcvQ== 0000950109-97-005383.txt : 19970814 0000950109-97-005383.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950109-97-005383 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970813 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-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-33495 FILM NUMBER: 97658726 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-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON REGISTRATION NO. - - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-3 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 OF (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) ---------------- 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068 (202) 872-2000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- ELLEN SHERIFF ROGERS ASSOCIATE GENERAL COUNSEL, SECRETARY AND ASSISTANT TREASURER POTOMAC ELECTRIC POWER COMPANY 1900 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20068 (202) 872-3526 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS) ---------------- WITH COPIES TO: D. MICHAEL LEFEVER, ESQ. STEPHEN K. WAITE, ESQ. COVINGTON & BURLING WINTHROP, STIMSON, PUTNAM & ROBERTS 1201 PENNSYLVANIA AVENUE, N.W. ONE BATTERY PARK PLAZA WASHINGTON, D.C. 20004 NEW YORK, NEW YORK 10004 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM AGGREGATE TITLE OF EACH CLASS OF OFFERING AMOUNT OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE - -------------------------------------------------------------------------------- Debt Securities.................................. $125,000,000 $37,878.79
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee. ---------------- Pursuant to Rule 429 under the Securities Act of 1933, each of the Prospectuses filed as part of this Registration Statement may be used as a combined prospectus in connection with the securities registered under this Registration Statement and unsold debt securities having an aggregate offering price of $75,000,000 previously registered under Registration Statement No. 33-61379 for which a registration fee of $25,862 was paid. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- EXPLANATORY NOTE This Registration Statement contains two forms of prospectus to be used in separate offerings of Debt Securities in an aggregate principal amount of $200,000,000, including $75,000,000 in principal amount of debt securities registered under Registration Statement No. 33-61379. One prospectus will be used in connection with the offering of First Mortgage Bonds (the "First Mortgage Bond Prospectus"). The other prospectus will be used in connection with the offering of Medium-Term Notes (the "Medium-Term Note Prospectus"). The First Mortgage Bond Prospectus and the Medium-Term Note Prospectus are identical with the exception of their respective Cover Pages, the section headed "Plan of Distribution," the sections describing the respective Debt Securities, and minor conforming changes to the sections headed "Use of Proceeds," "Experts," and "Legal Opinions." The First Mortgage Bond Prospectus includes a section headed "Description of Bonds and Mortgage" and the Medium- Term Note Prospectus includes a section headed "Description of the Notes." ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE + +WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES + +LAWS OF ANY SUCH JURISDICTION. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY PROSPECTUS DATED , SUBJECT TO COMPLETION POTOMAC ELECTRIC POWER COMPANY FIRST MORTGAGE BONDS ----------- Potomac Electric Power Company (the "Company") may offer from time to time up to $200,000,000 aggregate principal amount of its First Mortgage Bonds (the "New Bonds"), which may be offered in one or more series in amounts, at prices and on terms to be determined by market conditions at the time of sale. The aggregate principal amount, rate (or method of calculation) and time of payment of interest, maturity, offering price, any redemption terms and other specific terms of the series of New Bonds in respect of which this Prospectus is being delivered, are set forth in the accompanying Prospectus Supplement (the "Prospectus Supplement"). The amount of First Mortgage Bonds to be offered hereby will be reduced by the amount of any Medium-Term Notes sold pursuant to the Registration Statements of which this Prospectus is a part. See "Description of Bonds and Mortgage." The Company may sell the New Bonds through underwriters designated by the Company or through dealers, directly to a limited number of institutional purchasers, or through agents. See "Plan of Distribution." The Prospectus Supplement sets forth the names of such underwriters, dealers or agents, if any, any applicable commissions or discounts and the net proceeds to the Company from such sale. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- THE DATE OF THIS PROSPECTUS IS , 1997 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT SPEAKS AS OF THE DATE THEREOF AND DOES NOT PURPORT TO REFLECT ANY CHANGES IN THE AFFAIRS OF THE COMPANY THEREAFTER. ---------------- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files periodic and current reports and other information with the Securities and Exchange Commission (the "Commission"). Information concerning directors and officers, their remuneration and any material interest of such persons in transactions with the Company, as of particular dates, is disclosed in such reports and in proxy statements distributed to shareholders of the Company and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, 13th Floor, New York, New York. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and other information also may be obtained from the Commission's Electronic Data Gathering and Retrieval ("EDGAR") database located at the website maintained by the Commission at http://www.sec.gov. In addition, reports, proxy statements and other information concerning the Company can be inspected at the offices of the New York Stock Exchange, Inc., where certain securities of the Company are listed. The Company has filed with the Commission registration statements on Form S- 3 relating to the First Mortgage Bonds (herein, together with all amendments and exhibits, referred to as the "Registration Statements") under the Securities Act of 1933, as amended (the "1933 Act"). This Prospectus does not contain all of the information set forth in the Registration Statements, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statements. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company with the Commission under the 1934 Act are incorporated by reference in this Prospectus: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1996. (b) The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997. (c) The Company's Current Reports on Form 8-K dated April 7, 1997, April 17, 1997, May 5, 1997, July 14, 1997 and August 6, 1997. All documents subsequently filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of the filing of such documents. Any statement contained in an incorporated document shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other incorporated document subsequently filed or in an accompanying Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 2 THE COMPANY HEREBY UNDERTAKES TO FURNISH, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ELLEN SHERIFF ROGERS, ASSOCIATE GENERAL COUNSEL, SECRETARY AND ASSISTANT TREASURER, POTOMAC ELECTRIC POWER COMPANY, 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068 (202- 872-3526). 3 THE COMPANY Potomac Electric Power Company, a District of Columbia and Virginia corporation (the "Company"), is engaged in the generation, transmission, distribution and sale of electric energy in the Washington, D.C. metropolitan area, including the District of Columbia and major portions of Montgomery and Prince George's Counties in Maryland. It also supplies, at wholesale, electric energy to the Southern Maryland Electric Cooperative, Inc., which distributes electricity in Calvert, Charles, Prince George's and St. Mary's Counties in southern Maryland. The Company's wholly owned nonutility subsidiary, Potomac Capital Investment Corporation ("PCI"), was organized in late 1983 to provide a vehicle to conduct the Company's ongoing nonutility businesses. PCI's principal investments have been in aircraft and power generation equipment, equipment leasing and marketable securities, primarily preferred stock with mandatory redemption features. PCI is also involved with activities which provide telecommunication and energy services. In addition, PCI has investments in real estate properties in the Washington, D.C. metropolitan area. The mailing address of the Company's executive offices is 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068, and its telephone number is 202-872-2000. USE OF PROCEEDS The Company may offer from time to time pursuant to this Prospectus up to an aggregate principal amount of $200,000,000 of its First Mortgage Bonds. The proceeds from the sale of the First Mortgage Bonds will be used to refund short-term debt incurred primarily to finance, on a temporary basis, the Company's utility construction program and operations, and to refund the Company's senior securities, including the retirement of long-term debt and the satisfaction of contractual sinking fund requirements. 4 SELECTED FINANCIAL INFORMATION The following is a selection of certain consolidated financial information of the Company which was derived from, and is qualified in its entirety by, the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and the unaudited consolidated financial information contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, which are available as described herein under "Incorporation of Certain Documents by Reference." The interim financial data are unaudited; however, in the opinion of the management of the Company, such data reflect all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations for the interim periods presented.
12 MONTHS ENDED ----------------------------------------------- JUNE 30, DEC. 31, DEC. 31, DEC. 31, 1997 1996 1995 1994 ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) Income Statement Data: Total Revenue................. $ 1,911,969 $ 2,010,311 $ 1,876,102 $ 1,823,074 Operating Revenue............. 1,800,921 1,834,857 1,822,432 1,790,600 Net Income.................... 223,080 236,960 94,391 227,162 Earnings for Common Stock..... 206,490 220,356 77,540 210,725 Earnings Per Share of Common Stock........................ 1.74 1.86 .65 1.79 Balance Sheet Data at end of period: Property and Plant, net....... $ 4,443,141 $ 4,423,249 $ 4,400,311 $ 4,334,399
AS OF JUNE 30, 1997 ---------------------- AMOUNT RATIO ----------- ----- (THOUSANDS) Capital Structure (excluding nonutility subsidiary debt and current maturities): Long-Term Debt........................................ $1,727,065 44.9% Preferred Stock....................................... 266,293 6.9 Common Equity......................................... 1,857,120 48.2 ---------- ----- Total Capitalization................................ $3,850,478 100.0% ========== Parent Company Long-Term Debt and Preferred Stock Redemption Due in One Year and Short-Term Debt......... $ 412,585 ==========
RATIOS OF EARNINGS TO FIXED CHARGES
12 MONTHS ENDED ----------------------------------------------------- JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, 1997 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- Parent company only....... 2.90 3.08 3.05 3.23 3.20 2.73 Fully consolidated........ 2.26 2.24 1.52 2.37 2.31 2.19
For purposes of computing the ratio of earnings to fixed charges for rate- regulated public utilities, earnings represent net income before cumulative effect of accounting changes plus income taxes and fixed charges. Fixed charges represent interest charges on debt (exclusive of credits arising from the allowance for funds used during construction) and the portion of rentals deemed representative of the interest factor. 5 DESCRIPTION OF BONDS AND MORTGAGE GENERAL. The New Bonds are to be issued under the Mortgage and Deed of Trust dated July 1, 1936, between the Company and The Bank of New York, New York, N.Y., as Trustee and as successor in such capacity to The Riggs National Bank of Washington, D.C. (the "Trustee"), as amended and supplemented and as to be supplemented by a separate supplemental indenture (the "Supplemental Indenture") each time New Bonds are offered under this Prospectus and the accompanying Prospectus Supplement. Said mortgage, as so amended and supplemented and to be supplemented, is herein sometimes called the "Mortgage." Copies of the documents currently constituting the Mortgage are exhibits to the Registration Statements, as is the form of the Supplemental Indenture. Reference is made to the Prospectus Supplement which accompanies this Prospectus for the following terms and other information with respect to the New Bonds being offered thereby: (1) the designation and aggregate principal amount of such New Bonds; (2) the date on which such New Bonds will mature; (3) the rate per annum at which such New Bonds will bear interest, or the method of determining such rate; (4) the dates on which such interest will be payable; (5) any redemption terms; and (6) other specific terms applicable to the New Bonds. The New Bonds will be available only in fully registered form without coupons in denominations of $1,000 or any multiple thereof, except as may be set forth in the accompanying Prospectus Supplement. Both principal and interest on the New Bonds will be payable at the agency of the Company, The Bank of New York, New York, N.Y. The Company will not impose charges for any exchanges of New Bonds. The Supplemental Indenture will contain no provisions for an improvement and sinking fund or any maintenance and replacement requirement or dividend restriction; neither does the Mortgage nor any indenture supplemental thereto relating to any outstanding Series of Bonds contain any such provisions. The Mortgage does not contain any covenants or other provisions that specifically are intended to afford holders of the New Bonds special protection in the event of a highly leveraged transaction. The following statements are outlines of certain provisions contained in the Mortgage and do not purport to be complete. They are qualified by express reference to the cited Sections and Articles of the Mortgage. Certain terms used are as defined in the Mortgage. SECURITY. The New Bonds will be secured, together with all other Bonds now or hereafter issued under the Mortgage, by a valid and direct first lien (subject to certain leases, Permitted Liens and other minor matters) on substantially all the properties and franchises of the Company (the principal properties being its generating stations and its electric transmission and distribution systems), other than cash, accounts receivable and other liquid assets, securities (including securities evidencing investments in subsidiaries of the Company), leases by the Company as lessor, equipment and materials not installed as part of the fixed property, and electric energy and other materials, merchandise or supplies produced or purchased by the Company for sale, distribution or use. The Company's 9.72% undivided interest in a mine-mouth, steam-electric generating station, known as the Conemaugh Generating Station, which is located in Indiana County, Pennsylvania, and its associated transmission lines is that of a tenant in common with eight other utility owners. Substantially all of the Company's transmission and distribution lines of less than 230,000 volts, portions of its 230,000 and 500,000 volt transmission lines, substantially all of the Conemaugh transmission lines, and 11 substations are located on land owned by others or on public streets and highways. The Mortgage contains provisions subjecting after-acquired property (subject to pre-existing and Permitted Liens) to the lien thereof. The lien on such property is, however, subject to rights of persons having superior equities attaching prior to the recording or filing of an appropriate supplemental indenture. ISSUANCE OF ADDITIONAL BONDS. Additional Bonds ranking equally with the New Bonds may be issued in an aggregate amount of up to (i) 60% of the Net Bondable Value of Property Additions not subject to an 6 Unfunded Prior Lien, (ii) the amount of cash deposited with the Trustee (which may thereafter be withdrawn on the same basis that Additional Bonds are issuable under (i) and (iii)), and (iii) the amounts of Bonds retired or to be retired (except out of trust moneys or by any sinking or analogous fund if the fund prevents such use) (Secs. 4, 6 and 7, Art. III; Sec. 4, Art. VIII). Additional Bonds may not be issued unless Net Earnings of the Company Available for Interest and Property Retirement Appropriations (i.e., earnings before depreciation, amortization, income taxes and interest charges) during 12 of the immediately preceding 15 months shall have been at least twice the annual interest charges on all Bonds and Prior Lien Bonds then outstanding and then being issued, unless they are being issued on the basis of Bonds paid at or redeemed or purchased within two years of maturity or on the basis of Property Additions subject to an Unfunded Prior Lien (which simultaneously becomes a Funded Prior Lien) and the Bonds are issued within two years of the maturity of the Prior Lien Bonds secured by such Prior Liens (Secs. 3, 4 and 7, Art. III). Giving effect to the issuance of the New Bonds at an assumed rate of interest of 8%, such Net Earnings for the twelve months ended June 30, 1997 would be approximately 5.8 times the aggregate annual interest charges referred to above. Such coverage would permit issuance of approximately $2.6 billion of mortgage bonds (in addition to the New Bonds) at an assumed average interest rate of 8% per annum, against property additions or cash deposits, although only approximately $530 million of such additional bonds could currently be issued in compliance with unbonded net property addition limitations contained in the Mortgage. So long as any New Bonds are outstanding, Property Additions constructed or acquired on or before December 31, 1946 may not be made the basis for the issue of Bonds, or the withdrawal of cash, or the reduction of cash required to be paid to the Trustee (Sec. 2, Part IV, Supplemental Indenture). Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the circumstances and subject to the limitations contained in the Mortgage (Sec. 16, Art. IV). After giving effect to the issuance of the New Bonds (which are to be issued against Property Additions), approximately $880 million of the Property Additions as of June 30, 1997 will remain available for the purposes permitted in the Mortgage, including the issuance of Bonds. RELEASE OF PROPERTY. The Mortgage permits property to be released from the lien of the Mortgage upon compliance with the provisions thereof. Such provisions generally require that cash be deposited with the Trustee in an amount equal to the fair value of the property to be released. The Mortgage permits the Company to reduce such amounts of cash otherwise required to be deposited by substituting a like amount of Bonds retired. The Mortgage also contains certain requirements relating to the withdrawal of cash deposited to obtain a release of property (Art. VII and Art. VIII). MODIFICATION OF MORTGAGE. With the consent of the holders of 80% in amount of Bonds and of 80% in amount of Bonds of each series affected if less than all are affected, the Mortgage may be changed except to affect the terms of payment of the principal or interest on any Bonds or to reduce the percentage of Bondholders required to effect any change (Sec. 6, Art. XV). The Supplemental Indenture, however, provides that the foregoing percentages shall be reduced to 60% upon the consent or agreement to such change by the holders of all outstanding Bonds. Purchasers of the New Bonds will be deemed to have agreed to such reduction pursuant to the terms of the Supplemental Indenture. EVENTS OF DEFAULT. The holders of 25% in amount of Bonds, upon any Event of Default, may require the Trustee to accelerate maturity of the Bonds (although a majority in amount of Bonds may waive such default and rescind such acceleration if such default is cured) and to enforce the lien of the Mortgage upon being indemnified to its satisfaction (Sec. 1 and 4, Art. IX). The holders of a majority in amount of Bonds may direct proceedings for the sale of the trust estate, or for the appointment of a receiver or any other proceedings under the Mortgage, but have no right to involve the Trustee in any personal liability without indemnifying it to its satisfaction (Sec. 11, Art. IX). 7 Events of Default include failure to pay principal, failure for 30 days to pay interest or to satisfy any improvement, maintenance or sinking fund obligation, failure for 60 days (after notice by the Trustee or the holders of 15% in amount of Bonds) to perform any other covenant, and certain events of bankruptcy, insolvency or reorganization (Sec. 1, Art. IX). While the Mortgage by its terms does not require that periodic evidence be furnished to the Trustee as to the absence of default or as to compliance with the terms of the Mortgage, the Trust Indenture Act of 1939, as amended, requires that annual certificates as to the absence of such defaults be furnished to the Trustee. RELATIONSHIPS WITH TRUSTEE. The Bank of New York is the trustee under indentures for the Company's medium-term notes, 5% Convertible Debentures due 2002 and 7% Convertible Debentures due 2018, and in connection with a sale and leaseback of the Company's Control Center. The Company has with the Trustee and its affiliates, as it has with various other banks, a demand deposit account and conventional and revolving credit arrangements. The Bank of New York is the Issuing and Paying Agent for medium-term notes issued by PCI. PLAN OF DISTRIBUTION The Company may sell the New Bonds: (i) through underwriters or dealers; (ii) directly to one or more purchasers; (iii) through agents; or (iv) through a combination of any such methods of sale. The Prospectus Supplement with respect to any New Bonds being offered thereby sets forth the terms of the offering of such New Bonds, including the name or names of any underwriters, the purchase price of such New Bonds and the proceeds to the Company from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which such New Bonds may be listed. If underwriters are used in the sale, the New Bonds will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The New Bonds may be offered to the public, either through underwriting syndicates represented by the underwriter or underwriters to be designated by the Company or directly by one or more of such firms. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase the New Bonds offered thereby will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such New Bonds if any are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. New Bonds may be sold directly by the Company or through agents designated by the Company from time to time. The Prospectus Supplement sets forth the name of any agent involved in the offer or sale of the New Bonds in respect of which the Prospectus Supplement is delivered as well as any commission payable by the Company to such agent. Unless otherwise indicated in the Prospectus Supplement, any such agent is acting on a best efforts basis for the period of its appointment. If so indicated in the Prospectus Supplement, the Company will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase the New Bonds from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the 1933 Act. Agents and underwriters may be customers of, engaged in transactions with, or perform services for the Company in the ordinary course of business. 8 EXPERTS The consolidated financial statements incorporated in this Prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. With respect to the unaudited consolidated financial information of the Company for the three- and twelve-month periods ended March 31, 1997 and 1996, and the three-, six- and twelve-month periods ended June 30, 1997 and 1996 incorporated by reference in this Prospectus, Price Waterhouse LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports dated May 14, 1997 and August 13, 1997, incorporated by reference herein, state that they did not audit and they do not express opinions on that unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if such reports had not been included. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of Section 11 of the 1933 Act for their reports on the unaudited consolidated financial information because each such report is not a "report" or a "part" of the registration statement prepared or certified by Price Waterhouse LLP within the meaning of Sections 7 and 11 of the 1933 Act. The statements as to matters of law and legal conclusions contained under "Description of Bonds and Mortgage--Security" have been prepared under the supervision of, and reviewed by, William T. Torgerson, Esq., Senior Vice President and General Counsel for the Company, and are made on his authority. LEGAL OPINIONS Certain legal matters in connection with the securities to be offered hereby will be passed upon for the Company by Covington & Burling, 1201 Pennsylvania Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900 Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly employed by the Company as Senior Vice President and General Counsel. Unless otherwise indicated in the accompanying Prospectus Supplement, the legality of such securities will be passed upon for the underwriter, dealer or agents by Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, N.Y., who will, however, not pass on the incorporation of the Company. 9 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE + +WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES + +LAWS OF ANY SUCH JURISDICTION. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY PROSPECTUS DATED . SUBJECT TO COMPLETION POTOMAC ELECTRIC POWER COMPANY MEDIUM-TERM NOTES ----------- Potomac Electric Power Company (the "Company") may offer from time to time up to $200,000,000 aggregate principal amount of its Medium-Term Notes (the "Notes") having maturities ranging from nine months to thirty years from the date of issuance. Each Note will bear interest at a rate or pursuant to an interest rate formula determined by the Company at or prior to the sale thereof. The aggregate principal amount, the interest rate or formula for determining such rate, interest payment dates for floating rate Notes, purchase price, date of maturity, redemption terms, if any, and certain other variable terms with respect to the Notes will be set forth in the accompanying Prospectus Supplement (the "Prospectus Supplement") or Pricing Supplement thereto (the "Pricing Supplement") to be filed with respect to the issuance and sale of Notes. The terms upon which each issuance and sale of Notes are offered, together with the names of the agents and the agents' commissions or discounts, if applicable, will also be set forth in the Prospectus Supplement or Pricing Supplement. See "Plan of Distribution" regarding possible indemnification arrangements for agents. The amount of Medium-Term Notes to be offered hereby will be reduced by the amount of any First Mortgage Bonds sold pursuant to the Registration Statements of which this Prospectus is a part. See "Description of the Notes." The Notes may be offered on a continuous basis by the Company through agents. The Notes may also be sold by the Company to any agent at negotiated discounts for its own account or for resale to one or more investors and other purchasers at varying prices relating to prevailing market prices at the time of resale as determined by such agent. The Notes will not be listed on any securities exchange. The Company or the agents may reject, in whole or in part, any offer to purchase the Notes. See "Plan of Distribution." ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The date of this Prospectus is , 1997 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS SPEAKS AS OF ITS DATE AND DOES NOT PURPORT TO REFLECT ANY CHANGES IN THE AFFAIRS OF THE COMPANY THEREAFTER. ---------------- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files periodic and current reports and other information with the Securities and Exchange Commission (the "Commission"). Information concerning directors and officers, their remuneration and any material interest of such persons in transactions with the Company, as of particular dates, is disclosed in such reports and in proxy statements distributed to shareholders of the Company and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C., 500 West Madison Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, 13th Floor, New York, New York. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and other information also may be obtained from the Commission's Electronic Data Gathering and Retrieval ("EDGAR") database located at the website maintained by the Commission at http://www.sec.gov. In addition, reports, proxy statements and other information concerning the Company can be inspected at the offices of the New York Stock Exchange, Inc., where certain securities of the Company are listed. The Company has filed with the Commission registration statements on Form S- 3 relating to the Notes (herein, together with all amendments and exhibits, referred to as the "Registration Statements") under the Securities Act of 1933, as amended (the "1933 Act"). This Prospectus does not contain all of the information set forth in the Registration Statements, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statements. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company with the Commission under the 1934 Act are incorporated by reference in this Prospectus: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1996. (b) The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997. (c) The Company's Current Reports on Form 8-K dated April 7, 1997, April 17, 1997, May 5, 1997, July 14, 1997 and August 6, 1997. All documents subsequently filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of the filing of such documents. Any statement contained in an incorporated document shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other incorporated document subsequently filed or in an accompanying Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 2 THE COMPANY HEREBY UNDERTAKES TO FURNISH, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ELLEN SHERIFF ROGERS, ASSOCIATE GENERAL COUNSEL, SECRETARY AND ASSISTANT TREASURER, POTOMAC ELECTRIC POWER COMPANY, 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068 (202- 872-3526). THE COMPANY Potomac Electric Power Company, a District of Columbia and Virginia corporation (the "Company"), is engaged in the generation, transmission, distribution and sale of electric energy in the Washington, D.C. metropolitan area, including the District of Columbia and major portions of Montgomery and Prince George's Counties in Maryland. It also supplies, at wholesale, electric energy to the Southern Maryland Electric Cooperative, Inc., which distributes electricity in Calvert, Charles, Prince George's and St. Mary's Counties in southern Maryland. The Company's wholly owned nonutility subsidiary, Potomac Capital Investment Corporation ("PCI"), was organized in late 1983 to provide a vehicle to conduct the Company's ongoing nonutility businesses. PCI's principal investments have been in aircraft and power generation equipment, equipment leasing and marketable securities, primarily preferred stock with mandatory redemption features. PCI is also involved with activities which provide telecommunication and energy services. In addition, PCI has investments in real estate properties in the Washington, D.C. metropolitan area. The mailing address of the Company's executive offices is 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068, and its telephone number is 202-872-2000. USE OF PROCEEDS The Company may offer from time to time pursuant to this Prospectus up to an aggregate principal amount of $200,000,000 of its Medium-Term Notes. The proceeds from the sale of the Notes will be used to refund short-term debt incurred primarily to finance, on a temporary basis, the Company's utility construction program and operations, and to refund the Company's senior securities, including the retirement of long-term debt and the satisfaction of contractual sinking fund requirements. 3 SELECTED FINANCIAL INFORMATION The following is a selection of certain consolidated financial information of the Company which was derived from, and is qualified in its entirety by, the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and the unaudited consolidated financial information contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, which are available as described herein under "Incorporation of Certain Documents by Reference." The interim financial data are unaudited; however, in the opinion of the management of the Company, such data reflect all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations for the interim periods presented.
12 MONTHS ENDED ----------------------------------------------- JUNE 30, DEC. 31, DEC. 31, DEC. 31, 1997 1996 1995 1994 ----------- ----------- ----------- ----------- (THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) Income Statement Data: Total Revenue................. $ 1,911,969 $ 2,010,311 $ 1,876,102 $ 1,823,074 Operating Revenue............. 1,800,921 1,834,857 1,822,432 1,790,600 Net Income.................... 223,080 236,960 94,391 227,162 Earnings for Common Stock..... 206,490 220,356 77,540 210,725 Earnings Per Share of Common Stock........................ 1.74 1.86 .65 1.79 Balance Sheet Data at end of period: Property and Plant, net....... $ 4,443,141 $ 4,423,249 $ 4,400,311 $ 4,334,399
AS OF JUNE 30, 1997 ---------------------- AMOUNT RATIO ----------- ----- (THOUSANDS) Capital Structure (excluding nonutility subsidiary debt and current maturities): Long-Term Debt........................................ $1,727,065 44.9% Preferred Stock....................................... 266,293 6.9 Common Equity......................................... 1,857,120 48.2 ---------- ----- Total Capitalization................................ $3,850,478 100.0% ========== Parent Company Long-Term Debt and Preferred Stock Redemption Due in One Year and Short-Term Debt......... $ 412,585 ==========
RATIOS OF EARNINGS TO FIXED CHARGES
12 MONTHS ENDED ----------------------------------------------------- JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, 1997 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- Parent company only....... 2.90 3.08 3.05 3.23 3.20 2.73 Fully consolidated........ 2.26 2.24 1.52 2.37 2.31 2.19
For purposes of computing the ratio of earnings to fixed charges for rate- regulated public utilities, earnings represent net income before cumulative effect of accounting change plus income taxes and fixed charges. Fixed charges represent interest charges on debt (exclusive of credits arising from the allowance for funds used during construction) and the portion of rentals deemed representative of the interest factor. 4 DESCRIPTION OF THE NOTES The Notes will be issued under an Indenture between the Company and The Bank of New York, as Trustee (the "Trustee"), dated as of July 28, 1989 (such Indenture as originally executed and delivered and as thereafter supplemented and amended, together with any constituent instruments establishing the terms of particular Notes, being herein called the "Indenture"). The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indenture, a copy of which has been incorporated by reference as an exhibit to the Registration Statements of which this Prospectus is a part. The terms and conditions set forth below will apply to each Note unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement. Certain terms used are defined in the Indenture. As of the date of this Prospectus, $275,000,000 aggregate principal amount of Indenture Securities (defined herein) are issued and outstanding (not including the Notes offered hereby). The Notes, issued and to be issued, will be unsecured and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Company from time to time outstanding. As of the date of this Prospectus, an aggregate of $1,341,800,000 of secured debt is outstanding. The terms of the Notes will not restrict the further incurrence of secured debt by the Company. The Notes will not be subject to any sinking fund. Unless otherwise specified in a Prospectus Supplement, the Notes will mature on any day from 9 months to 30 years from the date of original issue (the "Original Issue Date"), as selected by the purchaser and agreed to by the Company. Each Note will bear interest at either (a) a fixed rate (a "Fixed Rate Note") or (b) rates determined by reference to a Base Rate (as hereafter defined), which may be adjusted by a Spread or Spread Multiplier (as hereafter defined) (a "Floating Rate Note"). The Notes will be offered on a continuous basis. Reference is made to the Prospectus Supplement or the applicable Pricing Supplement with respect to the Notes described therein for the following terms: (1) the purchase price of such Notes (the "Issue Price"), or a statement that the Notes are being offered by an agent as principal at varying market prices; (2) the Original Issue Date; (3) the stated maturity date of such Notes (the "Maturity Date"); (4) if Fixed Rate Notes, the rate per annum at which such Notes will bear interest (the "Interest Rate"); (5) if Floating Rate Notes, the interest rate formula and other variable terms; (6) the date or dates from which any such interest shall accrue; (7) the terms for redemption, if any; and (8) any other terms of such Notes. The Notes will be subject to redemption by the Company on and after the initial redemption date, if any, fixed at the time of sale and set forth in the applicable Pricing Supplement (the "Initial Redemption Date"). If no Initial Redemption Date is indicated with respect to a Note, such Note will not be redeemable prior to maturity. On and after the Initial Redemption Date with respect to any Note, such Note will be redeemable in whole or in part in increments of $1,000 at the option of the Company at a redemption price (the "Redemption Price") determined in accordance with the following paragraph, together with interest thereon payable to the date of redemption, on notice given no more than 60 nor less than 30 days prior to the date of redemption. The Redemption Price for each Note subject to redemption shall initially be equal to a certain percentage (the "Initial Redemption Percentage") of the principal amount of such Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date with respect to such Note by a percentage (the "Annual Redemption Percentage Reduction") of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. The Initial Redemption Percentage and any Annual Redemption Percentage Reduction with respect to each Note subject to redemption prior to maturity will be fixed at the time of sale and set forth in the applicable Pricing Supplement. The Notes will be repayable by the Company at the option of the Holders thereof prior to the stated Maturity Date only if one or more optional repayment dates ("Optional Repayment Date") are specified in the applicable Prospectus Supplement or Pricing Supplement. If so specified, the Notes will be subject to repayment at the 5 option of the Holders thereof on any Optional Repayment Date in whole or from time to time in part in increments of $1,000 or such other minimum denomination specified in the applicable Prospectus Supplement or Pricing Supplement (provided that any remaining principal amount thereof shall be at least $1,000 or such other minimum denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date of repayment. For any Note to be repaid, such Note must be received, together with the form thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at its office maintained for such purpose in the Borough of Manhattan, The City of New York, currently the corporate trust office of the Trustee located at 101 Barclay Street, not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment option by the Holder will be irrevocable. Only the Depositary may exercise the repayment option in respect of global securities representing Book-Entry Notes (as hereinafter defined). Accordingly, owners of beneficial interests in global securities ("Beneficial Owners") that desire to have all or any portion of the Book-Entry Notes represented by such global securities repaid must instruct the participant through which they own their interest to direct the Depositary to exercise the repayment option on their behalf by delivering the related global security and duly completed election form to the Trustee as aforesaid. In order to ensure that such global security and election form are received by the Trustee on a particular day, the applicable Beneficial Owner must so instruct the participant through which it owns its interest before such participant's deadline for accepting instructions for that day. Different firms may have different deadlines for accepting instructions from their customers. Accordingly, Beneficial Owners should consult the participants through which they own their interest to determine the respective deadlines for such participants. All instructions given to participants from Beneficial Owners of global securities relating to the option to elect repayment shall be irrevocable. In addition, at the time such instructions are given, each such Beneficial Owner shall cause the participant through which it owns its interest to transfer such Beneficial Owner's interest in the global security or securities representing the related Book-Entry Notes, on the Depositary's records, to the Trustee. If applicable, the Company will comply with the requirements of Section 14(e) of the 1934 Act, and the rules promulgated thereunder, and any other securities laws or regulations in connection with any such repayment. The Company may at any time purchase Notes at any price or prices in the open market or otherwise. Notes so purchased by the Company may, at the discretion of the Company, be held, resold or surrendered to the Trustee for cancellation. The Notes will be issued only in fully registered certificated or book-entry form without coupons and, except as may otherwise be provided in the applicable Prospectus Supplement or Pricing Supplement, in the denomination of $1,000 or any multiple thereof. Notes issued in certificated form may be transferred or exchanged at the offices described in the immediately following paragraphs. In the event the Notes are issued in book-entry form through the facilities of the Depositary (as defined below), transfers or exchanges may be similarly effected through a participating member of the Depositary. For Notes issued in certificated form, principal and interest will be payable, the transfer of the Notes will be registrable, and Notes will be exchangeable for Notes bearing identical terms and provisions at the office or agency of the Company in The City of New York designated for such purpose; provided, however, that payment of interest, other than interest at maturity (or on any date of redemption if a Note is redeemed prior to maturity), may be made at the option of the Company by check mailed to the address of the person in whose name the applicable Note is registered at the close of business on the Regular Record Date (as hereafter defined) as shown on the security register maintained by the Trustee. Interest will be payable on each date specified in the Note on which an installment of interest is due and payable (an "Interest Payment Date") and at maturity (or any date of redemption). Notwithstanding the foregoing, if the original issue date of a Note is between the Regular Record Date and the initial Interest Payment Date, the initial interest payment will be made on the Interest Payment Date following the next succeeding Regular Record Date to the registered holder on such next succeeding Regular Record Date. 6 No service charge will be made to holders of Notes for any transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or governmental charge incident to the transfer or exchange. Transfers and exchanges of Notes may be made at the Corporate Trust Office of the Trustee. Interest payments shall be the amount of interest accrued from and including the next preceding Interest Payment Date in respect of which interest has been paid (or from and including the date of issue, if no interest has been paid with respect to such Note), to, but excluding, the Interest Payment Date, maturity date or date of redemption (an "Interest Accrual Period"). The principal and interest payable at maturity (or any date of redemption) on each Note will be paid upon maturity (or any date of redemption) in immediately available funds against presentation of the Note at the Corporate Trust Office of The Bank of New York located at 101 Barclay Street, New York, New York. Interest payable at maturity (or on any date of redemption) will be payable to the person to whom the principal of the Note shall be paid. Notwithstanding the above, a holder of $10,000,000 or more in aggregate principal amount of Notes issued in certificated form having the same Interest Payment Date shall be entitled to receive payments of interest by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by The Bank of New York on or before the Regular Record Date immediately preceding the applicable Interest Payment Date. The Indenture does not contain any covenants or other provisions that specifically are intended to afford holders of the Notes special protection in the event of a highly leveraged transaction. BOOK-ENTRY NOTES. The Notes may be issued in whole or in part in the form of one or more fully-registered Notes (each, a "Book-Entry Note") which will be deposited with, or on behalf of, The Depository Trust Company, New York (the "Depositary") and registered in the name of the Depositary's nominee. Except as set forth below, the Book-Entry Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any nominee to a successor of the Depositary or a nominee of such successor. Upon the issuance of Notes by the Company represented by a Book-Entry Note, the Depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of the Notes represented by such Book-Entry Note to the accounts of participants. The accounts to be credited shall be designated by the agents for such Notes, or by the Company if such Notes are offered and sold directly by the Company. Ownership of beneficial interests in a Book-Entry Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in a Book-Entry Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary, or by participants or persons that may hold interests through participants. The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and such laws may impair the ability to transfer beneficial interests in a Book-Entry Note. So long as the Depositary for a Book-Entry Note, or its nominee, is the registered owner of a Book-Entry Note, the Depositary or its nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Book-Entry Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Book-Entry Note will not be entitled to have Notes represented by such Book-Entry Note registered in their names, will not receive or be entitled to receive physical delivery of Notes in certificated form and will not be considered the owners or holders thereof under the Indenture. Principal, premium, if any, and interest payments on Notes issued in book- entry form and represented by one or more Book-Entry Notes will be made by the Company to the Depositary or its nominee, as the case may be, as the registered owner of the related Book-Entry Note or Notes. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of 7 beneficial ownership interests of a Book-Entry Note, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depositary, upon receipt of any payment of principal, premium, if any, or interest in respect of a Book-Entry Note, will credit immediately the accounts of the related participants with payment in amounts proportionate to their respective holdings in principal amount of beneficial interest in such Book-Entry Note as shown on the records of the Depositary. The Company also expects that payments by participants to owners of beneficial interests in a Book-Entry Note will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such participants. The Depositary has advised the Company that it is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The Depositary was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Persons who are not participants may beneficially own securities held by the Depositary only through participants. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will issue Notes in certificated from in exchange for each Book-Entry Note. In addition, the Company may at any time determine not to have Notes represented by one or more Book-Entry Notes, and, in such event, will issue Notes in certificated form in exchange for the Book-Entry Note or Notes representing such Notes. Further, if the Company so specifies with respect to a Book-Entry Note, an owner of a beneficial interest in such Book- Entry Note may, on terms acceptable to the Company and the Depositary, receive Notes in certified form. In any such instance, an owner of a beneficial interest in a Book-Entry Note will be entitled to physical delivery in certificated form of Notes equal in principal amount to such beneficial interest and to have such Notes registered in its name. Notes so issued in certificated form will be issued in the denomination of $1,000 or any multiple thereof and will be issued in registered form only. FIXED RATE NOTES Each Fixed Rate Note will bear interest from the date of issue at the rate per annum stated on the face thereof until the principal amount thereof is paid or made available for payment. Interest on Fixed Rate Notes will be payable semiannually on each February 1 and August 1 Interest Payment Date and at maturity (or any date of redemption). The "Regular Record Date" for Fixed Rate Notes will be the fifteenth day of the month next preceding the February 1 or August 1 Interest Payment Date. Interest on the Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the maturity date (or any date of redemption) on a Fixed Rate Note falls on a day that is not a Business Day (as hereafter defined), the payment shall be made on the next Business Day as if it were made on the date such payment was due and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date or the Maturity Date (or any date of redemption), as the case may be. FLOATING RATE NOTES Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, Floating Rate Notes will be issued as described below. Interest on Floating Rate Notes will be determined by reference to a "Base Rate," which shall be the "Commercial Paper Rate" ("Commercial Paper Rate Notes"), "LIBOR" 8 ("LIBOR Notes"), the Treasury Rate" ("Treasury Rate Notes"), the "CD Rate" ("CD Rate Notes") or other interest rate formula, based upon the Index Maturity and adjusted by a Spread or Spread Multiplier, if any, as specified in the applicable Pricing Supplement. The "Index Maturity" is the period to maturity of the instrument or obligation from which the Base Rate is calculated. The "Spread" is the number of basis points above or below the Base Rate applicable to such Floating Rate Note, and the "Spread Multiplier" is the percentage of the Base Rate applicable to the interest rate for such Floating Rate Note. The Spread, Spread Multiplier, Index Maturity and other variable terms of the Floating Rate Notes are subject to change by the Company from time to time, but no such change will affect any Floating Rate Note theretofore issued or as to which an offer has been accepted by the Company. The rate of interest on each Floating Rate Note will be reset daily, weekly, monthly, quarterly, semiannually or annually, as specified in the applicable Prospectus Supplement or Pricing Supplement. The "Interest Rate Reset Date" will be, in the case of Floating Rate Notes which reset daily, each day; in the case of Floating Rate Notes which reset weekly, the Wednesday of each week (with the exception of weekly reset Treasury Rate Notes which reset the Tuesday of each week, except as specified below); in the case of Floating Rate Notes which reset monthly, the third Wednesday of each month; in the case of Floating Rate Notes which reset quarterly, the third Wednesday of March, June, September and December, in the case of Floating Rate Notes which reset semi- annually, the third Wednesday of the two months specified in the applicable Pricing Supplement; and in the case of Floating Rate Notes which reset annually, the third Wednesday of the month specified in the applicable Pricing Supplement. If any Interest Rate Reset Date for any Floating Rate Note would otherwise be a day that is not a Business Day, such Interest Rate Reset Date shall be postponed to the next succeeding day that is a Business Day, except that in the case of a LIBOR Note, if such next succeeding Business Day is in the next succeeding calendar month, such Interest Rate Reset Date shall be the next preceding Business Day. Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, "Business Day" means any day, other than a Saturday or Sunday, on which banks in The City of New York (and, with respect to LIBOR Notes, the City of London) are not required or authorized by law to close. The interest rate applicable to each Interest Accrual Period commencing on an Interest Rate Reset Date will be the rate determined on the "Interest Rate Determination Date." The Interest Rate Determination Date with respect to the Commercial Paper Rate and CD Rate will be the second Business Day preceding the Interest Rate Reset Date. The Interest Rate Determination Date with respect to LIBOR will be the second London Banking Date (defined in "LIBOR Notes" below) preceding an Interest Rate Reset Date. With respect to the Treasury Rate the Interest Rate Determination Date will be the day of the week in which the Interest Rate Reset Date falls on which Treasury bills normally would be auctioned; provided, however, that if as a result of a legal holiday an auction is held on the Friday of the week preceding the Interest Rate Reset Date, the related Interest Rate Determination Date shall be such preceding Friday; and provided, further, that if an auction shall fall on any Interest Rate Reset Date then the Interest Rate Reset Date shall instead be the first Business Day following such auction. A Floating Rate Note may also have either or both of the following: (i) a maximum limit ("Maximum Interest Rate"), or ceiling, on the rate of interest which may accrue during any Interest Accrual Period; and (ii) a minimum limit ("Minimum Interest Rate"), or floor, on the rate of interest which may accrue during any Interest Accrual Period. In addition to any Maximum Interest Rate which may be applicable to any Floating Rate Note pursuant to the above provisions, the interest rate on the Floating Rate Notes will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Under present New York law, the maximum rate of interest is 25% per annum on a simple interest basis. The limit does not apply to Floating Rate Notes in which $2,500,000 or more has been invested. The applicable Prospectus Supplement or Pricing Supplement will specify each variable term with respect to each Floating Rate Note, including the following: Initial Interest Rate, Interest Rate Reset Dates, Interest Payment Dates, Index Maturity, Maturity, Maximum Interest Rate and Minimum Interest Rate, if any, the Spread or Spread Multiplier, if any, and terms of redemption, if any. 9 Each Floating Rate Note will bear interest from the date of issue at the rates determined as described below until the principal thereof is paid or otherwise made available for payment. Except as provided below, interest will be payable, in the case of Floating Rate Notes which reset daily, weekly or monthly, on the third Wednesday of each month or on the third Wednesday of March, June, September and December of each year, as specified in the applicable Pricing Supplement; in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in the applicable Pricing Supplement; in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month specified in the applicable Pricing Supplement; and, in each case, at maturity (or any date of redemption). If any Interest Payment Date (other than an Interest Payment Date occurring on the Maturity Date or a Redemption Date) for any Floating Rate Note would fall on a day that is not a Business Day with respect to such Note, such Interest Payment Date will be the following day that is a Business Day with respect to such Note, except that, in the case of a LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding day that is a Business Day with respect to such LIBOR Note. If the Maturity Date (or any date of redemption) of any Floating Rate Note would fall on a day that is not a Business Day, the payment of interest and principal (and premium, if any) shall be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after the Maturity Date (or any date of redemption). The "Regular Record Date" with respect to Floating Rate Notes will be the date 15 calendar days (whether or not a Business Day) prior to the applicable Interest Payment Date. With respect to a Floating Rate Note, accrued interest is calculated by multiplying the face amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day from the date of issue, or from the last date to which interest has been paid, to the date for which accrued interest is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable to such day by 360 in the case of CD Rate Notes, Commercial Paper Rate Notes and LIBOR Notes, or by the actual number of days in the year in the case of Treasury Rate Notes. All percentages resulting from any calculation on Floating Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward, (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on Floating Rate Notes will be rounded to the nearest cent (with one-half cent being rounded upward). Unless otherwise provided for in the applicable Prospectus Supplement or Pricing Supplement. The Bank of New York will be the "Calculation Agent." Upon the request of the holder of any Floating Rate Note, the Trustee will provide the interest rate then in effect and, if determined, the interest rate that will become effective as a result of a determination made for the next Interest Rate Reset Date with respect to such Floating Rate Note. The Company, or the Calculation Agent, will notify the Trustee of each determination of the interest rate applicable to any such Floating Rate Note promptly after such determination is made. The "Calculation Date," where applicable, pertaining to any Interest Rate Determination Date will be the tenth calendar day after such Interest Rate Determination Date, or, if any such day is not a Business Day, the next succeeding Business Day. The interest rate in effect with respect to a Floating Rate Note from the date of issue to the first Interest Rate Reset Date (the "Initial Interest Rate") will be specified in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Prospectus Supplement or Pricing Supplement, the interest rate determined with respect to any Interest Rate Determination Date will become effective on and as of the next succeeding Interest Rate Reset Date; provided, however, the interest rate in effect for the period from the date of issue to the first Interest Rate Reset Date will be the Initial Interest Rate. The interest rate for each subsequent Interest Rate Reset Date will be determined by the Calculation Agent as follows: 10 CD RATE NOTES CD Rate Notes will bear interest at the interest rates (calculated with reference to the CD Rate and the Spread or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, "CD Rate" means, with respect to any Interest Rate Determination Date relating to a Floating Rate Note for which the interest rate is determined with reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for negotiable United States certificates of deposit having the Index Maturity specified in the applicable Pricing Supplement as published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or any successor publication ("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York City time, on the Calculation Date, the rate on such CD Rate Interest Determination Date for negotiable United States certificates of deposit of the Index Maturity specified in the applicable Pricing Supplement as published by the Federal Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor publication ("Composite Quotations") under the heading "Certificates of Deposit." If such rate is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate on such CD Rate Interest Determination Date will be calculated by the Calculation Agent and will be the arithmetic mean of the secondary market offered rates as of 10:00A.M., New York City time, on such CD Rate Interest Determination Date, of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York (which may include the Agents or their affiliates) selected by the Calculation Agent for negotiable United States certificates of deposit of major United States money center banks for negotiable certificates of deposit with a remaining maturity closest to the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement in an amount that is representative for a single transaction in that time; provided, however, that if the dealers selected by the Calculation Agent are not quoting as mentioned in this sentence, the CD Rate determined as of such CD Rate Interest Determination Date will be the CD Rate in effect on such CD Rate Interest Determination Date. COMMERCIAL PAPER RATE NOTES Commercial Paper Rate Notes will bear interest at the interest rates (calculated with reference to the Commercial Paper Rate and the Spread or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest Rate Determination Date relating to a Floating Rate Note for which the interest rate is determined with reference to the Commercial Paper Rate (a "Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as hereinafter defined) on such date of the rate for commercial paper having the Index Maturity specified in the applicable Pricing Supplement as published in H.15(519) under the heading "Commercial Paper" or, if such heading is no longer available and applicable, such other heading representing commercial paper issued by non-financial entities whose bond rating is "Aa", or the equivalent, from a nationally recognized statistical rating organization. In the event that such rate is not published by 3:00 P.M., New York City time, on the related Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date will be the Money Market Yield of the rate for commercial paper having the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement as published in Composite Quotations under the heading "Commercial Paper" (with an Index Maturity of one month or three months being deemed to be equivalent to an Index Maturity of 30 days or 90 days, respectively). If such rate is not yet published in either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the related Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date will be calculated by the Calculation Agent and will be the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on such Commercial Paper Rate Interest Determination Date of three leading dealers of commercial paper in The City of New York (which may include the Agents or their affiliates) selected by the Calculation Agent for 11 commercial paper having the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement placed for a non-financial entity whose bond rating is "Aa," or the equivalent, from a nationally recognized statistical rating organization; provided, however, that if the dealers selected by the Calculation Agent are not quoting as mentioned in this sentence, the Commercial Paper Rate determined as of such Commercial Paper Rate Interest Determination Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate Interest Determination Date. "Money Market Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: D X 360 Money Market Yield - X 100 360 - (D X M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the applicable interest period for which interest is being calculated. LIBOR NOTES LIBOR Notes will bear interest at the interest rates (calculated with reference to LIBOR and the spread or Spread Multiplier, if any) specified in the applicable Pricing Supplement. LIBOR Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, "LIBOR" means the rate determined in accordance with the following provisions: (i) With respect to any Interest Determination Date relating to a Floating Rate Note for which the interest rate is determined with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR Reuters" is specified in the applicable Prospectus Supplement or Pricing Supplement, the arithmetic mean of the offered rates (unless the Designated LIBOR Page by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in the Designated LIBOR Currency having the Index Maturity specified in such Prospectus Supplement or Pricing Supplement, commencing on the applicable Interest Reset Date, that appear (or, if only a single rate is required as aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable Prospectus Supplement or Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Prospectus Supplement or Pricing Supplement as the method for calculating LIBOR, the rate for deposits in the Designated LIBOR Currency having the Index Maturity specified in such Prospectus Supplement or Pricing Supplement, commencing on such Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date. If fewer than two such offered rates so appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR Interest Determination Date will be determined in accordance with the provisions described in clause (ii) below. (ii) With respect to a LIBOR Interest Determination Date on which fewer than two offered rates appear, or no rate appears, as the case may be, on the Designated LIBOR Page as specified in clause (i) above, the Calculation Agent will request the principal London offices of each of four major reference banks (which may include affiliates of the Agents) in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in the Designated LIBOR Currency for the period of the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement, commencing on the applicable Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount that is representative for a single transaction in the Designated LIBOR Currency in such market at such time. If at least two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of the 12 rates quoted at approximately 11:00 A.M., in the applicable Principal Financial Center, on such LIBOR Interest Determination Date by three major banks (which may include affiliates of the Agents) in such Principal Financial Center selected by the Calculation Agent for loans in the Designated LIBOR Currency to leading European banks, having the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement and in a principal amount that is representative for a single transaction in the Designated LIBOR Currency in such market at such time; provided, however, that if the banks so selected by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR in effect on such LIBOR Interest Determination Date. "Designated LIBOR Currency" means the currency or composite currency specified in the applicable Prospectus Supplement or Pricing Supplement as to which LIBOR shall be calculated or, if no such currency or composite currency is specified in the applicable Prospectus Supplement or Pricing Supplement, United States dollars. "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the applicable Prospectus Supplement or Pricing Supplement, the display on the Reuter Monitor Money Rates Service (or any successor service) on the page specified in such Prospectus Supplement or Pricing Supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the Designated LIBOR Currency, or (b) if "LIBOR Telerate" is specified in the applicable Prospectus Supplement or Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Prospectus Supplement or Pricing Supplement as the method for calculating LIBOR, the display on the Dow Jones Telerate Service (or any successor service) on the page specified in such Prospectus Supplement or Pricing Supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the Designated LIBOR Currency. TREASURY RATE NOTES Treasury Rate Notes will bear interest at the interest rates (calculated with reference to the Treasury Rate and the Spread or Spread Multiplier, if any) specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Prospectus Supplement or Pricing Supplement, "Treasury Rate" means, with respect to any Interest Rate Determination Date relating to a Floating Rate Note for which the interest rate is determined by reference to the Treasury Rate (a "Treasury Rate Interest Determination Date"), the rate from the auction held on such Treasury Rate Interest Determination Date (the "Auction") of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement, as such rate is published in H.15(519) under the heading "Treasury Bills-auction average (investment)" or, if not published by 3:00 P.M., New York City time, on the related Calculation Date, the auction average rate of such Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise announced by the United States Department of the Treasury. In the event that the results of the Auction of Treasury bills having the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement are not reported as provided by 3:00 P.M., New York City time, on the related Calculation Date, or if no such Auction is held, then the Treasury Rate will be calculated by the Calculation Agent and will be a yield to maturity (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest Determination Date, of three leading primary United States government securities dealers (which may include the Agents or their affiliates) selected by the Calculation Agent for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified in the applicable Prospectus Supplement or Pricing Supplement; provided, however, that if the dealers selected by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate determined as of such Treasury Rate Interest Determination Date will be the Treasury Rate in effect on such Treasury Rate Interest Determination Date. EVENTS OF DEFAULT, WAIVER AND NOTICE. An Event of Default with respect to the Notes of a particular series (the "Series Notes") is defined in the Indenture as (a) default in the payment of any installment of interest 13 on any of the Series Notes and the continuance of such default for a period of 30 days; (b) default in payment of the principal of (and premium, if any, on) any of the Series Notes when due at maturity; (c) default in the deposit of any sinking fund payment due under the Series Notes and the continuance of such default for a period of 3 business days; (d) default by the Company in the performance or breach of any other covenant or warranty contained in the Indenture and the continuance of such default or breach for a period of 60 days after appropriate notice; (e) certain events of bankruptcy, insolvency and reorganization of the Company; and (f) any other Event of Default established with respect to the Series Notes. (Section 501). The Indenture provides that the Trustee shall, within 90 days after the occurrence of a default with respect to the Series Notes, give all the registered holders of Series Notes then outstanding and any other holder of Series Notes entitled under the Indenture to receive reports notice of all incurred defaults known to it (the term default to mean any event which is or (after notice or lapse of time) would become an Event of Default); provide that, except in the case of a default in the payment of principal of or interest on any Series Note, the Trustee shall be protected in withholding such notice if it determines in good faith that the withholding of such notice is in the interest of all the holders of the Series Notes. (Section 602). The Indenture provides that if an Event of Default with respect to the Series Notes shall have occurred and to continuing, either the Trustee or the holders of at least 33% in principal amount (calculated as provided in the Indenture) of the Series Notes may declare the principal of all of the Series Notes and the interest accrued thereon or any lesser amount specified in the Series Notes to be due and payable immediately. (Section 502). Upon certain conditions, such declarations of acceleration with respect to Series Notes may be annulled and past defaults (except for defaults in the payment of principal, and premium (if any) or interest on such Series Notes not theretofore cured or in respect of a covenant or provision of the Indenture which cannot be amended or modified without the consent of the holder of each Series Note) may be waived with respect to the Series Notes by the holders of not less than a majority in principal amount (calculated as provided in the Indenture) of the Series Notes. (Section 513). The Indenture requires that the Company file with the Trustee annually a written statement as to the presence or absence of any defaults in the fulfillment of its obligations under the terms thereof and as to performance and fulfillment of obligations therein. (Section 1005). Prior to the time the Company must provide such written statement, the holders of not less than a majority in principal amount of the Series Notes may waive the Company's obligation to file a written statement as to the presence or absence of any such defaults. (Section 1006). The Indenture provides that the holders of not less than a majority in principal amount (calculated as provided in the Indenture) of the Series Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee by the Indenture with respect to defaults or Events of Default with respect to the Series Notes so long as any such direction does not conflict with any provision of the Indenture or is not unduly prejudicial to the rights of other holders of the Series Notes. (Section 512). In order to require the Trustee to take action with respect to the Series Notes, holders of at least 33% in principal amount (calculated as provided in the Indenture) of the Series Notes shall have made a written request upon the Trustee (Section 507). The Indenture provides that the Trustee shall be under no obligation, subject to the duty of the Trustee during default to act with the required standard of care, to exercise any of the rights or powers vested in it by the Indenture at the direction of the holders of the Series Notes unless such holders shall have offered to the Trustee reasonable security or indemnity against expenses and liabilities. (Section 603). MODIFICATION OF THE INDENTURE. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66 2/3% in principal amount (calculated as provided in the Indenture) of each series of securities, including the Notes, issued and outstanding pursuant to the Indenture 14 (the "Indenture Securities") and affected by such amendment to modify the Indenture or any supplemental indenture or the rights of the holders of the Indenture Securities affected by such modification; provided that no such modification shall, without the consent of each holder of the Indenture Securities affected thereby, change the maturity of principal of or interest on any Indenture Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable upon redemption of any Indenture Security, or reduce the overdue rate thereof or change the currency of payment of principal or interest on any Indenture Security or reduce the percentage in principal amount of Indenture Securities the consent of the holders of which is required for modification or amendment of the Indenture or for waiver of certain defaults or reduce the voting or quorum requirements under the Indenture. (Section 902). The Indenture also permits the Company and the Trustee to amend the Indenture in certain circumstances without consent of the holders of any Indenture Securities to evidence the merger of the Company or the replacement of the Trustee and for certain other purposes. (Section 901). RELATIONSHIPS WITH TRUSTEE. The Bank of New York is the trustee under indentures for the Company's First Mortgage Bonds, 5% Convertible Debentures due 2002 and 7% Convertible Debentures due 2018, and in connection with a sale and leaseback of the Company's Control Center. The Company has with the Trustee and its affiliates, as it has with various other banks, a demand deposit account and conventional and revolving credit arrangements. The Bank of New York is the Issuing and Paying Agent for medium-term notes issued by PCI. PLAN OF DISTRIBUTION The Notes may be offered on a continuous basis by the Company through agents, each of which will agree to use its best efforts to solicit offers to purchase the Notes. The Company may also sell the Notes to any of the agents at negotiated discounts for such agent's own account or for resale to one or more investors or other purchasers at varying prices related to prevailing market prices at the time of resale, as determined by such agent. The agents with respect to the offer and sale of any issue of the Notes will be named in the Prospectus Supplement relating thereto. The Prospectus Supplement will also describe the discounts and commissions to be allowed or paid to agents and all other items constituting agents' compensation. Agents may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the 1933 Act. Agents may be customers of, engage in transactions with or perform services for the Company in the ordinary course of business. The Notes will not be listed on any securities exchange. There currently is no established trading market for the Notes and no assurance can be given as to the existence or liquidity of a secondary market for the Notes in the future. EXPERTS The consolidated financial statements incorporated in this Prospectus by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. With respect to the unaudited consolidated financial information of the Company for the three- and twelve-month periods ended March 31, 1997 and 1996, and the three-, six- and twelve-month periods ended June 30, 1997 and 1996 incorporated by reference in this Prospectus, Price Waterhouse LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports dated May 14, 1997 and August 13, 1997, incorporated by reference herein, state that they did not audit and they do not express opinions on that unaudited consolidated financial information. Price 15 Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if such reports had not been included. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of Section 11 of the 1933 Act for their reports on the unaudited consolidated financial information because each such report is not a "report" or a "part" of the registration statement prepared or certified by Price Waterhouse LLP within the meaning of Sections 7 and 11 of the 1933 Act. ---------------- LEGAL OPINIONS Certain legal matters in connection with the Notes to be offered hereby will be passed upon for the Company by Covington & Burling, 1201 Pennsylvania Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900 Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly employed by the Company as Senior Vice President and General Counsel. The validity of the Notes is being passed upon on behalf of the Agents by Brown & Wood LLP, New York, New York. 16 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses relating to the New Bonds (assuming an issuance of $125,000,000) are as follows: Registration fee................................................. $ 37,879 Recordation taxes................................................ 573,000 Rating Agency fees............................................... 37,500 Printing......................................................... 62,500 Trustee's fees and expenses...................................... 45,000 Fee of independent accountants................................... 22,500 Fees of counsel.................................................. 40,000 Expenses incidental to qualification under Blue Sky Laws......... 7,500 Miscellaneous.................................................... 24,121 -------- Total.......................................................... $850,000 ========
Estimated expenses relating to the Notes (assuming an issuance of $125,000,000) are as follows: Registration fee................................................. $ 37,879 Rating Agency fees............................................... 37,500 Trustee's fees and expenses...................................... 10,000 Printing......................................................... 30,000 Fee of independent accountants................................... 22,500 Fees of counsel.................................................. 35,000 Expenses incidental to qualification under Blue Sky Laws......... 7,500 Miscellaneous.................................................... 19,621 -------- Total.......................................................... $200,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. 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. In the Underwriting Agreement and the Distribution Agreement, the underwriters and agents will agree to indemnify the Company, its directors, officers and controlling persons against certain civil liabilities that may arise under the Securities Act of 1933 in connection with this offering. The Company also has policies of insurance which insure officers and directors against certain liabilities and expenses incurred by them in such capacities. II-1 ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE* ----------- ---------------------- ---------- 1.1 --Form of Underwriting Agreement for the New Bonds.............. Filed herewith. 1.2 --Form of Distribution Agreement for the Medium-Term Notes...... Exh. 1-B to Registration Statement No. 33-48325, 6/2/92. 4.1 --Form of the New Bonds......... Included in Exhibit No. 4.4. 4.2 --Form of the Medium-Term Notes. Included in Exhibit No. 4.5. 4.3.1 --Mortgage and Deed of Trust, dated July 1, 1936, of the Company to The Riggs National Bank of Washington, D.C., as Trustee, securing First Mortgage Bonds of the Company, Exh. B-4 to First Amendment, and Supplemental Indenture 6/19/36, to Registration dated 7/1/36................... Statement No. 2-2232. --Supplemental Indentures, to the aforesaid Mortgage and Deed of Trust, dated-- 4.3.2 December 1, 1939 and December 10, 1939....................... Exhs. A & B to Form 8-K, 1/3/40. 4.3.3 August 1, 1940.................. Exh. A to Form 8-K, 9/25/40. 4.3.4 July 15, 1942 and August 10, Exh. B-1 to Amendment No. 2, 1942......................... 8/24/42, and B-3 to Post- Effective Amendment, 8/31/42, to Registration Statement No. 2-5032. 4.3.5 August 1, 1942.................. Exh. B-4 to Form 8-A, 10/8/42. 4.3.6 October 15, 1942................ Exh. A to Form 8-K, 12/7/42. 4.3.7 October 15, 1947................ Exh. A to Form 8-K, 12/8/47. 4.3.8 January 1, 1948................. Exh. 7-B to Post-Effective Amendment No. 2, 1/28/48, to Registration Statement No. 2-7349. 4.3.9 December 31, 1948............... Exh. A-2 to Form 10-K, 4/13/49. 4.3.10 May 1, 1949..................... Exh. 7-B to Post-Effective Amendment No. 1, 5/10/49, to Registration Statement No. 2-7948. 4.3.11 December 31, 1949............... Exh. (a)-1 to Form 8-K, 2/8/50. 4.3.12 May 1, 1950..................... Exh. 7-B to Amendment No. 2, 5/8/50, to Registration Statement No. 2-8430. 4.3.13 February 15, 1951............... Exh. (a) to Form 8-K, 3/9/51. 4.3.14 March 1, 1952................... Exh. 4-C to Post-Effective Amendment No. 1, 3/12/52, to Registration Statement No. 2-9435. 4.3.15 February 16, 1953............... Exh. (a)-1 to Form 8-K, 3/5/53. 4.3.16 May 15, 1953.................... Exh. 4-C to Post-Effective Amendment No. 1, 5/26/53, to Registration Statement No. 2-10246. 4.3.17 March 15, 1954 and March 15, Exh. 4-B to Registration 1955........................... Statement No. 2-11627, 5/2/55. 4.3.18 May 16, 1955.................... Exh. A to Form 8-K, 7/6/55. 4.3.19 March 15, 1956.................. Exh. C to Form 10-K, 4/4/56.
II-2
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE* ----------- ---------------------- ---------- 4.3.20 June 1, 1956................... Exh. A to Form 8-K, 7/2/56. 4.3.21 April 1, 1957.................. Exh. 4-B to Registration Statement No. 2-13884, 2/5/58. 4.3.22 May 1, 1958.................... Exh. 2-B to Registration Statement No. 2-14518, 11/10/58. 4.3.23 December 1, 1958............... Exh. A to Form 8-K, 1/2/59. 4.3.24 May 1, 1959.................... Exh. 4-B to Amendment No. 1, 5/13/59, to Registration Statement No. 2-15027. 4.3.25 November 16, 1959.............. Exh. A to Form 8-K, 1/4/60. 4.3.26 May 2, 1960.................... Exh. 2-B to Registration Statement No. 2-17286, 11/9/60. 4.3.27 December 1, 1960 and April 3, 1961.......................... Exh. A-1 to Form 10-K, 4/24/61. 4.3.28 May 1, 1962.................... Exh. 2-B to Registration Statement No. 2-21037, 1/25/63. 4.3.29 February 15, 1963.............. Exh. A to Form 8-K, 3/4/63. 4.3.30 May 1, 1963.................... Exh. 4-B to Registration Statement No. 2-21961, 12/19/63. 4.3.31 April 23, 1964................. Exh. 2-B to Registration Statement No. 2-22344, 4/24/64. 4.3.32 May 15, 1964................... Exh. A to Form 8-K, 6/2/64. 4.3.33 May 3, 1965.................... Exh. 2-B to Registration Statement No. 2-24655, 8/16/66. 4.3.34 April 1, 1966.................. Exh. A to Form 10-K, 4/21/66. 4.3.35 June 1, 1966................... Exh. 1 to Form 10-K, 4/11/67. 4.3.36 April 28, 1967................. Exh. 2-B to Post-Effective Amendment No. 1 to Registration Statement No. 2-26356, 5/3/67. 4.3.37 May 1, 1967.................... Exh. A to Form 8-K, 6/1/67. 4.3.38 July 3, 1967................... Exh. 2-B to Registration Statement No. 2-28080, 1/25/68. 4.3.39 February 15, 1968.............. Exh. II-I to Form 8-K, 3/7/68. 4.3.40 May 1, 1968.................... Exh. 2-B to Registration Statement No. 2-31896, 2/28/69. 4.3.41 March 15, 1969................. Exh. A-2 to Form 8-K, 4/8/69. 4.3.42 June 16, 1969.................. Exh. 2-B to Registration Statement No. 2-36094, 1/27/70. 4.3.43 February 15, 1970.............. Exh. A-2 to Form 8-K, 3/9/70. 4.3.44 May 15, 1970................... Exh. 2-B to Registration Statement No. 2-38038, 7/27/70. 4.3.45 August 15, 1970................ Exh. 2-D to Registration Statement No. 2-38038, 7/27/70. 4.3.46 September 1, 1971.............. Exh. 2-C to Registration Statement No. 2-45591, 9/1/72. 4.3.47 September 15, 1972............. Exh. 2-E to Registration Statement No. 2-45591, 9/1/72. 4.3.48 April 1, 1973.................. Exh. A to Form 8-K, 5/9/73. 4.3.49 January 2, 1974................ Exh. 2-D to Registration Statement No. 2-49803, 12/5/73.
II-3
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE* ----------- ---------------------- ---------- 4.3.50 August 15, 1974................. Exhs. 2-G and 2-H to Amendment No. 1 to Registration Statement No. 2-51698, 8/14/74. 4.3.51 June 15, 1977................... Exh. 4-A to Form 10-K, 3/19/81. 4.3.52 July 1, 1979.................... Exh. 4-B to Form 10-K, 3/19/81. 4.3.53 June 16, 1981................... Exh. 4-A to Form 10-K, 3/19/82. 4.3.54 June 17, 1981................... Exh. 2 to Amendment No. 1, 6/18/81, to Form 8-A. 4.3.55 December 1, 1981................ Exh. 4-C to Form 10-K, 3/19/82. 4.3.56 August 1, 1982.................. Exh. 4-C to Amendment No. 1 to Registration Statement No. 2-78731, 8/17/82. 4.3.57 October 1, 1982................. Exh. 4 to Form 8-K, 11/8/82. 4.3.58 April 15, 1983.................. Exh. 4 to Form 10-K, 3/23/84. 4.3.59 November 1, 1985................ Exh. 2-B to Form 8-A, 11/1/85. 4.3.60 March 1, 1986................... Exh. 4 to Form 10-K, 3/28/86. 4.3.61 November 1, 1986................ Exh. 2-B to Form 8-A, 11/5/86. 4.3.62 March 1, 1987................... Exh. 2-B to Form 8-A, 3/27/87. 4.3.63 September 16, 1987.............. Exh. 4-B to Registration Statement No. 33-18229, 10/30/87. 4.3.64 May 1, 1989..................... Exh. 4-C to Registration Statement No. 33-29382, 6/16/89. 4.3.65 August 1, 1989.................. Exh. 4 to Form 10-K, 3/28/90. 4.3.66 April 5, 1990................... Exh. 4-C to Registration Statement No. 33-36875, 9/24/90. 4.3.67 May 21, 1991.................... Exh. 4 to Form 10-K, 3/27/92. 4.3.68 May 7, 1992..................... Exh. 4-C to Registration Statement No. 33-48325, 6/2/92. 4.3.69 September 1, 1992............... Exh. 4 to Form 10-K, 3/26/93. 4.3.70 November 1, 1992................ Exh. 4 to Form 10-K, 3/26/93. 4.3.71 March 1, 1993................... Exh. 4 to Form 10-K, 3/26/93. 4.3.72 March 2, 1993................... Exh. 4 to Form 10-K, 3/26/93. 4.3.73 July 1, 1993.................... Exh. 4.4 to Registration Statement No. 33-49973, 8/11/93. 4.3.74 August 20, 1993................. Exh. 4.4 to Registration Statement No. 33-50377, 9/23/93. 4.3.75 September 29, 1993.............. Exh. 4 to Form 10-K, 3/25/94. 4.3.76 September 30, 1993.............. Exh. 4 to Form 10-K, 3/25/94. 4.3.77 October 1, 1993................. Exh. 4 to Form 10-K, 3/25/94. 4.3.78 February 10, 1994............... Exh. 4 to Form 10-K, 3/25/94. 4.3.79 February 11, 1994............... Exh. 4 to Form 10-K, 3/25/94. 4.3.80 March 10, 1995.................. Exh. 4.3 to Registration Statement No. 33-61379, 7/28/95. 4.3.81 September 6, 1995............... Exh. 4 to Form 10-K, 4/1/96. 4.3.82 September 7, 1995............... Exh. 4 to Form 10-K, 4/1/96. 4.4 --Form of Supplemental Indenture between the Registrant and The Bank of New York, Successor Trustee, with respect to the New Bonds...................... Filed herewith.
II-4
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE* ----------- ---------------------- ---------- 4.5 --Form of Indenture between the Registrant and The Bank of New York, Trustee, with respect to Exh. 4 to Form 8-K, 6/21/90. the Medium-Term Notes.......... 5 --Opinion of William T. Torgerson...................... Filed herewith. 12 --Computation of Ratios......... Exh. 12 to Form 10-Q, 8/13/97. 15 --Letter re Unaudited Financial Information.................... Filed herewith. 23.1 --Consent of Price Waterhouse LLP............................ Filed herewith. 23.2 --Consent of William T. Torgerson...................... Contained in Exhibit 5. 23.3 --Consent of Covington & Burling........................ Filed herewith. 24 --Power of Attorney............. Filed herewith. 25.1 --Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, with respect to the New Bonds.......................... Filed herewith. 25.2 --Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, with respect to the Exh. 26-B to Registration Medium-Term Notes.............. Statement No. 33-48325, 6/2/92.
- -------- * The exhibits referred to in this column by specific designations and date have heretofore been filed with the Securities and Exchange Commission under such designations and are hereby incorporated herein by reference. The Forms 8-A, 8-K and 10-K referred to above were filed by the Company under the Commission's File No. 1-1072 and the Registration Statements referred to are registration statements of the Company. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by these paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) For the purpose of determining any liability under the Securities Act of 1933, each 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 the time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-5 (4) 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 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to 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 (the "Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the By-Laws of the registrant or Virginia or District of Columbia Law, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant 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 Act and will be governed by the final adjudication of such issue. II-6 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WASHINGTON, DISTRICT OF COLUMBIA, ON THE 13TH DAY OF AUGUST, 1997. Potomac Electric Power Company (Registrant) Edward F. Mitchell* By __________________________________ (EDWARD F. MITCHELL, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED. (i) Principal Executive Officers: Edward F. Mitchell* Chairman of the - ------------------------------------- Board and Chief (EDWARD F. MITCHELL) Executive Officer John M. Derrick, Jr.* President and - ------------------------------------- Director (JOHN M. DERRICK, JR.) (ii) Principal Financial Officer and (iii) Principal Accounting Officer: D.R. Wraase* Senior Vice August 13, 1997 - ------------------------------------- President and Chief (DENNIS R. WRAASE) Financial Officer (iv) Directors: Roger R. Blunt, Sr.* Director - ------------------------------------- (ROGER R. BLUNT, SR.) A. James Clark* Director - ------------------------------------- (A. JAMES CLARK) II-7 H.L. Davis* Director - ------------------------------------- (H. LOWELL DAVIS) Richard E. Marriott* Director - ------------------------------------- (RICHARD E. MARRIOTT) David O. Maxwell* Director - ------------------------------------- (DAVID O. MAXWELL) Floretta D. McKenzie* Director - ------------------------------------- (FLORETTA D. MCKENZIE) Ann D. McLaughlin* Director - ------------------------------------- August 13, (ANN D. MCLAUGHLIN) 1997 Peter F. O'Malley* Director - ------------------------------------- (PETER F. O'MALLEY) Louis A. Simpson* Director - ------------------------------------- (LOUIS A. SIMPSON) A. Thomas Young* Director - ------------------------------------- (A. THOMAS YOUNG) Ellen Sheriff Rogers *By: ________________________________ (ELLEN SHERIFF ROGERS, ATTORNEY- IN-FACT) II-8 EX-4.4 2 EXHIBIT 4.4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POTOMAC ELECTRIC POWER COMPANY 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. TO THE BANK OF NEW YORK 101 BARCLAY STREET, NEW YORK, NY AS TRUSTEE ------------------ Supplemental Indenture DATED AS OF ,1997 ------------------ SUPPLEMENTAL TO MORTGAGE AND DEED OF TRUST DATED JULY 1, 1936 ------------------ FIRST MORTGAGE BONDS, % SERIES DUE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- POTOMAC ELECTRIC POWER COMPANY SUPPLEMENTAL INDENTURE DATED AS OF TABLE OF CONTENTS* ------------------
PAGE Parties................................................................... 1 Recitals.................................................................. 1 Granting Clauses.......................................................... 5 Certain Exceptions........................................................ 11 Grant in Trust............................................................ 12 PART I Description of Bonds Section 1. General description of Bonds of Series..................... 13 Section 2. Form of face of Bond of Series............................. 14 Form of Trustee's certificate................................. 17 Text appearing on reverse side of Bond of Series........... 17 Section 3. Denominations of Bonds of Series........................... 21 Section 4. Execution and form of temporary Bonds......................... 21 PART II Issue of Bonds Section 1. Limitation as to principal amount............................. 21 Section 2. Issue of Bonds................................................ 22 PART III Redemption at Option of Company Section 1. Bonds of Series redeemable ................................ 22 Section 2. Notice of Redemption, etc. ................................... 23 PART IV Repayment at Option of Holders Section 1. Bonds of Series redeemable at request of holders ............. 23 Section 2. Cancellation of redeemed bonds................................ 23
- --------- * The Table of Contents is not part of the Supplemental Indenture and should not be considered as such. It is included herein only for purposes of convenient reference. PART V
PAGE Additional Particular Covenants of the Company Section 1. Company not to withdraw moneys pursuant to Section 2 of 23 Article VIII in excess of an amount equal to principal amount of issued refundable bonds......................... Section 2. No property additions made on or prior to December 31, 1946 24 to be used for any purpose under the Indenture............ PART VI Amendment of Indenture to Permit Qualification Under Trust Indenture Act of 1939............................................................... 24 PART VII Amendment of Original Indenture......................................... 24 PART VIII The Trustee Acceptance of trusts by the Trustee..................................... 25 Trustee not responsible for validity of the Supplemental Indenture...... 25 PART IX Miscellaneous Provisions Execution of Supplemental Indenture in counterparts..................... 25 Appointment of attorneys-in-fact by parties............................. 25 Testimonium............................................................. 26 Execution............................................................... 27 Company's Acknowledgments............................................... 28 Trustee's Acknowledgments............................................... 31
ii SUPPLEMENTAL INDENTURE, dated as of the day of , nineteen hundred and ninety-seven (1997), made by and between Potomac Electric Power Company, a corporation organized and existing under the laws of the District of Columbia and a domestic corporation of the Commonwealth of Virginia (hereinafter some- times called the "Company"), party of the first part, and The Bank of New York, a New York banking corporation organized and existing under the laws of the State of New York (hereinafter sometimes called the "Trustee"), as Trustee under the Mortgage and Deed of Trust dated July 1, 1936, hereinafter men- tioned, party of the second part; Whereas, The Company has heretofore executed and delivered its Mortgage and Deed of Trust, dated July 1, 1936 (hereinafter sometimes referred to as the "Original Indenture"), to The Riggs National Bank of Washington, D.C., as trustee, to secure an issue of First Mortgage Bonds of the Company, issuable in series; and Whereas, the Trustee has succeeded The Riggs National Bank of Washington, D.C. as trustee under the Original Indenture pursuant to Article XIII, Section 3 thereof. Whereas, pursuant to the terms and provisions of the Original Indenture, in- dentures supplemental thereto dated as of July 1, 1936, December 1, 1939, Au- gust 1, 1940, August 1, 1942, January 1, 1948, May 1, 1949, May 1, 1950, March 1, 1952, May 15, 1953, May 16, 1955, June 1, 1956, December 1, 1958, November 16, 1959, December 1, 1960, February 15, 1963, May 15, 1964, April 1, 1966, May 1, 1967, February 15, 1968, March 15, 1969, February 15, 1970, August 15, 1970, September 15, 1972, April 1, 1973, January 2, 1974, August 15, 1974, Au- gust 15, 1974, June 15, 1977, July 1, 1979, June 16, 1981, June 17, 1981, De- cember 1, 1981, August 1, 1982, October 1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986, March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990, May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993, March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September 30, 1993, October 1, 1993, February 10, 1994, February 11, 1994, March 10, 1995, September 6, 1995 and September 7, 1995 have been heretofore entered into between the Company and the Trustee to provide, respectively, for the creation of the first through the sixty- first series of Bonds thereunder and, in the case of the supplemental inden- tures dated January 1, 1948, March 1, 1952, May 15, 1953, May 16, 1955, June 1, 1956, September 15, 1972, July 1, 1979, June 17, 1981, November 1, 1985, September 16, 1987, May 1, 1989, May 21, 1991, May 7, 1992, July 1, 1993 and one of the supplemental indentures dated August 15, 1974, to convey additional property; and Whereas, $20,000,000 principal amount of Bonds of the 3 1/4% Series due 1966 (the first series), $5,000,000 principal amount of Bonds of the 3 1/4% Series due 1974 (the second series), $10,000,000 principal amount of Bonds of the 3 1/4% Series due 1975 (the third series), $5,000,000 principal amount of Bonds of the 3 1/4% Series due 1977 (the fourth series), $15,000,000 principal amount of Bonds of the 3% Series due 1983 (the fifth series), $10,000,000 principal amount of Bonds of the 2 7/8% Series due 1984 (the sixth series), $30,000,000 principal amount of Bonds of the 2 3/4% Series due 1985 (the sev- enth series), $15,000,000 principal amount of Bonds of the 3 1/4% Series due 1987 (the eighth series), $10,000,000 principal amount of Bonds of the 3 7/8% Series due 1988 (the ninth series), $10,000,000 principal amount of Bonds of the 3 3/8% Series due 1990 (the tenth series), $10,000,000 principal amount of Bonds of the 3 5/8% Series due 1991 (the eleventh series), $25,000,000 princi- pal amount of Bonds of the 4 5/8% Series due 1993 (the twelfth series), $15,000,000 principal amount of Bonds of the 5 1/4% Series due 1994 (the thir- teenth series), $40,000,000 principal amount of Bonds of the 5% Series due 1995 (the fourteenth series), $45,000,000 principal amount of Bonds of the 7 3/4% Series due 2004 (the twentieth series), $35,000,000 principal amount of Bonds of the 8.85% Series due 2005 (the twenty-first series), $70,000,000 principal amount of Bonds of the 9 1/2% Series due August 15, 2005 (the twen- ty-second series), $50,000,000 principal amount of Bonds of the 7 3/4% Series due 2007 (the twenty-third series), $25,000,000 principal amount of Bonds of the 5 5/8% Series due 1997 (the twenty-fourth series), $100,000,000 principal amount of Bonds of the 8 3/8% Series due 2009 (the twenty-fifth series), $50,000,000 principal amount of Bonds of the 10 1/4% Series due 1981 (the twenty-sixth series), $50,000,000 principal amount of Bonds of the 10 3/4% Se- ries due 2004 (the twenty-seventh series), $38,300,000 principal amount of Bonds of the 6 1/8% Series due 2007 (the twenty-eighth series), $15,000,000 principal amount of Bonds of the 6 1/2% Series due 2004 (the twenty-ninth se- ries), $20,000,000 principal amount of Bonds of the 6 1/2% Series due 2007 (the thirtieth series), $7,500,000 principal amount of Bonds of the 6 5/8% Se- ries due 2009 (the thirty-first series), $30,000,000 principal amount of Bonds of the Floating Rate Series due 2010 (the thirty-second series), $50,000,000 principal amount of Bonds of the 14 1/2% Series due 1991 (the thirty-third se- ries), $60,000,000 principal amount of Bonds of the 14 1/4% Series due 1992 (the thirty-fifth series), 2 $50,000,000 principal amount of Bonds of the 11 7/8% Series due 1989 (the thirty-sixth series), $37,000,000 principal amount of Bonds of the 8 3/4% Se- ries due 2010 (the thirty-seventh series), $75,000,000 principal amount of Bonds of the 11 1/4% Series due 2015 (the thirty-eighth series), $75,000,000 principal amount of Bonds of the 9 1/4% Series due 2016 (the thirty-ninth se- ries), $75,000,000 principal amount of Bonds of the 8 3/4% Series due 2016 (the fortieth series), $75,000,000 principal amount of Bonds of the 8 1/4% Se- ries due 2017 (the forty-first series), $75,000,000 principal amount of Bonds of the 9% Series due 1990 (the forty-second series), $75,000,000 principal amount of Bonds of the 9 3/4% Series due 2019 (the forty-third series) and $75,000,000 principal amount of Bonds of the 8 5/8% Series due 2019 (the for- ty-fourth series), have been heretofore redeemed and retired and there are now issued and outstanding under the Original Indenture and under the supplemental indentures referred to above: $50,000,000 principal amount of Bonds of the 4 3/8% Series due 1998 (the fifteenth series); $45,000,000 principal amount of Bonds of the 4 1/2% Series due 1999 (the sixteenth series); $15,000,000 prin- cipal amount of Bonds of the 5 1/8% Series due 2001 (the seventeenth series); $35,000,000 principal amount of Bonds of the 5 7/8% Series due 2002 (the eigh- teenth series); $40,000,000 principal amount of Bonds of the 6 5/8% Series due 2003 (the nineteenth series); $50,000,000 principal amount of Bonds of the Ad- justable Rate Series due 2001 (the thirty-fourth series); $100,000,000 princi- pal amount of Bonds of the 9% Series due 2000 (the forty-fifth series); $100,000,000 principal amount of Bonds of the 9% Series due 2021 (the forty- sixth series); $75,000,000 principal amount of Bonds of the 8 1/2% Series due 2027 (the forty-seventh series); $30,000,000 principal amount of Bonds of the 6% Series due 2022 (the forty-eighth series); $37,000,000 principal amount of Bonds of the 6 3/8% Series due 2023 (the forty-ninth series); $78,000,000 principal amount of Bonds of the 6 1/2% Series due 2008 (the fiftieth series); $40,000,000 principal amount of Bonds of the 7 1/2% Series due 2028 (the fif- ty-first series); $100,000,000 principal amount of Bonds of the 7 1/4% Series due 2023 (the fifty-second series); $100,000,000 principal amount of Bonds of the 6 7/8% Series due 2023 (the fifty-third series); $50,000,000 principal amount of Bonds of the 5 5/8% Series due 2003 (the fifty-fourth series); $50,000,000 principal amount of Bonds of the 5 7/8% Series due 2008 (the fif- ty-fifth series); $75,000,000 principal amount of Bonds of the 6 7/8% Series due 2024 (the fifty-sixth series); $42,500,000 principal amount of Bonds of the 5 3/8% Series due 2024 (the fifty-seventh 3 series); $38,300,000 principal amount of Bonds of the 5 3/8% Series due 2024 (the fifty-eighth series); $16,000,000 principal amount of Bonds of the 5 3/4% Series due 2010 (the fifty-ninth series); $100,000,000 principal amount of Bonds of the 6 1/2% series due 2005 (the sixtieth series); and $75,000,000 principal amount of Bonds of the 7 3/8% Series due 2025 (the sixty-first se- ries); and Whereas, for the purpose of conforming the Original Indenture to the stan- dards prescribed by the Trust Indenture Act of 1939 or otherwise modifying certain of the provisions of the Original Indenture, indentures supplemental thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1, 1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October 1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986, March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990, May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993, March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September 30, 1993, October 1, 1993, February 10, 1994, February 11, 1994, March 10, 1995, September 6, 1995 and September 7, 1995 have been heretofore entered into between the Company and the Trustee, and for the purpose of conveying ad- ditional property, indentures supplemental thereto dated July 15, 1942, Octo- ber 15, 1947, December 31, 1948, December 31, 1949, February 15, 1951, Febru- ary 16, 1953, March 15, 1954, March 15, 1955, March 15, 1956, April 1, 1957, May 1, 1958, May 1, 1959, May 2, 1960, April 3, 1961, May 1, 1962, May 1, 1963, April 23, 1964, May 3, 1965, June 1, 1966, April 28, 1967, July 3, 1967, May 1, 1968, June 16, 1969, May 15, 1970, September 1, 1971, June 17, 1981, November 1, 1985, September 16, 1987, May 1, 1989, May 21, 1991, May 7, 1992 and July 1, 1993 have been heretofore entered into between the Company and the Trustee, and for the purpose of better securing and protecting the Bonds then or thereafter issued and confirming the lien of the Original Indenture, an in- denture dated October 15, 1942 supplemental thereto has been heretofore en- tered into between the Company and the Trustee; the Original Indenture as heretofore amended and supplemented being hereinafter referred to as the "Original Indenture as amended"; and Whereas, the Company is entitled to have authenticated and delivered addi- tional Bonds on the basis of the net bondable value of property 4 additions, upon compliance with the provisions of Section 4 of Article III of the Original Indenture as amended; and Whereas, the Company has determined to issue a sixty-second series of Bonds under the Original Indenture as amended in the principal amount of $ , to be known as First Mortgage Bonds, % Series due (herein- after called "Bonds of Series"); and Whereas, the Original Indenture as amended provides that certain terms and provisions, as determined by the Board of Directors of the Company, of the Bonds of any particular series may be expressed in and provided by the execu- tion of an appropriate supplemental indenture; and Whereas, the Original Indenture as amended provides that the Company and the Trustee may enter into indentures supplemental thereto to add to the covenants and agreements of the Company contained therein other covenants and agreements thereafter to be observed; and to surrender any right or power reserved to or conferred upon the Company in the Original Indenture as amended; and Whereas, the Company, in the exercise of the powers and authority conferred upon and reserved to it under the provisions of the Original Indenture as amended and pursuant to appropriate resolutions of its Board of Directors, has duly resolved and determined to make, execute and deliver to the Trustee a Supplemental Indenture in the form hereof for the purposes herein provided; and Whereas, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; Now, Therefore, This Indenture Witnesseth: That Potomac Electric Power Company, in consideration of the premises and of One Dollar to it duly paid by the Trustee at or before the ensealing and de- livery of these presents, and for other valuable considerations, the receipt whereof is hereby acknowledged, and in order further to secure the payment of the principal of, and premium (if any) and interest on all Bonds at any time issued and outstanding under the Indenture 5 according to their tenor, purport and effect, and for the purpose of ratifying and confirming the lien of the Indenture and the performance and observance by the Company of all of the covenants and conditions contained in the Indenture, has executed and delivered this Supplemental Indenture, and has granted, bar- gained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over, ratified and confirmed and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over, ratify and confirm unto The Bank of New York, as Trustee under the Indenture and to its successors in the trust created thereby and to its and their assigns forever, all and singular the following described properties (in addition to all other properties heretofore subject to the lien of the Original Indenture as amended and not heretofore released from the lien thereof), that is to say: FIRST. All and singular the lands, real estate, chattels real, easements, servitudes and leasehold and other interests in real estate which the Company now owns or, subject to the provisions of Article XII of the Original Indenture as amended, may hereafter acquire, including, among other things, the following (but reference to, or enumeration of, any particular kinds, classes or items of property shall not be deemed to exclude from the operation and effect of this Indenture any kind, class or item not so referred to or enumerated, ex- cept as hereinafter expressly provided): I. DISTRICT OF COLUMBIA The following parcel of land in the District of Columbia: Alabama Avenue Substation Land acquired from the District of Columbia, Department of Housing and Commu- nity Development by deed dated December 4, 1996 and recorded December 9, 1996 as Instrument No. 9600080488. 6 II. CHARLES COUNTY, MARYLAND Morgantown Fly Ash Site Land acquired from Brinsfield Farms, Inc. by deed dated June 27, 1995 and re- corded June 28, 1995 in Liber 2102, Folio 263. III. MONTGOMERY COUNTY, MARYLAND Derwood Substation No. 209 Land acquired from Potomac Capital Investment Corporation by quitclaim deed dated March 22, 1995 and recorded April 7, 1995 in Liber 13338, Folio 479. Brighton/High Ridge Transmission Line Right-of-Way The following parcels of land, being part of an 88-foot wide right-of-way ex- tending from Brighton Substation No. 66 in Montgomery County, Maryland to Bal- timore Gas and Electric Company's High Ridge Substation in Howard County, Maryland.:
PROPERTY NAME OF COMPANY'S DEED BY WHICH ACQUIRED NO. GRANTOR BY THE COMPANY - -------- ----------------- ---------------------- 1906 State of Maryland, to Deed of Easement Date--March 3, 1995 the use of the Record Date--March 22, 1995 Department of Liber 13309, Folio 345 Natural Resources 1913 Harold T. Meryman and Deed of Easement Date--May 2, 1994 Mary Lane Meryman Record Date--May 10, 1994 Liber 12602, Folio 415
7 IV. HOWARD COUNTY, MARYLAND Brighton/High Ridge Transmission Line Right-of-Way The following parcels of land, being part of a 150-foot wide right-of-way ex- tending from Brighton Substation No. 66 in Montgomery County, Maryland to Bal- timore Gas and Electric Company's High Ridge Substation in Howard County, Maryland:
PROPERTY NAME OF COMPANY'S DEED BY WHICH ACQUIRED NO. GRANTOR BY THE COMPANY - -------- ----------------- ---------------------- 1920.1 Guy J. Carson and Deed of Exchange Date--August 3, 1993 Kathryn D. Carson Record Date--October 29, 1993 Liber 3034, Folio 106 1932 Marie T. Spencer Deed of Easement Date--March 30, 1994 Record Date--March 30, 1994 Liber 3206, Folio 0027 1943 Samuel F. Lyons and Deed of Easement Date--March 26, 1993 Elsie K. Lyons Record Date--March 31, 1993 (Lot 1) Liber 2815, Folio 468 1943 Samuel F. Lyons and Deed of Easement Date--March 26, 1993 Elsie K. Lyons Record Date--March 31, 1993 (Lot 2) Liber 2815, Folio 473 1943 Samuel F. Lyons and Deed of Easement Date--March 26, 1993 Elsie K. Lyons Record Date--March 31, 1993 (Lot 3) Liber 2815, Folio 478 1943 Samuel F. Lyons and Deed of Easement Date--March 26, 1993 Elsie K. Lyons Record Date--March 31, 1993 (Lot 4) Liber 2815, Folio 483 1943 Samuel F. Lyons and Deed of Easement Date--March 26, 1993 Elsie K. Lyons Record Date--March 31, 1993 (Lot 5) Liber 2815, Folio 488
8 V. INDIANA COUNTY, PENNSYLVANIA The Company's undivided 9.72% interest as tenant in common in the following property located in Indiana County, Pennsylvania.
NAME OF COMPANY'S DEED BY WHICH ACQUIRED GRANTOR BY THE COMPANY --------------------------- ---------------------------- American Trustee & Transfer Deed Date--February 11, 1994 Corporation, Trustee Record Date--July 27, 1994 Deed Book 1048, Page 425
SECOND. Also all power houses, plants, buildings and other structures, dams, dam sites and substations, together with all and singular the electric and mechan- ical appliances appurtenant thereto of every nature whatsoever, now owned by the Company or, subject to the provisions of Article XII of the Original In- denture as amended, which it may hereafter acquire, including all and singular the machinery, engines, boilers, furnaces, generators, dynamos, turbines and motors, and all and every character of mechanical appliance for generating or producing electricity for light, heat, cold, power or other purposes. THIRD. Also all transmission and distribution systems used for the transmission and distribution of electricity for light, heat, cold or power or any other pur- pose whatsoever, whether underground or overhead, surface or otherwise, now owned by the Company or, subject to the provisions of Article XII of the Orig- inal Indenture as amended, which it may hereafter acquire, including all poles, towers, posts, wires, cables, conduits, manholes, pipes, tubes, drains, furnaces, switchboards, transformers, conductors, insulators, supports, me- ters, lamps, fuses, junction boxes and other electric fixtures and apparatus. Also all inventions, patent rights and licenses used or useful in connection with the generation, production, transmission or distribution of electricity for light, heat, cold, power or other purposes, now owned by the 9 Company or, subject to the provisions of Article XII of the Original Indenture as amended, which it may hereafter acquire. FOURTH. Also all franchises and all permits, ordinances, easements, privileges, immu- nities and licenses, all rights to construct, maintain and operate overhead, surface and underground systems for the distribution and transmission of elec- tricity for the supply to itself or others of light, heat, cold or power, all rights-of-way, all waters, water rights and flowage rights and all grants and consents, now owned or, subject to the provi-sions of Article XII of the Orig- inal Indenture as amended, which it may hereafter acquire. FIFTH. Also all improvements, extensions or additions purchased, constructed or oth- erwise acquired by the Company to or about all other property, real, personal and mixed (except as herein and in the Original Indenture as amended expressly provided), of every nature and kind wheresoever situated, as such property is described in the Original Indenture as amended and indentures supplemental thereto. Also, subject to the provisions of Article XII of the Original Indenture as amended, all other property, real, personal and mixed (except as herein ex- pressly excepted) of every nature and kind and wheresoever situated now or hereafter possessed by or belonging to the Company, or to which it is now, or may at any time hereafter be, in any manner entitled in law or in equity. SIXTH. Also any and all property of any kind or description which may from time to time after the date of this Supplemental Indenture by delivery or by writing of any kind be conveyed, mortgaged, pledged, assigned or transferred to the Trustee by the Company or by any person, copartnership or corporation, with the consent of the Company or otherwise as 10 expressly permitted by the terms of the Original Indenture as amended, and ac- cepted by the Trustee, to be held as part of the mortgaged property; and the Trustee is hereby authorized to accept and receive any such property and any such conveyance, mortgage, pledge, assignment and transfer, as and for addi- tional security hereunder, and to hold and apply any and all such property subject to and in accordance with the terms and provisions upon which such conveyance, mortgage, pledge, assignment or transfer shall be made. SEVENTH. Together with all and singular the tenements, hereditaments and appurtenances belonging or in anywise appertaining to the aforesaid prop- erty or any part thereof; with the reversion and reversions, remainder and re- mainders, tolls, rents, revenues, issues, income, product and profits thereof, and all the estate, right, title, interest and claim whatsoever, at law as well as in equity, which the Company now has or hereafter acquires in and to the aforesaid property and franchises and every part and parcel thereof. Expressly Excepting and Excluding, However, from this Supplemental Indenture and from the lien and operation hereof: (a) All bills, notes and accounts receivable, cash on hand or in bank, con- tracts, operating agreements, existing leases in which the Company is lessor and leases hereafter made of portions of the mortgaged property in which the Company is lessor; (b) All shares of stock and other certificates or evidences of interest therein, and all bonds, notes and other evidences of indebtedness or certif- icates of interest therein and other securities now owned or hereafter ac- quired or possessed by the Company (except securities or obligations re- quired to be pledged by the terms of the Original Indenture as amended); (c) All equipment and materials not installed as a part of the fixed prop- erty of the Company and merchandise and supplies acquired by the Company for the purpose of resale or leasing to its customers in the ordinary course and conduct of its business; and (d) All electric energy and other materials or products generated, manufac- tured, produced or purchased by the Company for sale, distribution or use in the ordinary course and conduct of its business. 11 And Further Expressly Excepting and Excluding from this Supplemental Inden- ture and from the lien and operation hereof, all property, permits and fran- chises of any other corporation of whatever character, shares of stock or se- curities whereof, or obligations secured by lien upon the properties and fran- chises whereof, which may be now owned or hereafter acquired or possessed by the Company, notwithstanding the fact that the Company may own or hereafter acquire all or substantially all of the shares of stock or other securities issued by, or secured by lien upon property of, any such corporation, or that any such corporation may be incorporated or organized at the instance of or for the account of the Company, or that all or any part of the shares of stock or other securities of such corporation may be subjected to the lien hereof by the Company. To Have and To Hold all said properties, real, personal and mixed, mortgaged, pledged and conveyed by the Company as aforesaid, or intended so to be, unto the Trustee, its successors in the Trust created by the Indenture and its and their assigns forever; Subject, However, to the exceptions and reservations and matters hereinabove recited, to existing leases, to existing mortgages or other liens upon ease- ments or rights-of-way for transmission or distribution line purposes, as de- fined in Article I of the Original Indenture as amended, and any extensions thereof, and subject to existing easements for streets, alleys, highways, rights-of-way and railroad purposes over, upon, and across any of the Property hereinbefore described, and subject also to all terms conditions, agreements, covenants, exceptions and reservations expressed or provided in the deeds or other instruments respectively under and by virtue of which the Company now owns or may hereafter acquire any property subject to the lien hereof, and to undetermined liens and charges, if any, incidental to construction or other existing permitted liens as defined in Article I of the Original Indenture as amended; In Trust Nevertheless, upon the terms and trusts in the Original Indenture and the indentures supplemental thereto, including this Supplemental Inden- ture, set forth, for the further, equal and proportionate benefit, security, and protection of all present and future holders of the Bonds and coupons is- sued and to be issued thereunder, or any of them, 12 without preference of any of said Bonds and coupons of any particular series over the Bonds and coupons of any other series, by reason of priority in the time of issue, sale or negotiation thereof, or by reason of the purpose of is- sue or otherwise howsoever, except as otherwise provided in Section 2 of Arti- cle IV of the Original Indenture as amended; And Potomac Electric Company hereby covenants, declares and agrees with the Trustee and its successors in the trust under the Original Indenture as amend- ed, for the benefit of those who hold the Bonds and coupons, or any of them, issued or to be issued hereunder or under the Original, Indenture as amended, as follows: PART I. Description of Bonds. Section 1. The Bonds of Series shall, subject to the provisions of Section 1 of Article II of the Original Indenture as amended, be designated as "First Mortgage Bonds, Series due " of the Company. The Bonds of Series shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, all of the terms, conditions and cov- enants of the Original Indenture as amended, except in so far as the terms and provisions of the Original Indenture as amended are amended or modified by this Supplemental Indenture. The Bonds of Series shall mature , and shall bear interest at the rate of per annum, payable semiannually, commencing , on the day of and the day of in each year (each such and being herein- after called an "interest payment date"). The Bonds of Series shall be pay- able as to principal and interest in lawful money of the United States of America, and shall be payable (as well the interest as the principal thereof) at the Agency of the Company in the Borough of Manhattan, The City of New York. The interest so payable on any interest payment date shall be paid to the persons in whose names the Bonds of Series are registered at the close of business on the last business day (hereinafter called the "rec- 13 ord date") which is more than ten days prior to such interest payment date, a "business day" being any day that is not a day on which banks in the City of New York, are authorized by law to close; except that if the Company shall de- fault in the payment of any interest due on such interest payment date, such defaulted interest shall be paid to the persons in whose names the Bonds of Series are registered on the date of payment of such defaulted interest, or in accordance with the regulations of any securities exchange on which the Bonds of Series are listed. Except as provided hereinafter, every Bond of Series shall be dated as of the date of its authentication and delivery, or if that is an interest payment date, the next day, and shall bear interest from the interest payment date next preceding its date or the date of delivery of the initial Bonds of Se- ries, whichever is later. Notwithstanding Section 6 of Article II of the Orig- inal Indenture, any Bond of Series authenticated and delivered by the Trustee after the close of business on the record date with respect to any in- terest payment date and prior to such interest payment date shall be dated as of the date next following such interest payment date and shall bear interest from such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date, such Bond shall bear interest from the next preceding interest payment date or the date of de- livery of the initial Bonds of Series, whichever is later. Section 2. The Bonds of Series, and the Trustee's certificate to be en- dorsed on the Bonds of Series, shall be substantially in the following forms, respectively: [form of face of bond of series] POTOMAC ELECTRIC POWER COMPANY (A District of Columbia and Virginia corporation) First Mortgage Bond, % Series Due No. $ Potomac Electric Power Company, a corporation organized and existing under the laws of the District of Columbia and a domestic cor- 14 poration of the Commonwealth of Virginia (hereinafter called the "Company", which term shall include any successor corporation as defined in the Amended Indenture hereinafter referred to), for value received, hereby promises to pay to ................... or registered assigns, the sum of .................. dollars, on the day of , in lawful money of the United States of Ameri- ca, and to pay interest thereon in like money from the later of the date of delivery of the initial Bonds of Series or the interest payment date or next preceding the date of this Bond, or if the Company shall default in the payment of interest due on such interest payment date, then from the next preceding interest payment date or the date of delivery of the initial Bonds of Series, whichever is later, at the rate of per annum, payable semiannually, commencing , on the day of and in each year un- til maturity, or, if the Company shall default in the payment of the principal hereof, until the Company's obligation with respect to the payment of such principal shall be discharged as provided in the Amended Indenture. The inter- est so payable on any or will, subject to certain exceptions pro- vided in the indenture dated as of , 1997 supplemental to the Amended In- denture, be paid to the person in whose name this Bond is registered at the close of business on the last business day which is more than ten days prior to such or . Both principal of, and interest on, this Bond are pay- able at the agency of the Company in the Borough of Manhattan, The City of New York. Reference is made to the further provisions of this Bond set forth on the re- verse hereof, and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Bond shall not be entitled to any benefit under the Amended Indenture or any indenture supplemental thereto, or become valid or obligatory for any purpose, until The Bank of New York, the Trustee under the Amended Indenture, or a successor trustee thereto under the Amended Indenture, shall have signed the form of certificate endorsed hereon. 15 In Witness Whereof, Potomac Electric Power Company has caused this Bond to be signed in its name by the signature (or a facsimile thereof) of its President or a Vice President, and its corporate seal (or a facsimile thereof) to be hereto affixed and attested by the facsimile signature of its Secretary or an Assistant Secretary. Dated, Potomac Electric Power Company By...................................... Vice President Attest: ................................... Secretary 16 [form of trustee's certificate] This Bond is one of the Bonds, of the series designated therein, described in the within-mentioned Amended Indenture and the Supplemental Indenture dated as of , 1997. The Bank of New York Trustee. By.......................................... Authorized Officer [TEXT APPEARING ON REVERSE SIDE OF BOND OF SERIES] This Bond is one of a duly authorized issue of Bonds of the Company (herein- after called the "Bonds") in unlimited aggregate principal amount, of the se- ries hereinafter specified, all issued and to be issued under and equally se- cured (except in so far as any purchase or sinking fund or analogous provi- sions for any particular series of Bonds, established by any indenture supple- mental to the Amended Indenture hereinafter mentioned, may afford additional security for such Bonds) by a mortgage and deed of trust, dated July 1, 1936, executed by the Company to The Bank of New York as successor to The Riggs Na- tional Bank of Washington, D.C. (herein called the "Trustee"), as trustee, as amended by indentures supplemental thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1, 1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October 1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986, March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990, May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993, March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September 30, 1993, October 1, 1993, February 10, 1994, February 11, 1994, March 10, 1995, September 6, 1995 and September 7, 1995 (said mortgage and deed of trust, as so amended, being herein called the "Amended Indenture") and all indentures supplemental thereto, to which Amended Indenture and supplemental indentures reference is hereby made for a descrip- tion of the properties mortgaged and pledged, the nature and extent of the se- curity, the 17 rights of the owners of the Bonds and of the Trustee in respect thereto, and the terms and conditions upon which the Bonds are, and are to be, secured. To the extent permitted by, and as provided in, the Amended Indenture, modifica- tions or alterations of the Amended Indenture, or of any indenture supplemen- tal thereto, and of the rights and obligations of the Company and of the hold- ers of the Bonds may be made with the consent of the Company by an affirmative vote of not less than 80% in amount of the Bonds entitled to vote then out- standing, at a meeting of Bondholders called and held as provided in the Amended Indenture, and by an affirmative vote of not less than 80% in amount of the Bonds of any series entitled to vote then outstanding and affected by such modification or alteration, in case one or more but less than all of the series of Bonds then outstanding under the Amended Indenture are so affected; provided, however, that no such modification or alteration shall be made which will affect the terms of payment of the principal of, or interest on, this Bond, which are unconditional, or which reduces the percentage of Bonds the affirmative vote of which is required for the making of such modifications or alterations. The Company is proposing an amendment to the Amended Indenture which would replace "80%" with "60%" in the preceding sentence, which amend- ment will become effective upon the consent or agreement thereto of the hold- ers of all the outstanding Bonds. The holder of this Bond will be deemed to have approved such amendment. The Bonds may be issued in series, for various principal sums, may mature at different times, may bear interest at different rates and may otherwise vary as in the Amended Indenture provided. This Bond is one of a series designated as the "First Mortgage Bonds, Series due (herein called the "Bonds of Series") of the Company, issued under and secured by the Amended Indenture and all indentures supplemental thereto and described in the indenture (herein called the "New Supplemental Indenture"), dated as of , 1997, between the Company and the Trustee, supplemental to the Amended Indenture. The Bonds of Series are subject to redemption, at any time or from time to time after and prior to maturity, at the option of the Company, ei- ther as a whole or in part by lot, upon payment of the redemption prices ap- plicable to the respective period set forth 18 below, together, in each case, with accrued interest to the redemption date, all subject to the conditions and as more fully set forth in the Amended In- denture and the New Supplemental Indenture:
REDEMPTION PRICE IF REDEEMED EXPRESSED AS DURING THE PERCENTAGE OF 12 MONTH PERIOD THE PRINCIPAL ENDING AMOUNT OF BONDS --------------- ---------------- 2008............. % 2009............. 2010............. 2011............. 2012............. 2013.............
REDEMPTION PRICE IF REDEEMED EXPRESSED AS DURING THE PERCENTAGE OF 12 MONTH PERIOD THE PRINCIPAL ENDING AMOUNT OF BONDS --------------- ---------------- 2014.................... % 2015.................... 2016.................... 2017.................... 2018 and thereafter..... 100.00
Notice of any redemption shall be sent by the Company through the mails, postage prepaid, at least thirty days and not more than sixty days prior to the redemption date, to the registered owners of any of the Bonds to be re- deemed, at their addresses as the same shall appear on the transfer register of the Company, all subject to the conditions and as more fully set forth in the Amended Indenture and New Supplemental Indenture. Any notice so mailed shall be conclusively presumed to have been duly given, whether or not the owner receives it. The Bonds of Series will be repayable on , at the option of the holders thereof, at 100% of their principal amount, together with accrued and unpaid interest to . In order for a Bond of Series to be repaid, the Company must receive at the corporate trust office of the Trustee during the period from and including to and including the close of business on (or if is not a Business Day, the next succeeding Business Day): (i) the Bond of Series (the "Redeemable Bond") with the form entitled "Option to Elect Repayment" on, or otherwise accompanying, the Redeemable Bond duly completed or (ii) a telegram, telex, facsimile transmission or letter from a member of a national securities exchange or the National Association of Securities Deal- ers, Inc. or a commercial bank or trust company in the United States of Amer- ica setting forth the name of the holder of the Redeemable Bond, the principal amount of the Redeemable Bond, the principal amount of the Redeemable Bond to be repaid, a statement that the option to elect repayment is being exercised thereby and a guarantee that the Redeemable Bond to be repaid (with the form entitled "Option to Elect Repayment" 19 on, or otherwise accompanying, the Redeemable Bond duly completed) will be re- ceived at the Trustee's corporate trust office not later than five Business Days after the date of such telegram, telex, facsimile transmission or letter, and such Redeemable Bond and form duly completed are received at the Trustee's office by such fifth Business Day. Effective exercise of the repayment option by the holder of any Redeemable Bond shall be irrevocable. No transfer or ex- change of any Redeemable Bond (or, in the event that any Redeemable Bond is to be repaid in part, such portion of the Redeemable Bond to be repaid) will be permitted after exercise of the repayment option. The repayment option may be exercised by the holder of a Redeemable Bond for less than the entire princi- pal amount of the Redeemable Bond, provided the principal amount which is to be repaid is set forth on the form entitled "Option to Elect Repayment" on the Redeemable Bond and is equal to $1,000 or any integral multiple thereof. All questions as to the validity, eligibility (including time of receipt) and ac- ceptance of any Redeemable Bond for repayment will be determined by the Compa- ny, whose determination will be final, binding and non-appealable. Upon timely delivery of a Redeemable Bond to the Trustee with the "Option to Elect Repay- ment" form completed in accordance with the foregoing, the outstanding princi- pal amount of such Redeemable Bond (or portion thereof indicated on the "Op- tion to Elect Repayment") shall become due and payable on , at the price equal to 100% of the principal amount to be repaid, plus accrued and unpaid interest to . In case an event of default, as defined in the Amended Indenture, shall oc- cur, the principal of all the Bonds at any such time outstanding under the Amended Indenture may be declared or may become due and payable, upon the con- ditions and in the manner and with the effect provided in the Amended Inden- ture. The Amended Indenture provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the Bonds entitled to vote then outstanding. This Bond is transferable by the registered owner hereof, in person or by duly authorized attorney, on the books of the Company to be kept for that pur- pose at the agency of the Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this Bond and on presentation of a duly executed written instrument of transfer, and thereupon a new Bond or Bonds of the same series, of the same aggregate 20 principal amount and in authorized denominations will be issued to the trans- feree or transferees in exchange therefor; and this Bond, with or without oth- ers of the same series, may in like manner be exchanged for one or more new Bonds of the same series of other authorized denominations but of the same ag- gregate principal amount; all subject to the terms and conditions set forth in the Amended Indenture. No recourse shall be had for the payment of the principal of, or the interest on, this Bond, or for any claim based hereon or otherwise in respect hereof or of the Amended Indenture or any indenture supplemental thereto, against any incorporator, or against any stockholder, director or officer, past, present or future, of the Company or of any predecessor or successor corporation, ei- ther directly or through the Company or any such predecessor or successor cor- poration, whether for amounts unpaid on stock subscriptions or by virtue of any constitution, statute or rule of law, or by the enforcement of any assess- ment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stock- holders, directors or officers being released by every owner hereof by the ac- ceptance of this Bond and as part of the consideration for the issue hereof, and being likewise released by the terms of the Amended Indenture. Section 3. The Bonds of Series shall be registered Bonds without coupons in denominations of any multiple of $1,000, numbered consecutively upwards from R1. Section 4. Until Bonds of Series in definitive form are ready for deliv- ery, the Company may execute, and upon its request in writing the Trustee shall authenticate and deliver, in lieu thereof, Bonds for such series in tem- porary form, as provided in Section 9 of Article II of the Original Indenture as amended. PART II. Issue of Bonds. Section 1. Except for Bonds of Series issued pursuant to Section 13 of Ar- ticle II of the Original Indenture as amended, the principal amount of Bonds of Series which may be authenticated and delivered hereunder is limited to $ aggregate principal amount. 21 Section 2. Bonds of Series in the aggregate principal amount permitted in Section 1 of this Part II, may at any time subsequent to the execution hereof be executed by the Company and delivered to the Trustee and shall be authenti- cated by the Trustee and delivered (either before or after the recording here- of) to or upon the order of the Company evidenced by a writing or writings, signed by its President or one of its Vice Presidents and its Treasurer or one of its Assistant Treasurers, at such time or times as may be requested by the Company subsequent to the receipt by the Trustee of (1) the certified resolution and the officers' certificate required by Sec- tion 3(a) and Section 3(b) of Article III of the Original Indenture as amended; (2) the opinion of counsel required by Section 3(c) of Article III of the Original Indenture as amended; (3) cash, if any, in the amount required to be deposited by Section 3(d) of Article III of the Original Indenture as amended, which shall be held and applied by the Trustee as provided in said Section 3(d); (4) the certificates, instruments, opinions of counsel, prior lien bonds and cash, if any, required by Section 4 of Article III of the Original In- denture as amended, except that, as required by Part V of this Supplemental Indenture, property additions purchased, constructed or otherwise acquired on or before December 31, 1946 shall not be made the basis for the authenti- cation and delivery of Bonds of Series; and (5) the certificates and opinions required by Article XVIII of the Original Indenture as amended. PART III. Redemption at Option of Company. Section 1. The Bonds of Series are not redeemable up to and including . The Bonds of Series shall, in accordance with the provisions of Arti- cle V of the Original Indenture as amended, be redeemable, at any time or from time to time after and prior to maturity, at the option of the Com- pany, either as a whole or in part by lot, upon payment of the redemption prices applicable 22 to the respective periods set forth in the form of Bond of Series contained in Section 2 of Part I hereof, together, in each case, with accrued interest to the redemption date. Section 2. In accordance with the provisions of Article V of the Original In- denture as amended, notice of any redemption shall be sent by the Company through the mails, postage prepaid, at least thirty days and not more than sixty days prior to the date of redemption, to the registered owners of any of the Bonds to be redeemed at their addresses as the same shall appear on the transfer register of the Company. Any notice so mailed shall be conclusively presumed to have been duly given, whether or not the owner receives it. All Bonds delivered to or redeemed by the Trustee pursuant to the provisions of this Part III shall forthwith be cancelled. PART IV. Repayment at Option of Holders Section 1. The Bonds of Series shall be repayable on , at the option of the respective holders thereof, at 100% of their principal amount, together with accrued and unpaid interest to , in accordance with the procedures set forth in the form of Bond of Series contained in Section 2 of Part I hereof. Section 2. All bonds of Series redeemed pursuant to the provisions of this Part IV shall forthwith be cancelled. PART V. Additional Particular Covenants of the Company. The Company hereby covenants, warrants and agrees that so long as any Bonds of Series are outstanding: Section 1. The Company will not withdraw, pursuant to the provisions of Sec- tion 2 of Article VIII of the Original Indenture as amended, any moneys held by the Trustee as part of the trust estate in excess of 23 an amount equal to the aggregate principal amount of such of the refundable Bonds as were theretofore issued by the Company; and that upon any such with- drawal by the Company refundable Bonds equal in aggregate principal amount to the amount so withdrawn shall be deemed to have been made the basis of such withdrawal. Section 2. Property additions purchased, constructed or otherwise acquired on or before December 31, 1946 shall not be made the basis for the authentication and delivery of Bonds, or the withdrawal of cash, or the reduction of the amount of cash required to be paid to the Trustee under any provision of the Indenture. PART VI. Amendment of Indenture to Permit Qualification Under Trust Indenture Act of 1939. The Company and the Trustee, from time to time and at any time, without any vote or consent of the holders of the Bonds of Series, may enter into such indentures supplemental to the Original Indenture as may or shall by them be deemed necessary or desirable to add to or modify or amend any of the provi- sions of the Original Indenture so as to permit the qualification of the Orig- inal Indenture under the Trust Indenture Act of 1939. Except to the extent specifically provided herein, no provision of this Sup- plemental Indenture is intended to modify, and the parties hereto do hereby adopt and confirm, the provisions of Section 318(c) of the Trust Indenture Act of 1939 which amend and supersede provisions of the Original Indenture, as supplemented, in effect prior to November 15, 1990. PART VII. Amendment of Original Indenture. Notwithstanding any other provisions of the Original Indenture as amended, the holders of the Bonds of Series, by their holding of such Bonds, are deemed to have approved the following amendment to the 24 Original Indenture as amended and to have authorized the Trustee to take any action necessary to evidence or effectuate such approval: Sections 5 and 6 of Article XV of the Original Indenture as amended are hereby amended by changing the words and figures "eighty percent. (80%)" to the words and figures "sixty percent. (60%)" wherever in such Sections such words and figures occur. PART VIII. The Trustee. The Trustee hereby accepts the trusts hereby declared and provided and agrees to perform the same upon the terms and conditions in the Original Indenture as amended set forth and upon the following terms and conditions: The Trustee shall not be responsible in any manner whatsoever for or in re- spect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XIII of the Original Inden- ture as amended shall apply to this Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Supplemental Indenture. PART IX. Miscellaneous Provisions. This Supplemental Indenture may be simultaneously executed in any number of counterparts, each of which when so executed shall be deemed to be an origi- nal; but such counterparts shall together constitute but one and the same in- strument. Potomac Electric Power Company hereby constitutes and appoints Dennis R. Wraase, one of its Senior Vice Presidents, to be its true and 25 lawful attorney-in-fact, for it and in its name to appear before any officer authorized by law to take and certify acknowledgments of deeds to be recorded in the District of Columbia, in the State of Maryland, in the Commonwealth of Virginia, and in the Commonwealth of Pennsylvania and to acknowledge and de- liver these presents as the act and deed of said Potomac Electric Power Compa- ny. The Bank of New York, hereby constitutes and appoints , one of its , to be its true and lawful attorney-in-fact, for it and in its name to appear before any officer authorized by law to take and certify acknowledgments of deeds to be recorded in the District of Columbia, in the State of Maryland, in the Commonwealth of Virginia, and in the Commonwealth of Pennsylvania and to acknowledge and deliver these presents as the act and deed of said The Bank of New York. 26 In Witness Whereof, said Potomac Electric Power Company has caused this Sup- plemental Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Supplemental Indenture to be attested by its Secretary or one of its Assistant Secretaries; and said The Bank of New York, in evidence of its ac- ceptance of the trust hereby created, has caused this Supplemental Indenture to be executed on its behalf by its President or one of its Vice Presidents, and its corporate seal to be hereto affixed and said seal and this Supplemen- tal Indenture to be attested by one of its Assistant Vice Presidents, all as of the day of , One thousand nine hundred and ninety-seven. Potomac Electric Power Company (Corporate Seal) By......................................... DENNIS R. WRAASE, Senior Vice President Attested: ................................... ELLEN SHERIFF ROGERS, Secretary Signed, sealed and delivered by Potomac Electric Power Company in the presence of: ................................... ................................... As Witnesses The Bank of New York (Corporate Seal) By.......................................... Vice President Attested: ................................... MARY BETH LEWICKI Assistant Vice President Signed, sealed and delivered by The Bank of New York in the presence of: ................................... ................................... As Witnesses 27 City of Washington, District of Columbia, ss.: I, Lisa A. Poole, a Notary Public in and for the District of Columbia, United States of America, whose commission as such will expire , do hereby certify that Dennis R. Wraase and Ellen Sheriff Rogers, whose names as Senior Vice President and Secretary, respectively, of Potomac Electric Power Company, a corporation, are signed to the foregoing and hereto attached deed, bearing date as of the day of , personally appeared this day before me in my District aforesaid and acknowledged themselves to be, respectively, a Senior Vice President and the Secretary of Potomac Electric Power Company, and that they as such, being authorized so to do, executed the said deed by signing the name of Potomac Electric Power Company by Dennis R. Wraase, as Senior Vice President, and attested by Ellen Sheriff Rogers, as Secretary, and acknowl- edged the same before me in my District aforesaid and acknowledged the forego- ing instrument to be the act and deed of Potomac Electric Power Company. Given under my hand and official seal this day of , 1997. (Notarial Seal) ............................................ Notary Public District of Columbia 28 City of Washington, District of Columbia, ss.: I, Lisa A. Poole, a Notary Public in and for the District of Columbia, United States of America, do hereby certify that Dennis R. Wraase, a Senior Vice President of Potomac Electric Power Company, a corporation, one of the parties to the foregoing instrument bearing date as of the day of , and hereto annexed, this day personally appeared before me in the City of Washington, the said Dennis R. Wraase being personally well known to me as the person who exe- cuted the said instrument as a Senior Vice President of and on behalf of said Potomac Electric Power Company and known to me to be the attorney-in-fact duly appointed therein to acknowledge and deliver said instrument on behalf of said corporation, and, as such attorney-in-fact, he acknowledged said instrument to be the act and deed of said Potomac Electric Power Company, and delivered the same as such. I further certify that the said Dennis R. Wraase, being by me duly sworn, did depose and say that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal and was so af- fixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. My commission expires . Given under my hand and official seal this day of , 1997. (Notarial Seal) ............................................ Notary Public District of Columbia 29 City of New York, State of New York,____________ ss.:___________________________________________ I, , a Notary Public in and for the City of New York, State of New York, do hereby certify that and Mary Beth Lewicki, whose names as Vice Presi- dent and Assistant Vice President, respectively, of The Bank of New York, a corporation, are signed to the foregoing and hereto attached deed, bearing date as of the day of , 1997, personally appeared before me this day in the State aforesaid and acknowledged themselves to be, respectively, a Vice President and an Assistant Vice President of The Bank of New York, and that they as such, being authorized so to do, executed the said deed by signing the name of The Bank of New York, by as Vice President, and attested by Mary Beth Lewicki, as Assistant Vice President, and acknowledged the same before me in the State aforesaid and acknowledged the foregoing instrument to be the act and deed of The Bank of New York, as therein set forth. Given under my hand and notarial seal this day of , 1997. (Notarial Seal) ............................................... Notary Public New York, New York My Commission Expires . 30 City of New York,_____________ ________________________________________________ State of New York,____________ ss.:___________________________________________ , of full age, being sworn according to law, on his oath deposes and says that he is a of The Bank of New York, the Trustee named in the foregoing Supplemental Indenture, dated as of the day of , 1997, that he is the agent of said Trustee for the purpose of perfecting such Supplemen- tal Indenture and that the consideration in the Original Indenture referred to therein and in all indentures supplemental to said Original Indenture, includ- ing the foregoing Supplemental Indenture, is true and bona fide as therein set forth. ............................................ Subscribed and sworn to before me this day of , 1997. ................................... Notary Public My Commission Expires . (Notarial Seal) 31 City of New York, State of New York______________ ss.:, I, , a Notary Public in and for the City of New York, State of New York, do hereby certify that a Vice President of The Bank of New York, a cor- poration, one of the parties to the foregoing instrument bearing date as of the day of , 1997, and hereto annexed, this day personally appeared be- fore me in the City of New York, the said , being personally well known to me as the person who executed the said instrument as a Vice President of and on behalf of said The Bank of New York, and known to me to be the attor- ney-in-fact duly appointed therein to acknowledge and deliver said instrument on behalf of said corporation, and, as such attorney-in-fact, he acknowledged said instrument to be the act and deed of said The Bank of New York, and de- livered the same as such. I further certify that the said , being by me duly sworn, did depose and say that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal and was so af- fixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. Given under my hand and official seal this day of , 1997. (Notarial Seal) ............................................... Notary Public New York, New York My Commission Expires . 32 CERTIFICATE OF RESIDENCE The Bank of New York, Mortgagee and Trustee within named, hereby certifies that its precise residence is 101 Barclay Street, New York, NY 10286. The Bank of New York By.......................................... MARY BETH LEWICKI, Assistant Vice President 33 EX-23.1 3 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting parts of this Registration Statement on Form S-3 of our report dated January 17, 1997, which appears on page 32 of the 1996 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, 1996. We also consent to the incorporation by reference of our report on the Consolidated Financial Statement Schedule, which appears on page 66 of such Annual Report on Form 10-K. We also consent to the reference to us under the headings "Experts" in such Prospectuses. Price Waterhouse LLP Washington, D.C. August 13, 1997 EX-1 4 FORM OF UNDERWRITING AGREEMENT POTOMAC ELECTRIC POWER COMPANY First Mortgage Bonds UNDERWRITING AGREEMENT To the Representatives named in Schedule I hereto of the Underwriters named in Schedule II hereto Ladies and Gentlemen: The undersigned Potomac Electric Power Company (the "Company") hereby confirms its agreement with the several underwriters named in Schedule II hereto (the "Underwriters") as set forth below to sell its First Mortgage Bonds of the designation, with the terms and in the amount, specified in Schedule I hereto (the "Bonds"). If the firm or firms listed in Schedule I hereto (the "Representatives") are the same as the firm or firms listed in Schedule II hereto, then the terms "Underwriters" and "Representatives," as used herein, shall each be deemed to refer to such firm or firms. SECTION I. Description of Bonds. The Company has authorized by appropriate corporate action and proposes to issue and sell the Bonds, to be issued under and secured by its Mortgage and Deed of Trust dated July 1, 1936 to The Bank of New York, as successor trustee (the "Trustee"), and the indentures supplemental thereto including the Supplemental Indenture relating to the Bonds (herein collectively called the "Indenture"). Certain of the terms and provisions relating to the Bonds and the Indenture are summarized in the Registration Statement and Prospectus hereinafter referred to. SECTION 2. Representations and Warranties of the Company. The Company represents and warrants to each of the Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") two registration statements on Form S-3 (No. 33-61379 and No. 33- ), including prospectuses, for the registration of the Bonds under the Securities Act of 1933, as amended (the "1933 Act"), and the qualification of the Indenture under the Trust Indenture Act of 1939 (the "1939 Act"), which registration statements have been declared effective by the Commission and which Indenture has been qualified under the 1939 Act. Such registration statements, as amended to the date of this Agreement, including the documents incorporated by reference but excluding the Form T-1 Statement of Eligibility and Qualification of the Trustee, and the prospectus contained in the registration statement on Form S-3 (No. 33- ) as supplemented either by a prospectus supplement, dated the date hereof, relating to the terms and offering of the Bonds to be filed pursuant to Rule 424 ("Rule 424") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and/or by a term sheet or abbreviated term sheet, if any, sent or given in reliance upon Rule 434 of the 1933 Act Regulations and to be filed pursuant to Rule 424 (including, in each case, the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act) are hereinafter called the "Registration Statement" and the "Prospectus," respectively; any reference herein to the terms "amend," or "amendment" with respect to the Registration Statement or the Prospectus shall be deemed to include any document incorporated by reference therein after the date hereof and prior to the termination of the offering of the Bonds by the Underwriters; provided, however, that any prospectus supplement, term sheet or abbreviated term sheet filed with the Commission pursuant to Rule 424 under the 1933 Act with respect to an offering of first mortgage bonds other than the Bonds shall not be deemed to be a supplement to, or a part of, the Prospectus. If any revised prospectus shall be provided to the Underwriters by the Company for use in connection with the offering of the Bonds (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Underwriters for such use. (b) At the time the Registration Statement became effective, the Registration Statement, the prospectus included therein and the Indenture fully complied, and at the Closing Date, as hereinafter defined, the Registration Statement and the Prospectus, as they may be amended or supplemented, and the Indenture will fully comply, in all material respects with the applicable provisions of the 1933 Act, the 1933 Act Regulations, and the 1939 Act; on said dates the Registration Statement did not, and the Registration Statement, as it may be amended or supplemented, will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; when the Registration Statement became effective, the prospectus included therein did not, and at the Closing Date and on the date it is filed with, or transmitted for filing to, the Commission pursuant to Rule 424 the Prospectus, as it may be amended or supplemented, will not, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the foregoing representations and warranties in this subparagraph (b) shall not apply to statements or omissions made in reliance upon and in conformity with information furnished herein or in writing to the Company by the Representatives or by or on behalf of any Underwriter through the Representatives expressly for use in the Registration Statement or the Prospectus. (c) The documents incorporated by reference in the Registration Statement and the Prospectus pursuant to Item 12 of Form S-3 under the 1933 Act, when they were filed with the Commission, complied in all - 2 - material respects with the applicable requirements of the 1933 Act and the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations of the Commission thereunder, and any documents so filed and incorporated by reference subsequent to the date hereof will, when they are filed with the Commission, comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder; and none of such documents included or includes or will include any untrue statement of a material fact or omitted or omits or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The financial statements incorporated by reference in the Registration Statement and the Prospectus present fairly the financial condition and operations of the Company and its consolidated subsidiaries at the respective dates or for the respective periods to which they apply; such financial statements have been prepared in each case in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as set forth therein; and the supporting schedules incorporated by reference in the Registration Statement and the Prospectus present fairly the information required to be stated therein and Price Waterhouse LLP ("Price Waterhouse"), who have examined certain of the financial statements, are independent accountants as required by the 1933 Act, and the rules and regulations of the Commission. (e) Except as reflected in, or contemplated by, the Registration Statement and the Prospectus, since the respective dates as of which information is given in the Registration Statement and the Prospectus, and prior to the Closing Date, (i) there has not been any material, adverse change in the business, property or financial condition of the Company and its subsidiaries considered as one enterprise and (ii) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise. The Company has no material contingent obligation which is not disclosed in or contemplated by the Registration Statement and the Prospectus. (f) The sale by the Company to the Underwriters, severally, of the Bonds for the consideration herein specified and upon the terms and conditions herein contained will not result in a breach of any of the terms or provisions of or constitute a default under the Company's Charter or By-Laws, each as amended, or any indenture or other agreement or instrument which the Company has assumed or to which it is now a party or any applicable law, administrative regulation or administrative court decree. - 3 - (g) There are no contracts or documents of the Company or any of its subsidiaries which are required to be filed as exhibits to the Registration Statement by the 1933 Act or by the 1933 Act Regulations which have not been so filed. SECTION 3. Sale of the Bonds. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each of the Underwriters and each Underwriter agrees, severally and not jointly, to purchase from the Company, at the purchase price set forth in Schedule I hereto, the respective principal amounts of Bonds set forth opposite the name of such Underwriter in Schedule II hereto. SECTION 4. Time and Place of Closing. Payment for the Bonds shall be made at the place, date and time specified in Schedule I hereto (or such other place, date and time as the Representatives and the Company may agree upon), against delivery of the Bonds, at the office of Bankers Trust Company, 4 Albany Street, New York, N.Y., to the Representatives for the respective accounts of the several Underwriters. The hour and date of such delivery and payment are herein called the "Closing Date." Payment for the Bonds shall be in immediately available funds. Certificates for the Bonds shall be delivered to the Representatives for the respective accounts of the several Underwriters in such names and denominations as the Representatives shall specify not later than the beginning of business on the third full business day before the Closing Date. For the purpose of expediting the checking of the certificates by the Representatives, the Company agrees to make the certificates for the Bonds available to the Representatives not later than 1:00 p.m., New York Time, on the last full business day prior to the Closing Date at said office of Bankers Trust Company. SECTION 5. Covenants of the Company. The Company agrees that: (a) As soon as possible after the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to Rule 424 setting forth, among other things, the necessary information with respect to the terms of offering of the Bonds. (b) The Company will give the Representatives notice of its intention to file any amendment to the Registration Statement or any amendment or supplement to the Prospectus, will furnish the Representatives and counsel for the Underwriters copies of any such amendment or supplement a reasonable time in advance of filing, and will not file any such amendment or supplement to which the Representatives or counsel for the Underwriters shall reasonably object prior to such filing. - 4 - (c) The Company will promptly deliver to the Representatives one fully executed copy of the registration statement as originally filed with the Commission and of each amendment or supplement thereto, heretofore or hereafter made, including any post-effective amendment (in each case including all exhibits filed therewith not previously furnished to the Representatives) and signed copies of each consent and certificate included therein or filed as an exhibit thereto. The Company will also send to the Representatives as soon as practicable after the date of this Agreement and thereafter from time to time not later than nine months after the date of this Agreement, as many copies of the Prospectus (excluding documents incorporated by reference under Item 12 of Form S-3) as the Representatives may reasonably request for the purposes contemplated by the 1933 Act, the 1934 Act and the rules and regulations of the Commission thereunder. (d) The Company will pay or cause to be paid all expenses in connection with (i) the preparation and filing by it of the Registration Statement and Prospectus and the preparation and delivery of this Agreement, (ii) the preparation, rating, issue and delivery of the Bonds to be sold by it as provided herein, (iii) the printing and delivery to the Underwriters in reasonable quantities of copies of the Registration Statement, each preliminary prospectus and the Prospectus, (iv) all filing fees and fees and disbursements not to exceed $5,000 of Winthrop, Stimson, Putnam & Roberts incurred in connection with the qualification of the Bonds under securities laws and the determination of the legality of the Bonds in accordance with the provisions of Section 5(i), and (v) the printing and delivery to the Underwriters of copies of the Blue Sky Survey; and will pay all taxes, if any (but not including any transfer taxes), on the issue of said Bonds; provided, however, that the Underwriters shall pay all of their own costs and expenses, including the fees and expenses of their counsel (subject however to the provisions of this subparagraph requiring the payment by the Company of certain fees and expenses, not to exceed $5,000), any transfer taxes on the Bonds which they may sell. (e) If, during the period when delivery of the Prospectus is required under the 1933 Act, any event relating to or affecting the Company, or of which the Company shall be advised in writing by the Representatives, shall occur which, in the Company's opinion, should be set forth in an amendment to the Prospectus, including an appropriate filing pursuant to Section 13(a) or (c) or Section 14 of the 1934 Act, in order to make the Prospectus not misleading in the light of the circumstances when it is delivered to a purchaser, or if it is necessary to amend the Prospectus to comply with the 1933 Act, the Company will forthwith at its expense prepare and file with the Commission (in form and substance satisfactory to counsel for the Underwriters) and furnish - 5 - to the Representatives a reasonable number of copies of such amendment or amendments to the Prospectus, including any filing pursuant to Section 13(a) or (c) or Section 14 of the 1934 Act, which will amend the Prospectus so that as amended it will comply with the 1933 Act and will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading. In case any of the several Underwriters is required to deliver a Prospectus after the expiration of nine months after the date of this Agreement, the Company, upon such Underwriter's request, will furnish to such Underwriter, at the expense of such Underwriter, a reasonable quantity of an amended prospectus, or amendments to the Prospectus, complying with Section 10(a) of the 1933 Act. (f) The Company will advise the Representatives promptly (confirming such advice in writing) (i) of the filing of the Prospectus pursuant to Rule 424 and of any amendment to the Prospectus or Registration Statement, (ii) of the receipt of any comments from the Commission, (iii) of any official request made by the Commission for amendments to the Registration Statement or Prospectus or for additional information with respect thereto or (iv) of official notice of institution of proceedings for, or the entry of, a stop order suspending the effectiveness of the Registration Statement. The Company will make every reasonable effort to prevent the issuance of any stop order and, if such a stop order should be entered by the Commission, will make every reasonable effort to obtain the lifting or removal thereof as soon as possible. (g) For a period of five years, the Company will (i) furnish to the Representatives as soon as practicable after the close of each fiscal year a consolidated balance sheet of the Company as of the close of such fiscal year, in reasonable detail, together with consolidated statements of earnings and of cash flows, in reasonable detail, of the Company, for such fiscal year, such consolidated balance sheet, statements of earnings and of cash flows, to be accompanied by an opinion thereon rendered by independent accountants, who may be the regular auditors for the Company; (ii) upon request, will furnish to the Representatives as soon as practicable after the close of each of the first three quarters of each fiscal year an interim earnings statement of the Company for the twelve months ended with the close of such quarter, which need not be audited, similar to that furnished pursuant to clause (i) of this subparagraph; and (iii) will furnish to the Representatives copies of all such financial statements as it shall file with the Commission or any governmental agency substituted therefor, and from time to time, copies of any reports or other communications which it shall send to stockholders generally. - 6 - (h) The Company will make generally available to its security holders, as soon as reasonably practicable, but in any event not later than 16 months after the end of the fiscal quarter in which the filing of the Prospectus pursuant to Rule 424 occurs, an earning statement (in form complying with the provisions of Section 11(a) of the 1933 Act and the 1933 Act Regulations, which need not be certified by independent public accountants) covering a period of twelve months beginning not later than the first day of the Company's fiscal quarter next following the filing of the Prospectus pursuant to Rule 424. (i) The Company will use its best efforts to qualify the Bonds for offer and sale under the applicable securities and legal investment laws of such jurisdictions as the Representatives may designate, and will file and make such statements or reports as are or may be reasonably required by the laws of such jurisdictions; provided, however, that the Company shall not be required to qualify as a foreign corporation or dealer in securities, or to file any general consents to service of process under the laws of any jurisdiction. The fees and disbursements of Winthrop, Stimson, Putnam & Roberts, who are acting as counsel for the Underwriters for the purposes of this Agreement, shall be paid by the Underwriters (subject however to provisions of subparagraph (d) hereof requiring payment by the Company of counsel fees and disbursements not to exceed $5,000), provided, however, that if this Agreement is terminated in accordance with the provisions of Section 6, 7 or 9, the Company shall reimburse the Underwriters for the amount of such fees and disbursements. The Company shall not be required to pay any amount for any expenses of the Underwriters except as provided in this Section 5. The Company shall not in any event be liable to the Underwriters for damages on account of the loss of anticipated profits. (j) The Company, during the period when the Prospectus is required to be delivered under the 1933 Act, will file promptly all documents required to be filed with the Commission pursuant to Section 13(a) or (c) or Section 14 of the 1934 Act subsequent to the time of execution of this Agreement. (k) Between the date hereof and the Closing Date, the Company will not, without prior written consent of the Representatives, offer or sell, or enter into any agreement to sell, any additional First Mortgage Bonds of the Company. (l) The Company will use the net proceeds received from the sale of the Bonds in the manner specified in the Prospectus under "Use of Proceeds". - 7 - SECTION 6. Conditions of Underwriters' Obligations. The several obligations of the Underwriters to purchase and pay for the Bonds shall be subject to the accuracy of the representations and warranties on the part of the Company, to the substantial accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations to be performed hereunder prior to the Closing Date, and to the following further conditions: (a) That, at the Closing Date, the Representatives shall receive the signed opinions of the following counsel, substantially in the respective forms attached hereto: Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, and Covington & Burling and William T. Torgerson, Esq., counsel for the Company. (b) That no amendment to the Registration Statement or Prospectus, filed subsequent to the execution of this Agreement, shall be unsatisfactory in substance to the Representatives or unsatisfactory in form to counsel for the Underwriters. (c) That, at or prior to 6:00 p.m., New York Time, on the date hereof or at such later time and date as the Representatives may have from time to time consented to in writing or by telephone, confirmed in writing, all orders of the Public Service Commission of the District of Columbia necessary to permit the issue and sale of the Bonds shall be in effect; that at or prior to the Closing Date the certificate of such Public Service Commission permitting the issue of the Bonds shall have been recorded on the books of the Company; that prior to the Closing Date no stop order with respect to the effectiveness of the Registration Statement shall have been issued under the 1933 Act by the Commission and that at the Closing Date no proceedings therefor shall be pending or threatened; and that at the Closing Date the Prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, other than any statement contained in, or any matter omitted from, the Registration Statement or the Prospectus in reliance upon, and in conformity with, information furnished to the Company in writing by the Representatives or by or on behalf of any of the several Underwriters through the Representatives expressly for use in the Registration Statement or the Prospectus. - 8 - (d) That, subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus and prior to the Closing Date, no material and adverse change in the condition of the Company and its subsidiaries, taken as a whole, financial or otherwise, shall have taken place (other than as referred to in or contemplated by the Registration Statement and Prospectus) and that the Company shall, at the Closing Date, deliver to the Representatives, a signed certificate of its President or a Vice President and its Treasurer or an Assistant Treasurer to the effect that (i) there has been no material adverse change, (ii) the representations and warranties in Section 2 are true and correct with the same force and effect as though expressly made at and as of the Closing Date, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Date, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (e) That at the Closing Date the Representatives shall have received a letter from Price Waterhouse in form and substance satisfactory to the Representatives, dated the Closing Date, confirming that they are independent accountants within the meaning of the 1933 Act, the 1934 Act and published rules and regulations thereunder and to the effect that (1) in their opinion the audited consolidated financial statements included in the Company's Annual Report to the Commission on Form 10-K, incorporated by reference in the Registration Statement (the "Form 10-K"), comply as to form in all material respects with the applicable accounting requirements of the 1933 Act, the 1934 Act and the published rules and regulations of the Commission issued thereunder with respect to Form 10-K and registration statements on Form S-3, and (2) on the basis of a reading of the unaudited consolidated financial data included in the Company's Quarterly Reports to the Commission on Form 10-Q, if any (the "Forms 10-Q"), incorporated by reference in the Registration Statement, and on the basis of the following procedures (but not on the basis of an audit in accordance with generally accepted auditing standards) to be performed by Price Waterhouse: (A) a reading of the minutes of the Board of Directors of the Company and the Executive Committee thereof as set forth in the minute books to a specified date not more than three business days prior to the date of such letter, (B) a reading of the latest available unaudited interim consolidated financial data (if any), and (C) inquiries of certain officials of the Company who have responsibility for financial and accounting matters, nothing has come to their attention which in their judgment would indicate that (a) the unaudited consolidated financial data included in the Forms 10-Q (if any) do not comply as to form in all material respects with the applicable accounting requirements of the 1934 Act and the published rules and regulations of the Commission - 9 - thereunder, or that any material modifications should be made to such unaudited consolidated financial data for such unaudited consolidated financial data to be in conformity with generally accepted accounting principles; (b) the unaudited amounts of operating revenue, net income, earnings applicable for common stock and earnings per share of common stock and unaudited amounts for property and plant -- net, long-term debt, preferred and preference stock and common equity outstanding, as included in the Registration Statement, were not determined on a basis substantially consistent with that of the corresponding amounts in the audited consolidated statements of earnings and consolidated balance sheets incorporated by reference in the Registration Statement; (c) the ratios of earnings to fixed charges, actual and (if any) pro forma, as set forth in the Registration Statement were not arithmetically correct; (d) at the date of the latest available unaudited interim financial data there was any change in the common stock outstanding or long-term debt of the Company or any decrease in the common equity of the Company (before giving effect to dividends declared on common stock) as compared with amounts shown in the most recent consolidated balance sheet incorporated by reference in the Registration Statement; or for the period from the date of such consolidated balance sheet to the date of the latest available unaudited interim consolidated financial data there were any decreases, as compared with the corresponding period in the preceding year, in operating revenue or in net income or earnings per share; or (e) at a specified date not more than three business days prior to the date of such letter there was any change in the common stock outstanding or long-term debt of the Company, in each case as compared with amounts shown in the most recent consolidated balance sheet incorporated by reference in the Registration Statement; except in all instances for (i) changes or decreases which the Registration Statement discloses have occurred or may occur or (ii) changes or decreases not in excess of $500,000 of (iii) changes occasioned by the issuance of common stock pursuant to the Company's Shareholder Dividend Reinvestment Plan, Savings Plan for Exempt Employees, Savings Plan for Bargaining Unit Employees and Savings Plan for Non-Bargaining Unit, Non- Exempt Employees, or Long-Term Incentive Plan or upon the conversion of the Company's Serial Preferred Stock, $2.44 Convertible Series of 1966, or the 7% Convertible Debentures and the 5% Convertible Debentures. The letter of Price Waterhouse also shall be to the effect that they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are derived from the general accounting records of the Company, which appear in the Registration Statement and Prospectus and which are specified by the Representatives, and have compared such amounts, percentages and financial information with the accounting records of the Company and have found them to be in agreement. - 10 - (f) That the Company shall have performed such of its obligations under this Agreement as are to be performed by the terms hereof at or before the Closing Date. (g) At the Closing Date counsel for the Underwriters shall have been furnished with such certificates, documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Bonds as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations and warranties, or the fulfillment of any of the conditions herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Bonds as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representatives by notice to the Company at any time at or prior to the Closing Date and such termination shall be without liability of any party to any other party except as provided in Section 5 and Section 8. SECTION 7. Conditions of Company's Obligations. The obligations of the Company with respect to the issue, sale and delivery of the Bonds shall be subject to the following conditions: (a) That, at or before 6:00 p.m., New York Time, on the date hereof, or such later time and day as the Company may have from time to time consented to in writing or by telegram, confirmed in writing, all orders of the Public Service Commission of the District of Columbia necessary to permit the issue, sale and delivery of the Bonds shall be in effect; and that, prior to the Closing Date, no stop order with respect to the effectiveness of the Registration Statement shall have been issued under the 1933 Act by the Commission and that at the Closing Date no proceedings therefor shall be pending or threatened. (b) That no order of the Public Service Commission of the District of Columbia relating to the issue or sale of the Bonds or to the application of the proceeds thereof, which may be entered after the execution of this Agreement and prior to the Closing Date, shall contain any conditions which are not acceptable to the Company. In case any of the conditions specified above in this Section shall not have been fulfilled, this Agreement may be terminated by the Company, upon notice thereof to the Representatives, at any time prior to Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 5 and Section 8. - 11 - SECTION 8. Indemnification. (a) The Company agrees to indemnify and hold harmless the several Underwriters and each person who controls any of the several Underwriters within the meaning of Section 15 of the 1933 Act against any and all losses, claims, damages or liabilities, as incurred, joint or several, to which they or any of them may become subject under the 1933 Act or under any other statute or common law, and to reimburse each such Underwriter and each such controlling person for any legal or other expenses (including, to the extent hereinafter provided, reasonable counsel fees) incurred by them in connection with investigating any such losses, claims, damages or liabilities or in connection with defending or settling (if settled with the written consent of the Company) any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement as originally filed or as subsequently amended or in the Registration Statement or any amendment thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in the preliminary prospectus or the prospectus as originally filed or as subsequently amended or the Prospectus, as amended or supplemented if there shall have been any amendment or supplement thereto, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnity agreement contained in this Section shall not apply to any such losses, claims, damages, liabilities, expenses or actions arising out of, or based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with information furnished herein or in writing to the Company by the Representatives or by or on behalf of any of the several Underwriters through the Representatives expressly for use in the registration statement as originally filed or as subsequently amended or in the preliminary prospectus as originally filed or as subsequently amended or in the Registration Statement or the Prospectus or any amendment or supplement to either thereof; and provided, further, that the indemnity agreement contained in this Section shall not inure to the benefit of any Underwriter (or of any person controlling such Underwriter) on account of any such losses, claims, damages, liabilities, expenses or actions arising from the sale of Bonds to any person if such Underwriter failed to send or give a copy of the Prospectus (as it may have been amended) (excluding documents incorporated by reference) to such person with or prior to the written confirmation of the sale involved. The indemnity agreement of the Company contained in this Section and the representations and warranties of the Company contained in Section 2 hereof shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter, or any such controlling person, and shall survive the delivery of the Bonds. The Underwriters agree to notify the Company promptly of the commencement of any litigation or proceedings against them or any of them or against any such controlling person in connection with the sale of Bonds. - 12 - (b) Each Underwriter agrees to indemnify and hold harmless the Company, its officers and directors, and each person who controls any thereof within the meaning of Section 15 of the 1933 Act against any and all losses, claims, damages or liabilities, as incurred, joint or several, to which they or any of them may become subject under the 1933 Act or under any other statute or common law, and to reimburse each of them for any legal or other expenses (including, to the extent hereinafter provided, reasonable counsel fees) incurred by them in connection with investigating any such losses, claims, damages or liabilities, or in connection with defending or settling (if settled with the Underwriters' written consent) any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement as originally filed or as subsequently amended or in the Registration Statement or any amendment thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in the preliminary prospectus or the prospectus as originally filed or as subsequently amended or the Prospectus, as amended or supplemented if there shall have been any amendment or supplement thereto, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished herein or in writing to the Company by the Representatives or by or on behalf of the several Underwriters through the Representatives expressly for use in the registration statement as originally filed or as subsequently amended or in the preliminary prospectus as originally filed or as subsequently amended or in the Registration Statement or the Prospectus or any amendment or supplement to either thereof. The indemnity agreement contained in this Section shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Company, or any such controlling person, and shall survive the receipt of the proceeds of the sale of the Bonds. The Company agrees promptly to notify the Representatives of the commencement of any litigation or proceedings against the Company or any of its officers or directors in connection with the sale of Bonds. The foregoing indemnity agreement is in addition to any further liability which any Underwriter may otherwise have to the Company or any of its directors, officers or controlling persons. (c) The Company and each of the several Underwriters agree that, upon the receipt of notice of the commencement of any action against it, its officers and directors, or any person controlling it as aforesaid in respect of which indemnity may be sought on account of any indemnity agreement contained herein, it will promptly give written notice of the commencement - 13 - thereof to the party or parties against whom indemnity shall be sought hereunder. The omission so to notify such indemnifying party or parties of any such action shall relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party on account of any indemnity agreement contained in (a) or (b) above, but shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party otherwise than on account of such indemnity agreement. In case such notice of any such action shall be so given, such indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects, to assume (in conjunction with any other indemnifying parties) the defense of such action, in which event such defense shall be conducted by counsel chosen by such indemnifying party or parties and reasonably satisfactory to the indemnified party or parties who shall be defendant or defendants in such action, and such defendant or defendants shall bear the fees and expenses of any additional counsel retained by them; but if the indemnifying party shall elect not to assume the defense of such action, such indemnifying party will reimburse such indemnified party or parties for the reasonable fees and expenses of any counsel retained by them. In the event that the parties to any such action (including impleaded parties) include both the indemnified party or parties and the indemnifying party and any of the indemnified parties shall have been advised by counsel chosen by it and reasonably satisfactory to the Company that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party or parties and will reimburse the indemnified party or parties as aforesaid for the reasonable fees and expenses of any counsel retained by such indemnified party or parties, it being understood that the indemnifying party shall not, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all such indemnified parties, which firm shall, in connection with indemnification provided for in (a) above, be designated in writing by the Representatives, and, in connection with indemnification provided for in (b) above, be designated in writing by the Company. (d) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 8 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of the losses, liabilities, claims, damages and expenses of the nature contemplated in said indemnity agreement in such proportion as is equitable and as shall reflect both the relative benefits received by the Company on the one hand and the Underwriter or Underwriters, as the case may be, on the other hand from the offering of the Bonds, and the relative fault, if any, of the Company on the one hand and of the Underwriter or Underwriters, as the case may be, on the other hand in - 14 - connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter or Underwriters, as the case may be, on the other hand in connection with the offering of the Bonds shall be deemed to be in the same proportion as the total net proceeds from the offering of such Bonds (before deducting expenses) received by the Company bear to the total commissions and underwriting discounts received by the Underwriter or Underwriters, as the case may be. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriter or the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. The amount paid or payable by an indemnified party as a result of the losses, liabilities, claims, damages and expenses referred to above shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as the Company. SECTION 9. Termination. This Agreement may be terminated any time prior to the Closing Date by the Representatives by giving notice thereof to the Company, if at or prior to such time (i) there shall have occurred any general suspension of trading in securities on the New York Stock Exchange or there shall have been established by the New York Stock Exchange or by the Commission or by any federal or state agency or by the decision of any court any limitation on prices for such trading, or (ii) if a banking moratorium has been declared by any Federal, New York, District of Columbia or Virginia authority, or (iii) there shall have occurred any new outbreak or escalation of hostilities or other national or international calamity or crisis, the effect of which on the financial markets of the United States shall be such as to make it impracticable for the Underwriters to enforce contracts for the sale of the Bonds, or (iv) the Company shall have sustained a substantial loss by fire, flood, accident or other calamity which renders it impracticable to - 15 - consummate the sale of the Bonds and the delivery of the Bonds by the several Underwriters at the initial public offering price. Any termination hereof pursuant to this Section 9 shall be without liability of any party to any other party except as otherwise provided in Section 5 and Section 8. SECTION 10. Default. If one or more of the Underwriters shall fail on the Closing Date to purchase the Bonds which it or they are obligated to purchase hereunder (the "Defaulted Bonds"), then the remaining Underwriters (the "Non-Defaulting Underwriters") shall have the right, within 24 hours after such date, to make arrangements for one or more of the Non-Defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Bonds in such amounts as may be agreed upon and upon the terms herein set forth. If, however, during such 24 hours such arrangements shall not have been completed for the purchase of all of the Defaulted Bonds, then: (a) If the principal amount of the Defaulted Bonds does not exceed 10% of the principal amount of the Bonds, the Non-Defaulting Underwriters shall be obligated to purchase the total number of such Defaulted Bonds in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all Non- Defaulting Underwriters. (b) If the principal amount of the Defaulted Bonds exceeds 10% of the principal amount of the Bonds, this Agreement shall terminate without any liability on the part of the Company or any Non-Defaulting Underwriter. Nothing in this Section 10 and no action taken pursuant to this Section 10 shall relieve any defaulting party from liability in respect of its default. In the event of a default by one or more Underwriters as set forth in this Section 10 which does not result in a termination of this Agreement, either the Non-Defaulting Underwriters or the Company shall have the right to postpone the Closing Date for a period of not exceeding 7 days in order that any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements may be effected. SECTION 11. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of the Bonds to the Underwriters. - 16 - SECTION 12. Miscellaneous. This Agreement shall inure to the benefit of the several Underwriters and the Company and with respect to the provisions of Section 8, the officers and directors and each controlling person referred to in Section 8, and their respective successors. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Section 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. The term "successors" as used in this Agreement shall not include any purchaser, as such purchaser, of any Bonds from the Underwriters. In all dealings hereunder, the Representatives shall act on behalf of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representatives (or by any one of the Representatives authorized by the agreement among the Underwriters relating to the Bonds to act on behalf of all the Underwriters). SECTION 13. Notices. All communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representatives at the address set forth in Schedule I hereto, and notices to the Company shall be directed to it at 1900 Pennsylvania Avenue, N. W., Washington, D. C. 20068, Attention of Ellen Sheriff Rogers, Associate General Counsel, Secretary and Assistant Treasurer. SECTION 14. Governing Law. This Agreement shall be governed by the laws of the State of New York. - 17 - SECTION 15. Counterparts. This Agreement may be simultaneously executed in counterparts, each of which when so executed shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed duplicate hereof, whereupon it will become a binding agreement between the Company and the several Underwriters in accordance with its terms. Very truly yours, POTOMAC ELECTRIC POWER COMPANY By The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. By____________________________ - 18 - SCHEDULE I Underwriting Agreement dated Registration Statements No. 33-61379 and No. 33- Representative and Address: Bonds: Designation: First Mortgage Bonds, % Series due Principal Amount: $ Supplemental Indenture dated as of Date of Maturity: Interest Rate: % per annum, payable _________ and __________ of each year, commencing _________ Purchase Price: % of the principal amount thereof, plus accrued interest, if any, from ________________ to the date of payment and delivery Public Offering Price: % of the principal amount thereof, plus accrued interest, if any, from the ____________ to the date of payment and delivery Closing Date and Location: - 19 - SCHEDULE II Principal Amount Name of Underwriter of Bonds $ Total $ - 20 - [LETTERHEAD OF WINTHROP, STIMSON, PUTNAM & ROBERTS] Ladies and Gentlemen: We have acted as counsel for you in connection with your several purchases from Potomac Electric Power Company (the "Company") of $ aggregate principal amount of its First Mortgage Bonds, % Series due (the "Bonds") pursuant to the Underwriting Agreement, dated , 19 , between you and the Company (the "Underwriting Agreement"). The Bonds have been issued under the Mortgage and Deed of Trust, dated July 1, 1936, between the Company and The Bank of New York, as successor trustee (the "Trustee"), as heretofore supplemented and amended, including a Supplemental Indenture dated as of , 19 (said Mortgage and Deed of Trust as so supplemented and amended being hereinafter referred to collectively as the "Indenture"). We are members of the New York Bar and do not hold ourselves out as experts on the laws of the District of Columbia, the State of Maryland or the Commonwealths of Pennsylvania or Virginia. We understand that you are relying and, in rendering this opinion, we have, with your consent, relied upon the opinion of even date herewith addressed to you by William T. Torgerson, Esq., Senior Vice President and General Counsel of the Company, with respect to legal matters regarding the corporate authority of the Company and other matters covered in such opinion relating to the laws of the District of Columbia, the State of Maryland and the Commonwealths of Pennsylvania and Virginia. We do not pass upon the organization of the Company or the lien of the Indenture. As to such matters, it is our understanding that you are relying on the above-mentioned opinion. We have reviewed such opinion and believe it is satisfactory and that you and we are justified in relying thereon. We have examined the documents described in the list of closing papers as having been delivered to you at the closing and such other documents and have satisfied ourselves as to such other matters as we have deemed necessary in order to enable us to express this opinion. We have not examined the Bonds, except for a specimen thereof, and we have relied upon a certificate of the Trustee as to the authentication and delivery thereof. As to various questions of fact material to this opinion, we have relied upon representations of the Company and statements in the Registration Statements and the Prospectus hereinafter mentioned. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us and the genuineness and conformity to original documents of documents submitted to us as certified or photostatic copies. As used herein, the term "Registration Statements" means the Company's registration statement on Form S-3 (No. 33-61379) (the "First Registration Statement") and the Company's registration statement on Form S-3 (No. 33- ) (the "Second Registration Statement") and the term "Prospectus" has the same meaning as the same word in the Underwriting Agreement. Based on the foregoing, we are of the opinion that: 1. The Bonds have been duly and validly authorized by all necessary corporate action of the Company, have been duly and validly issued in accordance with the provisions of the Indenture, and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other laws affecting the enforcement of mortgagees' and other creditors' rights and by general principles of equity, and the Bonds are entitled to the benefits and security afforded by the Indenture. 2. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 3. The Indenture has been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"), has been duly and validly authorized, executed and delivered by the Company and is a legal, valid and binding instrument, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other laws affecting the enforcement of mortgagees' and other creditors' rights and by general principles of equity. 4. The Registration Statements are effective under the Securities Act of 1933, as amended (the "1933 Act"), and to the best of our knowledge, no stop order suspending the effectiveness of either of the Registration Statements has been issued and no proceedings for that purpose are pending or threatened under Section 8(d) of the 1933 Act; each of the Registration Statements, at the time it became effective, and the Prospectus, at the time it was filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b) under the 1933 Act (except as to the financial statements and other financial or statistical data constituting a part thereof or incorporated by reference therein, or as to the parts of the Registration Statements that constitute the statements of eligibility of the Trustee, upon which we express no opinion), complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1939 Act and the applicable instructions, rules and regulations of the Commission thereunder. The documents or portions thereof filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), and incorporated by reference in the Registration Statement and the Prospectus pursuant to Item 12 of Form S-3 (except as to the financial statements and other financial or statistical data constituting a part thereof or incorporated by reference therein, upon which we express no opinion), at the time they were filed with the Commission, complied as to form in all material respects with the applicable requirements of the 1934 Act and the applicable instructions, rules and regulations of the Commission thereunder. 5. The summary of the terms of the Indenture and the Bonds contained in the Registration Statements and the Prospectus fairly describes the provisions thereof required to be described by the registration statement form, except that we express no opinion as to the statements contained under "Description of Bonds and Mortgage - Security." 6. The approval of the Public Service Commission of the District of Columbia that is required for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement has been obtained; to the best of our knowledge, such approval is in full force and effect; no approval by the State Corporation Commission of the Commonwealth of Virginia is necessary for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement; and we do not know of any other approvals of any governmental body required in that connection (other than in connection or in compliance with the provisions of the securities or blue-sky laws of any jurisdiction, upon which we express no opinion). All legal proceedings and legal opinions rendered in connection with the issuance and sale of the Bonds, including the opinion of William T. Torgerson, Esq. of even date herewith, are satisfactory in form to us. In passing upon the forms of the Registration Statements and the form of the Prospectus, we necessarily assume the correctness and completeness of the statements made and information included therein by the Company and take no responsibility therefor, except insofar as such statements relate to us and as set forth in paragraph 5 above. In connection with the Company's preparation of the Registration Statements and the Prospectus, we have had conferences with certain of its officers and representatives, with counsel for the Company, with Price Waterhouse LLP, the Company's independent public accountants, and with your representatives. We did not participate in the preparation of the documents incorporated by reference in the Registration Statements and the Prospectus. Our examination of the Registration Statements and the Prospectus, and our discussions in the above-mentioned conferences, did not disclose to us any information that gives us reason to believe that either the First Registration Statement, at the time the Company filed its Annual Report on Form 10- K for the year ended December 31, 1996, or the Second Registration Statement, at the time the Second Registration Statement became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, at the time it was filed with the Commission pursuant to Rule 424(b) under the 1933 Act or at the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. We do not express any opinion or belief as to the financial statements or other financial or statistical data constituting a part of, or incorporated by reference in, the Registration Statements or the Prospectus, or as to the parts of the Registration Statements that constitute the statement of eligibility of the Trustee. This opinion is given to you solely for your use in connection with the Underwriting Agreement and the transactions contemplated thereunder and may not be relied upon in any manner by any other person or for any other purpose, without our prior written consent. Very truly yours, [LETTERHEAD OF COVINGTON & BURLING] Ladies and Gentlemen: We have acted as special counsel to Potomac Electric Power Company (the "Company") in connection with the issuance and sale by the Company of $_______ principal amount of First Mortgage Bonds, % Series due ____ (the "Bonds"), which are being issued under the Mortgage and Deed of Trust dated July 1, 1936 between the Company and The Bank of New York, as successor trustee (the "Trustee"), as heretofore supplemented and amended, and as now further supplemented by a Supplemental Indenture dated as of , 19 (the "Supplemental Indenture"; said Mortgage and Deed of Trust as so further supplemented and amended being hereinafter referred to as the "Indenture"), and which are being purchased by the Underwriters named in the Underwriting Agreement dated ____________, 19__ between the Underwriters and the Company with respect to the Bonds (the "Underwriting Agreement"). As used herein, the term "Registration Statements" means the registration statements of the Company on Form S-3, with file numbers 33-61379 and 33- . All other terms used herein which are not defined herein but which are defined, either directly or by cross-reference, in the Underwriting Agreement are used herein with the respective meanings assigned to such terms therein. As counsel for the Company, we have examined originals (or copies certified or otherwise identified to our satisfaction) of such instruments, certificates and documents and have reviewed such questions of law as we have deemed necessary or appropriate for the purpose of the opinion rendered below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies and the conformity of the Bonds to the specimen thereof attached as Exhibit A to the certificate of the Trustee of even date herewith regarding the due authentication and delivery of the Bonds. As to any facts material to our opinion we have, when relevant facts were not independently established, relied upon the aforesaid certificates. Based on the foregoing, and subject to the following limitations and qualifications, we are of the opinion that: 1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the District of Columbia and under the laws of the Commonwealth of Virginia, and has the corporate power and authority to execute the Underwriting Agreement and the Indenture and to issue and sell the Bonds. 2. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 3. The Supplemental Indenture has been duly and validly authorized by all necessary corporate action of the Company, has been duly and validly executed and delivered by the Company, and, as amended by the Supplemental Indenture, the Indenture constitutes a valid and legally binding instrument of the Company enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights or by general principles of equity; the Indenture has been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). 4. The Bonds have been duly and validly authorized by all necessary corporate action of the Company, have been duly and validly issued in accordance with the provisions of the Indenture, and constitute the valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization or other laws affecting enforcement of creditors' rights or by general principles of equity, and are entitled to the benefit and security afforded by the Indenture. 5. The Registration Statements are effective under the Securities Act of 1933, as amended (the "1933 Act"), and to the best of our knowledge no stop order suspending the effectiveness of either of the Registration Statements has been issued and no proceedings for that purpose are pending or threatened under Section 8(d) of the 1933 Act. Each of the Registration Statements, at the time it became effective, and the Prospectus, at the time it was filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b) under the 1933 Act (except for the financial statements and other financial and statistical data constituting a part thereof, as to which we express no opinion), complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1939 Act, and the applicable rules and regulations of the Commission thereunder, except that we express no opinion on the Forms T-1 filed as exhibits to the Registration Statements. The documents or portions thereof filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), and incorporated by reference in the Registration Statements and the Prospectus, at the - 2 - times they were filed with the Commission, complied as to form in all material respects with the 1934 Act, and the rules and regulations of the Commission thereunder. 6. The approval of the Public Service Commission of the District of Columbia which is required for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement has been obtained; to the best of our knowledge, such approval is in full force and effect; no approval by the State Corporation Commission of the Commonwealth of Virginia is necessary for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement; and we do not know of any other approvals, consents or orders of any governmental body that are legally required as a condition to the valid authorization and issuance of the Bonds (other than in connection or in compliance with the provisions of the securities or "blue sky" laws of any jurisdiction, as to which we express no opinion). 7. The summary of the terms of the Indenture and the Bonds contained in the Registration Statements and the Prospectus fairly describes the provisions thereof required to be described by the registration statement form. 8. The Indenture constitutes a valid first lien or charge, to the extent that it purports to be such, upon the interest held by the Company in its property covered by the Indenture, subject only to such exceptions, defects, qualifications and other matters as may be permitted by the Indenture and to such other matters as do not materially affect the security for the Bonds; and the Supplemental Indenture has been recorded or filed for recording in the only counties in which any real property subject to the lien of the Indenture is located, and all requisite steps have been taken to perfect the security interest of the Indenture in personal property of the Company. With respect to the opinion set forth in paragraph 8, we have relied on the opinion to you of William T. Torgerson, Esq., General Counsel of the Company, dated the date hereof. In passing upon the forms of the Registration Statements and the form of the Prospectus, we necessarily assume the correctness and completeness of the statements made and information included therein by the Company and take no responsibility therefor, except insofar as such statements relate to us and as set forth in paragraph 7 above. In connection with the Company's preparation of the Registration Statements and the Prospectus, we had discussions with certain of its officers and representatives. Our examination of the Registration - 3 - Statements and the Prospectus and our discussions did not disclose to us any information which gives us reason to believe that, at the time the respective Registration Statements became effective, they contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, at the time it was filed with the Commission pursuant to Rule 424(b) or at the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. We do not express any opinion or belief as to the financial statements and other financial and statistical data constituting a part of the Registration Statements or the Prospectus. Very truly yours, Covington & Burling - 4 - [LETTERHEAD OF POTOMAC ELECTRIC POWER COMPANY] Ladies and Gentlemen: This opinion is being delivered to you in connection with the issuance and sale by Potomac Electric Power Company (the "Company") of $ aggregate principal amount of its First Mortgage Bonds, % Series due (the "Bonds"), which are being issued under the Mortgage and Deed of Trust dated July 1, 1936 between the Company and The Bank of New York, as successor trustee (the "Trustee"), as heretofore supplemented and amended, and as now further supplemented by a Supplemental Indenture dated as of , 19 (said Supplemental Indenture being hereinafter referred to as the "Supplemental Indenture" and said Mortgage and Deed of Trust as so further supplemented and amended being hereinafter referred to as the "Indenture") and which are being purchased by you pursuant to the Underwriting Agreement dated , 19 between you and the Company with respect to the Bonds (the "Underwriting Agreement"). As used herein, the term "Registration Statements" means the registration statements of the Company on Form S-3 filed with the Securities and Exchange Commission, with file numbers 33-61379 and 33- . Terms used in this opinion letter which are not defined herein but which are defined, either directly or by cross-reference, in the Underwriting Agreement are used herein with the respective meanings assigned to such terms therein. As counsel for the Company, I have examined such corporate records, certificates and other documents and such questions of law as I have considered necessary or appropriate for the purpose of this opinion. I have not examined the Bonds, except for the specimen thereof attached as Exhibit A to the certificate of the Trustee of even date herewith as to due authentication and delivery of the Bonds, have assumed that the Bonds conform in all respects to such specimen, and have relied on such certificate as to the due authentication and delivery of the Bonds. On the basis of my examinations as aforesaid, I advise you that, in my opinion: (1) The Company has been duly incorporated and is now validly existing as a corporation in good standing under the laws of the District of Columbia; is also now validly existing and in good standing as a domestic corporation of the Commonwealth of Virginia; has charter power to carry on the business in which it is now engaged as set forth in the Prospectus; is legally qualified to carry on in the State of Maryland the business in which it is now engaged in said State; and is legally qualified to carry on business within the Commonwealth of Pennsylvania, limited, however, to its participation in the construction, ownership and operation of the Conemaugh generating station and certain related transmission lines. (2) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. (3) The Indenture has been duly and validly authorized, executed and delivered by the Company and is a valid and legally binding instrument of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, or other laws of general application relating to the enforcement of creditors' rights. (4) The Bonds have been duly and validly authorized by all necessary corporate action of the Company, have been duly and validly issued in accordance with the provisions of the Indenture, and constitute the valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, except as the same may be limited as set forth in paragraph (3) above, and are entitled to the benefit and security afforded by the Indenture. (5) The Registration Statements are effective under the Securities Act of 1933, as amended (the "1933 Act"); no stop order suspending the effectiveness of either Registration Statement has been issued and to the best of my knowledge no proceedings for that purpose are pending or threatened under Section 8(d) of the 1933 Act; the approval of the Public Service Commission of the District of Columbia which is required for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement has been obtained and is in full force and effect; no approval by the State Corporation Commission of Virginia is necessary for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement; and I do not know of any other approvals of any governmental body required in that connection (other than in connection or in compliance with the securities or "blue sky" laws of any jurisdiction, as to which I express no opinion herein). No approval, consent or order of the Maryland Public Service Commission or any other regulatory authority of the State of Maryland is required for the valid authorization, issuance and sale of the Bonds by the Company in accordance with the Underwriting Agreement (other than any applicable requirements of the Maryland Securities Law, as to which I am not required to express an opinion). (6) The summary of the terms of the Indenture and the Bonds contained in the Registration Statements and Prospectus fairly - 2 - describes the provisions thereof required to be described by the registration form. (7) The Indenture constitutes a valid first lien or charge, to the extent that it purports to be such, upon the interest held by the Company in its property covered by the Indenture, subject only to such exceptions, defects, qualifications and other matters as may be permitted by the Indenture and to such other matters as in my opinion do not materially affect the security for the Bonds; the Mortgage and Deed of Trust dated July 1, 1936, and the supplements and amendments thereto other than the Supplemental Indenture have been duly recorded and filed for record in the only counties in which any real property subject to the lien of the Indenture is located, and the Supplemental Indenture has also been so recorded or filed for recording, and all requisite steps have been taken to perfect the security interest of the Indenture in personal property of the Company. (8) The Company holds valid franchises, permits and other rights adequate for the business of the Company in the territory which it serves, and such franchises, permits and other rights contain no unduly burdensome restrictions. (9) There are no material pending legal proceedings (other than ordinary routine litigation incidental to the business or as disclosed in the Prospectus) to which the Company is a party or of which any of its property is the subject. (10) The Company has good and valid title in and to all of the real property reflected in its most recent audited balance sheet, incorporated by reference in the Registration Statements (except real property disposed of in the ordinary course of business since that date), free and clear of all liens, charges and encumbrances against the same, except for the lien of the Indenture and for such liens, charges, encumbrances, defects, qualifications and other matters affecting title, possession or use as may be permitted by the Indenture. I also advise you that, in my opinion, each Registration Statement and the prospectus contained therein, as of the effective date of such Registration Statement, appeared on its face to be appropriately responsive in all material respects to the requirements of the 1933 Act, and to the extent applicable, the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations of the Securities and Exchange Commission thereunder and that the Supplemental Indenture appears on its face to be appropriately responsive in all material respects to the requirements of the 1939 Act and the applicable rules and regulations of the Securities and Exchange Commission thereunder. I believe, moreover, that the statements made in the Registration Statements and the Prospectus in - 13 - the section thereof entitled "Description of Bonds and Mortgage" fairly present the information respecting the same required to be set forth therein. Except as specifically noted in the preceding sentence, I am not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statements and Prospectus and make no representations that I have independently verified the accuracy, completeness or fairness of such statements, except insofar as such statements relate to me. However, based on my examination of the Registration Statements and Prospectus and of the documents specifically referred to in the section thereof entitled "Description of Bonds and Mortgage," on my general familiarity with the affairs of the Company and on my participation in conferences with officials and other representatives of, and other counsel for, the Company, with Price Waterhouse LLP, the independent accountants of the Company, and with your representatives and your counsel, I do not believe that the Registration Statements at the time of their effectiveness, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus at the time it was filed with, or transmitted for filing to, the Commission pursuant to Rule 424 or at the date hereof contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. I am expressing no opinion or belief, however, as to the financial statements or other financial data constituting a part of the Registration Statements or the Prospectus. I have assumed, with your approval, but not independently verified, that the signatures on all documents examined by me are genuine. This opinion is given to you solely for your use in connection with the Underwriting Agreement and the transactions contemplated thereunder and may not be relied upon for any manner by any other person or for any other purpose, without my prior written consent, except that Covington & Burling may rely on this opinion with respect to paragraph 8 above, and Winthrop, Stimson, Putnam & Roberts may rely on this opinion with respect to the application of the laws of the District of Columbia, the State of Maryland and the Commonwealths of Pennsylvania and Virginia that are relevant to its opinion, in connection with the delivery of their opinions required to be delivered under the Underwriting Agreement. Very truly yours, William T. Torgerson - 4 - EX-5 5 OPINION OF WILLIAM T. TORGERSON Exhibit 5 August 13, 1997 Potomac Electric Power Company Washington, D. C. Dear Sirs: Reference is made to the proposed issuance and sale, pursuant to rule 415, by Potomac Electric Power Company (the "Company") of up to $200,000,000 aggregate principal amount of its Debt Securities, which may consist of First Mortgage Bonds (the "New Bonds") and/or its Medium-Term Notes (the "Notes"); and with respect to which the Company is today filing with the Securities and Exchange Commission a registration statement on Form S-3 under the Securities Act of 1933, as amended (the "1933 Act") (which registration statement, as amended by all amendments, is hereinafter called the "Registration Statement"). As counsel for the Company, I have examined such certificates, corporate records and other documents and such questions of law as I have considered necessary or appropriate for the purposes of this opinion, and, on the basis of such examination, advise that, in my opinion: (1) The Company has been duly incorporated and is now validly existing as a corporation under the laws of the District of Columbia and is also now validly existing as a domestic corporation of the Commonwealth of Virginia. (2) The New Bonds will have been duly and validly issued and will constitute legal, valid and binding obligations of the Company upon (a) the due authorization by the Board of Directors or by the Executive Committee of the Board of Directors of the Company of an appropriate indenture supplemental to the Company's Mortgage and Deed of Trust dated July 1, 1936, providing for the creation of the New Bonds and the due execution and delivery of such instrument by the Company and the Trustee named therein, (b) the due authorization, by the Board of Directors or by the Executive Committee of the Board of Directors of the Company, of the specific terms of the New Bonds and of their issuance and sale in the manner and upon the terms set forth in the Registration Statement, (c) the due authorization of such issuance and sale by the Public Service Commission of the District of Columbia, (d) the recording upon the books of the Company of the certificate of said Public Service Commission, (e) the Registration Statement becoming effective under the 1933 Potomac Electric Power Company Page Two August 13, 1997 Act, (f) the qualification under the Trust Indenture Act of 1939, as amended (the "1939 Act"), of the Company's Mortgage and Deed of Trust dated July 1, 1936, as amended and supplemented by all indentures supplemental thereto, to and including the above-mentioned supplemental indenture (the "Mortgage"), (g) the execution of the New Bonds by the Company, the filing with the Trustee under the Mortgage of the appropriate certificates, instruments and opinions called for thereby, and the authentication of the New Bonds by the Trustee, all in accordance with the provisions of the Mortgage, and (h) the delivery of the New Bonds against payment therefor in accordance with such authorizations of the Board of Directors or the Executive Committee of the Board of Directors of the Company and of said Public Service Commission. (3) The Notes will have been duly and validly issued and will constitute legal, valid and binding obligations of the Company upon (a) the due authorization, by the Board of Directors or by the Executive Committee of the Board of Directors of the Company, of the terms of the Notes and of their issuance and sale in the manner and upon the terms set forth in the Registration Statement, (b) the due authorization of such issuance and sale by the Public Service Commission of the District of Columbia, (c) the recording upon the books of the Company of the certificate of said Public Service Commission, (d) the Registration Statement becoming effective under the 1933 Act, (e) the qualification under the 1939 Act of an indenture governing the issuance of the Notes (the "Indenture"), (f) the execution of the Notes by the Company, the filing with the Trustee under the Indenture of the appropriate certificates, instruments and opinions called for thereby, and the authentication of the Notes by the Trustee, if required, all in accordance with the provisions of the Indenture, and (g) the delivery of the Notes against payment therefor in accordance with such authorizations of the Board of Directors or the Executive Committee of the Board of Directors of the Company and of said Public Service Commission. I hereby consent to the filing of a copy of this opinion as an exhibit to said Registration Statement and to the making in the said Registration Statement of the statements with respect to me which are made under the captions "Experts" and "Legal Opinions" in the form of First Mortgage Bond Prospectus and under the caption "Legal Opinions" in the form of Medium-Term Note Prospectus, which prospectuses constitute a part of said Registration Statement. Very truly yours, /S/ WILLIAM T. TORGERSON William T. Torgerson EX-15 6 LETTER RE UNAUDITED FINANCIAL INFORMATION Exhibit 15 August 13, 1997 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 reports dated May 14, 1997 and August 13, 1997 (issued pursuant to the provisions of Statement on Auditing Standards Number 71) in the Prospectuses constituting part of its Registration Statement on Form S-3 to be filed on or about August 13, 1997. We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /S/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP EX-23 7 CONSENT OF COVINGTON & BURLING Exhibit 23.3 August 13, 1997 We hereby consent to the reference to this Firm under the heading "Legal Opinions" in the Prospectuses constituting part of the Registration Statement on Form S-3 of Potomac Electric Power Company, as filed the date hereof, relating to $125,000,000 of Debt Securities. /S/ COVINGTON & BURLING COVINGTON & BURLING EX-24 8 POWER OF ATTORNEY 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 Edward F. Mitchell, William T. Torgerson, Dennis R. Wraase, Anthony J. Kamerick, Peyton G. Middleton, Jr. and Ellen Sheriff Rogers, and each of them, their true and lawful attorneys and agents with full power and authority, in their names and on their behalf, or otherwise, 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 Act of 1933, as amended (the "Act"), and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with a Registration Statement on Form S-3 to be filed under the Act for the registration of $200,000,000 aggregate principal amount of First Mortgage Bonds and/or Medium-Term Notes of the Company (the "Securities"), and a Registration Statement for the registration of up to an additional 20% of aggregate principal amount of securities filed in accordance with Rule 462(b) under the Act, 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 any and all amendments to said Registration Statements and to any instruments or documents filed as a part of or in connection with said Registration Statements or amendments 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 5th day of August, 1997. Signature /S/ EDWARD F. MITCHELL Principal Executive Officers: EDWARD F. MITCHELL Chairman of the Board and Chief Executive Officer /S/ JOHN M. DERRICK, JR. JOHN M. DERRICK, JR. President and Director Principal Financial Officer: /S/ DENNIS R. WRAASE Principal Accounting Officer: DENNIS R. WRAASE Senior Vice President and Chief Financial Officer (over) /S/ ROGER R. BLUNT, SR. Director ___________________________________ ROGER R. BLUNT, SR. /S/ A. JAMES CLARK Director ___________________________________ A. JAMES CLARK /S/ H. LOWELL DAVIS Director ___________________________________ H. LOWELL DAVIS /S/ RICHARD 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/ PETER F. O'MALLEY Director ___________________________________ PETER F. O'MALLEY /S/ LOUIS A. SIMPSON Director ___________________________________ LOUIS A. SIMPSON /S/ A. THOMAS YOUNG Director ___________________________________ A. THOMAS YOUNG EX-25 9 FORM T-1 ============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ____________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ___________________ POTOMAC ELECTRIC POWER COMPANY (Exact name of obligor as specified in its charter) District of Columbia and Virginia 53-0127880 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1900 Pennsylvania Avenue, N.W. Washington, D.C. 20068 (Address of principal executive offices) (Zip code) ____________________ Debt Securities (Title of the indenture securities) ============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - ------------------------------------------------------------------------------ Name Address - ------------------------------------------------------------------------------ Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affilia- tion. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 14th day of July, 1997. THE BANK OF NEW YORK By: /s/ THOMAS E. TABOR Name: Thomas E. Tabor Title: Assistant Treasurer Exhibit 7 ______________________________________________________________________________ Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 8,249,820 Interest-bearing balances .......... 1,031,026 Securities: Held-to-maturity securities ........ 1,118,463 Available-for-sale securities ...... 3,005,838 Federal funds sold and Securities pur- chased under agreements to resell...... 3,100,281 Loans and lease financing receivables: Loans and leases, net of unearned income .................32,895,077 LESS: Allowance for loan and lease losses ..............633,877 LESS: Allocated transfer risk reserve........................429 Loans and leases, net of unearned income, allowance, and reserve 32,260,771 Assets held in trading accounts ...... 1,715,214 Premises and fixed assets (including capitalized leases) ................ 684,704 Other real estate owned .............. 21,738 Investments in unconsolidated subsidiaries and associated companies .......................... 195,761 Customers' liability to this bank on acceptances outstanding ............ 1,152,899 Intangible assets .................... 683,503 Other assets ......................... 1,526,113 ___________ Total assets ......................... $54,746,131 =========== LIABILITIES Deposits: In domestic offices ................ $25,614,961 Noninterest-bearing ......10,564,652 Interest-bearing .........15,050,309 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 15,103,615 Noninterest-bearing .........560,944 Interest-bearing .........14,542,671 Federal funds purchased and Securities sold under agreements to repurchase. 2,093,286 Demand notes issued to the U.S. Treasury ........................... 239,354 Trading liabilities .................. 1,399,064 Other borrowed money: With remaining maturity of one year or less .......................... 2,075,092 With remaining maturity of more than one year ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,160,012 Subordinated notes and debentures .... 1,014,400 Other liabilities .................... 1,840,245 __________ Total liabilities .................... 50,560,708 __________ EQUITY CAPITAL Common stock ........................ 942,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,544,303 Net unrealized holding gains (losses) on available-for-sale securities ........................ ( 19,449) Cumulative foreign currency transla- tion adjustments .................. ( 13,034) ___________ Total equity capital ................ 4,185,423 ___________ Total liabilities and equity capital ........................... $54,746,131 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith ) J. Carter Bacot ) Directors Thomas A. Renyi ) _____________________________________________________________________________ -----END PRIVACY-ENHANCED MESSAGE-----